Agency, Trust and Partnership

AGENCY

01. Rallos vs. Felix Go Chan and Sons Realty Corp.

Facts:
Conception and Gerundia Rallos were sisters. They executed a special power
of attorney in favor of their brother, Simeon Rallos to sell their land. Later,
Conception died with knowledge of Simeon. Simeon, thereafter, sold the land to
Felix Go Chan and Sons Corp. Ramon Rallos, the administrator of the estate of
Conception filed a complaint and prayed that the sale be declared unenforceable.
Issue:
Whether or not the sale was valid
Held:
No. Simeon knew of Concepcion‟s death. An act done by an agent after the
death of his principal is valid and effective only when: (1) The agent acted without
knowledge of the death of the principal; and (2) The third person who contracted
with the agent acted in good faith.

02. Bordador vs. Luz

Facts:
Deganos received several pieces of gold and jewelry from the petitioners. The
receipts indicated that they were received for and on behalf of a certain Luz.
Deganos was supposed to sell the items, remit the proceeds and return the unsold
items to the petitioners. He never paid the balance of the sales proceeds nor
returned the unsold. The petitioners filed a complaint against Deganos and Luz.
Issue:
Whether or not agency existed between Brigida and Deganos
Held:
No. The basis of agency is representation. There is no showing that Luz
consented to the acts of Deganos nor authorized her to act on her behalf. A person
dealing with an agent is put upon inquiry and must discover upon his own peril the
authority of the agent.

03. Orient Air Services vs. Court of Appeals

Facts:
American air entered into a General Sales Agency Agreement with Orient Air
for the sale of air passenger transportation. Orient Air did not remit the net
proceeds to American Air because the former still had unpaid commissions.
American Air terminated the agreement contending that the sale must be through
its ticket stocks in order to be entitled to such commissions. Later, CA declared
Orient Air entitled to such commissions and ordered American Air to reinstate
Orient Air as its general sales agent.
Issue:
Whether or not CA was correct
Held:

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No. CA in effect compelled American Air to extend its personality to Orient Air.
In an agent-principal relationship, the personality of the principal is extended
through the facility of the agent. Such a relationship can only be effected with the
consent of the principal which must not, in any way, be compelled by law or court.
The termination was valid as they stipulated that either party may terminate the
Agreement without cause.

04. Eurotech Industrial Technologies vs. Cuizon

Facts:
Impact Systems are owned by Erwin Cuizon. He and his brother Edwin
sought to buy from Eurotech a sludge pump valued P250,000. They made a
downpayment of P50,000. Later, Edwin and the general manager of Eurotech
executed a Deed of Assignment in favor of Eurotech. Despite the Deed, Cuizons
proceeded to collect from Toledo Company P365,135. Eurotech made several
demands upon them to pay all their obligations. Edwin alleged that he is not a real
party-in-interest because he merely acted as an agent of his principal.
Issue:
Whether or not Edwin exceeded his authority when he signed the Deed
thereby binding himself personally to Eurotech
Held:
No. A managing agent may enter into any contracts that he deems reasonably
necessary or requisite for the protection of the interest of his principal entrusted to
his management. Edwin‟s participation in the Deed was reasonably necessary
considering the significant amount of time spent in the negotiation for the sale of
the sludge pump.

05. Domingo vs. Domingo

Facts:
Vicente authorized Gregorio to sell his land at rate of P2 per sqm. The two
agreed that Gregorio would receive a commission of 5% of the total price, whether
the property is sold by any of them. Oscar, the prospective buyer, offered to buy the
property at P1.20 per sqm. Vicente acceded to the offer. It was unknown to Vicente
that Gregorio made an arrangement with Oscar whereby Gregorio would be given a
gift or propina by persuading Vicente to sell the property at P1.20. Later, the land
was sold by Vicente to Amparo, the wife of Oscar. Vicente denied Gregorio of his 5%
commission because the property was sold to different person. Gregorio contended
that the commission should still be awarded because the sale was made to the same
person considering that Amparo and Oscar are spouses.
Issue:
Whether or not Gregorio was entitled to receive the 5% commission
Held:
No. 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. Any stipulation exempting the agent from such
obligation is void.

06. Manotok Bros. Inc. vs. Court of Appeals

Facts:
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Manotok Bros. Inc. is the owner of a certain parcel of land. The land was
being leased by Manila City and used by the Claro M. Recto High School. They
authorized Salvador to negotiate with the City. They agreed to pay him 5% of the
price of the land upon completion of sale. Later, Manotok Bros. denied Salvador of
his commission on the ground that his authorization was no longer in force when
the City Mayor signed the ordinance to appropriate the property. His authority as
agent expired 3 days before the signing.
Issue:
Whether or not Salvador was entitled to 5% commission
Held:
Yes. In agencies to sell, where the entitlement of the commission is subject to
the successful consummation of the sale with the buyer located by the agent, said
agent would still be entitled to the commission on sales consummated after the
expiration of his agency when the facts show that the agent was the efficient
procuring cause in bringing about the sale. The City of Manila became to purchaser
of the property through Salvador‟s effort.

07. Inland Realty vs. Court of Appeals

Facts:
Araneta Inc. authorized Inland Realty to negotiate for the sale its 9,800 shares
of stocks in Architect‟s Building. The terms of the sale was for P1,500 per share. As
a broker, Inland strategized the sale by disseminating letters. It submitted to
Araneta the name of Stanford Microsystems which counter-offered to buy shares for
P1,000 per share. Inland finally sold the 9,800 shares of stock to Stanford for
P13,500,000. However, Inland‟s 5% broker commission was denied by Araneta.
Issue:
Whether or not Inland Realty is entitled to 5% broker‟s commission
Held:
No. Inland Realty was not the efficient procuring cause in bringing about the
sale. Inland failed to sell said shares under the terms and agreements set out by
Araneta. More than 1 year and 5 months had lapsed between the expiration of
Inland‟s authority to sell and the consummation of sale.

08. Tan vs. Gullas

Facts:
Spouses Gullas were registered owners of a parcel of land. They executed an
SPA to authorize Tan, a real estate broker, and his associates to negotiate for the
sale of the land. Tan accompanied Michaela and Azucena to Gullas and they
subsequently bought the land. However, Gullas refused to pay Tan of their
commission claiming that another broker had already introduced the property to the
sisters ahead of Tan.
Issue:
Whether or not Tan and his associates were entitled to their commission
Held:
Yes. While an agent receives a commission upon the successful conclusion of
sale, a broker earns his pay merely by bringing the buyer and the seller together
even if no sale is eventually made.

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09. Medrano vs. Court of Appeals

Facts:
Medrano owned a 17-hectare mango plantation. It was an asset of his bank
valued P2,200,000. He asked his cousin-in-law, Flor, to look for a buyer. Borbon, a
real estate broker relayed to her associates that she has a buyer, Mr. Lee, who is
looking for a mango orchard. Flor conferred with Medrano and the latter issued a
letter of authority to Borbon. Medrano promised Borbon to pay her a commission of
5% of the total purchase price. Later, the sale of the property between Medrano and
Lee was consummated. However, Borbon was denied of her commission by Medrano
on the ground that they did not perform any act to consummate the sale.
Issue:
Whether or not Borbon is entitled to the broker‟s commission for the sale of
the property
Held:
Yes. She was the procuring cause in the transaction although she did not
participate in the negotiation of the sale. The procuring cause, in describing a
broker‟s activity refers to a cause originating a series of events which, without break
in their continuity, result in the accomplishment of the prime objective of the
employment of the broker – producing a purchaser ready, willing and able to buy on
the owner‟s terms. To be regarded as the procuring cause, a broker‟s efforts must
have been the foundation on which the negotiations resulting in a sale began.

10. Litonjua Jr. vs. Eternit Corp.

Facts:
EC and ESAC engaged the services of Marquez, a broker, to dispose of their
land in Mandaluyong City. Marquez offered the land to Litonjua brothers for
P27,000,000 but Litonjuas counter-offered P20,000,000. Marquez appraised EC and
ESAC of the offer. Litonjuas deposited $1,000,000 and drafted an Escrow Agreement
to expedite the sale. Meanwhile, as the political situation in the Philippines
improved, Marquez received a letter from ESAC that they decided to cancel the sale.
Litonjuas filed a complaint for specific performance but the trial court ruled that
since the authority of Marquez was not in writing, the sale is void and not merely
unenforceable.
Issue:
Whether or not a written authority is necessary before the sale of a piece of
land can be perfected
Held:
Yes. Marquez acted not merely as a broker but also as an agent. His business
is only to find a purchaser who is willing to buy the land upon the terms fixed by
the owner. An authority to find a purchaser does not include authority to sell. When
a sale of a piece of land or any part thereof is made through an agent, the authority
of the latter shall be in writing; otherwise, the sale is void.

11. Rallos vs. Yangco

Facts:
Yangco conferred upon Collantes an SPA. He invited Rallos to do a
considerable business with him through Collantes. Rallos sent to Collantes 218
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bundles of tobacco to be sold on commission. The charges for that sale were
P206.96. He did not return to Rallos the sum of P1,537.08. It appeared that prior to
sending such tobacco, Yangco had already severed his relations with Collantes.
Yangco refused to pay the sum contending that Collantes was acting personally and
not as an agent.
Issue:
Whether or not Yangco is liable to Rallos
Held:
Yes. A long-standing client can recover from the principal the goods sent to be
sold on commission through his former agent when no previous notice of
termination of agency was given to said client.

12. Litonjua vs. Fernandez

Facts:
The land whose owners were being represented by Fernandez was offered to
the Litonjuas. The Litonjuas and Fernandez agreed that the former would buy the
property for the price of P150 per sqm. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses of the sale. It was also
agreed upon that Fernandez would present an SPA on the date of the sale. Later,
Fernandez did not arrive at the transaction and declined to the demands of
Litonjuas.
Issue:
Whether or not the contract entered into by Fernandez is binding on the
owners of the property
Held:
No. A special power of attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired either gratuitously
or for a valuable consideration, or to create or convey real rights over immovable
property, or for any other act of strict dominion. Otherwise, the sale is null and void.

13. Aggabao vs. Puruan

Facts:
Spouses Maria Elena and Atty. Puruan owned two parcels of land. They have
been estranged from one another. The property was offered to spouses Aggabao by
Atanacio, a real estate broker. Maria Elena showed them two TCTs, tax declarations
and her SPA. Later, Aggabao delivered the final amount to her but Maria Elena
could not turn over the other TCT. Aggabao learned that the copy was in the
custody of Atty. Puruan. It may be inferred that it was Dionisio, the administrator of
the property of the estranged spouses, who executed the SPAs to them.
Issue:
Whether or not the special power of attorneys are valid
Held:
No. The power of administration does not include acts of disposition or
encumbrance which are acts of strict ownership. An authority to dispose cannot
proceed from an authority to administer, and vice versa.

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14. Dominion Insurance Corp. vs. Court of Appeals

Facts:
Dominion Insurance appointed Guevarra Insurance as its agency manager.
Guevarra was given an authority to settle all motor car claims in the amount of
P5,000. The settlement of claims would come from Guevarra‟s funds. This authority
was stipulated in a document entitled “Special Power of Attorney.” Later, Guevarra
filed a complaint against Dominion for collection of sum of money. Dominion denied
any liability and instead counterclaimed for a premium that Guevarra allegedly
failed to remit.
Issue:
Whether or not Guevarra Insurance acted as an agent when it made
payments for claims
Held:
No. Payment of claims is not an act of administration. Despite the word
“Special” in the title of the document, the contents revealed that what was
constituted was only a general agency. The agency was limited only to acts of
administration.

15. Veloso vs. Court of Appeals

Facts:
Francisco owns a parcel of land in Tondo, Manila. The property did not belong
to the conjugal partnership. Its title was cancelled and a new one was issued in the
name of Aglaloma B. Escario. The transfer of property was supported by a “General
Power of Attorney” and Deed of Absolute Sale executed by Irma, his wife. The
document authorized Irma “to buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments.”
Issue:
Whether or not Irma could transfer their property through the General power
of Attorney
Held:
Yes. Even when the title given to a deed is as a “General Power of Attorney,”
but its operative clause contains an authority to sell, it is an SPA to sell a piece of
land. Thus, there was no need to execute a separate and special power of attorney
since the general power of attorney had expressly authorized the agent or attorney-
in-fact the power to sell the subject property.

16. Pineda vs. Court of Appeals

Facts:
PMSI procured a Group Policy from Insular Life Assurance. During its
effectivity, six covered employees of the PMSI perished at sea when their vessel
sunk. They were survived by the beneficiaries under the policy. The beneficiaries
were made to SPAs authorizing Capt. Nuval to "follow up, ask, demand, collect and
receive" for their benefit indemnities due them. Later, some of the checks released
were deposited in Capt. Nuval‟s account in Boston Bank. They sought to recover
these benefits from Insular Life but the latter denied their claim.
Issue:
Whether or not Insular Life is bound by the misconduct of PMSI

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Held:
Yes. The employer is considered as the agent of the insurer and any omission
of duty of the former in its administration should be attributable to the insurer.

17. Dominion Insurance Corp. vs. Court of Appeals

Facts:
Dominion Insurance appointed Guevarra Insurance as agency manager.
Guevarra was given an authority to settle all motor car claims in the amount of
P5,000. The settlement of claims would come from Guevarra‟s funds. This authority
was stipulated in a document entitled “Special Power of Attorney.” Later, Guevarra
filed a complaint against Dominion for collection of sum of money. Dominion denied
any liability and instead counterclaimed for a premium that Guevarra allegedly
failed to remit.
Issue:
Whether or not payment of claims is an act of strict dominion
Held:
Yes. In the case of an area manager of an insurance company, the payment of
claims is not an act of administration. Since the settlement of claims was not
included among the acts enumerated in the Special Power of Attorney, nor is of a
character similar to the acts enumerated therein, then a special power of attorney
was required before such area manager could settle the insurance claims of the
insured.

18. Home Insurance Co. vs. USL

Facts:
SS "Pioneer Moon" arrived in Manila and discharged 200 cartons of
carbonized adding machine rolls unto the custody of the Bureau of Customs.
However, several cartons were damaged upon delivery. The consignee claimed
damages from the Bureau of Customs, the owner of the vessel and Home Insurance.
The latter paid the claim and demanded reimbursement from the Bureau of
Customs and the carrier. Only the counsel for the plaintiff appeared who assured
the court that although he had no written authority, he had such authority verbally
given by the plaintiff. However, the court dismissed the case for failure of the
plaintiff to appear at the pre-trial conference.
Issue:
Whether or not authority to compromise requires a Special Power of Attorney
Held:
Yes. The Rules of Court require a special authority for attorneys to
compromise the litigation of their clients. And while the same does not state that the
special authority be in writing, the court has every reason to expect, that, if not in
writing, the same be duly established by evidence other than the self-serving
assertion of counsel himself that such authority was verbally given to him.

19. Estate of Lina Olaguer vs. Ongjoco

Facts:
When Lina Olaguer died, Olivia and Eduardo became administrators. They
sold the properties to Bacani. Bacani then sold the properties back to Olivia and
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Eduardo. Olivia and Eduardo then sold the properties to Estanislao. Estanislao then
sold them to Jose Olaguer. Jose then sold them to his son, Virgilio. Under an
alleged general power of attorney, Jose sold the lots 1 & 2 to Ongjoco. Jose sold the
other lots to Ongoco as well, also through an alleged general power of attorney. The
lots were sold twice evidenced by 2 deeds of sale but still to Ongjoco. The heirs of
the estate of Lina Olaguer claimed that the sale is void and the properties should be
returned to the estate.
Issue:
Whether or not the general the general power of attorney is valid
Held:
Yes. Even if a document is designated as a general power of attorney, the
requirement of a special power of attorney is met if there is a clear mandate from
the principal specifically authorizing the performance of the act. While the law
requires a special power of attorney, the general power of attorney is sufficient in
this case, as Jose Olaguer was expressly empowered to sell any of Virgilio's
properties and to sign, execute, acknowledge and deliver any agreement therefor.

20. Litonjua vs. Fernandez

Facts:
The land whose owners were being represented by Fernandez was offered to
the Litonjuas. Litonjuas and Fernandez agreed that the former would buy the
property for the price of P150 per sqm. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses of the sale. It was also
agreed upon that Fernandez would present a SPAon the date of the sale. Later,
Fernandez did not arrive at the transaction and declined to the demands of
Litonjuas.
Issue:
Whether or not the contract entered into by Fernandez is valid
Held:
No. A special power of attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired either gratuitously
or for a valuable consideration, or to create or convey real rights over immovable
property, or for any other act of strict dominion. Otherwise, the sale is null and void.

21. Bautista vs. Spouses Jalandoni

Facts:
Spouses Jalandoni applied for a loan and as a security thereof, offered to
constitute a real estate mortgage over their two lots. After a routine credit
investigation, it was discovered that their titles had been cancelled and new TCTs
were issued in the names of Spouses Baustista. Before the alleged transfer, Nasino
offered the two parcels of land to spouses Baustista. She showed them the
photocopies of the titles. Nasino told them that she would negotiate with the
Spouses Jalandoni, prepare the necessary documents and cause the registration of
the sale with the Register of Deeds.
Issue:
Whether or not the contract of sale entered into by Nasino is binding on the
owners of the property
Held:
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No. Article 1874 and Article 1875 (5) explicitly require a written authority
when the sale of a piece of land is through an agent, whether the sale is gratuitous
or for a valuable consideration. Absent such authority in writing, the sale is null
and void. The sale of the subject lots to Spouses Bautista was void. Nasino had no
written authority from Spouses Jalandoni to sell the subject lots.

22. Gutierrez Hermanos vs. Orense

Facts:
Orense had been the owner of a parcel of land. Duran, a nephew of Orense,
sold the property to Hermanos. Orense continued occupying the land by virtue of a
contract of lease. Gutierrez asked Orense to deliver the property and pay the
rentals. Orense refused claiming that the sale was void because he did not authorize
his nephew to sell the property. But in the estafa case filed by Hermanos against
Duran, Orense swore under oath that he had authorized his nephew to sell the
property.
Issue:
Whether or not Orense can be compelled in the civil action to execute the
deed of sale covering the property
Held:
Yes. It having been proven at the trial that he gave his consent to the said
sale, it follows that the Orense conferred verbal or at least implied power of agency
upon his nephew Duran, who accepted it in the same way by selling the said
property. The principal must therefore fulfill all the obligations contracted by the
agent, who acted within the scope of his authority.

23. Cosmic Lumber vs. Court of Appeals

Facts:
Cosmic Lumber Corporation executed an SPA appointing Villamil-Estrada as
attorney-in-fact to institute any court action for the ejectment of squatters in the
company‟s lots. Villamil-Estrada instituted an action for the ejectment of Perez and
to recover the possession of a portion of the lot. She entered into a Compromise
Agreement with Perez after which the property was sold to the latter. Although the
decision became final, it was not executed because Cosmic Lumber refused to
transfer the title of the lot in favor of Perez contending that the compromise
agreement was void.
Issue:
Whether or not Villamil-Estrada exceeded her authority as specified in the
SPA
Held:
Yes. When the sale of a piece of land or any interest therein is made through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void. Thus, the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority. A special power
of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration.

24. Pineda vs. Court of Appeals

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Facts:
Spouses Bañez are the owners of the Q.C. Property while Pineda is the owner
of the California Property. They agreed to: 1) exchange their respective properties; 2)
Pineda to pay an earnest money of $12,000; and 3) to consummate the exchange of
properties after 4 months. Unknown to the Spouses Bañez, Pineda sold the Q.C.
property to Spouses Duque. In his testimony, Mr. Duque confirmed that at the time
he purchased the property from Pineda, the latter had no SPA to sell the property.
Issue:
Whether or not there was a valid contract of sale between Pineda and the
Duques
Held:
No. The Civil Code provides that in a sale of a parcel of land or any interest
therein made through an agent, a special power of attorney is essential. This
authority must be in writing; otherwise the sale shall be void. Here, Pineda‟s sale of
the property to Spouses Duques was not authorized by the real owners of the land –
Spouses Bañezes.

25. Litonjua, Jr. vs. Eternit Corp.

Facts:
EC and ESAC engaged the services of Marquez, a broker, to dispose of their
land in Mandaluyong City. Marquez offered the land to Litonjua brothers for
P27,000,000 but Litonjuas counter-offered P20,000,000. Marquez appraised EC and
ESAC of the offer. Litonjuas deposited $1,000,000 and drafted an Escrow Agreement
to expedite the sale. Meanwhile, as the political situation in the Philippines
improved, Marquez received a letter from ESAC that they decided to cancel the sale.
Litonjuas filed a complaint for specific performance but the trial court ruled that
since the authority of Marquez was not in writing, the sale is void and not merely
unenforceable.
Issue:
Whether or not a written authority is necessary before the sale of a piece of
land can be perfected
Held:
Yes. Marquez acted not merely as a broker but also as an agent. His business
is only to find a purchaser who is willing to buy the land upon the terms fixed by
the owner. An authority to find a purchaser does not include authority to sell. When
a sale of a piece of land or any part thereof is made through an agent, the authority
of the latter shall be in writing; otherwise, the sale is void.

26. Pahud vs. Court of Appeals

Facts:
Spouses Agatona and Pedro were owners of a parcel of land situated in Los
Baños, Laguna. They left three children named Eufemia, Raul, Ferdinand, Zenaida,
Milagros, Minerva, Isabelita and Virgilio. Eufemia, Ferdinand and Raul executed a
Deed of Absolute Sale conveying their respective shares in favor of Spouses Pahud.
Eufemia also signed the deed on behalf of her 4 other co-heirs. Only Isabelita had
the Power of Attorney while the other 3 co-heirs had no written consent authorizing
such sale. When Eufemia and her co-heirs drafted an extrajudicial settlement of
estate to facilitate the transfer, Virgilio refused to sign it. A Compromise Agreement

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was signed with 7 of the co-heirs agreeing to sell their undivided shares to Virgilio.
The compromise agreement was not approved by the trial court because the counsel
of Eufemia and her 6 co-heirs refused to sign the agreement in view of the previous
sale to the Pahuds. Eufemia acknowledged having received the payments from
Virgilio. Virgilio then sold the entire property to spouses Belarminos who later
constructed a building thereon. Spouses Pahud immediately confronted Eufemia
who confirmed the sale by Virgilio to the Belarminos.
Issue:
Whether or not the sale of the subject property by Eufemia and co-heirs are
valid
Held:
Under Article 1878 of the Civil Code, a special power of attorney is necessary
for an agent to enter into a contract by which the ownership of an immovable
property is transmitted or acquired, either gratuitously or for a valuable
consideration. Absence of a written authority to sell a piece of land is ipso jure void,
precisely to protect the interest of an unsuspecting owner from being prejudiced by
the unwarranted act of another.
The sale made by Eufemia, Isabelita and her two brothers to the Spouses
Pahud should be valid only with respect to the authorized share of Eufemia, while
the sale with respect to the other portion of the lot representing the shares of
Zenaida, Milagros and Minerva, is void because Eufemia could not dispose of the
interest of her co-heirs in the said lot absent any written authority from the latter.

27. Yoshizaki vs. Joy Training Center of Aurora

Facts:
Richard and Linda Johnson were members of Joy Training‟s Board of Trustees
who sold the real and personal properties in favor of the spouses Sally and Yoshio
Yoshizaki. Joy Training filed an action for cancellation of sales alleging that the
spouses Johnson are without the requisite authority from the Board of Directors. It
assailed the validity of a board resolution which granted the spouses Johnson the
authority to sell its real properties. It averred that only a minority of the board,
composed of the spouses Johnson and Abadayan, authorized the sale through the
resolution.
Issue:
Whether or not the board resolution certification constituted a valid written
authority for the sale of the real properties of Joy Training Center
Held:
No. The certification is a mere general power of attorney. An agency couched
in general terms comprises only acts of administration, even if the principal should
state that he withholds no power or that the agent may execute such acts as he may
authorize as general and unlimited management.

28. City-Lite Realty Corp. vs. Court of Appeals

Facts:
F.P. Holdings is the registered owner of a parcel of land known as “Violago
Property.” Roy and Metro Drug Inc. were authorized as contact persons for the sale
of the property. City-Lite expressed its desire to buy the entire lot. The parties
reached an agreement and Roy agreed to sell the property to City-Lite. However,

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despite demand, F.P. Holdings refused to execute the corresponding deed of sale in
favor of City-Lite.
Issue:
Whether or not Metro Drug and Roy were authorized to sell the property
Held:
No. Art. 1874 of NCC provides that “When the 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.” In this case, Roy and Metro Drug was only a
contact person with no authority to conclude a sale of the property. Due to the lack
of a written authority to sell the property on their part, the sale should be declared
null and void.

29. BA Finance vs. Court of Appeals

Facts:
Spouses Cuadys acquired from Supercars, a credit of P39,574, which covered
the cost of a Ford Escort 1300. They obligated themselves to pay the sum in
monthly installments. The promissory note, together with the chattel mortgage was
assigned to B.A. Finance Corp. When Spouses Cuadys failed to renew the insurance
coverage of the motor vehicle, B.A. Finance, as the assignee of the mortgage,
obtained the renewal of its insurance coverage with Zenith Insurance. Under the
terms and conditions of the insurance coverage, any loss under the policy shall be
payable to the B.A. Finance Corp. Later, the vehicle met an accident and was badly
damaged. Spouses Cuadys asked the B.A. Finance to consider the same as total loss
and to claim from the insurer the face value of the car insurance policy. B.A.
Finance just had the vehicle repaired but not long thereafter, the car bogged down.
Spouses Cuadys requested B.A. Finance to enforce the total loss provision but the
latter did not respond favorably.
Issue:
Whether or not B.A. Finance Corporation became an agent
Held:
Yes. When the finance company executes a mortgage contract that contains a
provision that in the event of accident or loss, it shall make a proper claim against
the insurance company, was in effect an agency relation. Under Article 1884, the
finance company was bound by its acceptance to carry out the agency, and in spite
of the instructions of the borrowers to make such claims insisted on having the
vehicle repaired but eventually resulted in loss of the insurance coverage, the
finance company had breached its duty of diligence, and must assume the damages
suffered by the borrowers, and consequently can no longer collect on the balance of
the mortgage loan secured thereby.

30. British Airways vs. Court of Appeals

Facts:
Mahtani purchased a ticket from British Airways. Since BA had no direct
flights from Manila to Bombay, Mahtani took a flight to Hong Kong via PAL. Upon
arrival in Hong Kong, he took a connecting flight to Bombay on board BA. Mahtani
checked in at PAL counter his luggage. In Bombay, Mahtani discovered that his
luggage was missing. BA representatives told him that the same might have been
diverted to London. Mahtani alleged that the reason for the non-transfer of the

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luggage was due to the PAL‟s late arrival in Hong Kong, thus, leaving hardly for the
proper transfer of his luggage to BA aircraft bound for Bombay.
Issue:
Whether or not British Airways is liable for the negligence of PAL
Held:
Yes. The well-settled rule is that an agent is also responsible for any
negligence in the performance of its function (Art. 1909) and is liable for the
damages which the principal may suffer by reason of its negligent act (Art. 1884).
BA is liable for the negligence of its agent, PAL. The contract of air transportation
was exclusively between the Mahtani and BA, the latter merely endorsing the Manila
to Hong Kong connecting flight to Bombay with the PAL acting as its agent. BA and
PAL are members of International Air Transport Association (IATA), wherein member
airlines are regarded as agents of each other in the issuance of tickets and other
matters pertaining to their relationship. The contractual relationship between BA
and PAL is one of agency.

31. Cervantes vs. Court of Appeals

Facts:
PAL issued to Cervantes a round trip plane ticket for Manila-Honolulu-Los
Angeles-Honolulu-Manila, which provided an expiry of date of one year. On March
23, Four days before the expiry date of the ticket, the he used it. Upon his arrival in
Los Angeles, he immediately booked his Los Angeles-Manila return ticket with the
PAL office and it was confirmed for the April 2 flight. Learning that the PAL plane
would make a stop-over in San Francisco, and considering that he would be there
on April 2, Cervantes made arrangements with PAL agents for him to board the
flight for San Francisco instead of boarding in Los Angeles. On April 2, when he
checked in at the PAL counter in San Francisco, he was not allowed to board. The
PAL personnel did not accept the ticket due to its expiration.
Issues:
(1) Whether or not PAL is liable to Cervantes for damages through the acts of
its agent
(2) Whether or not PAL agent is liable to Cervantes for damages
Held:
(1) No. Under Article 1898, the acts of an agent beyond the scope of his
authority do not bind the principal, unless the latter ratifies the same expressly or
impliedly.
(2) No. If the said third person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the agent, unless the latter
undertook to secure the principals ratification. Cervantes had knowledge that the
ticket would expire on March 27 and that to secure an extension, he would have to
file a written request for extension at the PAL‟s office in the Philippines.

33. Borja, Sr. vs. Sulyap, Inc.

Facts:
Borja and Sulyap Inc. entered into a contract of lease involving a building
owned by the former. Sulyap paid advance rentals which, upon the expiration of the
lease, he demanded the return of but Borja refused. During the trial, they entered
into a compromise agreement stipulating the amounts and payment of 2% monthly
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interest and 25% attorney‟s fees in case of default. Borja failed to pay the amounts
prompting Sulyap to move for issuance of writ of execution. Borja alleged that his
former counsel removed the page of the genuine compromise agreement where he
affixed his signature and fraudulently attached the same to the compromise
agreement in order to make it appear that he agreed to the penalty clause.
Issue:
Whether or not Borja is bound by the penalty clause in the compromise
agreement
Held:
Yes. Even when the agent, in this case the attorney-at-law, who represented
the client in forging a compromise agreement, has exceeded his authority in
inserting penalty clause, the status of the said clause is not void but merely
voidable which capable of being ratified. The client‟s failure to question the inclusion
of the penalty in the judicial compromise despite several opportunities to do so and
with the representation of new counsel was tantamount to ratification.

34. Domingo vs. Domingo

Facts:
Vicente authorized Gregorio to sell his land at rate of P2 per sqm. The two
agreed that Gregorio would receive a commission of 5% of the total price, whether
the property is sold by any of them. Oscar, the prospective buyer, offered to buy the
property at P1.20 per sqm. Vicente acceded to the offer. It was unknown to Vicente
that Gregorio made an arrangement with Oscar whereby Gregorio would be given a
gift or propina by persuading Vicente to sell the property at P1.20. Later, the land
was sold by Vicente to Amparo, the wife of Oscar. Vicente denied Gregorio of his 5%
commission because the property was sold to different person. Gregorio contended
that the commission should still be awarded because the sale was made to the same
person considering that Amparo and Oscar are spouses.
Issue:
Whether or not Gregorio was entitled to receive the 5% commission
Held:
No. 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. Any stipulation exempting the agent from such
obligation is void.

35. Sazon vs. Vasquez-Menancio

Facts:
Letecia, a US resident, entrusted the management of her properties to
Caridad. Letecia claimed that the lots were all productive and all its fruits were
received by Caridad. Caridad alleged that the properties do not generate any
income. She claimed that any supposed income derived therefrom was not even
sufficient to answer for all the expenses incurred to maintain them. Letecia averred
that despite repeated demands, Caridad failed to render a proper accounting and to
remit the owner‟s share of the profits. She filed a complaint against Carida praying
that the lower court will order her to render an accounting and remit all the fruits
and income the latter received from the properties as administrator. Caridad
claimed that in the course of her administration of the properties, the letters she

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sent to Letecia should be considered as a fulfillment of her obligation to render an

accounting.
Issue:
Whether or not Caridad fulfilled her obligation
Held:
No. Caridad was the administrator of Letecia's properties for 18 years, and
four letters within 18 years can hardly be considered as sufficient to keep the
principal informed and updated of the condition and status of the latter's properties.

36. Hernandez v. Hernandez

Facts:
On November 1993, the owners of the Hernandez property, which includes
Cornelia Hernandez, executed a letter indicating Cecilio Hernandez as the
representative of the owners of the land and the compensation he would receive in
doing such job. Such property was subject of an expropriation case for a DPWH
project. Cornelia and her co-owners who were also signatories of the November 1993
letter executed an irrevocable SPA appointing Cecilio with respect to the
expropriation. Cornelia received from Cecilio a check amounting to P1,123,000. It
was accompanied by a Receipt and Quitclaim document in favor of Cecilio which
stated that: (1) the amount received would be the share of Cornelia in the just
compensation; (2) in consideration of the payment, it would forever discharge Cecilio
from any action, damages, claims or demands; and (3) Cornelia would not institute
any action. After Cornelia learned of her true share in the expropriation
proceedings, she demanded an accounting of the proceeds. The letter was left
unanswered.
Issue:
Whether or not Cecilio violated his duty to render an accounting
Held:
Yes. What is in the record is that Cornelia asked for an accounting of the just
compensation from Cecilio several times, but the request remained unheeded. Right
at that point, Cecilio violated the fiduciary relationship of an agent and a principal.
The relation of an agent to his principal is fiduciary and it is elementary that in
regard to property subject matter of the agency, an agent is estopped from acquiring
or asserting a title adverse to that of the principal. His position is analogous to that
of a trustee and he cannot, consistently with the principles of good faith, be allowed
to create in himself an interest in opposition to that of his principal.

37. Cosmic Lumber vs. Court of Appeals

Facts:
Cosmic Lumber Corporation executed an SPA appointing Villamil-Estrada as
attorney-in-fact to institute any court action for the ejectment of squatters in the
company‟s lots. Villamil-Estrada instituted an action for the ejectment of Perez and
to recover the possession of a portion of the lot. She entered into a Compromise
Agreement with Perez after which the property was sold to the latter. Although the
decision became final, it was not executed because Cosmic Lumber refused to
transfer the title of the lot in favor of Perez contending that the compromise
agreement was void.
Issue:

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Whether or not Villamil-Estrada exceeded her authority as specified in the

SPA
Held:
Yes. When the sale of a piece of land or any interest therein is made through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void. Thus, the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority. A special power
of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration.

38. British Airways vs. Court of Appeals

Facts:
Mahtani purchased a ticket from British Airways. Since BA had no direct
flights from Manila to Bombay, Mahtani took a flight to Hong Kong via PAL. Upon
arrival in Hong Kong, he took a connecting flight to Bombay on board BA. Mahtani
checked in at PAL counter his luggage. In Bombay, Mahtani discovered that his
luggage was missing. BA representatives told him that the same might have been
diverted to London. Mahtani alleged that the reason for the non-transfer of the
luggage was due to the PAL‟s late arrival in Hong Kong, thus, leaving hardly for the
proper transfer of his luggage to BA aircraft bound for Bombay.
Issue:
Whether or not British Airways is liable for the negligence of PAL
Held:
Yes. The well-settled rule is that an agent is also responsible for any
negligence in the performance of its function (Art. 1909) and is liable for the
damages which the principal may suffer by reason of its negligent act (Art. 1884).
BA is liable for the negligence of its agent, PAL. The contract of air transportation
was exclusively between the Mahtani and BA, the latter merely endorsing the Manila
to Hong Kong connecting flight to Bombay with the PAL acting as its agent. BA and
PAL are members of International Air Transport Association (IATA), wherein member
airlines are regarded as agents of each other in the issuance of tickets and other
matters pertaining to their relationship. The contractual relationship between BA
and PAL is one of agency.

39. Escueta vs. Lim

Facts:
10 lots owned by Ignacio Rubio and the Heirs of Baloloy were sold by Virginia
Lim to Rufina Lim. Rufina paid Ᵽ102,169 and Ᵽ450,000 to Rubio and the heirs of
Baloloy as partial payment with the understanding that the Certificate of Title would
be delivered to her upon payment of the balance. However, both Rubio and the heirs
refused her subsequent payment and did not deliver the Certificate of Title. They
claimed that Virginia Lim was never authorized to sell the lots as it was in fact
Patricia Llamas, Rubio‟s daughter, who had this authority.
Issue:
Whether or not Rubio is bound by the contract of sale considering that he did
not authorize Virginia to transact on his behalf
Held:

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Yes. Under the terms of Art. 1892, when a special power of attorney to sell a
piece of land does not contain a clear prohibition against the agent in appointing a
substitute, the appointment by the agent of a substitute to execute the contract is
within the limits of the authority given by the principal, although the agent would
be responsible for the acts of the sub-agent.
It is clear that Patricia Llamas was not prohibited from appointing a
substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely
acted within the limits of her authority. However, she will be held responsible for the
act of the sub-agent, among which is precisely the sale in favor of the Rufina Lim.

40. Serona vs. Court of Appeals

Facts:
Leonida delivered several pieces of jewelry to Virginia to be sold on
commission basis. It was agreed upon that the jewelry would be returned within 30
days if not sold. Virginia failed to pay for the sold items, thus, Leonida required her
to execute an acknowledgment receipt indicating the total amount due. Unknown to
Leonida, Virginia entrusted the jewelries to Marichu also to be sold on commission
basis. Virginia failed to collect from Marichu as the person whom the latter sold
these jewelries absconded. Consequently, Virginia failed to pay Leonida. An
information for Estafa was filed against the Virginia alleging that she
misappropriated the proceeds of the jewelries and converted the same for her
personal benefit.
Issue:
Whether or not there was abuse of confidence when Virginia entrusted the
jewelry to Marichu
Held:
No. The law on agency allows the appointment by an agent of a substitute or
sub-agent in the absence of an express agreement to the contrary between the agent
and the principal. Therefore, an agent who receives jewelry for sale or return cannot
be charged with Estafa for there was no misappropriation when she delivered the
jewelry to a sub-agent under the sales terms which the agent received it, but a client
of the sub-agent who absconded could no longer be of recovery. The appointment of
a sub-agent and delivery of the jewelry, in the absence of a prohibition, does not
amount to conversion or misappropriation as to constitute Estafa, but the agent
remains civilly liable for the value of the jewelry to the principal.

42. Municipal Council of Iloilo vs. Evangelista

Facts:
Tan Ong Tze sought to recover the value of a strip of land belonging to her
which was taken by the municipality to widen a public street. The judgment entitled
her to Ᵽ42,966. When the judgment became final, Atty. Evangelista as counsel for
the Intestate Estate of Atty. Arroyo, filed a claim for payment of professional services
that he and Atty. Arroyo rendered in the said case. At the hearing, several other
claimants appeared, including Atty. Soriano who claimed that Tan Boon Tiong, one
of Tan Ong Tze‟s attorney-in-fact, assigned the amount to him and that he in turn
assigned this amount to Mauricio Cruz & Co. Inc.
Held:
When two letters of attorney are issued simultaneously to two different
attorneys-in-fact but covering the same powers and show that it was not the

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principal„s intention that they should act jointly in order to make their acts valid,
the separate act of one of the attorney-in-fact, even when not consented to by the
other, is valid and binding on the principal, especially when the principal did not
only repudiate the act done, but continued to retain the said attorney-in-fact.

43. Chemphil Export vs. Court of Appeals

Facts:
Garcia and Consortium entered into a compromise agreement whereby Garcia
would pay Ᵽ145M. Garcia sold shares of stock to Ferro Chemicals Inc. for Ᵽ79M. It
was agreed that the purchase price shall be paid directly to Security Bank. Security
Bank refused the payment as it was not sufficient. Ferro in turn assigned the rights
to said stocks to Chemphil. When Garcia failed to comply with the compromise
agreement, Consortium caused the shares of stocks to be sold on execution.
Chemphil contended that it was the rightful owner of the shares.
Issue:
Whether or not Chemphil had been subrogated to the rights of Security Bank
Held:
No. When the buyer of shares of stock, pursuant to the terms of the deed of
sale, effects payment of part of the purchase price to one of the seller„s creditors,
then there is no subrogation that takes place, as the buyer then merely acts as an
agent of the seller effecting payment of money that was due to the seller in favor of a
third-party creditor.

44. Uy vs. Court of Appeals

Facts:
Uy and Roxas were agents authorized to sell 8 parcels of land. They offered
the lands to National Housing Authority. The parties executed a series of Deeds of
Absolute Sale. However, only 5 were paid by NHA due to the report it received from
the Land Geosciences Bureau that the remaining area is located at an active
landslide area not suitable for development into a housing project. NHA cancelled
the sale over the 3 parcels of land. Uy and Roxas filed a complaint for damages
against NHA.
Issue:
Whether or not Uy and Roxas, as agents, are real party in interest
Held:
No. Agents who have been authorized to sell parcels of land cannot claim
personal damages in the nature of unrealized commission by reason of the act of the
buyer in refusing to proceed with the sale. The rendering of such service did not
make them parties to the contracts of sale executed on behalf of the principal.

45. Angeles vs. PNR

Facts:
PNR accepted Romualdez‟s offer to buy the PNR‟s scrap or unserviceable rails
for P96,600. Romualdez authorized Angeles to be his representative in the
withdrawal of the rails. However, the PNR subsequently suspended the withdrawal
due to what it considered as documentary discrepancies. Consequently, Angeles

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demanded the refund of the amount of P96,000 but PNR refused to pay. Angeles
filed an action for specific performance and damages against PNR.
Issue:
Whether or not Angeles has personality to sue
Held:
No. A person acting as a mere representative of another acquires no rights
whatsoever nor does he incur any liabilities arising from the said contract between
his principal and another party.

46. National Power Corporation vs. NAMERCO

Facts:
NAMERCO was a representative of International Commodities Corp. It
executed a contract for the purchase by the NPC from New York firm of 4,000 long
tons of crude sulfur. NAMERCO did not disclose to NPC that NAMERCO‟s principal
said that the sale was subject to availability of steamer. The New York supplier was
not able to deliver the sulfur due to its inability to secure shipping space.
Consequently, the Corporate Counsel rescinded the contract of sale and demanded
payment of liquidated damages.
Issue:
Whether NAMERCO exceeded its authority
Held:
Yes. Where an agent defies the instructions of its principal in New York not to
proceed with the sale due to non-availability of carriage, it has acted without
authority or against its principal„s instructions and holds itself personally liable for
the contract it entered into with the local company.

47. BA Finance vs. Court of Appeals

Facts:
Spouses Gaytano applied for and was granted a loan with Traders Royal
Bank. Philip Wong was a credit administrator of BA Finance Corp. on behalf of the
spouses. He undertook to guarantee the loan. Partial payments were made on the
loan leaving an unpaid balance which the spouses refused to pay. The CA held
Gaytano spouses and BA Finance Corp. solidarily liable for the unpaid balance.
Issue:
Whether or not Gaytano spouses and BA Finance are solidarily liable
Held:
No. The special power to approve loans does not carry with it the power to
bind the principal to a contract of guaranty even to the extent of the amount for
which a loan could have been granted by the agent. Guaranty is not presumed. It
must be expressed and cannot be extended beyond its specified limits.

48. Pineda vs. Court of Appeals

Facts:
PMSI procured a Group Policy from Insular Life Assurance. During its
effectivity, six covered employees of the PMSI perished at sea when their vessel sunk

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somewhere in Morocco. They were survived by the beneficiaries under the policy.
The beneficiaries were made to execute special powers of attorney authorizing Capt.
Nuval to "follow up, ask, demand, collect and receive" for their benefit indemnities of
sums of money due them. Later, some of the checks released were endorsed and
deposited in Capt. Nuval‟s account with in Boston Bank. They sought to recover
these benefits from Insular Life but the latter denied their claim.
Issue:
Whether or not Insular Life acted with negligence
Held;
Yes. The practice in group insurance business is that the employer-
policyholder who takes out the insurance for its officers and employees is the agent
of the insurer who has authority to collect the proceeds from the insurer.
In this case, the insurer, through the negligence of its agent, allowed a
purported attorney-in-fact whose instrument did not clearly show such power to
collect the proceeds, is liable under the doctrine that the principal is bound by the
misconduct of its agent.

49. Development Bank of the Philippines vs. Court of Appeals

Facts:
Juan Dans applied for a loan of P500,000 with DBP. As principal-mortgagor,
Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption
insurance (MRI) with DBP MRI Pool. From the proceeds of the loan, DBP deducted
the payment for the MRI premium. The MRI premium of Dans was credited by DBP
to the savings account of DBP MRI Pool. Dans died of cardiac arrest. DBP MRI Pool
notified DBP that Dans was not eligible for MRI coverage, being over the acceptance
age limit of 60 years of age at the time of application. DBP offered to refund the
premium which the deceased had paid but Candida Dans refused to accept the
same demanding payment of the face value of the MRI or an amount equivalent of
the loan.
Issue:
Whether or not DBP acted as an agent of Dans
Held:
Yes. When the bank in extending a loan required the principal-borrower to
obtain an MRI and deducted the premiums pertaining thereto from the loan
proceeds, it was wearing two hats; as a lender and as insurance agent. When it
turned out that the DBP knew or ought to have known that Dans (principal) was not
qualified at his age for MRI coverage, the bank was deemed to have been an agent
who acted beyond the scope of its authority.

50. BA Finance vs. Court of Appeals

Facts:
Gaytano spouses applied for and was granted a loan with Traders Royal Bank
in the amount of P60,000. They executed a deed of suretyship binding themselves
jointly and severally to the bank. Philip Wong as credit administrator of BA Finance
undertook to guarantee the loan on behalf of the spouses. Since the spouses refused
to pay their obligation, the bank filed a complaint for sum of money against them
and BA Finance. BA Finance contended that the letter-guaranty was issued by its
employee beyond the scope of his authority and therefore unenforceable.

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Issue:
Whether or not BA Finance is liable
Held:
No. 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. The burden was on the bank to satisfactorily prove that the credit
administrator with whom they transacted acted within the authority given to him by
BA Finance.

52. Eugenio vs. Court of Appeals

Facts:
Nora Eugenio was a dealer of Pepsi Cola while her husband used to be a route
manager of the same company. Pepsi Cola filed a complaint for a sum of money
against the spouses alleging that on several occasions, the spouses purchased and
received on credit their various products which the couple failed to pay despite
demands. In their defense, the spouses presented receipts issued and received by
them from Pepsi Cola‟s route manager, Estrada.
Issue:
Whether or not the obligation of the Eugenio spouses was extinguished
Held:
Yes. Payment shall be made to the person in whose favor the obligation has
been constituted, his successor-in-interest or any person authorized to receive it. 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 even if the agent has in fact exceeded the limits of his authority according
to an understanding between the principal and his agent.

53. Toyota Shaw, Inc. vs. Court of Appeals

Facts:
Sosa met Bernardo, a sales representative of Toyota. They contracted an
agreement on the delivery of Lite Ace car and that the balance of the purchase price
would be paid by credit financing. The following day, Sosa paid the down payment.
On the day of delivery, Bernardo called Sosa to inform him that the car could not be
delivered. Toyota contends that the Lite Ace was not delivered due to disapproval by
B.A. Finance of the credit financing. Toyota then gave Sosa the option to purchase
the unit by paying the full purchase price in cash but Sosa refused.
Issue:
Whether or not the agreement could bind Toyota
Held:
No. The title of the agreement between the two parties was “AGREEMENTS
BETWEEN MR. SOSA AND POPONG BERNARDO OF TOYOTA SHAW INC.”
Therefore, Bernardo was acting on his personal capacity and did not represent
Toyota in said agreement, something that Mr. Sosa should have been aware of.
When one knowingly deals with the sales representative of a car dealership
company, one must realize that he is dealing with a mere agent and it is incumbent
upon such person to act with ordinary prudence and reasonable diligence to know
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the extent of the sales representative‟s authority as an agent in respect of contracts

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

54. Bacaltos Coal Mines vs. Court of Appeals

Facts:
In an “Authorization,” Bacaltos authorized Savellon to use the coal operating
contract of Bacaltos Coal Mine. A Trip Charter Party was executed “by and between
BACALTOS COAL MINES, represented by its Chief Operating Officer, RENE ROSEL
SAVELLON and San Miguel Corp.” Thereunder, Savellon claimed that Bacaltos Coal
Mines is the owner of the vessel M/V Premship II and that for P650,000 to be paid,
it let the vessel to charterer SMC for three round trips to Davao. The vessel was able
to make only one trip. Bacaltos Coal Mines alleged that Savellon was not their Chief
Operating Officer and that the powers granted to him do not include the power to
enter into any contract with SMC.
Issue:
Whether or not Bacaltos Coal Mines is bound by the agreement
Held:
No. Savellon‟s authority is limited to the use of the coal operating contract
and does not contemplate any other power not included in the enumeration.
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 the agency but also the nature and extent of the
authority, and in case either is controverted, the burden of proof is upon them to
establish it.

55. Yu Eng Cho v. PANAM

Facts:
Yu Eng Cho and his family bought plane tickets from Tagunicar who
represented herself to be an agent of Tourist World Services. Pan American World
Airways confirmed the bookings. Upon arrival in Tokyo, they called Pan American
office for reconfirmation of their flight to San Francisco but they were informed that
their names are not in the manifest. They were constrained to accept airline tickets
for Taipei instead as advised by JAL officials. Upon their return to Manila, Yu Eng
Cho filed a complaint for damages against Pan American World Airways, Tourist
World Services and Tagunicar. Yu Eng Cho insisted that agency relationship has
been established by the admission made of Pan. Am. that TWS is its authorized
ticket agent, and the admission by Tagunicar that she is a duly authorized agent of
TWSI.
Issue:
Whether or not TWSI and Pan. Am. are held liable as principals
Held:
No. TWSI and Pan. Am. should not be held liable for the acts of Tagunicar
who represented herself as their agent. The fact that one is dealing with an agent,
whether the agency be general or special, should be a danger signal. The mere
representation or declaration of one that he is authorized to act on behalf of another
cannot of itself serve as proof of his authority to act as agent or of the extent of his
authority as agent.

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56. Litonjua vs. Fernandez

Facts:
The land whose owners were being represented by Fernandez was offered to
the Litonjuas. Litonjuas and Fernandez agreed that the former would buy the
property for the price of P150 per sqm. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses of the sale. It was also
agreed upon that Fernandez would present a SPAon the date of the sale. Later,
Fernandez did not arrive at the transaction and declined to the demands of
Litonjuas.
Issue:
Whether or not the contract entered into by Fernandez is valid
Held:
No. A special power of attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired either gratuitously
or for a valuable consideration, or to create or convey real rights over immovable
property, or for any other act of strict dominion. Otherwise, the sale is null and void.
Persons dealing with an assumed agent are bound at their peril, and if they
would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to prove it.

57. Manila Memorial Park Cemetery, Inc. vs. Linsangan

Facts:
Baluyot offered a lot called Garden State at the Holy Cross Memorial Park
owned by MMPCI to Atty. Linsangan. According to Baluyot, a former owner of a
memorial lot under Contract No. 25012 was no longer interested in acquiring the lot
and had opted to sell his rights subject to reimbursement of the amounts he already
paid. Baluyot reassured Atty. Linsangan that once reimbursement is made to the
former buyer, the contract would be transferred to him. Baluyot issued receipts for
the payments of Atty. Linsangan. The contract was later cancelled. MMPCI alleged
Baluyot was not an agent but an independent contractor and as such was not
authorized to represent MMPCI or to use its name.
Issue:
Whether or not agency existed between Baluyot and MMPCI
Held:
No. The acts of an agent without or beyond the scope of his authority do not
bind the principal unless he ratifies them expressly or impliedly. A person dealing
with an agent assumes the risk of lack of authority of the agent. He cannot charge
the principal by relying upon the agent‟s assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the presumption that third
persons dealing with his agent will not be negligent in failing to ascertain the extent
of his authority as well as the existence of his agency.

58. Green Valley vs. IAC

Facts:

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E.R. Squibb appointed Green as a non-exclusive distributor for Squibb

Veterinary Products. Green Valley defaulted in the payment of goods delivered by
Squibbs. It claimed that the contract with Squibb was a mere agency to sell; that it
never purchased goods from Squibb; that the goods received were on consignment
only with the obligation to turn over the proceeds, less its commission, or to return
the goods if not sold.
Issue:
Whether or not Green Valley is liable for selling on credit
Held:
Yes. Whether viewed as an agency to sell or as a contract of sale, the liability
of Green Valley is indubitable. Adopting Green Valley‟s theory that the contract is an
agency to sell, it is liable because it sold on credit without authority from its
principal. Under Article 1905, a commission agent cannot, without the express or
implied consent of the principal, sell on credit, and should it do so the principal may
demand from him payment in cash.

59. Bucton vs. Rural Bank of El Salvador, Inc.

Facts:
Bucton owned a parcel of land whose title was borrowed by Concepcion on the
pretext that she was only going to show it to an interested buyer. Concepcion used
the title to mortgage the Bucton„s house and lot as security for a loan she obtained
from Rural Bank through an SPA allegedly executed by Bucton. Conception
defaulted in payment leading to the foreclosure of Bucton„s house and lot. Bucton
contended that she could not be held liable as both the promissory note and the real
estate mortgage were signed by Concepcion in her own personal capacity.
Issue:
Whether or not the Real Estate Mortgage is binding on Bucton
Held:
No. For the principal to be bound by a deed executed by an agent, the deed
must be signed by the agent for and in behalf of his principal. The Real Estate
Mortgage explicitly shows on its face that it was signed by Concepcion in her own
name and in her own personal capacity. There is nothing in the document to show
that she was acting or signing as an agent of Bucton. The words "as attorney-in-fact
of," "as agent of," or "for and on behalf of," are vital in order for the principal to be
bound by the acts of his agent. Without these words, any mortgage, although signed
by the agent, cannot bind the principal as it is considered to have been signed by
the agent in his personal capacity.

60. Panlilio vs. Citibank

Facts:
Spouses Panlilio intended to invest money in a Citibank which had a high
interest. Since it was not available, they put their P1,000,000 in a savings account
instead. More than a month later, Panlilio placed another amount of P2,134,635 in
the Citibank‟s Long-Term Commercial Paper (LTCP), a debt instrument that paid a
high interest, issued by the corporation Camella and Palmera Homes. Months after
signing with the debt instrument and after receiving interests, Panlilio contested the
investment contract and demanded Citibank to return their investment money. This
happened when Panlilio was informed that Camella and Palmera Homes‟ stock had
plunged in value.
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Issue:
Whether the Citibank is obliged to return the investment money of the Panlilio
Held:
No. Under Article 1910, the client assumed all obligations or inherent risks
entailed by transactions emanating from the arrangement, and the bank may be
held liable, as an agent, only when it exceeds its authority, or acts with fraud,
negligence or bad faith. Principals are solely obliged to observe the solemnity of the
transaction entered into by the agent on their behalf, absent any proof that the
latter acted beyond its authority, and concomitant to this obligation is that the
principal also assumes the risks that may arise from the transaction.

61. Manila Memorial Park Cemetery, Inc. vs. Linsangan

Facts:
Baluyot offered a lot called Garden State at the Holy Cross Memorial Park
owned by MMPCI to Atty. Linsangan. According to Baluyot, a former owner of a
memorial lot under Contract No. 25012 was no longer interested in acquiring the lot
and had opted to sell his rights subject to reimbursement of the amounts he already
paid. Baluyot reassured Atty. Linsangan that once reimbursement is made to the
former buyer, the contract would be transferred to him. Baluyot issued receipts for
the payments of Atty. Linsangan. The contract was later cancelled. MMPCI alleged
Baluyot was not an agent but an independent contractor and as such was not
authorized to represent MMPCI or to use its name.
Issue:
Whether or not agency existed between Baluyot and MMPCI
Held:
No. The acts of an agent without or beyond the scope of his authority do not
bind the principal unless he ratifies them expressly or impliedly. A person dealing
with an agent assumes the risk of lack of authority of the agent. He cannot charge
the principal by relying upon the agent‟s assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the presumption that third
persons dealing with his agent will not be negligent in failing to ascertain the extent
of his authority as well as the existence of his agency.

62. Cuison v. Court of Appeals

Facts:
Cuison is a sole proprietor engaged in the business of newsprint, bond paper
and scrap. Valiant delivered various kinds of paper products to a certain Tan
pursuant to orders by Tiac who was employed in the office of Cuison. Tan paid by
issuing several checks payable in cash at the specific request of Tiac. Tiac issued 9
postdated checks to Valiant as payment for the paper products. Unfortunately, the
checks were later dishonored by the drawee bank. Thereafter, Valiant made several
demands upon Cuison to pay for the merchandise in question, claiming that Tiac
was duly authorized as manager of his office to enter into the questioned
transactions with Valiant and Tan.
Issue:
Whether or not Tiac possessed the required authority from Cuison to hold the
Cuison liable
Held:
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Yes. The fact that the agent defrauded the principal in not turning over the
proceeds of the transactions to the latter cannot, in any way, relieve or exonerate
such principal from liability to the third persons who relied on his agent‟s authority.
As between two innocent parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss.

63. Pleasantville Dev. vs. Court of Appeals

Facts:
Jardinico bought Lot 9, Phase II from a former purchaser in Pleasantville
Development. He later found out that the property had improvements introduced by
Kee. Kee, on the other hand, bought Lot 8 from C.T. Torres Enterprises, the
exclusive real estate agent of Pleasantville. It was discovered that Lot 8 assessed and
sold by C.T. Torres was occupying a portion of Lot 9. Hence, spouses Kee had
constructed their residence, an auto repair shop, a store and other improvements
on the wrong lot.
Issue:
Whether or not Pleasantville is liable for the acts of C.T. Torres for the damage
caused to the third party
Held:
Yes. It is the negligence of C.T. Torres that is the basis of Pleasantville‟s
liability as principal. The principal is responsible for the acts of the agent, done
within the scope of his authority, and should bear the damage caused to third
persons. The principal cannot absolve itself from the damages sustained by its
buyer on the premise that the fault was primarily caused by its agent in pointing to
the wrong lot, since the agent was acting within its authority as the sole real estate
representative of the principal-seller. The liability of the principal for acts done by
the agent within the scope of his authority includes those done negligently.

64. Filipinas Life Assurance Co. vs. Pedroso

Facts:
Teresita availed of an investment program which entitled her to prepaid
interest from her long time insurance agent Valle who works for Fil-Life. To make
sure that the scheme is legit, she went to the office to inquire. She was assured by
the manager of its legitimacy. Satisfied, she even invited her friend Jennifer to join
her. All is well until Valle refused to return the principal upon maturity and after
demand. Fil-Life contended that Valle acted outside the scope of his authority since
Fil-Am only offers insurance policies and not investment programs. Thus, it cannot
be held liable for Valle‟s acts.
Issue:
Whether or not Fil-Life and its agent Valle are solidarily liable to Teresita and
Jennifer
Held:
Yes. The acts of an agent beyond the scope of his authority do not bind the
principal unless the principal ratifies them, expressly or implied. Even if Valle‟s
representations were beyond his authority as an insurance agent, Fil-Life ratified
Valle‟s acts by benefiting from the investments deposited by Valle in the account of
Filipinas Life.

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65. Manila Remnant Co., Inc. vs. Court of Appeals

Facts:
Manila Remnant and A.U. Valencia entered into a contract for the latter to
develop the Capital Homes Subdivision whose land is owned by the former. The
President of both A.U. Valencia and Manila Remnant was Artemio. Manila Remnant
through A.U. Valencia executed contracts to sell covering two lots in favor of
Ventanilla. Ten days after, Artemio, without the knowledge of the buyer, sold the
lots again to Crisostomo whose transaction was transmitted to Manila Remnant
while that of Ventanilla in the custody of Artemio which was subsequently remitted
to Manila Remnant. Later, Artemio was removed as President by the Board of
Manila Remnant. He stopped transmitting Ventanilla's monthly installments.
Issue:
Whether or not Manila Remnant is solidarily liable with A.U. Valencia
Held:
Yes. Even when the agent acts unlawfully and outside the scope of authority,
the principal can be held liable when by its own act it accepts without protest the
proceeds of the sale of the agents which came from double sales, as when learning
of the misdeed, it failed to take necessary steps to protect the buyers. In such case
the liabilities of both the principal and the agent is solidary.

66. Litonjua, Jr. vs. Eternit Corp.

Held:
For an agency by estoppel to exist, the following must be established: (1) the
principal manifested a representation of the agent‟s authority or knowingly allowed
the agent to assume such authority; (2) the third person, in good faith, relied upon
such representation; (3) relying upon such representation, such third person has
changed his position to his detriment. An agency by estoppel, which is similar to the
doctrine of apparent authority, requires proof of reliance upon the representations,
and that, in turn, needs proof that the representations predated the action taken in
reliance.

67. Manotok Bros. Inc. vs. CA

Facts:
Manotok Bros. Inc. is the owner of a certain parcel of land. The land was
being leased by Manila City and used by the Claro M. Recto High School. They
authorized Salvador to negotiate with the City. They agreed to pay him 5% of the
price of the land upon completion of sale. Later, Manotok Bros. denied Salvador of
his commission on the ground that his authorization was no longer in force when
the City Mayor signed the ordinance to appropriate the property. His authority as
agent expired 3 days before the signing.
Issue:
Whether or not Salvador was entitled to 5% commission
Held:
Yes. In agencies to sell, where the entitlement of the commission is subject to
the successful consummation of the sale with the buyer located by the agent, said
agent would still be entitled to the commission on sales consummated after the
expiration of his agency when the facts show that the agent was the efficient

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procuring cause in bringing about the sale. The City of Manila became to purchaser
of the property through Salvador‟s effort.

68. Hahn vs. Court of Appeals

Facts:
Hahn executed in favor of BMW a Deed of Assignment with Special Power of
Attorney which essentially, makes Hahn as the exclusive dealer of BMW. BMW and
CMC had a meeting which would grant CMC exclusive dealership of BMW cars.
BMW was dissatisfied with how Hahn was carrying its business. Hahn protested
that such termination is a breach of the Deed of Assignment and that as long as the
assignment of its trademark and device subsisted he remained BMW's exclusive
dealer.
Issue:
Whether or not Hahn is an agent of BMW
Held:
Yes. Upon receipt of the orders, BMW fixed the down payment and pricing
charges, notified Hahn of the scheduled production month for the orders, and
reconfirmed the orders by signing and returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW. Title to cars purchased passed
directly to the buyer and Hahn never paid for the purchase price of BMW cars sold
in the Philippines. Hahn was credited with a commission equal to 14% of the
purchase price upon the invoicing of a vehicle order by BMW.

69. Dominion Insurance Corp. vs. Court of Appeals

Facts:
Dominion Insurance appointed Guevarra Insurance as agency manager.
Guevarra was given an authority to settle all motor car claims in the amount of
P5,000. The settlement of claims would come from Guevarra‟s funds. This authority
was stipulated in a document entitled “Special Power of Attorney.” Later, Guevarra
filed a complaint against Dominion for collection of sum of money. Dominion denied
any liability and instead counterclaimed for a premium that Guevarra allegedly
failed to remit.
Issue:
Assuming that Guevarra Insurance exceeded its authority in the settlement of
the claims, can it recover from Dominion Insurance the sums it paid?
Held:
Yes. While the law on agency prohibits the area manager from obtaining
reimbursement, his right to recover may still be justified under the general law on
obligations and contracts, particularly the payment by a third party of the obligation
of the debtor which allows recovery only insofar as the payment has been beneficial
to the debtor. Thus, to the extent that the obligation of the insurance company has
been extinguished, the area manager may demand for reimbursement from his
principal. To rule otherwise would result in unjust enrichment.

70. Albaladejo y Cia vs. PRC

Facts:

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Cia is engaged in the buying and selling of copra. Visayan Refining Co. is
engaged in the manufacture of coconut oil. Cia entered into a contract with the VRC
stipulating that VRC would buy for a period of 1 year all the copra that Cia
purchased and that VRC would not appoint any other agent. After VRC ceased to
buy copra and their accounts were liquidated, Cia filed a complaint against PRC
(successor of VRC) seeking to recover an alleged amount spent in maintaining and
extending its organization. PRC contended that the contract created between Cia
and PRC is one of agency, thus, the VRC, the principal, should indemnify Cia.
Issue:
Whether or not there was a contract of agency between Cia and VRC
Held:
No. While VRC made Cia one of its instruments for the collection of copra, in
making its purchases from the producers, Cia was buying upon its own account.
When Cia turned over the copra to VRC, a second sale was effected. The use of this
term agent in one clause of the contract could not dominate the real nature of the
agreement as revealed in other clauses.

71. De Castro vs. Court of Appeals

Facts:
De castros were co-owners of four lots. They authorized Artigo to act as real
estate broker in the sale of these properties and 5% would be given to him as
commission. He first found Times Transit who bought tw lots. Artigo felt short of his
commission. Hence, he sued below to collect the balance. The De Castros argued
that Artigo always knew that the two lots were co-owned by other siblings and
failure to implead such indispensable parties is fatal to the complaint since Artigo
would be paid with funds from co-ownership.
Issue:
Whether or not the complaint should be dismissed
Held:
No. When the law expressly provides for solidarity of the obligation, as in the
liability of co-principals in a contract of agency, each obligor may be compelled to
pay the entire obligation. The agent may recover the whole compensation from any
one of the co-principals, as in this case.

72. Garcia vs. De Manzano

Facts:
Narciso gave a general power-of-attorney to his son, Angel. Later, he gave
general power of attorney to his wife, Josefa. Narciso was a co-owner of a half
interest in a small steamer while the other half co-owned by Ocejo, Perez & Co.
When the agreement expired, Ocejo, Perez & Co demanded that Narciso buy or sell.
Juan bought the half interest of Ocejo, Perez & Co. Angel sold the other half to
Garcia. The defendants allege that Narciso was the owner of one-half of the small
steamer San Nicolas arguing that Angel had no authority to sell the interest in the
steamer because the power of attorney given to Josefa revoked the one given to the
Angel.
Issue:
Whether or not the power of attorney given to Angel was revoked
Held:
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No. A second power of attorney revokes the first one only after notice given to
first agent. There is no proof that the son knew of the power-of-attorney to his
mother. The son had no notice of the second power-of-attorney. Therefore, Angel
was acting under a valid power-of-attorney from his father which had not been
legally revoked on the date of the sale.

74. CMS Logging vs. Court of Appeals

Facts:
DRACOR is the exclusive export and sales agent of CMS for all logs that CMS
may produce for a period of 5 years. However, CMS learned that DRACOR used
Shinko Trading Co. as agent in selling CMS' logs in Japan for which Shinko earned
a commission from the buyer. After this discovery, CMS sold and shipped logs
directly to several firms in Japan without the aid of DRACOR. CMS then sued
DRACOR for the commission received by Shinko. DRACOR filed a counterclaim for
its commission from the sales made by CMS of logs directly to Japanese firms.
Issues:
(1) Whether or not the agency between DRACOR and CMS is revoked
(2) Whether or not DRACOR is entitled to claim damages
Held:
(1) Yes. The principal may revoke a contract of agency at will, and such
revocation may be express, or implied, and may be availed of even if the period fixed
in the contract of agency has not yet expired. As the principal has this absolute
right to revoke the agency, the agent cannot object thereto; neither may he claim
damages arising from such revocation, unless it is shown that such was done in
order to evade the payment of agent's commission. NCC 1924 provides that “the
agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.”
(2) Damages are generally not awarded to the agent for the revocation of the
agency, and the case at bar is not one falling under the exception mentioned, which
is to evade the payment of the agent„s commission.

75. Dy Buncio & Co. vs. Ong Guan Can

Facts:
Dy Buncio, a judgment creditor of Ong Guan Can, levied upon the latter‟s
properties. Juan and Pua opposed claiming that they are the owners of the
properties by virtue of a deed executed between them and Ong Jr. as agent of Ong.
The power of attorney used for the said deed was a limited one which did not confer
right to alienate the said properties. Juan and Pua averred that a general power of
attorney executed prior to the limited power of attorney „cured‟ such defect.
Issue:
Whether or not Ong Jr.‟s limited power of attorney was sufficient to effect sale
Held:
No. 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.

76. Republic vs. Evangelista

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Facts:
Calimlim entered into a MOA with Reyes granting the latter a permit to hunt
for treasure. They started digging, tunneling and blasting works on the land of
Legaspi. Legaspi executed an SPA appointing Gutierrez as his attorney-in-fact.
Gutierrez was given the power to deal with the treasure hunting activities on
Legaspi‟s land and to file charges against those who may enter it without the latter‟s
authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be found in
the land. Gutierrez filed a case for damages and injunction against Calimlim and
Reyes for illegally entering Legaspi‟s land. He hired the services of Atty. Adaza who
was promised to be entitled to 30% of Legaspi‟s share in any treasure that may be
found. Calimlim filed a Motion to Dismiss contending that there is no real party-in-
interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi
earlier as evidenced by a Deed of Revocation.
Issue:
Whether or not the agency was revoked
Held:
No. An exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency. The
reason for its irrevocability is because the agency becomes part of another obligation
or agreement. It is not solely the rights of the principal but also that of the agent
and third persons which are affected. It is clear that the treasure that may be found
in the land is the subject matter of the agency. Under the SPA, Gutierrez entered
into a contract with Atty. Adaza. Thus, they have an interest in the subject matter of
the agency. This bilateral contract depends on the agency and thus renders it as
one coupled with interest, irrevocable at the sole will of the principal Legaspi.

77. Sevilla vs. Court of Appeals

Facts:
Tourist World Service leased the premises belonging to Noguera as its a
branch office. Sevilla assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. Later, TWS was informed
that Sevilla was connected with a rival firm and since the branch office was
somehow losing, it considered closing down the office. She continued the
business, using her own name, after TWS had stopped further operations.
Subsequently, the corporate secretary went to the branch office, and finding the
premises locked and being unable to contact Sevilla, padlocked the premises to
protect the interests of TWS.
Issue:
Whether or not the agency was properly revoked
Held:
No. The agency cannot be revoked at will because it is one coupled with an
interest, the agency having been created for the mutual interest of the agent and the
principal. Her interest, obviously, is not limited 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. Sevilla is a bona fide travel agent
herself, and as such, she had acquired an interest in the business entrusted to her.
It is an agency that cannot be revoked at the pleasure of the principal.

78. Valenzuela vs. Court of Appeals

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Facts:
Valenzuela is a General Agent of Philamgen. He was authorized to solicit and
sell on its behalf all kinds of non-life insurance. He was entitled to receive the full
agent's commission of 32%. Valenzuela solicited marine insurance from the Delta
Motors in the amount of P4.4 Million. However, he did not receive his full
commission which amounted to P1.6 Million from the insurance coverage of the
Delta Motors. Philamgen expressed its intent to share in the commission due
Valenzuela on a 50-50 basis. Because of the refusal of Valenzuela, Philamgen
terminated their General Agency Agreement.
Issue:
Whether or not the agency was properly revoked
Held:
No. The agency is one "coupled with an interest," and therefore, should not be
freely revocable at the unilateral will of one. To sell policies, an agent exerts great
effort, patience, perseverance, ingenuity, tact, imagination, time and money.
Therefore, it cannot be said that the agency relationship between Valenzuela and
Philamgen is not coupled with interest. Furthermore, there is an exception to the
principle that an agency is revocable at will and that is when the agency has been
given not only for the interest of the principal but for the interest of third persons or
for the mutual interest of the principal and the agent.

80. National Sugar Trading vs. Philippine National Bank

Facts:
PHILEXCHANGE was authorized to serve as the marketing agent of
PHILSUCOM. Its purchases of sugar were financed by PNB. PHILEXCHANGE paid
its obligations to PNB by depositing the proceeds of the sale of sugar. With the fall of
sugar prices in the world market, PHILEXCHANGE defaulted in the payments of its
loans. NASUTRA replaced PHILEXCHANGE as the marketing agent of PHILSUCOM.
NASUTRA executed a promissory note to PNB every time it availed of the credit line.
PHILSUCOM failed to remit the interest payments to PNB which resulted to its
dissolution.
Issue:
Whether or not the agency may be revoked at will by any of the parties
Held:
No. The relationship between NASUTRA/SRA and PNB when the former
constituted the latter as its attorney-in-fact is not a simple agency. NASUTRA/SRA
has assigned and practically surrendered its rights in favor of PNB for a substantial
consideration. NASUTRA/SRA executed promissory notes in favor of PNB every time
it availed of the credit line. The agency established between the parties is one
coupled with interest which cannot be revoked or cancelled at will by any of the
parties.

81. Ching vs. Bantolo

Facts:
Respondents executed an SPA authorizing petitioners to obtain a loan using
respondents‟ properties as collateral. Without notice to petitioners, respondents
executed a Revocation of SPA. Respondents alleged that they executed the SPA in
favor of petitioners because of their assurance that they would be able to get a loan

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in the amount of P50 million and that P30 million would be given to respondents
within a month. Later, they were informed that the loan was approved in the
amount of P25 million and that their share would be P6 million. Since it was not the
amount agreed upon, respondents revoked the SPA.
Issue:
Whether or not the revocation was valid
Held:
Yes. There is no question that the SPA executed by respondents in favor of
petitioners is a contract of agency coupled with interest. But although the
revocation was done in bad faith, respondents did not act in a wanton, fraudulent,
reckless, oppressive or malevolent manner. They revoked the SPA because they were
not satisfied with the amount of the loan approved. Thus, petitioners are not
entitled to exemplary damages. Even an agency coupled with interest may indeed be
revoked on the ground of fraud committed by the agent, which is really an act of
rescission.

82. Coleongco vs. Claparols

Facts:
Claparols executed in favor of Coleongco an SPA to represent him and the nail
factory making him an assistant manager. Claparols was surprised by a writ of
execution to enforce a judgment obtained against him by the PNB, despite the fact
that he had submitted an amortization plan to settle the account. The execution
was procured because of derogatory information against Coleongco. Claparols
revoked the power of attorney and demanded from Coleongco a full accounting.
Coleongco contended that the power of attorney was made to protect his interest
under the financing agreement and was one coupled with an interest.
Issue:
Whether or not the power of attorney coupled with an interest can be revoked
Held:
Yes. It must not be forgotten that a power of attorney although coupled with
interest 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. 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.

83. Rallos vs. Yangco

Facts:
Yangco conferred upon Collantes an SPA. He invited Rallos to do a
considerable business with him through Collantes. Rallos sent to Collantes 218
bundles of tobacco to be sold on commission. The charges for that sale were
P206.96. He did not return to Rallos the sum of P1,537.08. It appeared that prior to
sending such tobacco, Yangco had already severed his relations with Collantes.
Issue:
Whether or not the revocation of power of attorney is valid against clients
whom the agent was specified to deal with
Held:
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Where principal had expressly revoked the agent‟s power to handle the
business, but such revocation was not conveyed to a long-standing client to whom
the agent had been specifically endorsed in the past by the principal, the revocation
was not deemed effective as to such client and the contracts entered into by the
agent in the name of the principal after the revocation would still be valid and
binding against the principal.

84. Lustan vs. Court of Appeals

Facts:
Lustan leased a parcel of land to Parangan. Lustan executed a SPA in favor of
Parangan to secure an agricultural loan from PNB with the lot as collateral. A
second SPA was executed by Lustan by virtue of which Parangan was able to secure
4 additional loans. Another three loans were obtained but it was without the
knowledge of Lustan and all the proceeds therefrom were used by Parangan for his
own benefit. For fear that her property might be prejudiced by the continued
borrowing of Parangan, Lustan demanded the return of her certificate of title.
Lustan filed an action for cancellation of liens, quieting of title, recovery of
possession and damages against Parangan and PNB.
Issue:
Whether or not the revocation of agent‟s general powers effective against the
mortgagee bank
Held:
When the principal owner of land executes an SPA giving her agent the power
to mortgage the same, even when there has been a revocation thereof, but the same
has not been made known to third parties, then those who receive a mortgage on
the properties in good faith will be protected in their contract. Under Article 1921 of
the Civil Code, if an agency has been entrusted for the purpose of contracting with
specified persons, its revocation shall not prejudice the latter if they were not given
notice thereof.

85. Perez vs. Philippine National Bank

Facts:
Perez, agent of Vicente, mortgaged a lot owned by the latter to PNB. It was
made to secure payment of a loan plus interests. Vicente died intestate, survived by
his widow and children and leaving behind the outstanding balance. The bank
foreclosed the mortgaged properties without notice to the widow and heirs. A case
filed against PNB seeking to annul the extrajudicial foreclosure sale and the transfer
of the Certificate of Title on the ground that the bank had acted illegally and in bad
faith.
Issue:
Whether or not the extra-judicial foreclosure by PNB under its power of sale is
extinguished by the death of Perez
Held:
No. The power to foreclose is not an ordinary agency that contemplates
exclusively the representation of the principal by the agent but is primarily an
authority conferred upon the mortgagee for the latter‟s own protection. It is an
ancillary stipulation supported by the same cause or consideration for the mortgage
and forms an essential and inseparable part of that bilateral agreement.

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86. Terrado vs. Court of Appeals

Held:
The contract of agency establishes a purely personal relationship between the
principal and the agent, such that the agency is extinguished by the death of the
agent, and his rights and obligations arising from the contract of agency are not
transmittable to his heirs. However, when the agent dies, the agent‟s heir(s) must: i)
Notify Principal; and ii) Adopt Measures as Circumstances Demand in the
Principal‟s Interest.

TRUST

01. Morales v. Court of Appeals

Facts:
The subject land and two-storey building were acquired by Celso with the
money entrusted by his father to buy it. The property is in the name of Celso.
Rodolfo, son of his sister Precilla, built a beauty shop on the property. Celso sold the
property to spouses Ortiz. Despite due notice, Rodolfo refused to vacate unless he is
reimbursed.
The spouses filed a case to recover the property from Rodolfo. Precilla
contended that the sale was fraudulent since it included her share in the property.
Issue:
Whether or not Celso owns the land and two-storey building
Held:
Yes. Article 1448 provides that there is an implied trust when property is sold,
and the legal estate is granted to one party but the price is paid by another. The
former is the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child of the one paying the price of the sale, no trust
is implied by law, it being disputably presumed that there is a gift in favor of the
child.

02. Oco v. Limbaring

Facts:
Sabas sold his two lots to his nieces Sarah Jane and Jennifer. Percita, the
daughter of Sabas, filed a case of perjury and falsification of documents against
Victor who is the father of the vendees and who paid the purchase price. The parties
agreed that the lots should be reconveyed to Percita who would pay Victor all the
expenses incurred in the transfer.
Later, Victor filed a complaint for the rescission of the sales contract against
Percita and her husband with recovery of the lots. The spouses moved for the
dismissal on the ground that Victor is not a real-party in interest. Victor countered
that her daughters hold the properties in trust for him because he had paid for
them.
Issue:
Whether Victor is a real-party in interest in the complaint
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Held:
No. A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Under
Article 1448, if the person to whom the title is conveyed is a child of the one paying
the price of the sale, no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child.
Victor‟s act of paying the price and naming his children as owners raised the
presumption that a gift was effected in their favor.

03. Pealber v. Ramos

Facts:
Lina allowed the spouses Quirino and Leticia to manage the hardware store
she owns. The lot upon which the building stood is owned by Mendoza. When
Mendoza put up the property for sale, Lina entered into a verbal agreement with the
spouses to purchase the lot with the accumulated earnings of the store. The lot was
bought by the spouses on behalf of Lina, and the title was issued in their names.
The spouses failed to account for the difference in the inventory of the stocks in the
hardware store.
Lina asserted that the land was fully paid out of the funds of the store. The
spouses argued that since an express trust was created between them involving a
real property, it could not be proven by parol evidence.
Issues:
(1) Whether or not there is an express trust between Lina and the spouses
(2) Whether or not the express trust was proved
Held:
(1) Yes. Article 1443 provides that when an express trust concerns an
immovable property or any interest therein, the same may not be proved by parol or
oral evidence. It is merely for purposes of proof and not for the validity of the trust
agreement.
Although the difference in the inventory is not conclusive proof that the
amount was used to pay the purchase price of the property, the spouses failed to
timely object when the Lina tried to prove by parol evidence the existence of an
express trust over the immovable.
(2) No. The fact that the spouses never denied the difference or that they
failed to present proof that they used the said amount to pay the other obligations of
Lina, is not sufficient to discharge Lina‟s burden to prove the alleged express trust
agreement.

04. Torbela v. Spouses Rosario

Facts:
Torbela siblings inherited the subject lot from their parents. They executed a
Deed of Absolute Quitclaim over it in favor of Dr. Rosario and a TCT was issued in
the name of the latter. The purpose of the transfer was only to allow Dr. Rosario to
use the lot to secure a loan from DBP, thus, he obtained the loan and its proceeds
would be used for building a hospital on lot. Later, Dr. Rosario executed a Deed of
Absolute Quitclaim acknowledging that he only borrowed the lot from Torbela
siblings.

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Meanwhile, he acquired 2nd and 3rd loans from PNB and Banco Filipino
secured by the same lot. Torbela siblings filed an action for the recovery of the
property. Upon his failure to pay the 3rd loan, the lot was foreclosed and Banco
Filipino acquired it.
Issues:
(1) Whether or not there was an express trust between Torbela siblings and
Dr. Rosario
(2) Whether or not Dr. Rosario had repudiated the express trust
(3) Whether or not Torbela siblings was already barred from recovering the
property
Held:
(1) Yes. Article 1451 provides that when a land passes by succession to any
person and he causes the legal title to be put in the name of another, a trust is
established by implication of law for the benefit of the true owner.
Although an implied trust was created when Torbela siblings executed the
quitclaim, it was later converted into an express trust when Dr. Rosario executed
his quitclaim acknowledging that he only borrowed the lot.
(2) Yes. The repudiation of the express trust occurred when Dr. Rosario
applied for the loan and mortgaged the lot without Torbela‟s knowledge.
(3) No. Express trusts prescribe 10 years from the repudiation of the trust.
For acquisitive prescription to bar the action of the beneficiary it must be shown
that: (a) the trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui que trust; (b) such positive acts of repudiation have been made
known to the cestui que trust, and (c) the evidence thereon is clear and conclusive.
Here, the 10-year prescriptive period started only from the time the loan and
mortgage was annotated on the Torrens title because only then can it be said that
Torbela had knowledge of the repudiation Only 5 years had elapsed.

05. Julio v. Dalandan

Facts:
Clemente promised to Victoria a farm of about four hectares to replace the
land of her mother which was foreclosed. They agreed that Clemente's children may
not be forced to give up the harvest of the farm and that Victoria may not
immediately demand the substitute for the forfeited land.
Victoria instituted an action to declare her the owner of the land and to fix the
period for its delivery. A motion to dismiss was filed on the ground of prescription,
more than 10 years having elapsed.
Issue:
Whether or not the action has already prescribed
Held:
No. Under Article 1444, no particular words are needed for the creation of an
express trust. In view of the creation of the express trust, it is clear that no period of
prescription is involved, the recovery being imprescriptible.

06. Cañezo vs. Rojas

Facts:

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Soledad entrusted her land to her father, Crispulo in 1948. Crispulo died
later. In 1980, she discovered that her stepmother, Concepcion, took possession of
the land and that the tax declaration was already transferred in Crispulo‟s name.
Soledad alleged that the transfer was without her consent.
She sought for the reconveyance of the property based on trust. Conception
asserted that the complaint is already barred by prescription. Soledad insisted that
her right of action cannot be barred because there existed between her and her
father an express trust or a resulting trust.
Issues:
(1) Whether or not an express trust was constituted between Soledad and
Crispulo, making the action imprescriptible
(2) Whether or not there was a constructive trust between Soledad and
Conception
Held:
(1) No. Although no particular words are required for the creation of an
express trust, a clear intention to create a trust must be shown, and the proof of
fiduciary relationship must be clear and convincing.
Had it been her intention to create a trust and make Crispulo her trustee, she
would not have questioned the tax declaration because in a trust agreement, the
trustee would necessarily have the right to transfer the tax declaration in his name.
(2) Yes. Where one mistakenly retains property which rightfully belongs to
another, a constructive trust is the proper remedial devise to correct the situation.
After Crispulo‟s death, Conception 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.
Additional Note:
A trust terminates upon the death of the trustee where the trust is personal to
the trustee. If Crispulo was indeed appointed as such, it cannot be said that such
appointment was intended to be conveyed to Conception or any of her heirs.

07. PNB v. Aznar

Facts:
The stockholders contributed in the purchase of the three parcels of land to
rehabilitate RISCO. Titles were issued in the name of RISCO. The amount
contributed served as liens and encumbrances on the properties. The annotations
were made pursuant to the Minutes of the Board meetings. Various subsequent
annotations were made, including the Notice of Attachment and Writ of Execution in
favor of PNB for which the stockholders sought to quiet their supposed title and for
reconveyance.
The lower court ruled that there was an express trust created over the
properties whereby RISCO is the trustee and the stockholders are the beneficiaries.
The CA ruled that the monetary contributions by the stockholders to RISCO are
only loan secured by a lien on the lots rather than an express trust.
Issue:
Whether or not there was a trust agreement between RISCO and the
stockholders
Held:

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No. Express trusts are created not necessarily by some written words, but by
the direct and positive acts of the parties. The creation of an express trust must be
manifested with reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other interpretations.
What the stockholders had was merely a right to be repaid the amount of the
loan to RISCO. However, the right to reimbursement is already barred by
prescription, because it was based on the minutes by the Board of Directors in 1961
and the suit was brought only in 1998.

08. Heirs of Tranquilino Labiste v. Heirs of Jose Labiste

Facts:
Emilio and other heirs of Jose purchased a parcel of land. The money used
belonged to Emilio and Tranquilino. Emilio executed an affidavit affirming that he
and other heirs of Jose, and Tranquilino co-owned the lot. When World War II broke
out, Tranquilino‟s heirs fled the city. When they came back years after the war, they
found their houses destroyed and the records in the government offices burned.
They learned that one of the heirs of Jose filed a petition for reconstitution of title
over the lot.
The heirs of Tranquilino filed a complaint for annulment of title and
reconveyance of property. Jose‟s heirs contended that the action had long
prescribed or barred by laches.
Issues:
(1) Whether or not an express trust was constituted
(2) Whether or not a property subject of an express trust may prescribe or be
barred by laches
Held:
(1) Yes. The affidavit of Emilio is in the nature of a trust agreement. Emilio
affirmed that the lot bought in his name was co-owned by him, as one of the heirs of
Jose, and Tranquilino. By agreement, each of them has been in possession of half of
the property.
(2) Yes. For acquisitive prescription to bar the action of the beneficiary against
the trustee in an express trust, it must be shown that: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b)
such positive acts of repudiation have been made known to the cestui que trust;
and (c) the evidence thereon is clear and conclusive.
The only act that can be construed as repudiation was the petition for
reconstitution in 1993. Since the complaint was filed in 1995, their cause of action
has not yet prescribed.

09. Pacheco vs. Arro

Facts:
In a cadastral proceeding, Arro claimed the subject lots as his own. However,
Yulo declared that he would convey the lots Arro. Relying on this promise, Arro
withdrew his claim but the cadastral court confirmed the title in Yulo‟s name. The
CA reversed the decision.
Pacheco, the guardian of the Heirs of Yulo, argued that a trustee does not
have a title to the property which is the subject of the trust. It is vested in the cestui
que trust. Hence, the trustee or his successors-in-interest cannot be compelled in
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an action for specific performance to convey the property because the party to be
compelled is the one who has the title to the property.
Issue:
Whether or not there was an express trust between Yulo and Arro
Held:
Yes. The juridical concept of a trust which involves, arises from, or is the
result of, a fiduciary relation between the trustee and the cestui que trust as
regards certain property must not be confused with an action for specific
performance.
When Arro withdrew his claim on the land relying upon Yulo‟s promise, a
trust or fiduciary relationship was created. Hence, Pacheco‟s argument cannot be
sustained because it would prevent Arro from claiming his rightful share on the
land.

10. Rizal Surety & Insurance Co. v. Court of Appeals

Facts:
REPACOM and TRANSOCEAN obtained an insurance policy for M/V
TRANSOCEAN vessel with Rizal Surety & Insurance. The vessel was lost.
REPACOM requested Rizal to pay the insurance proceeds in their joint names.
Pursuant to a letter by Rizal, the Central Bank authorized it to receive and deposit
the dollar proceeds in a non-interest bearing account in the name of Rizal and for
the joint account of the insured. The insured entered into a compromise whereby
each would receive its initial share from the proceeds which is not disputed by the
other party. The Central Bank authorized them to transfer the balance of the
proceeds into an interest-bearing special dollar account with any local commercial
bank.
They requested Rizal to remit the amount to the PNB. Rizal argued that there
it has no obligation to do so because there is no trust relationship between them.
Issue:
Whether or not an express trust existed between the insured and Rizal
Surety, the latter being the trustee for the dollar balance
Held:
Yes. Express trusts are created by direct and positive acts of the parties, by
some writing or deed, or will, or by words either expressly or impliedly evincing an
intention to create a trust.
Rizal held on to the dollar balance of the insurance proceeds because: (1)
REPACOM requested it to do so as they had not yet agreed on the amount of their
respective claims, and the Final Compromise Agreement was yet to be executed; and
(2) they had not yet signed the Loss and Subrogation Receipt in favor of Rizal. No
manifest objection was made, but it instead proceeded to accept its role as such
trustee by implementing the compromise agreement.

11. Goyanko v. UCPB

Facts:
Goyanko Sr. invested P2M with PALII. After his death, his heirs filed a claim
over his estate. PALII deposited the proceeds with UCPB in trust for the heirs.
Thereafter, UCPB allowed PALII to withdraw P1.5M under that account. When the
heirs were about to claim the proceeds, UCPB refused to restore the amount.
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The heirs argued that PALII is the trustor as it created the trust; UCPB is the
trustee as it is the party in whom confidence is reposed as regards the property for
their benefit; and they are the beneficiaries as they are the persons for whose
benefit the trust is created. UCPB countered that the account only involves a
deposit contract between PALII and UCPB, which created a debtor-creditor
relationship obligating UCPB to return the proceeds to PALII.
Issue:
Whether or not there was a trust agreement
Held:
No. There must be some power of administration other than a mere duty to
perform a contract although the contract is for a third-party beneficiary. A
declaration of terms is essential, and these must be stated with reasonable certainty
in order that the trustee may administer.
UCPB was never under any equitable duty or given any power of
administration over P2M. On the contrary, it was PALII which undertook the duty to
hold the title on the account for the benefit of the heirs.

12. Gamboa v. Gamboa

Facts:
Spouses Juan and Ana sold all the subject properties to Javier with right of
redemption for two years. Juan and his family continued in possession as tenants of
the property until his death. Javier then sold the properties to their daughters
Feliciana and Modesta. The property had been in continuous possession of the
sisters for more than 10 years.
Their co-heirs argued that the purchase of the land was only a repurchase on
behalf of their ancestors and in effect they are co-owners of the property.
Issue:
Whether or not the purchase of the land by the Gamboa sisters was only in
trust
Held:
No. A person who has held legal title to land, coupled with possession and
beneficial use of the property for more than 10 years, will not be declared to have
been holding such title as trustee for himself and his brothers and sisters upon
doubtful oral proof tending to show a recognition by such owner of the alleged rights
of his brother and sisters.

13. Ty vs. Ty
Facts:
Alexander, husband of Sylvia, dies of cancer. Sylvia filed a petition for the
settlement of Alexander‟s intestate estate including a parcel of land in EDSA
Greenhills, a residential land, and a condominium unit. Alejandro, father of
Alexander, claimed that he owns the properties because he paid for them. In this
case, the property was supposedly held in trust for Alexander‟s siblings in case
Alejandro dies.
Issue:
Whether or not Alexander held the subject properties in trust for his father
Alejandro

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Held:
No. Article 1448 provides an exception that if the person to whom the title is
conveyed is a child, whether legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably presumed that there is a gift
in favor of the child.
Alejandro failed to prove that he did not intend a donation. Moreover, an
express trust over real property cannot be constituted when nothing in writing was
presented to prove it, but it may be proved as an implied trust.

14. Tan Senguan & Co. v. Phil. Trust Co.

Facts:
Phil. Trust was the trustee of Mindoro Sugar. Tan Senguan secured a
monetary judgment against Mindoro Sugar. Tan entered into an agreement with
Phil. Trust assigning the judgment from Mindoro Sugar to the latter for a
consideration that if ever Mindoro Sugar is sold, Phil. Trust would pay Tan a sum
certain in money.
Later, Mindoro Sugar and all its properties were sold at public auction. Tan
demanded payment in accordance with the agreement with Phil. Trust but the latter
refused.
Issue:
Whether or not Phil. Trust is individually liable to Tan Senguan
Held:
Yes. When a trustee enters into a contract that gives rise to liability, but there
is no clear indication that he enters into the contract as trustee, then the trustee
would be held individually liable on the liability arising from the contract.
While the Deed of Trust between Mindoro Sugar and Phil. Trust referred to
Phil. Trust as trustee, nowhere in the deed was any authority given to Phil. Trust to
enter into a contract with Tan Senguan.

15. Government v. Abadilla

Facts:
Luis Palad owned a parcel of land. He executed a will and later died leaving
only his widow Dorotea and collateral heirs. The will provided that when Dorotea
dies or remarries, the land would be donated to the Secondary College to be erected
in Tayabas and for this purpose delivered to the Ayuntamiento or the Civil Governor
of the province.
Dorotea remarried and the collateral heirs demanded that the land be
partitioned arguing that her subsequent marriage terminated her right to the land.
The Municipality intervened and the parties agreed that the Municipality would
inherit a part of the land while the remainder to Dorotea. The heirs argued that
there is no ayuntamiento, Gobernador Civil of the province, and a secondary school
in Tayabas.
Issue:
Whether or not there was a trust created in the will
Held:
Yes. In private trust, it is not always necessary that the beneficiary be named,
or exist at the time the trust is created in his favor. Moreover, testamentary
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dispositions must be liberally construed so as to give effect to the intention of the

testator as revealed by the will itself.
Even if the purported school has not been created yet, the same is not fatal to
the trust because a beneficiary does not need to actually exist at the time the trust
is created. Moreover, the Provincial Governor can be considered as the equivalent of
the Civil Governor being the legal successor of the latter.

16. Cristobal v. Gomez

Facts:
Epifanio sold his land but later, he wanted to redeem it but he did not have
money, so he approached Bibiano for a loan but the latter refused unless Epifanio‟s
siblings would act as guarantors. Epifanio‟s siblings, Marcelino and Telesfora,
agreed on the condition that the title on the land should be placed in their names.
The loan was granted and Epifanio redeemed the land. Marcelino and Telesfora
agreed to return the land to Epifanio once the capital has been covered. Telesfora
decided to convey her share to Marcelino on the condition that Marcelino would
assume her obligation under the loan to Bibiano. Thereafter, Marcelino paid the
loan and the land was now free from encumbrances.
Later, Paulina, Epifanio‟s heir, filed a suit to recover the land. Marcelino
argued that the action has prescribed because more than 10 years had already
elapsed.
Issues:
(1) Whether or not Paulina may recover the land
(2) Whether or not Marcelino had acquired the property through prescription
Held:
(1) Yes. A person who agrees with the vendor to buy the property and
administer it until all debts constituting an encumbrance thereon shall be paid,
after which the property shall be returned to the original owner, is bound by such
agreement, and upon buying the property the buyer in effect becomes a trustee.
(2) No. He was merely a trustee in possession under a continuing and
subsisting trust. Prescription is not effective in favor of such a holder.

17. DBP v. COA

Facts:
A Trust Indenture was entered into by DBP and the Board of Trustees of
Gratuity Plan Fund, vesting the administration of the retirement fund in the board.
Under the Special Loan Program established by DBP, a prospective retiree has the
option to utilize as a loan a portion of his outstanding equity in the Gratuity Fund
and to invest the same.
COA alleged that DBP is the actual owner of the Fund as its income and its
trustees are merely administrators. DBP countered that it transferred the legal title
over the Fund to the trustees, thus, such income should not be recorded in DBP‟s
books of account.
Issues:
(1) Whether or not there is an express trust between DBP, Board of Trustees
and the employees
(2) Whether or not the prospective retirees are sufficient beneficiaries

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Held:
(1) Yes. In a trust, one person has an equitable ownership in the property
while another person owns 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.
DBP, as the trustor, vested in the trustees of the Fund legal title over it as
well as control over the investment of the money and assets of the Fund.
(2) Yes. It is not always necessary that the cestui que trust should be named,
or even be in esse at the time the trust is created in his favor. It is enough that the
beneficiaries are sufficiently certain or identifiable.

18. Ramos v. Ramos

Facts:
Martin died and was survived by Emiliano and his other co-heirs. Jose was
appointed as the administrator of Hacienda Calaza. When the cadastral court
ordered the survey of the property, Emiliano did not file a claim but instead relied
on Jose‟s promise to have the titles issued in their names.
Later, Jose and his wife claimed Hacienda Calaza to the exclusion of Emiliano
and the other heirs. When Jose died, his wife leased the lots to Yulo who in turn
transferred his rights to 3rd persons. After 40 years, Emiliano sought to recover
Hacienda Calaza claiming that their shares were merely held in trust by the
defendants.
Issue:
Whether or not Emiliano and his co-heirs may still recover their share
Held:
No. Acquisitive prescription may bar the action of the beneficiary against the
trustee in an express trust where (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 conclusive.
The transactions prove that Jose had repudiated any trust which was
constituted over Hacienda Calaza in favor of the Emiliano and others. Therefore, the
statute of limitations applies to this case and such action is now barred.

19. Diaz v. Gorricho and Aguado

Facts:
Spouses Francisco and Maria owned lots 1 and 2. Francisco died and was
survived by Maria and their child Diaz. Gorricho filed a writ of attachment against
Maria‟s shares both lots. Both properties were sold at public auction with Gorricho
as the winning bidder. The sheriff executed a Final Deed of Sale in Gorricho‟s name.
However, the sheriff mistakenly conveyed the entire lots, instead of just
Maria‟s 1/2 interest. Gorricho obtained TCTs for both lots. After 15 years, Diaz filed
an action for reconveyance of their ½ interest in the property.
Issue:
Whether or not Diaz may still recover the property assuming a constructive
trust exists
Held:
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No. Diaz is now barred from recovering both lots because his action has
already prescribed. Constructive trust is subject to both prescription & laches.
In constructive trust, there is no fiduciary relationship. The trustee neither
recognizes any trust nor intends to hold the res for the beneficiary. The trustee‟s
possession is already adverse.

20. Vda. de Ouano v. Republic of the Philippines

Facts:
The Mactan Cebu International Airport Authority pursued a program to
expand the Cebu Lahug Airport. It negotiated with the owners of the properties
situated around the airport. The owners were assured that they could redeem their
properties if the expansion project did not push through. Later, Lahug Airport
ceased its operations and the project was abandoned.
The landowners sought to reacquire their properties. Mactan argued that their
claim is now barred under the Statute of Frauds because a contract for the sale or
acquisition of real property shall be unenforceable unless the contract be in writing
and subscribed by the party charged.
Issues:
(1) Whether or not the owners may redeem their properties from Mactan
Airport
(2) Whether the Statute of Frauds applies
Held:
(1) Yes. Constructive trusts are fictions of equity that courts use as a device to
remedy any situation where the holder of legal title may not, in good conscience,
retain the beneficial interest.
In this case, the landowners sold their properties to the Airport with the latter
obliging itself to use the properties for the expansion of the Lahug Airport. However,
it failed to fulfill its purpose and therefore the landowners may compel the Airport to
sell back the properties.
(2) No. Mactan‟s invocation of the Statute of Frauds is misplaced primarily
because the statute applies only to executory and not to completed, executed, or
partially consummated contracts.

21. Lopez v. Court of Appeals

Facts:
Juliana executed a will creating a trust fund over her paraphernal properties
with Jose as administrator. Once Jose dies, Lopez would become the administrator.
In a project of partition, Jose made it appear that some of Juliana‟s properties were
registered in both their names in 1969. The probate court approved the partition
and the certificates of titles issued in Jose's name.
In 1984, after Jose died, Lopez filed a suit in his capacity as trustee to recover
Juliana‟s paraphernal properties included in Jose‟s estate. He claimed that they
were included by mistake.
Issues:
(1) Whether or not there is an express trust
(2) Whether or not there is an implied trust

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(3) Assuming there is an implied trust, whether or not Lopez‟s action to has
prescribed
Held:
(1) No. The disputed properties were expressly excluded from the trust. These
were adjudicated to Jose as his exclusive share which bore the probate court‟s
approval.
(2) Yes. Article 1456 provides that if a 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.
The registration of the properties in the name of Jose is erroneous, thus,
Jose's possession would be that of a trustee in an implied trust.
(3) Yes. A constructive trust is subject to extinctive prescription that is 10
years. In this case, the prescriptive period began in 1969 when the disputed
properties were registered in Jose‟s name. At that point, there was already a
constructive notice of the mistake to Lopez.

22. Salao v. Salao

Facts:
Ambrosia and Juan purchased the Calunuran fishpond in 1917 and later
registered the same. After Ambrosia‟s death, the heirs of Valentin or the nephews of
the two co-owners, sued for reconveyance of the fishpond in 1952. They claimed
that the fishpond had been held in trust for their father by the co-owners. All that
they presented was an oral testimony to the effect that in the partition of Valentin‟s
estate, said fishpond had been assigned to them.
Issues:
(1) Whether or not trust was established
(2) Assuming there was an implied trust, whether or not the action for
reconveyance had prescribed
Held:
(1) No. Oral or parol evidence cannot prove an express trust. There was no
resulting implied trust for there was never any intention to create a trust and there
was no constructive trust, because the registration of the fishpond under the
Torrens system was not initiated by fraud or mistake.
(2) Yes. The action is already barred by prescription or laches because it was
filed only in 1952 or 41 years after the registration. The plaintiffs and their
predecessor in interest had slept on their rights if they had any right at all.

23. Municipality of Victorias v. CA

Facts:
Gonzalo owned the subject land. He died and was survived by his widow,
Simeona and daughter, Isabel. Later, Isabel likewise died leaving her child, Norma.
When Simeona died, Norma inherited the whole land and registered the same.
However, prior to the inheritance, the municipality bought a portion of the land
from Simeona but it failed to register the sale. Norma donated a portion of the land
to the municipality to be used for a certain high school. Later, she discovered that
the portion purchased from Simeona was being used by the Municipality as a
cemetery. She then demanded from the Municipality payment for past rentals and
delivery of the portion she alleged to have been illegally occupied.
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Issue:
Whether or not an implied trust was created between Norma and the
Municipality
Held:
Yes. When a land is decreed in a person‟s name through fraud or mistake,
such person is by operation of law considered a trustee of an implied trust for the
benefit of the true owner. The beneficiary has the right to enforce the trust and
recover the res even if the trustee has a Torrens title in his name.
Norma admitted that she inherited the land from Simeona who already sold
the disputed portion to the Municipality beforehand. Consequently, Norma had no
legal right to register the disputed portion in her name because she never owned it.

24. PNB v. Court of Appeals

Facts:
Mata is a private corporation engaged in providing goods and services to
shipping companies. Mata would advance StarKrist‟s shipping expenses and
StarKrist would reimburse Mata through PNB. PNB paid $14,000 to Mata by
crediting Mata‟s account. However, PNB noticed an error and found out that the
amount should only be $1,400 and not $14,000. Almost seven years later, it filed a
case for collection against Mata based on a constructive trust that it has a right to
recover the amount it erroneously credited.
Issue:
Whether or not PNB may still claim the $14,000 under a constructive trust
Held:
No. An 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 an unreasonable
delay.
It is unbelievable for a government bank which publishes its balanced
financial statements annually or more frequently, by the quarter, to notice its error
only seven years later.

25. Sime Darby Pilipinas, Inc. vs. Mendoza

Facts:
Sime Darby bought a share in Alabang country club but it was placed under
Mendoza‟s name in trust for Sime Darby. When Mendoza retired, Sime Darby
wanted to sell the share but it was required to secure an authorization from
Mendoza since the share was still registered in Mendoza‟s name. Mendoza refused
to sign unless Sime Darby pays him P300,000. The sale did not push through and
Sime Darby was forced to return the payment to the prospective buyer.
Issue:
Whether or not Sime Darby is the owner of the share
Held:
Yes. Trust arises in favor of one who pays the purchase price of a property in
the name of another, because of the presumption that he who pays for a thing
intends a beneficial interest for himself.

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While Sime Darby paid for the purchase price of the club share, Mendoza was
given the legal title. Thus, a resulting trust is presumed as a matter of law.

26. Paringit v. Bajit

Facts:
Julian and Aurelia have five children, including Felipe and Marciana. The
couple leased the subject lot from Terocel Realty and lived there. After Aurelia died,
Terocel offered the lot to Julian. Since Julian did not have enough money, he and
Felipe agreed that the latter would purchase the lot. Felipe registered the lot but it
was Marciana who lived in the property.
Later, Felipe succeeded in ejecting Marciana. Marciana insisted that the
agreement was that Felipe and his wife would acquire the lot for the benefit of all
the siblings.
Issue:
Whether or not Felipe purchased subject lot under an implied trust for the
benefit of his siblings and Julian
Held:
Yes. Under Article 1450, if the price of a sale of property is loaned or paid by
one person for the benefit of another and the conveyance is made to the lender or
payor to secure the payment of the debt, a trust arises by operation of law in favor
of the person to whom the money is loaned or for whom it is paid. However, it is
only after the beneficiary has reimbursed the trustee of the purchase price that the
former can compel conveyance of the property from the latter.
Julian said in his affidavit that Felipe and his wife bought the lot from Terocel
Realty on his behalf and on behalf of his other children. Julian added that his other
children were to reimburse Felipe for the money he advanced.

27. Heirs of Emilio Candelaria vs. Romero

Facts:
Lucas bought the subject lot on installment. He paid the 1st two but was
unable to pay the subsequent installments. Lucas sold his interest to his brother,
Emilio who reimbursed him the amount and continued paying the installments.
However, payments were still made in Lucas‟ name with the understanding that the
documents would be transferred later. A TCT was issued in Lucas‟ name and he
acknowledged that he holds the subject lot in trust for Emilio. The Heirs of Emilio
demanded the reconveyance of the property from Romero, Lucas‟ heir.
Issue:
Whether or not an implied trust existed between the Heirs of Emilio and
Romero
Held:
Yes. Under Article 1453, when property is conveyed to a person in reliance
upon his declared intention to hold it for, or transfer it to another or the grantor,
there is an implied trust in favor of the person whose benefit is contemplated.
There was an understanding between Emilio and Lucas that the documents
would be later transferred. Clearly, Emilio intended to obtain a beneficial interest on
the subject lot, having paid for the same.

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28. Adaza vs. Court of Appeals

Facts:
Victor donated the subject land to his daughter Violeta. Horacio, Violeta‟s
brother asked her to sign a Deed of Waiver which stipulated that the land is co-
owned by them. Violeta filed a suit to annul the Deed on the ground of fraud and
misrepresentation in the signing. She traced her claim of ownership on the Deed of
Donation executed by their father. However, it contained a crossed-out provision
stipulating that the donee shall share 1/2 of the property with one of her siblings
after the donor‟s death. Horacio claimed that the intent of their father was to make
them co-owners although Violeta alone was to be the registered owner.
Issue:
Whether or not Horacio has any interest on the land
Held:
Yes. Under Article 1449, there is an implied trust when a donation is made to
a person but it appears that although the legal estate is transmitted to the donee,
he nevertheless is either to have no beneficial interest or only a part thereof.
Consequently, the Deed of Donation created an implied trust in Horacio‟s
favor with respect to the half of the land.

29. Sing Juco and Sing Bengco vs. Sunyantong and Llorente
Facts:
Sings obtained a written option from Maria to purchase the San Antonio
Estate. Sunyantong was Sings‟ employee. Sunyantong advised Sings to let some
days pass before accepting Maria‟s terms to give the image that Sings are not
interested. Sings ordered the examination of the estate and Sunyantong
accompanied Alipio. The estate impressed Alipio but Sunyantong told him not to
report his finding to the Sings. Later, Sunyantong called Maria and offered to buy
the estate. Maria called Sings and the latter just replied “siya ang bahala” which
Maria understood as waiver of their option to buy. Maria then sold the Estate to
Sunyantong‟s wife.
Issue:
Whether or not Sunyantong‟s violation of confidence reposed in him gave rise
to a constructive trust in favor of Sings with respect to the property
Held:
Yes. The transaction of this nature might be regarded as an "equitable trust"
by virtue of which the things acquired by an employee is deemed not to have been
acquired for his own benefit or that of any other person but for his principal, and
held in trust for the latter.

30. Iglesia Filipina Independiente vs. Heirs of Taeza

Facts:
Iglesia Filipina was the owner of a parcel of land. Supreme Bishop Ga sold two
lots to Taeza. Taeza registered the lots and transfer certificates were issued in his
name. Iglesia Filipina filed an action to annul the sale on the ground that Rev. Ga
had no authority as their Canons requires that real properties of the Church can be
disposed of only with the approval and conformity of their committee.
Issue:

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Whether or not an implied trust existed between Taeza and Iglesia Filipina
Held:
Yes. Under Article 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 belongs.
The Constitution and Canons of the Philippine Independent Church provides
that all real properties of the Church can be disposed of only with the conformity of
the laymen's committee, the parish priest, the Diocesan Bishop, with sanction of the
Supreme Council, and with the approval of the Supreme Bishop, as administrator of
all the temporalities of the Church.
Since Supreme Bishop Ga was not authorized to do so, the property had been
acquired by mistake.

31. Chu, Jr. vs. Caparas

Facts:
The subject land was originally owned by Reyes. Reyes sold the eastern
portion to Caparas while the western portion was retained by her. The petitioners,
successors-in-interest of Reyes, asserted that under the survey plan initiated by
Caparas, the lot supposedly retained by Reyes was erroneously transferred to the
eastern portion owned by Caparas. The petitioners also alleged that Caparas sold to
the spouses Perez the consolidated parcels of land. They demanded the
reconveyance of the subject property from Caparas and the spouses but they
refused.
Issue:
Whether or not an implied trust was established
Held:
No. To warrant reconveyance of the land, the plaintiff must prove his
ownership over the land and the defendant‟s erroneous or fraudulent registration of
the property.
What the petitioners purchased from Reyes referred to another parcel
designated as Lot 3, while the subject property was designated as Lot 1 of Caparas‟
survey plan. Moreover, one of them admitted that what they purchased was
different from the subject property.

32. Pasio v. Monterroyo

Facts:
Pasino applied for and was granted a homestead patent over the subject land,
but he died before it was issued in his name. The land remained unregistered. Later,
a cadastral survey revealed that a small creek divided the land into two portions.
Jose, one of the heirs, filed a Free Patent application for the other portion in his
children‟s favor. It was granted and the children, including Pasio, received their
OCTs. After some time, Monterroyo took possession of such portion alleging his
predecessors-in-interest bought the land from the previous owners.
Issue:
Whether or not Monterroyo may compel Pasio to reconvey the land despite the
fact that Pasio already has a Torrens title registered in his name
Held:

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Yes. In an action for reconveyance, the decree of registration is respected as

incontrovertible but what is sought instead is the transfer of the property
erroneously registered in another‟s name to its rightful owner. The real owner is
entitled to file an action for reconveyance of the property.

33. Gayondato v. Treasurer

Facts:
Domingo owned the subject land that he inherited from his mother. He and
Adela had a child named Rosario. When Domingo died, Adela‟s father Gabino took
charge of the land. When Adela remarried, Cuachon being the new husband, Gabino
turned over the land to them. The land became subject of a cadastral case. During
the hearing, Cuachon, on behalf of his wife and stepdaughter, claimed the land as
property of Adela and Rosario. However, the CFI erroneously decreed the
registration in Adela‟s name alone. Later, Adela mortgaged the land to the National
Bank and was sold to Rodriguez.
Rosario then filed suit to recover the land but the CFI ordered Adela and
Cuachon to indemnify Rosario and absolved the Insular Treasurer and Rodriguez.
Issue:
Whether or not the Insular Treasurer is also liable
Held:
Yes. The Land Registration Act provides that the liability of the land
registration assurance fund is not confined to cases where the erroneous
registration is due to omission, mistake or malfeasance on the part of the employees
of the registration court, but extends to all cases in which a person is wrongfully
deprived of any kind or any interest therein, without negligence on his part, through
the bringing of the land under provisions of said Act.

34. Escobar v. Locsin

Facts:
In a cadastral proceeding, Escobar alleged that he is the owner of the subject
land but he was illiterate so she authorized Sumangil to claim the lot for her.
However, Sumangil committed a breach of trust by registering the property in his
favor. Sumangil died leaving the land to Juana. Later, Juana died and Locsin now
administers her estate.
The CFI found the existence of trust between Escobar and Juana but still
dismissed the case on the ground that the 1-year period to review the decree had
elapsed.
Issue:
Whether or not the trust may still be enforced despite the lapse of one year
from the time the decree was entered
Held:
Yes. The complaint did not seek the review of the decree or the reopening of
the cadastral case, but the enforcement of a trust. Juana‟s estate, as the trustee‟s
successor-in-interest, is in equity, bound to execute a deed of conveyance over the
land to Escobar, the beneficiary.
The Courts have shielded fiduciary relations against every manner of
chicanery or detestable design cloaked by legal technicalities. The Torrens system
was never calculated to foment betrayal in the performance of a trust.
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35. Cavile v. Litania-Hong

Facts:
Castor and Susana executed a Confirmation of Extrajudicial partition where
Castor confirmed that the properties are Susana‟s lawful shares in the estate of
their deceased parents. In 1962, Perfecta, Castor‟s daughter, was granted a Free
Patent and an OCT over the subject properties was issued in her name. In 1974,
Litania filed an action for reconveyance of the lots alleging she inherited the same
from her mother, Susana. Litania alleged that after Susana died, Castor and
Perfecta possessed the lands and excluded Litania from them.
Issue:
Whether or not the action for reconveyance by Litania has prescribed
Held:
Yes. When the action for reconveyance is one to enforce an implied or
constructive trust, it prescribes 10 years from the date the Torrens title was issued,
provided the property has not passed in the hands of a purchaser in good faith.
In this case, Litania brought the action 12 years after the Torrens title was
already issued in Perfecta‟s name. Therefore, the remedy is already time-barred.

36. Estrella Tiongco Yared vs. Jose Tiongco

Facts:
The petitioner and the respondent were one of the surviving heirs of Tiongco
who were co-owners of the subject properties. They were both in possession of the
lots. The respondent executed an Affidavit of Adjudication declaring that he is the
only heir and later acquired new TCTs over the lots in his name.
Petitioner filed an action for reconvenyance of the properties on the ground of
fraud. The respondent averred that he had been paying taxes on the properties for
more than 10 years. RTC ruled that prescription has set in since the complaint was
filed only 16 years after the respondent‟s registration.
Issue:
Whether or not the action for reconveyance has already prescribed
Held:
No. An action for reconveyance despite the lapse of more than 10 years from
the issuance of title, when based on fraud, is imprescriptible as long as the land has
not passed to an innocent purchaser for value. The registrant is deemed never in
possession of the property.
Moreover, prescription does not run against the plaintiff in actual possession
of the disputed land because such plaintiff has a right to wait until his possession is
disturbed. The action would be one for quieting of title.

37. PNB v. Jumamoy

Facts:
In an earlier case, the RTC excluded the 2.5 hectares from the coverage of an
OCT registered in the name of Pace. The lot was owned by the predecessor of
Jumamoy. Hence, it was reconveyed in his favor. However, the decision could not be
annotated on the OCT of Pace because it had already been cancelled by reason of an

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unpaid mortgage executed by Pace with PNB, and that a new TCT had already been
issued in its favor. Jumamoy filed a case for Reconveyance against PNB.
Jumamoy argued that Pace could not validly mortgage the entire Lot to PNB
as the 2.5 hectares thereof belongs to him. Jumamoy claimed that PNB is not an
innocent mortgagee for value since it had been notified that the lot was subject to
litigation. The RTC and CA ruled in his favor. PNB now contended that it is an
innocent mortgagee for value and that Jumamoy‟s action had already prescribed.
Issues:
(1) Whether or not the action for reconveyance had already prescribed
(2) Whether or not PNB is a mortgagee in good faith
Held:
(1) No. An action for reconveyance based on implied trust prescribes in 10
years as it is an obligation created by law, to be counted from the date of issuance of
the Torrens title over the property. This rule, however, applies only when the person
enforcing the trust is not in possession of the property.
Jumamoy is in actual possession of the property he claims and that he has a
better right to the disputed portion. His suit for reconveyance is in effect an action
for quieting of title.
(2) No. A banking institution is expected to exercise due diligence before
entering into a mortgage contract. The ascertainment of the status or condition of a
property offered to it must be a standard and indispensable part of its operations.
There was no showing that PNB conducted an investigation; that it observed
due diligence by checking for flaws in the title; verified the identity of the true
owner; and visited the premises to determine its actual condition before accepting
the same as collateral.

PARTNERSHIP

01. Lyons vs. Rosenstock

Facts:
Elser is engaged in the buying, selling and administering of real estate. Lyons
joined him and the profits were shared equally between them. Lyons co-owned with
Elser properties A, B and C each with 1/2 share. During Lyons‟ absence, he
executed a general power of attorney in Elser‟s favor, authorizing the latter to
manage and dispose the properties. Elser sold A and B and mortgaged C with the
consent of Lyons to purchase the San Juan Estate with Elser‟s own money. In order
to develop the property, a limited partnership was organized between Elser and
three other associates under the name of J.K. Pickering. Lyons alleged that when
Elser mortgaged Property C with which he was a co-owner, he became the owner of
an undivided interest in San Juan Estate.
Issue:
Whether or not Elser and Lyons were partners in the purchase of the San
Juan Estate
Held:
No. The partnership between Lyons and Elser was not involved. The mortgage
of Property C never resulted in damage to Lyons. No money belonging to Lyons was
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used to purchase the San Juan Estate. Elser bought San Juan Estate entirely upon
his account.

02. Pioneer Insurance vs. Court of Appeals

Facts:
Lim entered into a sales contract with Japan Domestic Airlines (JDA) to
purchase airplanes and spare parts. Pioneer Insurance executed a surety bond on
Lim‟s behalf and in favor of JDA. Border Machinery and Heavy Equipment Company
(Bormaheco), Cervantes, and Maglana also contributed funds to the purchase. The
funds were supposedly part of their contributions to a new corporation that Lim
proposed. The three executed indemnity agreements in Pioneer‟s favor while Lim
executed a chattel mortgage. After Lim defaulted in paying JDA, the latter
demanded payments from Pioneer. Pioneer paid JDA and filed suit to foreclose the
chattel mortgage. The lower courts found Lim liable to Pioneer and absolved
Bormaheco, Cervantes and Maglana.
Issue:
Whether or not a de facto partnership among Lim and three others was
formed and as a consequence, they must share in the loss or gains of the venture in
proportion to their contribution
Held:
No. When persons attempt but fail to form a corporation and carry on the
business under the corporate name, they may occupy the position of partners.
However, such partnership is implied only when necessary to do justice among the
parties because persons cannot be treated as partners when there is no intent to
form a partnership. No de facto partnership resulted among the parties that entitled
Lim to reimbursement of supposed losses from the proposed corporation. Lim was
acting on his own and not in behalf of his would-be incorporators in transacting the
sale of airplanes and spare parts.

03. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc.
Facts:
Antonio and Peter purchased fishing nets and floats from Philippine Fishing
Gear Industries on behalf of Ocean Quest Fishing Corp. They claim that they were
engaged in a business venture with Lim, who however, was not a signatory to the
purchase. After they defaulted in the payment, Philippine Fishing filed an action for
collection against Antonio, Peter, and Lim in their capacities as general partners.
The lower court held that a partnership existed on the ground that, in a prior civil
case, Antonio and Peter executed a Compromise Agreement with Lim where they
agreed to sell boats as payment to a third company and to divide or shoulder the
excess or deficiency from the sale equally among them.
Issue:
Whether or not Lim is liable as a general partner to Philippine Fishing
Held:
Yes. The Compromise Agreement revealed the parties‟ intention to pay the
loan with the proceeds of the sale of the boats and to divide equally among
themselves the excess or loss. Consequently, Antonio, Peter, and Lim formed a
partnership engaged in the fishing business and they purchased boats, nets, and
floats constituting the partnership‟s main assets, with the profits and loss to be
divided equally among them.
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04. Litton vs. Hil & Ceron

Facts:
Litton sold and delivered to Ceron, one of the managing partners of Hill &
Ceron Company, a certain number of mining shares. By virtue of said transaction,
Ceron paid Litton a sum certain leaving an unpaid balance. Litton was unable to
collect the unpaid balance either from the company or from its surety.
Issue:
Whether or not Ceron‟s transaction with Litton bound his company despite
the fact that Ceron did not obtain the consent of Hill, his co-managing partner
Held:
Yes. The third person has the right to presume that the contracting partner
has the consent of his co-partner. Such presumption will prevail if there‟s no
evidence to show that the contracting partner did not have the co-partner‟s consent
and the third person knew of such lack of consent. Here, the presumption applies
because Litton did not know of Hill‟s lack of consent and the transaction was part of
the partnership‟s ordinary business.

05. Goquiolay vs. Sycip

Facts:
Tan and Antonio entered into a general commercial partnership to deal in real
estate. The agreement authorized to Tan the sole management of the partnership‟s
affairs. Further, if a partner dies, the partnership would be continued by the heirs of
the deceased partner. The partnership purchased three parcels of land and
assumed mortgage payable to La Urbana. Tan also purchased 46 parcels of land but
in his individual capacity and assumed the mortgage thereon. Tan then died leaving
his widow Kong who sold the lands to Sycip and Lee to settle Tan‟s debts. The latter
sold the lands to Insular Development which Antonio sought to annul to the extent
of his interest in both lands.
Issue:
Whether or not Kong‟s sale of both lands valid despite Antonio‟s lack of
consent to the sale
Held:
Yes. Kong had become a partner upon Tan‟s death as expressly provided in
the articles of co-partnership. Antonio‟s authorization to Kong as an heir of Tan to
manage partnership was proof that she was considered as a general partner.
Moreover, Kong had authority to sell the partnership‟s real estate because the
partnership was precisely organized to deal with real estate mortgage.

06. Moran, Jr. vs. Court of Appeals

Facts:
Pecson and Moran entered into an agreement for the printing of posters
featuring the delegates of the 1971 Constitutional Convention. 95k posters were
supposed to be printed and sold at P2/each. Each partner would contribute P15k,
and Moran would supervise the work, while Pecson would receive a P1k monthly
commission. Only 2k posters were printed but each was sold for P5. Pecson then
filed an action for the recovery of a sum of money, the return of his P10k
contribution, and payment of his share in the expected profits.
Issue:

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Whether or not Moran is obliged to give Pecson the amount of expected profits
from their partnership
Held:
No. In a partnership arrangement, when the agreement to pay a high
commission to one of the partners was in anticipation of large profits being made
from the venture, but that eventually the venture sustained losses, then there is no
legal basis to demand for the payment of the commissions since the essence of the
partnership is the sharing of profits and losses.

07. Rojas vs. Maglana

Facts:
Rojas and Maglana executed their Articles of Co-Partnership called Eastcoast
Development Enterprises (EDE). EDE had an indefinite term of existence and was
constituted to secure timber licenses. Maglana was to manage the business affairs
while Rojas the logging operations. The profits and losses would be divided and
shared between them. EDE availed Pahamotang‟s services as industrial partner,
thus, creating new Articles. Rojas and Maglana bought Pahamotang‟s shares and its
equipment, and dissolved the second EDE. They continued the partnership without
reconstitution of the Articles. Later, Rojas entered into a management contract with
CMS Estate and abandoned the EDE. Maglana reminded Rojas of the latter‟s
obligation in the partnership but Rojas also withdrew his equipment and took funds
from EDE more than his contribution, causing Maglana to dissolve the partnership.
Issues:
(1) Whether or not the 1st partnership was dissolved
(2) Whether or Maglana could unilaterally dissolved the partnership
Held:
(1) No. The 2nd Articles only amended the 1st Articles and all business
transactions were carried out under the 1st Articles. Both partnerships had the
same name, purpose and capital contributions from Rojas and Maglana.
(2) Yes. A partner can unilaterally dissolve the partnership by a notice of
dissolution, which in effect is a notice of withdrawal. Under Article 1830(2), even if
there is a specified term, one partner can cause its dissolution by expressly
withdrawing even before the expiration of the period, with or without justifiable
cause.
If the cause is not justified or no cause was given, the withdrawing partner is
liable for damages but in no case can he be compelled to remain in the firm.

08. Evangelista & Co. vs. Abad Santos

Facts:
A co-partnership was formed under the name of „Evangelista & Co.” The
Articles of co-partnership was amended to include Estrella as industrial partner and
Evangelista, Atienza and Navarro, the original capitalist partners remaining in that
capacity with a contribution of 17k each. The Articles provided that Estrella‟s
contribution consist of her industry. Further, the profits and losses shall be divided
among them with 70% for the original capitalist partners, divided equally, and 30%
to Estrella. Evangelista argued that the parties never intended to make Estrella an
industrial partner because at the time, she was a judge devoting all her time to
performing her duties in public office.

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Issue:
Whether or not Estrella is an industrial partner
Held:
Yes. Article 1767 does not specify the kind of industry that a partner may
contribute. Hence, Estrella‟s services to the partnership can be considered her
contribution to the common fund. An industrial partner is not deemed to have
violated his fiduciary duties to the other partners by having delivered on the
particular service required of her and devoting her time serving in the judiciary
which is not considered to be engaged in an activity for profit.

09. Idos vs. Court of Appeals

Facts:
Eddie supplied chemicals and rawhide to Idos for use in the latter's business
of manufacturing leather. Later, he formed a partnership with Idos but it was short-
lived because soon after, the partners agreed to terminate it. The partnership's
assets were liquidated and Idos gave Eddie four checks, representing his share in
the partnership. Upon deposit, only three out of four checks were honored. Eddie
then filed a complaint for violation of B.P. 22.
Issue:
Whether or not the partnership was terminated
Held:
No. Although the parties agreed to dissolve the partnership, such agreement
did not automatically end the partnership, because they still had to sell the goods
on hand and collect the receivables from debtors.
The partnership was still in the process of 'winding up' its affairs, when the
check in question was issued. Idos issued the subject check to evidence only Eddie‟s
share or interest in the partnership. It did not involve a debt of or any account due
and payable by the Eddie.

10. Villareal vs. Ramirez

Facts:
Villereal, Carmelito, Jose and Jesus formed a partnership to operate a
restaurant business. Villareal was appointed general manager and Carmelito,
operations manager. Ramirez later joined as a partner in the business. Meanwhile,
Jesus withdrew from the partnership and his capital contribution was refunded to
him followed by the closure of the restaurant. Ramirez informed Villereal and the
other partners that they were no longer interested in continuing the partnership and
reopening the restaurant. Ramirez made demands from Villereal to return their
capital contribution.
Issue:
Whether or not partners are liable for the refund of the shares of a
withdrawing partner
Held:
No. Since a partnership has a separate juridical personality, then upon its
dissolution, the withdrawing partners have no cause of action to demand the return
of their equity from the other partners. It is the partnership that must refund the
equity of the retiring partners.

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11. Claudio vs. Zandueta

Facts:
Petitioners Claudio, Goyena and Flores organized the “Cotabato & Cagayan
Mining Association” together with the respondents Neuffer, Meyer, Skiles, Araneta
and Cowper. The respondents filed an action for the dissolution of the association.
One of their prayers was to appoint a receiver to take charge of the properties of the
association after its dissolution. The court through Judge Zandueta granted the
prayer and appointed J.C. Cowper as a receiver even if the latter was not made a
party to the case.
Issue:
Whether or not Judge Zandueta exceeded his jurisdiction and abused his
discretion when he appointed the receiver
Held:
Yes. An action to dissolve the partnership and for the appointment of a
receiver must include the partnership since it is entitled to be heard in matters
affecting its existence as well as the appointment of a receiver.

12. Muñaque vs. Court of Appeals

Facts:
Munasque entered into a partnership with Galan under the registered name
“Galan and Associates” as a contractor. They entered into a contract with Tropical
for remodeling the latter‟s branch building. Tropical made the first payment in a
check to Munasque which the latter indorsed to Galan to pay for the materials and
labor. However, Galan spent the money for his personal use. When the second
check came, Munasque refused to indorse it to Galan. Galan informed Tropical of
the misunderstanding between him and Munasque as partners. Hence, upon
second payment, Tropical changed the name of the payee on the second check from
Munasque to “Galan and Associates” which enabled Galan to encash the second
check. Meanwhile, the construction was continued through Munasque‟s sole efforts
by incurring debts from various suppliers.
Issue:
Whether or not Tropical‟s payment to Galan is payment to the partnership
Held:
Yes. A mere falling out or misunderstanding among the partners does not
convert the partnership into a sham organization, since the partnership exists and
is dissolved under the law.
When Elmo received the first check as the payee, he indorsed the check in
Galan‟s favor. Therefore, Tropical had every right to presume that Elmo and Galan
were true partners.

13. Realubit vs. Jaso

Facts:
Realubit entered into a Joint Venture Agreement with Biondo, a French
National, to operate an ice manufacturing business. The parties agreed on the
sharing of profits and the manner of acquiring the machines. Later, Biondo
executed a Deed of Assignment transferring all his rights in Jaso‟s favor. With

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Biondo‟s departure from the Philippines, Jaso informed Realubit of the assignment
and demanded an accounting as well as a portion of the profits. The demand
however went unheeded causing Jaso to file suit.
Issue:
Whether or not Jaso became a partner after Biondo‟s transfer of interest to
him
Held:
Transfer by a partner of his partnership interest does not make the assignee a
partner of the firm, nor entitle him to interfere in the management of the
partnership business or to receive anything except his profits. The assignment does
not purport to transfer an interest in the partnership, but only a future contingent
right to a portion of the ultimate residue as the assignor may become entitled to
receive by virtue of his proportionate interest in the capital.

14. Villareal vs. Ramirez

Facts:
Villereal, Carmelito, Jose and Jesus formed a partnership to operate a
restaurant business. Villareal was appointed general manager and Carmelito,
operations manager. Ramirez later joined as a partner in the business. Meanwhile,
Jesus withdrew from the partnership and his capital contribution was refunded to
him followed by the closure of the restaurant. Ramirez informed Villereal and the
other partners that they were no longer interested in continuing the partnership and
reopening the restaurant. Ramirez made demands from Villereal to return their
capital contribution.
Issue:
Whether or not partners are liable for the refund of the shares of a
withdrawing partner
Held:
No. Since a partnership has a separate juridical personality, then upon its
dissolution, the withdrawing partners have no cause of action to demand the return
of their equity from the other partners. It is the partnership that must refund the
equity of the retiring partners.

15. Commissioner of Internal Revenue vs. Suter

Facts:
Suter, as a general partner, and Spirig and Carlson, as limited partners,
formed a limited partnership. Each of the partners contributed various sums of
money. The limited partnership engaged in importing, marketing, distributing and
operating various products. The partnership had an office and held itself out as a
limited partnership. Later, Suter and Spirig got married and Carlson sold his share
to the spouses.
Issue:
Whether or not the limited partnership become a prohibited partnership
Held:
No. Prohibition against formation of a universal partnership among spouses
does not apply when the partners entered into a limited partnership, the man being
the general partner and the woman being the limited partner, and a year later the

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two get married. The disputed partnership was not a universal but a limited
partnership. The limited partnership was not a partnership that spouses were
forbidden to enter nor could their subsequent marriage operate to dissolve it.

16. Jo Chung Cang vs. Pacific Commercial Co.

Facts:
Pacific Commercial and other creditors of Teck Seing, Ltd., filed a motion to
declare the individual partners as party to the insolvency proceeding after Teck
Seing was adjudged insolvent. Teck Seing argued that it is not a corporation but a
limited partnership based on the articles of partnership. The creditors contended
that the partnership contract established a general partnership.
Issue:
Whether or not Teck Seing Ltd. is a general partnership
Held:
Yes. Substantial compliance in good faith with the legal requirements is all
that is necessary for the formation of a limited partnership. Otherwise, when there
is not even substantial compliance, the partnership becomes a general partnership
as far as third persons are concerned.
In this case, this requirement was not fulfilled. The fact that the firm does not
contain the name of all or any of the partners as prescribed by the Code of
Commerce does not prevent the creation of a general partnership.

17. Horn vs. Builder Supply Company of Longview

Facts:
Horn and the plaintiffs became partners in a limited partnership under the
name of Builders Supply Company. Horn and Cockrell were designated as general
partners, while the others as limited partners. The Articles of Partnership provided
that Horn and Cockrell shall draw a salary in such amounts as might be agreed on
from time to time by unanimous consent of all partners. During serious difficulties
in the conduct of the business, Cockrell advised Horn that his services were no
longer needed and requested that he vacate his office. The partners held a meeting
where the salary and expense account of both Cockrell and Horn were terminated.
Horn argued that the company was without authority to terminate his salary
because the agreement set forth in the Articles is a contract to pay him a salary co-
extensive with the life of the partnership which could not be terminated without the
unanimous consent of all.
Issue:
Whether or not Horn‟s salary could be withdrawn by the partners
Held:
Yes. When a contract provides that one party shall render services to another,
or shall "work" for another, but does not specify a definite time or prescribe
conditions which shall determine the duration of the relationship, the contract may
be terminated by either party at will.

18. Kilosbayan Inc. vs. Guingona

Facts:

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PCSO decided to put up an on-line lottery system that would establish a

national network system aimed at expanding its source of income. A bidding was
made after which a contract of lease was awarded in favor PGMC where PCSO would
operate the lottery and PGMC as a lessor. Kilosbayan opposed the agreement
alleging that under R.A. 1169, PCSO is prohibited from holding and conducting
lotteries in collaboration, association or joint venture with any person, association,
company or entity. PGMC and PCSO alleged that PGMC is not a collaborator but
merely a contractor for the building of the network and a mere lessor of the network
it would build.
Issue:
Whether or not the agreement between PCSO and PGMC is a Joint Venture
Held:
Yes. A joint venture is an association of persons or companies jointly
undertaking some commercial enterprise where all participants contribute assets
and share risks. It requires a community of interest in the performance of the
subject matter, a right to direct and govern the policy in connection therewith, and
duty, which may be altered by agreement to share both in profit and losses.
PCSO and PGMC mutually understood that any arrangement between them
would necessarily leave to PGMC the technical, operations, and management
aspects of the on-line lottery system, while PCSO would primarily provide the
franchise.

19. Information Technology Foundation of the Philippines vs. COMELEC

Facts:
COMELEC implemented the Automated Election System for the national and
local elections. It conducted a bidding for the automated election machines.
COMELEC found Mega Pacific Consortium (MPC) as eligible company and awarded
the contract in its favor. MPEI signed the Automation Contract for and on behalf of
MPC. Information Technology Foundation (ITF) questioned the award, alleging that
MPC and MPEI were not in consortium.
Issue:
Whether or not MPC is a member of the consortium
Held:
No. A joint venture is an association of persons or companies jointly
undertaking some commercial enterprise where all participants contribute assets
and share risks.
It requires a community of interest in the performance of the subject matter, a
right to direct and govern the policy in connection therewith, and duty, which may
be altered by agreement to share both in profit and losses.
MPEI signing on behalf of MPC did not show that MPEI or its president have
been duly authorized by the other members of the consortium to represent them,
bid on their behalf, and to commit them jointly and severally to the bid
undertakings.

20. Realubit vs. Jaso

Facts:
Realubit entered into a Joint Venture Agreement with Biondo, a French
National, to operate an ice manufacturing business. The parties agreed on the
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sharing of profits and manner of acquiring the machines. Later, Biondo executed a
Deed of Assignment transferring all his rights in Jaso‟s favor. With Biondo‟s
departure from the Philippines, Jaso informed Realubit of the assignment and
demanded an accounting as well as their portion of the profits. The demand
however went unheeded causing Jaso to file suit.
Issues:
(1) Whether or not Jaso became a partner after Biondo‟s transfer of interest to
him
(2) Whether or not Jaso may demand his share in the profits
Held:
(1) No. Transfer by a partner of his partnership interest does not make the
assignee a partner of the firm, nor entitle him to interfere in the management of the
partnership business or to receive anything except his profits.
(2) Yes. The assignment purports only to a future contingent right to a portion
of the ultimate residue as the assignor may become entitled to receive by virtue of
his proportionate interest in the capital.

21. Torres vs. Court of Appeals

Facts:
Sisters Antonia and Emeteria entered into a joint venture agreement with
Manuel. They agreed to execute a deed of sale in favor Manuel over a parcel of land.
They received no cash payment from Manuel but merely promise of profits where
60% would be distributed to them and 40% for Manuel. The land was intended to be
developed as a subdivision. Manuel transferred the title of the land in his name and
subsequently mortgaged the property. He used the proceeds to start building roads,
curbs and gutters. But due to adverse claims in the land, prospective buyers
became suspicious and the subdivision project eventually failed. The sisters sued
Manuel for damages equivalent to 60% of the value of the property.
Issues:
(1) Whether or not partnership existed
(2) Whether or not the sisters are entitled to the 60%
Held:
(1) Yes. They agreed to contribute the property which was to be developed as a
subdivision. On the other hand, although Manuel did not contribute capital, he is
an industrial partner for his contribution to the general expenses and other
costs. The income would be divided according to the stipulated percentage, 60-40.
The contract manifested the intention of the parties to form a partnership.
(2) No. The loss cannot be blamed to any of them as the partners bear the loss
in proportion to their contributions. Manuel does not bear the loss of the other 40%
because as an industrial partner he is exempt from losses.

22. Mendoza vs. Paule

Facts:
Paule, the proprietor of EMPCT executed an SPA in favor of Mendoza
authorizing the latter to participate in the bidding of NIA project. Mendoza won the
bidding and the project was awarded to EMPCT. Cruz learned that Mendoza needed
heavy equipment for the project. Mendoza and Cruz signed an agreement to lease

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the latter‟s heavy equipment to EMPCT. Later, Paule revoked the SPA. As a result,
Mendoza could no longer pay Cruz for the lease. Cruz demanded payment from
Mendoza and EMPCT but both refused to pay.
Issue:
Whether or not a partnership existed
Held:
Yes. The principal contributed his contractor„s license and expertise; While
the agent provided and secured the needed funds for labor, materials and services.
In general, the principal and the agent oversaw the effective implementation of the
project. The principal would receive as his share 3% of the project cost while the
rest of the profits shall go to the agent. The revocation of the powers of management
of the agent is deemed a breach of the contract.

23. Philex Mining Corp. vs. Commissioner of Internal Revenue

Facts:
Philex Mining entered into an agreement with Baguio Gold Mining for the
former to manage and operate the latter‟s mining claim. The agreement was called a
„Power of Attorney.‟ While managing the project, Philex made several cash advances
but the mine suffered continuing losses. As a result Philex withdrew from the mine.
Later, the parties executed a Compromise through Dation in Payment where Baguio
Gold promised to pay its debt in favor of Philex.
Issue:
Whether or not the „Power of Attorney‟ is a partnership agreement
Held:
Yes. While a corporation, like Philex, cannot generally enter into a contract of
partnership unless authorized by law or its charter, it may enter into a joint venture
which is akin to a particular partnership relationship. The agreement named as the
Power of Attorney indicates that they intended to create a partnership and establish
a common fund for the purpose. They also had a joint interest in the profits of the
business as shown by a 50-50 sharing in the income of the mine.

24. Marsman Drysdale Land, Inc. vs. Philippine Geoanalytics, Inc.

Facts:
Marsman and Gotesco Properties entered into a Joint Venture Agreement to
construct and develop an office building on the land owned by Marsman. The
parties agreed on a 50-50 ratio on the proceeds of the project but did not provide for
the splitting of losses. They hired Philippine Geoanalytics to provide subsurface soil
exploration and geotechnical engineering for the project. Geoanalytics billed the
joint venture a sum of money representing the cost of the study but the joint
venture failed to pay. Meanwhile, due to unfavorable economic conditions, the joint
venture was cut short and the planned building ceased.
Issue:
What is the extent of liability of Marsman and Gotesco for the loss?
Held:
50-50 ratio. A joint venture, being a form of partnership, is to be governed by
the laws on partnership. Under Article 1797 of the Civil Code, the losses and profits
shall be distributed in accordance with the partnership agreement. If only the share

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of each partner in the profits has been agreed upon, the share of each in the losses
shall be in the same proportion.

25. Tiosejo Investment Corp. vs. Ang

Facts:
Tiosejo entered into a Joint Venture Agreement with Primetown to develop a
residential condominium project on Tiosejo‟s property. They agreed that Tiosejo
would contribute the property while Primetown would develop the condominium.
The JVA also provided for a 17%-83% share in the condominium units between
them. Later, the Housing and Land Use Regulatory Board issued a license to sell in
favor of the parties. Through said license, Primetown executed a Contract to Sell
with the spouses Ang for a unit and parking lot. However, the Spouses filed a suit to
rescind the Contract to Sell because the unit and parking space were not complete
yet and thus could not be turned over to them on the date of delivery.
Issue:
Whether or not Tiosejo is also liable to the spouses Ang despite not being a
party to the Contract to Sell
Held:
Yes. Under Article 1824 of the Civil Code, all partners are solidarily liable with
the partnership for everything chargeable to the partnership, including loss or
injury caused to a third person or penalties incurred due to any wrongful act or
omission of any partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners.

26. Aurbach vs. Sanitary Wares Mnfg. Corp.

Facts:
Sanitary Wares, a domestic corporation, entered into a Joint Venture
Agreement with the American Standard, a foreign group, to expand their business
internationally. In the election of their board members, they agreed that three of the
nine directors shall be designated by American Standard while the other six shall be
designated by the Filipino stockholders. Dispute ensued when American Standard
invoked its right to cumulative voting. In order to determine who the directors are,
the court discussed whether the business was a joint venture or a corporation.
Issue:
Whether the nature of the business established by the parties was a joint
venture or a corporation
Held:
Corporation. The rule is that it depends upon the parties‟ actual intention
which is determined under the rules of interpretation and construction of contracts.
The actual intention of the parties was to form a corporation due to the
manner of nomination of the members of the Board of Directors that may be
reconciled with the provision on cumulative voting under the Corporation Code.

27. JG Summit Holdings, Inc. vs. Court of Appeals

Facts:
JG Summit questioned the right of first refusal of a Japanese corporation,
which owns shares in a Philippine Corporation. It submitted that such right, which
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was eventually converted into a right to top the bid in the bidding process that
occurred to sell the government‟s shares in the said Philippine corporation, would
allow the Japanese corporation to acquire more than the allowable 40% equity
allowed by law for corporations that own land.
Held:
The right itself does not violate the constitutional limit and that in any case, if
the Japanese corporation‟s shareholdings increase beyond 40%, it would only
disqualify the corporation from owning land.
This is because the shareholders and the corporation have separate entities,
and the right of first refusal refers to the shareholder independently of the capacity
(or lack thereof) to own land pertaining to the corporation.

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