Business Organization I: Partnership, Trusts, and Agency

BUSINESS
ORGANIZATION I
PARTNERSHIP, TRUSTS, AND AGENCY
3 – SANCHEZ ROMAN
A.Y. 2021-2022
CONTRIBUTORS:
ALAG | ALCORAN | CARIAGA | CAYBOT | CEROS | CORDERO | DACERA | FRIAS |

HECHANOVA | JUNSAY | LOQUIAS | ORTIZO | PAHM | PEROCHO | PUERTO | RAMOS |
SANTILLAS | SUYO | ZAMORAS
BUSINESS ORGANIZATION I: PARTNERSHIPS, TRUSTS, & AGENCY
From the lectures of Atty. Raymund Christian S. Ong Abrantes, CPA
TABLE OF CONTENTS
VII. LAW ON TRUSTS.................................................................................................................................................. 2
A. CONCEPT OF TRUST .......................................................................................................................................... 2
B. PARTIES TO A TRUST TRANSACTION .......................................................................................................... 2
C. KINDS OF TRUSTS .............................................................................................................................................. 2
GOVERNING LAW ..................................................................................................................................................... 2
D. CHARACTERISTICS OF TRUST ....................................................................................................................... 2
E. NATURE OF TRUST ............................................................................................................................................. 2
F. EXPRESS TRUSTS ............................................................................................................................................... 2
H. DISTINCTION: EXPRESS TRUST VS. RESULTING IMPLIED TRUSTS................................................... 3
G. IMPLIED TRUSTS ................................................................................................................................................. 3
VIII. LAW ON AGENCY ...........................................................................................................................................13
A. CHARACTERISTICS ..........................................................................................................................................13
B. CREATION OF AGENCY...................................................................................................................................15
C. IMPLIED V. AGENCY BY ESTOPPEL ............................................................................................................15
D. SALE OF LAND OR INTEREST THEREIN ....................................................................................................16
E. BROKER V. AGENT ...........................................................................................................................................16
F. KINDS OF AGENT...............................................................................................................................................16
G. WHEN SPECIAL POWERS OF ATTORNEY NECESSARY .......................................................................16
H. KINDS OF PRINCIPAL.......................................................................................................................................21
I. OBLIGATIONS OF THE AGENT .......................................................................................................................21
J. AUTHORITY V. INSTRUCTIONS ......................................................................................................................21
K. SUB-AGENT.........................................................................................................................................................22
L. OBLIGATIONS OF THE PRINCIPAL...............................................................................................................23
M. MODES OF EXTINGUISHMENT OF AGENCY .............................................................................................25
I. DEATH OF PRINCIPAL OR AGENT .........................................................................................................................25
II. REVOCATION ........................................................................................................................................................25
III. WITHDRAWAL ......................................................................................................................................................26
IV. DEATH .................................................................................................................................................................27
ALAG | ALCORAN | CARIAGA | CAYBOT | CEROS | CORDERO | DACERA | FRIAS | HECHANOVA | JUNSAY | LOQUIAS | ORTIZO | PAHM | PEROCHO | PUERTO | RAMOS | SANTILLAS | SUYO | ZAMORAS | Page 1 of 27
C. KINDS OF TRUSTS
BUSINESS ORGANIZATION I: KINDS OF TRUST:
PARTNERSHIPS, TRUSTS, & 1. Express trusts – which are created by the intention of the
AGENCY 2.
trustor or of the parties.
Implied trusts – come into being by operation of law.
Take note, of the distinction that is very debatable between express

Atty. Raymund Christian S. Ong Abrantes, CPA trusts and resulting implied trusts.
VII. LAW ON TRUSTS For implied trusts we have two subcategories: constructive trust and
resulting trust.
A. CONCEPT OF TRUST
We will see later why this is confusing because, by definition, when
The reason why the concept of trust is included in the discussion of we talk about express trust these are created by the intention of the
business organization because it involves fiduciary relationship. trustor or of the parties.
It has similarities with partnerships. If you are a partner in a Now, resulting implied trust, strictly speaking, only constructive trust
partnership whatever is entrusted to you, you held that in trust for the is created by implication of law. But the resulting implied trust
partnership. It’s like the same concept, they are discussed in relation requires the intention of the parties. That’s why it’s confusing. The
to the concept of business organization. distinction between express trust and resulting implied trust
becomes very, very vague. Even cases, you would say that it is an
So, the concept of trust is the fiduciary relationship between one express trust, but then the court will say it is a resulting implied trust.
person having an equitable ownership in property and another owning So, it becomes confusing to distinguish it from the two.
the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the exercise of Dean Villanueva actually suggested to recategorize the provisions
certain powers by the latter for the benefit of the former. and put it into two – constructive and express trust.
Take note that if you try to look at the Civil Code on the provisions on GOVERNING LAW
Trust, you can see at the end of the provision “(n)”, because these are
new. There are no Trust provisions in the Spanish Civil Code which is The principles of the general law of trusts, insofar as they are not in
the Civil Code of 1889. conflict with this Code, the Code of Commerce, the Rules of Court,
and Special Laws are hereby adopted.
The United States’ concept of trust has about 2000 provisions but
when you try to look at our provisions, we only have 18 provisions. The provisions that we have adopted - the law on trusts that we use -
But it has a catch-all provision – there is a provision that says that the is not actually exhaustive. Meaning, although it is not put there as a
general principle of trust in the US is equally applicable in our country. provision, we adopt the general law in trusts insofar as they are not in
The concept of trust is adopted because of the nature of it. conflict with our own domestic laws.
D. CHARACTERISTICS OF TRUST
EXAMPLE: You have a sibling who works as a nurse in another
country, and she wants to retire in the Philippines. She told you she
1) It is a Relationship.
wants to construct a building for lease to generate money, but she’s
not physically in the Philippines. She told you as her sibling that she 2) It is a Relationship of Fiduciary Character.
will temporarily register the property under your name.
3) It is a Relationship with respect to Property, not one involving
Later on, you were able to find a boyfriend. Your boyfriend told you merely personal duties.
“Uy, you have a property named under you pala”. When your sister
went back here in the Philippines, you don’t want to return the property 4) It involves the existence of equitable duties imposed upon the
to her. holder of title to the property to deal with it for the benefit of
another.
These are the types of instances where the concept of trust becomes
necessary to be adopted in the Philippines. 5) It arises as a result of manifestation of intention to create the
relationship. (Morales vs. CA)
It is a common law concept. It is not present in the previous civil
code. E. NATURE OF TRUST
Trusts do not create separate juridical entities.
B. PARTIES TO A TRUST TRANSACTION
Trusts is anchored on splitting the naked title and beneficial title.
So, for parties to a trust transaction, we have Article 1440.
ARTICLE 1440. A person who establishes a trust is called a trustor; F. EXPRESS TRUSTS
one in whom confidence is reposed as regards property for the benefit
of another person is known as the trustee; and the person for whose ARTICLE 1443. No express trusts concerning an immovable or any
benefit the trust has been created is referred to as the beneficiary. interest therein may be proved by parol evidence.
Please take note that when we talk about trust, it refers to a property. Article 1443 is very important because you'll realize later that if it's a
There’s no trust, if there’s no property. It is always in relation to resulting implied trust and it refers to immovable property (or any
property. Please take note of that. interest therein), proof thereof is material.
However, Article 1443 of the Civil Code which states: "No express
trusts concerning an immovable or any interest therein may be proved
by parol evidence," refers merely to enforceability, not validity of

a contract between the parties. Otherwise stated, for purposes of
G. IMPLIED TRUSTS
validity between the parties, an express trust concerning an
immovable does not have to be in writing. Thus, Article 1443 may be KINDS OF IMPLIED TRUST:
said to be an extension of the Statute of Frauds. [Enriquez v. Court
of Appeals, 104 SCRA 656 (1981)] as reiterated in [Maria G. De La 1. Resulting Trust
Cruz vs. Court of Appeals, G.R. No. 76590, February 26, 1990].
A resulting trust is a trust raised by implication of law and presumed
ARTICLE 1444. No particular words are required for the creation of always to have been contemplated by the parties, the intention of
an express trust, it being sufficient that a trust is clearly intended. which is found in the nature of the transaction, but not expressed in
the deed or instrument of conveyance. Examples of resulting trusts
are found in Articles 1448 to 1455 of the Civil Code.
Notice that the operative act is the intention of the parties. Where the
intention of the parties is to create a trust, there will be a trust. But 2. Constructive Trust
again, the question there is what type of trust?
On the other hand, a constructive trust is one not created by words,
An express trust is created by the direct and positive acts of the
either expressly or impliedly, but by construction of equity in order to
parties, by some writing or deed or by words evidencing an intention
satisfy the demands of justice. An example of a constructive trust is
to create a trust. The use of the word 'trust' is not required or essential
Article 1456 of the Civil Code. (Philippine National Bank vs. Court
to its constitution, it being sufficient that a trust is clearly intended.
of Appeals and Mata and Co. Inc., G.R. No. 97995, January 21,
(Heirs of Maximo Labanon, et al. vs. Heirs of Constancio
1993)
Labanon, et al., G.R. no. 160711, August 14, 2007)
Constructive trust is created not by the intention of the parties, but
ARTICLE 1445. No trust shall fail because the trustee appointed because the law steps in to interpret it as a trust to avoid injustice.
declines the designation, unless the contrary should appear in the
instrument constituting the trust. Notice in resulting trust that the operative act is again, the intention of
the parties. This is what I am telling you earlier that when it comes to
ARTICLE 1446. Acceptance by the beneficiary is necessary. implied trusts and express trusts, both of them are actually anchored
Nevertheless, if the trust imposes no onerous condition upon the on the intention of the parties. That's why the distinction becomes very
benficiary, his acceptance shall be presumed, if there is no proof to confusing. In fact, if you've read the book of Dean Villanueva, he is
the contrary. trying to reshuffle to provisions and say that there should only be two
types of trusts: (1) express trusts and (2) constructive trusts, because
of the seemingly confusing distinction of express trusts and resulting
implied trusts.
H. DISTINCTION: EXPRESS TRUST VS.
Why do we have to distinguish express trusts and resulting
RESULTING IMPLIED TRUSTS implied trusts? It matters when we are talking about immovable
property. If it's an express trust, we cannot prove it by testimonial or
Although properly placed in different categories, in one major respect parol evidence. If it's a resulting implied trust, we can prove it by parol
express trusts and resulting trusts are similar; to be created, both evidence.
depend upon the transferor’s intention. They differ sharply, however,
in the role intention plays their respective inceptions. Consider the ARTICLE 1447. The enumeration of the following cases of implied
function of intention with each type. trust does not exclude others established by the general law of trust,
but the limitation laid down in article 1442 shall be applicable.
Express trust: it is a positive intention flowing from some agreement
or other action between the parties that causes the division of interest In implied trust, there is an enumeration of samples of transactions
to occur and the trust to exist. Such an intention may be manifested enumerated in our Civil Code which are considered as implied trust.
in various ways.
First is what we called in Article 1448: Purchase money resulting
Clearly, the expressed intention to create the trust and not how that trust
expression is manifested is the basic ingredient essential to the
formation of the express trust.
ARTICLE 1448. There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by another
Resulting trusts are equally dependent on the element of intention
for the purpose of having the beneficial interest of the property. The
for their existence. It’s done, however, is the distinguishing feature of
former is the trustee, while the latter is the beneficiary. However, if the
this grouping. Unlike the express trust situation, an intention to
actually create a resulting trust is not necessary for its existence. person to whom the title is conveyed is a child, legitimate or
Instead to actually create a resulting trust is not necessary for its illegitimate, of the one paying the price of the sale, no trust is implied
existence. Instead of a positive intention to create a trust (as is found by law, it being disputably presumed that there is a gift in favor of the
in the express trust setting), the resulting trust depends on the child.
demonstration of absence of an intention to vest beneficial enjoyment
in the titleholder. Accordingly, testimonial evidence, that the land was not given as a gift
to Virginia, was properly allowed to rebut the disputable presumption
The key point is that the resulting trust is not established by an established in the foregoing article (Bernardo De Los Santos vs.
intention to create a trust, but is raised by operation of law based on Faustino B. Reyes, G.R. No. 45027, January 27, 1992)
a presumption that despite appearances to the contrary, a trust
relationship was intended. This application of intention distinguishes PNB vs CA and Lopez vs CA – resulting trust
the resulting trust from other trusts.
Exceptions to Purchase Money Resulting Trust:
[REDISCOVERING THE RESULTING TRUST; MODERN MANEUVERS FOR A DATED
DOCTRINE? MALCOLM L. MORRRIS. Associate Professor of Law, Northern Illinois Same situation: Legal estate is granted to one party but the price is
University School of Law; B.S., Cornell University, J.D. State University of New York at
Buffalo; L.L.M, Northwestern University]. paid by another, but it is not considered as trust because of the
following:
DISCUSSION: This means that if it is an express trust, there is a
positive intention to separate beneficial and legal title, but in resulting 1. Actual Contrary Intention
implied trust, there is no intention to consolidate.
Remember: Trust is based on intention
In your assigned cases, you will wonder that there could be an
express trust, but the Court ruled there is a resulting trust. 2. Presumed gift in favor of a Child
3. Made in violation of statute/law
Ex. A couple, one is a foreigner, and the other is Filipina.

The money came from the foreigner, and the estate is under Despite this, the Sisons asked Eduardo to pay 50% downpayment for
the name of the Filipina. the properties which the latter acceded. Cruz was instructed to place
the name of Rodolfo as “vendee” in the deeds to be prepared, this is
From this example, that could be a resulting trust arguably, so that Rodolfo can mortgage these properties to PNB for the funds
but because it is made to circumvent the law, there would needed to develop a fishpond. The deeds of sale was then made.
be no trust.
Rodolfo without knowledge to Eduardo, sold the Spouses Casipit the
What will happen? – It is advantageous to the Filipina portion of land, and the Spouses were aware that the land they bought
because she does not have an obligation to reconvey was owned by Eduardo. Eduardo sent the spouses a letter for them
because there is no trust related. to desist, but the sale was already consummated.
The Filipina will be happy because she will have no This prompted Eduardo to filed for action against Rodolfo Tigno and
obligation to reconvey because no trust was created. the Spouses complaining that the lands were named in favor of
Rodolfo Tigno for the purpose of mortgaging them to fund their
ALEJANDRO B. TY V. SYLVIA S. TY fishpond business emphasizing that there was trust and confidence
G.R. No. 165696 | April 30, 2008 as brothers. But, the trial court dismissed the complaint.
FACTS: Alexander Ty who was the husband of Sylvia and who was ISSUE: Was a trust created between Rodolfo Tigno and Eduardo
the son of Alejandro Ty, died of cancer. Sylvia filed to settlement of Tigno? YES.
the estate of Alexander, she asked the court to sell or mortgage
certain parcels of land to pay the estate tax. Alejandro, opposed and HELD:
filed for Recovery of the Property, claims that he owns the land I. Purchase Money Resulting Trust
because he paid for them. The property was registered only in trust of
Alexander’s brother and sisters in case he (Alejandro) dies. Alejandro Article 1448. This is referred sometimes as purchase money resulting
also claims that Alexander had no financial capacity to purchase the trust, in order to effectuate what the law presumes to have been the
disputed property. intention of the parties in the circumstances that the person to whom
the land was conveyed holds it as trustee for the person who supplied
Sylvia countered such allegation arguing that Alexander was capable the purchase money.
as he had been managing the family corporations since he was 18
years old and engaged in other profitable businesses. Alejandro To give rise to a purchase money resulting trust, it is essential that
argues that the properties, while registered in the name of Alexander, 1. An actual payment of money, property or services, or an
is covered by an implied trust under Article 1448 arguing that because equivalent constituting valuable consideration;
he paid the price when the property was purchased, this was for the 2. And such consideration must be furnished by the alleged
beneficial interest in the property. beneficiary of a resulting trust.
ISSUE: Was there a resulting implied trust in favor of Alejandro under II. Rodolfo was only to hold the property in trust for his brother
Article 1448? NO.
It is clear that the name of Rodolfo appeared in the deeds of sale not
HELD: Article 1448 is clear, if the person to whom the title is conveyed for the purpose of transferring ownership to him but only to enable him
is a child of the one paying the price of the sale, and in this case this to hold the property in trust for his brother, herein private respondent.
is undisputed, no trust is implied by law. The law, instead, disputably In the face of the testimony of the two witnesses, Cruz and Manuel,
presumes a donation in favor of a child. In addition, Alejandro Ty failed the probative value, if any, of the tax declarations being in the name
to prove a contrary intention that it was not a donation (which is a of Rodolfo is utterly minimal to show ownership. These documents,
factual finding). by themselves, are not conclusive evidence of ownership. Manuel
was corroborated by Cruz who was the real estate agent cum witness
The net effect of the foregoing is that respondent is obliged to collate in all three deeds of sale. As a witness, he pointed out that Rodolfo
into the mass of the estate of petitioner, in the event of death, the was named as the vendee in the deeds of sale upon the order of
EDSA property as advance of Alexander’s share in the estate of his private respondent.
father, to the extent that petition provided a part of the purchase price.
III. There was a purchase money resulting trust
NOTE: Of the three properties, only the EDSA property was shown to
have been (partially) paid for by Alejandro and not the Wack-Wack This is not an express trust because, under the Civil Code, specific
and Meridian Condominium Properties. instances or examples of implied trusts are given. Since, Article 1448
is a specific provision, it prevails over Article 1441, which is a general
There was also a showing that Alexander had sources of income as provision. Since this case involves an implied trust, parole evidence
found by the CA, who worked for nine years when Alexander had is allowed to prove its existence under Article 1457.
purchased the properties, a car care business, and several business
dealing and received emoluments and other benefits. Thus, as for the It is clear that (1) Eduardo is the real buyer and true owner of the lands
other two properties, there is also clearly no implied trust as there was in question and (2) Rodolfo is merely a trustee constituted over said
no showing the purchase price was paid by Alejandro and there was lands on behalf of plaintiff.
evidence that Alexander had the means of paying it.
IV. Spouses Casipit are not purchasers in good faith
If it was given to a child, there is a disputable presumption only, not
conclusive, that it was given as a donation. If there is proof that it is First, in a picnic, Eduardo informed them that he was the owner of the
not a donation, or that he or she actually has a capacity to buy, then property. Second, the agent told him about Eduardo owning the
there will be no donation, and there will also be no trust. property. Third, since the apparent vendor Rodolfo, did not have the
right to transfer ownership thereof, they did not acquire ownership of
the property. Since defendant-appellee is not the owner of the lands
RODOLFO TIGNO V. CA in question, which are not registered under the Torrens system, he
G.R. No. 110115 | October 8, 1997 could not by way of sale have transferred, as he has no right to
transfer, ownership of a portion thereof, at the time of delivery.
FACTS: The Sisons appointed Dominador Cruz as agent to sell 3 Therefore, the property must be returned to Eduardo.
parcels of land belonging to Bienvenido Sison, Heirs of Isaac Sison
and Remedios Sison. Now, Rodolfo Tigno learned that the properties
were for sale, thus he told Cruz to offer these parcels of land to his This is the same situation [as the previous case].
brother, Eduardo.
RICARDO AND MILAGROS HUANG V. CA
Rodolfo and Cruz went to convince Eduardo who later agreed to buy G.R. No. 108525 | September 13, 1994
them for P10,000. The Sisons, Cruz and Eduardo went to Atty.
Manuel for the preparation of the deeds of sale but because of certain FACTS: In a village, it was policy of subdivision owner to prohibit the
requirements, no deed of sale was made. acquisition of two lots by a single person. Since Dolores Sandoval
wanted to buy two lots in that village, she was advised by Milagros
Huang, wife of her brother, Ricardo Huang to register Lot 20 in the to buy the subject property. Herminio sold the right to Lydia Celestino
name of Ricardo. (Dolores bought Lot 21). who paid the amortizations over a period of 10 years but the TCT was
issue in the name of Herminio and wife Herminia.
Ricardo was allowed to mortgage Lot 20 with SSS to construct a small
residential, but it was Dolores who actually financed construction of RTC however, cancelled that TCT and issued a new one upon the
such house. Dolores later requested the Huangs to executed DOAS. petition of Herminia, claiming that the ODCT was lost and mission.
The Huangs leased the properties without the permission of Dolores Lydia Celestino filed a petition declaring the new TCT to be cancelled
who at first tolerated as she did not need it. But later on, the lessees on the ground that Herminia secured the new one out of fraud and
started prohibiting the family of Dolores from using the swimming pool misrepresentation.
and the Huangs then began to challenge the ownership of Dolores
over the property. CA ruled that there was an implied trust wherein legal title was taken
and given to the Ramoses while the beneficial owners remained with
The Huangs filed a case against the Dolores for nullity of the deed of the Spouses Celestino and that the restriction of the sale of the
sale with assumption of mortgage alleging that they were made to sign property without the approval of PHHC within 1 year from issuance of
blank papers which constituted the DOAS. RTC found that Dolores title does not militate against and not element of a resulting trust.
was indeed the owner and the one who built the house and swimming
pool and he fence and found that DOAS was signed voluntarily. The restriction reads:
Within a period of one year from the issuance of TCT by virtue of this
Here the Huangs argue that there was no implied trust but that of an deed no transfer or alienation whatsoever of the property subject
equitable mortgage and assuming that there was, it was already thereof whether in whole or in part shall be made or registered w/out
barred by prescription (filed case in October 1981, but TCT was the written consent of the vendor and such transfer or alienation may
issued in 1967). be made only in favor of person qualified to acquire land under the
laws of the Philippines.
ISSUE: Was a resulting trust created? YES.
ISSUE: Is there a resulting trust in favor of Lydia Celestino entitled
HELD: her to recover from Ramos the subject property? NO.
I. Evidence favors Dolores
HELD:
While Richard Huang argued that he paid for the installments from his I. Lydia was not qualified
income his annual income could not cover the amount of installments
and evidence was not shown as to his undeclared income. The only Lydia Celestino had candidly admitted in her testimony that although
logical conclusion then is that money which was used to buy Lot 20 she was a Central Bank employee, she was not qualified to acquire
did not belong to him. Dolores on the other hand was able to prove by any PHHC lot under the agreement entered into between the PHHC
evidence that she purchased the lots in her own funds and the and the Central Bank because she is already the owner of a lot in
agreements to purchase Lots 20 and 21 were made on the same day. Quezon City. Her disqualification is the probable reason why she did
not submit for approval by the PHHC the transfer in her favor of
II. Constructive Trust from Implied Trust Herminio Ramos' right to buy the lot in question. The PHHC's approval
was necessary for the validity of the transfer.
A constructive trust is imposed where a person holding title to property
is subject to an equitable duty to convey it to another on the ground II. SPA issued to Lydia was not sufficient compliance
that he would be unjustly enriched if he were permitted to retain it. The
duty to convey the property arises because it was acquired through The same awareness of the fatal flaw of the transfer is the most logical
fraud, duress, undue influence or mistake, or through breach of a explanation why Lydia Celestino took no further action to secure a
fiduciary duty, or through the wrongful disposition of another's new transfer certificate of title despite the fact that she had always
property. On the other hand, a resulting trust arises where a person been in the possession of TCT No. 204173 which was issued to
makes or causes to be made a disposition of property under Herminio Ramos on 21 November 1974 yet.
circumstances which raise an inference that he does not intend that
the person taking or holding the property should have the beneficial Instead of requiring Herminio Ramos to execute a deed of sale in her
interest in the property. It is founded on the presumed intention of the favor and to obtain the PHHC's conformity thereto, she was satisfied
parties, and as a general rule, it arises where, and only where such with the special power of attorney, executed five days after the
may be reasonably presumed to be the intention of the parties, as issuance of the title, or on 26 November 1974, authorizing her to
determined from the facts and circumstances existing at the time of "SELL, MORTGAGE, LEASE, LET, or RENT" this lot. Such authority
the transaction out of which it is sought to be established. is inconsistent with Lydia Celestino's claim for ownership because the
grantor therein, Herminio Ramos, solemnly declared that he is "the
III. There was a Resulting Trust owner in fee simple" of the lot described in TCT.
In the present case, Dolores provided money for the purchase of Lot III. Lydia did not come to court with clean hands
20 but the corresponding deed of sale and transfer certificate of title
were placed in the name of Ricardo Huang because she was advised The inevitable conclusion then is that Lydia Celestino, knowing of her
that the subdivision owner prohibited the acquisition of two (2) lots by disqualification to acquire a lot from the PHHC at the subdivision
a single individual. Guided by the foregoing definitions, we are in reserved for qualified Central Bank employees, tried to get one
conformity with the common finding of the trial court and respondent through the backdoor. Otherwise stated, she wanted to get indirectly
court that a resulting trust was created. Ricardo became the trustee that which she could not do so directly. Having acted with evident bad
of Lot 20 and its improvements for the benefit of Dolores as owner. faith, she did not come to court with clean hands when she asked for
The pertinent law is Art. 1448 of the New Civil Code which provides the reconveyance of the property on the basis of a resulting trust
that there is an implied trust when property is sold and the legal estate under Article 1448 of the Civil Code.
is granted to one party but the price is paid by another for the purpose
of having the beneficial interest for the property. A resulting trust A resulting trust is an "intent-enforcing" trust, based on a finding by
arises because of the presumption that he who pays for a thing the court that in view of the relationship of the parties their acts
intends a beneficial interest therein for himself. express an intent to have a trust, even though they did not use
language to that effect. The trust is said to result in law from the acts
She bought another lot. It was an association with a policy which of the parties.
prohibited the purchase of two lots. So she caused the other lot to be
named under a different person. The Court ruled that there was a However, if the purpose of the payor of the consideration in having
purchase money resulting trust. title placed in the name of another was to evade some rule of the
common or statute law, the courts will not assist the payor in achieving
HERMINIA L. RAMOS V. CA his improper purpose by enforcing a resulting trust for him in
G.R. No. 108120 | May 10, 1994 accordance with the "clean hands" doctrine.
FACTS: Spouses Celestino filed against Herminio Ramos and his The court generally refuses to give aid to claims from rights arising
heirs praying that the former be declared as lawful owners of real out of an illegal transaction, such as where the payor could not lawfully
property. It was shown in this case that Herminio was awarded rights take title to land in his own name and he used the grantee as a mere
dummy to hold for him and enable him to evade the land laws, (e.g., I want you to read the case of Adaza v. CA.
an alien who is ineligible to hold title to land, who pays for it and has ADAZA V. CA
the title put in the name of a citizen.) G.R. No. 47354 | March 21, 1989
Otherwise stated, as an exception to the law on trusts, "[a] trust or a FACTS: The decedent Victor Sr. executed a Deed of Donation in
provision in the terms of a trust is invalid if the enforcement of the trust favor of Violeta (daughter) single. The land was then part of public
or provision would be against public policy, even though its domain being disposable and had been held by Victor, Sr. for many
performance does not involve the commission of a criminal or tortious years. Violeta, with the aid of her brother Horacio, filed a homestead
act by the trustee." application covering the land involved. A free patent was issued to her
and OCT was issued in her name.
The parties must necessarily be subject to the same limitations on
allowable stipulations in ordinary contracts, i.e., their stipulations must Violeta and her husband obtained a loan from PNB secured by a
not be contrary to law, morals, good customs, public order, or public mortgaged on the land, which was continued to be administered by
policy. What the parties then cannot expressly provide in their her brother, Homero. Horacio, after 4 years, returned in Dapitan. In a
contracts for being contrary to law and public policy, they cannot family gathering, Horacio asked Violeta to sign a Deed of Waiver
impliedly or implicitly do so in the guise of a resulting trust. stating that the property was owned in common by Violeta and
Horacio even though OCT was only in her name. Violeta and the two
IV. Lydia allowed to recover what she paid brothers signed the Deed of Waiver.
Although the contract should be voided for being contrary to public Months later, Violeta Adaza filed a complaint for the annulment of the
policy, we deem it equitable to allow the private respondents to deed of waiver alleging that she was the absolute owner of the land
recover what they had paid for the land with legal interest thereon in question by reason of the donation made by their father and she
commencing from the date of the filing of the complaint in Civil Case was the registered owner of the land and the signing of the deed was
No. Q-49272. Thus, she is entitled to the return of the amount she had due to fraud, misrepresentation and undue influence.
paid to Herminio in the sum of P3,800.00 and the refund of the
installments she had paid to the PHHC (P34.11 monthly for a period However, Horacio argued that they were co-owners and the deed was
of ten years), with legal interest thereon. made voluntary and freely. Horacio argued that the Deed of Donation
was an implied trust and the that the deed of waiver had the effect of
These are employees. The village or association also have a policy reassuring that there was indeed an implied trust.
prohibiting two properties. So the property was also named under
another person. However, this time, the Court said that there is not ISSUE: Is there an implied trust? YES.
trust because it was made in violation of that rule.
HELD:
Huang v. CA Ramos v. CA I. There was ample evidence
A resulting implied trust exists No resulting implied trust
Prohibition was based on a Prohibition was based on We think this intent is evidenced, firstly, by the Deed of Waiver
policy of the subdivision owner PHHC restriction of 1 year executed by Violeta and quoted in full earlier. The Deed of Waiver is
which is predicated on statute important because there Violeta acknowledged that she owned the
or law land in common with her brother Horacio although the certificate of
Exception will not apply Exception applies title bore only her name. Both the trial court and the Court of Appeals
reached the conclusion that Violeta had in fact voluntarily signed the
[Made in violation of a] law refers to a law or statute, not just a mere Deed of Waiver, even though she had done so with reluctance.
guideline or policy.
The record is bereft of any indication of any evil intent or malice on
[Note: This was not in the presentation, but included in the syllabus.] the part of Homero, Victor, Jr. and Teresita that would suggest
deliberate collusion against their sister Violeta. Equally important
DE LOS SANTOS V. REYES
were the testimonies of Homero Adaza and Teresita Adaza, both of
G.R. No. L-45027 | January 27, 1992
whom explicitly stated that their father had executed the Deed of
Donation with the understanding that the same would be divided
HELD: Petitioner assumes that an express trust over an immovable
between Horacio and Violeta, that Violeta had signed the Deed of
was created when it was made to appear that the land in question was
Waiver freely and voluntarily, and that their brother Horacio had not
sold to and registered in name of Faustino Reyes' daughter, Virginia
threatened and forced her to do so.
— wife of petitioner — to conform with the limitation imposed by
vendor that no vendee could purchase from the former more than two
II. Article 1449 applies
lots. Consequently, pursuant to Article 1444 of the Civil Code, such a
trust cannot be proved by parol evidence. If his assumption is correct,
All the above circumstances lead this Court to the conclusion which
Article 1444 is applicable and both the trial court and the respondent
Violeta had admitted in the Deed of Waiver, that is, that the "property
Court then erred in admitting the oral testimony of Faustino Reyes
concerning the facts surrounding the "sale" of the lot in favor of [here involved] is owned in common by [her] and [her] brother, Horacio
Virginia. G. Adaza, although the certificate of title was issued only in [her]
name." We believe and so hold that this statement is an admission
that she held half of the land in trust for petitioner Horacio. The
Unfortunately, the assumption is wrong. There is neither an express
execution of the Deed of Donation of 10 June 1953 by respondent
nor implied trust in this case. The applicable provision of the Civil
Violeta's father created an implied trust in favor of Violeta's brother,
Code, as correctly pointed out by respondent Court, is Article 1448.
petitioner Horacio Adaza, in respect of half of the property donated.
Accordingly, testimonial evidence, such as that offered by Faustino
Article 1449 of the Civil Code is directly in point
Reyes, that the land was not given as a gift to Virginia, was properly
allowed to rebut the disputable presumption established in the
foregoing article. 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
NOTE: What is peculiar in this case is that the court rules that the the lender or payor to secure the payment of the debt, a trust arises
arrangement was neither an express trust nor an implied trust, but by operation of law in favor of the person to whom the money is loaned
what applies with Article 1448. But Article 1448 falls under Chapter 3 or for whom it is paid. The latter may redeem the property and compel
on Implied Trusts under the Civil Code, which is specifically a a conveyance thereof to him.
Purchase Money Resulting Trust.
PNB vs CA – resulting trust
ARTICLE 1449. There is also an implied trust when a donation is Lopez vs CA – constructive trust
made to a person but it appears that although the legal estate is
transmitted to the donee, he nevertheless is either to have no These two cases categorize what type of implied trust is under Article
beneficial interest or only a part thereof. 1449 to 1455. The cases are flip-flopping in what type of trust.
PNB vs CA and Lopez vs CA – resulting trust NAKPIL V. IAC

G.R. No. 74449 | August 20, 1993
FACTS: Pinggoy Nakpil and Charlie Valdes were the best of friends While the downpayment of P50K and the partial payment of
since high school under law school. Charlie easily became Pinggoy’s P25,000.00 to PNB came from the personal funds of Valdes, he
confidant, and later, his lawyer, accountant, auditor and sometimes considered them as advances to the late Nakpil. Otherwise, Valdes
as a financial consultant. The relationship even extended to their would never have deemed the amount as "unpaid" in his letter to
families. petitioner of 17 September 1974. The letter of Valdes to the City
Treasurer of Baguio made while remitting payment of real estate taxes
While two families were in vacation in Bataan, Pinggoy drowned. is also enlightening. It provided therein that the payment being
Charlie went to the succor of the wife of Pinggoy and acted as legal tendered was "[o]n behalf" of the Nakpil's, which is an express
counsel and accountant of Nena who became the administratrix of her recognition of the implied trust. Consequently, respondent Valdes is
husband’s estate. estopped from claiming that he bought Pulong Maulap for himself, and
not merely in trust for the late Nakpil, as this contention is belied by
In 1979, Imelda Nakpil filed an action for reconveyance for breach of the facts. Hence, we rule that constructive trust under Art. 1450 of the
trust against Charlie Valdes alleging that Pinggoy Nakpil prior to his New Civil Code existed between the parties.
death requested Valdes to purchase Pulong Maulap (summer
residence) and thereafter register the sale and hold the title thereto in II. Property cannot be redeemed yet
trust for Pinggoy which Valdes did. But after Pinggoy’s death, Valdes
concealed and suppressed all information as to the trust agreement However, petitioner cannot as yet redeem and compel conveyance of
and instead Valdes transferred Pulong Maulap in the name of Caval the property. For, Valdes must still be reimbursed for the advances he
Realty Corporation which is 99.7% owned by Valdes. made on the disputed property, such reimbursement being a condition
sine qua non for compelling conveyance under Art. 1450.
Valdes denied the existence of the trust agreement and argued that
he bought it using his own funds and without any participation of the III. Not Imprescriptible
late Nakpil and neither it was brought in trust of the latter. He argued
that he only offered a usufruct thereof. The period within which to compel conveyance of Pulong Maulap is
not imprescriptible. The rule is well-settled that an action for
From the records Valdes bought Pulong Maulap for P150K with reconveyance based on an implied or constructive trust prescribes in
Valdes giving P50K for downpayment and assuming mortgage ten (10) years. But, in the case before us, petitioner could still compel
obligation of P100K with PNB which was reduced to P75K after paying conveyance of the disputed property from respondent provided the
it P25K. A deed of sale was issued but even before such, the Nakpils former reimburses the latter for all his expenses. After all, Valdes
moved and stayed at Pulong Maulap even until after the death of never repudiated the constructive trust during the lifetime of the late
Pinggoy. Jose Nakpil. On the contrary, he expressly recognized it. The
prescriptive period therefore did not begin to run until after he
Valdes borrowed from First United Bank, where Pinggoy Nakpil was repudiated the trust.
then a vice-president, he borrowed P75,000 which he paid PNB and
constituted a mortgage in favor of FUB, he also borrowed P65,000 Such repudiation came when Valdes excluded Pulong Maulap from
more to renovate the Pulong Maulap. Imelda Nakpil submits that the list of properties of the late Jose Nakpil submitted to the intestate
Valdes recognized ownership of Pulong Maulap through certain court 15 in 1973. Even then, the present action for conveyance was
letters. filed in 1979 or well within the ten-years period.
RTC ruled that there was a trust relationship but that reconveyance IV. Pactum Commissorium
was not availing since there was a letter from Nena expressing the
resignation to demand reconveyance, but the IAC reversed finding Instead, the remedy of respondents Carlos J. Valdes and Caval
that there was no trust at all. Realty Corporation was to proceed against the estate of the late Jose
M. Nakpil and/or the property itself. The arrangement entered into
ISSUE: Is there an implied trust? YES. between the parties, whereby Pulong Maulap was to be "considered
sold to him (respondent) . . . in case petitioner fails to reimburse
HELD: Valdes, must then be construed as tantamount to a pactum
I. Article 1450 as a Constructive Trust commissorium which is expressly prohibited by Art. 2088 of the Civil
Code.
Implied trusts, which may either be resulting or constructive, are those
which, without being express, are deducible from the nature of the For, there was to be automatic appropriation of the property by
transaction as matters of intent, or which are superinduced on the Valdes in the event of failure of petitioner to pay the value of the
transaction by operation of law as matter of equity, independently of advances. Thus, contrary to respondent's manifestations, all the
the particular intention of the parties. elements of a pactum commissorium were present: there was a
creditor-debtor relationship between the parties; the property was
Article 1450, which petitioner invokes in the case at bar, is an used as security for the loan; and, there was automatic appropriation
illustration of an implied trust which is constructive. Article 1450 by respondent of Pulong Maulap in case of default of petitioner.
presupposes a situation where a person, using his own funds,
purchases a certain piece of land in behalf of another who, in the Fallo: In fine, we conclude that there was a constructive trust between
meantime, may not have sufficient funds to purchase the land. The the parties under Art. 1450 of the New Civil Code. Consequently,
property is then transferred in the name of the trustee, the person who petitioner may redeem and compel conveyance of the disputed
paid for the land, until he is reimbursed by the beneficiary, the person property but only after reimbursing respondent the sum of
for whom the land is purchased. It is only after the beneficiary P375,056.64, with legal interest from 31 July 1978, the amount
reimburses the trustee of the purchase price that the former can advanced by Valdes for the purchase of the Pulong Maulap.
compel conveyance of the purchased property from the latter.
ARTICLE 1451. When land passes by succession to any person and
From the evidence adduced, it may be concluded that respondent he causes the legal title to be put in the name of another, a trust is
Valdes, using his own funds, purchased Pulong Maulap in behalf of
established by implication of law for the benefit of the true owner.
the late Nakpil. This is based on the letters to petitioner of Valdes
where he categorically admitted that "[b]oth of these loans, while in
my (respondent Valdes) name, were obtained by Pinggoy (the late PNB vs CA and Lopez vs CA – resulting trust
Nakpil) for his person, and that the "P75,000.00 initially advanced for
the Moran property still remains unpaid. This is very common. There are tax implications on this one, so it
clearly happens now.
It is evident from these letters that while the balance of P75K on the
mortgage of the vendors with PNB was liquidated from the proceeds ANCOG V. CA
of a loan respondent obtained from FUB, such loan was actually G.R. No. 112260 | September 13, 1994
secured by the late Nakpil by merely using Valdes' name. Such is also
the case with respect to another FUB loan amounting to P65,000.00, FACTS:
the proceeds of which were used to finance the repair and renovation Petitioners – Jovita Yap Ancog, Gregorio Yap, Jr.
of Pulong Maulap. Respondents – Rosario Diez (mother), Caridad Yap
notified by petitioner Jovita Yap Ancog of their mother's plan to sell

The Spouses Gregorio Yap and Rosario Diez owned a parcel of land the property.
with improvements. Gregorio died, leaving as heirs his wife Rosario,
and children Jovita Yap Ancog and Gregorio Yap, Jr., and Caridad This Court has ruled that for prescription to run in favor of the trustee,
Yap. the trust must be repudiated by unequivocal acts made known to the
cestui que trust and proved by clear and conclusive evidence.
In 1954 and 1958, Rosario obtained loans secured by mortgage of the Furthermore, the rule that the prescriptive period should be counted
disputed land, later in 1961, pursuant to the suggestion of the bank’s from the date of issuance of the Torrens certificate of title applies only
lawyer, an extrajudicial settlement was signed and notarized to the remedy of reconveyance under the Property Registration
cancelling the OCT issuing a TCT. A REM was then constituted and Decree.
the loan was approved. (Gregorio, Jr. was not a party thereto as he
was 15 years old at that time). Since the action brought by petitioner Yap to claim his share was
brought shortly after he was informed by Jovita Ancog of their
Rosario exercised rights of ownership, she instituted ejectment suit mother's effort to sell the property, Gregorio Yap, Jr.'s claim cannot
against Jovita’s husband and son to evict them from the ground floor be considered barred either by prescription or by laches.
of the house for failure to pay rent. It was later learned that Rosario
offered the land for sale. Jovita told Gregorio about such plan. Fallo: Remanded to determine the claim of Gregorio, Jr.
[Note: Paragraphs under III were included in the presentation.]
This prompted them to file in 1985, action for partition alleging that the
extrajudicial settlement was simulated and void claiming that they did Read this. You will see that implied trust is actually based on many
not intend to convey their interest in the property to their mother but considerations, mainly based on equity. Here, it does not squarely
only to enable her to secure a loan to cover expense for Caridad’s falls under Article 1451, but the Court applied 1451 by analogy.
school fees and household repairs.
ARTICLE 1452. If two or more persons agree to purchase property
ISSUE: Will the claims of Jovita and Gregorio, Jr. prosper? – Only to and by common consent the legal title is taken in the name of one of
Gregorio, Jr.
them for the benefit of all, a trust is created by force of law in favor of
the others in proportion to the interest of each.
HELD:
I. Intention to Cede by Jovita and Caridad
PNB vs CA and Lopez vs CA – resulting trust
The two meant that the extrajudicial settlement to be fully effective as
shown that Rosario was able to exercise acts of ownership and even In both of these cases it was ruled that these are examples of resulting
register such without their objection. Jovita even leased the land from trust.
her mother and also accepted from her an SPA to use such land as
collateral for that she applied for. It was even Rosario who paid the ARTICLE 1453. When property is conveyed to a person in reliance
loan of the Ancogs to ensure release of property. It is immaterial that upon his declared intention to hold it for, or transfer it to another or the
they had been initially motivated by a desire to acquire a loan, grantor, there is an implied trust in favor of the person whose benefit
because every act which is intended to put an end to indivision among is contemplated.
the co-heirs is deemed to be a partition even though it is in another
transaction. Self-explanatory.
II. Gregorio, Jr. is not bound by the settlement ARTICLE 1454. If an absolute conveyance of property is made in
order to secure the performance of an obligation of the grantor toward
He is not barred by laches, as he did not take part in the partition and the grantee, a trust by virtue of law is established. If the fulfillment of
not bound by such – because he was a minor when extrajudicial the obligation is offered by the grantor when it becomes due, he may
settlement was executed – thus he could not have been included or demand the reconveyance of the property to him.
even informed of the partition.
PNB vs CA – resulting trust
III. Registration of Land in Rosario’s name created an Implied
Lopez vs CA – constructive trust
Trust in Favor of Gregorio, Jr.
Instead, the registration of the land in Rosario Diez's name created an ARTICLE 1455. When any trustee, guardian or other person holding
implied trust in his favor by analogy to Art. 1451. a fiduciary relationship uses trust funds for the purchase of property
and causes the conveyance to be made to him or to a third person, a
In the case of O'Laco v. Co Cho Chit, Art. 1451 was held as creating trust is established by operation of law in favor of the person to whom
a resulting trust, which is founded on the presumed intention of the the funds belong.
parties. As a general rule, it arises where such may be reasonably
presumed to be the intention of the parties, as determined from the PNB vs CA – Resulting trust
facts and circumstances existing at the time of the transaction out of Lopez vs CA – Constructive trust
which it is sought to be established.
Similar to partnership, if a partner misappropriates or uses the funds
In this case, the records disclose that the intention of the parties to the of a partnership then he set in trust for the partnership.
extrajudicial settlement was to establish a trust in favor of petitioner
Yap, Jr. to the extent of his share. ARTICLE 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
Rosario Diez testified that she did not claim the entire property, while implied trust for the benefit of the person from whom the property
Atty. de la Serna added that the partition only involved the shares of comes.
the three participants.
PNB vs CA and Lopez vs CA – Constructive trust
IV. Registration did not operate to repudiate claim
It is commonly used because it is actually the legal basis for someone
A cestui que trust may make a claim under a resulting trust within 10 who defrauded somebody to put the title in his name in any
years from the time the trust is repudiated. conveyance or forged the deed of sale such that it was reconveyed to
him.
Although the registration of the land in private respondent Diez's
name operated as a constructive notice of her claim of ownership, it A lot of cases are anchored to Article 1456. The basis is mistake or
cannot be taken as an act of repudiation adverse to petitioner fraud.
Gregorio Yap, Jr.'s claim, whose share in the property was precisely
not included by the parties in the partition. It is the only constructive trust because there is no intention at all for
the parties to separate beneficial and legal title. It is the law that steps
Indeed, it has not been shown whether he had been informed of her in to avoid injustice. That is why by force of law, it is considered a
exclusive claim over the entire property before 1985 when he was trust.
action for reconveyance is nonetheless filed, it would be in the nature

RAMON B. BRUTO SR. vs. SEVERINO D. DIANALA of a suit for quieting of title, an action that is imprescriptible. The
G.R. No. 171717 | December 15, 2010 reason for this is that one who is in actual possession of a piece of
land claiming to be the owner thereof may wait until his possession is
FACTS: A complaint for Recovery of Possession was filed by disturbed or his title is attacked before taking steps to vindicate his
Dichimos and Britos against Jose Maria Golez. The complainants right, the rationale for the rule being, that his undisturbed possession
alleged that they are the heirs of Vicente Dichimo and Eusebio provides him a continuing right to seek the aid of a court of equity to
Dichimo who inherited pro-indiviso shares in the lot in question. ascertain and determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be claimed only by
Golez argues that they have been in open, actual, public and
the one who is in possession.
uninterrupted possession of a portion of the subject property for more
than 30 years, and that in fact the complainants already disposed of
their shares long ago. HEIRS OF DOMINGO VALIENTES V. RAMAS
G.R. No. 157852, December 15, 2020
A compromise agreement was made, but however, respondents later
on opposed claiming better rights over the property thus they filed a FACTS: Heirs of Valientes claimed that they owned the subject
complaint for reconveyance against the heirs. They claim that the property covered by an OCT. Before the death of Domingo Valientes,
heirs acquired the property by fraud. he mortgaged the same subject property to the Spouses Belen as a
security of the loan and failed to retrieve the property.
Here, the heirs argue that granting that fraud existed, they are already
barred by prescription having filed their complaint for reconveyance
The heirs of Valientes alleged that the Spouses Belen executed a
after more than 8 years from the discovery of the fraud arguing that
under the law the actio prescribes in 4 years reckoned from the forged document denominated as VENTA DEFINITIVA which is a
discovery of he fraud. deed of sale stating that Domingo Valientes sold the property in favor
of the Spouses Belen, and the latter obtained a TCT in their name.
ISSUE: Is there an implied constructive trust? If there was, has the The heirs of Valientes executed an adverse claim at the back of the
action prescribed? TCT.
HELD: (1) There was a constructive trust. – Since the property was Upon the death of the Spouses Belen, their heirs executed an extra-
alleged to have been acquired through fraud, Article 1456 provides judicial settlement with partition and sale in favor of Vilma Valencia-
that a person acquiring property through fraud becomes, by operation Minor, and the latter filed a petition for cancellation of the
of law, a trustee of an implied trust for the benefit of the real owner of encumbrance at the back of the TCT, to which the RTC granted and
the property. Hence, an implied trust was created. The law then ordered that the title be transfer in Vilma’s name.
creates the obligation of the trustee to reconvey the property and the
title thereto in favor of the true owner.
The heirs of Valiente filed before the RTC a “CANCELLATION OF
(2) Action has not prescribed. – An action for reconveyance based TRANSFER CERTIFICATE OF TITLE NO. T-5,427,
on implied trust prescribes in 10 years reckoned from the date of RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP AND
registration of the deed or the date of issuance of certificate of title APPLICATION FOR A WRIT OF PRELIMINARY PROHIBITORY
over the property. INJUNCTION PLUS DAMAGES.” However, later on, the RTC
dismissed the case on the ground of forum shopping. On appeal, the
In this case the TCT was obtained by heirs in September 1990, while CA did not give due course to the petition on the ground of prescription
respondents filed complaint for reconveyance in August 1999. Hence, and laches.
it is clear that the 10-year prescriptive period has not yet expired.
ISSUE: WON the petition by the Heirs of Valiente will prosper.NO
(3) Laches or estoppel not applicable. – As a rule:
RULING: No, it will not prosper.
1. The prescriptive period applies only if there is an actual need
to reconvey the property as when the plaintiff is not in
The case cannot prosper because an action for reconveyance is a
possession thereof.
2. Otherwise, if the plaintiff is in possession of the property, the legal remedy granted to a landowner whose property has been
prescriptive period does not commence to run against him. wrongfully or erroneously registered in another’s name, which must
Thus, when an action for reconveyance is filed, it would be be filed within ten years from the issuance of the title since such
in the nature of a suit for quieting of title, an action which is issuance operates as a constructive notice. Where a party has
imprescriptible. neglected to assert his rights over a property in question for an
unreasonably long period, he is estopped from questioning the validity
One who is in actual possession of a piece of land claiming to be the of another person’s title to the property. Long inaction and passivity in
owner thereof may wait until his possession is disturbed or his title is asserting one’s rights over a disputed property precludes him from
attacked before taking steps to vindicate his right, the rationale for the recovering said property. In conclusion, petitioners’ cause of action
rule being that his undisturbed possession provides him a continuing has already prescribed and now heavily infirmed with laches.
right to seek the aid of a court of equity to ascertain and determine the
nature of the adverse claim of a third party and its effect on his own
Allegation by the heirs of Valiente: although the complaint was
title, which right can be claimed only by the one who is in possession.
captioned for "CANCELLATION OF TRANSFER CERTIFICATE OF
Here, the respondents are in possession of the subject property as TITLE NO. T-5,427, RECONVEYANCE, WITH ACCOUNTING,
evidenced by the fact that the heirs filed a recovery of possession RECEIVERSHIP, AND APPLICATION FOR A WRIT OF
thereof. Thus, their complaint for reconveyance is in fact PRELIMINARY PROHIBITORY INJUNCTION PLUS DAMAGES," the
imprescriptible. As such, they cannot be held guilty of laches which complaint is substantially in the nature of an action to quiet title which
cannot be set up to resist to enforcement of an imprescriptible right. allegedly does not prescribe.
The Court has ruled that, unless reasons of inequitable proportions Ruling: With regard to the issue of prescription, this Court has ruled
are adduced, a delay within the prescriptive period is sanctioned by a number of times before that an action for reconveyance of a parcel
law and is not considered to be a delay that would bar relief. Laches of land based on implied or constructive trust prescribes in ten years,
is recourse in equity. Equity, however, is applied only in the absence, the point of reference being the date of registration of the deed or the
never in contravention, of statutory law. date of the issuance of the certificate of title over the property. But this
rule applies only when the plaintiff is not in possession of the property,
If you are in possession, there is no prescription? YES. since if a person claiming to be the owner thereof is in actual
The prescriptive period applies only if there is an actual need to possession of the property, the right to seek reconveyance, which in
reconvey the property as when the plaintiff is not in possession effect seeks to quiet title to the property, does not prescribe.
thereof. Otherwise, if the plaintiff is in possession of the property,
prescription does not commence to run against him. Thus, when an
The cause of action of the heirs, wherein they claim that Minor’s B has no more right to ask for reconveyance because the requisite
predecessor-in-interest acquired the subject property by forgery, can number of years has already passed.
indeed be considered as that of enforcing an implied trust. In
particular, Article 1456 of the Civil Code provides: In this particular case, the court held that the prescriptive period is 10
Art. 1456. If property is acquired through mistake or fraud, the person years counted from the Date of Registration, registration being the
obtaining it is, by force of law, considered a trustee of an implied trust constructive notice to the whole world.
for the benefit of the person from whom the property comes.
Discussing prescription in the cases, you will realize that…But first, let
However, the Court made emphasized: when the plaintiff in such us separate first into 3: Express Trust, Implied Trust, and Constructive
action is not in possession of the subject property, the action Trust.
prescribes in ten years from the date of registration of the deed or the
date of the issuance of the certificate of title over the property. When When we talk about express and implied trust, the gist is that there is
the plaintiff is in possession of the subject property, the action, being an intention. The parties agree to separate legal title and beneficial
in effect that of quieting of title to the property, does not prescribe. title.
In the case at bar, the heirs are not in possession of the subject It (the property) is named in one of the parties for the purpose of… the
property. The civil case, if it were to be considered as that of enforcing property is held in trust. In that case, as a general rule, you can ask
an implied trust, should have therefore been filed within ten years from for reconveyance at any time. Why? Because the one holding the
the issuance of the TCT on December 22, 1969. The Civil Case was, property holds it interest with another. The other party has NO
however, filed on August 20, 1998, which was way beyond the exclusive ownership.
prescriptive period.
Remember in Property, what are the requisites, and what kind of
2nd allegation of the heirs: claim that the prescriptive period for filing possession for acquisitive prescription to lie or exist? OCEAN
their complaint is thirty years, pursuant to Article 1141 of the Civil possession.
Code, in connection with Articles 1134 and 1137 thereof
How would you know that possession is in the concept of an
Ruling: Articles 1141, 1134 and 1137 of the Civil Code, however, are owner? It is open, continuous, exclusive, and notorious (OCEAN)
general rules on prescription which should give way to the special possession.
statute on registered lands, Presidential Decree No. 1529, otherwise
known as the Property Registration Decree.. For example, I am the trustee, and it is an implied or express trust. In
that case, I am holding it on behalf of the beneficiary. My possession
As previously discussed, however, we have allowed actions for could never be exclusive because I agreed to hold it in trust of
reconveyance based on implied trusts even beyond such one-year someone else. But when I say that it is mine, in my own capacity and
period, for such actions respect the decree of registration as not in the capacity of a trustee, my possession becomes exclusive.
incontrovertible.
That is why, generally speaking, express or implied trust can never
In an action for reconveyance, the decree of registration is respected ripen into ownership because you hold it and recognize it is a trust. It
as incontrovertible. What is sought instead is the transfer of the is based on the intention.
property, in this case the title thereof, which has been wrongfully or
erroneously registered in another person's name, to its rightful and It is different if it is constructive trust because in constructive trust,
legal owner, or to one with a better right. This is what reconveyance there is no intention. The law just steps in and says it is a trust but
is all about there is no intention to hold it in trust of another. In constructive trust
the possession could ripen into ownership provided you have all the
Yet, the right to seek reconveyance based on an implied or other requisites because your possession at the outset is already
constructive trust is not absolute nor is it imprescriptible. An action for exclusive and you are not telling that you hold it in trust of another.
reconveyance based on an implied or constructive trust must perforce That is the difference between express/implied and constructive trust.
prescribe in ten years from the issuance of the Torrens title over the
property. SPS. GODOFREDO AND CARMEN ALFREDO V. SPS.
ARMANDO AND ADELIA BORRAS
As discussed above, the civil case was filed more than 28 years from G.R. No. 144225, June 17, 2003
the issuance of TCT. This period is unreasonably long for a party
seeking to enforce its right to file the appropriate case. Thus, An action for reconveyance based on an implied or constructive trust
petitioners’ claim that they had not slept on their rights is patently must perforce prescribed in ten years and not otherwise.
unconvincing.
An action for reconveyance has its basis in Section 53, paragraph 3
The action is based on implied trust. Here, the claim of the heirs was of Presidential Decree No. 1529, which provides:
predicated on the allegation that the predecessor in interest acquired
the subject property through forgery, and thus can be considered as In all cases of registration procured by fraud, the owner may pursue
enforcing an implied trust, therefore Art. 1456 applies. all his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the rights of any innocent holder of the
Here, the heirs are not in possession of the property, and the TCT decree of registration on the original petition or application, xxx
was issued in 1969, well the case for reconveyance was filed in 1998,
which was way beyond the prescriptive period. This provision should be read in conjunction with Article 1456 of the
Civil Code, which provides:
What is the prescriptive period? How many years is the
prescriptive period? 10 years, counted from the Registration of the Article 1456. If property is acquired through mistake or fraud, the
property. 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
Why is that? Because the registration serves as a constructive comes.
notice.
The law thereby creates the obligation of the trustee to reconvey the
Why is prescription relevant? With trusts, let us say that the property and the title thereto in favor of the true owner. Correlating
document was forged in transferred to A. A has juridical title but the Section 53, paragraph 3 of Presidential Decree No. 1529 and Article
beneficiary is B. What is the remedy of B if he wants to consolidate 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra,
his beneficial title? He should file an action for reconveyance. Of the prescriptive period for the reconveyance of fraudulently registered
course, one of the defenses invoked by A is prescription. He can say
real property is ten (10) years reckoned from the date of the issuance respected as incontrovertible. What is sought instead is the transfer
of the certificate of title. of the property or its title which has been wrongfully or erroneously
registered in another person’s name, to its rightful or legal owner, or
TIBURCIO SAMONTE V. CA to the one with a better right.
G.R. No. 104223, July 12, 2001
ARTICLE 1457. An implied trust may be proved by oral evidence.
It is true that registration under the Torrens system is constructive
notice of title, but it has likewise been our holding that the Torrens title ALEJANDRO TY V. SYLVIA TY
does not furnish a shield for fraud. It is therefore no argument to say G.R. No. 165696, April 30, 2008
that the act of registration is equivalent to notice of repudiation,
assuming there was one, notwithstanding the long-standing rule that As a rule, the burden of proving the existence of a trust is on the party
registration operates as a universal notice of title. asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements. While implied trusts
For the same reason, we cannot dismiss private respondents' claims may be proved by oral evidence, the evidence must be trustworthy
commenced in 1974 over the estate registered in 1955. While actions and received by the courts with extreme caution and should not be
to enforce a constructive trust prescribes in ten years, reckoned from made to rest on loose, equivocal or indefinite declarations.
the date of the registration of the property, we, as we said, are not Trustworthy evidence is required because oral evidence can easily be
prepared to count the period from such a date in this case. We fabricated.
note the petitioner's sub rosa efforts to get hold of the property
exclusively for himself beginning with his fraudulent misrepresentation Again, if it is an immovable property and express trust, you cannot
in his unilateral affidavit of extrajudicial settlement that he is "the only prove by oral evidence. If it is an implied trust, you can do so. That is
heir and child of his mother Feliza with the consequence that he was why classification matters. If you try to read the cases, we try to
able to secure title in his name [alone]." Accordingly, we hold that the discern if the facts can be considered as express trust.
right of the private respondents commenced from the time they
actually discovered the petitioner's act of defraudation. According to
As a rule, the burden of proving the existence of a trust is on the party
the respondent Court of Appeals, they "came to know [of it] apparently asserting its existence, and such proof must be clear and
only during the progress of the litigation." Hence, prescription is not a satisfactorily show the existence of the trust and its elements. While
bar. implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution and
Does an action for reconveyance and recovery of possession should not be made to rest on loose, equivocal or indefinite
constitute an indirect or collateral attack on the validity of the declarations. Trustworthy evidence is required because oral
subject certificate of title? Let’s say the property was registered evidence can easily be fabricated. (Alejandro Ty vs. Sylvia, April
under the name of B. If you are going to file an action for 30, 2008)
reconveyance, are you attacking the title? Is it a violation of the
rule of indefeasibility of title? NO. There are a lot of cases that when you look at the facts, it is too
express – such that there is an agreement & documentary evidence.
ESTATE OF MARGARITA D. CABACUNGAN V. MARILOU However the court refuses to call it an express trust but rather an
LAIGO, ET AL. implied trust. This is because of other reasons like (1) it cannot be
G.R. No. 175073, August 15, 2011 proved by *formal evidence, (2) and prescription. It is actually case-
to-case basis.
The invocation of the rules on limitation of actions relative to a
resulting trust is not on point because the resulting trust relation If a situation come up, how do we know if it is an implied or
between Margarita and Roberto had been extinguished by the latter’s express trust given the hairline distinction of the two? If the facts
death. A trust, it is said, terminates upon the death of the trustee, of the case fall between the different types of implied trust (Art. 1448
particularly where the trust is personal to him.65 Besides, prescription – 1455), then you refer that to an implied trust. If not, you should
and laches, in respect of this resulting trust relation, hardly can impair consider it as an express trust.
petitioner’s cause of action. On the one hand, in accordance with
Article 114466 of the Civil Code, an action for reconveyance to Sir submits that arguably it could still be considered as an express
enforce an implied trust in one’s favor prescribes in ten (10) years trust.
from the time the right of action accrues, as it is based upon an
obligation created by law.67 It sets in from the time the trustee ACQUISITIVE PRESCRIPTION IN RELATION TO TRUSTS
performs unequivocal acts of repudiation amounting to an ouster of
the cestui que trust which are made known to the latter.68 In this case, EXPRESS TRUST
it was the 1992 sale of the properties to respondents that comprised
the act of repudiation which, however, was made known to Margarita GENERAL RULE: Express trusts not susceptible to acquisitive
only in 1995 but nevertheless impelled her to institute the action in prescription
1996 – still well within the prescriptive period. Hardly can be • There is a rule that a trustee cannot acquire by prescription
considered as act of repudiation Roberto’s open court declaration the ownership of the property entrusted to him (Palma vs
which he made in the 1979 adoption proceedings involving Cristobal, 77 Phil. 712);
respondents to the effect that he owned the subject properties,69 nor • An action to compel a trustee to convey property registered
even the fact that he in 1977 had entered into a lease contract on one in his name in trust for the benefit of the cestui qui trust does
of the disputed properties which contract had been subject of a 1996 not prescribed (Manalang vs Canlas, 94 Phil 776; Cristobal
decision of the Court of Appeals.70 These do not suffice to constitute vs Gomez, 50 Phil. 810)
unequivocal acts in repudiation of the trust.
• The defense of prescription cannot be set up in an action to
recover property held by a person in trust for the benefit of
An action for reconveyance based on an implied trust. another (Sevilla vs De los Angeles, 97 Phil. 875)
• That property held in trust can be recovered by the
HEIRS OF POMPOSA SALUDARES V. CA beneficiary regardless of the lapse of time (Marabilles vs
G.R. No. 128254, January 16, 2004 Quito, 100 Phil 64; Bancairen vs Diones, 98 Phil. 122, 126;
Juan vs Zuniga, 62 O.G. 1351; 4 SCRA 1221; Jacinto, L-
Notwithstanding the indefeasibility of the Torrens title, the registered 17957, May 31, 1962. See Tamayo vs Callejo, 147 Phil. 31,
owner may still be compelled to reconvey the registered property to 37)
its true owner. The rationale for the rule is that reconveyance does not
set aside or re-subject to review the findings of fact of the Bureau of
Lands. In an action for reconveyance, the decree of registration is
EXCEPTION: An acquisitive prescription can bar the action of the to enforce a constructive trust prescribes in ten years, reckoned from
beneficiary against the trustee in an express trust for the recovery of the date of the registration of the property, we, as we said, are not
the property held in trust where prepared to count the period from such a date in this case. We note
a) The trustee has performed unequivocal acts of repudiation the petitioner's sub rosa efforts to get hold of the property exclusively
amounting to an ouster of the cestui qui trust for himself beginning with his fraudulent misrepresentation in his
b) Such positive acts of repudiation have been made known to unilateral affidavit of extrajudicial settlement that he is "the only heir
the cestiu qui trust and and child of his mother Feliza with the consequence that he was able
c) There evidence thereon is clear and conclusive to secure title in his name [alone]." Accordingly, we hold that the right
Prescription period for the enforcement of an express trust of the private respondents commenced from the time they actually
of 10 years starts upon the repudiation of the trust by the discovered the petitioner's act of defraudation. According to the
trustee (Secuyo vs. De Selma) respondent Court of Appeals, they "came to know [of it] apparently
only during the progress of the litigation." Hence, prescription is not a
As a general rule, express or implied trust is not susceptible to bar.
acquisitive prescription because you recognize that you hold it in trust
of another. Your possession is not actually exclusive and there is a We have the rule that you have to count the 10 years from the time of
recognition based on intent that you are not the beneficial owner. date of registration as it amounts to constructive notice. Strangely, in
this case, the Court did not count it from that. The Court counted from
So when can it ripen into ownership? It can ripen into ownership if the discovery (from the time of the filing of the case). Here, you cannot
there is repudiation. Once the trustee performed unequivocal acts of find any other reason on why it was counted from such aside from the
repudiation amounting to an ouster of the cestui qui trust. That’s the Court telling that “We are not prepared to count the period from such
time that acquisitive prescription may lie. Not only unequivocal acts of date.” Here, you see the leeway of the Court to decide on trust cases.
repudiation amounting to an ouster of the cestui qui trust but also
positive acts of repudiation have been made known to the cestiu qui
trust.
For example, you are in possession and you put up a fence saying
you own this property. That’s an example of positive acts of
repudiation.
And the evidence thereon is clear and conclusive. Take note that
since you are based on express trust, the repudiation must be clear
and conclusive. It must be an indication that you are no longer
respecting the express trust. That is when acquisitive prescription
could lie.
PRESCRIPTIVE PERIOD FOR THE ENFORCEMENT OF AN

EXPRESS TRUST –Ten (10) years from the repudiation of the trust
by the trustee (Secuya vs. De Selma)
GENERAL RULE: There is repudiation when you have it registered

your name, the certificate of title. Of course, there are exceptions.
IMPLIED TRUST
GENERAL RULE: Prescription may supervene an implied trust, and

whether the trust is resulting or constructive, its enforcement may be
barred by laches.
As differentiated from constructive trusts, where the settled rule is that

prescription may supervene, in resulting trust, the rule of
imprescriptibility may apply for as long as the trustee has not
repudiated the trust (O’Laco vs. Co Cho Cit). Once repudiated, that is
the time that you count the number of years for acquisitive prescription
to lie.
EXCEPTION TO THE EXCEPTION: There is no prescription if the

true owner is in possession of the property because it will now be
equivalent to an action to quiet title. Remember that in Property Law,
if the action is one to quiet title, such will not prescribe if you are in
possession. The rule is that a person in possession of property may
wait for some disturbances before recourse to legal action.
NOTE: I just want to highlight this case.
SAMONTE V. COURT OF APPEALS

G.R. No. 104223 | July 12, 2001
It is true that registration under the Torrens system is constructive

notice of title, but it has likewise been our holding that the Torrens title
does not furnish a shield for fraud. It is therefore no argument to say
that the act of registration is equivalent to notice of repudiation,
assuming there was one, notwithstanding the long-standing rule that
registration operates as a universal notice of title.
For the same reason, we cannot dismiss private respondents' claims

commenced in 1974 over the estate registered in 1955. While actions
VIII. LAW ON AGENCY It does not matter if the check used to pay came from FCI, because
the check represented not FCI funds but Garcia’s money, being as it
was part of FCI’s payment for the acquisition of the disputed shares.
This is not a business organization but it is a common theme for The FCI check should not be taken at face value, the attendant
business organizations because there is some concept of agency in circumstances must also be considered.
different types of business organization.
(2) FCI was a mere conduit, a mere agent. – The stipulation of the
‘Manner of Payment’ in the Deed of Sale was only for the matter of
A. CHARACTERISTICS convenience where payment was to be effected in the aforesaid
manner so as to prevent money from changing hands needlessly.
1. Consensual – perfected by mere consent; Besides, very purpose of Garcia in selling the disputed shares and his
other properties was to “settle certain civil suits filed against him”.
2. Nominate - It has its own name;
Since the money used to discharge Garcia’s debt rightfully belonged
3. Principal – does not depend on another contract for its to him, FCI cannot be considered a third party payor under Art.
existence and validity; 1302(2). It was but a conduit, or aptly categorized by respondents,
merely an agent under Article 1868 of the Civil Code. FCI was
Discussion: You enter into a contract of agency, like SPA, for merely fulfilling its obligations under the Deed of Sale.
a certain end.
Additionally, FCI is not a disinterested party as required by Art. 1302
Ex. SPA to get certificates – it is not a contract of agency to (2) since the benefits of the extinguishment of the obligation would
fulfill an end immediately. It has to be some other contract to redound to none other but itself. Payment of the judgment debt to
get to your purpose SBTC resulted in the discharge of the attachment lien on the disputed
shares purchased by FCI. The latter would then have a free and
4. Preparatory – entered into as a means to an end; "clean" title to said shares.
5. Unilateral/Bilateral: In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2),
a. Unilateral – if contract is gratuitous, it creates was not subrogated to the rights of SBTC against Antonio Garcia and
obligations for only one of the parties, i.e. agent. did not acquire SBTC's attachment lien over the disputed shares
b. Bilateral – if for compensation, it gives rise to which, in turn, had already been lifted or discharged upon satisfaction
reciprocal rights and obligations. by Garcia, through FCI, of his debt to said bank.
ARTICLE 1868. By the contract of agency a person binds himself to FILIPINAS LIFE ASSURANCE CO. V. CLEMENTE N. PEDROS
render some service or to do something in representation or on behalf ET. AL.,
of another, with the consent or authority of the latter. G.R. No. 159489 | February 4, 2008
The basis of agency is representation. The agent becomes the FACTS: Teresita Pedroso is a policyholder of a life insurance issued
extension of the principal in terms of personality. by Filipinas Life and claims that Renato Valle as insurance agent
since 1972 and collected from her monthly premiums.
CHEMPHIL EXPORT & IMPORT CORPORATION V. CA
G.R. No. 112438-39 | December 12, 1995 In 1977, Valle told her that Filipinas Life Escolta Office was holding a
promotional investment program offering 8% prepaid interest a month
FACTS: Chemphil traces its claim over the disputed shares to the for certain amounts deposited on monthly basis. She was enticed and
attachment lien obtained by SBTC against Antonio Garcia. It averse issued a postdate check for P10K. In return, Valle issued a personal
when FCI, CEIC’s predecessor-in-interest, paid SBTC the due check for the 8% prepaid interest and a Filipinas Life “Agent’s
obligations of Garcia to the said bank pursuant to the Deed of Receipt”
Absolute Sale and Purchase of Shares of Stock, FCI (and later CEIC)
was subrogated to the rights of SBTC in the attachment lien over Pedroso inquired about the promotional investment and branch
the disputed shares. manager Apetrior confirmed and was even told that she can push
through with the check. The check endorsed by administrative
CEIC argues that SBTC’s attachment lien is superior as it was assistant Alcantara, was deposited in the account of Filipinas Life.
obtained on July 2, 1985 ahead of the consortium attachment in July
19, 1985. Importantly, the CEIC lien was duly recorded in the stock Relying on the representations, Pedroso waited for maturity of her
and transfer books of Chemphil. initial investment. It was returned a month after (P10K) after a written
request for refund. Nonetheless, after a second investment, she made
ISSUE: Is CEIC subrogated to the rights of SBTC as to the attachment 7 to 8 more investments of different amount although at a lower rate
lien over the disputed shares? of 5% prepaid interest a month. Upon maturity, Valle would take back
yellow-colored agent’s receipts he issued to the latter. (Total of
HELD: (1) Subrogation theory is unavailing. – By definition, the P37,000)
subrogation is the transfer of rights of the creditor to a third person,
who substitutes the third person in all his rights. CEIC’s theory is Pedroso then told Palacio (also an insurance holder) about the
premised on Article 1302 (2) which states that: investment plan – latter made total investment of P49,550 but at 5%
prepaid interest.
“Article 1302. It is presumed that there is a legal subrogation: xxx (2)
when a third person, not interested in the obligation, pays with the When Pedroso tried to withdraw her investment, Valle did not want to
express and tacit approval of the debtor.” return some P17K of it. Palacio also tried to withdraw hers, but
Filipinas life refused to return her money. After futile inquiries, they
Here, CEIC presents and erroneous interpretation of the concept of were prompted to file an Action for Recovery of a Sum of Money.
subrogation, here Article 1302(2) does not apply. Antonio Garcia
sold the disputed shares to FCI for P79M. FCI did not pay the entire RTC held Filipinas Life, Valle, Apetrior, and Alcantara jointly and
amount to Garcia as FCI was obliged to deliver part of purchase price severally liable to the respondents, CA confirmed the ruling and
directly to SBTC pursuant to the following stipulation in the Deed of denied the MR.
Sale.
Filipinas Life admits that Valle was its agent but claims that it was only
Hence, when FCI issued check to SBTC for the P35M to pay the debt a life insurance company and was not engaged in the business of
of Garcia to the bank, it was in effect paying with Garcia’s money, collecting investment money – arguing that the investment scheme
no longer with its own, because said amount was part of the was offered to respondents by Valle, Apetrior and Alcantara was
purchase price which FCI owed Garcia in payment for the sale of the outside scope of their authority thus it cannot be held liable.
disputed shares by the latter to the former. The money ‘paid’ by FCI
to SBTC thus properly belonged to Garcia. It is as if Garcia himself While respondents argue that Filipinas authorized Valle to solicit
paid his own debt, to SBTC but through a third party – FCI. investments from them – it even used the official documents and
facilities in consummating the transactions and were even confirmed
by Apetrior and Alcantara – arguing they exercise all the diligence In a contract of agency, a person binds himself to render some service
required of them in ascertaining authority of the agents. or to do something in representation or on behalf of another with the
latter’s consent. The underlying principle of the contract of agency is
ISSUE: Should Filipinas Life be held jointly and severally liable with to accomplish results by using services of others.
its co-defendants on the claim of respondents? YES.
To do a great variety of things like selling, buying, manufacturing, and
HELD: (1) There was due diligence. – The amounts were received transporting. Its purpose is to extend the personality of the principal
by Valle and remitted it to Filipinas Life, using official receipts, or the party for whom another acts and from he or she derives
authenticity of which are not disputed. The authority of Valle to solicit authority to act. It is said that the basis of agency is representation,
and to receive investments were also established because when the that is, the agent acts for and on behalf of the principal on matters
respondents sought confirmation, Alcantara (holds supervisory within the scope of his authority and said acts have the same legal
position) and Apetrior as branch manager confirmed Valle’s authority. effect as if they were personally executed by the principal. By this
They exercised due diligence in confirming validity of the legal fiction, the actual or real absence of the principal is converted
representations made by Valle. into his legal or juridical presence – qui facit per alium facit per se.
(2) Filipinas Life is solidarily liable. - Filipinas Life, as the principal, Elements of Agency
is liable for obligations contracted by its agent Valle. By the contract 1. Consent, express or implied, of the parties to establish the
of agency, a person binds himself to render some service or to do relationship;
something in representation or on behalf of another, with the consent 2. Object is the execution of a juridical act in relation to a
or authority of the latter. third person;
3. The agent acts as a representative and not for himself;
The general rule is that the principal is responsible for the acts of its 4. The agent acts within the scope of his authority.
agent done within the scope of its authority, and should bear the
damage caused to third persons. (2) Article 1897 does not apply. – It reinforces the familiar doctrine
that an agent, who acts as such, is not personally liable to the party
When the agent exceeds his authority, the agent becomes with whom he contracts. Same provision, presents two instances
personally liable for the damage. when an agent becomes personally liable to a third person.
1. The first is when he expressly binds himself to the obligation
But even when the agent exceeds his authority, the principal is still 2. The second is when he exceeds his authority. Here, the agent can
solidarily liable together with the agent if the principal allowed the be held liable if he does not give the third party sufficient notice of
agent to act as though the agent had full powers. his powers.
In other words, the acts of an agent beyond the scope of his authority Here, Edwin does not fall to the exceptions Deed of Assignment
do not bind the principal, unless the principal ratifies them, expressly clearly states that respondent Edwin signed as sales manager of
or impliedly. Ratification in agency is the adoption or confirmation Impact Systems . The position of manager is unique in that it
by one person of an act performed on his behalf by another presupposes the grant of broad powers with which to conduct the
without authority. business of the principal. The powers of an agent are particularly
broad in the case of one acting as a general agent or manager.
(3) There was ratification. - Filipinas Life cannot profess ignorance In the absence of agreement to the contrary, a managing agent may
of Valle’s acts. Even if Valle’s representations were beyond his enter into contracts he deems reasonably necessary or requisite
authority as a debit/insurance agent, Filipinas Life thru Alcantara for the protection of the interests of his principal entrusted to his
and Apetrior expressly and knowingly ratified Valle’s acts. management.
It cannot even be denied that Filipinas Life benefited from the (3) Edwin Acted within His Authority. – It may be assumed that
investments deposited by Valle in the account of Filipinas Life. Impact Systems desperately needed the sludge pump for its business
since after it paid the downpayment, it still persisted in negotiating
In our considered view, Filipinas Life had clothed Valle with apparent which culminated in the execution of the deed of receivables from
authority; hence, it is now estopped to deny said authority. Innocent Toledo Power. It was reasonably necessary or was required in order
third persons should not be prejudiced if the principal failed to adopt for him to protect the business. Had he not acted in the way he did,
the needed measures to prevent misrepresentation, much more so if the business of his principal would have been adversely affected and
the principal ratified his agent’s acts beyond the latter’s authority . he would have violated his fiduciary relation with his principal.
The act of the agent is considered that of the principal itself. Qui per
alium facit per seipsum facere videtur. “He who does a thing by an VIOLETA TUDTUD BANATE V. PHIL. COUNTRYSIDE RURAL
agent is considered as doing it himself.” BANK
G.R. No. 163825 | July 13, 2010
EUROTECH INDUSTRIAL TECHNOLOGIES V. EDWIN CUIZON
G.R. No. 167552 | April 23, 2007 FACTS: The Spouses Maglasang obtained a loan from PCRB and to
secure payment a REM was constituted on their property including
FACTS: Eurotech sold to Impact Systems various products. Cuizons the house thereon which was owned by the Spouses Cortel. Later on,
sought to buy from Eurotech one unit of sludge pump worth P250K the Spouses Maglasang obtained two other loans secured by
by making a downpayment of P50K. When the sludge pump arrived mortgages over the other properties. The two spouses asked for the
here Eurotech refused to deliver the same without fully settling their permission for the permission to sell the subject properties since the
indebtedness. Thus Edwin the sales manager and de Jesus the other loans were secured by other properties.
general manager, executed a Deed of Assignment of receivables from
Toledo Power in favor of Eurotech, thus the sludge pump was The spouses here claimed that the PCRB, acting through branch
delivered. manager Mondigo, verbally agreed to their request but required first
the full payment of the subject loan.
But despite this arrangement, the Cuizons still collected from Toledo
Power which prompted Eurotech to make several demands upon the The two spouses sold the subject properties to Banate. Then, they
Cuizons to pay their obligations. For failure to abide in a final demand used the amount to pay the subject loan. After settling such loan,
letter, Eurotech instituted a complaint for sum of money. In the PCRB gave the ODCT to Banate who was able to secure a new title
complaint, Edwin Cuizon was sued in his capacity as Sales Manager in her name but still carried the mortgage lien in favor of PCRB. PCRB
of Impact System. Here, Edwin argued that he is not a real party in refused to release the mortgage.
interest because he was acting as mere agent of the principal Impact
Systems. This prompted the petitioners to file a case for specific performance.
But PCRB claimed that payment for the three loans was necessary
ISSUE: Has Edwin Cuizon acted in excess of authority? – No. for the mortgage to be released. (‘Cross-collateral stipulation).
HELD: (1) Edwin acted within his authority as an agent. – He did HELD: (1) There was no novation that bound PCRB. – As to the
not become personally liable and thus it follows that Edwin is not a alleged novation, four requisites must be present
real party in interest who should be impleaded in the case. 1. A previous valid obligation;
2. An agreement of all parties concerned to a new contract;
3. Extinguishment of the old obligation; and There is no need to give or execute an SPA every time. It will depend
4. Birth of valid new obligation. upon what type of action you want the agent to
In this case the second requisite is lacking, for the consequent How Do You Create an Agency? Articles 1870, 1871 and 1872:
creation of a new contractual obligation, consent to both parties is
required. Here, if both parties involved are juridical entities, proof that ARTICLE 1870. Acceptance by the agent may also be express, or
the second contract was executed by persons with the property implied from his acts which carry out the agency, or from his silence
authority to bind their principals is necessary. or inaction according to the circumstances. (n)
Under the Corporation Code, the corporate powers of all corporations
shall be exercised by the Board of Directors. This can be delegated If you are being appointed as an agent, and you don’t want it. You
of such power to enter in to contrasts to some of its officers, should object or voice it out.
committees or agents.
ARTICLE 1870. Between persons who are present, the acceptance
(2) Doctrine of Apparent Authority. – The authority of corporate
of the agency may also be implied if the principal delivers his power
officer or agent in dealing with third persons, may be actual or
of attorney to the agent and the latter receives it without any objection.
apparent. With special reference to banks is the doctrine of apparent
(n)
authority. The existence of apparent authority may be ascertained
through:
ATRICLE 1872. Between persons who are absent, the acceptance of
the agency cannot be implied from the silence of the agent, except:
1. The general manner in which the corporation holds out an
(1) When the principal transmits his power of attorney to the agent,
officer or agent as having power to act, or in other words, the
who receives it without any objection;
apparent authority to act in general, with which it clothes him; or
(2) When the principal entrusts to him by letter or telegram a power of
2. The acquiescence in his acts of a particular nature, with actual
attorney with respect to the business in which he is habitually engaged
or constructive knowledge thereof, within or beyond the scope
as an agent, and he did not reply to the letter or telegram. (n)
of his ordinary powers.
ARTICLE 1873. If a person specially informs another or states by
The principal’s liability, however, is limited only to third persons who
public advertisement that he has given a power of attorney to a third
have been led reasonably to believe by the conduct of the principal
person, the latter thereby becomes a duly authorized agent, in the
that such authority exists, although none was given. In other words,
former case with respect to the person who has received the special
apparent authority is determined only by the acts of the principal
information, and in the latter case with regard to any person
and not of the acts of the agent. There can be no apparent authority
of an agent without acts or conduct on the part of the principal; such
acts or conducts must have been known and relied upon in good faith The power shall continue to be in full force until the notice is
as a result of the exercise of reasonable prudence by a third party as rescinded in the same manner in which it was given. (n)
claimant.
If Dacera appointed Ramos to be an agent, and he informs especially
(3) No proof showing that principal conducted that it gave Lieu saying that Ramos is his agent. So, as to Lieu, Ramos is
apparent authority to Mondigo. – No proof of the course of Dacera’s agent. If Decera revokes the authority of Ramos, Dacera
business, usages and practices of the bank about, or knowledge that should especially inform Liu.
the board had or is presumed to have of, its responsible officers acts
regarding bank branch affairs was ever adduced to establish the If Dacera published or posted on FB that, ‘To whom it may concern,
branch manager’s authority to verbally alter the terms of mortgage Ramos is my agent,’ Ramos is the agent of Dacera even as to third
contracts. Neither was there any allegation, much less proof that persons. In order to properly revoke the agency, Dacera should
PCRB ratified Mondigo’s act or is estopped to make a contrary claim. publish such revocation in the same way.
Although a branch manager, within his filed as to third persons, is the
general agent and is general charge of the corporation, with apparent That is the reason why you see in Water District something posted on
authority commensurate with the ordinary business entrusted him and a bulletin board showing somewhat like a ‘mugshot’ of persons
the usual course and conduct thereof, yet the power to modify or informing the people that such persons are no longer connected with
nullify corporate contracts remains generally in the board of directors. the Water District. ‘Any transactions regarding him are no longer
Being a mere branch manager alone is then insufficient to support authorized.’ They are not trying to embarrass these persons; they are
that Mondigo had “apparent authority” to verbally alter terms of written trying to revoke their authority as agents legally.
contract. do.
It is a settled rule that persons dealing with an agent are bound at their C. IMPLIED V. AGENCY BY ESTOPPEL
peril, if they would hold the principal liable, to ascertain not only the
fact of agency but also the nature and extent of the agent’s authority,
and in case either is controverted, the burden of proof is upon them YUN KWAN BYUNG V. PAGCOR
to establish it, which petitioners failed to do in this case. Hence, the G.R. No. 163553, December 11, 2009
alleged subsequent contract cannot prejudice PCRB as it is beyond
Mondigo’s authority. Article 1869 of the Civil Code states that implied agency is derived
from the acts of the principal, from his silence or lack of action, or his
failure to repudiate the agency, knowing that another person is acting
B. CREATION OF AGENCY on his behalf without authority. Implied agency, being an actual
agency, is a fact to be proved by deductions or inferences from other
ARTICLE 1869. Agency must be express, or implied from the acts of facts.
the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is action on his On the other hand, apparent authority is based on estoppel and can
behalf without authority. arise from two instances. First, the principal may knowingly permit the
agent to hold himself out as having such authority. Second, the
Agency may be oral, unless the law requires a specific form principal may clothe the agent with the indicia of authority as to lead
a reasonably prudent person to believe that the agent actually has
The basis of agency is representation, that is, the agent acts for and such authority. In an agency by estoppel, there is no agency at all, but
the one assuming the act as agent has apparent or ostensible,
on behalf of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were personally although not real, authority to represent another. The law makes no
executed by the principal. On the part of the principal, there must be presumption of agency and proving its existence, nature and extent is
incumbent upon the person alleging it. Whether or not an agency has
an actual intention to appoint or an intention naturally inferable from
his words or actions, while on the part of the agent, there must be an been created is a question to be determined by the fact that one
intention to accept the appointment and act on it. Absent such mutual represents and is acting for another.
intent, there is generally no agency. (Yun Kwan Byung v. PAGCOR,
G.R. No. 163553, December 11, 2009)
Implied agency and agency by estoppel is elucidated succinctly in the events which, without break in their continuity, result in the
case of Yun Kwan Byung v. PAGCOR. This speaks of a Korean accomplishment of the prime objective of the employment of the
national who gambled. That a casino is an agent of PAGCOR. broker – producing a purchaser ready, willing, and able to buy on the
owner’s terms. To be regarded as the “procuring cause” of a sale as
Yun Kwan Byung gambled and won several times, by the time he was to be entitled to a commission, a broker’s efforts must have been
going to convert the money, PAGCOR then claimed that they did not the foundation on which the negotiations resulting in a sale
authorize the casino where he won as their agent. That is why, there began [Medrano v. Court of Appeals, G.R. No. 150678, February 18,
is a discussion between implied agency and agency by estoppel in 2005, 452 SCRA 77, 88, citing Clark v. Ellsworth, 66 Ariz. 119, 184 P.
this case. 2d821 (1947)].
The counsel of Yun Kwan Byung is saying that even if it is not really Simply put, in Medrano v. Court of Appeals, it was clearly stated by
your agent, there could be an implied agency or even an agency by the Court that a broker is entitled if he/she is the procuring cause,
estoppel. Thus, in this particular case, the court had a reason to even if the sale was not consummated.
differentiate the two – when is there an implied agency and when
is there an agency by estoppel?
F. KINDS OF AGENT
In short, there really is agency in implied agency. It may be because
of the actions of the principal, refusal or repudiation. In agency by Are there different types of agent? Yes, we have general or special.
estoppel, there is no actual agency; only that the principal is estopped
from questioning the agency. ARTICLE 1876. An agency is either general or special.
The former comprises all the business of the principal. The latter, one
D. SALE OF LAND OR INTEREST or more specific transactions.
THEREIN
ARTICLE 1877. An agency couched in general terms comprises only
ARTICLE 1874. Acceptance by the agent may also be express, or acts of administration, even if the principal should state that he
implied from his acts which carry out the agency, or from his silence withholds no power or that the agent may execute such acts as he
or inaction according to the circumstances. (n) may consider appropriate, or even though the agency should
authorize a general or unlimited management. (n)
Take note: it is the authority which has to be in writing. If the authority
is not in writing, not only is the authority void, but also the sale as well. When you speak of a general agent, he does all the business of the
principal, but only the administrative acts (only the general business,
If the Deed of Sale is not in writing but the authority of the agent not those actions that are actually considered as acts of ownership).
is in writing, is the sale valid? How about a deed of sale which is
not in writing, but the authority is in writing, would that still be Examples of Acts of Mere Administration (which can be given to
considered as valid? What have you learned in contracts in your a general agent):
Law on Sales? Does a contract of sale have to be in writing to be
valid? It is not necessary. How about if the object of the sale is a piece 1. To sue for collection of debts;
of land or immovable property, does it have to be in writing for validity? 2. To employ workers or servants and employees needed for
Revisit your Law on Sales on that. the conduct of business;
3. To engage counsel to preserve the ownership and
ARTICLE 1875. Agency is presumed to be for a compensation, possession of the principal’s property;
unless there is proof to the contrary. (n) 4. To lease real property to another person for 1 year or less,
provided the lease is not registered;
Agency is presumed to be for compensation. 5. To make customary gifts for charity or to employees in the
business managed by the agent;
6. To borrow money if it be urgent and indispensable for the
E. BROKER V. AGENT preservation of the things under administration.
You have here the distinction between a broker and an agent. Is an

agent a broker? Is a broker an agent? G. WHEN SPECIAL POWERS OF
ATTORNEY NECESSARY
BROKER v. AGENT
Broker – negotiator between parties; he does NOT act in his own ARTICLE 1878. Special powers of attorney are necessary in the
name; he is the middleman or agent of both parties. following cases:
Agent – represents only one party who is the principal (1) To make such payments as are not usually considered as acts
of administration;
In Tan v. Gullas [441 Phil. 662, (2002)], we had occasion to define a (2) To effect novations which put an end to obligations already in
broker and distinguish it from an agent, thus: existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce
[O]ne who is engaged, for others, on a commission, the right to appeal from a judgment, to waive objections to the
negotiating contracts relative to property with the custody of venue of an action or to abandon a prescription already
which he has no concern; the negotiator between the other acquired;
parties, never acting in his own name but in the name of (4) To waive any obligation gratuitously;
those who employed him. [A] broker is one whose (5) To enter into any contract by which the ownership of an
occupation is to bring the parties together, in matter of immovable is transmitted or acquired either gratuitously or for
trade, commerce, or navigation. a valuable consideration;
(6) To make gifts, except customary ones for charity or those
An agent receives a commission upon the successful conclusion of made to employees in the business managed by the agent;
a sale. On the other hand, a broker earns his pay merely by bringing (7) To loan or borrow money, unless the latter act be urgent and
the buyer and the seller together, even if no sale is eventually indispensable for the preservation of the things which are
made. under administration;
(8) To lease any real property to another person for more than
Take note of the distinction between the two. one year;
(9) To bind the principal to render some service without
When is a broker entitled to compensation? compensation;
(10) To bind the principal in a contract of partnership;
In relation thereto, we have held that the term “procuring cause” in (11) To obligate the principal as a guarantor or surety;
describing a broker’s activity refers to a cause originating a series of (12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the Roque’s death constrained petitioner to deal with respondent Efren P.
agency; Roque, one of the surviving children of the late Dr. Roque, but the
negotiations broke down due to some disagreements. In a letter,
Any other act of strict dominion. (n) respondent advised petitioner “to desist from any attempt to enforce
the aforementioned contract of lease and memorandum of
Now, Article 1878 is very important because it speaks of the actions agreement”.
which require special powers of attorney (SPA).
On 15 February 1995, respondent filed a case for annulment of the
Technically, it is not accurately correct to say that everything needs
contract of lease and the memorandum of agreement, with a prayer
SPA. Article 1878 provides the actions which require SPA.
for the issuance of a preliminary injunction before the RTC alleging
Technically, it is not accurately correct to say that every transaction
must have an SPA because not all transactions are special. Some that he had long been the absolute owner of the subject property by
transactions may be covered by a general power. virtue of a deed of donation inter vivos executed in his favor by his
parents, Dr. Felipe Roque and Elisa Roque, and that the late Dr.
Special powers of attorney are necessary (1) to make such Felipe Roque had no authority to enter into the assailed agreements
payments as are not usually considered as acts of with petitioner.
administration-
The donation was made in a public instrument duly acknowledged by
Example: If a person is the purchaser of the company, he does not the donor-spouses before a notary public and duly accepted on the
need secure an SPA from the company for every purchase that he will same day by respondent before the notary public in the same
make if it is only a general business transaction. A SPA is required instrument of donation. The title to the property, however, remained
only if it is not considered as an act of administration. in the name of Dr. Felipe C. Roque, and it was only transferred to and
in the name of respondent sixteen years later.
Does a SPA need to be in writing? Under Art. 1878, it is not required
for a SPA to be in writing.
Respondent, while he resided in the United States of America,
Situation: A person went to the Office of Registrar to claim the TOR delegated to his father the mere administration of the property.
of his friend. He claims that he was given a SPA by his friend but it Respondent came to know of the assailed contracts with petitioner
was not in writing. How can he prove that he has a SPA to the only after retiring to the Philippines upon the death of his father.
Registrar if he does not have it in writing? The question was The trial court dismissed the complaint of respondent. On appeal, the
answered in the case below. CA reversed the decision of the trial court and held to be invalid the
Contract of Lease and Memorandum of Agreement.
Must the authority be in writing?
Article 1878 does not state that the authority be in writing. As long as ISSUE: W/N Dr. Felipe Roque was an authorized agent of the
the mandate is express, such authority may be either oral or written. respondent.
We unequivocably declared in Lim Pin v. Liao Tian, et al., 7 that the
requirement under Article 1878 of the Civil Code refers to the nature
HELD: NO. In a contract of agency, the agent acts in representation
of the authorization and not to its form. Be that as it may, the authority
must be duly established by competent and convincing evidence or in behalf of another with the consent of the latter.
other than the self-serving assertion of the party claiming that
such authority was verbally given (Patrimonio v. Gutierrez and Article 1878 of the Civil Code expresses that a special power of
Marasigan | GR No. 1887769 | June 4, 2014). attorney is necessary to lease any real property to another person for
more than one year. The lease of real property for more than one year
In the situation given, the person cannot just go to the Office of is considered not merely an act of administration but an act of strict
Registrar and claim that he has a SPA because that is a self-serving dominion or of ownership. A special power of attorney isthus
assertion by the one claiming that such authority was verbally given. necessary for its execution through an agent.
There should be some other person or some other document
who/which would testify that he has SPA to claim the TOR. It must not The Court cannot accept petitioner's argument that respondent is
come from the person claiming to be an agent or other than the guilty of laches. Laches, in its real sense, is the failure or neglect, for
assertion of the person claiming to be an agent.
an unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier; it is
Again, this abused our concept of SPA that it has to be in writing
because it was not written in the rules. SPA could be oral or written. negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
Special Power of Attorney refers to the nature of the grant of abandoned or declined to assert it. Respondent learned of the
authority. The grant of authority must be special and not as to its form. contracts only in February 1994 after the death of his father, and in
the same year, during November, he assailed the validity of the
But in practice you can’t really argue this in a government agency. But agreements. Hardly, could respondent then be said to have neglected
legally speaking, it need not be in writing. to assert his case for an unreasonable length of time. Neither is
respondent estopped from repudiating the contracts
SHOPPER’S PARADISE REALTY & DEVELOPMENT CORP. VS.
ROQUE In the case of Shoppers Paradise, it was leasing for more than one
G.R. No. 148775. January 13, 2004 year.
FACTS: Petitioner Shopper’s Paradise Realty & Development DOMINION INSURANCE CORPORATION VS. CA (2002)
Corporation, represented by its president, Veredigno Atienza, entered
into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, FACTS: In 1991, Rodolfo Guevarra (Guevarra) filed a civil case for
over a parcel of land in the name of Roque. Petitioner issued to Dr. sum of money against Dominion Insurance Corp. (Dominion) for the
Roque a check for P250,000.00 by way of “reservation payment.” amount advanced( P156,473.90) by Guevarra in his capacity as
manager of defendant to satisfy certain claims filed by defendant’s
Simultaneously, petitioner and Dr. Roque likewise entered into a client.
memorandum of agreement for the construction, development and
operation of a commercial building complex on the property. Dominion, however, stated that they are not liable to pay respondent
Conformably with the agreement, petitioner issued a check for because he had not acted within his authority as an agent for
another P250,000.00 “downpayment” to Dr. Roque. The contract of Dominion. They have instructed the respondent that the payment for
lease and the memorandum of agreement, both notarized, were never the claims of the insured should be taken from the revolving fund, not
annotated on the Certificate of title because of the untimely demise of from respondents’ personal money
Roque.
The pre-trial was always postponed. During one of the pre-trial
conferences, Dominion failed to arrive and the court declared them to
be in default. Dominion filed a Motion to Lift Order of Default but was Petitioners act of entrusting and delivering his TCT and Residence
denied by the court. The RTC rendered its decision making Dominion Certificate to Salvador was only for the purpose of helping him find a
liable to repay Guevarra for the sum advanced, other damages and money lender. Not having executed a power of attorney in her favor,
attorney’s fees. Dominion appealed but CA affirmed the decision of he clearly did not authorize her to be his agent in procuring the
RTC and denied the appeal of Dominion. mortgage. He only asked her to look for possible money
lenders. Article 1878 of the Civil Code provides:
Art. 1878. Special powers of attorney are necessary in the following
ISSUE/S:
cases:
xxxxxxxxx
(a) Whether or not Guevarra acted within his authority as agent of (7) To loan or borrow money, unless the latter act be urgent and
petitioner. indispensable for the preservation of the things which are under
administration;
HELD: xxxxxxxxx
(a) NO. By the contract of agency, a person binds himself to render (12) To create or convey real rights over immovable property;
some service or to do something in representation or on behalf x x x x x x x x x.
of another, with the consent or authority of the latter. The basis
for agency is representation. On the part of the principal, there As between petitioner and respondent, the court ruled that the failure
must be an actual intention to appoint or an intention of the latter to verify essential facts was the immediate cause of his
naturally inferrable from his words or actions, and on the part of predicament. Thus, assuming that both parties were negligent, the
the agent, there must be an intention to accept the appointment Court opines that respondent should bear the loss. His superior
and act on it,and in the absence of such intent, there is generally knowledge of the matter should have made him more cautious before
no agency. releasing the loan and accepting the identity of the mortgagor.
Given the particular circumstances of this case, the SC believed that
the negligence of petitioner is not enough to offset the fault of
Even though the contact entered into by Guevarra and Dominion was
respondent himself in granting the loan. The former should not be
with the word “special” the contents of the document was actually a
made to suffer for respondent’s failure to verify the identity of the
general agency. A general power permits the agent to do all acts for mortgagor and the actual status of the subject property before
which the law does not require a special power and the contents in agreeing to the real estate mortgage. While we commiserate with
the document did not require a special power of attorney. Art 1878 respondent -- who in the end appears to have been the victim of
provides for instances when a special power of attorney is required: scoundrels -- his own negligence was the primary, immediate and
1) To make such payment as are not usually considered as acts overriding reason that put him in his present predicament.
of administration.
XXXXXX To summarize, SC ruled that both law and equity favor
15) any other act of dominion petitioner. First, the relevant legal provision, Article 2085 of the Civil
Code, requires that the mortgagor be the absolute owner of the thing
The payment of claims is not an act of administration which requires x x x mortgaged. Here, the mortgagor was an impostor who executed
a special power of attorney before Guevarra could settle the the contract without the knowledge and consent of the
insurance claims of the insured. owner. Second, equity dictates that a loss brought about by the
concurrent negligence of two persons shall be borne by one who was
In the case of Dominion Insurance, this is actually a settlement and in the immediate, primary and overriding position to prevent it. Herein
not the usual way of business that's why and SPA is needed. respondent who, we repeat, is engaged in the business of lending
money secured by real estate mortgages could have easily avoided
ADRIANO VS. PANGILINAN (2002) the loss by simply exercising due diligence in ascertaining the identity
of the impostor who claimed to be the owner of the property being
FACTS: The petitioner Adriano is the registered owner of a parcel of mortgaged. Finally, equity merely supplements, not supplants, the
land covered by Transfer Certificate of Title No. 337942. Sometime law. The former cannot contravene or take the place of the latter.
on 1990, petitioner entrusted the original owner's copy of the TCT to
Salvador, a distant relative, for the purpose of securing a mortgage If it is mortgage, it needs an SPA because it involves a real property.
loan.
PEOPLE VS. CARPO (2001)
Thereafter without the knowledge and consent of petitioner, Salvador
mortgaged the property to Respondent Pangilinan. Subsequently FACTS: The accused Jaime Carpo impute error to the trial court for
when petitioner verified the status of his title with the RD of Marikina, relying on the testimony of a single witness in convicting them of
he was surprised to discover that there was already annotation for multiple murder complexed with attempted murder for the death of
REM in the title, purportedly executed by one Adriano, in favor of the Florentino Dulay, Norwela Dulay and Nissan Dulay, and the wounding
Respondent, in consideration of P60,000.00, petitioner then denied of Noemi Dulay.
that he executed deed.
Since the three (3) murders and attempted murder were produced by
After repeated demand by the petitioner that respondent return or a single act, namely, the explosion caused by the hurling of a grenade
into the bedroom of the Dulays, the case comes under Art. 48 of The
reconvey to him his title to the said property and when these demands
Revised Penal Code on complex crimes.
were ignored or disregarded, he instituted the present suit.
ISSUE: WON the exercise of attys power to compromise bound the
Respondent claimed that petitioner voluntarily entrusted his title accused Jaime?
Salvador for the purpose of securing a loan, thereby creating a
principal-agent relationship between the plaintiff and Salvador for the HELD: No. Article 1878 of the Civil Code and Sec. 23 of Rule 138 of
aforesaid purpose. Thus, according to respondent, the execution of the Rules of Court set forth the attorney's power to
the REM was within the scope of the authority granted to Salvador; compromise. Under Art. 1878 of the Civil Code, a special power of
that in any event that since the said TCT has remained with petitioner, attorney is necessary "to compromise, to submit questions to
the latter has no cause of action for reconveyance against him." The arbitration, to renounce the right to appeal from a judgment, to waive
trial court ruled in favor of the petitioner, and the CA reversed the said objections to the venue of an action or to abandon a prescription
decision. already acquired." On the other hand, Sec. 23, Rule 138 of the Rules
of Court provides, "(a)ttorneys have authority to bind their clients in
any case by any agreement in relation thereto made in writing, and in
ISSUE: Whether or not Salvador was acted as an agent of petitioner
taking appeal, and in all matters of ordinary judicial procedure, but
(to excuse the purchaser from concurrent neglience). they cannot, without special authority, compromise their clients'
litigation or receive anything in discharge of their clients' claims but
HELD: No. Since he knew that the property was being leased,
the full amount in cash."
respondent should have made inquiries about the rights of the actual
possessors. He could have easily verified from the lessees whether
the claimed owner was, indeed, their lessor.
The requirements under both provisions are met when there is a clear Security and Detective Agency and/or GM Ruperto Acle Jr.
mandate expressly given, by the principal to his lawyer specifically (petitioners).
authorizing the performance of an act. It has not escaped our attention Labor Arbiter ruled in favor of respondents. NLRC affirmed.
that in the present case counsel for both parties had no special power
of attorney from their clients to enter into a compromise. However, So, respondents subsequently filed a Motion for Issuance of a Writ of
insofar as Teresita was concerned, she was apprised of the Execution. But thereafter, they filed a Joint Manifestation
agreement and in fact had signed her name as instructed by the court,
acknowledging complete satisfaction of the award.
thereby tacitly ratifying the same.
As for accused-appellants, the aforecited dialogue between the court However, respondents again filed a Motion for the Issuance of an
and counsel does not show that they were ever consulted regarding Alias Writ of Execution for the Recovery of the Balance of the Award,
the proposed settlement. In the absence of a special power of claiming that they received less than the award of LA. This motion was
attorney given by accused-appellants to their counsel, the latter can granted
neither bind nor compromise his clients' civil liability.
Petitioner moved for reconsideration, but was denied. Hence, this
Consequently, since Atty. Sanglay and Atty. Rafael had no specific petition.
power to compromise the civil liability of all accused-appellants, its
approval by the trial court which did not take the precautionary PETITIONERS’ CONTENTION:
measures to ensure the protection of the right of accused-appellants That respondent Prado’s acts of entering into a compromise
not to be deprived of their property without due process of law, could agreement and in accepting an advance of P5,000 from petitioner
not legalize it. For being violative of existing law and jurisprudence, Acle constituted a novation of the award adjudged by the LA.
the settlement should not be given force and effect.
ISSUE: WON the compromise agreement is valid and enforceable.
Discussion: power to enter compromise entered by the lawyer (NOT VALID)
without authority of the accused. The same with the case of Anacleto
vs Van Twest. HELD: The compromise agreement is not valid:
a. There is no compliance with the NLRC rules which requires the
ANACLETO V. ALEXANDER VAN TWEST assistance of counsel and approval of the LA in approving the
G.R. No. 131411, August 29, 2000 compromise agreement; and
FACTS: A complaint for reconveyance was filed in the name of There is no compliance with Article 1878, NCC which requires that
Alexander Van Twest and Euroceanic against Anacleto and Bongar. a SPA is necessary to effect novations, to compromise, to waive any
The case was filed in 1995. It was stated that Van Twest has been obligation gratuitously, any in any other act of strict dominion. In this
missing since 1992 but is duly represented by counsel as agent case, there was no showing that respondent Prado was duly
and/or general counsel – Atty. Perez. authorized by co-respondent Tuscano to waive a part of the
award given to her – considering that respondent Prado executed
Atty. Perez entered into a compromise agreement with Anacleto and the compromise agreement not only on his own behalf but also on
Bongar and the trial court rendered a judgment on such. Anacleto filed behalf of co-respondent Tuscano
a manifestation submitting a copy of an SPA. Anacleto sought to defer
compliance with obligation under the compromise agreement.
It was admitted that Atty. Perez did not have SPA from Van Twest to MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V.
enter into a compromise agreement but claimed that the law firm of UNCHUAN
the former counsel of Anacleto was informed of such fact. But the trial G.R. No. 128537, June 1, 2016
court denied the motion of Anacleto stating that she already knew of
such fact disclosed to her. FACTS: Richard Unchuan filed a complaint for Declaration of Nullity
of DOAS against MCIAA claiming that he was the rightful owners of
HELD: (1) Anacleto is Not Estopped, No SPA. – A compromise parcels of land in question. Unchuan alleged that he came to know
contract is a contract whereby the parties make reciprocal that a certain Godinez who was the supposed attorney-in-fact of the
concessions. It is only admitted herein that the authority Atty. Perez registered owners of the lots he bought, sold both lots to CAA (now,
had was the retainer agreement with Van Twest. the MCIAA) under a DOAS.
Clearly the retainer agreement did not include a special authority MCIAA argued that Godinez acting as representative of the heirs of
to enter into the questioned compromise agreement as required the registered owners, sold the lot to the Republic of the Philippines
under Rule 128, Section 23 and Article 1878(3) which requires that thru CAA thereafter CAA took possession of said property upon the
there be a special power of attorney for an agent to enter into payment of the purchase price and had been in the possession of the
compromise Republic ever since. There was also a deed of partition attesting to
the fact of sale in favor of the government.
(2) Euroceanic is a juridical person. – The law specifically requires
that juridical persons may enter into a compromise only in the form
But, the RTC ruled that Godinez was not legally authorized to act as
and with the requisites which may be necessary to alienate their
attorney-in-fact of his brothers and sisters and to transact on their
property. The power to compromise or settle claims in favor of or
behalf because he was not clothed with a special power of attorney
against the corporation is vested in the board of directors. Hence, in
granting him authority to sell the disputed lots.
the absence of any authorization from the board of directors of
Euroceanic, Atty. Perez could not file any suit in its behalf, regardless
ISSUE: Whether the deed of absolute sale entered into by MCIAA and
of the fact that Van Twest was the former chairman of its board.
Atanacio Godinez is void. – Yes, except as to Atanacio.
(3) Compromise Agreement is void. – Atty. Perez had no authority
HELD: (1) Other registered owners were represented with
to enter into a compromise agreement in behalf of Van Twest or authority. – The sale transaction executed between Atanacio acting
Euroceanic. Thus, not only the compromise agreement is void but as an ‘agent’ of his fellow registered owners and the CAA was void
also the judgment based on such compromise agreement. Here, a insofar as the other registered owners were concerned. They were
void contract does not become valid and enforceable because it is represented without a written authority from them in violation of the
based on a judgment upon compromise. requirements under 1874 and 1878(5).
LOYOLA SECURITY AND DETECTIVE AGENCY V. NATIONAL The significance of requiring the authority of an agent to be put into
LABOR RELATIONS COMMISSION writing was amplified in DIZON V. COURT OF APPEALS:
May 9, 1995
”When the sale of a piece of land or any interest thereon is through
FACTS: This involves a complaint for illegal dismissal, etc. filed by an agent, the authority of the latter shall be in writing; otherwise, the
Victor Prado Sr. and Matilde Tuscano (respondents) against Loyola 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, either to conduct the general business of the

principal or to execute a binding contract containing terms and What is authority?
conditions which are in the contract he did execute. A special power The power of the agent to affect the legal relations of the principal by
of attorney is necessary to enter into any contract by which the acts done in accordance with the principal’s manifestation of consent
ownership of an immovable, is transmitted or acquired either to him. The authority of the agent is the very existence – sine qua non
gratuitously or for a valuable consideration. The express mandate – of the principal and agent relationship. This authority, unless it is
required by law to enable an appointee of an agency couched in otherwise agreed, includes only the authority to act for the benefit of
general terms must be one that must expressly mention a sale or that the principal, and the source of the authority is the principal and never
includes a sale as a necessary ingredient of the act mentioned. For the agent (Clikas vs. Steele).
the principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in clear What are the different kinds of authority?
and unmistakable language. When there is an reasonable doubt that
the language so used conveys such power, no such construction shall 1. Actual – when it is actually granted, and it may be express
be given the document.” or implied, it results from what the principal indicates to the
agent.
Thus, without an SPA specifying his authority to dispose of an
immovable, Atanacio could not be legally considered as the 2. Express – when it is directly conferred by words.
representative of the other registered co-owners of the properties in
question. Atanacio’s act of conveying the lots cannot be a valid source 3. Implied – when it is incidental to the transaction or
of obligation to bind all the other registered co-owners and their heirs reasonably necessary to accomplish the purpose of the
because he was not clothed with authority to enter into a contract agency, and therefore, the principal is deemed to have
with CAA. actually intended the agent to possess.
(2) Valid as to Atanacio. – It was not entirely void because the lack 4. Apparent or Ostensible – when it is conferred by words,
of consent by the other co-owners in the sale was with respect to their conduct or even by the silence of the principal which causes
shares only. Although the sale transaction insofar as other heirs of the a third person reasonably to believe that a particular
registered owners was void, the sale insofar as the extent of person, who may or may not be the principal’s agent, has
Atanacio’s interest is concerned, remains valid. Atanacio is one of the actual authority to act for the principal. Ostensible authority
registered co-owners and may validly dispose his undivided share is another name for authority by estoppel.
in the lots. Thus, CAA became a co-owner with respect to the aliquot
5. General – when it refers to all businesses of the principal.
share of Atanacio
6. Special – when it is limited only to one or more specific
Sale of real property so there must be a written SPA. transactions.
ARTICLE 1879. A special power to sell excludes the power to By necessity or by operation of law, when it is demanded by virtue of
mortgage; and a special power to mortgage does not include the the existence of an emergency, it terminates when the emergency has
power to sell. passed.
So, these two powers are different thus it must be expressly given. SUMMARY OF STATUS OF CONTRACT ENTERED INTO BY AN
AGENT
The following are included in the Power to Sell:
1. Find a purchaser or to sell directly; Authority from Contract is Status of contract
2. Deliver the property; Principal entered in behalf
3. Make the usual representation and warranty of the…
4. Execute the necessary transfer documents YES PRINCIPAL VALID – The
5. Fix the terms of the sale unless there be set conditions that principal is bound.
are stipulated by the principal; YES AGENT VALID – Agent is
6. Sell only for cash as this is advantageous to the principal bound unless it
7. Receive the price unless he was authorized only to solicit involves something
orders belonging to the
principal
If you are given the power to sell you are not allowed to sell it in NO PRINCIPAL UNENFORCEABLE
credit. NO AGENT VALID – Agent is
bound
Powers Not Included in a Power to Mortgage
1. The power to sell; ARTICLE 1882. The limits of the agent's authority shall not be
2. The power to execute a second mortgage considered exceeded should it have been performed in a manner
3. To mortgage for the benefit of the agent or for the benefit more advantageous to the principal than that specified by him. (1715)
of any third person, unless contrary has been clearly
indicated. It is easy for us to say “within the limits of his authority.” But what
constitutes as the limit of authority?
ARTICLE 1880. A special power to compromise does not authorize
submission to arbitration. Is it required that all the actions to be considered as within the limits
of authority in the SPA? For example, you were tasked to buy soap
Why? Because the principal may trust the agent, but the principal for ₱10.00, but you found a ₱9.00 one instead. Is it considered
does not trust the arbitrator. beyond your authority?
ARTICLE 1881. The agent must act within the scope of his authority. Based on Article 1882, it is not beyond your authority. In fact, that
He may do such acts as may be conducive to the accomplishment of is more advantageous to the principal.
the purpose of the agency.
The test really is “would the principal enter to this transaction?” If
Requisites for principle to be bound by active agent: the answer is yes, you are not considered to have exceeded the
authority granted to you.
1. The agent must act on behalf of the principal;
2. The agent must act within the scope of his authority ARTICLE 1883. If an agent acts in his own name, the principal has
no right of action against the persons with whom the agent has
If one requisite is missing, then the principal may not be bound. contracted; neither have such persons against the principal.
If that is the case, then who would be bound by the action of the
agent? The agent, personally, but of course with exception.
In such case the agent is the one directly bound in favor of the person 2. To answer for damages which through his non-performance
with whom he has contracted, as if the transaction were his own, the principal may suffer.
except when the contract involves things belonging to the principal. 3. To finish the business already begun on the death of the
principal should delay entail danger.
The provisions of this article shall be understood to be without 4. To observe the diligence of a good father of a family in the
prejudice to the actions between the principal and agent. (1717) custody and preservation of the goods forwarded to him by
the owner in case he declines an agency, until an agent is
appointed.
H. KINDS OF PRINCIPAL 5. To advance the necessary funds should there be a stipulation
to do so.
What are the different kinds of principals? 6. To act in accordance with the instructions of the principal, and
in default thereof, to do all that a good father of a family would
1. Disclosed – if at the time of the transaction contracted by do.
the agent, the other party thereto has known that the 7. Not to carry out the agency if its execution would manifestly
agent is acting for the principal and has known the result in loss or damage to the principal.
principal’s identity. 8. To answer for damages if there be a conflict between his
interests and those of the principal, he should prefer his own.
2. Partially disclosed – if the other party knows or has 9. Not to loan to himself if he has been authorized to lend money
reasons to know that the agent is or may be acting for a at interest.
principal but is unaware of the principal’s identity. The 10. To render an account of his transactions and to deliver to the
partially disclosed principal may enforce against the third principal whatever he may have received by virtue of the
person the contract of the agent like any disclosed agency.
principal. Similarly, the third person has the right of action 11. To be responsible in certain cases for the act of the substitute
against the principal. appointed by him.
12. To pay interest on funds he has applied to his own use.
3. Undisclosed – if the party has no notice of the fact that
the agent is acting as such for a principal. These summarize the provisions to be discussed.
If Disclosed, the 3rd person knows who the principal is.
ARTICLE 1886. Should there be a stipulation that the agent shall
advance the necessary funds, he shall be bound to do so except when
If Partially Disclosed, the 3rd person knows that the agent is acting as
the principal is insolvent.
an agent, but he does not know who the principal is.
Example: In bidding of artworks. The bidders know that there is a ARTICLE 1888. An agent shall not carry out an agency if its execution
principal but they do not know who is the principal. would manifestly result in loss or damage to the principal.
If Undisclosed, the 3rd person has no idea at all that there is a ARTICLE 1889. The agent shall be liable for damages if, its execution
principal. would manifestly result in loss or damage to the principal.
REMEDY OF THE PRINCIPAL – He can demand from the agent ARTICLE 1890. If the agent has been empowered to borrow money,
damages for his failure to comply with the agency. he may himself be the lender at the current rate of interest. If he has
been authorized to lend money at interest, he cannot borrow it without
REMEDY OF THE 3RD PERSON WITH WHOM THE AGENT the consent of the principal.
CONTRACTED IN CASE THE OBLIGATION IS NOT COMPLIED
WITH In Art 1889 – please take note of the word MANIFESTLY. Just
because it will damage the principal, it doesn’t excuse from performing
• If the case falls under the general rule, he can sue the the obligation. It must be MANIFESTLY RESULT IN LOSS.
agent.
• But, when the contract involves things belonging to the In Art. 1890 - If he has been authorized to lend money at interest, he
principal, he can sue the principal. cannot borrow it without the consent of the principal. WHY?
• But, if it cannot be determined without litigation who is He may be a good lender but a bad borrower.
liable, he can sue both
ARTICLE 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
I. OBLIGATIONS OF THE AGENT received by virtue of the agency, even though it may not be owing to
the principal.
Acceptance by an agent is necessary in a contract of agency for him
to be bound, but not compulsory. Thus, if the agent wants to decline Every stipulation exempting the agent from the obligation to render
his appointment, he must immediately react so that supposed an account shall be void. (1720a)
principal may be put on notice. (KALIBO, JR. v. CA)
ARTICLE 1884. The agent is bound by his acceptance to carry out

the agency and is liable for the damages which, through his non- J. AUTHORITY V. INSTRUCTIONS
performance, the principal may suffer.
ARTICLE 1887. In the execution of the agency, the agent shall act in
He must also finish the business already begun on the death of the accordance with the instructions of the principal.
principal, should delay entail any danger.
In default thereof, he shall do all that a good father of a family would
ARTICLE 1885. In case a person declines an agency, he is bound to do, as required by the nature of the business.
observe the diligence of a good father of a family in the custody and
preservation of the goods forwarded to him by the owner until the If the principal is no longer solvent, the agent is no longer obliged to
latter should appoint an agent. The owner shall as soon as practicable advance the necessary funds.
either appoint an agent or take charge of the goods.
AUTHORITY INSTRUCTIONS
GENERAL OBLIGATIONS OF AN AGENT TO HIS PRINCIPAL Sum total of powers committed Direct the manner of
1. To act with the utmost good faith and loyalty for the or permitted to the agent by the transacting the authorized
furtherance and advancement of the interests of the principal. principal business and contemplates
2. To obey the principal’s instructions. only a private rule of guidance
3. To exercise reasonable care. to the agent.
Relates to the subject with Refers to the manner or more of
SPECIFIC OBLIGATIONS which the agent is empowered his action with respect to
1. To carry out the agency he has accepted. to deal or the kinds of business matters which in their
or transactions upon which he substance are within the scope Authority to appoint but Agent liable for acts of sub-
is powered to act. of permitted action. not designated by agent if the sub-agent is
Limitations of authority are Without significance as against principal notoriously incompetent or
operative as against those who those dealing with the agent insolvent
have or are charged with with neither knowledge nor Authority to appoint and Agent is released from any
knowledge of them. notice of them. designated by principal liability from the acts of the
Contemplated to be made Not expected to be made sub-agent
known to the 3rd person dealing known to those with whom the
with the agent. agent deals. IF THERE ARE 2 OR MORE AGENTS, THE TYPE OF LIABILITY
Is the agent bound by the instruction of the principal? Is a 3rd ARTICLE 1893. In the cases mentioned in Nos. 1 and 2 of the
person obliged to know the instruction? preceding article, the principal may furthermore bring an action
against the substitute with respect to the obligations which the latter
Scenario: Let’s say the authority is to buy flowers. But, the instruction has contracted under the substitution. (1722a)
of the principal is to buy Tulip. The agent forgot the instruction and
bought Santan from you, a flower vendor, instead. The principal ARTICLE 1894. The responsibility of two or more agents, even
insists that he should not be bound because the transaction was not though they have been appointed simultaneously, is not solidary, if
according to his instruction. solidarity has not been expressly stipulated. (1723)
Take note of this because the nature of the liability changes if there
Are you bound by the principal’s instruction? No.
are two or more principals.
Instructions direct the manner of transacting the authorized business If there are two or more agents, it is not solidary. It is joint.
and contemplates only a private rule of guidance to the agent.
ARTICLE 1895. If solidarity has been agreed upon, each of the
K. SUB-AGENT agents is responsible for the non-fulfillment of agency, and for the fault
or negligence of his fellow agents, except in the latter case when the
ARTICLE 1892. The agent may appoint a substitute if the principal fellow agents acted beyond the scope of their authority. (n)
has not prohibited him from doing so; but he shall be responsible for
the acts of the substitute: You are responsible for your agent.
(1) When he was not given the power to appoint one; ARTICLE 1896. The agent owes interest on the sums he has applied
(2) When he was given such power, but without designating the to his own use from the day on which he did so, and on those which
person, and the person appointed was notoriously incompetent or he still owes after the extinguishment of the agency. (1724a)
insolvent.
ARTICLE 1897. The agent who acts as such is not personally liable
All acts of the substitute appointed against the prohibition of the to the party with whom he contracts, unless he expressly binds himself
principal shall be void. (1721) or exceeds the limits of his authority without giving such party
sufficient notice of his powers. (1725)
EXAMPLE: Ms. Liu made an SPA for Mr. Polinar. However, Mr. ARTICLE 1898. If the agent contracts in the name of the principal,
Polinar is busy at that time. So, she gave her SPA to Mr. Alag. The exceeding the scope of his authority, and the principal does not ratify
SPA of Mr. Polinar was to buy coffee. Ms. Caybot is the one who the contract, it shall be void if the party with whom the agent
released the coffee. contracted is aware of the limits of the powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the
Ms. Caybot told Mr. Alag: “You are not the agent, it’s Mr. Polinar” principal's ratification. (n)
Is the contention of Ms Caybot valid? NO. The agent may appoint a Take note of this: If the agent contracts in the name of the principal,
substitute if the principal has not prohibited him from doing so. exceeding the scope of his authority, and the principal does not ratify
the contract, it shall be void if the party with whom the agent
GENERAL RULE: The agent can appoint a substitute contracted is aware of the limits of the powers granted by the principal.
EXCEPTION: If substitution is prohibited by the principal.
If the third party is aware that the authority given has already been
SPOUSES MAY VILLALUZ AND JOHNNY VILLALUZ, JR. VS LBP exceeded, then it is already void, unless contract was ratified by the
GR. No. 192602 | January 18, 2007 principal.
The law creates a presumption that an agent has the power to appoint ARTICLE 1899. If a duly authorized agent acts in accordance with the
a substitute. The consequence of the presumption is that, upon valid orders of the principal, the latter cannot set up the ignorance of the
appointment of a substitute by the agent, there ipso jure arises an agent as to circumstances whereof he himself was, or ought to have
agency relationship between the principal and the substitute, i.e., the been, aware. (n)
substitute becomes the agent of the principal. As a result, the principal
is bound by the acts of the substitute as if these acts had been ARTICLE 1900. So far as third persons are concerned, an act is
performed by the principal's appointed agent. Concomitantly, the deemed to have been performed within the scope of the agent's
substitute assumes an agent's obligations to act within the scope of authority, if such act is within the terms of the power of attorney, as
authority, 18 to act in accordance with the principal's instructions, 19 written, even if the agent has in fact exceeded the limits of his authority
and to carry out the agency, 20 among others. In order to make the according to an understanding between the principal and the agent.
presumption inoperative and relieve himself from its effects, it is (n)
incumbent upon the principal to prohibit the agent from appointing a
substitute. Even if it violates the instruction, provided that it is within the authority,
then it is considered to have been performed within the agent’s
4 INSTANCES WHERE A SUB-AGENT IS APPOINTED AND THE authority.
EFFECTS OF EACH:
WAYS by Which the Agent’s Authority May Be BROADENED OR
Instance Effect RESTRICTED
No prohibition Agent responsible for all the
acts of sub-agent 1. By implication – agent’s authority extends not only to express
Prohibition Sub-agent’s acts are VOID requests, but also to those acts and transactions incidental
as to the principal thereto. It embraces all the necessary and appropriate means to
accomplish the desired end.
That’s also the reason why an SPA bears the following provision
‘all other actions incidental to the aforementioned…” ARTICLE 1902. A third person with whom the agent wishes to
contract on behalf of the principal may require the presentation of the
2. By usage & custom – An agent’s authority may not be enlarged power of attorney, or the instructions as regards the agency. Private
through usage and custom in the following cases: or secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions
Where it is sought to: shown them.
• Vary the terms of an express authorization;
• Dispense with a legal requirement enacted for a ARTICLE 1903. The commission agent shall be responsible for the
principal’s benefit; goods received by him in the terms and conditions and as described
• Change a rule of law or dispense with a formality in the consignment, unless upon receiving them he should make a
required by law; written statement of the damage and deterioration suffered by the
• Vary an essential quality of the agency relationship. same. (n)
GENERAL RULE: Principal must have notice of the alleged custom, Who is a commission agent? One whose business is to receive and
before the agent’s acts, in accordance therewith, may bind the sell goods for a commission and who is entrusted by the principal with
principal. the possession of goods to be sold and usually in selling his own
name.
EXCEPTIONS:
1. Where the principal and the agent reside in the same An example of this is a consignment or a consignment sale. The
community, use is definite and well-known, and the agent property was given to you to sell and you earn your commission.
has no notice that he is to act to the contrary;
2. Where the agent is authorized to deal in a particular place ARTICLE 1904. The commission agent who handles goods of the
or in a particular market exchange. same kind and mark, which belong to different owners, shall
distinguish them by countermarks, and designate the merchandise
That is also the reason in SPAs, you’ll see there “all other actions respectively belonging to each principal. (n)
which are incidental to the aforementioned…”. That is considered a
safe provision for the one granting authority. There is also ratification, ARTICLE 1905. The commission agent cannot, without the express
“hereby ratifying whatever has been done…”. That is the standard or or implied consent of the principal, sell on credit. Should he do so, the
sample SPA. principal may demand from him payment in cash, but the commission
agent shall be entitled to any interest or benefit, which may result from
It could also be broadened or restricted by usage and custom. such sale.
An agent’s authority may not be enlarged through usage and custom ARTICLE 1906. Should the commission agent, with authority of the
in the following cases: Where it is sought to… principal, sell on credit, he shall so inform the principal, with a
• Vary the terms of an express authorization statement of the names of the buyers. Should he fail to do so, the sale
• Dispense with a legal requirement enacted for the principal’s shall be deemed to have been made for cash insofar as the principal
benefit is concerned. (n)
• Change a rule of law or dispense with a formality required by
law; Take note: Sell on credit. He shall inform the principal. If this is not
• Vary an essential quality of the agency relationship. done this is considered to have made in cash.
Be careful when it comes to usage and customs. It is more prudent to ARTICLE 1907. Should the commission agent receive on a sale, in
have it in writing rather than to rely on usage and custom. addition to the ordinary commission, another called a guarantee
commission, he shall bear the risk of collection and shall pay the
GENERAL RULE: Principal must have notice of the alleged custom, principal the proceeds of the sale on the same terms agreed upon
before the agent’s acts, in accordance therewith, may bind the with the purchaser. (n)
principal.
ARTICLE 1908. The commission agent who does not collect the
EXCEPTIONS: credits of his principal at the time when they become due and
1. Where the principal and the agent reside in the same demandable shall be liable for damages, unless he proves that he
community, the usage is definite and well known, the exercised due diligence for that purpose.
agent has no notice that he is to act to the contrary;
2. Where the agent is authorized to deal in a particular place
Commission agents is very dated. Now it’s only contractual or in a
or in a particular market exchange.
distributor level when you talk about commission agents. Note that if
there is no contract, the provisions on the civil code will apply, but if
3. By necessity – the existence of an emergency or other unusual
there is a contract the contract will be followed.
conditions may operate to invest in an agent authority to meet
the emergency, provided:
a. The emergency actually exists ARTICLE 1909. The agent is responsible not only for fraud, but also
b. Agent is unable to communicate with the principal for negligence, which shall be judged with more or less rigor by the
c. Agent’s enlarged authority is exercised for the courts, according to whether the agency was or was not for a
principal’s protection; and compensation.
d. The means adopted are reasonable under the
circumstances. Of course, that would be equitably decided if there is a compensation
or not.
4. By certain doctrines – apparent authority; liability by estoppel;
ratification.
L. OBLIGATIONS OF THE PRINCIPAL
5. By the ejusdem generis rule – such that where there is an
Since this is the Law of Agency, between the Principal and the Agent,
instrument or any kind, an enumeration of specific matter is
there are really more obligations which pertain to the Agent compared
followed by a general phrase is held to be limited in scope by the
to that of the Principal.
specific matter.
In eiusdem generis, for example “the agent is authorized to do the ARTICLE 1910. The principal must comply with all the obligations
following…and any other acts.” It means that it is limited only to those which the agent may have contracted within the scope of his authority.
previously mentioned acts.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound, except when he ratifies it expressly or tacitly.
ARTICLE 1901. A third person cannot set up the fact that the agent
has exceeded his powers, if the principal has ratified, or has signified
his willingness to ratify the agent's acts. (n)
How can you make sure that the Principal is bound by the public sale before he can actually appropriate for himself. If there’s no
contract entered into by the agent? – It must be within the other buyer, that is the time he can appropriate it.
authority of the agent.
ARTICLE 1915. If two or more persons have appointed an agent for
The other requirement is that he must act in behalf of the principal a common transaction or undertaking, they shall be solidarily liable to
or in the name of the principal because the agent is merely an the agent for all the consequences of the agency. (1731)
extension of the personality of the principal.
What if there are many principals as a customary agent? For a
As for any obligation wherein the agent has exceeded his authority or common transaction or undertaking, they shall be solidarily liable.
power, the principal is not bound, except when he ratifies it expressly
or tacitly. For plurality of agent, the liability is joint.
ARTICLE 1911. Even when the agent has exceeded his authority, the For plurality of principal, the liability is solidary for all the
principal is solidarily liable with the agent if the former allowed the consequences of the agency.
latter to act as though he had full powers.
ARTICLE 1916. When two persons contract with regard to the same
The basis of this is actually the Principle of Estoppel. The principal is thing, one of them with the agent and the other with the principal, and
estopped to deny if he allowed the agent to act as though he had full the two contracts are incompatible with each other, that of prior date
powers. shall be preferred, without prejudice to the provisions of article 1544.
(n)
RATIFICATION VS. ESTOPPEL
RATIFICATION ESTOPPEL ARTICLE 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
Rests on intention. Rests on prejudice. person who may have first taken possession thereof in
good faith, if it should be movable property.
So that you would not prejudice
a third person who has relied Should it be immovable property, the ownership shall
upon the previous action or belong to the person acquiring it who in good faith first
statement of the agent as recorded it in the Registry of Property.
though he had full powers.
Should there be no inscription, the ownership shall pertain
Affects the entire transaction Affects only relevant parts of to the person who in good faith was first in the possession;
from the beginning. the transaction. and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. (1473)
It cures all the defects of the
transaction. Referring to first registration in good faith. This would take precedence
compared to the one who takes possession in a prior date.
Substance is confirmation of an Substance is the principal's
unauthorized act or conduct inducement to another to act to
ARTICLE 1917. In the case referred to in the preceding article, if the
after it has been done. his prejudice.
agent has acted in good faith, the principal shall be liable in damages
to the third person whose contract must be rejected. If the agent acted
ARTICLE 1912. The principal must advance to the agent, should the in bad faith, he alone shall be responsible. (n)
latter so request, the sums necessary for the execution of the agency.
Classic Example: Selling a property through an agent, and buyer
Should the agent have advanced them, the principal must reimburse bought the property directly to the principal (but it is different if it is a
him therefor, even if the business or undertaking was not successful, broker).
provided the agent is free from all fault.
ARTICLE 1918. The principal is not liable for the expenses incurred
The reimbursement shall include interest on the sums advanced, by the agent in the following cases:
from the day on which the advance was made.
(1) If the agent acted in contravention of the principal's instructions,
Take note of what we've discussed in the previous session that the unless the latter should wish to avail himself of the benefits derived
agent may advance, subject to reimbursement by the principal. from the contract;
The third paragraph is similar to a partner who used the money in the (2) When the expenses were due to the fault of the agent;
partnership coffers. So again, both of them have the fiduciary duty to
account. (3) When the agent incurred them with knowledge that an
unfavorable result would ensue, if the principal was not aware
ARTICLE 1913. The principal must also indemnify the agent for all thereof;
the damages which the execution of the agency may have caused the
latter, without fault or negligence on his part. (4) When it was stipulated that the expenses would be borne by the
agent, or that the latter would be allowed only a certain sum. (n)
This is actually a type of legal indemnification. You do not have to do
it contractually. There is a provision provided by law for the principal Note: Familiarize for these are the grounds for the principal to actually
to indemnify the agent. avoid being liable to an agent.
ARTICLE 1914. The agent may retain in pledge the things which are For the first ground (Take note): It is not in contravention with the
the object of the agency until the principal effects the reimbursement authority given, it refers to the contravention to the principal’s
and pays the indemnity set forth in the two preceding articles. instruction because if it is in contravention with the authority given, the
principal may not be bound, but in this particular case, principal is
Art. 1914 is an example of a legal pledge. In the event that the bound to third person, but he need not reimburse the expenses
principal does not reimburse for the advances made by the agent, or incurred by the agent because it in contravention with principal’s
instruction.
did not pay for the indemnity under Art. 1913, the agent can actually
hold the thing in pledge.
For the fourth ground: Unless the expenses incurred by the agent
Can the agent appropriate the things given or the things which exceeded than what is stipulated provided with valid reason or
may be the object of the agency for himself? Can he appropriate justification by the agent, hence, the principal cannot hide behind this
provision.
it for himself (agent)? (Revisit the rule on pledge in Credit
Transactions) There are procedures such as there is a need of a
Those are the obligation of a principal which is very few compared to b. ARTICLE 1931 – Anything done by the agent, without
that of an agent. knowledge of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall be fully
effective with respect to third persons who may have contracted
with him in good faith.
M. MODES OF EXTINGUISHMENT OF Discussion: Take note of the words "good faith". The third
person must have no knowledge of the death of the principal.
AGENCY
c. ARTICLE 1884 – The agent is bound by his acceptance to carry
ARTICLE 1919. Agency is extinguished: out the agency and is liable for the damages which, through his
non-performance, the principal may suffer. He must also finish
(1) By its revocation; the business already begun on the death of the principal, should
delay entail any danger.
(2) By the withdrawal of the agent;
Discussion: You have that holdover and duty to finish the
(3) By the death, civil interdiction, insanity or insolvency of the business with them in cases of endangerment due to delays.
principal or of the agent;
(4) By the dissolution of the firm or corporation which entrusted or

accepted the agency;
II. REVOCATION
(5) By the accomplishment of the object or purpose of the agency; ARTICLE 1920. The principal may revoke the agency at will, and
compel the agent to return the document evidencing the agency. Such
(6) By the expiration of the period for which the agency was revocation may be express or implied.
constituted. (1732a)
GENERAL RULE: Agency may be revoked at will - the principal may
(1) By its revocation; revoke the agency at will because agency is based on trust and
confidence. It can be revoked anytime because revocation is the
What can be given, can be revoked. The power given by the principal, prerogative of the principal even if the agency is onerous or the period
the same can be revoked. fixed for its performance has not lapsed.
(2) By the withdrawal of the agent; EXCEPTIONS:

1. If the agency is coupled with interest
If the agent does not want to be an agent anymore, he can withdraw. 2. When the revocation is done in bad faith
3. When there is waiver made by principal of his right to revoke
(3) By the death, civil interdiction, insanity or insolvency of the
principal or of the agent Agency coupled with interest
This is very common, even in the bar. It will give you sets of facts,
The contract of agency is a personal contract, in a way that the death then the question will be, “Can the principal unilaterally revoke such
of either party would extinguish the agency, because when you select agency?” So you have to determine if this is an agency coupled with
an agent, you also consider the personality of that agent. The contract an interest. What is it?
of agency is not transmissible. It could be extinguished by death,
civil interdiction, insanity or insolvency. ARTICLE 1927. An agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an
(4) By the dissolution of the firm or corporation which entrusted obligation already contracted, or if a partner is appointed
or accepted the agency manager of a partnership in the contract of partnership and his
removal from the management is unjustifiable.
Dissolution is considered as termination of the corporation or the firm.
“If a partner is appointed manager of a partnership in the
(5) By the accomplishment of the object or purpose of the agency contract of partnership and his removal from the management is
unjustifiable”
Of course, it is accomplished. That extinguishes the obligation. There
is no perpetual agency. We have already discussed the last sentence when we talked about
management of a partnership.
(6) By the expiration of the period for which the agency was
constituted “If a bilateral contract depends upon it, or if it is the means of
fulfilling an obligation already contracted”
Self-explanatory.
For example, you executed a contract of agency in favor of a certain
I. DEATH OF PRINCIPAL OR AGENT person. That certain person entered into a contract with third person.
You cannot just revoke the agency with that person, and avoid the
contract entered into with the third person because there is already a
GENERAL RULE: Death of either party extinguishes the agency. bilateral contract which depends upon the contract of agency.
Civil personality is extinguished by death. (Article 42)
The usual question that will come out is:
EXCEPTIONS: Is the agency compensation the one being referred to when
There are exceptions which you have to consider because most of the talking about agency coupled with interest? There is a plethora of
questions would ask whether or not the death will extinguish the cases saying that it is not.
contract of agency.
ARTICLE 1921. If the agency has been entrusted for the purpose of
a. ARTICLE 1930 – Agency shall remain in full force and effect
contracting with specified persons, its revocation shall not prejudice
even after the death of the principal if it has been constituted in
the latter if they were not given notice thereof. (1734)
the common interest of the latter and of the agent or in the
interest of a third person who has accepted the stipulation in his
ARTICLE 1922. If the agent had general powers, revocation of the
favor.
agency does not prejudice third persons who acted in good faith and
without knowledge of the revocation. Notice of the revocation in a
Discussion: In stipulations pour autrui (remember your
newspaper of general circulation is a sufficient warning to third
ObliCon), if some interest is affected, death cannot just
persons. (n)
extinguish the contract of agency.
Knowledge of the third person is very important when it comes to

revocation. When an agency is constituted as a clause in a bilateral contract,
that is, when the agency is inserted in another agreement, the
ARTICLE 1923. The appointment of a new agent for the same agency ceases to be revocable at the pleasure of the principal as
business or transaction revokes the previous agency from the day on the agency shall now follow the condition of the bilateral
which notice thereof was given to the former agent, without prejudice agreement. Consequently, the Deed of Revocation executed by
to the provisions of the two preceding articles. (1735a) Legaspi has no effect. The authority of Gutierrez to file and
continue with the prosecution of the case at bar is unaffected.
Take note: the business or the transactions must be incompatible.
This must refer to the same transaction and the same business.
If you are going to revoke the agency, you are going to revoke a
contract entered into by an agent. As if it is not revocable in that sense.
ARTICLE 1924. The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with The second paragraph is very common. Although some contracts
third persons. (n) expressly provide the irrevocability of the contract of agency.
Another implied revocation. Are agencies coupled with interest not true agents?
ARTICLE 1925. When two or more principals have granted a power Because persons with proprietary interests in the subject matter of
of attorney for a common transaction, any one of them may revoke their agency are not true agents at all. One of the hallmarks of the
the same without the consent of the others. (n) agency relation is the control of the principal over the acts of the agent
and over the subject matter of the agency. An agency coupled with an
ARTICLE 1926. A general power of attorney is revoked by a special interest removes that control.
one granted to another agent, as regards the special matter involved
in the latter. (n) In an agency coupled with interest, it is the agency that cannot be
revoked or withdrawn by the principal due to an interest of a third party
It does not revoke the entire General Power of Attorney (GPA). This that depends upon it, or the mutual interest of both principal and
is only effective up to a special particular matter. agent.
This is because the essence of true agency is representation. An

ARTICLE 1927. An agency cannot be revoked if a bilateral contract
agent represents that principal. Thus, does not want the
depends upon it, or if it is the means of fulfilling an obligation already
representation anymore, the principal should be able to revoke that.
contracted, or if a partner is appointed manager of a partnership in the
contract of partnership and his removal from the management is
In an agency coupled with interest, the agency can become
unjustifiable. (n)
irrevocable. In that sense, they are saying that, in this particular
instance, the agents are not considered as true agents, because
An agency coupled with an interest which is again the basis for a lot persons with propriety interest in the subject matter of the agency are
of bar and exam questions. not true agents at all.
GENEVIEVE LIM vs FLORENCIO SABAN One of the hallmarks of the agency relation is the control of the
G.R. No. 163720, December 16, 2004 principal over the acts of the agent, and over the subject matter of the
agency. An agency coupled with interest removes that control. So, in
Stated differently, an agency is deemed as one coupled with an an agency coupled with interest, it is the agency that cannot be
interest where it is established for the mutual benefit of the revoked or withdrawn by the principal due to:
principal and of the agent, or for the interest of the principal and of (a) an interest of a third party that depends upon it, or
third persons, and it cannot be revoked by the principal so long as (b) the mutual interest of both principal and agent.
the interest of the agent or of a third person subsists. In an agency
coupled with an interest, the agent’s interest must be in the subject So, this is a nice commentary to think about. Again, in between the
matter of the power conferred and not merely an interest in the essence of agency and avoiding prejudice to third persons, of course,
exercise of the power because it entitles him to compensation. the latter subsists. That’s why some contracts of agency are
When an agent’s interest is confined to earning his agreed irrevocable.
compensation, the agency is not one coupled with an interest,
since an agent’s interest in obtaining his compensation as such
agent is an ordinary incident of the agency relationship.
III. WITHDRAWAL
This case refers to the compensation of an agent. Usually the
question is “is the agent compensation in the contract of agency the ARTICLE 1928. The agent may withdraw from the agency by giving
one referred to in the agency coupled with interest?”. The answer is due notice to the principal. If the latter should suffer any damage by
NO. reason of the withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon the impossibility of
“In an agency coupled with an interest, the agent’s interest must be in continuing the performance of the agency without grave detriment to
the subject matter of the power conferred and not merely an interest himself. (1736a)
in the exercise of the power because it entitles him to compensation”
ARTICLE 1929. The agent, even if he should withdraw from the
It must be in the main subject matter. It is shown in the authority given. agency for a valid reason, must continue to act until the principal has
Compensation is just a consequence of the authority given. One is had reasonable opportunity to take the necessary steps to meet the
being paid because he exercises this type of power, it does not go on situation. (1737a)
to the subject matter which is the power given. That is why
compensation of an agent is never the one referred to as interest in
an agency coupled with interest. First, the agent can withdraw by giving due notice to the principal. If
the principal suffered damage by reason of the withdrawal, the agent
It does not go on to the very subject matter of the power given to that must indemnify him therefor, unless the agent should base his
particular agent. withdrawal upon the impossibility of continuing the performance of the
agency without grave detriment to himself.
REPUBLIC vs EVANGELISTA
G.R. No 156015 | August 11, 2005 Take note of the phrase “impossibility of continuing the
performance of the agency without grave detriment to himself.”
The reason for its irrevocability is because the agency becomes This is the only instance wherein the withdrawal could not give rise to
part of another obligation or agreement. It is not solely the rights of liability on the part of the agent.
the principal but also that of the agent and third persons which are
affected. Hence, the law provides that in such cases, the agency
cannot be revoked at the sole will of the principal.
The agent, even if he should withdraw, must continue to act until the Remember that my that the provisions are only there if there is no
principal has had reasonable opportunity to take the necessary steps contractually agreed terms and conditions.
to meet the situation.
That is what I mean when I say that, now, in practice and in reality,
some of them are contractually given. This will only step in when there
are no provisions in the contract. but, in your example if it will prejudice
IV. DEATH the third person, then it cannot revoke it; unless he can prove that
there is no prejudice to third persons.
ARTICLE 1930. The agency shall remain in full force and effect even Note: In the recent 2018 bar exam, this was asked. This was the only
after the death of the principal, if it has been constituted in the question on Agency.
common interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor. (n)
2018 Bar Question
ARTICLE 1931. Anything done by the agent, without knowledge of
Shasha purchased an airline ticket from Sea Airlines (SAL) covering
the death of the principal or of any other cause which extinguishes the
Manila- Bangkok- Hanoi- Manila. The ticket was exclusively
agency, is valid and shall be fully effective with respect to third
endorsable to Siam Airlines (SMA) the contract of air transportation
persons who may have contracted with him in good faith. (1738)
was between Shasha and SAL, with the letter endorsing to SMA the
Hanoi- Manila segment of the journey. All her flights were confirmed
GENERAL RULE: Death extinguishes the obligation. by SAL. Before she left Manila, Shasha took the flight from Manila to
Bangkok on board SAL using her ticket. When she arrived in Bangkok,
EXCEPTIONS: Article 1930 and Article 1931. she went to SAL ticket counter and confirmed her return trip from
Hanoi to Manila on board SMA Flight No. SA 888. On the date of her
RAMON RALLOS v. COURT OF APPEALS return trip, she checked with SMA Flight No. SA 888, boarded the
G.R. No. L-24332, January 31, 1978 plane, and before she could even settle in on her assigned seat, she
was offloaded and treated rudely by the crew. She lost her luggage
Under this provision, an act done by the agent after the death of his and missed an important business meeting. She thereafter filed a
principal is valid and effective only under two conditions, viz: complaint solely against SAL and argued that it was solidarity liable
(1) that the agent acted without knowledge of the death of the with SMA for damages she suffered since the latter was only an agent
principal and of the former.
(2) that the third person who contracted with the agent himself acted
in good faith. (a) Should either, or both, SAL and SMA be held liable for damages
that Shasha suffered? (2.5%) [related to the law on transportation]
Good faith here means that the third person was not aware of the
death of the principal at the time he contracted with said agent. These (b) assuming that one is an agent of the other, is the agency coupled
two requisites must concur the absence of one will render the act of with interest? (2.5%)
the agent invalid and unenforceable.
Yes, the agency was constituted as a means of fulfilling an obligation
Article 1931, being an exception to the general rule, is to be strictly which had already been contracted and also a bilateral contract
construed, it is not to be given an interpretation or application beyond depends upon agency (Art. 1927, NCC). in the case of Philex Mining
the clear import of its terms for otherwise the courts will be involved in v CIR, the court defined an agency coupled with an interest as one
a process of legislation outside of their judicial function. that cannot be revoked or withdrawn by the principal due to an interest
of the third party that depends upon it, or mutual interest of both
If the third person is aware, then there is no more good faith. The principle and agent.
contract is no longer valid.
Here, since the ticket was endorsable to the agent, SAM, when it has
How about is the agent dies? a mutual interest with the principal, SAL, in the fulfillment of the
ARTICLE 1932. If the agent dies, his heirs must notify the principal obligation.
thereof, and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. (1739) It is easy to determine. The airline cannot just revoke it at will.
Even if he was not chosen by the principal, but there is a stop-gap END OF BUSINESS ORGANIZATION I
measure, that the heirs should adopt the necessary measures to
ensure that the interest of the principal will not be prejudiced. If you only do what you can do,
you will never be more than who you are now.✨
— Kung Fu Panda 3
Can the heirs continue the agency?
GENERAL RULE: No, since an agency calls for personal services on

the part of the agent.
EXCEPTIONS:
(1) Agency by operation of law, or a presumed or tacit agency;
(2) Agency is coupled with an interest of the subject matter of
the agency.
In an agency coupled with an interest, is there really no other way for

the principal to revoke the contract, other than through negotiation
with the agent? Is there any other way for the principal to revoke the
contract, or leave from the contract if he does not want to be
represented by the agent anymore? No, there is no other way.
Classmate’s Question: is there any other way for the principal to

revoke the contract or leave the contract if he does not want to be
represented by the agent anymore?
Sir’s answer: If it is coupled with interest and the revocation will

prejudice interests other than that of the agent, then there is no other
way. Except, if at the onset, it is stipulated in the contract of agency
(making it contractual), the right of the principal to revoke it, even if it
is coupled with interest.

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BUSINESS

ALAG | ALCORAN | CARIAGA | CAYBOT | CEROS | CORDERO | DACERA | FRIAS |

Take note, of the distinction that is very debatable between express

by parol evidence," refers merely to enforceability, not validity of

3. Made in violation of statute/law

Ex. A couple, one is a foreigner, and the other is Filipina.

PNB vs CA and Lopez vs CA – resulting trust NAKPIL V. IAC

notified by petitioner Jovita Yap Ancog of their mother's plan to sell

action for reconveyance is nonetheless filed, it would be in the nature

PRESCRIPTIVE PERIOD FOR THE ENFORCEMENT OF AN

GENERAL RULE: There is repudiation when you have it registered

GENERAL RULE: Prescription may supervene an implied trust, and

As differentiated from constructive trusts, where the settled rule is that

EXCEPTION TO THE EXCEPTION: There is no prescription if the

NOTE: I just want to highlight this case.

SAMONTE V. COURT OF APPEALS

It is true that registration under the Torrens system is constructive

For the same reason, we cannot dismiss private respondents' claims

You have here the distinction between a broker and an agent. Is an

him specific authority, either to conduct the general business of the

ARTICLE 1884. The agent is bound by his acceptance to carry out

(4) By the dissolution of the firm or corporation which entrusted or

(2) By the withdrawal of the agent; EXCEPTIONS:

Knowledge of the third person is very important when it comes to

This is because the essence of true agency is representation. An

GENERAL RULE: No, since an agency calls for personal services on

In an agency coupled with an interest, is there really no other way for

Classmate’s Question: is there any other way for the principal to

Sir’s answer: If it is coupled with interest and the revocation will

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