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BUSINESS ORGANIZATION I

AGENCY AND TRUST

COMPILATION OF CASE DIGEST 2017

COR JESU COLLEGE OF LAW


BUSINESS ORGANIZATION I

AGENCY
A. GENERAL (ARTICLES 1868 -1883)
1. ORIENT AIR SERVICES & HOTEL REPRESENTATIVES VS. CA, 197 SCRA 645
2. RALLOS VS. FELIX GO CHAN & SONS REALTY CORP., 18 SCRA 251
3. AIR FRANCE VS. CA, 126 SCRA 448
4. SANTOS VS BUENCONSEJO, 14 SCRA 407
5. ALBALADEJO Y CIA VS. PHIL. REFINING CO., 45 PHIL 556
6. THOMAS VS PINEDA, 89 PHIL 312
7. PALMA VS. CRISTOBAL, 77 PHIL 712
8. VALERA VS. VELASCO, 51 PHIL 695
9. CUI VS. CUI, 100 PHIL 913
10. ALLIED FREE WORKSER’S UNION (PLUM) VS. COMPANIA MARITAMA, 19 SVRA 258
11. FAR ESTER EXPORT AND IMPORT CO. VS LIM TECK SUAN, 97 PHIL 171
12. NELSON & CO., INC. VS LEPANTO CONSOLIDATED MINING CO., 26 SCRA 540
13. SHELL CO., OF THE PHILS LTD VS. FIREMEN’S INSURANCE OF NEWARK, NJ., 100 PHIL 755
14. SEVILLA VS. CA, 160 SCRA 171
15. LIM VS. PEOPLE, 133 SCRA 333
16. SAN DIEGO, SR. VS. NOMBRE, 11 SCRA 165
17. CONDE VS. CA, 119 SCRA 245
18. HARRY E. KELLER ELEC. CO. VS. RODRIGUEZ, 44 PHIL 19
19. RALLOS VS. YANGCOP, 20 PHIL 269
20. MACKE VS. CAMPS, 7 PHILS 553/ JIMENS VS. RABOT, 38 PHIL 387
21. LINAN VS. PUNO, 31 PHIL 259/ KATIGBAK VS. TAI HING CO., 52 PHIL 622
22. DANON VS. BRIMO & CO., 42 PHIL 133
23. INFANTE VS. CUNANAN, 93 PHIL 693
24. MONOTOK BROTHERS, INC. VS. CA, 221 SCRA 224
25. DOMINGO VS. DOMINGO, 42 SCRA 131
26. SIASAT VS. IAC, 139 SCRA 238
27. GERMAN & CO., VS. DONALDSON, SIM & CO., 1 PHIL 63
28. MUNICIPAL COUNCIL OF ILOILO VS. EVANGELISTA, 55 PHIL 290
29. CABALLERO VS. DEIPARINE, 60 SCRA 136
30. PHIL. NATIONAL BANK VS. STA. MARIA, 29 SCRA 303
31. BA FINANCE CORP. VS. CA, 211 SCRA 112
32. DIRECTOR OF PUBLIC WORKS VS. SING JUCO, 53 PHIL 205
33. PHILIPPINE SUGAR ESTATES DEVT CO. VS. POIZAT, 48 PHIL 536
34. RURAL BANK OF BOMBON, INC. VS. CA, 212 SCRA 25
35. COMMERIAL BANK & TRUST CO. OF THE PHILS VS. REPUBLIC ARMORED CAR SERVICE CORP 9 SCRA 142
36. LIM TIU VS. RUIZ Y REMENTERIA, 15 PHIL 367
37. PHIL. NATIONAL BANK VS. AGUDELO Y GONZAGA, 58 PHIL 635
38. SYJUCO AND VIARDO VS. SYJUCO, 40 PHIL 634
39. NATIONAL FOOD AUTHORITY VS. IAC, 184 SCR 166
40. AWAD VS. FILMA MERCANTILE CO., 49 PHIL 816
41. BORADOR VS. LUZ, GR NO. 130148
42. ALFRED HAHN VS. CA AND BMW, GR NO. 113074
43. MANUEL B. TAN, ET AL VS. EDUARDO R. GULLAS, GR NO. 143978
44. QUIROGA VS. PARSONS HARDWARE, CO., 38 PHIL 501
45. PHIL. NATIONAL BANK VS. STA. MARIA, 29 SCRA 303

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46. DPWH VS. SIN JUCO, ET AL, 53 PHILS 205


47. RURAL BANK OF BOMBON, INC. VS.CA, 212 SCRA 25
48. DOMINION INSURANCE CORP. VS.CA, ET AL, GR NO. 129919
49. VICTORIAS MILLING VS. CA, GR NO. 117356
50. EUROTECH INDUSTRIAL TECHNOLOGIES, INC. VS. CUIZON, GR NO. 16755

B. OBLIGATIONS OF THE AGENT (ARTICLES 1884-1909)

1. PHIL NATIONAL BANK VS. MANILA SURETY & FIDELITY CO., INC. 14 SCRA 776
2. RAMOS VS. CAOIBES, 94 PHIL 440
3. GUTIERREZ HERMANOS VS. ORIA HERMANOS, 30 PHIL 491
4. DOMINGO VS. DOMINGO, 42 SCRA 131
5. US VS. REYES, 36 PHIL 791
6. VILLASI VS. GARCIA BUSQUE, 49 PHIL 126
7. DEVELOPMENT BANK OF THE PHILIPPINES VS. CA, 49 SCAD 715, 231 SCRA 370
8. PHIL PRODUCTS CO. VS. PRIMARIA (PHIL) INC., 15 SCRA 301
9. NATIONAL POWER CORP. VS. NATIONAL MECHANDISING CORP., 117 SCRA 789
10. ALBERT VS. UNIVERSITY PUBLISHING CO.,J 13 SCRA 84
11. EUGENIO VS. CA, 239 SCRA 207
12. GREEN VALLEY POULTRY AND ALLIED PRODUCTS, INC. VS. IAC 133 SCRA 169

C. OBLIGATIONS OF THE PRINCIPAL (ARTICLES 1910-1918)


1. PRUDENTIAL BANK VS. CA, 223 SCRA 391
2. CUISON VS. CA, 227 SCRA 391
3. RALLOS VS. YANGCO, 20 PHIL 269

D. MODE OF EXTINGUISHMENT OF AGENCY (ARTICLES 1919-1932)


1. RALLOS VS. FELIX GO CHAN & SONS REALTY CORP, 81 SCRA 251
2. DIOLOSA VS. CA, 130 SCRA 350
3. PHILIPPINE NATIONAL BANK VS. IAC, 189 SCRA 251
4. DY BUNCIO & CO VS. ONG GUAN GAN, 60 PHIL 696
5. INFANTE VS. CUNANAN, 93 PHIL 693
6. HERRERA VS. LUY KIM GUAN, 1 SCRA 577
7. BUASON AND REYES VS. PANUYAS, 105 PHIL 795

TRUST
GENERAL (ARTICLES 1440-1442)
1. SALAO VS. SALAO, 70 SCRA 65
2. DE LEON VS. MOLO-PECKSON, 6 SCRA 978
3. GOVERNMENT VS. ABADILLA, 46 PHIL 642
4. CRISTOBAL VS. GOMEZ, 50 PHIL 810
5. ARANETA VS. PEREZ, 5 SCRA 338
6. MINDANAO DEVELOPMENT AUTHORITY VS. CA, 113 SCRA 429
7. ROA, JR. VS CA, 123 SCRA 3 UNDER ART 1456
8. PREZ VS. ARANETA, 4 SCRA 430
9. POLICARPIO VS. CA, 269 SCRA 344
10. HEIRS OF L. YAP VS. CA, 312 SCRA 603

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11. MULLER VS. MULLER, 500 SCRA 65


12. HEIRS OF LABANON VS. HEIRS OF LABANAON , 530 SCRA 97
13. CANEZ VS. ROJAS, 538 SCRA 242
14. ESTATE OF E. GREMM VS. ESTATE OF C. PARSONS, 504 SCRA 67

EXPRESS TRUST (ARTICLES 1443-1446)


1. CUAYCONG VS. CUAYCONG, 21 SCRA 1192
2. SINAON VS. SORONGON, 136 SCRA 407

IMPLIED TRUST (1447-1457)


1. O’LACO VS. CO CHO CHIT, 220 SCRA 656
2. SPECIAL SERVICES CORPORATION VS. CENTRO LA PAZ, 121 SCRA 748
3. CHIAO LIONG TAN VS. CA, 46 SCRAD 435, 228 SCRA 75
4. HOMENA VS CASA, 157 SCRA 232
5. HEIRS OF CANDELARIA VS. ROMERO, 109 PHIL 500
6. PNB VS. CA, 217 SCRA 347

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BUSINESS ORGANIZATION I

AGENCY
A. GENERAL (ARTICLES 1868 -1883)

1. ORIENT AIR SERVICES & HOTEL REPRESENTATIVES VS. CA, 197 SCRA 645
FACTS: 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.

May 11 1981- American Air took charge of the collection of the proceeds of tickets sold
originally by Orient Air and terminated the Agreement in accordance with Paragraph 13
thereof (Termination).

Termination
American may terminate the Agreement on two days' notice in the event Orient Air
Services is unable to transfer to the United States the funds payable by Orient Air Services
to American under this Agreement. Either party may terminate the Agreement without
cause by giving the other 30 days' notice by letter, telegram or cable.

May 15 1981- American Air instituted suit against Orient Air with the Court of First
Instance of Manila, for Accounting with Preliminary Attachment or Garnishment,
Mandatory Injunction and Restraining Order

In its Answer with counterclaim dated 9 July 1981, Orient Air denied the material
allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted
amounts, contending that after application thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding
commissions. Further, the defendant contended that the actions taken by American Air
in the course of terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's precipitous conduct had occasioned
prejudice to its business interests.

Trial Court ruled in favor of Orient Air.

ON APPEAL: Intermediate Appellate Court affirmed the ruling of TC

ISSUE: W/N the respondent appellate court correctly ruled that Orient Air be reinstated
again as sales agent of American Air

RULING: By affirming this 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

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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 affected 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." (Emphasis supplied) We, therefore, set aside the
portion of the ruling of the respondent appellate court reinstating Orient Air as general
sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and
resolution of the respondent Court of Appeals, dated 27 January 1986 and 17 December
1986, respectively. Costs against petitioner American Air.

2. RALLOS VS. FELIX GO CHAN & SONS REALTY CORP., 18 SCRA 251
FACTS: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel
of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.

They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.

After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New
TCTs were issued to the latter.

Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a


complaint praying (1) that the sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
cancelled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.

CFI: [Plaintiff’s Complaint]


Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion
Rallos.

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Ordered the issuance of new TCTs to respondent corporation and the estate of
Concepcion in the proportion of ½ share each pro-indiviso and the payment of attorney’s
fees and cost of litigation.

[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during
pendency of case)

Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay
defendant the price of the ½ share of the land (P5,343.45) plus attorney’s fees.
[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of
the Estate of Gerundia

Dismissed without prejudice to filing either a complaint against the regular administrator
of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos,
covering the same subject-matter

CA: CFI Decision reversed, upheld the sale of Concepcion’s share.


MR: denied.

ISSUES:
1. Whether or not sale was valid although it was executed after the death of the principal,
Concepcion.
2. Whether or not the sale fell within the exception to the general rule that death
extinguishes the authority of the agent.
3. Whether or not the agent’s knowledge of the principal’s death is a material factor.

RULING:
1. Sale was void.
No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him (Art. 1317 of the Civil Code).
Simon’s authority as agent was extinguished upon Concolacion’s death.

2. The sale did not fall under the exceptions to the general rule that death ipso jure
extinguishes the authority of the agent
Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with interest.

Art. 1931 inapplicable: Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcion’s death.
For Art 1931 to apply, both requirements must be present.

3. Yes, agent’s knowledge of principal’s death is material.


Respondent asserts that: there is no provision in the Code which provides that whatever
is done by an agent having knowledge of the death of his principal is void even with

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respect to third persons who may have contracted with him in good faith and without
knowledge of the death of the principal.
Court says: this contention ignored the ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. Article
1931, being an exception to the general rule, is to be strictly construed.

3. AIR FRANCE VS. CA, 126 SCRA 448


CAUSE OF ACTION: Petition for review on certiorari assailing the Decision of then
respondent Court of Appeals promulgated "Jose G. Gana, et al. vs. Sociedad Nacionale Air
France", which reversed the Trial Court's judgment dismissing the Complaint of private
respondents for damages arising from breach of contract of carriage, and awarding
instead P90,000.00 as moral damages.

Late Jose G. Gana and his family (the GANAS), purchased from AIR FRANCE (9) "open-
dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route. On 24 April 1970,
AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for
the same route. At this time, the GANAS were booked for the Manila/Osaka segment on
AIR FRANCE Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip on AIR
FRANCE Flight 187 on 22 May 1970.

The aforesaid tickets were valid until 8 May 1971. The GANAS did not depart on 8 May
1970. Instead, Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the
Sta. Clara Lumber Company where Jose Gana was the Director and Treasurer, for the
extension of the validity of their tickets, which were due to expire on 8 May 1971.

Teresita enlisted the help of Lee Ella Manager of the Philippine Travel Bureau. Ella sent
the tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets were returned to Ella
who was informed that extension was not possible unless the fare differentials resulting
from the increase in fares triggered by an increase of the exchange rate of the US dollar
to the Philippine peso and the increased travel tax were first paid. Ella then returned the
tickets to Teresita and informed her of the impossibility of extension.

In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day
before the expiry date. Teresita requested travel agent Ella to arrange the revalidation of
the tickets. Ella gave the same negative answer and warned her that although the tickets
could be used by the GANAS if they left on 7 May 1971, the tickets would no longer be
valid for the rest of their trip because the tickets would then have expired on 8 May 1971.
Teresita replied that it will be up to the GANAS to make the arrangements.

With that assurance, Ella on his own, attached to the tickets validating stickers for the
Osaka/Tokyo flight, one a JAL. sticker and the other an SAS (Scandinavian Airways System)
sticker. The SAS sticker indicates thereon that it was "Reevaluated by: the Philippine
Travel Bureau, Branch No. 2" (as shown by a circular rubber stamp) and signed "Ador",

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and the date is handwritten in the center of the circle. Then appear under printed
headings the notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status).
Apparently, Ella made no more attempt to contact AIR FRANCE as there was no more
time.

Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7
May 1971 on board AIR FRANCE Flight 184 for Osaka, Japan. There is no question with
respect to this leg of the trip.

However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the
tickets because of their expiration, and the GANAS had to purchase new tickets. They
encountered the same difficulty with respect to their return trip to Manila as AIR FRANCE
also refused to honor their tickets. They were able to return only after pre-payment in
Manila, through their relatives, of the readjusted rates. They finally flew back to Manila
on separate Air France Frights on 19 May 1971 for Jose Gana and 26 May 1971 for the
rest of the family.

On 25 August 1971, the GANAS commenced before the then Court of First Instance of
Manila, Branch III, Civil Case No. 84111 for damages arising from breach of contract of
carriage.

AIR FRANCE traversed the material allegations of the Complaint and alleged that the
GANAS brought upon themselves the predicament they found themselves in and
assumed the consequential risks; that travel agent Ella's affixing of validating stickers on
the tickets without the knowledge and consent of AIR FRANCE, violated airline tariff rules
and regulations and was beyond the scope of his authority as a travel agent; and that AIR
FRANCE was not guilty of any fraudulent conduct or bad faith.

TC dismissed the Complaint of the GANAS based on Partial and Additional Stipulations of
Fact. The GANAS appealed to the CA. During the pendency of the appeal, Jose Gana, the
principal plaintiff, died.

CA set aside and reversed the TC’s decision ordering Air France to pay appellants moral
damages in the total sum P90,000.00 plus costs.

Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse before
this instance, to which we gave due course.

ISSUES:
1. Whether or not, under the environmental milieu the GANAS have made out a case for
breach of contract of carriage entitling them to an award of damages? No!

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2. Whether or not Teresita was the agent of the GANAS and notice to her of the rejection
of the request for extension of the validity of the tickets was notice to the GANAS, her
principals? YES!

RULING:
1. NO. SC reversed the affirmative ruling of the CA. (As for the main—FIRST issue)
AIR FRANCE cannot be faulted for breach of contract when it dishonored the tickets of
the GANAS after 8 May 1971 since those tickets expired on said date; nor when it required
the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila
segment of their trip. Neither can it be said that, when upon sale of the new tickets, it
imposed additional charges representing fare differentials, it was motivated by self-
interest or unjust enrichment considering that an increase of fares took effect, as
authorized by the Civil Aeronautics Board (CAB) in April, 1971. This procedure is well in
accord with the IATA tariff rules which provide:

TARIFF RULES . APPLICABLE FARE ON THE DATE OF DEPARTURE

3.1 General Rule.


All journeys must be charged for at the fare (or charge) in effect on the date on which
transportation commences from the point of origin. Any ticket sold prior to a change of
fare or charge (increase or decrease) occurring between the date of commencement of
the journey, is subject to the above general rule and must be adjusted accordingly. A new
ticket must be issued and the difference is to be collected or refunded as the case may
be. No adjustment is necessary if the increase or decrease in fare (or charge) occurs when
the journey is already commenced.

The GANAS cannot defend by contending lack of knowledge of those rules since the
evidence bears out that Teresita, who handled travel arrangements for the GANAS, was
duly informed by travel agent Ella of the advice of Reno, the Office Manager of Air France,
that the tickets in question could not be extended beyond the period of their validity
without paying the fare differentials and additional travel taxes brought about by the
increased fare rate and travel taxes.

2. YES. Teresita was the agent of the GANAS and notice to her of the rejection of the
request for extension of the validity of the tickets was notice to the GANAS, her principals.

(AGENCY: NOTICE TO THE AGENT IS NOTICE TO THE PRINCIPAL)


The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed
the GANAS to leave is not tantamount to an implied ratification of travel agent Ella's
irregular actuations. It should be recalled that the GANAS left in Manila the day before
the expiry date of their tickets and that "other arrangements" were to be made with
respect to the remaining segments. Besides, the validating stickers that Ella affixed on his
own merely reflect the status of reservations on the specified flight and could not legally
serve to extend the validity of a ticket or revive an expired one.

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The conclusion is inevitable that the GANAS brought upon themselves the predicament
they were in for having insisted on using tickets that were due to expire in an effort,
perhaps, to beat the deadline and in the thought that by commencing the trip the day
before the expiry date, they could complete the trip even thereafter.

It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL.
stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE
merely acted within their contractual rights when they dishonored the tickets on the
remaining segments of the trip and when AIR FRANCE demanded payment of the adjusted
fare rates and travel taxes for the Tokyo/Manila flight.

4. SANTOS VS BUENCONSEJO, 14 SCRA 407


FACTS: Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First
Instance of Albay, denying his petition:
a. Cancellation of original certificate of title No. RO-3848 (25322), issued in the name of
Anatolio Buenconsejo, Lorenzo Bon and Santiago Bon, and covering Lot No. 1917 of the
Cadastral Survey of Tabaco, Albay, and
b. Issuance in lieu thereof, of a separate transfer certificate of title in his name.

Lot No. 1917 covered by Original Certificate of Title No. RO-3848 (25322) was originally
owned in common by Anatolio Buenconsejo to the extent of ½ undivided portion and
Lorenzo Bon and Santiago Bon to the extent of the other ½ (Exh. B)

Anatolio Buenconsejo's rights, interests and participation over the portion


abovementioned were by a Certificate of Sale executed by the Provincial Sheriff of Albay,
transferred and conveyed to Atty. Tecla San Andres Ziga, awardee in the corresponding
auction sale conducted by said Sheriff

By a certificate of redemption issued by the Provincial Sheriff of Albay, the rights, interest,
claim and/or or participation which Atty. Tecla San Andres Ziga may have acquired over
the property in question by reason of the aforementioned auction sale award, were
transferred and conveyed to the herein petitioner in his capacity as Attorney-in-fact of
the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena
Buenconsejo and Azucena Buenconsejo (Exh. C).

Petitioner Santos had redeemed the aforementioned share of Anatolio Buenconsejo,


upon the authority of a special power of attorney executed in his favor by the children of
Anatolio Buenconsejo.

Relying upon this power of attorney and redemption made by him, Santos now claims to
have acquired the share of Anatolio Buenconsejo in the aforementioned Lot No. 1917;

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As the alleged present owner of said share, Santos caused a subdivision plan of said Lot
No. 1917 to be made, in which the portion he claims as his share thereof has been marked
as Lot No. 1917-A; and that he wants said subdivision at No. 1917-A to be segregated from
Lot No. 1917 and a certificate of title issued in his name exclusively for said subdivision
Lot No. 1917-A.

Lower court: ruled in favor of the respondents.

ISSUE: Whether or not petitioner Santo’s claim that he has acquired the share of Anatolio
Buenconsejo in Lot No. 1917 relying upon a power of attorney and redemption made by
him is tenable?

RULING: NO. SC affirmed the lower court’s decision that petitioner's claim is clearly
untenable, for three reasons:

a. Said special power of attorney authorized him to act on behalf of the children of
Anatolio Buenconsejo, and, hence, it could not have possibly vested in him any
property right in his own name;

b. The children of Anatolio Buenconsejo had no authority to execute said power of


attorney, because their father is still alive and, in fact, he and his wife opposed the
petition of Santos;

c. In consequence of said power of attorney (if valid) and redemption, Santos could have
acquired no more than the share pro indiviso of Anatolio Buenconsejo in Lot No. 1917,
so that petitioner cannot — without the conformity of the other co-owners (Lorenzo
and Santiago Bon), or a judicial decree of partition issued pursuant to the provisions
of Rule 69 of the new Rules of Court (Rule 71 of the old Rules of Court) which have
not been followed By Santos — adjudicate to himself in fee simple a determinate
portion of said Lot No. 1917, as his share therein, to the exclusion of the other co-
owners.

Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby
affirmed, with treble cost against petitioner-appellant Jose A. Santos y Diaz. It is so
ordered.
5. ALBALADEJO Y CIA VS. PHIL. REFINING CO., 45 PHIL 556

FACTS: It appears that Albaladejo y Cia. is a limited partnership, organized in conformity


with the laws of these Islands, and having its principal place of business at Legaspi, Albay.
The firm was engaged in the buying and selling of the products of the country, especially
copra.

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The Visayan Refining Co. is a corporation organized engaged in operating its extensive
plant at Opon, Cebu, for the manufacture of coconut oil.

On August 28, 1918, the plaintiff made a contract with the Visayan Refining Co., the
material parts of which are as follows: (important provisions)

- The party of the first part (Albadejo) agrees and binds itself to sell to the party of the
second part (Visayan Refining Co.) , and the party of the second part agrees and binds
itself to buy from the party of the first part, for a period of one (1) year

- During the continuance of this contract the party of the second part will not appoint any
other agent for the purchase of copra in Legaspi, nor buy copra from any vendor in
Legaspi.

- The party of the second part will provide transportation by sea to Opon, Cebu, for the
copra delivered to it by the party of the first part, but the party of the first part must
deliver such copra to the party of the second part free on board the boats of the latter's
ships or on the pier alongside the latter's ships.

Pursuant to this agreement the plaintiff bought copra extensively for the Visayan Refining
Co. for a year. At the end of said year both parties found themselves satisfied with the
existing arrangement, and they therefore continued by tacit consent to govern their
future relations by the same agreement.

When the contract above referred to was originally made, Albaladejo y Cia. apparently
had only one commercial establishment. After the Visayan Refining Co. had ceased to buy
copra, the supplies of copra already purchased by the plaintiff were gradually shipped out
and accepted by \the Visayan Refining Co. In next eight or ten months the accounts
between the two parties were liquidated. The last account rendered by the Visayan
Refining Co. to the plaintiff was for the month of April, 1921, and it showed a balance of
P288 in favor of the defendant.

Under date of June 25, 1921, the plaintiff company addressed a letter from Legaspi to the
Philippine Refining Co. (which had now succeeded to the rights and liabilities of the
Visayan Refining Co.), expressing its approval of said account. In this letter no
dissatisfaction was expressed by the plaintiff as to the state of affairs between the parties;
but about six weeks thereafter the present action was begun.

This action was instituted in the CFI Albay by Albaladejo to recover a sum of money from
the Philippine Refining Co., as successor to the Visayan Refining Co., two causes of action
being stated in the complaint.

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Upon hearing the cause, the trial judge absolved the defendant from the first cause of
action but gave judgment for the plaintiff to recover the sum of P49,626.68, with costs,
upon the second cause of action.

The plaintiff appealed the first cause of action, and the defendant appealed with respect
to the action taken upon the second cause of action. It results that, by the appeal of the
two parties, the decision of the lower court is here under review.

ISSUE: Whether he defendant liable for the expenses incurred by the plaintiff in keeping
its organization intact during the period now under consideration.

RULING: NO. First cause of action: The alleged negligent failure of the Visayan Refining
Co. to provide opportune transportation for the copra collected by the plaintiff and
deposited for shipment.

Upon consideration of all the facts revealed in evidence (records of shipping), court found
that the Visayan Refining Co. had used reasonable promptitude in its efforts to get out
the copra from the places where it had been deposited for shipment, notwithstanding
occasional irregularities due at times to the condition of the weather as related to
transportation by sea and at other times to the inability of the Visayan Refining Co. to
dispatch boats to the more remote ports. This finding of the trial judge, that no negligence
of the kind alleged can properly be imputed to the Visayan Refining Co., is in our opinion
supported by the proof.

The trial judge calls attention to the fact that it is expressly provided in paragraph two of
the contract that the shrinkage of copra from the time of its delivery to the party of the
second part till its arrival at Opon should fall upon the plaintiff, from whence it is to be
interfered that the parties intended that the copra should be paid for according to its
weight upon arrival at Opon regardless of its weight when first purchased.

From what has been said it follows that the first cause of action set forth in the complaint
is not well founded, and the trial judge committed no error in absolving the plaintiff
therefrom.

Second cause of action: Plaintiff seeks to recover the sum of P110,000, the alleged
amount expended by the plaintiff in maintaining and extending its organization for
Visayan Refining Co.

As a basis for the defendant's liability in this respect it is alleged that said organization
was maintained and extended at the express request, or requirement, of the defendant,
in conjunction with repeated assurances that the defendant would soon resume activity
as a purchaser of copra.

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SC: We note that in his letter of July 10, 1920, Mr. Day suggested that if the various
purchasing agents of the Visayan Refining Co. would keep their organization intact, the
company would endeavour to see that they should not lose by the transaction in the long
run. These words afford no sufficient basis for the conclusion, which the trial judge
deduced there from, that the defendant is bound to compensate the plaintiff for the
expenses incurred in maintaining its organization. The correspondence sufficiently shows
on its face that there was no intention on the part of the company to lay a basis for
contractual liability of any sort; and the plaintiff must have understood the letters in that
light. The parties could undoubtedly have contracted about it, but there was clearly no
intention to enter into contractual relation; and the law will not raise a contract by
implication against the intention of the parties.

The inducement held forth was that, when purchasing should be resumed, the plaintiff
would be compensated by the profits then to be earned for any expense that would be
incurred in keeping its organization intact. It is needless to say that there is no proof
showing that the officials of the defendant acted in bad faith in holding out this hope.

In the appellant's brief the contention is advanced that the contract between the plaintiff
and the VisayanRefining Co. created the relation of principal and agent between the
parties, and the reliance is placed upon article1729 of the Civil Code which requires the
principal to indemnify the agent for damages incurred in carrying out the agency.
Attentive perusal of the contract is, however, convincing to the effect that the relation
between the parties was not that of principal and agent in so far as relates to the purchase
of copra by the plaintiff. It is true that the Visayan Refining Co. made the plaintiff one of
its instruments for the collection of copra; but it is clear that in making its purchases from
the producers the plaintiff was buying upon its own account

In paragraph three of the contract it is declared that during the continuance of this
contract the Visayan Refining Co. would not appoint any other agent forthe purchase of
copra in Legaspi; and this gives rise indirectly to the inference that the plaintiff was
considered its buying agent. But the use of this term in one clause of the contract cannot
dominate the real nature of the agreement as revealed in other clauses, no less than in
the caption of the agreement itself.

In some of the trade letters also the various instrumentalities used by the Visayan Refining
Co. for the collection of copra are spoken of as agents. But this designation was evidently
used for convenience; and it is very clear that in its activities as a buyer the plaintiff was
acting upon its own account and not as agents of the Visayan Refining Co. The title to all
of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered
by way of subsequent sale to said company.

For the reasons stated we are of the opinion that no liability on the part of the defendant
is shown upon the plaintiff's second cause of action, and the judgment of the trial court
on this part of the case is erroneous.

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6. THOMAS VS PINEDA, 89 PHIL 312


FACTS: Thomas bought the bar and restaurant known as Silver Dollar Café at Plaza Sta.
Cruz. He employed Pineda as a bartender-promoted to cashier and manager during
Japanese occupation, to prevent the business and its property from falling into enemy
hands, Thomas made a fictitious sale to Pineda – fictitious sale was admitted by both
parties; 2nd agreement which was a secret stating that the sale was fictitious. Original
building was destroyed by fire, Pineda was able to remove some furniture and a
considerable qty of stocks to a place of safety- a bar was opened on Calle Bambang-after
4 months it was transferred to the original location. Thomas brought a CPA for the
purpose of examining the books- Pineda threatened Thomas with a gun if they persisted
in their purpose. So Thomas filed a case and set up another bar. 1st CoA- Thomas sought
to compel an ACCOUNTING of Pineda’s operations during the time he was in control of
the bar. Pineda claims that there was a 3rd verbal agreement, the import of which was
that he was to operate the business with no liability other than to turn over to the plaintiff
as the plaintiff would find it after the war. 2nd CoA: ownership of Silver Dollar Café trade
name – it appears that Pineda registered the business as his own

RULING: VALID. Little or no weight can be attached to Pineda’s assertion .As sole
manager with full power to do as his fancies dictated; the defendant could strip the
business naked of all its stocks, leaving the plaintiff holding the bag, as it were, when the
defendant's management was terminated. Unless Thomas was willing to give away his
property and its profits, no man in his right senses would have given his manager an
outright license such as the defendant claims to have gotten from his employer.

The conclusion thus seems clear that the defendant owes the plaintiff an accounting of
his management of the plaintiff's business during the occupation. The exact legal
character of the defendant's relation to the plaintiff matters not a bit. It was enough to
show, and it had been shown, that he had been entrusted with the possession and
management of the plaintiff's business and property for the owner's benefit and had not
made an accounting.

7. PALMA VS. CRISTOBAL, 77 PHIL 712


FACTS: A parcel of a land located in Quesada Street, Tondo, Manila, covered by transfer
certificate of title No. 31073 of the Register of Deeds of Manila, issued in favor of
petitioner Pablo D. Palma, is the subject of contention between the parties.

Petitioner sought, at first, to eject respondent Eduardo Cristobal Reyes from the land in
question in a complaint filed with the Municipal Court of Manila. As respondent raised
the question of ownership, the complaint was dismissed, and petitioner filed with the
Court of First Instance of Manila the complaint which initiated this case, petitioner praying
that he be declared the owner of the land and that respondent be ordered to restore its
possession and to remove his house therefrom.

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The complaint was dismissed and petitioner brought the case to the Court of Appeals,
where he again failed.

The case is appealed by certiorari. In 1909, after registration proceedings under the
provisions of Act No. 496, original certificate of title No. 1627 was issued in the names of
petitioner and his wife Luisa Cristobal. In 1923, said certificate was cancelled and
substituted by certificate of title No. 20968 by virtue of a decree issued by the Court of
First Instance of Manila in connection with Manila cadastre. It was later substituted by
certificate of title No. 26704, also in the name of petitioner and his wife.

After the wife’s death in 1922,a new certificate of title was issued in 1923 only in the
name of the name of the petitioner, substituted in 1928 by certificate of title No. 31073.
The Court of Appeals, upon the evidence, concluded with the Court of First Instance of
Manila that the parcel of land in question is a community property held by petitioner in
trust for the real owners (the respondent being an heir of one of them), the registration
having been made in accordance with an understanding between the co-owners, by
reason of the confidence they had in petitioner and his wife. This confidence, close
relationship, and the fact that the co-owners were receiving their shares in the rentals,
were the reasons why no step had been taken to partition the property.

It was only after the death of Luisa Cristobal and petitioner had taken a second wife that
trouble on religious matters arose between petitioner and respondent, and it gives
credence to the testimony of Apolonia Reyes and respondent to the effect that Luisa,
before her death, called her husband, the petitioner, and enjoined him to give her co-
owners their shares in the parcel of land; but respondent told her then not to worry about
it, for it was more important to them to have her cured of the malady that affected her.
Petitioner answered his wife that she should not worry because he would take care of the
matter by giving the co-owners their respective shares.

After Luisa Cristobal, petitioner’s wife, died in 1922, instead of moving for the partition of
the property, considering specially that petitioner had promised such a partition at the
deathbed of the deceased, respondent appeared as attorney for petitioner and prayed
that a new certificate of title be issued in the name of said petitioner as the sole owner of
the property.

Petitioner assigns as first error of the Court of Appeals the fact that it considered the oral
testimony adduced in behalf of respondent sufficient to rebut the legal presumption that
petitioner is the owner of the land in controversy.

In Severino vs. Severino (43 Phil. 343), this court declared that Affirming the said doctrine
in Barretto vs. Tuason (50 Phil. 888), the Supreme Court declared that In Palet vs. Tejedor
(55 Phil. 790), it was declared that This right to recover is sanctioned by section 55 of Act
No. 496, as amended by Act No. 3322.

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There is no showing why the conclusions of facts of the Court of Appeals should be
disturbed, and upon said facts petitioner’s first assignment of errors appears to be
untenable in the light of law and of the decision of this court. Petitioner alleged that the
Court of Appeals erred in not holding

ISSUE 1: Whether the respondent is estopped from claiming that petitioner is not the
absolute owner of the property in question.

RULING: No. The fact that respondent has been a party to the deception which resulted
in petitioner’s securing in his name the title to a property not belonging to him, is not
valid reason for changing the legal relationship between the latter and its true owners to
such an extent as to let them lose their ownership to a person trying to usurp it.

Respondent is not barred because his appearance as attorney for petitioner was not a
misrepresentation which would induce petitioner to believe that respondent recognized
the former as the sole owner of the property in controversy.

Respondent’s appearance, as attorney for petitioner in 1923, was a consequence of the


understanding, and petitioner could not legitimately assume that it had the effect of
breaking or reversing said understanding.

Lastly, it is contended by petitioner that, even conceding that the controverted property
was owned in common by several co-owners, yet the Court of Appeals erred in not
holding that, as against respondent.

ISSUE 2: Whether petitioner had acquired absolute ownership of the property through
prescription.

RULING. No, Petitioner’s pretension of building his right to claim ownership by


prescription upon his own breach of a trust cannot be countenanced by any court, being
subversive of generally accepted ethical principles.

Petitioner held the property and secured its registration in his name in a fiduciary
capacity, and it is elementary that a trustee cannot acquire by prescription the ownership
of the property entrusted to him.

The position of a trustee is of representative nature. His position is the position of a cestui
que trust. It is logical that all benefits derived by the possession and acts of the agent, as
such agent, should accrue to the benefit of his principal.

The registration of the property in the name of the trustees in possession thereof, must
be deemed to have been effected for the benefit of the cestui que trust.

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Whether or not there is bad faith or fraud in obtaining a decree with respect to a
registered property, the same does not belong to the person in whose favor it was issued,
and the real owners be entitled to recover the ownership of the property so long as the
same has not been transferred to a third person who has acquired it in good faith and for
a valuable consideration.

8. VALERA VS. VELASCO, 51 PHIL 695


Doctrine: The filing of a complaint by an agent against his principal for the collection of a
balance in his favor resulting from the liquidation of the agency accounts between them,
and his rendering of a final account of his operations, are equivalent to an express
renunciation of the agency and terminates the juridical relation between them.

FACTS: This is an appeal taken by Federico Valera from the judgment of the Court of First
Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that
he has not satisfactorily proven his right of action.

By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11,
1919, and on August 8, 1922, the defendant was appointed attorney-in-fact of the said
plaintiff with authority to manage his property in the Philippines, consisting of the
usufruct of a real property located of Echague Street, City of Manila.

The defendant accepted both powers of attorney, managed plaintiff's property, reported
his operations, and rendered accounts of his administration; and on March 31, 1923
presented exhibit F to plaintiff, which is the final account of his administration for said
month, wherein it appears that there is a balance of P3,058.33 in favor of the plaintiff.

The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as
misunderstanding arose between them, the defendant brought suit against the plaintiff,
civil case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923,
and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of
usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of
his claim.

Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo
Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser
conveyed the same right of redemption, for the sum of P200, to the plaintiff himself,
Federico Valera (Exhibit C).

After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had
an execution upon a judgment against the plaintiff rendered in a civil case against the
latter, levied upon said right of redemption, which was sold by the sheriff at public auction
to Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred

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said right of redemption to the defendant Velasco. This is how the title to the right of
usufruct to the aforementioned property later came to vest the said defendant.

ISSUE: Whether the lower court erred in holding that one of the ways of terminating an
agency is by the express or tacit renunciation of the agent; and that the institution of a
civil action and the execution of the judgment obtained by the agent against his principal
is but renunciation of the powers conferred on the agent;

RULING: The lower court did not err. The fact that an agent institutes an action against
his principal for the recovery of the balance in his favor resulting from the liquidation of
the accounts between them arising from the agency, and renders a final account of his
operations, is equivalent to an express renunciation of the agency, and terminates the
juridical relation between them.

Article 1732 of the Civil Code reads as follows:


Art. 1732. Agency is terminated:
o By revocation;
o By the withdrawal of the agent;
o By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
And article 1736 of the same Code provides that:
Art. 1736. An agent may withdraw from the agency by giving notice to the principal.
Should the latter suffer any damage through the withdrawal, the agent must indemnify
him therefore, unless the agent's reason for his withdrawal should be the impossibility of
continuing to act as such without serious detriment to himself.

The misunderstanding between the plaintiff and the defendant over the payment of the
balance of P1,000 due the latter, as a result of the liquidation of the accounts between
them arising from the collections by virtue of the former's usufructuary right, who was
the principal, made by the latter as his agent, and the fact that the said defendant brought
suit against the said principal on March 28, 1928 for the payment of said balance, more
than prove the breach of the juridical relation between them; for, although the agent has
not expressly told his principal that he renounced the agency, yet neither dignity nor
decorum permits the latter to continue representing a person who has adopted such an
antagonistic attitude towards him.

When the agent filed a complaint against his principal for recovery of a sum of money
arising from the liquidation of the accounts between them in connection with the agency,
Federico Valera could not have understood otherwise than that Miguel Velasco
renounced the agency; because his act was more expressive than words and could not
have caused any doubt.

In order to terminate their relations by virtue of the agency the defendant, as agent,
rendered his final account on March 31, 1923 to the plaintiff, as principal.

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The defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his


principal, suing him for the collection of the balance in his favor, resulting from the
liquidation of the agency accounts, ceased ipso facto to be the agent of the plaintiff-
appellant, said agent's purchase of the aforesaid principal's right of usufruct at public
auction held by virtue of an execution issued upon the judgment rendered in favor of the
former and against the latter, is valid and legal.

The defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of


redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a
writ of execution issued upon the judgment obtained by the said Vallejo against the said
Valera, the latter lost all right to said usufruct.

The disagreements between an agent and his principal with respect to the agency, and
the filing of a civil action by the former against the latter for the collection of the balance
in favor of the agent, resulting from a liquidation of the agency accounts, are facts
showing a rupture of relations, and the complaint is equivalent to an express renunciation
of the agency, and is more expressive than if the agent had merely said, "I renounce the
agency.

9. CUI VS. CUI, 100 PHIL 913


FACTS: The Hospicio is a charitable institution established by the spouses Don Pedro Cui
and Doña Benigna Cui, now deceased, "for the care and support, free of charge, of
indigent invalids, and incapacitated and helpless persons." It was incorporated under Act
No. 3239 of the Philippine Legislature in 1925 and endowed with extensive properties by
the said spouses through a series of donations, principally the deed of donation executed
in 1926.

Section 2 of Act No. 3239 gave the initial management to the founders jointly and, in case
of their incapacity or death, to "such persons as they may nominate or designate, in the
order prescribed to them."

Don Pedro Cui died in 1926, while his widow died in 1929. The administration passed to
Mauricio Cui and Dionisio Jakosalem. The former died on 8 May 1931 and the latter on 1
July 1931. On 2 July 1931 Dr. Teodoro Cui, only son of Mauricio Cui, became the
administrator. Beginning 1932, a series of controversies and court litigations ensued
concerning the position of administrator. Plaintiff Jesus Ma. Cui and defendant Antonio
Ma. Cui are brothers, being the sons of Mariano Cui, one of the nephews of the spouses
Don Pedro Cui and Doña Benigna Cui. In 1960, the then incumbent administrator, Dr.
Teodoro Cui, resigned in favor of Antonio Ma. Cui pursuant to a "convenio" entered into
between them. On February 28, Antonio Ma. Cui took his oath of office. Jesus Ma. Cui,
had no prior notice of either the "convenio" or of his brother's assumption of the position.

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Dr. Teodoro Cui died on 27 August and the plaintiff wrote a letter to the defendant
demanding that the office be turned over to him. The demand remained unheeded, the
plaintiff filed the complaint. Romulo Cui later on intervened, claiming a right to the same
office, being a grandson of Vicente Cui, one of the nephews mentioned by the founders
of the Hospicio in their deed of donation.

As between Jesus and Antonio the main issue turns upon their respective qualifications
to the position of administrator. Jesus is the older and under equal circumstances would
be preferred pursuant to section 2 of the deed of donation. However, before the test of
age may be, applied the deed gives preference to the one, among the legitimate
descendants of the nephews named, "que posea titulo de abogado, o medico, o ingeniero
civil, o farmaceutico, o a falta de estos titulos el que pague al estado mayor impuesto o
contribucion."

What is being disputed is the meaning of the term "titulo de abogado." Jesus Ma. Cui
holds the degree of Bachelor of Laws from the University of Santo Tomas (Class 1926) but
is not a member of the Bar, not having passed the examinations. Antonio Ma. Cui is a
member of the Bar and although disbarred by the Court but was reinstated by resolution
about two weeks before he assumed the position of administrator of the Hospicio.

The Court a quo, decied in favor of the plaintiff and held that the phrase "titulo de
abogado," taken alone, means that of a full-fledged lawyer, but that has used in the deed
of donation and considering the function or purpose of the administrator, it should not
be given a strict interpretation but a liberal one," and therefore means a law
degree or diploma of Bachelor of Laws.

Jesus Ma. Cui believed he was entitled to the office in as long ago as 1932. On January 26
of that year he filed a complaint in quo warranto against Dr. Teodoro Cui, who assumed
the administration of the Hospicio. Mariano Cui, the plaintiff's father and Antonio Ma. Cui
came in as intervenors. The case was dismissed by the Court of First Instance upon a
demurrer by the. Upon appeal to the Supreme Court from the order of dismissal, the case
was remanded. The plaintiff, did not prosecute the case as decided by the Court, but
entered into an arrangement whereby Teodoro Cui continued as administrator, Mariano
Cui was named "legal adviser" and plaintiff Jesus Ma. Cui accepted a position as assistant
administrator.

The plaintiff tried to get the position by a series of extra-judicial maneuvers. However, the
Commissioner to the Secretary of Justice ruled that the plaintiff, not being a lawyer, was
not entitled to the administration of the Hospicio.

Defendant Antonio Ma. Cui was reinstated by this Court as member of the Bar, and
succeeded Dr. Teodoro Cui when he resigned as administrator pursuant to the "convenio"
between them.

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ISSUE & RULING:


1. WON the administrator should only have possession of the academic degree
of Bachelor of Laws.

NO. The Court is of the opinion, that whether taken alone or in context the
term "titulo de abogado" means not mere possession of the academic degree
of Bachelor of Laws but membership in the Bar after due admission, qualifying
one for the practice of law. In Spanish the word "titulo" is defined as
"testimonies o instrumento dado para ejercer un empleo, dignidad o
profesion" and the word "abogado," as follows: "Perito en el derecho positivo
que se dedica a defender en juicio, por escrito o de palabra, los derechos o
intereses de los litigantes, y tambien a dar dictmen sobre las cuestiones o
puntos legales que se le consultan (Id., p.5) A Bachelor's degree alone,
conferred by a law school upon completion of certain academic requirements,
does not entitle its holder to exercise the legal profession. The English
equivalent of "abogado" is lawyer or attorney-at-law. This term has a fixed and
general signification, and has reference to that class of persons who are by
license officers of the courts, empowered to appear, prosecute and defend,
and upon whom peculiar duties, responsibilities and liabilities are devolved by
law as a consequence.

2. WON Jesus Cui is disqualified as being an administrator.

YES. He only has the academic degree of Bachelor of Laws. The founders of the
Hospicio de San Jose de Barili provided in the deed of donation that if not a
lawyer, the administrator should be a doctor or a civil engineer or a
pharmacist, in that order; or failing all these, should be the one who pays the
highest taxes among those otherwise qualified. A lawyer, first of all, because
under Act No. 3239 the managers or trustees of the Hospicio shall "make
regulations for the government of said institution (Sec. 3, b); shall "prescribe
the conditions subject to which invalids and incapacitated and destitute
persons may be admitted to the institute" (Sec. 3, d); shall see to it that the
rules and conditions promulgated for admission are not in conflict with the
provisions of the Act; and shall administer properties of considerable value —
for all of which work, it is to be presumed, a working knowledge of the law and
a license to practice the profession would be a distinct asset.

3. WON Antonio Cui is entitled as administrator despite his past disbarment.

YES. It is argued that although the latter (Antonio) is a member of the Bar he
is nevertheless disqualified by virtue of paragraph 3 of the deed of donation,
which provides that the administrator may be removed on the ground, among
others, of ineptitude in the discharge of his office or lack of evident sound

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moral character. Reference is made to the fact that the defendant was
disbarred by this Court in1957 for immorality and unprofessional conduct. It is
also a fact, however, that he was reinstated in 1960, before he assumed the
office of administrator. His reinstatement is a recognition of his moral
rehabilitation, upon proof no less than that required for his admission to the
Bar in the first place.

As far as moral character is concerned, the standard required of one seeking


reinstatement to the office of attorney cannot be less exacting than that
implied in paragraph 3 of the deed of donation as a requisite for the office
which is disputed in this case. When the defendant was restored to the roll of
lawyers the restrictions and disabilities resulting from his previous disbarment
were wiped out.

This action must fail on one other ground: it is already barred by lapse of time
amounting the prescription or laches. Under Section 16 of Rule 66, this kind of
action must be filed within one (1) year after the right of plaintiff to hold the
office arose.

4. WON the action of the plaintiff for administrator has prescribed.

YES. The failure of the plaintiff to prosecute his claim judicially after this Court
decided the first case of Cui v. Cui in 1934 remanding it to the trial court for
further proceedings; his acceptance instead of the position of assistant
administrator, allowing Dr. Teodoro Cui to continue as administrator and his
failure to file an action in quo warranto against said Dr. Cui after 31 July 1956,
when the appeal in Civil Case No. R-1216 of the Cebu Court was dismissed
upon motion of the parties precisely so that the conflicting claims of the
parties could be ventilated in such an action — all these circumstances militate
against the plaintiff's present claim in view of the rule that an action in quo
warranto must be filed within one year after the right of the plaintiff to hold
the office arose. The excuse that the plaintiff did not file an action against Dr.
Teodoro Cui after 31 July 1956 because of the latter's illness did not interrupt
the running of the statutory period. And the fact that this action was filed
within one year of the defendant's assumption of office in September 1960
does not make the plaintiff's position any better, for the basis of the action is
his own right to the office and it is from the time such right arose that the one-
year limitation must be counted, not from the date the incumbent began to
discharge the duties of said office.

5. WON Romulo Cui is entitled as administrator.

NO. Now for the claim of intervenor and appellant Romulo Cui. This party is
also a lawyer, grandson of Vicente Cui, one of the nephews of the founders of

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the Hospicio mentioned by them in the deed of donation. He is further, in the


line of succession, than defendant Antonio Ma. Cui, who is a son of Mariano
Cui, another one of the said nephews. The deed of donation provides: "a la
muerte o incapacidad de estos administradores (those appointed in the deed
itself) pasara a una sola persona que sera el varon, mayor de edad, que
descienda legitimamente de cualquiera de nuestros sobrinos legitimos
Mariano Cui, Mauricio Cui, Vicente Cui, Victor Cui, y que posea titulo de
abogado ... En igualdad de circumstancias, sera preferido el varon de mas edad
descendiente de quien tenia ultimamente la administration." Besides being a
nearer descendant than Romulo Cui, Antonio Ma. Cui is older than he and
therefore is preferred when the circumstances are otherwise equal. The
intervenor contends that the intention of the founders was to confer the
administration by line and successively to the descendants of the nephews
named in the deed, in the order they are named. Thus, he argues, since the
last administrator was Dr. Teodoro Cui, who belonged to the Mauricio Cui line,
the next administrator must come from the line of Vicente Cui, to whom the
intervenor belongs. This interpretation, however, is not justified by the terms
of the deed of donation.

10. ALLIED FREE WORKSER’S UNION (PLUM) VS. COMPANIA MARITAMA, 19 SVRA 258
FACTS: MARITIMA is a local corporation engaged in the shipping business. Teves is its
branch manager in the port of Iligan City and AFWU is a duly registered legitimate labor
organization with 225 members. On August 11, 1952, MARITIMA, through Teves, entered
into a CONTRACT with AFWU to do and perform all the work of stevedoring and arrastre
services of all its vessels or boats calling in the port of Iligan City, beginning August 12,
1952. During the first month of the existence of the CONTRACT, AFWU rendered
satisfactory service. So, MARITIMA, through Teves, verbally renewed the same.

The harmonious relations between MARITIMA and AFWU lasted up to the latter part of
1953 when the former complained to the latter of unsatisfactory and inefficient service
by the laborers doing the arrastre and stevedoring work. This deteriorating situation was
admitted as a fact by AFWU's president. To remedy the situation since MARITIMA's
business was being adversely affected -Teves was forced to hire extra laborers from
among "stand-by" workers not affiliated to any union to help in the stevedoring and
arrastre work. The wages of these extra laborers were paid by MARITIMA through
separate vouchers and not by AFWU. Moreover, said wages were not charged to the
consignees or owners of the cargoes.

On July 23, 1954, AFWU presented to MARITIMA a written proposal for a collective
bargaining agreement. This demand embodied certain terms and conditions of
employment different from the provisions of the CONTRACT. No reply was made by
MARITIMA. AFWU sued MARITIMA for unfair labor practice saying that MARITIMA

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refused to bargain collectively. CIR dismissed the case on the ground that it has no
jurisdiction over the case.

ISSUES: 1. Whether or not Maritima is can be considered an employer of the members


of AFWU? NO. 2. Whether or not AFWU is an agent of Maritima? NO.

RULING:
1. There is no any direct employment relationship between MARITIMA and the laborers.
The latter have no separate individual contracts with MARITIMA. In fact, the court a quo
found that it was AFWU that hired them. Their only possible connection with MARITIMA
is through AFWU which contracted with the latter. Hence, they could not
possibly be in a better class than AFWU which dealt with MARITIMA.

a. Under the CONTRACT, AFWU was an independent contractor of MARITIMA.

i. The petitioner union operated as a labor contractor under the so-called "cabo" system
has a complete set of officers and office personnel and its organizational structure.

ii. The payrolls where laborers are listed and paid were prepared by the union itself
without the intervention or control of the respondent company and/or its agent at. The
respondent never had any knowledge of the individual names of laborers and/or workers
listed in the union payroll or in their roster of membership.

iii. The union engaged the services of their members in undertaking the work of arrastre
and stevedoring geither to haul shippers' goods from their warehouses to the MARITIMA
boat or from the boat to the different consignees. The charges for such service were
known by the union and collected by them through their bill collector, who are employees
of the union and not of the respondent. The respondent had no intervention whatsoever
in the collection of those charges.

iv. The union members who were hired by the union to perform arrastre and stevedoring
work on respondents' vessels at Iligan port were being supervised and controlled by the
general foreman of the petitioner union or by any union assistant when performing
arrastre and/or stevedoring work aboard vessels of the Compañia MARITIMA. There were
no instances where offices and employees of the respondent Compañia MARITIMA
and/or its agent had interferred in the giving of instructions to the laborers performing
the arrastre and/or stevedoring work.

b. It is true that MARITIMA admits that it did not answer AFWU's proposal for a
collective bargaining agreement. From this it does not necessarily follow that it is guilty
of unfair labor practice. Under the law the duty to bargain collectively arises only
between the "employer" and its "employees". Where neither party is an ''employer"
nor an "employee" of the other, no such duty would exist. Needless to add, where there
is no duty to bargain collectively the refusal to bargain violates no right.

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c. The facts as found by the court a quo strongly indicate that it is AFWU itself who is the
"employer" of those laborers. The facts very succinctly show that it was AFWU, through
its officers, which (1) selected and hired the laborers, (2) paid their wages, (3) exercised
control and supervision over them, and (4) had the power to discipline and dismiss them.
These are the very elements constituting an employer-employee relationship.

2. An agent can not represent two conflicting interests that are diametrically opposed.
And that the cases sought to be relied upon did not involve representatives of opposing
interests.

11. FAR ESTER EXPORT AND IMPORT CO. VS LIM TECK SUAN, 97 PHIL 171
FACTS: Sometime in November, 1948, Ignacio Delizalde, an agent of the Far Eastern
Export & Import Company, went to the store of Lim Teck Suan and offered to sell textile,
showing samples thereof, and having arrived at an agreement with Bernardo Lim, the
General Manager of Lim Teck Suan, Delizalde returned on November 17 with the Buyer's
order. In accordance with said order, respondent established a letter of credit No. 6390
in favor of Frenkel International Corporation through the Hongkong and Shanghai
Bangking Corporation. On February 11, 1949, the textile arrived at Manila on board the
vessel M. S. Arnold Maersk. The respondent complained to the petitioner of the inferior
quality of the textile received by him. Upon instructions of the petitioner, the goods were
deposited to the United Warehouse Corporation. Then as per suggestion of the
Petitioner, respondent withdrew the textiles from the Warehouse for the purpose of
offering them for sale which netted P11,907.30. Deducting this amount from the sum of
P23,686.96 which included the amount paid by respondent for said textile and the
warehouse expenses, a difference of P11,476.66 is left, representing the net direct loss.

Herein respondent filed an action for collection of sum of money amounting to P11,
4476.60, with legal interest from the date of the filing of the complaint and to pay the
costs. The Court of First Instance of Manila court acquitted the petitioner. On appeal the
Court of Appeals reversed the judgment entered by the lower court, basing its decision
of reversal on the case of Jose Velasco, vs. Universal Trading Co., where the transaction
therein involved was found by the court to be one of purchase and sale and not of
brokerage or agency. Hence this present petition for certiorari to review a decision of the
CA.

ISSUE: WON the transaction involved in the case is a contract of purchase and sale or of
a brokerage or agency.

HELD: The transaction is a contract of purchase and sale

We notice the following similarities between the Velasco case and the present case,
however, in the latter case although Suan received the merchandise he immediately

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protested its poor quality and it was deposited in the warehouse and later withdrawn and
sold for the best price possible, all at the suggestion of the Export company. The present
case is in our opinion a stronger one than that of Velasco for holding the transaction as
one of purchase and sale because the Buyer’s Order, the same speaks of the items
(merchandise) therein involved as sold, and the sale was even confirmed by the Export
company. In both cases, the agents Universal Trading Co. and the export company dealt
directly with the local merchants Velasco and Suan without expressly indicating or
revealing their principals.

In both cases there was no privity of contract between the buyers — Suan and Velasco
and the suppliers Frenkel International Corporation and A. J. Wilson Company,
respectively. In both cases no commission or monetary consideration was paid or agreed
to be paid by the buyers to the Export company and the Universal Trading Co., proof that
there was no agency or brokerage, and that the profit of the latter was undoubtedly the
difference between the price listed to the buyers and the net or special price quoted to
the sellers, by the suppliers. As already stated, it was held in the Velasco case that the
transaction therein entered into was one of purchase and sale, and for the same reasons
given there, we agreed with the Court of Appeals that the transaction entered into here
is one of purchase and sale.

As was held by this Tribunal in the case of Gonzalo Puyat & Sons Incorporated vs. Arco
Amusement, 72 Phil., 402, where a foreign company has an agent here selling its goods
and merchandise, that same agent could not very well act as agent for local buyers,
because the interests of his foreign principal and those of the buyer would be in direct
conflict. He could not serve two masters at the same time. In the present case, the Export
company being an agent of the Frenkel International Corporation could not, as it claims,
have acted as an agent or broker for Suan. Finding no reversible error in the decision
appealed from, the same is hereby affirmed, with costs.

12. NELSON & CO., INC. VS LEPANTO CONSOLIDATED MINING CO., 26 SCRA 540

FACTS: The Management contract in question was made by the parties on January 30,
1937 for a period of five (5) years. In the latter part of 1941, the parties agreed to renew
the contract for another period of five (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. 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 of 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. On June 26, 1948 the mines resumed
operation under the exclusive management of LEPANTO. Shortly after, a disagreement
arose between NIELSON and LEPANTO over the status of the operating contract in
question which as renewed expired in 1947. Under the terms thereof, the management

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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 February 6, 1958, plaintiff brought this action against defendant 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 January 30, 1937, including
attorney's fees and costs. Defendant 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 present action. After trial, during which the parties
presented testimonial and numerous documentary evidence, the court a quo rendered a
decision dismissing the complaint with costs. Nielson appealed and the SC hereby reverse
the decision of the court a quo and entered in lieu thereof another, ordering the appellee
Lepanto to pay appellant Nielson.

Now in another case, following the above mentioned order, Lepanto filed a Motion for
consideration asserting for the first time that the management contract in question is a
contract of agency such that, it has the right to revoke and terminate the said contract,
as it did terminate the same, under the law of agency, and particularly pursuant to Article
1733 of the Old Civil Code (Article 1920 of the New Civil Code).

ISSUE: Whether the management contract is a contract of agency or a contract of lease


of services.

RULING: The Management Contract is a Contract of Lease of services

Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the
contract of agency, one person binds himself to render some service or do something for
the account or at the request of another." On the other hand, 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 contemplates 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.

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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 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 approval of Lepanto. It is clear, therefore, that even in these cases
Nielson could not execute juridical acts which would bind Lepanto without first 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 for 1936, and from the provision
of paragraph XI of the Management contract, that the employment by Lepanto of Nielson
to operate and manage its mines was principally in consideration of the know-how and
technical services that Nielson offered Lepanto. The contract thus entered into pursuant
to the offer made by Nielson and accepted by Lepanto was a "detailed operating
contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto
considered Nielson as its agent and that Lepanto terminated the management contract
because it had lost its trust and confidence in Nielson. It is Our considered view that by
express stipulation of the parties, the management contract in question is not revocable
at the will of Lepanto. We rule that this management contract is not a contract of agency
as defined in Article 1709 of the old Civil Code, but a contract of lease of services as
defined in Article 1544 of the same Code. This contract cannot be unilaterally revoked by
Lepanto.

13. SHELL CO., OF THE PHILS LTD VS. FIREMEN’S INSURANCE OF NEWARK, NJ., 100 PHIL 755
FACTS: It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on
September 3, 1947 to the Shell Gasoline and Service Station, operated by Porfirio De la
Fuente, for washing, greasing and spraying. The operator of the station, having agreed to
do service upon payment of P8.00, the car was placed on a hydraulic lifter under the
direction of the personnel of the station, when before the service be could be
accomplished, there was an escape of the air from the hydraulic lifter which caused the
car to sway and just for a few seconds, the car fell.

The case was immediately reported to the Manila Adjustor Company, the adjustor of the
firemen's Insurance Company and the Commercial Casualty Insurance Company, as the
car was insured with these insurance companies. The damaged car was taken to the shop
of the Philippine Motors, Incorporated, for repair upon order of the Firemen's Insurance
Company and the Commercial Casualty Company, with the consent of Salvador R. Sison.

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The car was restored to running condition after repairs amounting to P1,651.38, and was
delivered to Salvador R. Sison, who, in turn made assignments of his rights to recover
damages in favor of the Firemen's Insurance Company and the Commercial Casualty
Insurance Company.

The insurance companies after paying the sum of P1,651.38 for the damage and charging
the balance of P100.00 to Salvador Sison in accordance with the terms of the insurance
contract, have filed this action together with said Salvador Sison for the recovery of the
total amount of the damage from the defendants on the ground of negligence. The
defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his
separate answer and contended further that the accidental fall of the car was caused by
unforseen event. After trial the Court dismissed the complaint. The plaintiffs appealed.
The Court of Appeals reversed the judgment and sentenced the defendant to pay the
amount sought to be recovered, legal interest and costs, as stated at the beginning of this
opinion. Hence this present Appeal by certiorari under Rule 46.

ISSUE: WON Shell Co. of the Phil. is liable because Porfirio Dela Fuente is their Agent.

HELD: YES

Taking into consideration the fact that the operator owed his position to the company
and the latter could remove him or terminate his services at will; that the service station
belonged to the company and bore its trade name and the operator sold only the
products of the company; that the equipment used by the operator belonged to the
company and were just loaned to the operator and the company took charge of their
repair and maintenance; that an employee of the company supervised the operator and
conducted periodic inspection of the company's gasoline and service station; that the
price of the products sold by the operator was fixed by the company and not by the
operator; and that the receipt signed by the operator indicated that he was a mere agent,
the finding of the Court of Appeals that the operator was an agent of the company and
not an independent contractor should not be disturbed. As the act of the agent or his
employees acting within the scope of his authority is the act of the principal, the breach
of the undertaking by the agent is one for which the principal is answerable.

14. SEVILLA VS. CA, 160 SCRA 171

FACTS: On Oct. 19, 1960, an contract was entered between Mrs. Segundina Noguera,
party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao
as party of the second part, and hereinafter referred to as appellants, the Tourist World
Service, Inc. leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former use as a branch office. In the said contract the party of the third
part held herself solidarily liable with the party of the part for the prompt payment of the
monthly rental agreed on.

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On or about November 24, 1961 the Tourist World Service branch in Mabini St. appears
to be losing, it decided on closing down its office. It further appears that on Jan. 3, 1962,
the contract with the appellees for the use of the Branch Office premises was terminated
and while the effectivity thereof was Jan. 31, 1962, the appellees no longer use it. As a
matter of fact appellants have not been using it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the corporate secretary Gabino
Canilao went over to the branch office, and, finding the premises locked, and, being
unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service.

When neither the appellant Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against the appellees with a
prayer for the issuance of mandatory preliminary injunction. Both appellees answered
with counterclaims. For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice. The appellee Segundina Noguera
sought reconsideration of the order dismissing her counterclaim which the court a quo,
in an order dated June 8, 1963, granted permitting her to present evidence in support of
her counterclaim. On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard
following which the court a quo ordered both cases dismissed for lack of merit, on the
basis of which was elevated the instant appeal.

The trial court held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative
to terminate the lease and padlock the premises. It likewise found the petitioner, Lina
Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was
bound by the acts of her employer. The respondent Court of Appeal rendered an
affirmance. Hence the present petition.

ISSUE: WON Sevilla is an employee of Tourist World Service, Inc.

HELD: NO

The records will show that the petitioner, Lina Sevilla, was not subject to control by the
private respondent Tourist World Service, Inc., either as to the result of the enterprise or
as to the means used in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and
for rental payments, an arrangement that would be like claims of a master-servant
relationship. True the respondent Court would later minimize her participation in the
lease as one of mere guaranty, that does not make her an employee of Tourist World,
since in any case, a true employee cannot be made to part with his own money in

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pursuance of his employer's business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly not employment.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must
have done so pursuant to a contract of agency. It is the essence of this contract that the
agent renders services "in representation or on behalf of another. In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November 28, 1961,
pre-assumed her principal's authority as owner of the business undertaking. We are
convinced, considering the circumstances and from the respondent Court's recital of
facts, that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it
is one coupled with an interest, the agency having been created for mutual interest, of
the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent herself,
and as such, she had acquired an interest in the business entrusted to her. Moreover, she
had assumed a personal obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business, using her own name, after
Tourist World had stopped further operations. Her interest, obviously, is not to the
commissions she earned as a result of her business transactions, but one that extends to
the very subject matter of the power of management delegated to her. It is an agency
that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the
revocation complained of should entitle the petitioner, Lina Sevilla, to damages. As we
have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking WHEREFORE, the Decision promulgated on January 23,
1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals
is hereby REVERSED and SET ASIDE.

15. LIM VS. PEOPLE, 133 SCRA 333


FACTS: The appellant is a businesswoman. On January 10, 1966, the appellant went to
the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the
proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The
appellant was to receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Of the total
value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on
three different times. Demands for the payment of the balance of the value of the tobacco
were made Ayroso but to no avail. Interestingly, the appellant denied that demands for

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payment were made upon her, although it is a fact that on October 19, 1966, she wrote
a letter to Salud Bantug, explaining her nonpayment.

Pursuant to this letter, the appellant sent a money order for P100.00 on October
24, 1967, and another for P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967,
dated April 18, 1967, or a total of P240.00. As no further amount was paid, the
complainant filed a complaint against the appellant for estafa. After trial, Petitioner
Lourdes Valerio Lim was found guilty of the crime of estafa. From this judgment, appeal
was taken to the then Court of Appeals which affirmed the decision of the lower court
but modified the penalty. Hence this present petition for review by certiorari.

ISSUE: Whether or not the honorable Court of Appeals was legally right in holding that
the foregoing receipt is a contract of agency and not a contract of sale

HELD: CA is correct; it is a Contract of Agency

Aside from the fact that Maria Ayroso testified that the appellant asked her to be her
agent in selling Ayroso's tobacco, the appellant herself admitted that there was an
agreement that upon the sale of the tobacco she would be given something. The
appellant is a businesswoman, and it is unbelievable that she would go to the extent of
going to Ayroso's house and take the tobacco with a jeep which she had brought if she
did not intend to make a profit out of the transaction. Certainly, if she was doing a favor
to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would
not have been the appellant who would have gone to the house of Ayroso, but it would
have been Ayroso who would have gone to the house of the appellant and deliver the
tobacco to the appellant. The fact that appellant received the tobacco to be sold at P1.30
per kilo and the proceeds to be given to complainant as soon as it was sold, strongly
negates transfer of ownership of the goods to the petitioner. The agreement constituted
her as an agent with the obligation to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With
costs.

16. SAN DIEGO, SR. VS. NOMBRE, 11 SCRA 165


FACTS: The case at bar had its origin in Special Proceedings No. 7279 of the CFI of Negros
Occidental wherein respondent Adelo Nombre was the duly constituted judicial
administrator. On May 1, 1960, Nombre, in his capacity was judicial administrator of the
intestate estate subject of the Sp. Proc. stated above, leased one of the properties of the
estate (a fishpond identified as Lot No. 1617 of the cadastral survey of Kabankaban,
Negros Occidental), to Pedro Escanlar, the other respondent. The terms of the lease was
for three (3) years, with a yearly rental of P3,000.00 to expire on May 1, 1963, the
transaction having been done, admittedly, without previous authority or approval of the

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Court where the proceedings was pending. On January 17, 1961, Nombre was removed
as administrator by Order of the court and one Sofronio Campillanos was appointed in his
stead.

The appeal on the Order of Nombre's removal is supposedly pending with the
Court of Appeals. Respondent Escanlar was cited for contempt, allegedly for his refusal to
surrender the fishpond to the newly appointed administrator. On March 20, 1961,
Campillanos filed a motion asking for authority to execute a lease contract of the same
fishpond, in favor of petitioner herein, Moises San Diego, Sr., for 5 years from 1961, at a
yearly rental of P5,000.00. Escanlar was not notified of such motion. Nombre, the
deposed administrator, presented a written opposition to the motion of Campillanos on
April 11, 1964, pointing out that the fishpond had been leased by him to Escanlar for 3
years, the period of which was going to expire on May 1, 1963. Notwithstanding the
opposition, the Court declared that the contract in favor of Escanlar was null and void, for
want of judicial authority. Nombre moved to reconsider the order but it was denied. The
trial judge stating that the contract in favor of Escanlar was executed in bad faith and was
fraudulent because of the imminence of Nombre's removal as administrator, one of the
causes of which was his indiscriminate pleasant, of the property with inadequate rentals.

A Petition for Certiorari was filed by the Nombre and Escanlar, asking for the
annulment of the Orders of the Court of Appeals. A Writ of preliminary injunction was
likewise prayed for to restrain the new administrator Campillanos from possessing the
fishpond and from executing a new lease contract covering it. The CA issued the injunctive
writ and required respondents therein to Answer. Thereafter, the CA dismissed the
petition for certiorari as it has been held that even in the absence of such special powers,
a contract or lease for more than 6 years is not entirely invalid; it is invalid only in so far
as it exceeds the six-year limit. On September 13, 1961, petitioner herein Moises San
Diego, Sr., who was not a party in the case, intervened and moved for a reconsideration
of the above judgment. The petition was denied. With the denial of the said motions, only
San Diego, appealed therefrom.

ISSUE: WON a judicial administrator can validly lease property of the estate without prior
judicial authority and approval.

HELD: NO

The lease contract in favor of Escanlar being for 3 years and without such court approval
and authority is, therefore, null and void.

While it may be admitted that the duties of a judicial administrator and an agent
(petitioner alleges that both act in representative capacity), are in some respects,
identical, the provisions on agency (Art. 1878, C.C.), should not apply to a judicial
administrator. A judicial administrator is appointed by the Court. He is not only the
representative of said Court, but also the heirs and creditors of the estate (Chua Tan v.

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Del Rosario, 57 Phil. 411). A judicial administrator before entering into his duties, is
required to file a bond. These circumstances are not true in case of agency. The agent is
only answerable to his principal. The protection which the law gives the principal, in
limiting the powers and rights of an agent, stems from the fact that control by the
principal can only be thru agreements, whereas the acts of a judicial administrator are
subject to specific provisions of law and orders of the appointing court. WHEREFORE, the
decision appealed from should be, as it is hereby affirmed, in all respects, with costs
against petitioner Moises San Diego, Sr.

17. DE LA PENA VS. HIDALGO, 16 PHIL 450


FACTS: Before De la Pena went to Spain, he executed a power of attorney in favor of
Federico and for 3 other people. Their task is to represent him and administer various
properties he owned in Manila. Federico took charge in Nov. 1887. After a few years,
Federico wrote a letter to De la Pena. It contains a request that De la Pena assign a person
who might substitute Federico in the event that he leaves the Philippines because one of
the agents died and the other 2 are unwilling to take charge. De la Pena did not answer
the letter – there was neither approval nor objection on the accounts and no appointment
of another person who might substitute Federico. Because of health reasons, Federico
went to Spain. Before he departed, he sent another letter to De la Pena a summary of
accounts and informing that he will be leaving the Philippines and that he turned over the
administration to Antonio (though Federico stated that if De la Pena is not happy with
this, De la Pena must send Antonio a new power of attorney). De la Pena files in court for
the collection of revenue from his accounts which was handled by Federico. De la Pena
alleges that Federico has only remitted P1, 200.00 and still owes him roughly P72,000.00.
Furthermore, De la Pena seeks to hold Federico liable for the administration from the
period of 1887 until 1904. Federico asserts that he cannot be liable for the period after
he renounced his agency. Furthermore Federico argues that his renunciation and
appointment of a substitute was legal for there was no objection on the part of De la
Pena.

ISSUE: WON there was a valid agency in the case of Antonio.

HELD: YES

There was an implied agency in the case of Antonio. De la Pena created an implied
agency in favor of Antonio because of his silence on the matter for a number of years.
There was a valid renunciation in the case of Federico. His reason for leaving the country
is legitimate. Furthermore, he gave notice to De la Pena about his situation in which the
latter failed to give his objection. Being a valid agency on the part of Antonio and a valid
renunciation on the party of Federico, it must follow that the liability of Federico only
extends up to the point before his renunciation of the agency. The implied agency is
founded on the lack of contradiction or opposition, which constitutes simultaneous
agreement on the part of the presumed principal to the execution of the contract. The

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agent and administrator who was obliged to leave his charge for a legitimate cause and
who duly informed his principal, is thenceforward released and freed from the results and
consequences of the management of the person who substituted him with the consent,
even tacit though it be, of his principal.

Furthermore, it was also argued by De la Pena that there was no authority on the
part of Federico to appoint a substitute. The COURT ruled that the power of attorney
given by De la Pena to Federico did not include a power to appoint a substitute.
Nevertheless, it was pointed out that the appointment made by Federico was not based
on the power of attorney of De la Pena. The appointment was grounded on a new power
of attorney Federico himself executed in favor of Antonio. Thus, there was no violation
incurred by Federico. And as stated in the case, De la Pena was duly informed of this but
nevertheless kept his silence on the matter.

18. CONDE VS. CA, 119 SCRA 245


FACTS: On 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga
Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years
from said date, a parcel of agricultural land located in Maghubas Burauen Leyte, (Lot 840),
with an approximate area of one (1) hectare, to Casimira Pasagui, married to Pio Altera
for P165.00. On 28 November 1945, private respondent Paciente Cordero, son-in-law of
the Alteras, signed a document in the Visayan dialect, the English translation of which
reads: MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH
REPURCHASE WHICH DOCUMENT GOT LOST

To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira
Pasagui, was a signatory to the deed. Petitioner maintains that because Pio Altera was
very ill at the time, Paciente Cordero executed the deed of resale for and on behalf of his
father-in-law. Petitioner further states that she redeemed the property with her own
money as her co-heirs were bereft of funds for the purpose. The pacto de retro document
was eventually found. On 30 June 1965 Pio Altera sold the disputed lot to the spouses
Ramon Conde and Catalina T. Conde, who are also private respondents herein. Their
relationship to petitioner does not appear from the records. Nor has the document of sale
been exhibited. Contending that she had validly repurchased the lot in question in 1945,
petitioner filed in the CFI of Leyte, Branch IX, Tacloban City, a Complaint against Paciente
Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and
Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and
declaration of ownership.

After trial, the lower Court rendered its Decision dismissing the Complaint and the
counterclaim and ordering petitioner "to vacate the property in dispute and deliver its
peaceful possession to the defendants Ramon Conde and Catalina T. Conde". On appeal,
the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to

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validly exercise her right of repurchase in view of the fact that the Memorandum of
Repurchase was signed by Paciente Cordero and not by Pio Altera, the vendee-a-retro,
and that there is nothing in said document to show that Cordero was specifically
authorized to act for and on behalf of the vendee a retro, Pio Altera. Reconsideration
having been denied by the Appellate Court, the case is before us on review.

ISSUE: WON there was an implied agency when Cordero signed the Memorandum of
Repurchase.

HELD: YES. There is no question that neither of the vendees-a-retro signed the
"Memorandum of Repurchase", and that there was no formal authorization from the
vendees for Paciente Cordero to act for and on their behalf. However, the fact that from
the execution of the repurchase document in 1945, possession, which heretofore had
been with the Alteras, has been in the hands of petitioner as stipulated therein. Land
taxes have also been paid for by petitioner yearly from 1947 to 1969 inclusively. If, as
opined by both the Court a quo and the Appellate Court, petitioner had done nothing to
formalize her repurchase, by the same token, neither have the vendees-a-retro done
anything to clear their title of the encumbrance therein regarding petitioner's right to
repurchase. No new agreement was entered into by the parties as stipulated in the deed
of pacto de retro, if the vendors a retro failed to exercise their right of redemption after
ten years. If, as alleged, petitioner exerted no effort to procure the signature of Pio Altera
after he had recovered from his illness, neither did the Alteras repudiate the deed that
their son-in-law had signed. Thus, an implied agency must be held to have been created
from their silence or lack of action, or their failure to repudiate the agency.

In sum, although the contending parties were legally wanting in their respective
actuations, the repurchase by petitioner is supported by the admissions at the pre-trial
that petitioner has been in possession since the year 1945, the date of the deed of
repurchase, and has been paying land taxes thereon since then. The imperatives of
substantial justice, and the equitable principle of laches brought about by private
respondents' inaction and neglect for 24 years, loom in petitioner's favor. WHEREFORE,
the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and
petitioner is hereby declared the owner of the disputed property.
19. HARRY E. KELLER ELEC. CO. VS. RODRIGUEZ, 44 PHIL 19
FACTS: The plaintiff is a domestic corporation with its principal office in the city of Manila
and engaged in the electrical business, and among other things in the sale of what is
known as the "Matthews" electric plant, and the defendant is a resident of Talisay,
Occidental Negros, and A. C. Montelibano was a resident of Iloilo. Having this information,
Montelibano approached plaintiff at its Manila office, claiming that he could find a
purchaser for the "Matthews" plant. Montelibano was told by the plaintiff that for any
plant that he could sell or any customer that he could find he would be paid a commission
of 10% for his services, if the sale was consummated. Among other persons. Montelibano

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interviews the defendant, and, through his efforts, one of the "Matthews" plants was sold
by the plaintiff to the defendant, and was shipped from Manila to Iloilo. Thereafter the
same was installed on defendant's premises after but without the knowledge of the
plaintiff, the defendant paid the purchase price to Montelibano. As a result, plaintiff
commenced this action against the defendant, alleging that about August 18, 1920, it sold
and delivered to the defendant the electric plant at the agreed price of P2,513.55 no part
of which has been paid, the demands judgment for the amount with interest from
October 20, 1920. For answer, the defendant admits the corporation of the plaintiff, and
denies all other material allegations of the complaint. Upon such issues the testimony was
taken, and the lower court rendered judgment for the defendant, from which the plaintiff
appealed.

ISSUE: WON Montelibano is authorized to receive money for or in behalf of Keeler


Electric.

HELD: NO

Article 1727 provides: The principal shall be liable as to matters with respect to
which the agent has exceeded his authority only when he ratifies the same expressly or
by implication. It appears from the testimony of H. E. Keeler that he was president of the
plaintiff and that the plant in question was shipped from Manila to Iloilo and consigned
to the plaintiff itself, and that at the time of the shipment the plaintiff sent Juan Cenar,
one of its employees, with the shipment, for the purpose of installing the plant on
defendant's premises. That plaintiff gave Cenar a statement of the account, including
some extras and the expenses of the mechanic, making a total of P2,563,95. That
Montelibano had no authority from the plaintiff to receive or receipt for money. That in
truth and in fact his services were limited and confined to the finding of purchasers for
the "Matthews" plant to whom the plaintiff would later make and consummate the sale.
That Montelibano was not an electrician, could not install the plant and did not know
anything about its mechanism. WHEREFOR, the judgment of the lower court is reversed,
and one will be entered here in favor of the plaintiff and against the defendant for the
sum of P2,513.55 with interest at the legal rate from January 10, 1921, with costs in favor
of the appellant.

20. RALLOS VS. YANGCOP, 20 PHIL 269


FACTS: The defendant in this case (Yangco), on the 27th day of November 1907, sent to
the plaintiff (Rallos), stating that he (Yangco) has a steamship office at No. 163 Muelle de
la Reina, Binondo, Manila, P. I., which is a shipping and commission department for buying
and selling leaf tobacco and other native products. Furthermore in the letter, it was
mentioned that Mr. Florentino Collantes, was granted by Yangco a power of attorney
before the notary, Mr. Perfecto Salas Rodriguez, dated November 16, 1907, to perform in
Yangco’s name and on his behalf all acts necessary for carrying the plans of Yangco’s
business. Mr. Collantes signed the power of attorney.

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Accepting this invitation, Rallos proceeded to do a considerable business with the


defendant through the said Collantes, as his factor, sending to him as agent for the
defendant a good deal of produce to be sold on commission. Later, and in the month of
February, 1909, the plaintiffs sent to the said Collantes, as agent for the defendant, 218
bundles of tobacco in the leaf to be sold on commission, as had been other produce
previously. The said Collantes received said tobacco and sold it for the sum of P1,744. The
charges for such sale were P206.96, leaving in the hands of said Collantes the sum of
P1,537.08 belonging to the plaintiffs. This sum was, apparently, converted to his own use
by said agent.

The defendant refused to pay the said sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time that the said tobacco was received and sold by
Collantes he was acting personally and not as agent of the defendant. Thus, Rallos filed
an action to recover said sum against Yangco. The CFI rendered a decision in favor of
Rallos hence this present appeal of Yangco.

ISSUE: Whether or not the Rallos, having sent produce to sell on commission to the
former agent of the Yangco, can recover from the latter..

HELD: YES. We are of the opinion that the Yangco is liable. In the present case, it appears,
that prior to the sending of said tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his factor. This fact was not known
to the plaintiff and it is conceded in the case that no notice of any kind was given by the
defendant to the plaintiffs of the termination of the relations between the defendant and
his agent. Having advertised the fact that Collantes was his agent and having given them
a special invitation to deal with such agent, it was the duty of the defendant on the
termination of the relationship of principal and agent to give due and timely notice
thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods
may have been in good faith and without negligence sent to the agent without
knowledge, actual or constructive, of the termination of such relationship. For these
reasons the judgment appealed from is confirmed, without special finding as to costs.

21. MACKE VS. CAMPS, 7 PHILS 553/ JIMENS VS. RABOT, 38 PHIL 387
FACTS: The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing
business under the firm name of Macke, Chandler & Company, allege that during the
months of February and March, 1905, they sold to the defendant and delivered at his
place of business, known as the "Washington Cafe," various bills of goods amounting to
P351.50; that the defendant has only paid on account of said accounts the sum of P174;
that there is still due them on account of said goods the sum of P177.50; that before
instituting this action they made demand for the payment thereof; and that defendant
had failed and refused to pay the said balance or any part of it up to the time of the filing

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of the complaint. Plaintiffs made demand for the payment from defendant and that the
latter failed and refused to pay the said balance or any part of it

Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who
represented himself to be the agent of Jose Camps, he shipped the said goods to the
defendant at the Washington Café; that Flores (agent) later acknowledged the receipt of
the said goods and made various payments thereon amounting in all to P174; that
believes that Flores is still the agent of Camps; and that when he went to the Washington
Café for the purpose of collecting his bill he found Flores, in the absence of Camps,
apparently in charge of the business and claiming to be the business manager of Camps,
said business being that of a hotel with a bar and restaurant annexed.

A written contract was introduced as evidence, from which it appears that one
Galmes, the former of “Washington Café” sub rented the building wherein the business
was conducted, to Camps for 1 year for the purpose of carrying on that business, Camps
obligating himself not to sublet or sub rent the building or the business without the
consent of the said Galmes.

This contract was signed by Camps and the name of Ricardo Flores as a witness
and attached thereon is an inventory of the furniture and fittings which also is signed by
Camps with the word “sub lessee” below the name, and at the foot of this inventory the
word “received” followed by the name “Ricardo Flores” with the words “managing agent”
immediately following his name.

ISSUE: Whether or not Ricardo Flores was the agent of Jose Camps

RULING: Yes. Evidence is sufficient to sustain a finding that Flores is the agent of Camps
in the management of the bar of the Washington Café with authority to bind Camps, his
principal, for the payment of the goods.

The contract sufficiently establishes the fact that Camps was the owner of the
business and of the bar, and the title of “managing agent” attached to the signature of
Flores which appears on that contract, together with the fact that at the time the
purchases were made, Flores was apparently in charge of the business performing the
duties usually intrusted to a managing agent leave little room for doubt that he was there
as the authorized agent of Camps.

Agency by Estoppel --- 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 persons dealing with
such person in good faith and in the honest belief that he is what he appears to be.
Estoppel---- “Whenever a party has, by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing true, and to act
upon such belief, he cannot, in any litigation arising out of such declaration, act, or

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omission be permitted to falsify; and unless the contrary appears, the authority of the
agent must be presumed to include all the necessary and usual means of carrying his
agency into effect. The judgment of the trial court is affirmed with the costs of his
instance against the appellant. After expiration of twenty days judgment will be
rendered in accordance herewith, and ten days thereafter the case remanded to the
lower court for proper action. So ordered.

22. LINAN VS. PUNO, 31 PHIL 259/ KATIGBAK VS. TAI HING CO., 52 PHIL 622
FACTS: The plaintiff, in the month of May, 1908, and for a long time prior thereto, was
the owner of a certain parcel of land particularly described in paragraph 2 of the
complaint. On the 16th day of May, 1908, the plaintiff executed the following document,
which conferred upon the defendant Marcos P. Puno the power, duties and obligations
therein contained:

I, Diego Liñan, of age, married, a resident of Daet, Province of Ambos Camarines,


Philippine Islands, and at the present time temporarily residing in this city of Tarlac,
capital of the Province of Tarlac, P.I., set forth that I hereby confer sufficient power, such
as the law requires, upon Mr. Marcos P. Puno, likewise a resident of this city of Tarlac,
capital of the Province of Tarlac, in order that in my name and representation he may
administer the interest I possess within this municipality of Tarlac, purchase, sell, collect
and pay, as well as sue and be sued before any authority, appear before the courts of
justice and administrative officers in any proceeding or business concerning the good
administration and advancement of my said interests, and may, in necessary cases,
appoint attorneys at law or attorneys in fact to represent him.

The meaning, purport, and power conferred by this document constitute the very gist
of the present action. That in June, 1911, the defendant Puno, for the sum of P800, sold
and delivered said parcel of land to the other defendants.

The plaintiff alleges that the said document did not confer upon Puno the power to
sell the land and prayed that the sale be set aside and that the land be returned to him
and with damages.

ISSUE: Whether or not Puno is an agent of the plaintiff and the sale made by the former
in favor of other defendants binds the principal/plaintiff.

HELD: No. Puno had no authority to sell the land but only to administer the land. The
Document presented did not give Puno authority to sell the land; that the sale was illegal
and void; that defendants should return the land to the plaintiff; and that defendants
should pay plaintiff the sum of P1,000 as damages, P400 of which Puno should be
responsible for, and to pay the costs.

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Contracts of agency as well as general powers of attorney must be interpreted in


accordance with the language used by the parties. The real intention of the parties is
primarily to be determined from the language used. The intention is to be gathered from
the whole instrument. In case of doubt, resort must be had to the situation, surroundings
and relations of the parties.

Whenever it is possible, effect is to be given to every word and clause used by the
parties. It is to be presumed that the parties said what they intended to say and that they
used each word or clause with some purpose and that purpose, if possible to be
ascertained and enforced. The intention of the parties must be sustained rather than
defeated.

If the contract be open to two constructions, one of which would uphold while the
other would overthrow it, the former is to be chosen. So, if by one construction the
contract would be illegal, and by another equally permissible construction it would be
lawful, the latter must be adopted. The acts of the parties in carrying out the contract will
presumed to be done in good faith. The acts of the parties will be presumed to have been
done in conformity with and not contrary to the intent of the contract. There is no proof
that Puno acted in bad faith or fraudulently in selling the land. It will be presumed that he
acted in good faith and in accordance with his power as he understood it. That his
interpretation of his power is tenable cannot be successfully denied. The defendants
should be relieved from liability.

The words “administer, sell, and purchase” etc used in the contract seem to be
used coordinately. Each has equal force with the other. There seems to be no good reason
for saying that Puno had authority to administer and not to sell when “to sell” was as
advantageous to the plaintiff in the administration of his affairs as “to administer”. To
hold that the power was “to administer” only when the power “to sell” was equally
conferred would be to give effect to a portion of the contract only. That would give to
special words of the contract a special and limited meaning to the exclusion of other
general words of equal import. In view of all the foregoing, we are of the opinion that
the lower court committed the error complained of in the second assignment, and,
without discussing the other assignments of error, we are of the opinion, and so hold,
that the judgment of the lower court should be and is hereby revoked and that the
appellants should be relieved from all liability under the complaint. Without any finding
as to costs, it is so ordered.

23. DANON VS. BRIMO & CO., 42 PHIL 133


FACTS: This action was brought to recover the sum of P60,000, alleged to be the value of
services rendered to the defendant by the plaintiff as a broker. The plaintiff alleges that
in the month of August, 1918, the defendant company, through its manager, Antonio A.

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Brimo, employed him to look for a purchaser of its factory known as "Holland American
Oil Co.," for the sum of P1,200,000, payable in cash; that the defendant promised to pay
the plaintiff, as compensation for his services, a commission of five per cent on the said
sum of P1,200,000, if the sale was consummated, or if the plaintiff should find a purchaser
ready, able and willing to buy said factory for the said sum of P1,200,000; that
subsequently the plaintiff found such a purchaser, but that the defendant refused to sell
the said factory without any justifiable motive or reason therefor and without having
previously notified the plaintiff of its desistance or variation in the price and terms of the
sale.

Immediately after having an interview with Mr. Brimo, Danon went to see Mr.
Mauro Prieto, president of the Santa Ana Oil Mill, a corporation,and offered to sell to him
the defendant's property at P1,200,000. The said corporation was at that time in need of
such a factory, and Mr. Prieto,instructed the manager, Samuel E. Kane, to see Mr. Brimo
and ascertain whether he really wanted to sell said factory, and, if so, to get
permissionfrom him to inspect the premises. Mr. Kane inspected the factory and,
presumably, made a favorable report to Mr. Prieto. The latter asked for anappointment
with Mr. Brimo to perfect the negotiation. In the meantime Sellner, the other broker
referred to, had found a purchaser for the sameproperty, who ultimately bought it
for.P1,300,000.For that reason Mr. Prieto, the would be purchaser found by the plaintiff,
never came to seeMr. Brimo to perfect the proposed negotiation.

ISSUE: Whether or not Danon as broker was the“Procuring Cause”of Sale.

HELD: NO. The most that can be said as to what the plaintiff had accomplished is, that
he had found a person who might have bought the defendant's factory. The evidence
does not show that the Santa Ana Oil Mill had definitely decided to buy the property at
the fixed price of P1,200,000. The plaintiff claims that the reason why the sale was not
consummated was because Mr. Brimo refused to sell.

It is clear that his "services" did not contribute towards bringing about the sale. He was
not "the efficient agent or the procuring cause of the sale."The broker must be the
efficient agent or the procuring cause of sale.. The means employed by him and his efforts
must result in the sale. The failure therefore and its consequences were the risk of the
broker only. This however must be taken with one important and necessary limitation. If
the efforts of the broker are rendered a failure by the fault of the employer; if
capriciously he changes his mind after the purchaser, ready and willing, and consenting
to the prescribed terms, is produced; or if the latter declines to complete the contract
because of some defectof title in the ownership of the seller, some unresolved
encumbrance, some defect which is the fault of the latter, then the broker does not lose
his commissions. But this limitation is not even an exception to the general rule affecting
the broker's right for it goes on the ground that the broker has done his duty, that he has
brought buyer and seller to an agreement, but that the contract is not consummated and
fails though theafter-fault of the seller.

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Although the present plaintiff could probably have effected the sale,he is not entitled to
the commissions agreed upon because he had nointervention whatever in, and much sale
in question. It must be borne in mind that no definite period was fixed by the defendant
within which theplaintiff might effect the sale of its factory. Nor was the plaintiff given by
the defendant the exclusive agency of such sale.

Therefore, the plaintiff cannot complaint of the defendant's conduct in selling the
property through another agent before the plaintiff's efforts were crowned with
success."One who has employed a broker can himself sell the property to a purchaser
whom he has procured, without any aid from the broker."

For the foregoing reasons the judgment appealed from is hereby revoked and the
defendant is hereby absolved from all liability underthe plaintiff's complaint, with costs
in both instances against the plaintiff. So ordered.

24. INFANTE VS. CUNANAN, 93 PHIL 693


FACTS: Consejo Infante, defendant herein, was the owner of two parcels of land, together
with a house built thereon, situated in the City of Manila and covered by Transfer
Certificate of Title No. 61786. On or before November 30, 1948, she contracted the
services of Jose Cunanan and Juan Mijares, plaintiff herein, to sell the above-mentioned
property for a price of P30,000 subject to the condition that the purchaser would assume
the mortgage existing thereon in the favor of the Rehabilitation Finance Corporation.

She agreed to pay them a commission of 5 per cent on the purchase price plus
whatever overprice they may obtain for the property. Plaintiffs found one Pio S. Noche
who was willing to buy the property under the terms agreed upon with defendant, but
when they introduced him to defendant, the latter informed them that she was no longer
interested in selling the property and succeeded in making them sign a document stating
therein that the written authority she had given them was already can-celled. However,
on December 20, 1948, defendant dealt directly with Pio S. Noche selling to him the
property for P31,000. Upon learning this transaction, plaintiffs demanded from defendant
the payment of their commission, but she refused and so they brought the present action.
Defendants herein demanded for their commission. RTC ordered Infante to pay
commission. CA affirmed.

ISSUE: Whether or not petitioner was duty bound to pay commission notwithstanding
that authority to sell has been cancelled.

HELD: A principal may withdraw the authority given to an agent at will. But respondents
agreed to cancel the authority given to them upon assurance by petitioner that should
property be sold to Noche, they would be given commission.

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That petitioner had changed her mind even if respondents had found a buyer who
was willing to close the deal, is a matter that would not give rise to a legal consequence
if respondents agree to call off the transaction in deference to the request of the
petitioner. But the situation varies if one of the parties takes advantage of the
benevolence of the other and acts in a manner that would promote his own selfish
interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned
without ac-cording to the party prejudiced the reward which is due him. This is the
situation in which respondents were placed by petitioner. Petitioner took advantage of
the services rendered by respondents, but believing that she could evade payment of
their commission, she made use of a ruse by inducing them to sign the deed of
cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve as
basis for petitioner to escape payment of the commission agreed upon.Wherefore, the
decision appealed from is hereby affirmed, with costs against petitioner.

25. MONOTOK BROTHERS, INC. VS. CA, 221 SCRA 224


FACTS: Petitioner herein (then defendant-appellant) is the owner of a certain parcel of
land and building which were formerly leased by the City of Manila and used by the Claro
M. Recto High School, at M.F. Jhocson Street, Sampaloc Manila.

By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent
Salvador Saligumba to negotiate with the City of Manila the sale of the aforementioned
property for not less than P425,000.00. In the same writing, petitioner agreed to pay
private respondent a five percent (5%) commission in the event the sale is finally
consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private
respondent for 120 days. Thereafter, another extension was granted to him for 120 more
days, as evidenced by another letter 7 dated June 26, 1967.

Finally, through another letter 8 dated November 16, 1967, the corporation with Rufino
Manotok, its President, as signatory, authorized private respondent to finalize and
consummate the sale of the property to the City of Manila for not less than P410,000.00.
With this letter came another extension of 180 days.

The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance
No. 6603, appropriating the sum of P410,816.00 for the purchase of the property which
private respondent was authorized to sell. Said ordinance however, was signed by the
City Mayor only on May 17, 1968, one hundred eighty three (183) days after the last letter
of authorization.

On January 14, 1969, the parties signed the deed of sale of the subject property. The initial
payment of P200,000.00 having been made, the purchase price was fully satisfied with a
second payment on April 8, 1969 by a check in the amount of P210,816.00.

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Notwithstanding the realization of the sale, private respondent never received any
commission, which should have amounted to P20,554.50. This was due to the refusal of
petitioner to pay private respondent said amount as the former does not recognize the
latter's role as agent in the transaction.

ISSUE: Whether or not private respondent Salvador Saligumba was an agent of Manotoc
entitling him to the commission.

HELD: Yes. We agree with respondent Court that the City of Manila ultimately became
the purchaser of petitioner's property mainly through the efforts of private respondent.
Without discounting the fact that when Municipal Ordinance No. 6603 was signed by the
City Mayor on May 17, 1968, private respondent's authority had already expired, it is to
be noted that the ordinance was approved on April 26, 1968 when private respondent's
authorization was still in force. Moreover, the approval by the City Mayor came only three
days after the expiration of private respondent's authority. It is also worth emphasizing
that from the records, the only party given a written authority by petitioner to negotiate
the sale from July 5, 1966 to May 14, 1968 was private respondent.

The denial of private respondent's claim, does not apply squarely to the instant petition.
Claimant-agent in said case fully comprehended the possibility that he may not realize
the agent's commission as he was informed that another agent was also negotiating the
sale and thus, compensation will pertain to the one who finds a purchaser and eventually
effects the sale. Such is not the case herein. On the contrary, private respondent pursued
with his goal of seeing that the parties reach an agreement, on the belief that he alone
was transacting the business with the City Government as this was what petitioner made
it to appear.

While it may be true that Filomeno Huelgas followed up the matter with Councilor
Magsalin, the author of Municipal Ordinance No. 6603 and Mayor Villegas, his
intervention regarding the purchase came only after the ordinance had already been
passed — when the buyer has already agreed to the purchase and to the price for which
said property is to be paid. Without the efforts of private respondent then, Mayor Villegas
would have nothing to approve in the first place. It was actually private respondent's labor
that had set in motion the intervention of the third party that produced the sale, hence
he should be amply compensated.

WHEREFORE, in the light of the foregoing and finding no reversible error committed by
respondent Court, the decision of the Court of Appeals is hereby AFFIRMED. The
temporary restraining order issued by this Court in its Resolution dated October 1, 1990
is hereby lifted.

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26. DOMINGO VS. DOMINGO, 42 SCRA 131


FACTS: Vicente Domingo granted to Gregorio Domingo, a real estate broker, the
exclusive agency to sell his Lot No. 883,Piedad Estate in a document. Said lot has an area
of 88,477 sq. m. According to the document, said lot must be sold for P2 per sq. m.
Gregorio is entitled to 5% commission on the total price. Subsequently, Gregorio
authorized Teofilo Purisima to look for a buyer without notifying Vicente. Gregorio
promised Teofilo½ of the 5% commission. Teofilo introduced Oscar de Leon to Gregorio
as a prospective buyer.

Oscar gave Gregorio P1,000 as a gift or propina for succeeding in persuading


Vicente to sell his lot at P1.20 per sq. m. .Gregorio did not disclose said gift or propina to
Vicente. The deed of sale was not executed since Oscar gave up on the negotiation when
he did not receive his money from his brother in the US, which he communicated to
Gregorio.

Gregorio did not see Oscar for several weeks thus sensing that something fishy
might be going on. So, he went to Vicente’s house where he read a portion of the
agreement to the effect that Vicente was still willing to payhim 5% commission, P5 450.
Thereafter, Gregorio went to the Register of Deeds of QC, where he discovered that
a Deed of sale was executed by Amparo de Leon, Oscar’s wife, over their house and lot
in favor of Vicente. After discovering that Vicente sold his lot to Oscar’s wife, Gregorio
demanded in writing the payment of his commission.

Gregorio also conferred with Oscar. Oscar told him that Vicente went to him and
asked him to eliminate Gregorio in the transaction and that he would sell his
property to him for P104,000.

The Court of Appeals said that the exclusive agency contract is genuine. The sale of
the lot to Amparo de Leon is practically a sale to Oscar.

ISSUE: Whether or not Gregorio’s act of accepting the gift or propina from Oscar
constitutes a fraud which would cause the forfeiture of his 5% commission.

HELD: Yes. Gregorio Domingo as the broker, received a gift or propina from the
prospective buyer Oscar de Leon, without the knowledge and consent of his principal,
Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to
serve the interests only of his principal and undermined his loyalty to his principal, who
gave him partial advance of P3000 on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the most
advantageous terms desired by his principal, Gregorio Domingo, succeeded in persuading
his principal to accept the counter-offer of the prospective buyer to purchase the
property at P1.20 per sq. m.

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The duties and liabilities of a broker to his employer are essentially those which
an agent owes to his principal.

An agent who takes a secret profit in the nature of a bonus, gratuity or personal
benefit from the vendee, without revealing the same to his principal, the vendor, is guilty
of a breach of his loyalty to the principal and forfeits his right to collect the commission
from his principal, even if the principal does not suffer any injury by reason of such
breach of fidelity, or that he obtained better results or that the agency is a gratuitous
one, or that usage or custom allows it.

The fact that the principal may have been benefited by the valuable services of
the said agent does not exculpate the agent who has only himself to blame for such a
result by reason of his treachery or perfidy. As a necessary consequence of such breach
of trust, Gregorio Domingo must forfeit his right to the commission and must return the
part of the commission he received from his principal.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the


Court of Appeals and directing defendant-appellee Gregorio Domingo: (1) to pay to the
heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral
damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo
Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.

27. SIASAT VS. IAC, 139 SCRA 238


FACTS: Respondent Teresita Nacianceno succeeded in convincing officials of the then
Department of Education and Culture to purchase one million pesos worth of national
flags for the use of public schools throughout the country. The respondent was able to
expedite the approval of the purchase by hand-carrying the different indorsements from
one office to another, so that by the first week of September, 1974, all the legal
requirements had been complied with, except the release of the
purchase orders. When Nacianceno was informed by the Chief of the Budget Division of
theDepartment that the purchase orders could not be released unless a formal offer to deliver the flags in
accordance with the required specifications was first submitted for approval, she
contacted the owners of the United Flag Industry.
The respondent states that she later on learned that petitioner Siasat had already
received payment for the second delivery of 7,833 flags. When she confronted the
petitioners, they vehemently denied receipt of the payment, at the same time claiming
that the respondent had no participation whatsoever with regard to the second delivery
of flags and that the agency had already been revoked. She filed an action in the Court of
First Instance of Manila to recover the following commissions: 25%, as balance on the first
delivery and 30%, on the second delivery.

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The trial court decided in favor of the respondent. The decision was affirmed in toto by
the Intermediate Appellate Court.

ISSUE: Whether or not Teresita Nacianceno was an agent of United Flag Industry.

RULING: Yes. We deny the petitioners' contention that respondent Nacianceno is not
entitled to the stipulated commission on the second delivery because of the revocation
of the agency effected after the first delivery. The revocation of agency could not prevent
the respondent from earning her commission because the contract of sale having been
already perfected and partly executed. There is merit, however, in the petitioners'
contention that the agent's commission on the first delivery was fully paid. The evidence
does not sustain the respondent's claim that the petitioners paid her only 5% and that
their right to collect another 25% commission on the first delivery must be upheld. When
respondent Nacianceno asked the Malacanang Complaints and Investigation Office to
help her collect her commission, her statement under oath referred exclusively to the
30% commission on the second delivery. The statement was emphatic that "now" her
demand was for the 30%commission on the (second) release of P469,980.00.

The demand letter of the respondent's lawyer dated November 13, 1984 asked
petitioner Siasat only for the 30% commission due from the second delivery. The fact that
the respondent demanded only the commission on the second delivery without reference
to the alleged unpaid balance which was only slightly less than the amount claimed can
only mean that the commission on the first delivery was already fully paid, Considering
the sizeable sum involved, such an omission is too glaringly remiss to be regarded as an
oversight. We also rule against the respondent's allegation that the petitioners acted in
bad faith when they revoked the agency given to the respondent. There is no evidence
on record from which to conclude that the revocation of the agency was deliberately
effected by the petitioners to avoid payment of the respondent's commission. What
appears before us is only the petitioner's use incourt of such a factual allegation as a
defense against the respondent's claim. This alone does not per se make the petitioners
guilty of bad faith for that defense should have been fully litigated.

WHEREFORE, the decision of the respondent court is hereby MODIFIED. The


petitioners are ordered to pay the respondent the amount of ONE HUNDRED FOURTY
THOUSAND NINE HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission
on the second delivery of flags with legal interest from the date of the trial court's
decision. No pronouncement as to costs.

28. GERMAN & CO., VS. DONALDSON, SIM & CO., 1 PHIL 63
FACTS: This is an incident of want of personality of the plaintiff's attorney. The action is
to recover a sum claimed to be due for freight under a charter party. It was brought by
virtue of a general power for suits, executed in Manila October 27, 1900, by Fernando

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Kammerzell, and purporting to be a substitution in favor of several attorneys of powers


conferred upon Kammerzell in an instrument executed in Berlin, Germany, February 5,
1900, by Max Leonard Tornow, the sole owner of the business carried on in Berlin and
Manila under the name of Gemann & Co. The first-named instrument was authenticated
by a notary with the formalities required by the domestic laws. The other was not so
authenticated. Both Tornow and Kammerzell are citizens of Germany. Tornow is a
resident of Berlin and Kammerzell of Manila.

ISSUE: Whether or not the authority include the power to file actions in court for the
purpose of recovering a sum of money.

RULING: Yes, the authority includes the power to file suits to recover sums of money due
to the business concern, for it cannot be supposed in the absence of very clear language
to that effect, that it was the intention of the principal to withhold from the agent
essential to efficient management of the business entrusted to his control.

We should not be inclined to regard in institution of a suit like the present, which appears
to be brought to collect a claim accruing in the ordinary course of the plaintiff's business,
as properly belonging to the class of acts described in article 1713 of the Civil Code as acts
"of strict ownership." It seems rather to be something which is necessarily a part of the
mere administration of such a business as that described in the instrument in question
and only incidentally, if at all, involving a power to dispose of the title to property.

But whether regarded as an act of strict ownership or not, it appears to be expressly and
specially authorized by the clause conferring the power to "exact the payment" of sums
of money "by legal means." This must mean the power to exact the payment of debts due
the concern by means of the institution of suits for their recovery. If there could be any
doubt as to the meaning of this language taken by itself, it would be removed by a
consideration of the general scope and purpose of the instrument in which it occurs. (See
Civil Code, art. 1286.) The main object of the instrument is clearly to make Kammerzell
the manager of the Manila branch of the plaintiff's business, with the same general
authority with reference to its conduct which his principal would himself possess if he
were personally directing it. It cannot be reasonably supposed, in the absence of very
clear language to that effect, that it was the intention of the principal to withhold from
his agent a power so essential to the efficient management of the business entrusted to
his control as that to sue for the collection of debts.

29. MUNICIPAL COUNCIL OF ILOILO VS. EVANGELISTA, 55 PHIL 290


FACTS: Tan Ong Sze Vda. De Tan Taco, respondent, wanted to recover from the
Municipality of Iloilo, petitioner, the value of the strip of land belonging to the former
taken by the latter to widen a public street. Atty. Jose Evangelista, in his own behalf and
as counsel fo the administratrix of Jose Ma. Arroyo’s intestate estate, filed a claim in the

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same case for professional services rendered by him which the court, acting within the
widow of respondent, fixed at 15% of the amount of the judgment.

After hearing all the claims on the amount of the judgment, the court ordered that the
attorney’s lien in the amount of 15% of the judgment be recorded in favor of Atty
Evangelista, in his own behalf and as counsel for the administratrix of deceasaed Jose
Arroyo.and directed the municipality of Iloilo to file an action of interpleading against
adverse claimants including, PNB, Soriano etc.

The municipal treasurer of Iloilo, with the approval of the auditor, of the provincial
treasurer of Iloilo, and the Executive Bureau, paid the late Antero Soriano the amount of
P6,000 in part payment of the judgment assigned to him by Tan Boon Tiong, acting as
atty-in-fact of Tan Toco which she then deposited with the clerk of CFI of Iloilo.

In pursuance of the court ordering that the atty’s lien of 15% in favor of Atty. Evangelista,
in his own behalf and as counsel for the late Jose Arroyo, the said clerk of court delivered
on the said date to said Atty. Evangelista the said amount of P6,000.

This case is confined to the claim of Mauricio as alleged assignee of the rights of the late
Atty Soriano by virtue of said judgment in payment of professional services rendered by
him to the said widow and her coheirs.

ISSUE: Whether or not there was a contract of agency between Tan Toco, principal, and
Tan Boon Tiong, atty-in-fact/agent.

HELD: Yes. It does not appear that Atty. Soriano was counsel for Tan Toco in his case
which she instituted against the municipality of Iloilo for the recovery of a the value of a
strip of land expropriated by said municipality for the widening of a public street. The only
lawyers who appear to have represented her in that case were Arroyo and Evangelista,
who filed a claim for their professional fees.

When Tan Toco’s credit, right, and interests were assigned by her attorney-in-fact
Tan Boon Tiong, to Atty Soriano in payment of professional services rendered by the latter
to Tan Toco and her coheirs in connection with other cases, that particular case had been
decided, and the only thing left to do was to collect the judgment. There was no relation
of attorney and client, then, between Soriano and Tan Toco thus the assignment of her
credit, right and interest to said lawyer did not violate prohibition against ”lawyers and
solicitors with respect to any property or rights involved in any litigation in which they
may take part by virtue of their profession and office.”

By virtue whereof, and finding no error in the judgment appealed from, the same is
affirmed in its entirety, with costs against the appellant. So ordered.

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30. CABALLERO VS. DEIPARINE, 60 SCRA 136


FACTS: Plaintiffs are the children by the first marriage Vicenta Bucao. Defendants
(Raga’s) are the children by Bucao's second marriage. Vicenta Bucao and Tomas Raga
acquired land in Cebu. ¼ of this land was sold to Antonio Caballero (one of the plaintiffs).
Land was never transferred thru title. Vicenta dies, but no partition of her estate was
made between her heirs-Later on, Deiparine acquired the whole lot through purchase
from Tomas Raga. TCT was issued to Deiparine, who instituted ejectment proceedings
against the plaintiff.

Plaintiffs assailed said sale, alleging said land was previously sold to him and is also forms
part of the share inherited from Vicenta. The stipulation was only signed by Atty. Guba
(for plaintiffs) and Atty. Hilario Davide (for respondents). From the stipulation of facts, the
CFI rendered decision in favor of the defendants (that Deiparine owns the whole lot).

ISSUE: Whether or not the sale was binding.

RULING: No. The stipulation of facts which was made the basis of the decision was null
and void as it contained serious unauthorized admissions against the interest of the
plaintiffs who had no hand in its preparation.-Attorneys cannot, without special authority,
compromise their client’s litigation.

No agency related provision was cited in the decision, but Rule 138, Section 23 of the
Rules of Court was cited providing that: Authority of attorneys to bind clients. —
Attorneys have authority to bind their clients in any case by any agreement in relation
thereto made in writing, and in taking appeals, and in all matters of ordinary judicial
procedure.

But they cannot, without special authority, compromise their client's litigation, or receive
anything in discharge of a client's claim but the full amount in cash. Hence we can infer
that the relevant provision may be Art. 1878 (3) which provide that: Art. 1878. Special
powers of attorney are necessary in the following cases:
To compromise, to submit questions to arbitration, to renounce the right to appeal from
a judgment, to waive objections to the venue of an action or to abandon a prescription
already acquire.

FOR ALL THE FOREGOING, the decision appealed from is hereby set aside and this case
shall be remanded to the court a quo for further proceedings in consonance with the
opinion above set forth, and to admit the amended complaint submitted by the
plaintiffs.

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31. PHIL. NATIONAL BANK VS. STA. MARIA, 29 SCRA 303

FACTS: Defendant Maximo Sta. Maria from plaintiff bank under a special power of
attorney, executed in his favor by his six brothers and sisters, defendants-appellants
herein, to mortgage a 16-odd hectare parcel of land, jointly owned by all of them to
obtain a sugar crop loan from plaintiff bank. In addition, Valeriana Sta. Maria alone also
executed in favor of her brother, Maximo, a special power of attorney to borrow money
and mortgage any real estate owned by her.

By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop
loans. As security for the two loans, Maximo Sta. Maria executed in his own name in favor
of plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety bonds
for the full authorized amounts of the loans executed by the Associated Insurance &
Surety Co., Inc. as surety with Maximo Sta. Maria as principal.

Plaintiff bank filed this action on February 10, 1961 against defendant Maximo Sta. Maria
and his six brothers and sisters, defendants-appellants, Valeriana, Emeteria, Teofilo,
Quintin, Rosario and Leonila, all surnamed Sta. Maria, and the Associated Insurance &
Surety Co., Inc. as surety, for the collection of certain amounts representing unpaid
balances on two agricultural sugar crop loans due allegedly from defendants.

ISSUE: Whether or not Maximo Sta. Maria has an authority to loan money from plaintiff
bank as an agent of his brothers and sisters by virtue of the Special Power of Attorney
executed by them.

HELD: NO. The authority granted by defendants-appellants (except Valeriana) unto their
brother, Maximo, was merely to mortgage the property jointly owned by them. They did
not grant Maximo any authority to contract for any loans in their names and behalf.
Maximo alone, with Valeriana who authorized him to borrow money, must answer for
said loans and the other defendants-appellants' only liability is that the real estate
authorized by them to be mortgaged would be subject to foreclosure and sale to respond
for the obligations contracted by Maximo. But they cannot be held personally liable for
the payment of such obligations, as erroneously held by the trial court.

32. BA FINANCE CORP. VS. CA, 211 SCRA 112

FACTS: Renato Gaytano, doing business under the name Gebbs International, applied
for and was granted a loan with respondent Traders Royal Bank in the amount of
P60,000.00. As security for the payment of said loan, the Gaytano spouses executed a
deed of suretyship whereby they agreed to pay jointly and severally to respondent bank
the amount of the loan including interests, penalty and other bank charges. Philip Wong
as credit administrator of BA Finance Corporation for and in behalf of the latter,
undertook to guarantee the loan of the Gaytano spouses. Partial payments were made

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on the loan leaving an unpaid balance in the amount of P85,807.25. Since the Gaytano
spouses refused to pay their obligation, respondent bank filed with the trial court
complaint for sum of money against the Gaytano spouses and petitioner corporation as
alternative defendant. The Gaytano spouses did not present evidence for their defense.
Petitioner corporation, on the other hand, raised the defense of lack of authority of its
credit administrator to bind the corporation.

ISSUE: Whether or not the corporation is bound by the act of the credit administrator.

HELD: NO. It is a settled rule that 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 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 (Harry Keeler v. Rodriguez, 4 Phil. 19). Hence, the burden is on respondent
bank to satisfactorily prove that the credit administrator with whom they transacted
acted within the authority given to him by his principal, petitioner corporation.

Respondent bank had not shown any evidence aside from the testimony of the credit
administrator that the disputed transaction of guaranty was in fact entered into the
official records or files of petitioner corporation, which will show notice or knowledge on
the latter's part and its consequent ratification of the said transaction. In the absence of
clear proof, it would be unfair to hold petitioner corporation guilty of estoppel in allowing
its credit administrator to act as though the latter had power to guarantee.

Guaranty is not presumed, it must be expressed and cannot be extended beyond its
specified limits (Director v. Sing Juco, 53 Phil. 205).

33. DIRECTOR OF PUBLIC WORKS VS. SING JUCO, 53 PHIL 205

FACTS: Mariano de la Rama was transferred her interest in Torrens certificate of title No.
1359 relating to land in the municipality of Iloilo, to sale to Enrique Enchaus. Also, the
owners of the property covered by the said certificate conveyed it by way of a mortgage
to the Philippine National Bank for the purpose of securing a credit in current account in
a mount not in excess of P170,000, with interest at a rate of 12 percent per annum. A
contract was made between the Director of Public Works, representing the Government
of the Philippine Islands, and the four owners, M. de la Rama, Sing Juco, G. M.
Tanboontien, and Seng Bengco.

In connection with the making of the contract abovementioned, the, Director of


Public Works required a bond to be supplied by the owners in the penal amount of
P150,000. This bond was executed contemporaneously with the main contract; and in
connection therewith it should be noted that one of the names appearing upon said
contract was that of "Casa Viuda de Tan Toco," purporting to be signed by M. de la Rama.

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No such payment was, however, made as a consequence this action was instituted by the
Director of Public Works for the purpose of recovering the amount due to the
Government under the contract from the original owners of the property from the
sureties whose names were signed to the contract of suretyship, and to enforce the
obligation as a real lien upon the property. PNB and Enchaus were made defendants.

ISSUE: Whether or not the powers of attorney conferred authority to M. de la Rama to


bind the widow of Tan Toco by the contract of suretyship.

HELD: NO. Neither of the powers officially confers upon Mariano de la Rama the power
to bind a principal by a contract of suretyship. The clauses noted relate more specifically
to the execution of contracts relating to property; and the more general words at the
close of the quoted clauses should be interpreted, under the general rule ejusdem
generis, as referring to the contracts of like character. Power to execute a contract so
exceptional a nature as a contract of suretyship or guaranty cannot be inferred from the
general words contained in the powers.

In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must
be expressed and cannot be extended beyond its specified limits. By analogy a power of
attorney to execute a contract of guaranty should not be inferred from vague or general
words, especially when such words have their origin and explanation in particular powers
of a wholly different nature. It results that the trial court was in error in giving personal
judgment against Tan Ong Sze upon the bond upon which she was sued in this case.

34. PHILIPPINE SUGAR ESTATES DEVT CO. VS. POIZAT, 48 PHIL 536
FACTS: Gabriela Andrea de Coster consent executed to and in favor of her husband, Juan
M. Poizat, a general power of attorney on August 25, 1905, which among other things,
authorized him to do in her name, place and stead, and making use of her rights and
actions to loan or borrow any amount in cash or fungible conditions he may deem
convenient. Poizat applied for and obtained from the plaintiff a credit for the sum of
10,000 Pounds Sterling to be drawn on the" Banco Espanol del Rio de la Plata" in London
not later than January, 1913. Later, to secure the payment of the loan, he executed a
mortgage upon the real property of his wife on November 2, 1912. For failure to pay the
loan, on November 12, 1923, the plaintiff brought an action against the defendants to
foreclose the mortgage.

ISSUE: Whether or not the act of the agent, Poizat is binding with his wife, the principal,
in the credit transaction he obtained from plaintiff.

HELD: NO. Under his power of attorney, Juan M. Poizat may have had authority to borrow
money and mortgage the real property of his wife, but the law specifies how and in what
manner it must be done, and the stubborn fact remains that, as to the transaction in

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question, that power was never exercised. The mortgage in question was executed by
him and him only, and for such reason, it is not binding upon the wife, and as to her, it is
null and void.
It is a general rule in the law of agency that in order to bind the principal by a deed
executed by an agent, the deed must upon its grace purport to be made, signed and
sealed in the name of the principal. If, on the contrary, though the agent describes name,
the words of grant, covenant and the like, purport upon the face of the instrument to be
his, and the seal purports to be his seal, the deed will bind the agent if any one and not
the principal.

35. RURAL BANK OF BOMBON, INC. VS. CA, 212 SCRA 25

FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of


attorney in favor of Rufina S. Aquino authorizing her to secure a loan from any bank or
lending institution for any amount or otherwise mortgage the property covered by
Transfer Certificate of Title No. S-79238 situated at Las Piñas, Rizal, the same being
Ederlinda’s paraphernal property.

On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in
favor of the Rural Bank of Bombon (Camarines Sur), Inc. wherein the property was being
given as security for the payment of "certain loans, advances, or other accommodations
obtained by the mortgagor from the mortgagee in the total sum of Three Hundred Fifty
Thousand Pesos only (P350,000.00).

ISSUE: Whether or not the Deed of Real Estate Mortgage executed by Aquino, as
attorney-in-fact of Gallardo, in favor of the Rural Bank of Bombon (Cam. Sur), Inc is valid.

HELD: NO. The Special Power of Attorney above quoted shows the extent of authority
given by the plaintiff to defendant Aquino. But defendant Aquino in executing the deed
of Real Estate Mortgage in favor of the rural bank over the three parcels of land covered
by Gallardo's title named himself as the mortgagor without stating that his signature on
the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-in-
fact.

This case is governed by the general rule in the law of agency which this Court, applied in
"Philippine Sugar Estates Development Co. vs. Poizat," 48 Phil. 536, 538:

It is a general rule in the law of agency that, in order to bind the principal
by a mortgage on real property executed by an agent, it must upon its face
purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the
name of the principal. Neither is it ordinarily sufficient that in the mortgage

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the agent describes himself as acting by virtue of a power of attorney, if in


fact the agent has acted in his own name and has set his own hand and
seal to the mortgage.

This is especially true where the agent himself is a party to the instrument.
However clearly the body of the mortgage may show and intend that it shall be
the act of the principal, yet, unless in fact it is executed by the agent for and on
behalf of his principal and as the act and deed of the principal, it is not valid as to
the principal.

36. COMMERIAL BANK & TRUST CO. OF THE PHILS VS. REPUBLIC ARMORED CAR SERVICE
CORP 9 SCRA 142
FACTS: Damaso Perez claimed that he was not aware of the nature of the power of
attorney that Ramon Racelis used, purportedly signed by him, to secure the loans for the
Republic Armored Car Service Corporation and the Republic Credit Corporation. It is his
claim and contention that Ramon Racelis had no authority to bind the him as surety for
the loans obtained from the Commercial Bank & Trust Company.

ISSUE: Whether or not Perez should be held liable as principal for the loans obtained by
his agent Racelis.

HELD: YES. We hold that this general power attorney to secure loans from any banking
institute was sufficient authority for Ramon Racelis to obtain the credits subject of the
present suits. It will be noted furthermore that Racelis, as agent Damaso Perez, executed
the documents evidencing the loans signing the same "Damaso Perez by Ramon Racelis,"
and in the said contracts Damaso Perez agreed jointly and severally to be responsible for
the loans. As the document as signed makes Perez jointly and severally responsible, there
is no merit in the contention that Perez was only being held liable as a
guarantor. Consequently Perez could not and may not now claim that his agent did not
have authority to execute the loan agreements.

37. LIM TIU VS. RUIZ Y REMENTERIA, 15 PHIL 367


FACTS: Plaintiffs commenced an action against the defendants in the Court of First
Instance of the city of Manila, alleging that upon the 26th day of May, 1908, the 5th day
of June, 1908, and the 12th day of June, 1908, they sold to the defendant certain
merchandise, amounting to the sum of P1,043.57 which was unpaid. The lower court,
found as a fact that "the defendants purchased the merchandise in question from
Domingo Tim Bun Liu and paid the said Domingo Tim Bun Liu for the merchandise."

The plaintiffs appealed alleging that the lower court erred in holding that the plaintiffs
never notified the defendants, in any way, that their employee, Domingo Tim Bun Liu,
could sell their merchandise, but could not receive payment for it, and that the

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defendants never had notice that their business transactions with Domingo Tim Bun Liu
were by him as agent or employee of the plaintiffs.

ISSUE: Whether or not Domingo Tim Bun Liu acted as agent of the plaintiff in the
transaction.

HELD: NO. It being established by a preponderance of the evidence that Domingo Tim
Bun Liu acted in his own name selling the merchandise to the defendants, and that the
defendants fully believed that they were dealing with the said Domingo Tim Bun Liu,
without any knowledge of the fact that he was the agent of the plaintiffs, and having paid
him in full for the merchandise purchased, they are not liable to the plaintiffs, for said
merchandise, even though it be admitted that Domingo Tim Bun Liu was in fact the agent
of the plaintiffs in selling the merchandise in question.

Article 1717 of the Civil Code provides: When an agent acts in his own name the principal
shall have no action against the persons with whom the agent has contracted, nor the
said persons against the principal. Consequently, article 246 of the Commercial Code
provides that: "When an agent transacts business in his own name, it shall not be
necessary for him to state who is the principal, and he shall be directly liable, as if the
business were for his own account, to the persons with whom he transacts the same, said
persons not having any right of action against the principal, nor the latter against the
former, the liabilities of the principal and the agent to each other reserved."

38. PHIL. NATIONAL BANK VS. AGUDELO Y GONZAGA, 58 PHIL 635


FACTS: Paz Agudelo y Gonzaga executed in favor Mauro A. Garrucho, a special power of
attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the
manner and form he might deem convenient, all her real estate situated in the
municipalities of Murcia and Bacolod, Occidental Negros together with the improvement
thereon. Nothing in the aforesaid powers of attorney expressly authorized Mauro A.
Garrucho to contract any loan nor to constitute a mortgage on the properties belonging
to the respective principals, to secure his obligations.

Mauro executed in the favor of PNB a real estate mortgage constituting the property
covered by original certificates of title Nos. 2216 and 1148, respectively, issued in the
name of Paz Agudelo y Gonzaga to secure the payment of credits, loans, commercial
overdrafts, etc

ISSUE: Whether or not the powers of attorney, issued in favor of Mauro A. Garrucho to
mortgage real estate, authorized him to obtain loans secured by mortgage in the
properties in question

HELD: NO. Mauro A. Garrucho, appears to have acted in his personal capacity. He could
not delegate his power, in view of the legal principle of "delegata potestas delegare non

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potest" (a delegated power cannot be delegated), inasmuch as there is nothing in the


records to show that he has been expressly authorized to do so.

ART. 1717. When an agent acts in his own name, the principal shall have no right of action
against the persons with whom the agent has contracted, or such persons against the
principal.In such case, the agent is directly liable to the person with whom he has
contracted, as if the transaction were his own.

When an agent negotiates a loan in his personal capacity and executes a promissory note
under his own signature, without express authority from his principal, giving as security
therefor real estate belonging to the letter, also in his own name and not in the name and
representation of the said principal, the obligation do constructed by him is personal and
does not bind his aforesaid principal.

39. SYJUCO AND VIARDO VS. SYJUCO, 40 PHIL 634


FACTS: Santiago Sy-Juco was appointed by the plaintiffs administrator of their property
and acted as such until June 30, 1916, when his authority was cancelled. The plaintiffs are
defendant's father and mother who allege that during his administration the defendant
acquired the property claimed in the complaint in his capacity as plaintiffs' administrator
with their money and for their benefit.

ISSUE: Whether or not Santiago can buy property in his own name as plaitiff’s
administrator with their money and for their benefit.

HELD: NO. From the rule established in article 1717 of the Civil Code that, when an agency
acts in his own name, the principal shall have no right of action against the person with
whom the agent has contracted, cases involving things belonging to the principal are
excepted. According to this exception (when things belonging to the principal are dealt
with) the agent is bound to the principal although he does not assume the character of
such agent and appears acting in his own name (Decision of the Supreme Court of Spain,
May 1, 1900). This means that in the case of this exception the agent's apparent
representation yields to the principal's true representation and that, in reality and in
effect, the contract must be considered as entered into between the principal and the
third person; and, consequently, if the obligations belong to the former, to him alone
must also belong the rights arising from the contract.

40. NATIONAL FOOD AUTHORITY VS. IAC, 184 SCR 166

FACTS: Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation,
entered into a contract for hire of ship known as "MV Sea Runner" with defendant
National Grains Authority (now NFA). Plaintiff wrote to NFA, specifically requesting that

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the payment for freightage and other charges be made to it and not to defendant Medalla
because plaintiff was the owner of the vessel "MV Sea Runner".

NFA informed Superior Shipping Corp that it could not grant its request because the
contract to transport the rice was entered into by NFA and Medalla who did not disclose
that he was acting as a mere agent of plaintiff. Superior Shipping Corp wrote Medalla
demanding that he turn over to plaintiff the amount of P27,000.00 paid to him by NFA.
Medalla, however, "ignored the demand."

ISSUE: Whether or not NFA is jointly and severally liable with Gil Medalla for freightage.

HELD: YES. It is an undisputed fact that Gil Medalla was a commission agent of respondent
Superior Shipping Corporation which owned the vessel "MV Sea Runner" that transported
the sacks of rice belonging to petitioner NFA. The context of the law is clear.

Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal. In such case the agent is the one directly bound in favor of the person with whom
he has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.

Consequently, when things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although he does not
assume the character of such agent and appears acting in his own name. In other words,
the agent's apparent representation yields to the principal's true representation and that,
in reality and in effect, the contract must be considered as entered into between the
principal and the third person. Corollarily, if the principal can be obliged to perform his
duties under the contract, then it can also demand the enforcement of its rights arising
from the contract.

41. AWAD VS. FILMA MERCANTILE CO., 49 PHIL 816

FACTS: Early in the month of September, 1924, the plaintiff, doing business in the
Philippine Islands under the name of E. Awad & Co., delivered certain merchandise of the
invoice value of P11,140 to Chua Lioc, a merchant operating under the name of Hang Chua
Co. in Manila, said merchandise to be sold on commission by Chua Lioc. Representing
himself as being the owner of the merchandise, Chua Lioc, on September 8, 1924, sold it
to the defendant for the sum of P12,155.60. He owed the Philippine Manufacturing Co.,
the sum of P3,480, which the defendant agreed to pay, and was also indebted to the
defendant itself in the sum of P2,017.98. The total amount of the two debts, P5,497.98,
was deducted from the purchase price, leaving a balance of P6,657.52 which the
defendant promised to pay to Chua Lioc on or before October 9, 1924. The merchandise
so purchased on September 9, was delivered to the defendant, who immediately offered

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it for sale. Three days later D. J. Awad, the representative of the plaintiff in the Philippine
Islands; having ascertained that the goods entrusted to Chua Lioc was being offered for
sale by the defendant, obtained authorization from Chua Lioc to collect the sum of
P11,707 from said defendant and informed the latter's treasurer of the facts above set
forth. On September 15, D. J. Awad, in behalf of E. Awad & Co., wrote a letter to the
defendant corporation advising it that, inasmuch as the merchandise belonged to E. Awad
& Co., the purchase price should be paid to them, to which letter, the defendant, on
September 18, 1924, responded that since the transaction was with Chua, they can only
make the payment to Chua.

ISSUE: WON defendant is liable to plaintiff.

HELD: No. The law applicable to the case is well settled. Article 246 of the Code of
Commerce reads as follows: When the agent transacts business in his own name, it shall
not be necessary for him to state who is the principal and he shall be directly liable, as if
the business were for his own account, to the persons with whom he transacts the same,
said persons not having any right of action against the principal, nor the latter against the
former, the liabilities of the principal and of the agent to each other always being
reserved. The rule laid down in the article quoted is contrary to the general rule in the
United States as to purchases of merchandise from agents with undisclosed principal, but
it has been followed in a number of cases and is the law in its jurisdiction. (Pastells &
Regordosa vs. Hollman & Co., 2 Phil., 235; Castle Bros., Wolf & Sons vs. GoJuno, & Phil.,
144; Lim Tiu vs. Ruiz y Rementeria, 15 Phil., 367.) But the appellant points out several
circumstances which, in his opinion, indicate that the defendantappellee was aware of
the condition under which the merchandise was entrusted to the agent Chua Lioc and
therefore did not purchase the goods in good faith. This, if true, would, of course, lead to
a decision of the case in favor of the plaintiff, but there is, in our opinion, nothing
conclusive about the circumstances referred to and they are not sufficient to overcome
the presumption of good faith.

42. BORADOR VS. LUZ, GR NO. 130148

FACTS: Petitioners were engaged in the business of purchase and sale of jewelry and
respondent Brigida Luz, also known as Aida Luz, was their regular customer.

On several occasions, respondent Deganos, brother of Luz, received several pieces of gold
and jewelry from petitioners amounting to P382, 816. These items and their prices were
indicated in seventeen receipts covering the same. 11 of the receipts stated that they
were received for a certain Aquino, a niece of Deganos, and the remaining 6 receipts
indicated that they were received for Luz.

Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and
return the unsold items to Bordador. Deganos remitted only the sum of P53, 207. He

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neither paid the balance of the sales proceeds, nor did he return any unsold item to
petitioners.

The total of his unpaid account to Bordador, including interest, reached the sum of P725,
463.98. Petitioners eventually filed a complaint in the barangay court against Deganos to
recover said amount.

In the barangay proceedings, Luz, who was not impleaded in the caes, appeared as a
witness for Deganos and ultimately, she and her husband, together with Deganos signed
a compromise agreement with petitioners.

In that compromise agreement, Deganos obligated himself to pay petitioners, on


installment basis , the balance of his account plus interest thereon. However, he failed to
comply with his aforestated undertakings.

Petitioners instituted a complaint for recovery of sum of money and damages, with an
application for preliminary attachment against Deganos and Luz.

Deganos and Luz was also charged with estafa

During the trial of the civil cae, petitioners claimed that Deganos acted as agent of Luz
when received the subject items of jewelry, and because he failed to pay for the same,
Luz, as principal, and her spouse are solidarily liable with him

Trial court ruled that only Deganos was liable to Bordador for the amount and damages
claimed. It held that while Luz did have transactions with petitioners in the past, the items
involved were already paid for and all that Luz owed Bordador was the sum or P21, 483
representing interest on the principal account which she had previously paid for.

CA affirmed TC’s decision

ISSUE: W/N Luz are liable to petitioners for the latter’s claim for money and damages in
the sum of P725,463.98, plus interests and attorney’s fees, despite the fact that the
evidence does not show that they signed any of the subject receipts or authorized
Deganos to receive the items of jewelry on their behalf

HELD: No.

Evidence does not support the theory of Bordador that Deganos was an agent of Luz and
that the latter should consequently be held solidarily liable with Deganos in his obligation
to petitioners.

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The basis for agency is representation. Here, there is no showing that Luz consented to
the acts of Deganos or authorized him to act on her behalf, much less with respect to the
particular transactions involved.

It was grossly and inexcusably negligent of petitioner to entrust to Deganos, not once or
twice but on at least six occasions as evidenced by 6 receipts, several pieces of jewelry of
substantial value without requiring a written authorization from his alleged principal.

A person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.

Records show that neither an express nor an implied agency was proven to have existed
between Deganos and Luz. Evidently, Bordador who were negligent in their transactions
with Deganos cannot seek relief from the effects of their negligence by conjuring a
supposed agency relation between the two respondents where no evidence supports
such claim

43. ALFRED HAHN VS. CA AND BMW, GR NO. 113074


Hahn v. Court of Appeals [266 SCRA 537 (January 22, 1997)]
Jurisdiction Over Foreign
Corporation
Doing Business in the Philippines Without a License

FACTS: Petitioner is a Filipino citizen doing business under the name of “Hahn-Manila”.
Private respondent BMW is a non-resident corporation incorporated in Germany.
Petitioner executed in favor of private respondent a “Deed of Assignment with a Special
Power of Attorney” which constituted petitioner as the exclusive dealer of private
respondent as long as the assignment of its trademark and device subsisted. However, no
formal contract was drawn between the two parties. Thereafter, petitioner was informed
that BMW was arranging to grant the exclusive dealership of BMW cars and products to
Columbia Motors Corp. (CMC). BMW expressed dissatisfaction with various aspect of
petitioner’s business but nonetheless also expressed willingness to continue business
relations with petitioner on the basis of a standard BMW contract otherwise, if said offer
was unacceptable to petitioner then BMW would terminate petitioner’s exclusive
dealership. Petitioner refused BMWs offer in which case BMW withdrew its alternative
offer and terminated petitioner’s exclusive dealership. Petitioner therefore filed an action
for specific performance and damages against BMW to compel it to continue the exclusive
dealership.
BMW moved to dismiss the case contending that the trial court did not
acquire jurisdiction over it through the service of summons on DTI because BMW is a
foreign corporation and is not doing business in the Philippines. The trial court deferred
the resolution of the motion for dismissal until after trial on the merits for the reason that
the grounds advanced by BMW did not seem indubitable. BMW appealed said order to
the CA. The CA resolved that BMW was not doing business in the country and therefore
jurisdiction over it could not have been acquired through the service of summons on DTI
and it dismissed the petition.

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ISSUE: W/N BMW is doing business in the Philippines so as to enable the court to acquire
jurisdiction over it through the service of summons on the DTI.

HELD: RA 7042 enumerates what acts are considered as “doing business”. Section 3(d)
enumerating such acts includes the phrase “appointing representatives or distributors in
the Philippines” but not when the representative or distributor “transacts” business in his
own name for his own account. In the case at bar, petitioner is private respondent BMW’s
agent and not merely a broker. The record reveals that private respondent exercised
control over petitioner’s activities as a dealer and made regular inspections of petitioner’s
premises to enforce its standards. Since BMW is considered as doing business in the
Philippines, the trial court validly acquired jurisdiction over it by virtue of the service of
summons on the DTI. Furthermore, it is now settled that, for purposes of having summons
served on a foreign corporation in accordance with the Rules of Court, it is sufficient that
it be alleged in the complaint that the foreign corporation is doing business in the
Philippines. The court need not go beyond the allegations in the complaint in order to
determine whether or not it acquired jurisdiction. Such determination that the foreign
corporation is doing business in the Philippines is only tentative and only for the purpose
of enabling the court to acquire jurisdiction. A contrary determination may be made
based on the court’s findings or evidence presented.

44. MANUEL B. TAN, ET AL VS. EDUARDO R. GULLAS, GR NO. 143978

FACTS: Respondents, were the registered owners of a parcel of land, they executed a
special power of attorney authorizing petitioners Tan, a licensed real estate broker, and
his associates Tecson and Saldaña, to negotiate for the sale of the land, at a commission
of 3% of the gross price. Tan contacted the Sisters of Mary of Banneaux, Inc. (hereafter,
Sisters of Mary), a religious organization interested in acquiring a property. The Sisters,
who had already seen and inspected the land, found the same suitable for their purpose
and expressed their desire to buy it.

However, they requested that the selling price be reduced. Respondents agreed to sell
the property to the Sisters of Mary. Petitioners went to see respondents who refused to
pay the broker’s fee and alleged that another group of agents was responsible for the
sale of land to the Sisters of Mary. Petitioners filed a complaint against the defendants
for recovery of their broker’s fee. They alleged that they were the efficient procuring
cause in bringing about the sale of the, but that their efforts in consummating the sale
were frustrated by the respondents who, in evident bad faith, malice and in order to
evade payment of broker’s fee, dealt directly with the buyer
whom petitioners introduced to them.

ISSUE: Whether or not the petitioners are entitled to the brokerage commission.(2) An
agent distinguished from a broker.

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HELD: The records show that petitioner Tan is a licensed real estate broker, and other
petitioners his associates. "Broker" as "one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has no concern;
the negotiator between other parties, never acting in his own name but in the name of
those who employed him. x x x a broker is one whose occupation is to bring the parties
together, in matters of trade, commerce or navigation." The petitioners were responsible
for the introduction of there presentatives of the Sisters of Mary to respondent.(2) There
was no dispute as to the role that petitioners played in the transaction. "Anagent receives
a commission upon the successful conclusion of a sale. On the other hand, a broker earns
his pay merely by bringing the buyer and the seller together, even if no sale is eventually
made." Clearly, therefore, petitioners, as brokers, should be entitled to the commission
whether or not the sale of the property subject matter of the contract was concluded
through their efforts.

45. QUIROGA VS. PARSONS HARDWARE, CO., 38 PHIL 501

FACTS: On January 24, 1911, plaintiff Andres Quiroga and J. Parsons (to whose rights and
obligations the present defendant Parsons Hardware Co. later subrogated itself) entered
into a contract, where it was stated among others that Quiroga grants in favor of Parsons
the exclusive rights to sell his beds in the Visayan Islands under some conditions. One of
the said conditions provided that “Mr. Parsons may sell, or establish branches of his
agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are
no exclusive agents, and shall immediately report such action to Mr. Quiroga for his
approval” while another one passed on to Parsons the obligation to order by the dozen
and in no other manner the beds from Quiroga.

Alleging that the Parsons was his agent for the sale of his beds in Iloilo, Quiroga filed a
complaint against the former for violating the following obligations implied in what he
contended to be a contract of commercial agency: not to sell the beds at higher prices
than those of the invoices; to have an open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and to pay for the advertisement expenses
for the same; and to order the beds by the dozen and in no other manner.

ISSUE: Is the defendant, by reason of the contract, a purchaser or an agent of the plaintiff
for the sale of the latter’s beds in Iloilo?

HELD: The Supreme Court declared that the contract by and between the plaintiff and
the defendant was one of purchase and sale, and that the obligations the breach of which
is alleged as a cause of action are not imposed upon the defendant, either by agreement
or by law.

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In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is
that the plaintiff was to furnish the defendant with the beds which the latter might order,
at the price stipulated, and that the defendant was to pay the price in the manner
stipulated. There was the obligation on the part of the plaintiff to supply the beds, and,
on the part of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the
thing to sell it, and does not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed in selling it, he
returns it.

46. PHIL. NATIONAL BANK VS. STA. MARIA, 29 SCRA 303

FACTS: PNB filed an action against the Sta. Maria family and Associated Surety for the
collection of certain amounts representing unpaid balances on two crop loans due from
the defendants. Maximo Sta Maria obtained a Special Power of Attorney, executed in his
favor from his brothers and sisters. Said power of attorney authorized Maximo to
“mortgage or convey as security to any bank, company or to any natural or juridical
person, our undivided shares over a certain parcel of land together with the
improvements thereon.” In addition, sister Valerina alone executed in favor of Maximo,
a Special Power of Attorney authorizing the latter to “borrow money and make, execute,
sign and deliver mortgages of real estate in my name xxx”. By virtue of these two powers,
applied for two loans from the PNB. As security, Maximo executed in his own name, in
favor of PNB, two chattel mortgages over the standing crops on the land, guaranteed by
Associated. The lower court found for PNC, holding that the Sta. Marias and Associated
liable. The Sta Maria brothers and sisters (except Maximo) appealed. The Sta Maria’s
contend that they did not authorize Maximo to borrow money but only to mortgage the
real estate jointly owned by them.

ISSUE: W/N the SPAs of (1) the Sta Marias and (2) Valeriana authorized Maximo to borrow
money.

HELD: A Special Power of Attorney to mortgage real estate is limited to such authority to
mortgage and does not carry with it the authority to contract obligation unless the
contrary is shown.
In the case at bar, the authority granted by the Sta Marias (except Valeriana) to Maximo
was merely to mortgage the property jointly owned by them. They did not grant Maximo
any authority to contract for any loans in their names and behalf. MAximo alone and
Valeriana who authorized him to borrow money, must answer for said loans and the
others’ only liability is that the real estate authorized by them would be subject to
foreclosure and sale to respond for the obligations contracted by Maximo. Hence, in the
absence of ratification on their part by estoppel, they cannot be held personally liable for
the payment of such obligations.

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47. DPWH VS. SIN JUCO, ET AL, 53 PHILS 205

FACTS: Plaintiff-Appelle DPWH began constructing harbor improvements near the mouth
of the Iloilo River. The dredging operations meant that the earth removed from the river-
bed had to be transferred to a nearby location. The DPWH and the defendants Mariano
Tanboontien, Mariano dela Rama, Sing Juco and Sing Bengco agreed that the dredged
materials would be placed in a nearby property subject to periodic flooding the four co-
owned. In exchange for the expected improvements, the co-owners agreed to pay the
DPWH for every cubic meter of landfill. The contract for improvement was subject to a
bond signed by the co-owners but Mariano dela Rama also included a non-owner, Tan
Ong Sze as “Casa de Viuda de Tan Toco”. Dela Rama included Tan Ong Sze by virtue of an
assignment of a special power of attorney conferred upon him by one Tan Lieno Co, Tan
Ong Sze’s uncle. Tan Lieno Co’s power of attorney stated among others that:

. . . and also for me and in my name to sign, seal and execute, and as my act and deed
deliver, any lease or any other deed for the conveying any real or personal property or
the other matter or thing wherein I am or may be personally interested or concerned.
And I do hereby further authorize and empower my said attorney to substitute and point
any other attorney or attorneys under him for the purposes aforesaid, and the same again
and pleasure to revoke; and generally for me and in my name to do, perform, and execute
all and any other lawful and reasonable acts and things whatsoever as fully and effectually
as I, the said Tan Ong Sze might or could do if personally present.

After failing to pay for the subsequent improvements to their lot, the DPWH then
collected the co-owners and Tan Ong Sze for expenses. The RTC adjuged Tan Ong Sze
subsidiarily liable as surety on the basis of the SPA.
ISSUE: Whether or not the assignment of special powers of attorney specifically
conferred on dela Rama the power to bind a principal by contract of suretyship?

HELD: No, The clauses noted relate more specifically to the execution of contracts
relating to property; and the more general words at the close of the quoted clauses should
be interpreted, under the general rule ejusdem generis, as referring to the contracts of
like character. Power to execute a contract so exceptional a nature as a contract of
suretyship or guaranty cannot be inferred from the general words contained in these
powers.
In article 1827 of the Civil Code it is declared that guaranty shall not be presumed; it must
be expressed and cannot be extended beyond its specified limits. By analogy a power of
attorney to execute a contract of guaranty should not be inferred from vague or general
words, especially when such words have their origin and explanation in particular powers
of a wholly different nature. It results that the trial court was in error in giving personal
judgment against Tan Ong Sze upon the bond upon which she was sued in this case.

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48. RURAL BANK OF BOMBON, INC. VS.CA, 212 SCRA 25

FACTS: 1. On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed
a special power of attorney in favor of Rufina S. Aquino authorizing him: - To secure a loan
from any institution for any amount or mortgage the property at Las Pinas, Rizal 2. On
August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in
favor of the Rural Bank of Bombon (Camarines Sur), Inc. The property was secured for a
loan in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00), plus
interest at the rate of fourteen (14%) per annum. 3. Spouses Gallardo filed an action
against Rufino Aquino and Rural Bank. They alleged that Aquino mortgaged the property
to pay for his personal loans, from the same Bank. - The trial court temporarily restrained
the Rural Bank "from enforcing the real estate mortgage and from foreclosing it either
judicially or extrajudicially until further orders from the court.” 4. Aquino, in his answer,
alleged that the spouses allowed him to mortgage the property and use the use the
proceeds thereof to compensate for the pre-existing obligation of P350,000 that the
spouse owed him. 5. The trial court lifted the TRO against the bank and ordered the
foreclosure proceeding against the mortgaged property. The Spouses Gallardo appealed
to the Court of Appeals (CA). The CA reversed the trial court and held that Rufino Aquino
had no authority to mortgage the land. Thus, this appeal against the decision.

ISSUE: Whether or not the Deed of Real Estate Mortgage executed by Rufino S. Aquinoin
favor of the Rural Bank of Bombon (Cam. Sur), Inc. is with authority, thus valid? NO, it was
without authority.

RULING: Agent who signs a Deed of Mortgage in his name alone does not validly bind the
owner of the real estate mortgaged. Aquino's act of signing the Deed of Real Estate
Mortgage in his name alone as mortgagor, without any indication that he was signing for
and in behalf of the property owner, Ederlinda Gallardo, bound himself alone in his
personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-
fact of Gallardo. The petitioner misapplied Art. 1883. The above provision of the Civil Code
relied upon by the petitioner Bank, is not applicable to the case at bar. Herein respondent
Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal
capacity. Involved herein are properties titled in the name of respondent Gallardo against
which the Bank proposes to foreclose the mortgage constituted by an agent (Aquino)
acting in his personal capacity. Under these circumstances, we hold, that Gallardo's
property is not liable on the real estate mortgage.

49. DOMINION INSURANCE CORP. VS.CA, ET AL, GR NO. 129919

FACTS: Rodolfo Guevarra (Guevarra) filed a civil case for sum of money against Dominion
Insurance Corp. (Dominion) for the amount advanced by Guevarra in his capacity as
manager of defendant to satisfy certain claims filed by defendant’s client.

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The pre-trial was always postponed, and during one of the pre-trial conference dominion
failed to arrive therefore the court declared them to be in default. Dominion filed several
Motions to Lift Order of Default but was always denied by the court. The RTC rendered
its decision making Dominion liable to repay Guevarra for the sum advanced and other
damages and fees. Dominion appealed but CA affirmed the decision of RTC and denied
the appeal of Dominion.

ISSUE:
(a) W/N Guevarra acted within his authority as agent of petitioner.
(b) W/N Guevarra must be reimbursed for the amount advanced.

HELD:
(a) NO. Even though the contact entered into by Guevarra and Dominion was with the
word “special” the contents of the document was actually a general agency. A general
power permits the agent to do all acts for which the law does not require a special power
and the contents in the document did not require a special power of attorney.

Art 1878 of the civil code provides instances when a special power of attorney is required.:
1) To make such payment as are not usually considered as acts of administration.
15) any other act of dominion

The payment of claims is not an act of administration which requires a special power of
attorney before Guevarra could settle the insurance claims of the insured.

Also Guevarra was instructed that the payment for the insured must come from the
revolving fund or collection in his possession, Gueverra should not have paid the insured
through his own capacity. Under 1918 of civil code an agent who acted in contravention
of the principal’s instruction the principal will not be liable for the expenses incurred by
the agent.

(b) YES. Even if the law on agency prohibits Gueverra from obtaining reimbursement his
right to recover may be justified under the article 1236 of the civil code.[1] Thus Guevarra
must be reimbursed but only to the extent that Dominion has benefited without interest
or demand for damages.

50. VICTORIAS MILLING VS. CA, GR NO. 117356

FACTS: St. Therese Merchandising regularly bought sugar from Victorias Milling Co., Inc.
In the course of their dealings, Victorias Milling issued several Shipping List/Delivery
Receipts (SLDRs) to St. Therese Merchandising as proof of purchases. Among these was
SLDR No. 1214M which covers 25,000 bags of sugar. Each bag contained 50 kilograms and
priced at P638.00 per bag. The transaction it covered was a direct sale.

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On October 25, 1989, St. Therese Merchandising sold to Consolidated Sugar Corp. its
rights in SLDR No. 1214M for P14,750,000.00. Consolidated Sugar Corp. issued checks in
payment. That same day, Consolidated Sugar Corp. wrote Victorias Milling that it had
been authorized by St. Therese Merchandising to withdraw the sugar covered by SLDR
No. 1214M.

Consolidated Sugar Corp. surrendered SLDR No. 1214M to Victorias Milling’s NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been
released, Victorias Milling refused to allow further withdrawals of sugar against SLDR No.
1214M because, according to it, St. Therese Merchandising had already withdrawn all the
sugar covered by the cleared checks.

ISSUE: WON the contract was one of agency or sale

HELD: Sale.

Victorias Milling heavily relies upon St. Therese Merchandising’s letter of authority
allowing Consolidated Sugar Corp. to withdraw sugar against SLDR No. 1214M to show
that the latter was St. Therese Merchandising’s agent. The pertinent portion of said letter
reads: “This is to authorize Consolidated Sugar Corporation or its representative to
withdraw for and in our behalf (stress supplied) the refined sugar covered by Shipping
List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total
quantity of 25, 000 bags.”

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. 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.

51. EUROTECH INDUSTRIAL TECHNOLOGIES, INC. VS. CUIZON, GR NO. 16755


FACTS: Petitioner is engaged in the business of importation and distribution of various
European industrial equipment here in the Philippines. It has as one of its customers,
Impact Systems Sales (Impact Systems) a sole proprietorship owned by respondent
ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact Systems.
Petitioner Eurotech sold to Impact Systems various products. Subsequently,
respondents sought to buy from petitioner one unit of sludge pump with respondents
making a down payment. When the sludge pump arrived from the United Kingdom,

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petitioner refused to deliver the same to respondents without their having fully settled
their indebtedness to petitioner. Thus, respondent EDWIN and Alberto de Jesus, general
manager of petitioner, executed a Deed of Assignment of receivables in favor of
petitioner Eurotech which reads:

1.) That ASSIGNOR has an outstanding receivables from Toledo Power


Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00)
PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE the said receivables from Toledo Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR
is the lawful recipient;
xxx
Despite the existence of the Deed of Assignment however, respondents
proceeded to collect from Toledo Power Company the amount of P365,135.29. Alarmed
by this development, petitioner made several demands upon respondents to pay their
obligations. As a result, respondents were able to make partial payments to
petitioner. Petitioners counsel sent respondents a final demand letter but they failed to
abide by the same. Hence, petitioner instituted a complaint for sum of money, damages,
with application for preliminary attachment against herein respondents.

Respondent EDWIN alleged that he is not a real party in interest in this


case. According to him, he was acting as mere agent of his principal, which was the Impact
Systems, in his transaction with petitioner and the latter was very much aware of this fact.

ISSUE: Whether or not respondent acted as a mere agent of Impact Systems.

HELD: We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something


in representation or on behalf of another with the latter’s consent. The underlying
principle of the contract of agency is to accomplish results by using the services of others
to do a great variety of things like selling, buying, manufacturing, and transporting. Its
purpose is to extend the personality of the principal or the party for whom another acts
and from whom he or she derives the authority to act. It is said that the basis of agency
is representation, that is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal. By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence qui facit per alium facit per se.

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52. LIM VS. PEOPLE, 133 SCRA 333


FACTS: Lourdes Lim went to the house of Maria de Guzman and proposed to sell the
latter’s tobacco. Maria agreed with the proposal—hence the execution of a receipt
manifesting that Lourdes received 615 kilos of tobacco to be sold at P1.30 per kilo, the
overprice for which would be received by Lourdes. The receipt also states that the
proceeds will be given to Mariaas soon as it was sold. However, Lourdes paid only P240,
despite repeated demands. Thus, Maria filed a complaint, and Lourdes was found guilty
of estafa. (Estafa is present where contract to sell constituted another as mere agent)
Lourdes argued that the receipt was a “contract of sale” and not a “contract of agency to
sell.”

ISSUE: Whether the contract was a contract of sale and not a contract of agency to sell.

RULING: NO. The contract was not a contract of sale because there was no transfer of
ownership of the goods to Lourdes. Instead, the agreement was a contract of agency to
sell for it constituted Lourdes as agent with the obligation to give the proceeds of the sale
to Maria as soon as the same was sold.

The obligation was immediately demandable as soon as the tobacco was disposed of.
Consequently, there is no need for the court to fix the duration of the obligation, as
contended by Lourdes.

E. OBLIGATIONS OF THE AGENT (ARTICLES 1884-1909)

1. PHIL NATIONAL BANK VS. MANILA SURETY & FIDELITY CO., INC. 14 SCRA 776

An agent is required to act with the care of a good father of a family and becomes liable
for the damages, which the principal may suffer through his non-performance. A bank is
answerable for negligence in failing to collect the sums due its debtor from the latter’s
own debtor, contrary to said bank’s duty as holder of an exclusive and irrevocable power
of attorney to make such collections.

FACTS: Adams & Taguba Corporation (ATACO) constituted PNB as its assignee and
attorney-in-fact to receive and collect from the Bureau of Public Works the amount to
pay for the asphalt delivered to it under a trust receipt guaranteed by Manila Surety.
ATACO delivered to BPW asphalt worth P431,466.52. Of this amount, PNB was able to
regularly collect a total of P106,382.01. However, due to unexplained reasons, PNB was
not able to collect until the investigators found out that more money were payable to
ATACO from BPW. The latter allowed another creditor to collect funds due to ATACO
under the same purchase order, to a total of P311,230.41.

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Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18,
plus interests and damages. CA ruled that PNB was negligent in having stopped collecting
from BPW before ATACO’s debt is fully collected, thereby allowing funds to be taken by
other creditors to the prejudice of the surety. PNB asserts that the power of attorney
executed in it is favor from ATACO was merely an additional security; that it was the duty
of the surety to see to it that the obligor fulfills his obligation; and that PNB has no
obligation to the surety to collect any sum from ATACO.

ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting sums due to it.

HELD: YES. The CA did not hold PNB responsible for its negligence in failing to collect from
ATACO for its debt to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO
FROM BPW. An agent is required to act with the care and diligence of a good father of a
family and becomes liable for the damages, which the principal may suffer through its
non-performance. PNB’s power to collect was expressly made irrevocable so that BPW
could very well refuse to make payments to ATACO itself, and reject any demands by the
surety.

2. RAMOS VS. CAOIBES, 94 PHIL 440


FACTS: Concepcion Ramos appointed Caoibes through a power of attorney to collect an
amount due him from the Philippine War Damage Commission. Half of that amount will
then be given to the sister of Concepcion and half to her niece and nephew as evidenced
by an affidavit. Days after Concepcion died, a Check was issued to Caoibes when he
presented the power of attorney and affidavit and later on encashed it for himself. The
administratrix discovered the collection made by Caoibes. The administratrix filed to the
court asking Caoibes to deposit the money to the clerk of court. Caoibes contended that
he will deliver half of the amount to the clerk of court and then said that he had the right
to retain half of the money by virtue of the power of attorney and the Affidavit.

ISSUE: Whether Caoibes is correct with her contention that he had the right to retain the
money by virtue of the power of attorney?

RULING: No. Caoibes as an agent had the obligation to deliver the amount collected by
virtue of the power of attorney to his principal, Concepcion or the administratrix since
she died. No where in the in power of attorney did it state that the was a cession of rights
made in favour of Caoibes. And the prevailing provision during the time of the transaction
stated that a contract of agency is deemed gratuitous unless the agent is a professional
agent and there was no showing that Caoibes was such. Lastly, an agency is terminated
by death of the principal or of the agent. When Caoibes made use of the power of
attorney, the principal was already dead.

Additional: Verbal donation requires the simultaneous delivery of the gift. In the absence
of this requisite the donation shall produce no effect, unless made in writing and accepted

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in the same form. The alleged donation was made in writing but it has not been accepted
in the same form, and consequently, has no validity.

3. GUTIERREZ HERMANOS VS. ORIA HERMANOS, 30 PHIL 491

In an action by an agent to recover the amount of certain disbursements and not


compensation for services, Art. 1728, not Art. 1711, is applicable.

Fortis, an employee of Gutierrez Hermanos, brought the action to recover the balance of
his salary for the year 1902, which is 5% of the net profits of Hermanos’ business, FACTS:
and the amount he expended for the year 1903 amounting to P600. The salary was in
accordance with the contract made by Miguel Alonzo Gutierrez, who was made as one of
the managers of the company, with full power to transact all of the business and to make
a contract of employment. In 1903, Fortis went to Hongkong to look after the business of
Gutierrez Hermanos in the matter of the repair of a certain steamship, for which he
expended P600. Gutierrez Hermanos contended that Fortis is not entitled to
compensation for the services rendered, because according to Art. 1711 of the Civil Code,
the contract of agency is supposed to be gratuitous in the absence of an agreement to
the contrary. Lower court ruled in favor of Fortis.

ISSUE: W/N Fortis, as an agent of Gutierrez Hermanos in Hongkong, is entitled to


reimbursement of the P600 expense he incurred

HELD: YES. Art. 1711 is INAPPLICABLE in this case because the amount of P600 is not
claimed as compensation for services but as a reimbursement for money expended by
him in the business of Hermanos. Thus, it is Art. 1728 (now Art. 1912 of the NCC) that is
applicable Article 1912. The principal must advance to the agent, should the latter so
request, the sums necessary for the execution of the agency. Should the agent have
advanced them, the principal must reimburse him therefore, even if the business or
undertaking was not successful, provided the agent is free from all fault. The
reimbursement shall include interest on the sums advanced, from the day on which the
advance was made. (1728)

4. DOMINGO VS. DOMINGO, 42 SCRA 131


SUMMARY:
Gregorio Domingo, Vicente Domingo’s broker and agent, received P1,000 from Oscar de
Leon as gift or propina. Oscar gave him said amount after Gregorio succeeded in
persuading Vicente to accept his offer to buy the lot for P1.20 instead of P2.

An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same to his principal, the vendor, is guilty of a
breach of his loyalty to the principal and forfeits his right to collect the commission from

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his principal, even if the principal does not suffer any injury by reason of such breach of
fidelity, or that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it. The fact that the principal may have been benefited by the
valuable services of the said agent does not exculpate the agent who has only himself to
blame for such a result by reason of his treachery or perfidy. As a necessary consequence
of such breach of trust, Gregorio Domingo must forfeit his right to the commission and
must return the part of the commission he received from his principal.

FACTS: Vicente Domingo granted to Gregorio Domingo, a real estate broker, the exclusive
agency to sell his Lot No. 883, Piedad Estate in a document. Said lot has an area of 88,477
sq. m.
According to the document, said lot must be sold for P2 per sq. m. Gregorio is
entitled to 5% commission on the total price if the property is sold:
by Vicente or by anyone else during the 30-day duration of the agency or
by Vicente within 3 months from the termination of the agency to a purchaser
to whom it was submitted by Gregorio during the effectivity of the agency with
notice to Vicente.
This contract is in triplicate with the original and another copy being retained by
Gregorio. The last copy was given to Vicente.

Subsequently, Gregorio authorized Teofilo Purisima to look for a buyer without


notifying Vicente. Gregorio promised Teofilo ½ of the 5% commission.
Teofilo introduced Oscar de Leon to Gregorio as a porspective buyer. Oscar
submitted a written offer which was very much lower than the P2 per sq. m. price.
Vicente directed Gregorio to tell Oscar to raise his offer. After several conferences
between Gregorio and Oscar, Oscar raised his offer to P1.20 per sq. m. or P109,000
in total. Vicente agreed to said offer. Upon Vicente’s demand, Oscar issued a P1,000
check to him as earnest money. Vicente, then, advanced P300 to Gregorio.

Subsequently, Vicente asked for an additional P1,000 as earnest money, which


Oscar promised to deliver to Vicente. The written agreement, Exhibit C, between
the parties was amended. Oscar will vacate on or about September 15, 1956 his
house and lot at Denver St., QC, which is part of the purchase price. Later on, it was
again amended to state that Oscar will vacate his house and lot on Dec. 1, 1956
because his wife was pregnant at that time. Oscar gave Gregorio P1,000 as a gift or
propina for succeeding in persuading Vicente to sell his lot at P1.20 per sq. m.
gregorio did not disclose said gift or propina to Vicente.

Moreover, Oscar did not pay Vicente the additional P1,000 Vicente asked from him
as earnest money. The deed of sale was not executed since Oscar gave up on the
negotiation when he did not receive his money from his brother in the US, which he
communicated to Gregorio. Gregorio did not see Oscar for several weeks thus
sensing that something fishy might be going on. So, he went to Vicente’s house

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where he read a portion of the agreement to the effect that Vicente was still willing
to pay him 5% commission, P5,450.

Thereafter, Gregorio went to the Register of Deeds of QC, where he discovered that
a Deed of sale was executed by Amparo de Leon, Oscar’s wife, over their house and
lot in favor of Vicente. After discovering that Vicente sold his lot to Oscar’s wife,
Gregorio demanded in writing the payment of his commission. Gregorio also
conferred with Oscar. Oscar told him that Vicente went to him and asked him to
eliminate Gregorio in the transaction and that he would sell his property to him for
P104,000. In his reply, Vicente stated that Gregorio is not entitled to the 5%
commission because he sold the property not to Gregorio's buyer, Oscar de Leon,
but to another buyer, Amparo Diaz, wife of Oscar de Leon.

CA: exclusive agency contract is genuine. The sale of the lot to Amparo de Leon is
practically a sale to Oscar.

ISSUE: WON Gregorio’s act of accepting the gift or propina from Oscar constitutes a
fraud which would cause the forfeiture of his 5% commission [YES]

HELD: Gregorio Domingo as the broker, received a gift or propina from the
prospective buyer Oscar de Leon, without the knowledge and consent of his
principal, Vicente Domingo. His acceptance of said substantial monetary gift
corrupted his duty to serve the interests only of his principal and undermined his
loyalty to his principal, who gave him partial advance of P3000 on his commission.
As a consequence, instead of exerting his best to persuade his prospective buyer to
purchase the property on the most advantageous terms desired by his principal,
Gregorio Domingo, succeeded in persuading his principal to accept the counter-
offer of the prospective buyer to purchase the property at P1.20 per sq. m.

 The duties and liabilities of a broker to his employer are essentially those
which an agent owes to his principal.
 An agent who takes a secret profit in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his loyalty to the principal and
forfeits his right to collect the commission from his principal, even if the
principal does not suffer any injury by reason of such breach of fidelity, or
that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it.
 Rationale: prevent the possibility of any wrong not to remedy or repair an
actual damage
 agent thereby assumes a position wholly inconsistent with that of being an
agent for hisprincipal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed

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 The fact that the principal may have been benefited by the valuable services
of the said agent does not exculpate the agent who has only himself to blame
for such a result by reason of his treachery or perfidy.
 As a necessary consequence of such breach of trust, Gregorio Domingo must
forfeit his right to the commission and must return the part of the
commission he received from his principal.

Decisive Provisions
Article 18911 and 19092 CC
The modification contained in the first paragraph Article 1891 consists in
changing the phrase "to pay" to "to deliver", which latter term is more
comprehensive than the former. Paragraph 2 of Article 1891 is a new addition
designed to stress the highest loyalty that is required to an agent —
condemning as void any stipulation exempting the agent from the duty and
liability imposed on him in paragraph one thereof.

Article 1909 demand the utmost good faith, fidelity, honesty, candor and
fairness on the part of the agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon the agent the absolute obligation
to make a full disclosure or complete account to his principal of all his
transactions and other material facts relevant to the agency, so much so that
the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void. The
duty of an agent is likened to that of a trustee. This is not a technical or
arbitrary rule but a rule founded on the highest and truest principle of morality
as well as of the strictest justice.

Situations where the duty mandated by Art 1891 does not apply
Agent or broker acted only as a middleman with the task of merely bringing
together the vendor and vendee, who themselves thereafter will negotiate on
the terms and conditions of the transaction. Agent or broker had informed
the principal of the gift or bonus or profit he received from the purchaser and
his principal did not object

Teofilo Purisima’s entitlement to his share in the 5% commission


Teofilo can only recover from Gregorio his ½ share of whatever amounts
Gregorio Domingo received by virtue of the transaction as his sub-agency
contract was with Gregorio Domingo alone and not with Vicente Domingo,
who was not even aware of such sub-agency.

Since Gregorio already received a total of P1,300 from Oscar and Vicente, P650
of which should be paid by Gregorio to Teofilo.

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5. US VS. REYES, 36 PHIL 791

FACTS: Private respondent [Montoya] is an American citizen, employed as an


identification (I.D.) checker at the U.S. Navy Exchange (NEX) at the Joint United States
Military Assistance Group (JUSMAG) headquarters in Quezon City. Petitioner [Bradford]
also worked at NEX JUSMAG as an “activity manager”. There was an incident on 22
January 1987 whereby Bradford had Montoya’s person and belongings searched in front
of many curious onlookers. This caused Montoya to feel aggrieved and to file a suit for
damages.

Contentions: Bradford claimed that she was immune from suit because:
1) (This) action is in effect a suit against the United States of America, a foreign sovereign
immune from suit without its consent for the cause of action pleaded in the complaint;
and

2) Defendant, Maxine Bradford, as manager of the US Navy Exchange Branch at JUSMAG,


Quezon City, is immune from suit for act(s) done by her in the performance of her official
functions under the Philippines-United States Military Assistance Agreement of 1947 and
Military Bases Agreement of 1947, as amended.

Montoya argued that:


(a) Bradford, in ordering the search upon her person and belongings outside the NEX
JUSMAG store in the presence of onlookers, had committed an improper, unlawful and
highly discriminatory act against a Filipino employee and had exceeded the scope of her
authority; (b) having exceeded her authority, Bradford cannot rely on the sovereign
immunity of the public petitioner because her liability is personal; (c) Philippine courts are
vested with jurisdiction over the case because Bradford is a civilian employee who had
committed the challenged act outside the U.S. Military Bases; such act is not one of those
exempted from the jurisdiction of Philippine courts; and (d) Philippine courts can inquire
into the factual circumstances of the case to determine whether or not Bradford had
acted within or outside the scope of her authority.

ISSUE: 1.) Whether or not Bradford acted as an agent of the US government hence
entitled to diplomatic immunity. 2.) Whether or not the case at bar is a suit against the
State.

HELD: 1.) NO. First of all, she is not among those granted diplomatic immunity under
Art. 16(b) of the 1953 Military Assistance Agreement creating the JUSMAG. Second, even
diplomatic agents who enjoy immunity are liable if they perform acts outside their official
functions (Art. 31, Vienna Convention on Diplomatic Relations).

2.) NO .Doctrine of state immunity is expressed in Art. XVI, Sec. 3 of the 1987
Constitution. This immunity also applies to complaints filed against officials of the state

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for acts allegedly performed by them in discharge of their duties since it will require the
state to perform an affirmative act such as appropriation of amount to pay damages. This
will be regarded as a case against the state even if it has not be formally impleaded. But
this is not all encompassing. It’s a different matter where the public official is made to
account in his capacity as such for acts contrary to law & injurious to rights of plaintiff.
State authorizes only legal acts by its officers. Action against officials by one whose rights
have been violated by such acts is not a suit against the State w/in the rule of immunity
of the State from suit. The doctrine of state immunity cannot be used as an instrument
for perpetrating an injustice. It will not apply & may not be invoked where the public
official is being sued in his private & personal capacity as an ordinary citizen. This usually
arises where the public official acts w/o authority or in excess of the powers vested in
him. A public official is liable if he acted w/malice & in bad faith or beyond the scope of
his authority or jurisdiction. (Shauf vs. CA) Also, USA vs. Guinto declared that USA is not
conferred with blanket immunity for all acts done by it or its agents in the Philippines
merely because they have acted as agents of the US in the discharge of their official
functions. In this case, Bradford was sued in her private/personal capacity for acts done
beyond the scope & place of her official function, thus, it falls w/in the exception to the
doctrine of state immunity.

6. VILLASI VS. GARCIA BUSQUE, 49 PHIL 126

FACTS: Villasi engaged the services of respondent Fil-Garcia Construction, Inc. (FGCI) to
construct a seven-storey condominium building located Cubao, Quezon City. For failure
of Villasi to fully pay the contract price despite several demands, FGCI initiated a suit for
collection of sum of money. Villasi filed an answer specifically denying the material
allegations of the complaint. Contending that FGCI has no cause of action against her,
Villasi averred that she delivered the total amount of P7,490,325.10 to FGCI but the latter
accomplished only 28% of the project.To enforce her right as prevailing party, Villasi filed
a Motion for Execution. To satisfy the judgment, the sheriff levied on a building located
Kalayaan Avenue, Quezon City. While the building was declared for taxation purposes in
the name of FGCI, the lots in which it was erected were registered in the names of the
Spouses Garcia. The Spouses Garcia argued that the building covered by the levy was
mistakenly assessed by the City Assessor in the name of FGCI and that it could not be
levied upon not being owned by the judgment debtor.

ISSUE: Whether the general rule on accession can be applied in the case at bar

HELD: While it is a horn-book doctrine that the accessory follows the principal, that is,
the ownership of the property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or
artificially, such rule is not without exception. In cases where there is a clear and
convincing evidence to prove that the principal and the accessory are not owned by one
and the same person or entity, the presumption shall not be applied and the actual
ownership shall be upheld.

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When there are factual and evidentiary evidence to prove that the building and the lot on
which it stands are owned by different persons, they shall be treated separately. As such,
the building or the lot, as the case may be, can be made liable to answer for the obligation
of its respective owner.

7. DEVELOPMENT BANK OF THE PHILIPPINES VS. CA, 49 SCAD 715, 231 SCRA 370

A mistake upon a doubtful or difficult question of law may be the basis of good faith.

FACTS: Spouses Piñedas are registered owners of a parcel of land in Capiz, which they
mortgaged to DBP to secure the loan (P20,000) they obtained from the latter. Piñedas
eventually defaulted, prompting DBP to extra-judicially foreclose and take possession of
such property. The Ministry of Justice, then, opined through its Opinion No. 92 (’78) that
lands covered by P.D. No. 27, to which the subject property was included, may not be the
object of foreclosure proceedings. The Piñedas, then, sought to redeem such property
(with P10,000 as downpayment) but was denied as the land was allegedly tenanted. They
then sought the cancellation of the title and specific performance, stating that DBP acted
in bad faith when it took possession of the property andcaused the consolidation of its
title in spite of the fact that the 5-year redemption period expressly stated in the Sheriff’s
Certificate of Sale had not yet lapsed and that their offer to redeem was within the
redemption period.

ISSUE: Whether or not DBP acted in bad faith when it took possession of the property

RULING: NO. DBP’s act of consolidating its title and taking possession of the property
after the expiration of the redemption period was in accordance with Sec. 6 of Act No.
3135, which states that if no redemption of a foreclosed property is made within one
year, the purchaser (DBP) is entitled as a matter of right to consolidate and to possess the
property. In addition to this, it was in consonance with Sec. 4 of the mortgage contract
between DBP and the Piñedas where they agreed the appointment of DBP as receiver to
take charge and to hold possession of the mortgaged property in case of foreclosure. In
fact, without DBP’s act of consolidating its title, the Piñedas would not be able to assert
their right to repurchase the property within 5 years, which would begin to run after the
expiration of the one-year period. Thus, its acts cannot be tainted with bad faith nor did
it impair Piñedas’ right to repurchase

It may also be argued that P.D. No. 27 was already in effect when DBP foreclosed the
property. However, the legal propriety of the foreclosure of the land was questioned only
after Opinion No. 92 (’78) was issued, which happened almost 2 months after DBP
consolidated its title to the property. By law and jurisprudence, a mistake upon a doubtful
or difficult question of law may properly be the basis of good faith.

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Art. 526 of NCC states that “a possessor in good faith is one who is not aware that there
exists in his title or mode of acquisition any flaw, which invalidates it.” Moreover, Art. 527
of NCC provides “good faith is always presumed, and upon him who alleges bad faith on
the part of the possessor rests the burden of proof.” Thus, it is incumbent on the Piñedas
to prove that DBP was aware of the flaw in its title (nullity of the foreclosure), but this
they failed to do.

8. PHIL PRODUCTS CO. VS. PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE


EXTERIUR: PRIMARIA (PHIL) INC., 15 SCRA 301

FACTS: Primateria Societe Anonyme Pour Le Commerce Exterieur (Primateria Zurich, a


sociedad anonima formed in Zurich), through Alexander Baylin, entered into an
agreement with Philippine Products Company (PPC) whereby it was agreed that from
1951 to 1953, PPC shall ship copra products abroad.

Apparently, Primateria Zurich was not licensed by the Securities and Exchange
Commission to do business in the Philippines. Primateria Zurich also failed to pay its
obligations amounting to P31,009.71. PPC sued Primateria Zurich and it impleaded Baylin,
Primateria Philippines, and one Jose Crame, the latter three being impleaded as agents of
Primateria Zurich.

The lower court ruled in favor PPC but it absolved Baylin, Crame, and Primateria
Philippines.

PPC appealed as it insists that Baylin et al should be liable as agents because under Section
68 and 69 of the Corporation Law, the agents of foreign corporations not licensed to
transact in the Philippines shall be personally liable for contracts made in their (foreign
corporation’s) behalf.

ISSUE: Whether or not PPC is correct.

HELD: No. PPC was not able to prove that Primateria Zurich, a sociedad anonima, is a
foreign corporation. And as a sociedad anonima, Primateria Zurich is not a corporation
under our Corporation Law. As such, Sections 68 and 69 cannot be invoked in order to
make the alleged agents of Primateria Zurich be liable. PPC will have to enforce the
judgment against Primateria Zurich alone.

9. NATIONAL POWER CORP. VS. NATIONAL MECHANDISING CORP., 117 SCRA 789
FACTS: Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant
National Merchandising Corporation (NAMERCO), the Philippine representative of New
York-based International Commodities Corporation, executed a contract of sale of sulfur
with a stipulation for liquidated damages in case of breach.

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Defendant-appellant Domestic Insurance Company executed a performance bond in


favor of NPC to guarantee the seller's obligation. In entering into the contract, Namerco,
however, did not disclose to NPC that Namerco's principal, in a cabled instruction, stated
that the sale was subject to availability of a steamer, and contrary to its principal's
instruction, Namerco agreed that non-availability of a steamer was not a justification for
non-payment of liquidated damages.
The New York supplier was not able to deliver the sulfur due to its inability to secure
shipping space. Consequently, the Government Corporate Counsel rescinded the contract
of sale due to the supplier's non-performance of its obligations, and demanded payment
of liquidated damages from both Namerco and the surety. Thereafter, NPC sued for
recovery of the stipulated liquidated damages. After trial, the Court of First Instance
rendered judgment ordering defendants-appellants to pay solidarity to the NPC reduced
liquidated damages with interest.

ISSUE: Whether NaMerCo exceeded their authority

HELD: Yes, NaMerCo exceeded their authority.

The Supreme Court held that before the contract of sale was signed Namerco was already
aware that its principal was having difficulties in booking shipping space.

It is being enforced against the agent because article 1897 implies that the agent who acts
in excess of his authority is personally liable to the party with whom he contracted.

Moreover, the rule is complemented by article 1898 of the Civil Code which provides that
"if the agent contracts in the name of the principal, exceeding the scope of his authority,
and the principal does not ratify the contract, it shall be void if the party with whom the
agent contracted is aware of the limits of the powers granted by the principal".

Namerco never disclosed to the Napocor the cabled or written instructions of its principal.
For that reason and because Namerco exceeded the limits of its authority, it virtually
acted in its own name and not as agent and it is, therefore, bound by the contract of sale
which, however, is not enforceable against its principal

10. ALBERT VS. UNIVERSITY PUBLISHING CO.,J 13 SCRA 84

FACTS: In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we found
plaintiff entitled to damages (for breach of contract) but reduced the amount from P23,
000.00 to P15, 000.00. Then in Albert vs. University Publishing Co., Inc., L-15275, October
24, 1960, we held that the judgment for P15,000.00 which had become final and
executory, should be executed to its full amount, since in fixing it, payment already made
had been considered. 15 years ago, Mariano Albert entered into a contract with
University Publishing Co., Inc. through Jose M. Aruego, its President, whereby University

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would pay plaintiff for the exclusive right to publish his revised Commentaries on the
Revised Penal Code. The contract stipulated that failure to pay one installment would
render the rest of the payments due. When University failed to pay the second
installment, Albert sued for collection and won.

However, upon execution, it was found that the records of this Commission do not show
the registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or
partnership. Albert petitioned for a writ of execution against Jose M. Aruego as the real
defendant. University opposed, on the ground that Aruego was not a party to the case.

ISSUE: WON the non-registration of University Publishing Co., Inc. in the SEC is an existing
corporation with an independent juridical personality.

HELD: No.

Ratio: On account of the non-registration it cannot be considered a corporation, not even


a corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no personality
separate from Jose M. Aruego; it cannot be sued independently.

In the case at bar, Aruego represented a non-existent entity and induced not only Albert
but the court to believe in such representation. He signed the contract as “President” of
“University Publishing Co., Inc.,” stating that this was “a corporation duly organized and
existing under the laws of the Philippines”.

“A person acting or purporting to act on behalf of a corporation which has no valid


existence assumes such privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent.”

Aruego, acting as representative of such non-existent principal, was the real party to the
contract sued upon, and thus assumed such privileges and obligations and became
personally liable for the contract entered into or for other acts performed as such agent.

The Supreme Court likewise held that the doctrine of corporation by estoppel cannot be
set up against Albert since it was Aruego who had induced him to act upon his (Aruego’s)
willful representation that University had been duly organized and was existing under the
law.

11. EUGENIO VS. CA, 239 SCRA 207

As far as third persons are concerned, an act is deemed to have been performed within
the scope of the agent’s authority, if such is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits of his authority according to the
understanding between the principal and his agent.

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FACTS: Nora Eugenio was a dealer of Pepsi. She had one store in Marikina but had a
regular charge account in Q.C. And Muntinlupa. Her husband Alfredo used to be a route
manager for Pepsi in its Q.C. Plant. Pepsi filed a complaint for a sum of money against
Eugenio spouses. since according to them the spouses (1) had an outstanding balance
since it purchased and received on credit various products from both its Q.C. and
Muntinlupa plant and (2) had an unpaid obligation for the loaned “empties” from Pepsi.
They contend that the total outstanding account was P94,651.xx. Eugenio's in their
defense presented four Trade Provisional Receipts (TPR) allegedly issued to and received
by them from Pepsi's Route Manager (Malate Warehouse) Jovencio Estrada showing that
they paid a total sum of P80,500.xx. They also claim that the signature of Nora Eugenio in
a Sales Invoice (85366) for the amount of P5,631.xx which was included in the
computation of their debt was falsified. Therefore, without these errors, petitioner
contend that (1) they do not have any outstanding debt, and (2) it is Pepsi who owes them
P3,546.02. RTC found in favor of Pepsi. CA affirmed the decision.

ISSUE: W/N the amounts in the TPR should be credited in favor of the spouses.

HELD: CA decision is annulled and set-aside. Pepsi is ordered to pay Eugenio. Background:
Eugenio submitted the TPR's to Atty. Rosario (Pepsi's lawyer). Thereafter, Rosario ordered
Daniel Azurin (asst.personnel manager) to conduct an investigation to verify the claim of
the petitioners. According to Azurin, Estrada denied that he issued and signed the TPR's.
Azurin testified to this in Court (However, Estrada never did. He failed to appear and was
never found. Therefore, his testimony- as told by Azurin- is barred by the Hearsay
Evidence Rule). Furthermore, the “investigation” conducted was really more of an
interview without any safeguards and did not give Eugenio opportunity to object or cross-
examine Estrada. The other points of Estrada (and Pepsi) were all invalid since Estrada
was nowhere to be found and Pepsi failed to comply with the pertinent rules for the
admission of the evidence by which it sought to prove its contentions. Pepsi therefore
was unable to rebut the aforestated presumptions in favor of valid payment by
petitioners, In relation to Agency: Assuming in this case that Pepsi never received the
amounts reflected in the TPR's, Pepsi still failed to prove that Estrada (its duly authorized
agent) did not receive the amounts. In so far as Eugenio is concerned, their obligation is
extinguished when they paid Estrada using Pepsi's official receipt. The substantive law is
that payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it. *TPR:
Trade Provisional Receipts are bound and given in booklets to the company sales
representatives, under proper acknowledgement by them and with a record of the
distribution thereof. After every transaction, when a collection is made the customer is
given by the sales representative a copy of the TPR, that is, the triplicate copy or
customer's copy, properly filled up to reflect the completed transactions. All unused
TPR's,as well as the collections made, are turned over by the sales representative to the
appropriate company officer.

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12. GREEN VALLEY POULTRY AND ALLIED PRODUCTS, INC. VS. IAC 133 SCRA 169

In an agency to sell, the agent is liable to pay the principal for goods sold by the agent
without the principal’s consent. The commission agent cannot without the express or
implied consent of the principal, sell on credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent shall be entitled to any interest or
benefit, which may result from such sale.

FACTS: In 1969, GREEN VALEY POULTRY AND ALLIED PRODUCTS entered into a letter
agreement with SQUIBB & SONS PHILIPPINE CORPORATION. The details of the agreement
state that Green Valley will be the nonexclusive distributor of the products of Squibb
Veterinary Products. As its distributor Green Valley is entitled to 10% discount on Squibb’s
whole sale price and catalogue price. Green Valley is also limited to selling Squibb’s
products to central and northern Luzon. Payment for purchases from Squibb will be due
60 days from date of invoice, etc. For goods delivered to Green Valley but unpaid, Squibb
filed a suit to collect. Squibb argues that their relationship with Green Valley is a mere
contract of sale as evidenced by the stipulation that Green Valley was obligated to pay for
the goods received upon the expiration of the 60-day credit period. Green Valley counters
that the relationship between itself and Squibb is that of an agency to sell.

ISSUE: W/N Green Valley is an agent of Squibb.

RULING: Whether viewed as an agency to sell or as a contract of sale GREEN VALLEY is


liable to Squibb for the unpaid products. If it is a contract of sale then the Green Valley is
liable by just merely enforcing the clear words of the contract. If it is an agency then Green
Valley is liable because it sold on credit without authority from its principal. The Civil Code
says: Art. 1905 – The commission agent cannot without the express or implied consent of
the principal, sell on credit. Should he do so, the principal may demand from him payment
in cash, but the commission agent shall be entitled to any interest or benefit, which may
result from such sale.

F. OBLIGATIONS OF THE PRINCIPAL (ARTICLES 1910-1918)

1. PRUDENTIAL BANK VS. CA, 223 SCRA 391

Through a letter of credit, the bank merely substitutes its own promise to pay for one
of its customers who in return promises to pay the bank the amount of funds mentioned
in the letter of credit plus credit or commitment fees mutually agreed upon.

FACTS: Japan for the importation of textile machineries under a 5-year deferred payment
plan. To effect the payment, PRMI applied for a commercial letter of credit with the
Prudential Bank and Trust Company in favor of Nissho. Prudential Bank opened Letter of

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Credit No. DPP-63762 for $128,548.78 Against this letter of credit, drafts were drawn and
issued by Nissho, which were all paid by the Prudential Bank through its correspondent
in Japan, the Bank of Tokyo, Ltd. Two of the original drafts were accepted by PRMI through
its president, Anacleto R. Chi, while the others were not. Upon the arrival of the
machineries, the Prudential Bank indorsed the shipping documents to the PRMI which
accepted delivery of the same. To enable PRMI to take delivery of the machineries, it
executed, by prior arrangement with the Prudential Bank, a trust receipt which was signed
by Anacleto R. Chi in his capacity as President of PRMI company.

At the back of the trust receipt was printed a form to be accomplished by 2 sureties who,
by the very terms and conditions thereof, were to be jointly and severally liable to the
Prudential Bank should the PRMI fail to pay the total amount or any portion of the drafts
issued by Nissho and paid for by Prudential Bank. . PRMI was able to take delivery of the
textile machineries and installed the same at its factory site. Chi argued that presentment
for acceptance was necessary to make PRMI liable. The trial court ruled that that
presentment for acceptance was an indispensable requisite for Philippine Rayon’s liability
on the drafts to attach.

ISSUE: Whether or not presentment for acceptance was needed in order for PRMI to be
liable under the draft.

HELD : Presentment for acceptance is defined an the production of a bill of exchange to


a drawee for acceptance. Acceptance, however, was not even necessary in the first place
because the drafts which were eventually issued were sight drafts. Even if these were not
sight drafts, thereby necessitating acceptance, it would be the Bank (Bank of America) —
and not Philippine Rayon — which had to accept the same for the latter was not the
drawee.

The trial court and the public respondent, therefore, erred in ruling that presentment for
acceptance was an indispensable requisite for Philippine Rayon’s liability on the drafts to
attach. Contrary to both courts’ pronouncements, Philippine Rayon immediately became
liable upon Bank of America’s payment on the letter of credit. Such is the essence of the
letter of credit issued by the petitioner. A different conclusion would violate the principle
upon which commercial letters of credit are founded because in such a case, both the
beneficiary and the issuer, Nissho Company Ltd. and the petitioner, respectively, would
be placed at the mercy of Philippine Rayon even if the latter had already received the
imported machinery and the petitioner had fully paid for it.

In fact, there was no need for acceptance as the issued drafts are sight drafts.
Presentment for acceptance is necessary only in the cases expressly provided for in
Section 143 of the Negotiable Instruments Law (NIL).

In the instant case then, the drawee was necessarily the herein the Bank of America. It
was to the latter that the drafts were presented for payment.

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2. CUISON VS. CA, 227 SCRA 391

FACTS: Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap. Valiant Investment Associates delivered various kinds
of paper products to a certain Tan. The deliveries were made by Valiant pursuant to
orders allegedly placed by Tiac who was then employed in the Binondo office of
petitioner. Upon delivery, Tan paid for the merchandise by issuing several checks payable
to cash at the specific request of Tiac. In turn, Tiac issued nine (9) postdated checks to
Valiant as payment for the paper products. Unfortunately, sad checks were later
dishonored by the drawee bank.

Thereafter, Valiant made several demands upon petitioner to pay for the merchandise in
question, claiming that Tiac was duly authorized by petitioner as the manager of his
Binondo office, to enter into the questioned transactions with Valiant and Tan. Petitioner
denied any involvement in the transaction entered into by Tiac and refused to pay Valiant.

Left with no recourse, private respondent filed an action against petitioner for the
collection of sum of money representing the price of the merchandise. After due hearing,
the trial court dismissed the complaint against petitioner for lack of merit. On appeal,
however, the decision of the trial court was modified, but was in effect reversed by the
CA. CA ordered petitioner to pay Valiant with the sum plus interest, AF and costs.

ISSUE: WON Tiac possessed the required authority from petitioner sufficient to hold the
latter liable for the disputed transaction

HELD: YES.As to the merits of the case, it is a well-established rule that 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.

It matters not whether the representations are intentional or merely negligent so long as
innocent, third persons relied upon such representations in good faith and for value.
Article 1911 of the Civil Code provides:

“Even when the agent has exceeded his authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as though he had full powers.”

The above-quoted article is new. It is intended to protect the rights of innocent persons.
In such a situation, both the principal and the agent may be considered as joint tortfeasors
whose liability is joint and solidary.

It is evident from the records that by his own acts and admission, petitioner held out Tiac
to the public as the manager of his store in Binondo. More particularly, petitioner

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explicitly introduced to Villanueva, Valiant’s manager, as his (petitioner’s) branch


manager as testified to by Villanueva. Secondly, Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiac to be the manager of the
Binondo branch. Even petitioner admitted his close relationship with Tiu Huy Tiac when
he said that they are “like brothers” There was thus no reason for anybody especially
those transacting business with petitioner to even doubt the authority of Tiac as his
manager in the Binondo branch. Tiac, therefore, by petitioner’s own representations and
manifestations, became an agent of petitioner by estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon (Article 1431, Civil Code of the
Philippines). A party cannot be allowed to go back on his own acts and representations to
the prejudice of the other party who, in good faith, relied upon them. Taken in this light,.
petitioner is liable for the transaction entered into by Tiac on his behalf. Thus, even when
the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to fact as though he had full powers (Article 1911 Civil Code),
as in the case at bar.

Finally, although it may appear that Tiac defrauded his principal (petitioner) in not turning
over the proceeds of the transaction to the latter, such fact cannot in any way relieve nor
exonerate petitioner of his liability to private respondent. For it is an equitable maxim
that as between two innocent parties, one who made it possible for the wrong to be done
should be the one to bear the resulting loss.

3. RALLOS VS. YANGCO, 20 PHIL 269

FACTS: Yangco sent Rallos a letter inviting the latter to be the consignor in buying and
selling leaf tobacco and other native products. Terms and conditions were also contained
in the letter. Accepting the invitation, Rallos proceeded to do a considerable business
with Yangco through the said Collantes, as his factor, sending to him as agent for Yangco
a good deal of produce to be sold on commission. Rallos sent to the said Collantes, as
agent for Yangco, 218 bundles of tobacco in the leaf to be sold on commission, as had
been other produce previously. The said Collantes received said tobacco and sold it for
the sum of P1,744. The charges for such sale were P206.96, leaving in the hands of said
Collantes the sum of 1,537.08 belonging to Rallos. This sum was, apparently, converted
to his own use by said agent. It appears, however, that prior to the sending of said
tobacco Yangco had severed his relations with Collantes and that the latter was no longer
acting as his factor. This fact was not known to Rallos; and it is conceded in the case that
no notice of any kind was given by Yangco of the termination of the relations between
Yangco and his agent, Collantes. Yangco thus refused to pay the said sum upon demand
of Rallos, placing such refusal upon the ground that at the time the said tobacco was
received and sold by Collantes, he was acting personally and not as agent of Yangco.

ISSUE: Whether or not Yangco as principal is liable brought by the sale of the produce

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RULING: Yes. Yangco, as principal is liable. Having advertised the fact that Collantes was
his agent and having given special notice to Rallos of that fact, and having given them a
special invitation to deal with such agent, it was the duty of Yangco on the termination of
the relationship of the principal and agent to give due and timely notice thereof to Rallos.
Failing to do so, he is responsible to them for whatever goods may have been in good
faith and without negligence sent to the agent without knowledge, actual or constructive,
of the termination of such relationship.

G. MODE OF EXTINGUISHMENT OF AGENCY (ARTICLES 1919-1932)

1. RALLOS VS. FELIX GO CHAN & SONS REALTY CORP, 81 SCRA 251
Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel
of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.

They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.

After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New
TCTs were issued to the latter.

Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a


complaint praying (1) that the sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
cancelled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.

CFI: [Plaintiff’s Complaint] Sale of land was null and void insofar as the one-half pro-
indiviso share of Concepcion Rallos; Ordered the issuance of new TCTs to respondent
corporation and the estate of Concepcion in the proportion of ½ share each pro-indiviso
and the payment of attorney’s fees and cost of litigation

[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during
pendency of case)] Juan T. Borromeo, administrator of the Estate of Simeon Rallos was
ordered to pay defendant the price of the ½ share of the land (P5,343.45) plus attorney’s
fees

[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of
the Estate of Gerundia] Dismissed without prejudice to filing either a complaint against

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the regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate-
Estate of Cerundia Rallos, covering the same subject-matter

CA: CFI Decision reversed, upheld the sale of Concepcion’s share. MR: denied.

ISSUES:
a. WON sale was valid although it was executed after the death of the principal,
Concepcion.
b. WON sale fell within the exception to the general rule that death extinguishes the
authority of the agent
c. WON agent’s knowledge of the principal’s death is a material factor.
d. WON petitioner must suffer the consequence of failing to annotate a notice of death
in the title (thus there was good faith on the part of the Respondent vendee)
e. WON good faith on the part of the respondent in this case should be treated parallel
to that of an innocent purchaser for a value of a land.
Held/Ratio:

HELD: Relationship of Agency (concept arising from principles under Art 1317 and 1403)-
one party, caged the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons. 1) derivative
in nature, power emanating from principal; 2) agent’s acts are acts of the principal

Essential Elements:
(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.

Extinguishment
Generally: among others, By the death, civil interdiction, insanity or insolvency of
the principal or of the agent - death of the principal effects instantaneous and absolute
revocation of the authority of the agent

Exceptions:
 (Art. 1930) 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.
 (Art. 1931) agent acted without knowledge of the pricipal’s death and that
the third person was in good faith (both these reqs should be present)

IN THE CASE AT BAR:

1) Sale was void.

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 No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him (Art. 1317 of the Civil Code).
 Simon’s authority as agent was extinguished upon Concolacion’s death

2) The sale did not fall under the exceptions to the general rule that death ipso jure
extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with
interest
o Art. 1931 inapplicable:
 Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcion’s death
 For Art 1931 to apply, both requirements must be present

3) Yes, agent’s knowledge of principal’s death is material.


Respondent asserts that: there is no provision in the Code which provides that
whatever is done by an agent having knowledge of the death of his principal is
void even with respect to third persons who may have contracted with him in good
faith and without knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency.
Article 1931, being an exception to the general rule, is to be strictly construed.

4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or
others of the death of the principal.
 If revocation was by the act of the principal: a general power which does not
specify the persons to whom represents' on should be made, it is the general
opinion that all acts, executed with third persons who contracted in good faith,
Without knowledge of the revocation, are valid.
 BUT, if revocation was due to death of the principal: extinguishment, by
operation of law, is instantaneous without the need for notification to the
parties concerned.

5) No.
 Laws on agency, the terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, should apply, the law provides
that death of the principal ipso jure extinguishes the authority of the agent to
sell rendering the sale to a third person in good faith unenforceable unless at
the agent had no knowledge of the principal’s death at that time (exception
under Art. 1931)

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2. DIOLOSA VS. CA, 130 SCRA 350

FACTS: Baterna is a licensed real estate broker. The spouses Biolosa owned the Villa
Alegre subdivision. June 20, 1968, they entered into an agreement: Baterna would be
their exclusive sales agent to sell the lots of the subdivision “until all the property is fully
disposed.” Sept 27, 1986 (about 3 mos later) the spouses terminated the services of
Baterna as because the remaining unsold lots were reserved for their 6 grandkids. (there
were 27 lots which remained unsold) Now, Baterna is claiming that under the terms of
their contract, he had unrevocable authority to sell the lots until all were disposed. The
rescission of the contract contravenes their agreement. He also claims to be entitled to a
commission on the lots unsold because of the rescission. The spouses argue that they are
within their legal right to terminate the agency because they needed the undisposed lots
for the use of their family. They also say that Baterna has no legal right to a commission
to unsold lots.

CFI dismissed. CA says that notwithstanding NCC 1920 (that the principal may revoke the
agency at will) spouses could not terminate the agency agreement without paying
damages. o The agency agreement expressly stipulated “until all the property as is fully
disposed" o The testimony of a certain Roberto Malundo that Baterna agreed to the
intention of Mrs. Diolosa to reserve some lots cannot prevail over the clear terms of the
agreement. o Wanting to reserve the lots for the grandkids is not a legal reason to rescind
the agency agreement. (even if each kid would be given one lot each, there would still be
21 lots available and the spouses have other lands that can be reserved for the kids)

ISSUE: Can the spouses terminate the agency without paying damages to Baterna, the
real estate broker?

HELD: NO. They have to pay damages.

Ratio:  Under the contract, the spouses allowed the real estate broker to sell, cede, etc.
until all lots are fully disposed. The authority to sell is not extinguished until all lots are
disposed.  When they revoked the contract, they became liable to the real estate broker
for damages for breach of contract.  Since the agency agreement is a valid contract, it
may only be rescinded on grounds specified in NCC 1381- 82. ART. 1381.

The following contracts are rescissible: (1) Those which are entered in to by guardians
whenever the wards whom they represent suffer lesion by more than one-fourth of the
value of the things which are the object thereof; (2) Those agreed upon in representation
of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those
undertaken in fraud of creditors when the latter cannot in any other name collect the
claims due them; (4) Those which refer to things under litigation if they have been entered
into by the defendant without the knowledge and approval of the litigants or of
competent judicial authority; (5) All other contracts specially declared by law to be subject
to rescission.

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ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment
the debtor could not be compelled at the time they were effected, are also rescissible.

3. PHILIPPINE NATIONAL BANK VS. IAC, 189 SCRA 251

FACTS: Rita Tapnio owes PNB an amount of P2,000.00. The amount is secured by her
sugar crops about to be harvested including her export quota allocation worth 1,000
piculs. The said export quota was later dealt by Tapnio to a certain Jacobo Tuazon at P2.50
per picul or a total of P2,500. Since the subject of the deal is mortgaged with PNB, the
latter has to approve it. The branch manager of PNB recommended that the price should
be at P2.80 per picul which was the prevailing minimum amount allowable. Tapnio and
Tuazon agreed to the said amount. And so the bank manager recommended the
agreement to the vice president of PNB. The vice president in turn recommended it to
the board of directors of PNB.

However, the Board of Directors wanted to raise the price to P3.00 per picul. This Tuazon
does not want hence he backed out from the agreement. This resulted to Tapnio not
being able to realize profit and at the same time rendered her unable to pay her P2,000.00
crop loan which would have been covered by her agreement with Tuazon.
Eventually, Tapnio was sued by her other creditors and Tapnio filed a third party
complaint against PNB where she alleged that her failure to pay her debts was because
of PNB’s negligence and unreasonableness.

ISSUE: Whether or not Tapnio is correct.

HELD: Yes. In this type of transaction, time is of the essence considering that Tapnio’s
sugar quota for said year needs to be utilized ASAP otherwise her allotment may be
assigned to someone else, and if she can’t use it, she won’t be able to export her crops. It
is unreasonable for PNB’s board of directors to disallow the agreement between Tapnio
and Tuazon because of the mere difference of 0.20 in the agreed price rate. What makes
it more unreasonable is the fact that the P2.80 was recommended both by the bank
manager and PNB’s VP yet it was disapproved by the board. Further, the P2.80 per picul
rate is the minimum allowable rate pursuant to prevailing market trends that time. This
unreasonable stand reflects PNB’s lack of the reasonable degree of care and vigilance in
attending to the matter. PNB is therefore negligent.

A corporation is civilly liable in the same manner as natural persons for torts, because
“generally speaking, the rules governing the liability of a principal or master for a tort
committed by an agent or servant are the same whether the principal or master be a
natural person or a corporation, and whether the servant or agent be a natural or artificial
person. All of the authorities agree that a principal or master is liable for every tort which
it expressly directs or authorizes, and this is just as true of a corporation as of a natural
person, a corporation is liable, therefore, whenever a tortious act is committed by an

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officer or agent under express direction or authority from the stockholders or members
acting as a body, or, generally, from the directors and the governing body.

4. DY BUNCIO & CO VS. ONG GUAN GAN, 60 PHIL 696

FACTS: This is a suit over a rice-mill and camarin situated at Dao, Province of Capiz.
Plaintiff claims that the property belongs to its judgment debtor, Ong Guan Can, while
defendants Juan Tong and Pua Giok Eng are claiming to be the owner and lessee by virtue
of a deed dated July 31, 1931, by Ong Guan Can, Jr. After trial the Court of First Instance
of Capiz held that the deed was invalid and that the property was subject to the execution
which has been levied on said properties by the judgment creditor of the owner.
Defendants Juan Tong and Pua Giok bring this appeal and insist that the deed of the 31st
of July, 1931, is valid.

The first recital of the deed is that Ong Guan Can Jr., as agent of Ong Guan Can, sells the
rice-mill and camarin for P13,000 and gives as his authority the power of attorney dated
the 23d of May, 1928. The receipt of the money acknowledged in the deed was to the
agent, and the deed was signed by the agent in his own name and without any words
indicating that he was signing it for the principal. Leaving aside the irregularities of the
deed and coming to the power of attorney referred to in the deed and registered
therewith, it is at once seen that it is not a general power of attorney but a limited one
and does not give the express power to alienate the properties in question. (Article 1713
of the Civil Code.)

ISSUES: W/N the deed of sale executed by Ong Guan Can Jr. was valid.

HELD: NO. Appellants claim that this defect is cured by Exhibit 1, which purports to be a
general power of attorney given to the same agent in 1920. Article 1732 of the Civil Code
is silent over the partial termination of an agency. The making and accepting of a new
power of attorney, whether it enlarges or decreases the power of the agent under a prior
power of attorney, must be held to supplant and revoke the latter when the two are
inconsistent. If the new appointment with limited powers does not revoke the general
power of attorney, the execution of the second power of attorney would be a mere futile
gesture.

5. INFANTE VS. CUNANAN, 93 PHIL 693

FACTS: Infante was the owner of the land with a house built on it. Cunanan and Mijares
were contracted to sell the property from which they would receive commission. Noche
agreed to purchase the lot but Infante informed C & M about her change of mind to sell
the lot and had them sign a document stating that their authority to sell was already

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cancelled. Subsequently, Infante sold the lot & house to Noche. Defendants herein
demanded for their commission. RTC ordered Infante to pay commission. CA affirmed.

ISSUE: Whether or not petitioner was duty bound to pay commission notwithstanding
that authority to sell has been cancelled.

HELD: A principal may withdraw the authority given to an agent at will. But respondents
agreed to cancel the authority given to them upon assurance by petitioner that should
property be sold to Noche, they would be given commission.

That petitioner had changed her mind even if respondents had found a buyer who was
willing to close the deal, is a matter that would give rise to a legal consequence if
respondents agree to call off to transaction in deference to the request of the petitioner.
Petitioner took advantage of the services of respondents, but believing that she could
evade payment of their commission, she made use of a ruse by inducing them to sign the
deed of cancellation. This act of subversion cannot be sanctioned and cannot serve as
basis for petitioner to escape payment of the commissions agreed upon.

6. COLEONGCO VS. CLAPAROLS, 10 SCRA 577

FACTS: Since 1951, Claparols operated a factory for the manufacture of nails under the
style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from
foreign sources. Losses compelled Claparols in 1953 to look for someone to finance his
imports of nail wires. Coleongco became his financier. A financing agreement was
perfected .

In addition, a special power of attorney was executed authorizing Coleongco to open and
negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering
transactions; to represent appellee and the nail factory; and to accept payments and cash
advances from dealers and distributors.

Thereafter, Coleongco also became the assistant manager of the factory. 1956, Claparols
was surprised by service of an alias writ of execution to enforce a judgment obtained
against him by the Philippine National Bank, despite the fact that on the preceding
September he had submitted an amortization plan to settle the account.

He learned that the execution had been procured because of derogatory information
against appellee that had reached the bank Coleongco. His letters to the Philippine
National attempting to undermine the credit of the principal and to acquire the factory
of the latter, without the principal's knowledge. Fortunately, Claparols managed to
arrange matters with the bank and to have the execution levy lifted.

He further discovered the following acts of disloyalty of Coleongco:

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A letter to his cousin, Kho To , instructing the latter to reduce to one-half the usual
monthly advances to Claparols on account of nail sales in order to squeeze said appellee
and compel him to extend the contract entitling Coleongco to share in the profits of the
nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's
letter, ,reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam
pour acid on the machinery; His illegal diversion of the profits of the factory to his own
benefit, And the surreptitious disposition of the Yates band resaw machine in favor of his
cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August
of 1956, Instead of putting up all the necessary money needed to finance the imports of
raw material, Coelongco merely advanced 25% in cash on account of the price and had
the balance covered by surety agreements with Claparols and others as solidary
guarantors.

Claparols consequently revoked the power of attorney, and informed Coleongco by


registered mail, demanding a full accounting at the same time. Coleongco protested.
Claparols requested external auditors, examination showed that Coleongco owed the
Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957.

The Complaint: Coleongco field a suit against Claparols charging breach of contract
asking for accounting plus damages.

His Argument:
He also contended that the power of attorney was made to protect his interest under the
financing agreement and was one coupled with an interest that the appellee Claparols
had no legal power to revoke.

Caparols' mal-administration of the business endangered the security for the advances
that he had made under the financing contract
Appellant likewise denies the authorship of the letter to Kho as well as the attempt to
induce Agsam to damage the machinery of the factory

RTC: Dismiss action for damages and order him to pay Claparols P81,387.27 as per audit
as adjusted plus damages.

ISSUES:
1.) WON the contract of agency between Claparols and Coleongco was one coupled with
interest.
2.) WON a contract of agency when coupled with an interest may be validly revoked by
the principal.

HELD:
1.) NO. The financing agreement itself already contained clauses for the protection
of appellant's interest, and did not call for the execution of any power of attorney in favor
of Coleongco.

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2.) YES. But granting appellant's view, it must not be forgotten that a power of
attorney can be made irrevocable by contract only in the sense that the principal may not
recall it at his pleasure; but coupled with interest or not, the authority certainly can be
revoked for a just cause, such as when the attorney-in-fact betrays the interest of the
principal, as happened in this case. It is not open to serious doubt that the irrevocability
of the power of attorney may not be used to shield the perpetration of acts in bad faith,
breach of confidence, or betrayal of trust, by the agent for that would amount to holding
that a power coupled with an interest authorizes the agent to commit frauds against the
principal.

Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all obligations, and that any waiver of
action for future fraud is void. It is also on this principle that the Civil Code, in its Article
1800, declares that the powers of a partner, appointed as manager, in the articles of co-
partnership are irrevocable without just or lawful cause; and an agent with power
coupled with an interest can not stand on better ground than such a partner in so far as
irrevocability of the power is concerned.

That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the
record, unquestionable.

7. HERRERA VS. LUY KIM GUAN, 1 SCRA 577

DOCTRINE:
The death of the principal does not render the act of an agent unenforceable, where the
latter had no knowledge of such extinguishment.
FACTS: Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and
who died in China sometime after he went to that country. Luis was the owner of the
three parcels of land and their improvements. Before leaving for China, Luis executed a
deed of General Power of Attorney, which authorized and empowered Uy Kim Guan
among others to administer and sell the properties of Luis. Lots were sold after 1936. As
admitted by both parties, Luis is now deceased, but as to the specific and precise date of
his death, the evidence of both parties fails to show.

ISSUE: W/N the sale of the lands is valid

HELD: YES. The date of death of Luis has not been satisfactorily proven. The only evidence
presented by the plaintiff is a “supposed” letter received from a certain Candi, dated Nov.
1936, purporting to give information that Luis (without mentioning his name) had died in
August that year. This was properly rejected by the trial court for lack of identification.
The testimony of the witness Lu Chung Chian that when he was in Amoy in the year 1940,
Luis visited him. Since the documents had been executed in 1937 and 1939, it is evident

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that the documents were executed during the lifetime of the principal. Even granting
arguendo that Luis did die in 1936, plaintiffs presented no proof that the agent Uy Kim
Guan was aware of the death of his principal at the time he sold the property. The death
of the principal does not render the act of an agent unenforceable, where the latter had
no knowledge of such extinguishment of the agency.

8. BUASON AND REYES VS. PANUYAS, 105 PHIL 795

FACTS: Spouses Dayao acquired a homestead patent over a parcel of land (14hec) in
Nueva Ecija. In 1930, they executed a power of attorney authorizing Bayuga to engage
the services of an attorney to prosecute their case against Gambito for annulment of a
contract of sale of the parcel of land and after the termination of the case in their favor
to sell it, and from the proceeds of the sale to deduct whatever expenses he had incurred
in the litigation.

In 1934, Dayao-husband died leaving his wife and 4 children and in 1939, the 4 children
executed a deed of sale over 12 hec in favor of Buason. The Dayao-wife affixed her
thumbmark as witness. Buason took possession of the land through their tenants that
same year.

In 1944, Bayuga sold 8 hec to Panuyas and Cruz. Bayuga died in 1946 and Dayao-wife in
1954. Buason and Panuyas claimed ownership over the same parcel of land. RTC ruled in
favor of Panuyas, declaring that Buason was barred by prescription.

ISSUE: W/N the death of Dayao (principal) ended the authority of the agent

HELD: NO. It was not shown that Bayuga knew about the death of his principal, Dayao.
Art. 1931 states that anything done by the agent, without the knowledge of 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. Therefore, since the sale by the agent to Panuyas was registered, while the sale to
Buason was not, the former has a better right over the parcel of land than the latter.

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TRUST
GENERAL (ARTICLES 1440-1442)
1. SALAO VS. SALAO, 70 SCRA 65
FACTS: The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon,
Rizal begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel
Salao died in 1885. His eldest son, Patricio, died in 1886 survived by his only child. Valentin
Salao.

After Valentina’s death, her estate was administered by her daughter Ambrosia. The
documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her
two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185
of the Registry of Deeds of Pampanga, in their names.

The property in question is the forty-seven-hectare fishpond located at Sitio Calunuran,


Lubao, Pampanga, wherein Benita Salao-Marcelo daughter of Valentin Salao claimed 1/3
interest on the said fishpond.

The defendant Juan Y. Salao Jr. inherited from his father Juan Y. Salao, Sr. ½ of the
fishpond and the other half from the donation of his auntie Ambrosia Salao.

It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia Salao had engaged in
the fishpond business. Where they obtained the capital and that Valentin Salao and
Alejandra Salao were included in that joint venture, that the funds used were the earnings
of the properties supposedly inherited from Manuel Salao, and that those earnings were
used in the acquisition of the Calunuran fishpond. There is no documentary evidence to
support that theory.

The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January
26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the two
fishponds and that when Juani took possession thereof in 1945, in which he refused to
give Benita and Victorina’s children their one-third share of the net fruits which allegedly
amounted to P200,000. However, there was no mention on the deeds as to the share of
Valentin and Alejandra.

Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin
Salao did not have any interest in the two fishponds and that the sole owners thereof his
father Banli and his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917,
and that he Juani was the donee of Ambrosia’s one-half share.

Benita Salao and her nephews and niece asked for the annulment of the donation to Juan
S. Salao, Jr. and for the reconveyance to them of the Calunuran fishpond as Valentin

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Salao’s supposed one-third share in the 145 hectares of fishpond registered in the names
of Juan Y. Salao, Sr. and Ambrosia Salao.

ISSUE:
1. Whether or not the Calunuran fishpond was held in trust for Valentin Salao by Juan
Y. Salao, Sr. and Ambrosia Salao.
2. Whether or not plaintiffs’ action for reconveyance had already prescribed.
HELD:
1. There was no resulting trust in this case because there never was any intention on the
part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There
was no constructive trust because the registration of the two fishponds in the names
of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case where to
satisfy the demands of justice it is necessary to consider the Calunuran fishpond ”
being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.

Ratio:
A Torrens Title is generally a conclusive evidence of the ownership of the land referred to
therein. (Sec. 47, Act 496). A strong presumption exists that Torrens titles were regularly
issued and that they are valid. In order to maintain an action for reconveyance, proof as
to the fiduciary relation of the parties must be clear and convincing.

The plaintiffs utterly failed to prove by clear, satisfactory and convincing evidence. It
cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations.

Trust and trustee; establishment of trust by parol evidence; certainty of proof. — Where
a trust is to be established by oral proof, the testimony supporting it must be sufficiently
strong to prove the right of the alleged beneficiary with as much certainty as if a
document proving the trust were shown. A trust cannot be established, contrary to the
recitals of a Torrens title, upon vague and inconclusive proof.

Trusts; evidence needed to establish trust on parol testimony. — In order to establish a


trust in real property by parol evidence, the proof should be as fully convincing as if the
act giving rise to the trust obligation were proven by an authentic document. Such a trust
cannot be established upon testimony consisting in large part of insecure surmises based
on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).

The foregoing rulings are good under article 1457 of the Civil Code which, as already
noted, allows an implied trust to be proven by oral evidence. Trustworthy oral evidence
is required to prove an implied trust because, oral evidence can be easily fabricated.

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On the other hand, a Torrens title is generally a conclusive of the ownership of the land
referred to therein (Sec. 47, Act 496). A strong presumption exists. that Torrens titles were
regularly issued and that they are valid. In order to maintain an action for reconveyance,
proof as to the fiduciary relation of the parties must be clear and convincing.

The real purpose of the Torrens system is, to quiet title to land. “Once a title is registered,
the owner may rest secure, without the necessity of waiting in the portals of the court, or
sitting in the mirador de su casa, to avoid the possibility of losing his land”.

2. Reconveyance had already prescribed. Plaintiffs’ action is clearly barred by


prescription or laches.

Ratio:
Under Act No. 190, whose statute of limitation would apply if there were an implied trust
in this case, the longest period of extinctive prescription was only ten year.

The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its
reconveyance was made by the plaintiffs in 1951. Their action was filed in 1952 or after
the lapse of more than forty years from the date of registration. The plaintiffs and their
predecessor-in-interest, Valentin Salao, slept on their rights if they had any rights at
all. Vigilanti prospiciunt jura or the law protects him who is watchful of his rights (92 C.J.S.
1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).

“Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the
claim, since it is human nature for a person to assert his rights most strongly when they
are threatened or invaded”. “Laches or unreasonable delay on the part of a plaintiff in
seeking to enforce a right is not only persuasive of a want of merit but may, according to
the circumstances, be destructive of the right itself.”

Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of
the Calunuran fishpond, it is no longer to Pass upon the validity of the donation made by
Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds The
plaintiffs have no right and personality to assil that donation.

Even if the donation were declared void, the plaintiffs would not have any successional
rights to Ambrosia’s share. The sole legal heir of Ambrosia was her nephew, Juan, Jr., her
nearest relative within the third degree. Valentin Salao, if living in 1945 when Ambrosia
died, would have been also her legal heir, together with his first cousin, Juan, Jr. (Juani).
Benita Salao, the daughter of Valentin, could not represent him in the succession to the
estate of Ambrosia since in the collateral line, representation takes place only in favor of
the children of brothers or sisters whether they be of the full or half blood is (Art 972,
Civil Code). The nephew excludes a grandniece like Benita Salao or great-gandnephews
like the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176).

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2. DE LEON VS. MOLO-PECKSON, 6 SCRA 978


FACTS: In 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed his
entire estate to his wife, Juana Juan. On May 11, 1948, Juana Juan in turn executed a will
naming therein many devisees and legatees, one of whom is San Rafael, mother of the
plaintiffs and defendant Pilar Perez Nable. On June 7, 1948, however, Juana Juan
executed a donation inter vivos in favor of Emiliana Molo-Peckson and Pilar Perez Nable
of almost all of her entire property leaving only about P16,000.00 worth of property for
the devisees mentioned in the will. Among the properties conveyed to the donees are
the ten parcels of land subject of the present action. Juana Juan died on May 28, 1950.

On December 5, 1950, Emiliana Molo-Peckson and Pilar Perez Nable executed a


document which they called "MUTUAL AGREEMENT" the pertinent provisions of which
are: 1)that the following lots should be sold at ONE (1) PESO TO — JUSTA DE LEON and
RESURRECCION DE LEON, several parcels of land located at Calle Tolentino , share and
share alike or half and half of TEN (10) LOTS described in TCT 28157. 2.) That this
agreement is made in conformity with the verbal wish of the late Don Mariano Molo y
Legaspi and the late Dona Juana Francisco Juan y Molo. These obligations were repeatedly
told to Emiliana Molo Peckson, before their death and that same should be fulfilled after
their death.

On August 9, 1956, however, the same defendants, executed another document in which
they revoked the so-called mutual agreement mentioned above

August 11, 1956, the beneficiary Resurreccion de Leon and Justa de Leon, thru their
counsel demanded the conveyance to them of the ten parcels of land for the
consideration of P1.00 per parcel as stated in the document of December 5, 1950. And
having the defendants refused to do so, said beneficiaries consigned on July 8, 1957 the
amount of P10.00 as the consideration of the ten parcels of land.lawphil.net
Hence this case.

CFI: Trust has been constituted by the late spouses Mariano Molo and Juana Juan over
the ten parcels of land in question in favor plaintiffs as beneficiaries and, as a
consequence concluded:

1. The defendants, jointly and severally to free the said ten (10) parcels of land from
the mortgage lien in favor of DBP, and to sign and execute in favor of the plaintiffs
a deed of absolute sale of the said properties for and in consideration of TEN
(P10.00) PESOS;
2. The defendants to render an accounting of the fruits of said ten (10) parcels of
land from the time plaintiffs demanded the conveyance of said parcels of land on
August 11, 1956

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ISSUE:
WON there the Dec. 5, 1950 document created an express trust in favor of the appellees
YES
WON the mutually agreement creating the trust can be revoked without the consent of
the trustee? NO

RULING:
That the document represents a recognition of pre-existing trust or a declaration of an
express trust impressed on the ten parcels of land in question is evident. A declaration of
trust has been defined as an act by which a person acknowledges that the property, title
to which he holds, is held by him for the use of another. This is precisely the nature of the
will of the donor: to convey the titles of the lands to appellants with the duty to hold them
in trust for the appellees. Appellants obligingly complied with this duty by executing the
document under consideration.

There is nobody who could cajole them to execute it, nor is there any force that could
corce them to make the declaration therein expressed, except the constraining mandate
of their conscience to comply with "the obligations repeatedly told to Emiliana Molo
Peckson," one of appellants, before their death, epitomized in the "verbal wish of the late
Don Mariano Molo y Legaspi and the late Doña Juana Francisco Juan y Molo" to convey
after their death said ten parcels of land at P1.00 a parcel to appellees.

In fact, the acknowledgement appended to the document they subscribed states that it
was "their own free act and voluntary deed."1awphi1.netIndeed, it is to be supposed that
appellants understood and comprehended the legal import of said documents when they
executed it more so when both of them had studied in reputable centers of learning, one
being a pharmacist and the other a member of the bar.

It is true, as appellants contend, that the alleged declaration of trust was revoked, and
having been revoked it cannot be accepted, but the attempted revocation did not have
any legal effect. The rule is that in the absence of any reservation of the power to revoke
a voluntary trust is irrevocable without the consent of the beneficiary. It cannot be
revoked by the creator alone, nor by the trustee. Here, there is no such reservation.

To recapitulate, we hold:
(1) that the document executed on December 5, 1950 creates an express trust in favor of
appellees; (2) that appellants had no right to revoke it without the consent of the cestui
que trust; (3) that appellants must render an accounting of the fruits of the lands from
the date the judgement rendered in G.R. No. L-8774 became final and executory; and (4)
that appellants should free said lands from all liens and encumbrances.

WHEREFORE, with the modification as above indicated with regard to accounting, we


hereby affirm the decision appealed from, without pronouncement as to costs.

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3. GOVERNMENT VS. ABADILLA, 46 PHIL 642


FACTS: On January 25, 1892, Luis Palad executed a holographic will granting his wife,
Dorothea Lopez, the right of exclusive use and possession of several parcels of lands in
the Province of Tayabas during her lifetime or until she remarries. The lands shall be
donated to the secondary school in Tayabas upon Dorothea’s death or second marriage.
On December 3, 1896, the testator died.

Sometime in 1900, Dorothea married one Calixto Dolendo. On April 20, 1903, the
testator’s collateral heirs brought an action for the partition of the lands on the ground
that Dorothea lost her right over the lands by reason of her second marriage.

During the pendency of the action, the parties arrived at an agreement delivering the
lands with lot nos. 3464 and 3469 to the Municipality of Tayabas as trustee while lot no.
3470 was left in the possession of Dorothea. The testator’s collateral heirs filed a claim
over the lands contending that the trust instituted in the will was ineffective.

ISSUE: Whether or not the trust instituted in the will was effective

HELD: Yes. A liberal interpretation of the will revealed that the testator intended to create
a trust for the benefit of the secondary school, naming the ayuntamiento of the town or
the Civil Governor of the Province as trustee. In order that a trust may be effective, there
must be a trustee and a cestui que trust. The Governor of Tayabas, as the successor of
the Civil Governor under the Spanish regime, acted as trustee in the present case.
If the trustee holds the legal title and the devise is valid, the natural heirs of the deceased
testator have no remaining interest in the land except their right to the reversion in the
event the devise for some reason should fail, an event which has not yet taken place. The
intention of the testator was to have the income of the property accumulate for the
benefit of the proposed school until the same should be established.

The lands with lot nos. 3464 and 3469 shall hereby remain in the possession of the
Municipality of Tayabas as trustee until the secondary school is erected. However, the
ownership of lot no. 3470 has lawfully passed to Dorothea by prescription, having held
possession of the land, adverse to all claimants, since 1904.

4. CRISTOBAL VS. GOMEZ, 50 PHIL 810

FACTS: Epifanio Gomez owns two parcels of land located in the Jabay, Municipality of
Bacoor, Cavite and a lot located in town of Bacoor, Cavite. He sold the property with Pacto
de Retro to Luis Yangco, redeemable in five years. The period to redeem expired but
Yangco extended it. Gomez approached Bibiano Banas , a relative, to secure a loan. The
latter only agreed if Gomez’s brother Marcelino and sister Telesfora would also be
responsible for the loan.

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On 12 August 1907, Marcelino and Telesfora entered into a “private partnership


in participation” for the purpose of redeeming the property from Yangco. Epifanio was
present when said agreement was discussed and assented to. The capital consisted of
P7000, of which P1500 came from Marcelino, and P5500 from Telesfora. The agreement
provided that the property redeemed will be placed in the name of Marcelino and
Telesfora, the income, rent, and produce of the property would go to the two and that
the property shall be returned to their brother as soon as the capital employed have been
covered. Epifanio should also manifest good behavior in the opinion of Marcelino and
Telesfora.

More than a year later, Epifanio Gomez dies leaving Paulina Cristobal and their
four children. Meanwhile, Marcelino Gomez continued to possess the property, improved
it, and earned income from it. He acquired exclusive rights over it when Telesfora
conveyed her interest to him. He sold the property with pacto de retro to Banas,
redeemable within five years. On April 1, 1918, he redeemed the property from Banas.

Subsequently, Paulina and children filed action to recover property from


Marcelino. They claimed that the capital had been covered by the property’s income,
hence, the same should be returned to them. The lower court granted their petition.
Marcelino appealed. Hence the present petition.

ISSUE: Whether there was acceptance by Epifanio of the trust agreement.

HELD: Yes. Contrary to defendant’s claim that the agreement was kept secret from
Epifanio, the testimony of Banas stated that Gomez was present when the arrangement
for the repurchase of the property was discussed. Banas even told Epifanio to be thankful
that the latter was able to recover the property from Yangco.

Defendants also claim that because Epifanio had not accepted the donation in a public
document, the same is unenforceable. This is untenable. Epifanio need not accept in
accordance with formalities of donations. The court said that the partnership agreement
should be viewed as an express trust, not as an intended donation.

THUS: Heirs of Epifanio entitled to recover the property.

5. ARANETA VS. PEREZ, 5 SCRA 338


FACTS: The law firm Araneta & Araneta appears to have rendered services, as counsel for
the trustee and the trusteeship, herein appellee. The trustee, J. Antonio Araneta was
ordered by the lower court to pay a sum of money to the law firm, Araneta & Araneta, of
which he is a member, for services rendered to him, in his aforementioned capacity as
such trustee, in several judicial proceedings. The lower court authorized the payment for
the services thus rendered by Araneta & Araneta, which appellant, Antonio Perez, assails

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upon the ground that, pursuant to the provisions of the Rules of Court, specifically Section
7 of Rule 86, that the attorney-executor or administrator shall not charge against the
estate any professional fees for legal services rendered by him.

ISSUE: Whether or not the provision of the Rules of Court as regards executors and
administrators applies to trustees.

HELD: NO. The contention of the appellant is untenable. Said Section 7 of Rule 86 refers
only to "executors or administrators" of the estate of deceased persons, and does not
necessarily apply to trustees. It is true that some functions of the former bear a close
analogy with those of the latter. Moreover, a trustee, like, an executor or administrator,
holds an office of trust, particularly when, as in the case of appellee herein, the trustee
acts as such under judicial authority.

However, the duties of executors or administrators are fixed and/or limited by law,
whereas those of trustee of an express trust — like that which we have under
consideration — are, usually, governed by the intention of the trustor or of the parties, if
established by contract (Art. 1441, Civil Code of the Philippines). Besides, the duties of
trustees may cover a much wider range than those of executors or administrators of the
estate of deceased persons.

As its policy, therefore, the Supreme Court authorizes the courts to exercise a sound
judgment in determining whether or not a trustee shall be allowed to pay attorney's fees
and charge the same against the trust estate, independently of his compensation as a
trustee in the light of the peculiar circumstances obtaining in each case.

In the case at bar, considering that the appellee was merely defending himself in the
proceedings that required the services of counsel; that in each case the stand taken by
the appellee was upheld by the court; that the will creating the trust and designating the
appellee as trustee explicitly grants him the right to collect for his services such
reasonable fees; that, in view of the nature of the relations between the trustor and the
trustee, on the one hand, and the trustor and appellant on the other, there can be little
doubt but that the trustor would have sanctioned the payment of the attorney's fees
involved in this incident; and that it may have been more costly for the trust estate to
engage the services of a law firm other than that of Araneta & Araneta.

Ultimately, it is but well-settled that a trustee may be indemnified out of the trust estate
for his expenses in rendering and proving his accounts and for costs and counsel fees" in
connection therewith (54 Am. Jur. 415-416).

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6. MINDANAO DEVELOPMENT AUTHORITY VS. CA, 113 SCRA 429

FACTS: Francisco Ang Bansing owns a big tract of land in Davao City. On February 1939,
he sold a portion thereof to Juan Cruz. The contract provided, among others, the
following: That I hereby agree to work for the titling of the entire area of my land under
my own expenses and the expenses for the titling of the portion sold to me shall be under
the expenses of the said Juan Cruz Yap Chuy.

After the sale, the land of Ang Bansing was surveyed and was further subdivided into five
(5) lots. The portion sold to Juan Cruz, was sold to the Commonwealth of the Philippines
on December 1939.

February 1965, the President of the Philippines issued Proclamation No. 459, transferring
ownership of certain parcels of land situated in Davao City, to the Mindanao Development
Authority (MDA), subject to private rights, if any. The lot sold to Juan Cruz was among the
parcels of land transferred to the MDA in said proclamation.

March 1969, the counsel for the MDA wrote to Ang Bansing requesting the latter to
surrender the Owner's duplicate copy of TCT No. 2601 so that the subject lot could be
formally transferred to MDA, but Ang Bansing refused. Consequently, MDA filed a
complaint against Francisco Ang Bansing for the reconveyance of the title over lot.

ISSUE: Whether or not Ang Bansing, as vendor and the one who worked to secure the
title of his entire tract of land which included the portion sold by him to Juan Cruz, acted
in the capacity of and/or served as trustee for any and all parties who become successor-
in-interest to the buyer thereof.

HELD: NO. No express trust had been created between Ang Banging and Juan Cruz over
Lot 1846-C of the Davao Cadastre. "Trusts are either express or implied. Express trusts are
created by the intention of the trustor or of the parties. Implied trusts come into being by
operation of law." It is fundamental in the law of trusts that certain requirements must
exist before an express trust will be recognized. Basically, these elements include

a. Competent trustor and trustee,


b. Ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities are
unnecessary, but nevertheless each of the above elements is required to be
established, and, if any one of them is missing, it is fatal to the trusts.
c. Present and complete disposition of the trust property, notwithstanding that the
enjoyment in the beneficiary will take place in the future.
d. The purpose be an active one to prevent trust from being executed into a legal estate
or interest, and one that is not in contravention of some prohibition of statute or rule
of public policy.
e. Some power of administration other than a mere duty to perform a contract although
the contract is for a third-party beneficiary.

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f. Declaration of terms which must be stated with reasonable certainty in order that
the trustee may administer, and that the court, if called upon so to do, may enforce,
the trust.

In this case, the herein petitioner relies mainly upon the stipulation in the deed of sale
executed. However, the above-quoted stipulation is nothing but a condition that Ang
Bansing shall pay the expenses for the registration of his land and for Juan Cruz to
shoulder the expenses for the registration of the land sold to him. It does not categorically
create an obligation on the part of Ang Bansing to hold the property in trust for Juan Cruz.
Hence, there is no express trust.

It is essential to the creation of an express trust that the settlor presently and
unequivocally makes a disposition of property and make himself the trustee of the
property for the benefit of another. The declaration must be clear and unequivocal that
the owner holds property in trust for the purposes named.

The intent to create a trust must be definite and particular. It must show a desire to pass
benefits through the medium of a trust, and not through some related or similar device.
Moreover, the absence of an express trust agreed upon by Ang Bansing and Juan Cruz is
evident from the fact that the latter, who is the supposed beneficiary of the trust, never
made any attempt to enforce the alleged trust and require the trustee to transfer the title
in his name.

At most, only an implied trust may have been impressed upon the title of Ang Banging
over the subject lot since the same was registered in his name although it belonged to
another. In implied trusts, there is neither promise nor fiduciary relations, the so-called
trustee does not recognize any trust and has no intent to hold the property for the
beneficiary." It does not arise by agreement or intention, but by operation of law.

Thus, 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. If a person obtains legal title to property by fraud or concealment,
courts of equity will impress upon the title a so-called constructive trust in favor of the
defrauded party.

There is also a constructive trust if a person sells a parcel of land and thereafter obtains
title to it through fraudulent misrepresentation. Such a constructive trust is not a trust in
the technical sense and is prescriptible; it prescribes in 10 years. Here, the 10-year
prescriptive period began on March 31, 1941, upon the issuance of Original Certificate of
Title No. 26 in the names of Victoriana Ang Bansing Orfelina Ang Bansing and Francisco
Ang Banging. From that date up to April 11, 1969, when the complaint for reconveyance
was filed, more than 28 years had passed. Clearly, the action for reconveyance had
prescribed.

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7. ROA, JR. VS CA, 123 SCRA 3 UNDER ART 1456


FACTS: Plaintiffs were the co-owners pro-indiviso of a parcel of land located in Tagoloan,
Misamis Oriental. They filed for the issuance of title but opposition was made by one
Pablo Valdehuesa for a portion of the land. Pablo claimed that the portion was his. In
order to ensure the issuance of the tittle the siblings entered into an agreement with
Pablo (compromise agreement) wherein they would replace the lot with another parcel
of land of equivalent size or if the replacement is not to his liking they would pay him four
hundred pesos. As a result of the agreement Pablo withdrew his opposition. Pablo died
so ownership passed to his heirs, however no lot was given as replacement nor were they
paid. Also the property described I the original agreement was partitioned already to the
plaintiff in this case.

ISSUE: Whether or not the agreement created a trust. HELD: YES

“A constructive trust is a trust by operation of law which arises contrary to intention,


against one who, by fraud, actual or constructive, by duress or abuse of confidence, by
commission of wrong, or by any form of unconscionable conduct, artifice, concealment,
or questionable means, or who in any way against equity and good conscience, either has
obtained or holds the legal right to property which he ought not, in equity and good
conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice.
However, a constructive trust does not arise on every moral wrong in acquiring or holding
property or on every abuse of confidence in business or other affairs; ordinarily such a
trust arises and will be declared only on wrongful acquisitions or retentions of property
of which equity, in accordance with its fundamental principles and the traditional exercise
of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been
broadly ruled that a breach of confidence, although in business or social relations,
rendering an acquisition or retention of property by one person unconscionable against
another, raises a constructive trust.”

The court said that what was created was not an express trust because in that type of
trust the intent to create one needs to be clear even in the absence of particular words.
Furthermore it could not be an implied trust because the law states that “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.” And in this case there was no use of force or fraud in play.

The court concluded that although this type of scenario may not fall under the types of
implied trusts enumerated in the CC, the enumeration given does not preclude the
existence of other types of trusts that are in line with the general law on trusts. In this
case the court resolved the case on the general principles of law on constructive trust
which basically rest on equitable considerations in order to satisfy the demands of justice,
morality, conscience and fair dealing and thus protect the innocent against fraud.

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8. PREZ VS. ARANETA, 4 SCRA 430


Trustor: Angela S. Tuason Trustee: J. Antonio Araneta Beneficiaries: Benigno, Angela and
Antonio, all surnamed Perez y Tuason, the grandchildren of the decedent

FACTS: Sometime in 1948, Angela S. Tuason died leaving a will. In conformity with this
provision of said will, the present trusteeship proceedings was instituted and certain
properties of the estate of the deceased were turned over in 1950 to J. Antonio Araneta,
as trustee for the benefit of the grandchildren of the decedent referred to in her
aforementioned will.

Portions of said properties constituting the trust were sold at prices exceedingly by from
their respective original valuation in the aggregate amount of P98,828.88.

On September 28, 1959, the judicial guardian and father of said minors filed a motion in
the trusteeship proceedings alleging that said sum of P98,828.88 represents profits or
income of the trusteeship to which said minors are entitled, pursuant to the above quoted
provision of the will, and praying that the trustee be accordingly instructed to deliver said
sum.

ISSUE: Whether or not the trustee should turn over the profits realized in the sale of trust
properties to the beneficiaries.

HELD: NO.

Aforesaid sum of P98,828.88 is not a profit or income which should be turned over to the
guardian of said minors according to the provisions of the will.

To begin with, the issue as to whether or not the minors are entitled to the delivery of
said sum of P98,828.88 is a matter dependent exclusively upon the conditions upon which
the trust had been established, as provided in the above quoted paragraph of the will of
the decedent, which in turn depends upon the latter's intent, as set forth in said
paragraph. The fact that it is treated as profit within the purview of our internal revenue
law is not controlling.

The provision of the will of the decedent explicitly authorizing the trustee to sell the
property held in trust and to acquire, with the proceeds of the sale, other property leaves
no room for doubt about the intent of the testatrix to keep, as part of the trust, said
proceeds of the sale, and not to turn the same over to the beneficiary as net rentals.

Pursuant to the general law on trust, a provision in the instrument to the effect that the
beneficiary shall be entitled to the income and profits of the trust estate is not ordinarily
sufficient to indicate an intention that he should be entitled to receive gains arising from
the sale of trust property.

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It is well settled that profits realized in the sale of trust properties are part of the capital
held in trust to which the beneficiaries are not entitled as income.

9. POLICARPIO VS. CA, 269 SCRA 344


FACTS: Petitioner (along with his co-plaintiffs in the antecedent cases, namely, Rodolfo
Gayatin, Jose Villacin and Jocelyn Montinola) and private respondent Rosito Uy were
former tenants of the 30-door Barretto Apartments formerly owned by Serapia Realty,
Inc..

Sometime in April 1984, private respondent was elected President of the Barretto Tenants
Association (hereafter referred to as the "Association") which was formed, among others,
"to promote, safeguard and protect the general interest and welfare of its members."

In a letter dated July 30, 1984, private respondent as president of the Association sought
the assistance of the then Minister of Human Settlements to cause the expropriation of
the subject property under the Urban Land Reform Program for subsequent resale to its
tenants.

Failing to get the assistance of the government, the tenants undertook to negotiate
directly with the owners of the Barretto Apartments. Initially, Private Respondent Rosito
Uy orally expressed to Mrs. Rosita Barretto Ochoa the tenants' desire to purchase their
respective units. Later, in a letter dated May 29, 1985, signed by thirty (30) tenants of the
commercial and residential units, the tenants formally expressed to Mrs. Ochoa their
intent to purchase.

One and a half years later, on March 12, 1987, petitioner and his co-plaintiffs were
notified that private respondent was the new owner of the apartment units occupied by
them.

Applicable Laws: (1) Article 1447. The enumeration of the following cases of implied trust
does not exclude others established by the general law of trust, but the limitation laid
down in article 1442 shall be applicable. (2) Article 1442. The principles of the general law
of trusts, insofar as they are not in conflict with this Code, the Code of Commerce, the
Rules of Court and special laws are hereby adopted.

ISSUE: Whether or not a constructive trust existed between the plaintiffs and the
defendant.

HELD: There was a constructive trust. Implied trust was created by the agreement
between petitioner (and the other tenants) and private respondent.

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Implied trusts are those which, without being expressed, are deducible from the nature
of the transaction by operation of law as matters of equity, independently of the
particular intention of the parties.

Constructive trusts are created in order to satisfy the demands of justice and prevent
unjust enrichment. They arise 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. A constructive trust is substantially an appropriate remedy against
unjust enrichment. It is raised by equity in respect of property, which has been acquired
by fraud, or where although acquired originally without fraud, it is against equity that it
should be retained by the person holding it.

The tenants could not be faulted for not inquiring into the status of private respondent's
negotiation with the owners of the apartments. They had a right to expect private
respondent to be true to his duty as their representative and to take the initiative of
informing them of the progress of his negotiations.

10. HEIRS OF L. YAP VS. CA, 312 SCRA 603


FACTS: Petitioners as heirs of Lorenzo Yap filed an action against Ramon Yap and co-
respondent for the reconveyance of land, with buildings and improvement on it. They
alleged that the said property was held in trust by Ramon and that it was their father
Lorenzo who purchased the said land and constructed the apartment building on it.
However, alleging that since at that time, Lorenzo was still a Chinese citizen, hence
prohibited from owning land, he caused it to be registered in the name of respondent
Ramon.

The said property was sold by Ramon to his co-respondent which caused the petitioners
to file this action.

The lower court ruled in favor of the respondents or the ownership of Ramon. This was
affirmed by the Court of Appeals. Hence this petition.

ISSUE: Whether or not a trust was constituted between Lorenzo and Ramon.

RULING: No, and even it there was an implied trust, it could not have been valid as it was
in contravention of applicable laws.

There is a basic distinction between implied and express trusts. Express trusts cannot be
proved by parole evidence. Even then, in order to establish the existence of an implied
trust in real property by parole evidence, the prove should be as fully convincing as the
facts as if the acts giving rise to the trust obligation are proven by an authentic document.

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The petitioners' evidence was insufficient to prove clearly that a trust was constituted
between their father and Ramon.

11. MULLER VS. MULLER, 500 SCRA 65


FACTS: Petitioner Elena Buenaventura Muller and respondent Helmut Muller were
married in Hamburg, Germany on September 22, 1989. The couple decided to reside
permanently in the Philippines in 1992. By this time, the respondent has purchased of a
parcel of land in Antipolo, Rizal from the proceeds of the sale of his parent’s house in
Germany. The said property was registered in the name of petitioner.

Due to incompatibilities and respondent's alleged womanizing, drinking, and


maltreatment, the spouses eventually separated. The trial court rendered a decision
which terminated the regime of absolute community of property between the petitioner
and respondent.

As regards to the Antipolo property, the court held that it was acquired using paraphernal
funds of the respondent. However, the trial court further ruled that respondent cannot
recover his funds because the property was purchased in violation of Section 7, Article XII
of the Constitution.

Upon appeal of the respondent, the Court of Appeals modified the trial court's Decision.
It held that respondent merely prayed for reimbursement for the purchase of the
Antipolo property, and not acquisition or transfer of ownership to him. It also considered
petitioner's ownership over the property in trust for the respondent. Hence, the instant
petition for review.

ISSUES: Whether or not the petitioner holds in trust the Antipolo property in favor of
the respondent.

HELD: NO. The Court of Appeals erred in holding that an implied trust was created and
resulted by operation of law in view of petitioner’s marriage to respondent.

Where the purchase of the subject property is made in violation of an existing statute and
in evasion of its express provision, no trust can result in favor of the party who is guilty of
the fraud. To hold otherwise would allow circumvention of the constitutional prohibition
against aliens acquiring lands in the Philippines. Save for the exception provided in cases
of hereditary succession, respondent’s disqualification from owning lands in the
Philippines is absolute. Not even an ownership in trust is allowed.

Respondent was aware of the constitutional prohibition and expressly admitted his
knowledge thereof to this Court. He declared that he had the Antipolo property titled in
the name of petitioner because of the said prohibition. His attempt at subsequently
asserting or claiming a right on the said property cannot be sustained.

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12. HEIRS OF LABANON VS. HEIRS OF LABANAON , 530 SCRA 97


FACTS: Constancio Labanon settled upon a piece of alienable and disposable public
agricultural land situated in Kidapawan, Cotabato. He cultivated the said lot and
introduced permanent improvements. Constancio asked his brother, Maximo, who was
better educated to file a public land application under the express agreement that they
will divide the said lot as soon as it would be feasible for them to do so. During the time
of the application it was Constancio who continued to cultivate the said lot.

The Homestead Application was approved and an original Certificate of Title over said lot
was issued in favor of Maximo Labanon. Maximo Labanon executed an Assignment of
Rights and Ownership' to safeguard the ownership and interest of his brother Constancio
Labanon.

Later on, Maximo executed a sworn statement assigning the eastern portion of the said
lot to his elder brother and his heirs. After the death of Constancio, his heirs executed an
extra judicial settlement of estate with simultaneous sale over the aforesaid eastern
portion of the lot in favor of Alberto Makilang, the husband of Visitacion Labanon, one of
the children of Constancio.

Subsequently, the parcel of land was declared for taxation purposes in the name of
Alberto. The defendant’s heirs of Maximo caused to be cancelled from the records of the
defendant provincial assessor of Cotabato the aforesaid tax declaration, without first
verifying the legality of the basis for said cancellation. The heirs of Constancio demanded
the owner’s copy of the certificate of title covering the aforesaid Lot to be surrendered to
the register of deeds.

ISSUE: Whether or not a Trust Relationship was created between Constancio and Maximo
with respect to the subject parcel of land.

HELD: YES.

Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. Trusts are classified under the Civil Code as either
express or implied. Such classification determines the prescriptive period for enforcing
such trust.

Article 1444 of the New Civil Code on express trust provides that no particular words are
required for the creation of an express trust, it being sufficient that a trust is clearly
intended.

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An express trust is created by the direct and positive acts of the parties, by some writing
or deed or by words evidencing an intention to create a trust.

In the instant case, such intention to institute an express trust between Maximo as trustee
and Constancio as trustor was contained in not just one but two written documents, the
Assignment of Rights and Ownership as well as Maximo’s April 25, 1962 Sworn Statement.
In both documents, Maximo recognized Constancio’s ownership and possession over the
eastern portion of the property, even as he recognized himself as the applicant for the
Homestead Patent over the land. Thus, Maximo maintained the title over the property
while acknowledging the true ownership of Constancio over the eastern portion of the
land. The existence of an express trust cannot be doubted nor disputed.

On the issue of prescription, it is a well-settled rule that unrepudiated written express


trusts are imprescriptible. In the case at bar, Maximo never repudiated the express trust
instituted between him and Constancio. And after Maximo’s death, the trust could no
longer be renounced; thus, respondents right to enforce the trust agreement can no
longer be restricted nor prejudiced by prescription.

It must be noted that the Assignment of Rights and Ownership and Maximo’s Sworn
Statement were executed after the Homestead Patent was applied for and eventually
granted with the issuance of Homestead Patent. Evidently, it was the intent of Maximo to
hold the title over the land in his name while recognizing Constancio’s equitable
ownership and actual possession of the eastern portion of the land.

The Court directed the subdivision of the subject property in accordance with the terms
written in the Assignment of Rights and Ownership executed by Maximo Labanon and
Constancio Labanon.

13. CANEZ VS. ROJAS, 538 SCRA 242


FACTS: Petitioner filed complaint for recovery of a parcel of land against Rojas, the
second wife of her father.

etitioner alleges she bought the subject which she entrusted to her father when she left
for Mindanao. Her father took possession of land and cultivated the same. Later on,
however, she discovered that respondent was in possession and cultivating the land and
that tax declarations over the said property was registered in her father’s name.

For her part, respondent claims that it was the father who bought the property; hence,
the reason why tax declaration was in his name and that he was in possession thereof
until death. Consequently, the property was included in the estate of the father.
Furthermore, the respondent also claims that petitioner has abandoned her right over
the property; thus, prescription against her has rightfully set in.

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Petitioner contends that there was express trust hence prescription will not set in.

ISSUE: Whether or not a trust relationship existed between the petitioner and her father
in relation to the subject land.

HELD: NO, neither express nor implied trust existed in this case. Intention to create trust
CANNOT be inferred from petitioner’s testimony and on the facts and circumstance.

The Court states that had it been her intention to create trust, she should not have made
an issue of the tax declarations. Trustee would necessarily have legal title hence right to
transfer the tax declarations in his name as this was more beneficial to the beneficiary.

In light of the discussions, we 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,
we can only conclude that the father uninterrupted 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.

Assuming trust existed, it was deemed terminated upon the death of the father. A TRUST
TERMINATES UPON DEATH of the trustee where the trust is PERSONAL to the trustee in
the sense that the trustor INTENDED NO OTHER person to administer.

If father was appointed as trustee of the property, such appointment cannot be intended
to be conveyed to the respondent or heirs. After death, the respondent had no right to
retain possession of the property. At such point, a constructive trust would be created
over the property by operation of law where one mistakenly retains property which
rightfully belongs to another, a constructive trust is the proper remedial device to correct
the situation. In constructive trust the relation of trustee and cestui que trust does not in
fact exist, and the holding of a constructive trust is for the trustee himself, and therefore,
at all times adverse.

14. ESTATE OF E. GREMM VS. ESTATE OF C. PARSONS, 504 SCRA 67


FACTS: Parsons and Edward Miller Grimm formed in 1952 a partnership in the
import/export and real estate business. The Manila Golf & Country Club, Inc. (MGCC or
The Club), issued a stock certificate, MC No. 590 in favor of the partnership. Asserting
clashing ownership claims over MC No. 590, although recorded in the name of Charles
Parsons, are petitioner Estate of Edward Miller Grimm and respondent G-P and Company
Parsons and Grimm each owned proprietary membership share in the Club.

Legal dispute started when the sons of Parsons, who were admitted to the partnership
after the former’s death, rejected the existence of a trust arrangement between their
father and Grimm involving MC No. 590.

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On August 31, 1992 the Estate of Grimm filed before the RTC of Makati City the Estate of
Grimm, represented by its judicial administrator, Ramon J. Quisumbing, alleged the
following, among other things, that Grimm transferred MC No. 590 in trust to Parsons;
That in separate letters dated February 28, 1968 addressed to MGCC, both Grimm and
Parsons stated that the transfer of MC No. 590 was temporary; That Patrick and Jose
Parsons had, when reminded of the trust arrangement between their late father and
Grimm, denied the existence of a trust over the Club share and refused to return the
same.

Patrick Parsons averred that his father was, with respect to MC No. 1088, a mere trustee
of the true owner thereof, G-P & Co., and alleged, by way of affirmative defense, that the
claim set forth in the complaint is unenforceable, barred inter alia by the dead man's
statute, prescription or had been waived or abandoned.

The trial court rendered decision Ordering defendants ESTATE OF CHARLES PARSONS and
PATRICK C. PARSONS to turn over [MC] No. 1088 to plaintiff ESTATE OF EDWARD MILLER
GRIMM; thereafter the petitioners appealed to the CA and the RTC decision was reversed
and set aside.

ISSUE: whether or not the transfer of MC No. 590 by Grimm in favor of Parsons resulted
in the formation of a trust relationship.

RULLING: Trust is the legal relationship between one having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. Trust relations between parties may be express,
as when the trust is created by the intention of the trustor.

An express trust is created by the direct and positive acts of the parties, by some writing
or deed or by words evidencing an intention to create a trust; the use of the word trust is
not required or essential to its constitution, it being sufficient that a trust is clearly
intended.

Judging from their documented acts immediately before and subsequent to the actual
transfer on September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as
transferor, indubitably contemplated a trust arrangement. The Court finds the evidence
adduced and admitted by the trial court more than adequately supporting a conclusion
that MC No. 590 was issued to and held by Parsons as the trustee thereof of Grimm or his
estate. The fact that respondent G-P & Co. may have paid, starting 1992 the membership
fees due on MC No. 590 does not make Grimm less of a beneficial owner. Such payment,
needless to stress, is not a mode of acquiring ownership.

The attendant facts and circumstances militate against the finding of the appellate court
pointing to G-P & Co. as the beneficial owner of MC No. 590. What the evidence adduced

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instead proved beyond doubt is that Grimm or his estate is the owner thereof. The
Supreme Court thus \ reversed the decision of the Court of Appeals.

EXPRESS TRUST (ARTICLES 1443-1446)


1. CUAYCONG VS. CUAYCONG, 21 SCRA 1192
FACTS: The surviving children and grandchildren of Lino Cuaycong, brother of
deceased Eduardo Cuaycong filed a suit against Justo, Luis and Benjamin Cuaycong for
conveyance of inheritance and accounting alleging that Eduardo Cuaycong had on several
occasions, made known to his brothers and sisters that he and his wife Clotilde de Leon
(died in 1940) had an understanding and made arrangements with Luis Cuaycong and his
father Justo Cuaycong, that it was their desire to divide Haciendas Sta. Cruz and Pusod
among his brothers and sister and his wife Clotilde. As the two haciendas were the subject
of transactions between the spouses and Justo and Luis Cuaycong, Eduardo told Justo and
Luis, and the two agreed, to hold in trust what might belong to his brothers and sister as
a result of the arrangements and deliver to them their share when the proper time comes.
And as far back as 1936 Lino demanded from Justo and Luis his share and especially after
Eduardo's and Clotilde's death, the plaintiffs demanded their shares.

ISSUES: Whether or not an express trust was made over the properties in question

HELD: Yes. An express trust was made over the properties in question.

RATIO: The intention of the trustor may be seen in the complaint that “on several
occasions during the later years of Eduardo and Lino Cuaycong, the former made known
to the latter and to their brothers and sister, that he and his wife, Clotilde de
Leon, who died in 1941, had an understanding and made arrangements with
defendant Luis D. Cuaycong and his father, Justo Cuaycong, that it was their (Eduardo's
and Clotilde's) wish and desire, that Hdas. "Sta. Cruz," and "Pusod" above-referred to,
should be divided between the brothers and sister of Eduardo Cuaycong, namely, Justo,
Meliton, Lino and Basilisa, all surnamed Cuaycong, and his wife, Clotilde de Leon.”
Said complaint also provides “pursuant to such wish and desire and
arrangements, the said Eduardo Cuaycong, with the knowledge and consent of his wife,
Clotilde de Leon, and as an agreement with the latter to effectuate their wish and desire
had directed his brothers and sister to pay his wife the sum of P75,000.00, the value
of the two haciendas above-mentioned being P150,000.00, and then divide the same
among themselves share and share alike; or, at all events, should his brothers and sister
fail to do just that, they should divide only the one-half (1/2) portions proindiviso thereof
appertaining to him (Eduardo) in the conjugal properties.” Such being the case, it is clear
that the trustor expressly told the defendants of his intention to establish the trust.

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2. SINAON VS. SORONGON, 136 SCRA 407


FACTS:
Canuta Soblingo – on of the 5 children of Domingo Soblingo (the alleged owner of the lot
in litigation when it was not yet registered)

4 March 1916 – Judge Carlos Imperial adjudicated to Canuta Soblingo Lot No 4781 of the
Sta Barbara, Iloilo cadastre with an area of 5.5 hectares. OCT No 6178-A was issued in
1917 to Canuta

1923- Canuta sold the lot to spouses Patricio Sinaon and Julia Sualibio (granddaughter of
Canuta)

i. Canutas were registered owners for more than 40years and had possession of
the lot during that period

1968 – Sorongon (et al) amended their complaint filed in 1964 that Canuta and the
Sinaons were TRUSTEES of the lot in litigation. As such the heirs of Domingo’s four heirs
are entitled to 4/5 share.

Trial Court – sustained the “Trustee” theory of Sorongon, and ordered the Sinaons to
convey 4/5 of Lot No 4781 to Sorongon et al.

ISSUE: WON Canuta and the Sinaons were mere trustees via an implied or express trust
of the lot in litigation?

HELD: No.
Sinaons were registered owners for more than 40 years had become indefeasible and
possession could not be disturbed. Any pretension as to the existence of an implied trust
should not be countenanced. Sorongon used unreliable oral evidence to prove the trust
to which The Court said that title and possession cannot be defeated by oral evidence
that can be easily fabricated and contradicted.

The Court said that there was no express trust because “Express trusts concerning real
property cannot be proven by parol evidence (Art 1443, Civil Code). Citing Suarez vs
Tirambulo where it was held that An implied trust “cannot be established contrary to the
recitals of a Torrens Title, upon vague and inconclusive proof. No

The supposed trust in this case is a constructive trust arising by operation of law. (Art
1465, Civil Code). It is not a trust in the technical sense.

Note: Even assuming that there was an implied trust, prescription would have worked in
favor of the Sinaons. In Gerona vs de Guzman, the Court said that “an action for

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reconveyance of realty, based upon a constructive or implied trust resulting from fraud,
may be barred by prescription. The prescriptive period is reckoned from the issuance of
the title which operates as a constructive notice”.

IMPLIED TRUST (1447-1457)


1. O’LACO VS. CO CHO CHIT, 220 SCRA 656
FACTS: This Case involves half-sisters each claiming ownership over a parcel of land. While
petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the
property with private respondent O Lay Kia for safekeeping, the latter who is the former's
older sister insists that the title was in her possession because she and her husband
bought the property from their conjugal funds.

The trial court declared that there was no trust relation of any sort between the sisters.
The Court of Appeals ruled otherwise. Hence, the instant petition for review on certiorari
of the decision of the appellate court together with its resolution denying
reconsideration.

ISSUE: 1) Whether a resulting trust was intended by them in the acquisition of the
property; 2) Whether Prescription has set in.

HELD:

1. YES. By definition, trust relations between parties may either be express or


implied. Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words evincing an intention to create a
trust. Implied trusts are those which, without being express, are deducible from the
nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties. Implied trusts may either be resulting or constructive trusts, both
coming into being by operation of law.

A resulting trust was indeed intended by the parties under Art. 1448 of the New Civil Code
which states ----

"Art. 1448. 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 of the property. The former is the trustee, while the latter is the beneficiary . . ."

2. As differentiated from constructive trusts, where the settled rule is that prescription
may supervene, in resulting trust, the rule of imprescriptibility may apply for as long as
the trustee has not repudiated the trust. Once the resulting trust is repudiated, however,
it is converted into a constructive trust and is subject to prescription.

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A resulting trust is repudiated if the following requisites concur: (a) the trustee has
performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust;
(b) such positive acts of repudiation have been made known to the cestui qui trust; and,
(c) the evidence thereon is clear and convincing.

In Tale v. Court of Appeals, the Court categorically ruled that an action for reconveyance
based on an implied or constructive trust must perforce prescribe in ten (10) years, and
not otherwise, thereby modifying previous decisions holding that the prescriptive period
was four (4) years.

Neither the registration of the Oroquieta property in the name of petitioner Emilia O'Laco
nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged loss of
the original may be made the basis for the commencement of the prescriptive period. For,
the issuance of the Torrens title in the name of Emilia O'Laco could not be considered
adverse, much less fraudulent. Precisely, although the property was bought by
respondent-spouses, the legal title was placed in the name of Emilia O'Laco. The transfer
of the Torrens title in her name was only in consonance with the deed of sale in her favor.
Consequently, there was no cause for any alarm on the part of respondent-spouses. As
late as 1959, or just before she got married, Emilia continued to recognize the ownership
of respondent-spouses over the Oroquieta property.

Thus, until that point, respondent-spouses were not aware of any act of Emilia which
would convey to them the idea that she was repudiating the resulting trust. The second
requisite is therefore absent. Hence, prescription did not begin to run until the sale of the
Oroquieta property, which was clearly an act of repudiation. But immediately after Emilia
sold the Oroquieta property which is obviously a disavowal of the resulting trust,
respondent-spouses instituted the present suit for breach of trust. Correspondingly,
laches cannot lie against them.

After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the
recognition, and ordinarily will not be in fault for omitting to bring an action to enforce
his rights. There is no running of the prescriptive period if the trustee expressly recognizes
the resulting trust. Since the complaint for breach of trust was filed by respondent-
spouses two (2) months after acquiring knowledge of the sale, the action therefore has
not yet prescribed.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court
of Appeals of 9 April 1981, which reversed the trial court, is AFFIRMED. Costs against
petitioners

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2. SPECIAL SERVICES CORPORATION VS. CENTRO LA PAZ, 121 SCRA 748


FACTS: The Union Espiritista Cristiana de Filipinas, Inc., is a semi-religious and charitable
organization. On October 10, 1972, judgment was rendered in favor of petitioner Special
Services Corporation by the CFI, Branch IV, Manila, against one Alejandro Estudillo in the
amount of P94,727.52, more or less, in an action for Replevin with Sum of Money. A writ
of execution was thereafter issued but which has remained unsatisfied. The Sheriff of
Manila caused the annotation of a notice of levy on TCT No. 51837 on December 15, 1972,
in respect of the rights, interest and participation of Alejandro Estudillo, one of the
registered owners indicated in said title.

Title covers two (2) parcels of land situated in Sampaloc, Manila, consisting 348 square
meters and registered in the names of:
1. Alejandro Estudillo, married to Primitiva Victoria;
2. Joaquina de la Rosa, widow;
3. Pedro Paguio, married to Amor Jose and
4. Maximo Victoria, married to Juliana Roberto, all Chapter members.

On July 23, 1973: schedule of the public auction sale of Estudillo's rights and interests
in said properties, and Alejandro Estudillo filed a "Motion to Dissolve and/or Cancel
the Notice of Levy" alleging that he and the other registered owners indicated on the
title merely held in trust the properties and improvements thereon in favor of Centro
La Paz (Samahang Espiritista Sa Lunduyang La Paz) a Chapter of Union Espiritista
Cristiana de Filipinas, Inc. as evidenced by "Acknowledgments" executed by them on
October 20, 1961 and October 2, 1971.

Estudillo further alleged that CENTRO's ownership was also evidenced by letters sent
to the City Assessor by him and Crispulo Romero, President of CENTRO, long before
the filing of the replevin case on December 28, 1971 praying for the revocation of tax
assessments on said properties as the same, were used for religious purposes. Date of
letters are as follows: February 15, 1963, November 29, 1963, and August 8, 1966

July 21, 1973, CENTRO submitted a third party claim to the Sheriff of Manila likewise
averring exclusive ownership of the properties in question.

ISSUES:
I. WON Estudillo is merely the trustee of Centro La Paz?
II. WON the “Acknowledgements” of registered owners not being annotated on TCT
No. 51837 is conclusive of all matters, valid and binding?
III. Whether or not Centro La Paz which is merely a Chapter of Union Espiritista de
Filipinas, Inc. has a juridical personality of its own in accordance with the
provisions of our laws;

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HELD:
1. CENTRO reiterated ownership of the properties in question and emphasized that
the registered owners thereof had publicly acknowledged their possession of said
properties in the concept of trustees.

2. Preponderance of evidence CENTRO had established that it was "really and true
and lawful owner of the property in dispute, and that the persons registered
therein as its owners are merely trustees of the plaintiff, the series of documents
executed even as early as 1957, long before the issue of whether Alejandro
Estudillo really has an interest and/or participation in the property in dispute,
attest to plaintiff's ownership of the property in question.
 The Deed of Donation dated March 13, 1957
 Deed of Absolute Sale executed by Joaquina dela Rosa in favor of Alejandro
Estudillo, Pedro Paguio and Maximo Victoria of the same property covered by
the Deed of Donation;
 Deed of Sale of two parcels in dispute described under T.C.T. No. 51837
executed by Sta. Mesa Realty, Inc. in favor of Alejandro Estudillo, Joaquina
dela Rosa, Pedro Q. Paguio and Maximo Victoria
 Deed of Acknowledgment dated October 30, 1961 also executed by Estudillo
de la Rosa and Victoria acknowledging that the property described under the
aforementioned T.C.T. No. 51837, together with the improvements thereon
are being possessed by them only as trustees;
 Deed of Acknowledgment executed on October 22, 1971, jointly by Amor
Jose, widow of Paguio and the latter's daughters, Sumilang Paguio and Filipina
Paguio (co-registered owner of Estudillo) likewise declaring that their
possession of the said property is merely that of trustees and not as owners;
 Petitions for revocation of tax assessments Nos. 3187 and 3188
 Petition to exempt said parcels from taxation, being owned by a religious
organization and;
 Follow-up letters addressed to the City Assessor of Manila, dated February 15,
1963; December 29,1963 and May 29, 1962 respectively
 Deed of Sale executed by Estudillo, heirs of dela Rosa and Paguio of the two
parcels in favor of Centro La Paz, indubitably point to one and inescapable
conclusion that the plaintiff is really the true and lawful owner of the property
in dispute and that persons registered therein as its owners, are merely
trustees of the plaintiff.

I. As found by both the Trial Court and Appellate Court, the evidence sufficiently
establishes that the registered owners of the parcels of land covered by TCT
51837, all of whom are members of CENTRO, hold the properties in trust for
CENTRO by virtue of the indubitable documents executed even before the
institution of suit. In the same manner that the real property, registered solely in
the name of a husband, can be proven to be conjugal property with his wife, the

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fact of registration in the name of Alejandro Estudillo and others does not bar
evidence to show that the registered owners hold the properties in trust for
CENTRO.

Admittedly, the trust was not registered in accordance with section 65 of Act 496
(the former Land Registration Law). The absence of said registration, however,
cannot be taken against CENTRO inasmuch as, if the public auction sale had
actually been held, with Special Service Corp. (SSC) as the successful buyer, SSC
could not have been considered a purchaser for value and in good faith at said
sale since it had knowledge of CENTRO's claim, particularly when the latter had
filed a third-party-claim with the Sheriff of Manila before the scheduled auction
sale, which knowledge was equivalent to registration of the several
"Acknowledgments" in the Registry of Deeds.

II. Evident from the record that although it was CENTRO that was actively
prosecuting the case, in substance, it was representing the mother organization,
the Union Espiritista Cristiana de Filipinas, Inc., which is the real party in interest
and is itself named in the Complaint. It is an organization that is duly registered
with the Securities and Exchange Commission, and thus possessed of a juridical
personality to sue and be sued.

3. CHIAO LIONG TAN VS. CA, 46 SCRAD 435, 228 SCRA 75

FACTS: Chiao Long Tan claims to be the owner of a 1976 Isuzu Elf van. As owner
thereof, petitioner says he has been in possession, enjoyment, and utilization of the
van until his older brother, Tan Ban Yong, unlawfully took it away from him. Chiao claims
that the van is registered under his name, that he bought the vehicle from isuzu
balintawak, that he sent his brother to pay for the van and the receipt was issued
in his name because it was his money that was used to pay for the vehicle, that he allowed
his brother to use the vehicle because the latter was working for the company,
and that his brother later refused to return the vehicle and appropriated the same
for himself.

According to respondent CLT Industries is the family business and it was under the
name of petitioner since at the that time, he was leaving for the US and petitioner
is the only Filipino left in the Philippines. When the family business needed a vehicle, he
asked petitioner to look for a vehicle and gave him money as downpayment for an
Isuzu Elf van. After a month, he paid for the van by getting a loan from a friend.

As much as the receipt was placed in the name of petitioner,


private respondent allowed the registration under the name of petitioner.

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There was also agreement that he would use the vehicle as he paid for the
same. All the above-mentioned allegations of private respondent has been
corroborated by witnesses. The trial court hence ruled in favor of the private
respondent and the CA affirmed this decision.

ISSUE: WON there was an implied trust created when the Van was registered under
petitioners name but was paid for and really owned by respondent
HELD: YES. The New Civil Code recognizes cases of implied trust other than those
enumerated therein. Thus, although no specific provision could be cited to apply to the
parties herein, it is undeniable that an implied trust was created when the certificate of
registration of the motor vehicle was placed in the name of the petitioner although the
price thereof was not paid by him but by private respondent. The principle that a trustee
who puts a certificate of registration in his name cannot repudiate the trust by relying on
the registration is one of the well-known limitations upon a title. A trust, which derives its
strength from the confidence one reposes on another especially between brothers, does
not lose that character simply because of what appears in a legal document.

On the side issue of replevin, the court said that respondent should have filed for
recovery of possession on the basis of ownership, but due to the policy to settle in one
action all the conflicting claims of the parties to the possession of the property in
controversy, the question of ownership may be resolved in the same proceeding.

4. HOMENA VS CASA, 157 SCRA 232


FACTS:
1. Homena and Juaneza filed a case against Casa and Castor for unlawful dispossession
disturbing the former’s peaceful, continuous, open, uninterrupted adverse and public
possession of the property in question.
a. Homena and Juaneza sought to annul the original certificate of title in favor of
Casa and Castor pursuant to a Homestead Patent on the ground that said
patent was obtained fraudulently by stating that the lot was not claimed and
occupied by another person.
b. Homena and Juaneza allege than on June 15, 1967, they purchased from Casa
and Castro 2 hectares of land with the agreement that the deed of sale would
be given to the former after the 5-year prohibitive period provided in the
Homestead Patent Law. However, they never got the title from Casa and
Castro.

2. Casa and Castro’s motion to dismiss:


a. complaint is barred by prescription, since thirteen years had elapsed from the
issuance of the homestead patent before the action was filed;

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b. The deed of sale executed on June 15, 1952 or prior to the approval of the
application and issuance of the homestead patent was null and void and
inoperative to convey the land in question, which was at that time still public
land; and
c. Homena and Juaneza are not the proper party to institute the action to annul
the homestead patent.

3. Homena and Juaneza’s opposition to the motion to dismiss:


a. The validity of the patent as a whole was not assailed, only with respect to the
2 hectares that Casa and Castro were able to register.
b. Because of the fraud in registration, it needs 4 years to be prescribed, action
was started before that time elapsed.
c. The defense of prescription cannot be set up in an action to recover property
held in trust by a person for another.

4. TC dismissed the case. MR denied. Appealed to CA, which certified the case to SC.

ISSUE: WON there was an implied trust among the parties


HELD: NO.
1. Under the Public Land Act, the homestead owner was prohibited from transferring his
rights. Hence, the agreement is clearly illegal and void ab initio; it is intended to
circumvent and violate the law.

2. As parties to a void contract, the Homena and Juaneza have no rights which they can
enforce and the court cannot lend itself to its enforcement.

3. Homena and Juaneza cannot invoke the doctrine of implied trust based on an illegal
contract. The issue of prescription or laches becomes irrelevant in a case such as this,
where plaintiffs clearly have no cause of action.

5. HEIRS OF CANDELARIA VS. ROMERO, 109 PHIL 500

FACTS: Emilio Candelaria and his brother Lucas Candelaria bought each a lot in the
Solokan Subdivision on installment basis.

Lucas paid the first two installments corresponding to his lot, but faced with the inability
of meeting the subsequent installments because of sickness which caused him to be
bedridden, he sold his interest to his brother Emilio, who then reimbursed him the
amount he had already paid, and thereafter continued payment of the remaining
installments until the whole purchase price had been fully satisfied. Said payments done

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by Emilio were however made in the name of Lucas, with the understanding that the
necessary documents of transfer will be made later.

In 1918 a transfer certificate of title for said lot was issued by the register of deeds of
Manila in the name of "Lucas Candelaria married to Luisa Romero".
Lucas held the title to said lot merely in trust for Emilio and that this fact was
acknowledged not only by him but also by the defendants (Lucas’ heirs) on several
occasions.

Lucas' possession of the lot was merely tolerated by Emilio and his heirs. Lucas had been
collecting all its rents for his own use as financial aid by Emilio to him as a brother in view
of the fact that he was bedridden without any means of livelihood and with several
children to support, although from 1926, when Emilio was confined at the Culion Leper
Colony up to his death on February 5, 1936, Lucas had been giving part of the rents to
Fortunata Bautista, the second wife of Emilio, in accordance with the Emilio's wishes.

Lucas died in August, 1942, survived by the present defendants, who are his spouse Luisa
Romero and several children; and that said defendants are still in possession of the lot,
having refused to reconvey it to plaintiff despite repeated demands.

Heirs of Emilio filed complaint for reconveyance of real property with damages.

TC: Dismissed complaint on the ground that cause of action is unenforceable under the
NCC and that the action has already prescribed.

 In the order granting the motion to dismiss, the lower court held that an express
and not an implied trust was created as may be gleaned from the facts alleged in
the complaint, which is unenforceable without any writing, and that since Transfer
Certificate of Title No. 9584 covering the land in question had been issued to Lucas
Candelaria way-back in 1918 or 38 years before the filing of the complaint, the
action has already prescribed.

SC: Implied trust, not express trust. As to whether action is barred by lapse of time, the
case is remanded for further proceedings to allow them to present proof in support of
their claim.

 Where property is taken by a person under an agreement to hold it for, or convey


it to another or the grantor, a resulting or implied trust arises in favor of the person
for whose benefit the property was intended. This rule, which has been
incorporated in the new Civil Code in Art. 1453 thereof, is founded upon equity.

 An implied trust arises where a person purchases land with his own money and
takes a conveyance thereof in the name of another. In such a case, the property
is held on a resulting trust in favor of the one furnishing the consideration for the

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transfer, unless a different intention or understanding appears. The trust which


results under such circumstances does not arise from contract or agreement of
the parties, but from the facts and circumstances, that is to say, it results because
of equity and arises by implication or operation of law.

 In the present case, the complaint expressly alleges that "although Lucas
Candelaria had no more interest over the lot, the subsequent payments made by
Emilio Candelaria until fully paid were made in the name of Lucas Candelaria, with
the understanding that the necessary documents of transfer will be made later,
the reason that the transaction being brother to brother." From this allegation, it
is apparent that Emilio Candelaria who furnished the consideration intended to
obtain a beneficial interest in the property in question. Having supplied the
purchase money, it may naturally be presumed that he intended the purchase for
his own benefit. Indeed, it is evident from the above-quoted allegation in the
complaint that the property in question was acquired by Lucas Candelaria under
circumstances which show it was conveyed to him on the faith of his intention to
hold it for, or convey it to the grantor, the plaintiff's predecessor in interest.

 Constructive or implied trusts may, of course, be barred by lapse of time. The


rule in such trusts 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. Continuous recognition of a resulting trust, however, precludes
any defense of laches in a suit to declare and enforce the trust.

6. PNB VS. CA, 217 SCRA 347

DOCTRINE: A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense for in a typical trust, confidence is reposed in one person who is named a trustee
for the benefit of another who is called the cestui que trust, respecting property which is
held by the trustee for the benefit of the cestui que trust. 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 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.

FACTS: Private Respondent B.P. Mata & Co. Inc. (Mata), a private corporation engaged in
providing goods and services to shipping companies. has acted as a manning or crewing
agent for Star Kist Foods, Inc., USA (Star Kist). Mata makes advances for the crew's
expenses, fees, and basic personal needs. Subsequently, Mata sends monthly billings to
Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks
for credit to the latter's account.

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In 1975, Security Pacific National Bank (SEPAC) of Los Angeles transmitted a cable
message to the International Department of Philippine National Bank to pay the amount
of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and
America (IBAA), per order of Star Kist. PNB's International Department noticed an error
and sent a service message to SEPAC Bank. The latter replied with instructions that the
amount of US$14,000 should only be for US$1,400. A cashier's check in the amount of
US$1,400 representing reimbursement from Star Kist, was issued by the Star Kist for the
account of Mata on February 25, 1975 through the Insular Bank of Asia and America
(IBAA).

However, a few days later, PNB effected another payment in the amount of US$14,000
purporting to be another transmittal of reimbursement from Star Kist, private
respondent's foreign principal. Six years later, (in 1981), PNB requested Mata for refund
of US$14,00 after it discovered its error in effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against
Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it
has a right to recover the said amount it erroneously credited to respondent Mata.

After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint
ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not
under Article 1456 on constructive trust. The lower court ruled out constructive trust,
applying strictly the technical definition of a trust as "a right of property, real or personal,
held by one party for the benefit of another; that there is a fiduciary relation between a
trustee and a cestui que trustas regards certain property, real, personal, money or choses
in action." The appellate court, in affirming the lower court, concluded that petitioner's
demand for the return of US$14,000 cannot prosper because its cause of action had
already prescribed under Article 1145, paragraph 2 of the Civil Code which states that
action upon quasi-contract must be commenced within 6 years. This is because
petitioner's complaint was filed only on February 4, 1982, almost seven years after March
11, 1975 when petitioner mistakenly made payment to private respondent.
Petitioner naturally opts for an interpretation under constructive trust as its action filed
on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10)
years as provided by Article 1144, paragraph 2 of the Civil Code.

ISSUE: WON petitioner may still claim the US$14,000 it erroneously paid private
respondent under a constructive trust.

HELD: The Court rule in the negative. Although the Court is aware that only seven (7)
years lapsed after petitioner erroneously credited private respondent with the said
amount and that under Article 1144, petitioner is well within the prescriptive period for
the enforcement of a constructive or implied trust, the Court rule that petitioner's claim
cannot prosper since it is already barred by laches. It is a well-settled rule now that an

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BUSINESS ORGANIZATION I

action to enforce an implied trust, whether resulting or constructive, may be barred not
only by prescription but also by laches. While prescription is concerned with the fact of
delay, laches deals with the effect of unreasonable delay. It is amazing that it took
petitioner almost seven years before it discovered that it had erroneously paid private
respondent.

CONTRIBUTORS:

LLB-3 Cor Jesu College of Law


Villanueva, F.
Diano, A.
Embodo,
Arnaez, C.
Diamante, A.
Diamante, J.
Barro, M.
Catubag, D.
Ramoga, C.
Omar, N.
Pagaduan, J.

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