CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
PARTNERSHIP
1. Unless all the partners give their consent, one of the partners or all
of them have no authority to do the acts provided in art 1818.
Article 1818. Every partner is an agent of the partnership for the purpose of its
business, and the act of every partner, including the execution in the partnership
name of any instrument, for apparently carrying on in the usual way the business of
the partnership of which he is a member binds the partnership, unless the partner so
acting has in fact no authority to act for the partnership in the particular matter, and
the person with whom he is dealing has knowledge of the fact that he has no such
authority.
An act of a partner which is not apparently for the carrying on of business of the
partnership in the usual way does not bind the partnership unless authorized by the
other partners.
Except when authorized by the other partners or unless they have abandoned the
business, one or more but less than all the partners have no authority to:
(1) Assign the partnership property in trust for creditors or on the
assignee's promise to pay the debts of the partnership;
(2) Dispose of the good-will of the business;
 for value of the real property conveyed.
(3) Do any other act which would make it impossible to carry on the
ordinary business of a partnership;
 d. If the title is in the name of all the partners and all
(4) Confess a judgment;
(5) Enter into a compromise concerning a partnership claim or liability;
(6) Submit a partnership claim or liability to arbitration;

(7) Renounce a claim of the partnership.
No act of a partner in contravention of a restriction on authority shall bind the
partnership to persons having knowledge of the restriction. (n)
2. With respect to conveyance of titles over real property, 1819
provides you the rules.
Article 1823. The partnership is bound to make good the loss:
a. If it is in the name of the partnership, any partner
may convey title of such property. however, the partnership
may recover the title, unless:
i. the conveyance was made by that partner in the
usual business of the partnership or
ii. It has been already conveyed to a purchaser for
value in good faith.
b. A partner can also convey property but only his equitable
interest. Pag equitable interest, effectively, means
interest over the property short of actual title over that
property. This is true when the title is in the name of the
partnership but he executed the contract in his own name.
This is subject to the fact that it has to be in the usual
course of business of the partnership.
c. Re conveyances, if the title is in the name of some of
the partners, and it was still not transferred in the
name of the partnership but it was contributed to the
partnership, the partner in whose name the title stands
may convey title of the property.
i. Although the partnership may also recover the
titled, subject to the provision of the first paragraph
of 1818 – if it was done in the usual course of
business.
ii. It cannot be recovered if it was passed to a holder
the partners signed the title, naturally it conveys all
those partner’s interest over the property conveyed.
3. As a necessary implication of agency, a partner acting as an agent of
the partners, in case of partnership, an admission or representation
made by one of the partners concerning the affairs, again you have
to take note of the qualifications earlier – it has to be in the usual
course of business of the partnership. It has to be connected to the
partnership affairs within the scope of its authority.


(1) Where one partner acting within the scope of his apparent authority
receives money or property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or
property of a third person and the money or property so received is
misapplied by any partner while it is in the custody of the partnership.
1
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
(n)
4. In case of a wrongful act or omission of a partner acting in the
ordinary course of the business of the partnership, or with authority
of his co-partners, the partners can be held solidarily liable. This is
true in case of violations or in cases provided in article 1823, like a
partner who was acting within the scope of his authority receives
funds for the partnership and misappropriate it. For example, it
was for a payment for something sold by the partnership. if that
particular partner who receives it within the scope of his authority
misapplied it, the partnership will also be liable for that. this is
without prejudice to the causes of action and recoveries among the
partners.
5. Take note that the partnership has a relationship with third parties
dealing with the partnership and among themselves.
6. Island Sales v Pioneer (1975)
a. FACTS: The partnership purchased a motor vehicle from
island sales on installment for P9450. The partnership
defaulted in its payment. There was an outstanding balance
of around P7000. Island Sales, the seller, filed a case to
recover the balance against the partnership.
i. There were 5 partners in this case. All of them were
pleaded as co-defendants. During the course of the
trial, Island Sales withdrew the case against one of
the partners.
ii. The contention of the remaining partners is that
their individual liability should still be 1/5 of the
remaining balance. The absolution of one of the
partners must not in effect increase their pro-rata
share in the liability.
b. HELD: SC upheld their contention. The law provides that
the liability of the partners of the partnership with
respect to contracts entered into in the name of
the partnership are pro-rata.
i. The fact that the plaintiff withdrew the claim
against one of the partners should not increase the
liability of the other partners. It remains 1/5 for
each one of them.
I. Dissolution
7. For dissolution of the partnership. The final stage of a partnership
consists of the dissolution, winding up of the partnership and the
actual termination.
a. Dissolution – it is the change in the relationship among
the partners. Their relationship changes based on Article
1830 – 1831. These articles provide for the different
grounds for dissolving or asking for a court decree to
dissolve the partnership.
b. Winding up – after dissolution is the winding up of the
corporate affairs of partnership. The liquidation of
whatever existing liabilities of the partnership will be
settled based on the hierarchy of payments provided under
the civil code. This depends on whether the partnership is a
general partnership or a limited partnership. Order of
satisfaction of outstanding debts and shares of the partners
would depend on whether the partnership is general or
limited.
c. Actual termination - After the liquidation has been
done, outstanding obligations had been settled and the
shares had been returned to the partners, this is the period
when the partnership is deemed actually terminated. You
see that in the case of Singsong v Isabella Sawmill.
Article 1830. Dissolution is caused:

(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking
specified in the agreement;
(b) By the express will of any partner, who must act in good faith,
when no definite term or particular is specified;
(c) By the express will of all the partners who have not assigned their
interests or suffered them to be charged for their separate debts,
2
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015

either before or after the termination of any specified term or

particular undertaking; (5) The business of the partnership can only be carried on at a loss;

(d) By the expulsion of any partner from the business bona fide in (6) Other circumstances render a dissolution equitable.

accordance with such a power conferred by the agreement
between the partners; On the application of the purchaser of a partner's interest under article 1813 or
1814:
(2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of (1) After the termination of the specified term or particular undertaking;
this article, by the express will of any partner at any time;
(2) At any time if the partnership was a partnership at will when the
(3) By any event which makes it unlawful for the business of the interest was assigned or when the charging order was issued. (n)
partnership to be carried on or for the members to carry it on in
partnership;
8. Singsong v Isabella Sawmill
(4) When a specific thing which a partner had promised to contribute to
the partnership, perishes before the delivery; in any case by the loss of
a. FACTS: there was already a dissolution of the partnership
the thing, when the partner who contributed it having reserved the
ownership thereof, has only transferred to the partnership the use or
however, the partnership still continued to operate.
enjoyment of the same; but the partnership shall not be dissolved by Although between the partners there was an understanding
the loss of the thing when it occurs after the partnership has acquired that the Spouses Saldajeno are no longer part of the
the ownership thereof; partnership.

(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
 partnership. They foreclosed some properties of the
(7) By the civil interdiction of any partner;

(8) By decree of court under the following article. (1700a and 1701a)
Article 1831. On application by or for a partner the court shall decree a
dissolution whenever:
 b. HELD: SC held that termination of partnership is different
(1) A partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part
of the partnership contract;

(3) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the partnership
agreement, or otherwise so conducts himself in matters relating to the
partnership business that it is not reasonably practicable to carry on
the business in partnership with him;
i. After the supposed dissolution of the partnership,
Spouses Saldajeno had claims against the
partnership.
ii. Later on, the other creditors of the partnership
wanted to collect. They also wanted to recover
those already foreclosed by the Spouses Saldajeno.
from its dissolution. Dissolution should be followed by
liquidation. Obligations of the partnership must be settled.
Only after such can the partnership be deemed terminated.
i. While the Spouses Saldajeno were in good faith,
the creditors were also in good faith. They had no
knowledge of the dissolution of the partnership.
The creditors thus had the right to assume that
they can collect from whatever property the
partnership has.
3
 CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
9. After the dissolution of a partnership, the effect is that the authority
of the all partners is terminated. In partnership, the partners can
appoint a managing partner. Every agent (partner) may act on
behalf of the partnership, depending on their agreement. Upon
dissolution, those authority ceases.
a. However, the authority continues, as a general rule, for
purposes of winding up the affairs of the partnership.
i. Like continuing businesses with has been started
prior to the dissolution, just to wind it up.
ii. For purposes of selling the partnership properties
to pay off the existing debts of the company. So
whatever may be necessary to wind up the affairs of
the partnership.
10. Note the exceptions under Article 1834. After the dissolution, the
partner can bind the partnership, except as provided in 3 rd
paragraph of this article.
a. For those acts which are necessary for the winding up of the
affairs of the company
b. Subject to the condition that for purposes of continuing
transactions with persons who had extended credit to the
partnership prior to the dissolution, it had no knowledge or
notice of the dissolution of the partnership, or
c. those who have extended credit but had no knowledge of
the fact that the partnership has already been dissolved.
Article 1834. After dissolution, a partner can bind the partnership, except as
provided in the third paragraph of this article:
(1) By any act appropriate for winding up partnership affairs or completing
transactions unfinished at dissolution;
(2) By any transaction which would bind the partnership if dissolution had
not taken place, provided the other party to the transaction:
(a) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of the dissolution; or
(b) Though he had not so extended credit, had nevertheless known of
the partnership prior to dissolution, and, having no knowledge or
notice of dissolution, the fact of dissolution had not been
advertised in a newspaper of general circulation in the place (or in
each place if more than one) at which the partnership business
was regularly carried on.
The liability of a partner under the first paragraph, No. 2, shall be satisfied out of
partnership assets alone when such partner had been prior to dissolution:
(1) Unknown as a partner to the person with whom the contract is made; and
(2) So far unknown and inactive in partnership affairs that the business
reputation of the partnership could not be said to have been in any degree
due to his connection with it.
The partnership is in no case bound by any act of a partner after dissolution:
(1) Where the partnership is dissolved because it is unlawful to carry on the
business, unless the act is appropriate for winding up partnership affairs; or
(2) Where the partner has become insolvent; or

(3) Where the partner has no authority to wind up partnership affairs; except
by a transaction with one who –
(a) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of his want of authority; or
(b) Had not extended credit to the partnership prior to dissolution,
and, having no knowledge or notice of his want of authority, the
fact of his want of authority has not been advertised in the manner
provided for advertising the fact of dissolution in the first
paragraph, No. 2 (b).
Nothing in this article shall affect the liability under article 1825 of any person who
after dissolution represents himself or consents to another representing him as a
partner in a partnership engaged in carrying on business. (n)
11. In case of dissolution of the partnership, it cannot be
overemphasized that need for winding up and liquidation.
Otherwise, the public can assume that the partnership is still
existing, like in the case of Singsong v Isabella Sawmill.
4
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
12. Just take note of the different rules governing dissolution, the
different liabilities of the partners because it would depend on the
grounds of the dissolution. Partnership may be dissolved even
without violation of the agreement, like for example:
a. the end of the term or the specific undertaking of the
partnership or
b. if there is no specific undertaking or no specific period
provided in their agreement, when it was only based on the
will of the partners acting in good faith
c. if there is a ground provided in their agreement to remove
one of the partners without necessarily violating the
agreement, for example, his contribution is no longer useful
to the partnership and such is provided in the agreement. It
can be a ground for dissolution of the partnership under
the civil code
d. if there is contravention of the agreement
e. it has become unlawful for the business to continue
f. the object of the partnership has become illicit
g. in case of loss of the thing which is the object of the
partnership
i. in case of loss of the thing due, it can extinguish
existing obligation if the object of the contract is
loss without fault of any of the parties to the
contract.
h. death of the partner, insolvency or civil interdiction of a
partner
i. by court decree as provided under Article 1831
13. A purchaser of an interest to a partnership may also ask for the
dissolution of the partnership. If one of the partners assigns his
interest to a third party, remember, when a partnership interest is
assigned to a third party, the transfer does not make the third party
a partner to the partnership.
a. Partnership is based on confidence – dilectus personae.
You cannot just introduce anybody to the partnership
without the consent of the other partners.
b. The assignee does not have the right to interfere in the
management of the partnership or even ask for an
accounting as if he was a general partner.
c. Assignee’s right is limited to:
i. getting whatever profits he may his assignor
partner is entitled to and,
ii. after dissolution, whatever interest the assignor has
in the partnership.
d. Although the assignee under the civil code may ask for the
dissolution if the period has already expired or the specific
undertaking has been already accomplished or at any time
if the partnership was at will, meaning there was no
particular period for the partnership to exists.
II. General and limited partnership
14. A partnership may be a general partnership or a limited
partnership.
a. General partnership – all partners are liable for all the
obligations of the partnership
b. Limited partnership – it is defined under the civil code.
You have one or two general partners and you have other
limited partners.
i. The limited partners’ contribution is limited to
money or property. They cannot contribute service
or industry. This is expressly provided in the civil
code (Art 1845).
(1) Because limited partners should have no
say in the management or control of the
5
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
partnership. That is the trade off of their
limited liability.
ii. Limited partners are prioritized upon dissolution of
the company.
15. For there to be limited partnership, for specific requirements:
a. There has to be a certificate to that effect signed and sworn
to by the partners providing the details set out in 1844. This
includes the stipulations regarding the limited partnership.
i. The certificate of the limited partnership must be
registered with the SEC.
b. The partnership’s name has to have limited “ltd”.
i. This cautions people that it is a limited partnership
and that not all of the partners are necessarily
general partners. Mamaya tumitingin ka sa
mayamang partner, yung pala limited partner
pala siya. You cannot hold him personally liable.
ii. Law firms are usually general partnerships. Partner
lawyers act as agents of the partnership. Contract
with parties they are dealing with, if they render an
opinion, it is as if it is the firm which rendered the
opinion.
c. The name of the limited partner must not appear.
i. The general rule is that only the names of the
general partners should appear.
(1) Exception, is when a general partner and a
limited partner have the same surname.
For example, magkapatid sila or tatay niya
yung general partner. what can he do?
(2) If prior to the time that the limited partner
became such, the business had been
carried on under a different name, in which
his surname appears. The partnership is
not duty bound to have the partnership
name changed just because he became a
limited partner and that it is his surname.
ii. If there is a third person who lets his name appear
in the partnership name, although he is not
actually a partner, he can be held liable as if he is a
partner in case of partnership obligations.
iii. If the case does not fall any of the exceptions, and a
limited partner’s name appears in the partnership
name, the limited partner can be held liable as if he
is a general partner of the company.
16. Limited partner has also the same rights as that of a general partner
with respect to:
a. Books must be kept at the principal place of business
b. Right to inspect books (unlike an assignor of partnership
interest. Do not be confused with respect to rights of an
assignor and a limited partner.)
c. Right to ask for an account of the partnership affairs.
(unlike an assignor who has no such right.)
d. To ask for Dissolution and winding up by decree of court.
i. Based on the grounds under 1831, he ask for
dissolution of the partnership.
17. In case of a dissolution of general partnership, the order of
satisfaction of liabilities. Take note of the order of disposition of
remaining assets of the partnership.
a. If it is a general partnership: (article 1839)
i. Those owing to creditors other than partners,

ii. Those owing to partners other than for capital and
profits,
iii. Those owing to partners in respect of capital,

6
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
iv. Those owing to partners in respect of profits.
b. If it is a limited partnership: (article 1863)
i. Those to creditors, in the order of priority as
provided by law, except those to limited partners
on account of their contributions, and to general
partners;
ii. Those to limited partners in respect to their share
of the profits and other compensation by way of
income on their contributions; (they are like
preferred stockholders of the company)
iii. Those to limited partners in respect to the capital
of their contributions;
iv. Those to general partners other than for capital and
profits;
 b. You give him P1500. Be pays it to rustans, on your behalf.
v. Those to general partners in respect to profits;
 has to return to you the P300 change. There is a duty to
vi. Those to general partners in respect to capital.
18. Even among the limited partners they can also have preference.
Parang stocks, you have class A, class B, class C shares. Their
agreements can provide that one limited partner is preferred over
the other limited partner. this is under article 1844 – content of
the certificate filed with the SEC.
AGENCY
I. DEFINITION
Article 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. (1709a)
19. It is a contract of representation. When you ask somebody to buy
something for you, when you ask your brother to buy you a shirt at
rustans, is that a contract of agency?
a. Yes, because you are asking that person to do a specific act
on your behalf. However it is still you, the principal, who is
buying the tshirt. You were just asking him to do it for you.
Pag may sukli siya, for example, P1200 lang yung shirt, he
account. That is the essence of agency.
i. As oppose to a contract of sale. Your brother goes
to rustans, buys the shirt from his own money.
Nakita mo siya. You liked the tshirt. Then you buy
the shirt from him. that is the basic distinction
between contract of agency and sale.
(1) The title over that short was first
transferred to your brother. Your brother
transferred the title to you.
(2) Even if he only purchased it for P1200, and
he sold it to you subsequently for P1300,
kanya na yung profit.
ii. Whereas in the case of agency, your brother would
have the duty to return to you the excess of the
price of the shirt. Agency is attended by fiduciary
duties on the part of the agent. Civil code provides
that the agent would have to account everything, all
7
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
the proceeds of the work he had to do for the
principal.
c. You ask him to bring a document for you to a client. He was
acting as your agent. If the client gives him a tip, he has to
account it to you. Nasa sakanya na yung if he’ll give you the
tip but the agent has to inform the principal. Agent has to
inform the principal even on those amounts not owing to
him.
d. A contract of agency may be
i. Oral or in writing
ii. Express and tacit
(1) Express
(2) Tacit – in case of inaction, knowing that
another person is acting on his behalf. He
remains silent about it. it can be deemed as
tacit consent to the agency.
20. 1871 provides on how contract of agency is created between two
persons who are present.
Article 1870. Acceptance by the agent may also be express, or implied
from his acts which carry out the agency, or from his silence or inaction
according to the circumstances. (n)
Article 1871. Between persons who are present, the acceptance of the
agency may also be implied if the principal delivers his power of attorney to
the agent and the latter receives it without any objection. (n)
a. If the principal says to the to the agent that “you shall be
my agent for this purpose”, and the agent remains silent,
that can be deemed as an acceptance of the contract of
agency.
b. On the other hand, between person who are absent,
the acceptance of the agency cannot be implied by mere
silence subject to exceptions:
Article 1872. Between persons who are absent, the acceptance
of the agency cannot be implied from the silence of the agent,
except:
(1) When the principal transmits his power of attorney to the
agent, who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a
power of attorney with respect to the business in which
he is habitually engaged as an agent, and he did not
reply to the letter or telegram. (n)
ii. Example of para 2: the agent is really a broker
of land as a profession. You sent him an SPA to sell
your land and he did not reply. It is deemed as if he
accepted that agency.
iii. Later on if he enters into a contract, there was
already a contract of agency.
21. Take note of article 1873, if a person specifically informs another or
states by public advertismenet that he has given a power of attorney
to a third person, that other person becomes an agent of that person
with respect to those who were informed of the announcement.
Unless it was revoked in the same manner that it was been made.
a. Please take note of that next paragraph.
b. For example, the initial information was through a special
information and the revocation was done through
publication, is that sufficient?
i. No. the civil code provides that revocation has to be
in the same manner under which the agency was
given.
Article 1873. If a person specially informs another or states by
public advertisement that he has given a power of attorney to a
third person, the latter thereby becomes a duly authorized agent,
in the former case with respect to the person who received the
special information, and in the latter case with regard to any
person.
The power shall continue to be in full force until the notice is
rescinded in the same manner in which it was given. (n)
8
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015

22. In case of a sale of a piece of a land, the power of attorney must be
in writing. otherwise it is void.
a. A sale of land must be in writing to be enforceable.
b. If the sale was doing through an agent, the authority of that
agent must be in writing. otherwise the sale is void.
Article 1878. Special powers of attorney are necessary in the following cases:
23. What if for example an agent had a special power of attorney in
writing. the principal specifically authorizes the agent to sell a piece
of land. The agent is as if the principal, as long as the agent has the
SPA. Subsequently he enters into a contract of sale involving the
land of the principal. The contract the agent entered into was
however not in writing, but it was partially executed. How will you
rule?
a. Analyze first if the agent was properly authorized by his
principal to enter into a contract of sale of land. Afterwards,
analyze as if it is the principal dealing with the buyer of the
land. Do not get confused in which cases a specific form is
required.
b. Dissect the facts of the case and apply it where it is
applicable. Kasi baka mamaya you get confused and say
that it is not valid because the contract of sale was not in
writing. because you got confused with the special power of
attorney which is required to be in writing to be valid.
Article 1874. When a sale of a piece of land or any interest
therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. (n)
Article 1875. Agency is presumed to be for a compensation,
unless there is proof to the contrary. (n)
a. General: deemed only to include acts of administration. It
does not include acts of dominion. In case of strict act of
dominion, it would require special power of attorney.
b. Special: 1878 enumerates the cases where in SPA is
required.
(1) To make such payments as are not usually considered as acts of
administration;
(2) To effect novations which put an end to obligations already in existence at
the time the agency was constituted;
(3) 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 acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable
for the preservation of the things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;


Article 1876. An agency is either general or special.
 The former (11) To obligate the principal as a guarantor or surety;
comprises all the business of the principal. The latter, one or more
specific transactions. (1712) (12) To create or convey real rights over immovable property;


24. An agency is presumed for compensation unless there is (13) To accept or repudiate an inheritance;

proof to the contrary.
(14) To ratify or recognize obligations contracted before the agency;
25. Agency can be general or special.
9
 CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015

(15) Any other act of strict dominion. (n) a. In one of our cases, the principal can go after the agent.

26. Take note of the list. We have in our cases – sales and loan.
a. In case you enter into a compromise agreement, example
when you have a pending case in court. The lawyer needs to
ask for a special power of attorney even if he was already
the counsel of the party for purpose of entering into a
compromise agreement.
b. The catch all provision is the “any other act of strict
dominion”
Article 1883. If an agent acts in his own name, the principal has
no right of action against the persons with whom the agent has
contracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the
person with whom he has contracted, as if the transaction were
his own, except when the contract involves things belonging to the
principal.
The provisions of this article shall be understood to be without
prejudice to the actions between the principal and agent. (1717)

i. That is why if it is a general power of attorney, you 31. Yoshizaki v Joy Training Center (2013)
only assume acts of administration.
a. FACTS: The Jonson Spouses were members of the board
27. Special power to sell excludes the power to mortgage. The person of directors of Joy Training Center. Both of them were
has to be authorized for both if they intend both. directors. Later on they sold the property of the company to
Yoshizaki spouses.
Article 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell. (n)
i. Yoshizaki presented as proof of authorization the
original TCTs. They also presented photocopies of
28. Remember the case we had before involving an SPA. It was board resolution and secretaries certificate issued
provided that instead of getting payments, they entered into and authorizing the Jonson spouses to dispose of the
exchange where in in lieu of the payment, they were issued shares property.
in the asset pool. The court said that that was covered by a contract
of sale because there was a valuable consideration given to it. the
ii. The TCT provides that the property was owned by
agent was expressly authorized (hernandez case) that he was
“Joy Training represented by Spouses Jonson”
empowered to sell the property, subject to any terms and conditions
he may give which are appropriate under the circumstances. In that
b. HELD: Since the Jonson spouses were not authorized, the
case the court said that it is covered by the authority to sell granted
sale was rendered unenforceable.
to the agent.
i. TCT: It was found out that Joy Training was
29. A special power to compromise does not cover the authority to
represented by Spouses Jonson in the registration
submit to arbitration.
of the property. Remember that the subject
involved was an immovable property. For the
30. If an agent acts in his own name, apparently there is no agency
purpose of selling an immovable property, there
because the agent acted on his own name. The third person, whom
must be a special power of attorney expressly
the putative agent is dealing with, has no cause of action against the
authorizing the person to represent the owner in
principal, except if the contract involves a thing that is owned by a
the sale. Thus, the TCT was not enough.
principal. In such case, the principal will be bound by that
agreement.
ii. Board Resolution: The court noted that
10
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
Yoshizaki only presented the photocopies of the
board resolution which are inadmissible based on
the best evidence rule. Even looking at the contents
of the, the court found that it was assented to by
less than a majority of the board of directors. Thus,
it was not a sufficient authorization.
iii. Certification: it merely provides a general power
of attorney. it was merely for the purpose of
conducting the business activities of Joy Training
center. Thus, it is not the SPA contemplated under
the civil code.
c. In this case, the court characterized the contract of sale as
unenforceable because the agent has no authority. When
you look at 1403, a person acting without authority results
to an unenforceable contract.
d. Atty tizon’s comment: Although the civil code provides
that in the absence of an SPA, it is void. If it is a void
contract, it has no effect, whatsoever. But in case of a sale
who is not authorized, the other person, although he may
not enforce the contract against the owner, he can have a
cause of action against a putative agent. He can go after the
putative agent for the amount he has given the agent. There
is also a basis to argue that although the civil code provides
that it is void, the intention is just merely an unenforceable
contract because it has an effect. The other party can go
after the supposed agent who was not authorized by the
principal.
II. SCOPE OF AUTHORITY
32. We’ve mentioned under 1883, if an agent acts in his own name,
meaning he does not make any representation that he is action on
behalf of a principal, there is no agency.
a. In case the agent is the one directly bound in favor of the
person with whom he has contracted as if the contract is
his, except if it involves a thing belonging to a principal.
b. This is interpreted in the case of NFA v IAC.
33. NFA v IAC (1990)
a. FACTS: Gil Medalla, a commission agent of Superior
Shipping, entered into a contract for hire of ship “MV Sea
Runner” with National Grains authority which later on
replaced by NFA. The contract involves shipping 8550
sacks of rice of NFA using the ship of Superior Shipping.
i. After the goods have been transported, Superior
Shipping sought to collect from NFA. NFA did not
want to pay Superior Shipping because it contract
with Medalla. Medalla did not make any
representation that it was acting on behalf of
superior shipping.
ii. Eventually, NFA paid Medalla.
iii. Superior shipping demanded from Medalla to give
it the amount paid to him by NFA. Medalla refused
to pay. Thus, Superior Shipping filed a case against
NFA and Medalla.
iv. The argument of NFA was there was no privity of
contract between NFA and Superior Shipping.
b. HELD: 1883 was applied. Qnder 1883, if the contract of
agency involves property belonging to the principal, the
principal is deemed bound by the contract. it should also
follow that even if the agent acted in his own name, the
principal should also be allowed to collect whatever is due
to him under the agreement.
34. Urban Bank v Atty Pena (2011)
a. FACTS: In question in this case is the amount of the
compensation that should be given to Pena, the agent. This
is aside to the issue of whether there was a contract of
agency between pena and urban bank.
i. With respect to the existence of contract of agency
between pena and urban bank, pena alleged that he
called the president of urban bank. Originally Pena
11
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015

was the agent of ISA, for purpose of ejecting the
informal settlers.
ii. When he found out that the property was already
been sold to urban bank, he called the president of
urban bank. Allegedly during that conversation, the
president agreed to give him 10% of the total
contract price, which was P240M. Pena’s claim was
he should be entitled to P24M.
c.
iii. TC: granted the P24M.
iv. CA: only P3M
enrichment and quantum meruit. The issues
involved were not really that difficult. Pena was a
lawyer. He was able to settle the case with the
tenants for P1.5M. how complicated can it be? That
was the tenor of the court’s decision. Thus, Pena is
entitled to the reimbursement he paid and spent
for the job, which is P3M and an additional P1.5M
for additional compensation for his services.
Atty Tizon’s comment: wag kasi masyadong greedy. Kung
binabaan niya siguro yun, hindi P24M, baka medyo
believable pa yung conversation about his compensation.
But he asked for a wooping P24M in this case.

b. HELD: in a contract of agency, it can be oral or in writing.
In a contract of agency, there is a presumption that it is for
compensation, unless there is a proof to the contrary.
i. At the same time, the court said that an agent can
be an agent of two principal. the scope of authority
given to Pena by ISA and Urban Bank was almost
the same. He could have been the agent of both.
ii. The court in passing mentioned that a person may
be an agent of one person, although compensation
is payable by a third party.
iii. In this case, court found based on evidence –
written authorization issued by Urban Bank in
favor of Pena – that he was actually the agent of
Urban Bank. However, it does not follow that his
compensation should be P24M.
35. Country Bankers v Keppel (2012)
a. FACTS: Unimarine shipping lines contracted the services
of Keppel Cebu Shipyard for the dry-docking and ship
repair of its MV Pacific Fortune for a total contract price of
P3.85M. Keppel performed the dry-docking and repair.
They executed an agreement whereby the total contract
price shall be paid on installment. Meantime, the vessel can
be released to UniMarine.
i. To secure the release of the vessel, UniMarine
obtained surety bonds from country bankers for the
amount of P3M and another one from Plaridel for
P1.62M.
ii. Vessel was released. UniMarine failed to pay the
contract price. Keppel sought to collect from
Unimarine and issuers of the surety bonds.

iv. The amount was too much for any court to believe.
At the time the president spoke to Pena, the
president was already in a position where he would
simply say yes because after purchasing P250M, he
is faced with the possibility of not having the
possession of the property. furthermore, Pena had
contradicting statements.
v. The court instead applied the principle of unjust
iii. Country Bankers was refuting its liability under the
surety. UniMarine was only talking to the
insurance agent Quinain who was not authorized
by country bankers.
b. HELD: applying provisions on agency, SC noted that agent
must act within the scope of his authority. In this case,
under 1878, an SPA is necessary to obligate a principal as a
guarantor or surety. Quinain must be specially authorized

12
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
by Country Bankers for the Country Bankers to be liable
under the surety bond.
i. The SPA issued to Quinain expressly provides the
limits of his authority. He can only issue surety
bonds to government agencies and it should not
exceed the amount of P500K.
ii. The bond in question was worth P3M.
iii. In this case there was no tacit approval of country
bankers of the alleged surety bond. In fact, there
was no showing tha country bankers was aware of
such issuance.
iv. The rule on agency by estoppel does not apply. The
insurance company was not negligent in providing
restrictions on the authority of Quinain. At the
same time, they have a system in place which
monitors the surety bonds issued and it was found
that the premiums were never reported to Country
bankers.
v. There was neglect on the part of Unimarine in not
ascertaining the authority of Quinain. Since it was
expressly proivded that an agent must act within
his authority, they could have simply called the
insurance company to verify the validity of the
surety bond, including the extent of the agent. But
Unimarine did not do so.
c. Country Bankers was released from liability. Without the
SPA, the Country Banker is not bound.
36. Petron v Spouses Jovero (2012)
a. FACTS: Petitioner entered into a dealership contract with
a dealer. Petitioner shall deliver gasoline to the dealer.
Petitioner shall not be liable for any damage to any one
which occurs within the premises of the dealer.
i. Petitioner contracted with the hauling services of
Gale Freight Services. Under this contract, 3 trucks
were specifically assigned.
ii. In one instance, while using a different truck from
that which was assigned to petitioner, fire started
from the pipe and spread to the rubber hose as the
gasoline was unloaded to the station. The loading
was left unattended by the driver. When the driver
returned and saw the flame, he droved the truck in
reverse, dragging the burning hose along.
Conflagration started and consumed the nearby
houses.
iii. The sole petitioner argued that it was not privy to
the incident.
b. HELD: as far as the public is concerned, petron’s name
was used. The dealer carries all petron products. The public
which is not privy to the dealership of petron and the dealer
may assume that it was actually petron who owns and
operates the establishment. In any case of damage caused
by the establishment, it is natural, and it is within their
right, to go after Petron.
i. The public thought, or may assume, based on the
set up, that the gasoline station was owned and
operated by Petron.
ii. With respect to dealership agreement being
expired, thus, the dealer has become a mere agent
of petron, the court agreed with petron that
expiration of the dealership agreement did not
automatically make their arrangement one of
agency. Since they still continued to do what they
are doing under the dealership agreement and the
mutual benefits still remain – promotion and sale
of product on the part of petron – the agreement
was not automatically changed into a contract of
agency.
iii. Although not mentioned in this case. The contract
of agency requires the consent of both parties. If
13
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
the parties did not contemplate a contract of
agency because of the expiration of the dealership
agreement, naturally, it cannot be argued that
just because the original contract of
dealership expired that a contract of
agency was created.
iv. Looking at the dealership agreement, there was
neglect on the part of petron, which could be a
basis to hold it liable. The hauling company
engaged by petron was acting an agent of petron in
delivering gasoline to the station. There was an
agency as the hauling company was performing a
service for a fee for petron. Petron, as the principal,
since the injury was caused by a negligent agent,
was liable for the damage caused. This is aside
from its direct liability from allowing a different
truck to be used to deliver its products.
v. Petron is liable. This is without prejudice to
whatever right it may have against the actual
person liable, the driver and the hauling company.
However, Petron did not appeal nor made it an
issue that its cross claims were dismissed by the
CA.
37. Villoria v Continental Airlines (2012)
a. the court discussed why it was a contract of agency and not
of sale. All the elements of a contract of agency was present.
– consent; object is the execution of the juridical act in
relation to a third person or make a representation to a
third person; agent acts as representative; acted within his
authority. All these requisites were satisfied in the
arrangement between holiday travel and continental
airlines.
b. Holiday travel was selling contract of carriage on behalf of
continental airlines.
c. It was continental airlines that is bound by the terms of the
contract of carriage. This is opposed to a contract of sale.
38. Recio v Altamirano (2013)
a. FACTS: Facts: Nena Recio, mother of Reman Recio leased
from the Altamiranos a parcel of land with improvements.
The Altamiranos inherited the subject land from their
deceased parents, the spouses Aguedo Altamirano and
Maria Vaduvia. The sale of the land to Nena Recio did not
materialize. The Altamiranos consolidated the two parcels
of land covered by the TCT and subdivided into 3 parcels of
lands. Reman and his family remained in the peaceful
possession of Lot 3. He renewed Nena’s option to buy the
subject property. They conducted negotiations with
Alejandro who introduced himself as representing the other
heirs. After which, the Altamiranos through Alejandro
entered into an oral contract of sale with the petitioner and
made partial payments which Alejandro received. Then,
the petitioner offered to pay the remaining balance, but
Alejandro kept on avoiding the petitioner. Recio filed a case
and while its pending, it was discovered that the property
was sold to respondents Spouses Lajarca.
i. The RTC ruled that the Absolute Sale between
Altamiranos and the Lajarcas was Null and Void,
but the Court of Appeals modified that the sale
between Alejandro and Recio is valid only with
respect to the aliquot share of Alejandro. CA held
that Alejandro’s sale of Not. No. 3 did not bind his
co-owners because a sale of real property by one
purporting to be an agent of the owner without any
written authority from the latter is null and void.
An SPA from co-owners pursuant to Art 1878 of the
NCC is necessary.
ii. Issue: Can the contract of sale between Alejandro
(representing the share of his co-owners) and Recio
be held valid pursuant to Apparent Authority of an
Agent based on Estoppel?
b. HELD: No. Woodchild Holdings, Inc. vs. Roxas Electric
and Construction Company, Inc. stressed that apparent
authority based on estoppel can rise from the principal who
knowingly permit the agent with indicia of authority that
would lead a reasonable prudent person to believe that he
14
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
actually has such authority.
i. Apparent authority of an agent arises only from
acts or conducts on the part of the principal and
such act or conduct of the principal must have been
known and relied upon in good faith and as a result
of the exercise of a reasonable prudence by a third
person as claimant and such must have produced a
change of position to its detriment.
ii. In this case, there was no evidence on record of
specific acts which the Altamiranos made before
the sale to the petitioner, indicating that they fully
knew of the representation of Alejandro.
iii. All that the petitioner relied upon were acts that
happened after the sale to him. Absent the consent
of Alejandro’s co-owners, the Court held that the
sale between the other Altamarinos and the
petitioner was null and void.
39. Patrimonia v Gutierrez (2014)
a. The contract in question was a loan supposedly by
gutierrez on behalf of patrimonio from marasigan
b. Authorization for purposes of borrowing money. Borrowing
a loan is one of those cases which requires an SPA. See art
1878.
c. There was no SPA issued in favor of Gutierrez by
PAtrimonio.
d. Article 1878 in providing special power of attorney, does
not pertain to form but to the nature of the authority. The
provision does not say that SPA must be in writing. this is
opposed to a sale of a land.
i. To borrow money and to sell a land both require
SPA. But for purposes of selling land, authority has
to be in writing. whereas in a contract of loan, there
is no specific provision which requires that the SPA
should be in writing. It is enough that authorization
is specific. It can be oral.
ii. However, there are no other evidence presented in
court that would show that Gutierrez was given
SPA, whether orally or in writing.
iii. Court discussed sec 14 of the Negotin because
Patrimonio signed blank checks in this case.
III. EXTINGUISHMENT
Article 1927. An agency cannot be revoked if a bilateral contract depends upon it,
or if it is the means of fulfilling an obligation already contracted, or if a partner is
appointed manager of a partnership in the contract of partnership and his removal
from the management is unjustifiable. (n)
40. General rule: a contract of agency can be revoked
a. Exception
i. if a bilateral contract depends upon it
ii. it is the means of fulfilling an obligation already
contracted
iii. a partner is appointed manager of a partnership in
the contract of partnership and his removal from
the management is unjustified
41. as earlier mention, an appointed manager of a partnership may
only be removed upon a just cause. It is an agency coupled with
interest. This it cannot be revoked at the will of the principal.
42. Dela Rama SS v Tan (1956)
a. FACTS: Dela Rama was appointed as a manager of
steamships owned by national development company. The
management agreement was supposed to be for 5 years. At
the end, dela rama was given the option to purchase the
steamships upon termination of the agreement.
15
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015
i. NDC terminated the agreement before 5 years.
Dela rama questioned the termination.
b. HELD: since dela Rama has an interest in his appointment
as an agent for purposed of managing the steamships NDC
cannot terminate the agency at will.
43. Perez v PNB (1966)
a. When you execute a mortgage, it is a standard stipulation
that you constitute the mortgagee as your attorney in fact
for purposes of disposing the property in case of default.
b. It is a contract of agency although not an ordinary one. If
you are acting as attorney in fact, you are still acting on
behalf of the mortgagor.
c. In this case, with respect to extinguishment, death would
extinguish a contract of agency. Except for those that has
already been started for purposes of finishing the
undertakings. This does not apply in a contract of agency
included in a mortgage contract. the mortgagee has an
interest under the agreement.
44. Lim v Saban (2004)
a. FACTS: Ibanez owned a 1000 sqm land. He entered into
an agreement and executed an authority to negotiate and
sell with Saban (agent).
i. The property shall be sold for at least P200K. but
Saban may mark it up to cover his expenses and
commission.
ii. Saban closed a deal with lim for the price of
P600K. times 3 of the price payable to Ibanez.
P130K went to real property taxes. P50K went to
commission to another broker. For the remaining
balance, Lim issued postdated checks to Saban.
iii. Before checks became due, Ibanez wrote a letter to
Lim telling him to directly deal with him and
disregard Saban.
iv. Lim did not fund the checks he issued to Saban and
paid directly to Ibanez of P400K. lim was able to
save P200K by dealing directly with Ibanez.
v. Saban wanted to collect from the two as he was
entitled to roughly P200K.
b. Defense by lim was there was no privity of contract. Ibanez
said that he can terminate the agency at will. Court of
appeals said that the agency was that coupled with interest,
thus it cannot be terminated at will.
c. HELD: It agreed with CA that the agency cannot be
terminated by Ibanez at that point because Saban already
performed his obligation under the contract of agency. He
was able to closed a sale. Having delivered his obligation,
the agency cannot be terminated without respecting his
rights under the obligation.
i. SC qualified that this is not an agency
coupled with interest.
ii. Court discussed what is agency coupled
with interest. Contract of agency can only be that
coupled with interest if the agent has separate
interest in carrying out the contract of agency. This
is opposed to having the interest of getting a
commission out of the contract of agency.
iii. Although not provided in the case, and
example is:
(1) Contract of agency for purpose of being
able to pay existing loan.
(2) For example I purchased from you a
certain property and I was not able to pay
the entire amount. I have no other money.
We enter into an agreement allowing me to
sell the property to a third person. From
16
CIVIL LAW REVIEW 2: ATP
Atty Tizon
Lecture: 7 March 2015

the proceeds I can recover what I have

already paid and I can give you my balance.
COMPROMISE
In this case, the agency is one coupled with
interest. There is a separate interest in
making sure that the contract of agency is Article 2035. No compromise upon the following questions shall be valid:
carried out.
(1) The civil status of persons;
iv. in this case, his interest was only to get his (2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;

commission from the contract of agency.
(4) Future support;

(5) The jurisdiction of courts;
(1) Lim actually paid P400K. there is a (6) Future legitime.
remaining balance of P200K as agreed
upon with Saban. Lim was ordered to pay Article 2037. A compromise has upon the parties the effect and authority of res
directly to Saban. judicata; but there shall be no execution except in compliance with a judicial
compromise. (1816)
(2) Ibanez received directly from Lim P230K.
the excess of P300 was paid to Saban. Article 2041. If one of the parties fails or refuses to abide by the compromise, the
other party may either enforce the compromise or regard it as rescinded and insist
upon his original demand. (n)

17