agency and trust reviewer.doc

8/14/2019 Agency and Trust reviewer.doc

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ATENEO DEMANILALAW SCHOOL

OUTLINEONAGENCY,TRUSTS, ATTY.CESARL.VILLANUEVAPARTNERSHIPSAND JOINTVENTURES1 ATTY.JOSE COCHINGYANIII First Semester, SY 2!2"!#

A. LAWONAGENCY

I. NATUREANDO$JECTOFAGENCY

!. De%i&iti'& (Art. !)*)+ P-rties i& -& Ae&/0 Re1-ti'&si3

Under Article 1868 of the Civil Code, a contract of agency as one whereby a person bindshimself to render some service or to do something in representation or on behalf of another,with the consent or authority of the latter.!

"he #panish term for principal is mandante. Among the terms used for agent aremandatario,attorney$in$fact, pro%y, delegate or representative.

2. R''t -&4 O56e/ti7es '% Ae&/0 (Arts. !#!8 -&4 !9#:!;+

"he right of inspection given to a stoc&holder under the law can be e%ercised either by himself orby any proper representative or attorney$in$fact, and either with or without the attendance of thestoc&holder. "his is in conformity with the general rule that what a man may do in person he may dothrough another. Philpotts v. Phil. Mfg. Co., '( )hil '*1 +11-.

"hepurpose of every contract of agency is the ability, by legal fiction, to e%tend the personality ofthe principal through the facility of the agent but the same can only be effected with the consent of theprincipal. Orient Air Service & Hotel Representatives v. Court of Appeals, 1* #C/A 6'0 +11-.

#. E1eme&ts '% te C'&tr-/t '% Ae&/0

Rallos v. Felix Go Chan & Sons Realty Corp., )! SCRA 2"he following are theessential elements of the contract of agency

+a- Consent, e%press or implied, of the parties to establish the relationship

+b- Object, is the e%ecution of a 2uridical act in relation to third parties

+c- "he agent acts as a representative and not for himself and

+d- "he agent acts within the scope of his authority.3

4hether or not an agency has been created is determined by the fact that one is representing andacting for another. "he law ma&es no presumption of agency proving its e%istence, nature and e%tentis incumbent upon the person alleging it. Urban Bank, Inc. v. e!a,G.R. N'. !9


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/. C'&si4er-ti'&> Ae&/0 Pres?me4 t' $e %'r C'm3e&s-ti'&, U&1ess Tere Is Pr''% t'te C'&tr-r0 (Art. !)85CKE@#)AL5E''3 +10(-

A")MNK 5utlinePage 2 of 66


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within the scope of the authority. 6ui facit per alium facit per se . Be who acts through another actshimself. Rallos v. Felix Go Chan & Sons Realty Corp., )! SCRA 2

"he essence of agency being the representation of another, it is evident that the obligationscontracted are for and on behalf of the principalOa conse


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-. Fr'm Em31'0me&t C'&tr-/t

"he relationship between the corporation which owns and operates a theatre, and the individual ithires as a security guard to maintain the peace and order at the entrance of the theatre is not that ofprincipal and agent, because the principle of representation was in no way involved. "he securityguard was not employed to represent the defendant corporation in its dealings with third parties hewas a mere employee hired to perform a certain specific duty or tas&, that of acting as special guard

and staying at the main entrance of the movie house to stop gate crashers and to maintain peaceand order within the premises. ela Cru* v. ;orthern )heatrical nterprises, 0 )hil *3 +10'-.

ut to set the record straight, the concept of a single person having the dual role of agent andemployee while doing the same tas& is a novel one in our 2urisprudence, which must be viewedwith caution especially when it is 4e7'i4 '% -&0 6?ris3r?4e&ti-1 s?33'rt 'r 3re/e4e&t . All these,read without any clear understanding of fine legal distinctions, appear to spea& of control by theinsurance company over its agents. "hey are, however, controls aimed only at specific results inunderta&ing an insurance agency, and are, in fact, parameters set by law in defining an insuranceagency and the attendant duties and responsibilities an insurance agent must observe andunderta&e. "hey do not reach the level of control into the means and manner of doing an assignedtas& that invariably characteri7es an employment relationship as defined by labor law. 1onkov. 1he -an%(act%rers "i(e Ins%rance Co. 2hils.3, Inc., *9 SCRA #=< (2!!+.

5. Fr'm C'&tr-/t %'r - Pie/e"'%"W'r@"a&ing into consideration the facts that the operator owed his position to the company and the

latter could remove him or terminate his services at will that the service station belonged to thecompany and bore its tradename and the operator sold only the products of the company that thee


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A real estate bro&er is one who negotiates the sale of real properties. Bis business, generallyspea&ing, is only to find a purchaser who is willing to buy the land upon terms fi%ed by the owner.Be has no authority to bind the principal by signing a contract of sale. ndeed, an authority to find apurchaser of real property does not include an authority to sell. "itonj%a, )r. v. 'ternit Corp., 9=SCRA 29 (2*+.

#ince bro&erage relationship is necessary a contract for the employment of an agent, principles

of contract law also govern the bro&er$principal relationship. 'A(acus Securities Corp. v. Ampil$ '83#C/A 310 +!((6-.

Contrary to the appellate court;s conclusion, this arrangement shows an agency. An agentreceives a commission upon the successful conclusion of a sale. 5n the other hand, a bro&er earnshis pay merely by bringing the buyer and the seller together, even if no sale is eventually made.+O(iter @ the issue was whether it was an independent distri(utor of 1M, cars in the Philippines-

'Hahn v. Court of Appeals, !66 #C/A 03* +1*-.

4. Fr'm S-1e

4hen the terms of the agreement compels the purported agent to pay for the products receivedfrom the purported principal within the stipulated period, even when there has been no sale thereofto the public, the underlying relationship is not one of contract of agency to sell, but one of actual

sale. A real agent does not assume personal responsibility for the payment of the price of the ob2ectof the agency his obligation is merely to turn$over to the principal the proceeds of the sale once hereceives them from the buyer. Conse


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/. Fr'm Si4e '% Tir4 P-rtiesP?51i/ (Arts. !)8# -&4 !9) !=2! -&4 !=22+

A long$standing client, acting in good faith and without &nowledge, having sent goods to sellon commission to the former agent of the defendant, can recover of the defendant, when noprevious notice of the termination of agency was given said client. Baving advertised the fact that

Collantes was his agent and having given special notice to the plaintiff of that fact, and havinggiven them a special invitation to deal with such agent, it was the duty of the defendant on thetermination of the relationship of principal and agent to give due and timely notice thereof to theplaintiffs. Railing to do so, he is responsible to them for whatever goods may have been in goodfaith and without negligence sent to the agent without &nowledge, actual or constructive, of thetermination of such relationship. Rallos v. 5anco, 2 Pi1 2*= (!=!!+

4hen the owner of a hotelcafS business allows a person to use the title managing agent andduring his prolonged absences allows such person to ta&e charge of the business, performing theduties usually entrusted to managing agent, then such owner is bound by the act of such person.5ne who clothes another apparent authority as his agent, and holds him out to the public as such,can not be permitted to deny the authority of such person to act as his agent, to the pre2udice ofinnocent third parties dealing with such person in good faith and in the following pre$assumptionsor deductions, which the law e%pressly directs to be made from particular facts, are deemedconclusive. "he hotel owner is bound by the contracts entered into by said managing agent thatare within the scope of authority pertinent to such position, including the purchasing suchreasonable


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the compromise agreement that has been validly entered into by his client, he is acting beyond thescope of his authority.)%=Phil. Marine$ !nc. v. ;"RC$ 061 #C/A 6*0 +!((8?.

/. Weter It C'7ers A/ts '% A4mi&istr-ti'& 'r A/ts '% D'mi&i'&> oers o( *ttorney

(!+ F'rm '% P'Bers '% Att'r&e0

n a case involving authority to act in baranggay conciliation cases covering an e2ectment forfailure to pay rentals A power of attorney is an instrument in writing by which one person, asprincipal, appoints another as his agent and confers upon him the authority to perform certainspecified acts or &inds of acts on behalf of the principal. "he written authori7ation itself is thepower of attorney, and this is clearly indicated by the fact that it has also been called a letter ofattorney. ,ee v. e Castro, 06! #C/A 60, *1! +!((8-.

"he Eetter dated Nanuary 16, 16 relied upon by the petitioners was signed by respondentRernande7 alone, without any authority from the respondents$owners. "here is no actuation ofrespondent Rernande7 in connection with her dealings with the petitioners. As such, said letter isnot binding on the respondents as owners of the sub2ect properties. "itonj%a v. Fernan#e+, 928SCRA 98) (29+.

(2+ Ge&er-1 P'Ber '% Att'r&e0 (Art. !)88+

A power of attorney is an instrument in writingby which one person, as principal, appointsanother as his agent and confers upon his the authority to perform certain acts or &inds of acts onbehalf of the principal. ,ee v. e Castro, 06! #C/A 60 +!((8-.

onetheless, we stress that the power of administration does not include acts of disposition orencumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceedfrom an authority to administer, and vice versa, for the two powers may only be e%ercised by anagent by following the provisions on agency of the Civil Code +from Article 18*6 to Article 18*8-.

*abao v. ar%lan )r., *2= SCRA


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with sole purpose, and that purpose is, if possible, to be ascertained and enforced. f the contractbe open to two constructions, one of which would while the other would overthrow it, the former isto be chosen. f by one construction the contract would be illegal, and by another e


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According to the provisions of Article 18*' on Agency, when the sale of a piece of land orany interest therein is made through an agent, the authority of the latter shall be in writing.Absent this re


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4hen the sale of a piece of land or any interest therein is through an agent, the authority ofthe latter shall be in writing otherwise, the sale shall be void. City=lite Realty Corporation v. Courtof Appeals, 3!0 #C/A 380 +!(((-.

4hen the corporationGs primary purpose is to mar&et, distribute, e%port and importmerchandise, the sale of land is not within the actual or apparent authority of the corporationacting through its officers, much less when acting through the treasurer. Ei&ewise Articles 18*'

and 18*8 of Civil Code re"he agent may borrow money when it s urgent and indispensable for thepreservation of the things which are under administration.

P'Ber t' Se11 E/1?4es P'Ber t' M'rt-e -&4 ice ersa(Art. !)8=+

A special power of attorney is necessary for an agent to borrow money, unless it beurgent and indispensable for the preservation of the things which are under administration.+asuma v. Heirs of Cecilio S. e 8illa$ ' #C/A '66 +!((6-.

t is a general rule in the law agency that, in order to bind the principal by a mortgage on

real property e%ecuted by an agent, it must upon its face purport to be made, signed andsealed in the name of the principal, otherwise, it will bind the agent only. :o*un v. Mercado011 #C/A 3(0 +!((6-.

A power of attorney, l i&e any other instrument, is to be construed according to the naturalimport of its language and the authority which the principal has conferred upon his agent isnot to be e%tended by implication beyond the natural and ordinary significance of the terms inwhich that authority has been given. "he attorney has only such authority as the principal haschosen to confer upon him, and one dealing with him must ascertain at his own ris& whetherhis acts will bind the principal. "hus, where the power of attorney which vested the agent withauthority for me and in my name to sign, seal and e%ecute, and as my act and deed, deliveryany lease, any other deed for conveying any real or personal property or any other deed for

8A7 Realty & ev.$ !nc. v. ieselman 7reight Services Co.$ 3*3 #C/A 380 +!((!- 7irme v. 1u-al nterprises and ev. Corp., '1'

#C/A 1( +!((3-.9:o*un v. Mercado 011 #C/A 3(0 +!((6-.



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the conveying of any real or personal property, it does not carry with it or imply that theagent for and on behalf of his principal has the power to e%ecute a promissory note or amortgage to secure its payment. ;ational 1an-v. )an Ong S*e, 03 )hil. '01 +1!-.

4here the power of attorney e%ecuted by the principal authori7ed the agent y meansof a mortgage of my real property, to borrow and lend sums in cash, at such interest and forsuch periods and conditions as he may deem property and to collect or to pay the principal

and interest thereon when due, while it did not authori7e the agent to e%ecute deeds of salewith right of repurchase over the property of the principal, nonetheless would validate themain contract of loan entered into with the deed of sale with right of repurchase constitutingmerely an eeneral words contained in such power will not beinterpreted to e%tend power to the ma&ing of a contract of suretyship, but will be limited, underthe well$&now rule of construction indicated in the e%press in e#usdem generis, as applying tomatters similar to those particularly mentioned. irector v. Sing %uco, 03 )hil !(0 +1!-.

(!#+ T' A//e3t 'r Re3?4i-te -& I&erit-&/e

(!9+ T' R-ti%0 'r Re/'&ie O51i-ti'&s C'&tr-/te4 $e%'re te Ae&/0

4here it appears that a wife gave her husband a power of attorney to loan and borrowmoney and to mortgage her property, that fact does not carry with it or imply that he has alegal right to sign her name to a promissory note which would ma&e her liable for the paymentof a pre$e%isting debt of the husband or that of his firm, for which she was not previously liable,or to mortgage her property to secure the pre$e%isting debt. 1an- of P.!. v. e Coster, '* )hil0' +1!0-.

4here the terms of the power granted to the substituted attorney$in$fact was to the endthat the principal$seller may be able to collect the balance of the selling price of the printingestablishment sold, such substitute agent had no power to enter into new sales arrangementswith the buyer, or to novate the terms of the original sale. 8illa v. :arcia 1os9ue, ' )hil 1!6+1!6-.

e. N't-rie4 P'Ber '% Att'r&e0

A notari7ed power of attorney carries with it the evidentiary weight conferred upon it withrespect to its due e%ectuion. 8elso v. Court of Appeals, !6( #C/A 03 +16-.

4hen the document under scrutiny is a special power of attorney that is duly notari7ed, the

notarial ac&nowledgment isprima facie evidence of the fact of its due e%ecutionOa buyer hasevery reason to rely on a personGs authority to sell a particular property owned by a corporation



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on the basis of a notari7ed board resolutionOundeniably the buyer is an innocent purchaser forvalue in good faith. St. Mary


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with the principal;s manifestation of consent.P aci(ic Reho%se Corp. v. 'IB Sec%rities,Inc., *## SCRA 2!9 (2!+.

5.C'm3-re Bit Art. !))8? Ae&t M?st F'11'B I&str?/ti'&s '% te Pri&/i3-1

/. A?t'rit0 '% Ae&t N't Deeme4 E/ee4e4 I% Per%'rme4 i& - M-&&er M're

A47-&t-e'?s t' Pri&/i3-1(Art. !))2+(!+ C'm3-re> *ent Sho%l# 6ot *ct I( It ;o%l# -ani(estly Res%lt in "oss or

4a$ae to rincipal(Art. !)))+.

Article 188! of the Civil Code provides that the limits of an agentGs authority shall not beconsidered e%ceeded should it have been performed in a manner advantageous to theprincipal than that specified by him. Olaguer v. Purugganan$ %r., 010 #C/A '6( +!((*-.

"he admissions obtained by the agent from the adverse party prior to the formalamendment of the complaint that included the principal as a party to the suit, can be availedof by the principal since an agent may do such acts as may be conducive to theaccomplishment of the purpose of the agency, admissions secured by the agent within thescope of the agency ought to favor the principal. "his has to be the rule, for the act ordeclarations of an agent of the party within the scope of the agency and during its e%istenceare considered and treated in turn as declarations, acts and representations of his principaland may be given in evidence against such party 1ay 8iew Hotel v. er & Co., 116 #C/A3!* +18!-.

4. E%%e/ts '% N'&"R-ti%ie4 A/ts D'&e 50 Ae&t i& E/ess '% His A?t'rit0>U&e&%'r/e-51e, N't V'i4 (Arts. !#!8, !9#, -&4 !)=)+

4hen money is received as a deposit by an agent, and that money is turned over by theagent to the principal, with notice that it is the money of the depositor, the principal is bound todeliver to the depositor, even if his agent was not authori7ed to receive such deposit. ="here has,in effect, ratification of the unauthori7ed act of the agent, thereby binding the principalI. Cason v.Ric-ards, 0 )hil 63 +1(6-.

4hen the administrator enters into a contract that are outside of the scope of authority, thecontract would nevertheless not be an absolute nullity, but simply voidable =unenforceableI at theinstance of the parties who had been improperly represented, and only such parties can assertthe nullity of said contracts as to them. Dayco v. Serra, ' )hil 80 +1!0-.

Under Article 188 of the ew Civil Code, the acts of an agent beyond the scope of hisauthority do not bind the principal, unless the latter ratifies the same e%pressly or impliedly.Rurthermore, when the third person . . . &nows that the agent was acting beyond his power orauthority, the principal cannot be held liable for the acts of the agent. f the said third person isaware of the limits of the authority, he is to blame, and is not entitled to recover damages fromthe agent, unless the latter undertoo& to secure the principalGs ratification. Cervantes v. Co%rto( *ppeals, #9 SCRA 2< (!===+ Safic Alcan v. !mperial 8egeta(le, 300 #C/A 00 +!((1-.

@ven when the agent, in this case the attorney$at$law who represented the client in forging acompromise agreement, has e%ceeded his authority in inserting penalty clause, the status of the

said clause is not void but merely voidable, i.e.$ capable of being ratified. ndeed, the clientGsfailure to e. C'&se?e&/es We& Ae&t A/ts i& His OB& N-me (Art. !))#+

(!+ rincipal 7as 6o Riht *ainst 1hir# erson I( *ent *cts in 7is On 6a$e

Article 1*1* of the =oldI Civil Code provides that 4hen an agent acts in his own name,the principal shall have no action against the persons with whom the agent has contracted,nor the said persons against the principal. Article !'6 of the Code of Commerce providesthat 4hen an agent transacts business in his own name, it shall not be necessary for him tostate who is the principal, and he shall be directly liable as if the business were for his ownaccount, to the persons with whom he transacts the same, said person not having any rightof action against the principal, nor the latter against the former, the liabilities of the principaland the agent to each other always reserved. t being established by a preponderance of theevidence that the agent acted in his own name in selling the merchandise to the defendants,and that the defendants fully believed that they were dealing with the said agent, without any&nowledge of the fact that he was the agent of the plaintiffs, and having paid him in full for themerchandise purchased, they are not liable to the plaintiffs, for said merchandise. "his is true

whether the transaction is covered by theprovisions of the Civil Code or by the provisions ofthe Commercial Code. "im )iu v. Rui* & Rementeria, 10 )hil. 36*, 3*( +11(-.



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4hen an agent acts in his own name, the principal has no right of action against thepersons with whom the agent has contracted, or such persons against the principal. n suchcase, the agent is directly liable to the person with whom he has contracted, as if thetransactions were his own. Smith 1ell v. Sotelo Matti, '' )hil. 8*' +1!!-.

@ven when the agent has a special power of attorney to mortgage the property of theprincipal, when such agent nevertheless e%ecuted the real estate mortgage in his own name,

then it is not valid and binding on the principal pursuant to the provisions of Article 1883 ofthe Civil Code. Philippine Sugar states ev. Corp. v. Poi*at, '8 )hil. 036 +1!0- Rural1an- of 1om(on v. Court of Appeals, !1! #C/A !0 +1!-.

Under Article 1883 of the Civil Code, if an agent acts in his own name, the principal hasno right of action against the persons with whom the agent has contracted neither have suchpersons against the principal. n such case the agent is the one directly bound in favor of theperson with whom he has contracted, as if the transaction were his own, e%cept when thecontract involves things belonging to the principal. #ince the principals have caused theiragent to enter into a charter party in his own name and without disclosing that he acts for anyprincipal, then such principals have no standing to sue upon any issue or cause of actionarising from said charter party. Marimperio Compania ;aviera$ S.A. v. Court of Appeals , 106#C/A 368 +18*-.

(2+*ent Is 4irectly Bo%n# to 1hir# erson as I( the 1ransaction ;ere 7is On

4hen the agent e%ecutes a contract in his personal capacity, the fact that he is describedin the contract as the agent of the principal and the properties mortgaged pertain to theprincipal, may not be ta&en to mean that he enters into the contract in the name of theprincipal. A mortgage on real property of the principal not made and signed in the name ofthe principal is not valid as to the principal. ;ational 1an- v. Palma :il, 00 )hil. 63 +131-;ational 1an- v. Agudelo, 08 )hil 600 +133-.

A party who signs a bill of e%change as an agent +as the )resident of the company-, butfailed to disclose his principal becomes personally liable for the drafts he accepted, evenwhen he did so e%pressly as an agent. #ection !( of the egotiable nstruments Eaw saysprovides e%pressly that when an agent signs in an representative capacity, but does notindicate or disclose his principal would incur personal liability on the bill of e%change. Phil.

1an- of Commerce v. Aruego, 1(! #C/A 03( +181-.

ECEPTION> We& C'&tr-/t I&7'17es Ti&s $e1'&i& t' Pri&/i3-1

@ven when the agent has written authority to convey real property on behalf of theprincipal, nevertheless when the deed of sale was e%ecuted by the agent in her own namewithout showing the capacity in which she acted, although the act was doubtless irregular,the deed operated to bind the principal who had authori7ed the sale. %imene* v. Ra(ot, 38)hil. 3*8 +118-.

4here the plaintiffs appointed the defendant to purchase a vessel and giving him moneyfor that purpose, but the agent purchased the boat and placed it in his own name, he hasbreached his fiduciary obligation and is obliged to transfer the same to the plaintiffs, or theplaintiffs have a right to be subrogated. According to the e%ception under Art. 1*1* of the old

Civil Code +when things belonging to the principal are dealt with- the agent is (ound to theprincipal although he does not assume the character of such agent and appears acting in hisown name. "he money with which the launch was bought having come from the plaintiff, thee%ception established in Art. 1*1* is applicable to the instant case. #y =%uco v. Sy=%uco, '()hil. 63' +1!(-.

4here a co$owner transfers the entirety of the mining claim to the buyer, where the buyer&new that it included the one$half share pro=indiviso of the other co$owner, then thetransaction may be considered as one where the disposing co$owner acted as agent of theother co$owner. Conse


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-. N' O51i-ti'& '% Ae&t t' A47-&/e F?&4s (Art. !))*+>

It is rincipal9s obliation to a#vance the (%n#s, b%t rincipal to pay interest

on a#vances $a#e by *ent (ro$ #ay he a#vances the $oney(Art. !=!2+.

ECEPT> (!+ I% Sti3?1-te4 i& te Ae&/0 Areeme&t

(2+ Were 3ri&/i3-1 is i&s'17e&t (See Art. !=!=:#;> I&s'17e&/0eti&?ises -& -e&/0+

5. Ae&t S'?14 C-rr0 O?t Ae&/0 i& A//'r4-&/e Bit Pri&/i3-1Ks I&str?/ti'&s (Art.!))8+

(!+I% -e&t %'11'Be4 i&str?/ti'&s, 3ri&/i3-1 /-&&'t set ?3 -e&tKs i&'r-&/e 'r/ir/?mst-&/e Bi/ 3ri&/i3-1 B-s, 'r '?t t' -7e 5ee&, -B-re '%+Art. !)==-

)ursuant to the instructions of the principals, the agent purchased a piece of land in theirnames and in the sums given to him by the principal, and that after the fact of purchase theprincipals had ratified the transaction and even received profits arising from the investment in theland, but that eventually a defect in the title to the land arose, the said principals cannot recovertheir lost investment from the agent. "here is nothing in the record which would indicate that the

defendant failed to e%ercise reasonable care and diligence in the performance of his duty as suchagent, or that he undertoo& to guarantee the vendorGs title to the land purchased by direction ofthe plaintiffs. ;epomuceno v. Heredia, * )hil 063, 066 +1(*-.

4hen an agent in e%ecuting the orders and commissions of his principal carries out theinstructions he has received from his principal, and does not appear to have e%ceeded hisauthority or to have acted with negligence, deceit or fraud, he cannot be held responsible for thefailure of his principal to accomplish the ob2ect of the agency. Agents$ although they act inrepresentation of the principal$ are not guarantors for the success of the (usiness enterprise theyare as-ed to manage. :uiterre* Hermanos v. Oria Hermanos, 3( )hil. '1 +110-.

/. O51i-ti'& N't C-rr0 O?t Ae&/0 I% Ee/?ti'& W'?14 M-&i%est10 Res?1t i& L'ss 'rD-m-e t' Pri&/i3-1 (Art. !)))+

4hile it is true that an agent who acts for a revealed principal in the ma&ing of a contractdoes not become personally bound to the other party in the sense that an action can ordinarily bemaintained upon such contract directly against the agent, yet that rule does not control when theagent cannot intercept and appropriate the thing which the principal is bound to deliver, andthereby ma&e the performance of the principal impossible. "he agent in any event must beprecluded from doing any positive act that could prevent performance on the part of his principal,otherwise the agent becomes liable also on the contract. ;ational 1an- v. ,elsh 7airchild, '')hil *8( +1!3-.

4. DUTYOFLOYALTY> O51i-ti'& i& - C'&%1i/t '% I&terest Sit?-ti'& (Art. !))=+

(!+ Ae&t s-11 5e 1i-51e t' te 3ri&/i3-1 %'r 4-m-es s?st-i&e4 50 te 1-tter Berei& /-se '% /'&%1i/t '% i&terest sit?-ti'&, -&4 -e&t 3re%erre4 is 'B& i&terest.

(2+ Ae&t 3r'i5ite4 %r'm 5?0i& 3r'3ert0 e&tr?ste4 t' im %'r -4mi&istr-ti'& 'rs-1e Bit'?t 3ri&/i3-1Ks /'&se&t (Art. !9=!:2;+.

An agent cannot represent both himself and his principal in a transaction involving the shiftingto another person of the agentGs liability for a debt to the principal.A(oiti* v. e Silva, '0 )hil883 +1!'-.

"he director and general manager of the stoc& corporation, who also was the ma2oritystoc&holder, and was designated to be the main negotiator for the company with the>overnment for the sale of its large tract of land, having special &nowledge of commercialinformation that would increase the value of the shares in relation to the sale of the parcels ofland to the >overnment, can be treated legally as being an agent of the stoc&holders of thecompany, with a fiduciary obligation to reveal to the other stoc&holders such special informationbefore proceeding to purchase from the other stoc&holders their shares of stoc&. f such director

obtains the purchase of the shares of a stoc&holder without having disclosed important facts orto render the appropriate report on the e%pected increase in value of the company, there wasfraud committed for which the director shall be liable for the earnings earned against thestoc&holder on the sale of shares. Strong v. :uiterre* Repide, '1 )hil. '* +1(-.

A confidential employee who, &nowing that his principal was negotiating with the owner ofsome land for the purchase thereof, surreptitiously succeeds in buying it in the name of his wife,commits an act of disloyalty and infidelity to his principal, whereby he becomes liable, amongother things, for the damages caused, which meant to transfer the property bac& to the principalunder the terms and conditions offered to the original owner. Sing %uco and Sing 1engco v.Sunyantong and "lorente, '3 )hil 08 +1!!-.

4here an uncle who was acting as agent or administrator of property belonging to a niecehad procured a "orrens title in his own name to said property, he is deemed to be a trustee, and

he must surrender the property to the niece and transfer title to her. "he relations of an agent tohis principal are fiduciary and in regard to the property forming the sub2ect$matter of the agency,



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he is estopped from ac


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. Li-5i1it0 '% Ae&t %'r I&terest (Art. !)=*+

(!+Ae&t Is Li-51e %'r I&terest>

(-+ On S%$s 7e *pplie# to 7is On Use 2(ro$ the 1i$e 7e Use# 1he$3

(5+ On S%$s Oin the rincipal 2(ro$ the 1i$e *ency Is 'xtin%ishe#3

As to the interest imposed in the 2udgment on the amounts received by the agent whichwere not turned over to the principal, it is sufficient to cite aarticle 1*!' of the Civil Code,which provides that an agent shall be liable for interest upon any sums he may have appliedto his own use, from the day on which he did so, and upon those which he still owes, afterthe e%piration of the agency, from the time of his default. Mende*onna v. 8da. e :oitia, 0')hil 00*, 0*(+13(-.

"he successor$in$interest of the principal is not entitled to collect interest from the agentof the father for sums loaned to and collected by the agent from various persons for thedeceased principal. n all the aforementioned transactions, the defendant acted in hiscapacity as attorney$in$fact of the deceased father, and there being no evidence showing thathe converted the money entrusted to him to his own use, he is not liable for interest thereon,in accordance with the provisions ofAart. icle 1*!' of the Civil Code. e 1or#a v. e 1or#a,

08 )hil 811 +133-.. DUTYOFDILIGENCE> Ae&t Li-51e %'r Fr-?4 -&4 Ne1ie&/e (Arts. !))9 -&4 !==+

(!+ W-t S-11 Ar-7-te 'r Miti-te Li-5i1it0 Arisi& O?t '% Ne1ie&/e WeterAe&/0 W-s %'r - C'm3e&s-ti'& 'r W-s Gr-t?it'?s

4here the agent by means of misrepresentation of the condition of the mar&et induces hisprincipal to sell to him the property consigned to his custody at a price less than that for which hehas already contracted to sell part of it, and who thereafter disposes of the whole at an advance,is liable to principal for the difference. #uch conduct on the part of the agent constituted fraud,entitling the principal to annul the contract of sale. Although commission earned by the agent onthe fraudulent sale may be disallowed, nonetheless commission earned from other transactionswhich were not tainted with fraud should be allowed the agent. Cadwallader v. Smith 1ell, * )hil.'61 +1(*-.

n consignment of goods for sale, as a form of agency, the consignee$agent is relieved fromhis liability to return the goods received from the consignor$principal when it is shown bypreponderance of evidence in the civil case brought that the goods were ta&en from the custodyof the consignee by robbery, and no separate conviction of robbery is necessary to avail of thee%empting provisions under Article 11*' for force ma#eure. Austria v. CAourt of Appeals, 3#C/A 0!* +1*1-.

"he Court brushed aside the contention that since it was merely acting as collecting ban&, itwas the drawee$ban& that should be held liable for the loss of a depositor n stressing that itwas acting only as a collecting agent for >olden #avings, Jetroban& seems to be suggestingthat as a mere agent it cannot be liable to the principal. "his is not e%actly true. 5n the contrary,Article !1( of the Civil Code clearly provides that the agent is responsible not only for fraud,but also for negligence. Metro(an- v. Court of Appeals, 1' #C/A 16 +11-.

4hen an agent is involved in the perpetration of fraud upon his principal for his e%trinsicbenefit, he is not really acting for the principal but is really acting for himself, entirely outside thescope of his agency ? the basic tenets of agency rest on the highest consideration of 2ustice,e Ae&t M?st A/t i& Pers'&, $?t M-0 A33'i&t - S?5stit?te I% N'tPr'i5ite4

Under the terms of Art. 18!, when a special power of attorney to sell a piece of land does notcontain a clear prohibition against the agent in appointing a substitute, the appointment by theagent of a substitute to e%ecute the contract is within the limits of the authority given by theprinciple, although the agent then would have to be responsible for the acts of the sub$agent.

'sc%eta v. "i$,

R%le Opposite Un#er the Ol# Civil Co#e> An agent cannot delegate his powers under anpower of attorney to a sub$agent in view of the legal principle delegata potestas delegare non

potest3 +a delegated power cannot be delegated-, inasmuch as there is nothing in the records toshow that he has been e%pressly authori7ed to do so. ;ational 1an- v. Agudelo, 08 )hil 600, 661+133-.



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5. E%%e/ts We& Ae&t A33'i&ts - S?5stit?te> He Is Res3'&si51e %'r A/ts '%S?5stit?te

(!+ 7e as not iven poer to appoint one

(2+ 7e as iven s%ch poer itho%t #esinatin the person an# s%bstit%te isnotorio%sly inco$petent or insolvent.

A subagent cannot be held at greater liability that the main agent, and when the subagenthas not received any special instructions from the agent to insure the ob2ect of the agency, thesubagent cannot be held liable for the loss of the thing from fire, which is merely force ma2eure.!nternational 7ilms >China? v. "yric 7ilm, 63 )hil. **8 +136-.

/. A11 A/ts '% S?5stit?te A33'i&te4 A-i&st Pri&/i3-1Ks Pr'i5iti'& Are V'i4 (-sA-i&st te Pri&/i3-1+

"he law on agency in our 2urisdiction allows the appointment by an agent of a substitute orsub$agent in the absence of an e%press agreement to the contrary between the agent and theprincipal. "herefore, an agent who receives 2ewelry for sale or return cannot be charged withestafa for there was no misappropriation when she delivered the 2ewelry to a sub$agent under thesale terms which the agent received it, but a client of the sub$agent absconded with them and

could no longer be recovered. "he appointment of a sub$agent and delivery of the 2ewelry, in theabsence of a prohibition, does not amount to conversion or misappropriation as to constituteestafa but the agent remains civilly liable for the value of the 2ewelry to the principal. Serona v.Co%rt o( *ppeals, #=2 SCRA #< (22+.1(

"he legal ma%impotestas delegate non delegare potestE a power once delegated cannot bere$delegated, while applied primarily in political law to the e%ercise of legislative power, is aprinciple of agency O for another, a re$delegation of the agency would be detrimental to theprincipal as the second agent has no privity of contract with the former. 1alta*ar v. Om(udsman01( #C/A *' +!((6-.

n a situation where the special power of attorney to sell a piece of land contains a prohibitionto appoint a substitute, but nevertheless the agent appoints a substitute who e%ecutes the deedof sale in name of the principal, while it may be true that the agent may have acted outside the

scope of his authority, that did not ma&e the sale void, but merely unenforceable under thesecond paragraph of Article 131* of the Civil Code. And only the principal denied the sale, hisacceptance of the proceeds thereof are tantamount to ratification thereof. 'sc%eta v. "i$,

4. Rits '% Pri&/i3-1 A-i&st S?5stit?te (Art. !)=#+

"he principal is liable upon a sub$agency contract entered into by its selling agent in thename of the principal, where it appears that the general agent was clothed with such broadpowers as to 2ustify the interference that he was authori7ed to e%ecute contracts of this &ind, andit not appearing from the record what limitations, if any, were placed upon his powers to ace forhis principal, and more so when the principal had previously ac&nowledged the transactions ofthe subagent. el Rosario v. "a 1adenia, 33 )hil. 316 +116-.

*. R?1e '& Li-5i1it0 We& TB' 'r M're Ae&ts A33'i&te4 50 te S-me Pri&/i3-1

-. Res3'&si5i1it0 '% TB' 'r M're Ae&ts N't S'1i4-r0 (Art. !)=9+

(!+ C'm3-re TB' 3ri&/i3-1s Bit /'mm'& -e&t "E-/ 3ri&/i3-1 s'1i4-ri10 1i-51e(Art. !=!. *3! +106-.



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behalf of the foreign company, does not amount to a contractual acceptance of personal liability onthe part of the local settling or claim agent. An ad2ustment and settlement agent is no different fromany other agent from the point of view of his responsibilities, for he also acts in a representativecapacity. =9uoted from Salonga v. ,arner$ 1arnes &Co.$ "td., 88 )hil. 1!0 +101-I. n the samemanner, a resident agent, as a representative of the foreign insurance company, is tas&ed only toreceive legal processes on behalf of its principal and not to answer personally for the any insurance

claims. S$ith Bell v. Co%rt o( *ppeals, 2*8 SCRA

#ince, as a rule, the agency, as a contract, is binding only between the contradicting parties,then only the parties, as well as the third person who transacts with the parties themselves, mayOSPA? v. Court of Appeals, 06 #C/A 63( +!((-. Ormoc Sugarcane PlantersOSPA? v. Court of Appeals, 06 #C/A 63( +!((-.12

Chua v. )otal Office Products and Services >)opros?$ !nc.$ '*1 #C/A 0(( +!((0- )an v. ngineering Services$ '8 #C/A 3 +!((6-Chong v. Court of Appeals$ 0!* #C/A 1'' +!((*-.



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authority, or even when acting within the scope of his authority, he e%pressly binds himselfpersonally liable to the contract entered into in the name of the principal. "herefore, a third partycannot generally sue on the contract see&ing both the principal and the agent to be liable thereon,for by suing the principal on the contract, the agent is deemed not to be personally liable. 5n theother hand, if the agent is being sued on the basis that he acted outside the scope of his authority,then it does not ma&e sense to be also suing the principal who cannot be held liable for the acts ofthe agent outside the scope of his authority. At any rate, =Article 18*I does not hold that in casesof e%cess of authority, (oth the agent and the principal are liable to the other contracting party.Phil. Products Co. v. Primateria Society Anonyme, 10 #C/A 3(1, 3(0 +160-.

4here an agent defies the instructions of its principal in ew Hor& not to proceed with the saledue to non$availability of carriage, it has acted without authority or against its principalGsinstructions and holds itself personally liable for the contract it entered into with the local company.

6ational oer v. 6*-*RCO, !!8 SCRA 8)= (!=)2+.

"he special power to approve loans does not carry with it the power to bind the principal to acontract of guaranty even to the e%tent of the amount for which a loan could have been granted bythe agent. >uaranty is not presumed, it must be e%pressed and cannot be e%tended beyond itsspecified limits +Director v. #ing Nuco, 03 )hil. !(0. n one case, where it appears that a wife gaveher husband power of attorney to loan money, this Court ruled that such fact did not authori7edhim to ma&e her liable as a surety for the payment of the debt of a third person. B* Finance v.Co%rt o( *ppeals, 2!! SCRA !!2 (!==2+.

"o reiterate, the first part of Article 18* declares that the principal is liable in cases when theagent acted within the bounds of his authority. Under this, the agent is completely absolved of anyliability. "he second part of the said provision presents the situations when the agent himselfbecomes liable to a third party when he e%pressly binds himself or he e%ceeds the limits of hisauthority without giving notice of his powers to the third person. Bowever, it must be pointed outthat in case of e%cess of authority by the agent, li&e what petitioner claims e%ists here, the lawdoes not say that a third person can recover from both the principal and the agent. t is well tostate here that Article 18* of the ew Civil Code upon which petitioner anchors its claim does nothold that in case of e%cess of authority, both the agent and the principal are liable to the othercontracting party. urotech !ndustrial )echnologies$ !nc. v. Cui*on$ 0!1 #C/A 08' +!((*-.

(#+ We& te Ae&t A/ts Bit Fr-?4 'r Ne1ie&/e

"he rule relied upon by the =agent to avoid the imposition of the li


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"he Eaw on Agency, as applied in civil cases, has no application in criminal cases, and noman can escape punishment when he participates in the commission of a crime upon the groundthat he simply acted as an agent of any party. People v. Chowdury, 3!0 #C/A 0*! +!(((-.

4. Ae&tKs Writte& P'Ber '% Att'r&e0, I&s'%-r -s C'&/er&s Tir4 Pers'&s, G'7er&s '&?esti'&s Weter Ae&t A/te4 Witi& S/'3e '% A?t'rit0 E7e& i% it E/ee4sA?t'rit0 A//'r4i& t' U&4erst-&4i& $etBee& Pri&/i3-1 -&4 Ae&t (Art. !=+

4here the wife gave her husband a power of attorney to loan and borrow money, and forsuch purpose to mortgage her property, and where the husband signed his wifeGs name to a noteand gave a mortgage on her property to secure the note and the amount of the loan was actuallypaid to her husband in money at the time the note and mortgage were e%ecuted, the transaction isbinding upon the wife under her power of attorney, regardless of what the husband may ha e donewith the money which he obtained on the loan. 1an- of P.!. v. e Coster, '* )hil 0' +1!0-.

t is a settled rule that persons dealing with an assumed agent, whether the assumed agencybe a general or special one are bound at their peril if they would hold the principal liable, toascertain not only the fact of agency but also the nature and e%tent of authority, and in case eitheris controverted, the burden of proof is upon them to establish it. Harry eeler v. Rodrigue*, ' )hil.1-. Bence, when the ban& accepted a letter of guarantee signed by a mere credit administrator onbehalf of the finance company, the burden was on the ban& to satisfactorily prove that the credit

administrator with whom they transacted acted within the authority given to him by his principal.B* Finance v. Co%rt o( *ppeals, 2!! SCRA !!2 (!==2+.

As far as third persons are concerned, an act is deemed to have been performed within thescope of the agentGs authority, if such is within the terms of the power of attorney, as written, evenif the agent has in fact e%ceeded the limits of his authority according to an understanding betweenthe principal and his agent. '%enio v. Co%rt o( *ppeals, 2#= SCRA 28 (!==9+.

4hen one &nowingly deals with the sales representative of a car dealership company, onemust reali7e that one is dealing with a mere agent, and it is incumbent upon such person to actwith ordinary prudence and reasonable diligence to &now the e%tent of the sales representativeGsauthority as an agent in respect of contracts to sell the vehicles. A person dealing with an agent isput upon in


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4hen dealing with an assumed agent, a third party should ascertain not only the fact ofagency, but also the nature and e%tent of the agentGs authority. scueta v. "im, 01! #C/A '11+!((*-.

"he an& of Commerce clearly failed to observe the reWe& He M-@es - Writte& St-teme&t '% D-m-e -&4 Deteri'r-ti'& +Art.!=#-

5. O51i-ti'& i& H-&41i& V-ri'?s G''4s %'r Di%%ere&t OB&ers (Art. !=9+>

(!+Disti&?is Tem 50 C'?&term-r@s I% G''4s '% S-me i&4 -&4 M-r@

UROS'> T' Pre7e&t C'&%1i/t '% I&terest Am'& OB&ers

(2+ Disti&?is %r'm Art. !=8* (C'&tr-/t '% De3'sit+ De3'sit-r0 M-0 C'mmi&1eGr-i& 'r Oter Arti/1es '% Simi1-r N-t?re -&4 ?-1it0 'B&ersi3pro8rata

/. He C-&&'t Se11 '& Cre4it Wit'?t Pri&/i3-1Ks C'&se&t (Art. != C'&si4ere4 -s C-s S-1es

4hether viewed as an agency to sell or as a contract of sale, the liability of >reen Kalleyis indubitable. Adopting >reen KalleyGs theory that the contract is an agency to sell, it is liablebecause it sold on credit without authority from its principal. Under Article 1(0, it is provided

that the commission agent cannot, without the e%press or implied consent of the principal,



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sell on credit, and should it do so the principal may demand from him payment in cash.Green alley v. I*C, !## SCRA *=8 (!=)9+.

4. We& Wit Pri&/i3-1Ks A?t'rit0 t' Se11 '& Cre4it> (Art. !=*+

(!+ I&%'rm te Pri&/i3-1 Bit St-teme&t '% $?0erKs N-mes

(2+ E%%e/t '% N'&"C'm31i-&/e C'&si4ere4 S-s S-1e

e. E%%e/t We& Ae&t Re/ei7es G?-r-&t0 'r 4el Cre#ereC'mmissi'&s (Art. !=8+

(!+He S-11 Se-r te Ris@ '% C'11e/ti'&

(2+ He S-11 P-0 Pri&/i3-1 te Pr'/ee4s '% S-1e '& S-me Terms Aree4 BitP?r/-ser

%. Li-5i1it0 %'r F-i1?re t' C'11e/t Pri&/i3-1Ks Cre4it We& D?e (Art. !=)+

(!+Li-5i1it0 %'r D-m-es

(2+ U&1ess D?e Di1ie&/e Pr'7e&

IV. O$LIGATIONSOFTHEPRINCIPAL

!. $i&4i& E%%e/t '& Pri&/i3-1 '% C'&tr-/ts M-4e 50 te Ae&t

-. We& D'&e Witi& Ae&tKs S/'3e '% A?t'rit0> Pri&/i3-1 te O&10 O&e $'?&4 (Art.!)=8+

n investment management account, where under the terms of the written instrument, the ban&shall purchase debt securities on behalf of the client and will handle the accounts in accordancewith the instructions of the client, creates a principal$agent relationship, and not a trust relationshipor an ordinary ban& deposit account. UConse


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4here a sale of land is effected through an agent who made misrepresentations to the buyerthat the property can be delivered physically to the control of the buyer when in fact it was inadverse possession of third parties, the seller$principal is bound for such misrepresentations andcannot insist that the contract is valid and enforceable the seller$principal cannot accept thebenefits derived from such representations of the agent and at the same time deny the responsibilityfor them. :on*ales v. Ha(erer, '* )hil. 38( +1!0-.

4hen an agent has been empowered to sell hemp in a foreign country, that e%press powercarries with it the implied power to ma&e and enter into the usual and customary contract for itssale, which sale contract may provide for settlement of issues by arbitration. 4e are clearly of theopinion that the contract in


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the buyer, although =iIn acting within its scope of authority, =the agentI was, however, negligent,since it is negligence that is the basis of principalGs liability since under Arts. 1( and 11(, theliability of the principal for acts done by the agent within the scope of his authority do not e%cludethose done negligently. leasantville 4ev. v. Co%rt o( *ppeals, 2


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(/+ Ae&/0 50 Est'33e1

y the opening of branch office with the appointment of its branch manager and honoringseveral surety bonds issued in its behalf, the insurance company induced the public tobelieve that its branch manager had authority to issue such bonds. As a conse


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standards were maintained. ndeed, it would seem from J4;s letter to Bahn that it was forBahn;s alleged failure to maintain J4 standards that J4 was terminating Bahn;sdealership. "he fact that Bahn invested his own money to put up these service centers andshowrooms does not necessarily prove that he is not an agent of J4. Ror as already noted,there are facts in the record which suggest that J4 e%ercised control over Bahn;s activitiesas a dealer and made regular inspections of Bahn;s premises to enforce compliance with J4

standards and specifications. 7ahn v. Co%rt o( *ppeals, 2** SCRA "iability o( *ent (or 4a$aes (or 6on8per(or$ance o( *ency(Art.!))9+

4hen the purchase by one company of the copra of another company is by way ofcontract of purchase rather than an agency to purchase, the former is not liable to reimbursethe latter for e%penses incurred by the latter in maintaining it purchasing organi7ation intactover a period during which the actual buying of copra was suspended. *lbala#ejo y Cia v.RC, 9< Pi1


28/66

committed by its agent;s employees and the principal$agency relationship per se does not ma&e theprincipal a party to such tort hence, the need to prove the principal;s own fault or negligence.Spouses 8iloria v. Continental Airlines$ !nc., >./. o. 188!88,16 Nanuary !(1!.

Co$pare>

"hus, with regard to the delivery of the petroleum, Killaru7 was acting as the agent of petitioner

)etron. Ror a fee, he delivered the petroleum products on its behalf. otably, petitioner evenimposed a penalty clause in instances when there was a violation of the hauling contract, wherein itmay impose a penalty ranging from a written warning to the termination of the contract. "herefore,as far as the dealer was concerned with regard to the terms of the dealership contract, acts ofKillaru7 and his employees are also acts of petitioner. etron Corp.v. Spo%ses Cesar )overo& 'r$a F. C%#illa,G.R. N'. !

V. ETINGUISHMENTOFAGENCY

!. H'B -&4 We& Ae&/0 Eti&?ise4 (Art. !=!=+

-. $0 Pri&/i3-1Ks Re7'/-ti'& '% Ae&/0 (E3ress 'r Im31ie4+

5. $0 Ae&tKs Wit4r-B-1 %r'm Ae&/0

/. $0 De-t, Ci7i1 I&ter4i/ti'&, I&s-&it0 'r I&s'17e&/0 '% te Pri&/i3-1 'r te Ae&t

4. $0 te Diss'1?ti'& '% te J?ri4i/-1 E&tit0 Wi/ E&tr?ste4 'r A//e3te4 te Ae&/0

e. $0 te A//'m31isme&t '% te O56e/t 'r P?r3'se '% Ae&/0

%. $0 te E3ir-ti'& '% te Peri'4 %'r Wi/ Ae&/0 W-s C'&stit?te4

2. E3ress Re7'/-ti'&> Te Pri&/i3-1 M-0 Re7'@e -& *ency at ;ill

-. I& Wi/ C-se, Pri&/i3-1 M-0 C'm3e1 Ae&t t' Ret?r& te D'/?me&t E7i4e&/i&te Ae&/0. (Art. !=2+

4here no time for the continuance of the agency is fi%ed by the terms, the principal is atliberty to terminate it at will sub2ect only to the re


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"he revocation of a special power of attorney, although embodied in a private writing is validand binding between the parties. Philippine ;ational 1an- v. !ntermediate Appellate Court, 18#C/A 68( +1(-.

4here the purported agent was orally given authority to follow up the purchase of the firetruc& with the municipal government, there is no authority to sell nor has the purported agent beenempowered to ma&e a sale for and in behalf of the seller. ut even if the purported agent is

considered to have been constituted as an agent to sell the fire truc&, such agency would havebeen deemed revo&ed upon the resumption of direct negotiations between the seller and themunicipality, the purported agent having in the meantime abandoned all efforts +if indeed any weree%erted- to secure the deal in the sellerGs behalf. :uarde' v. ;"RC, 11 #C/A '8* +1(-.

)rincipal may revo&e, e%press or impliedly, a contract of agency at will, and may be availed ofeven if the period fi%ed in the contract of agency has not yet e%pired. As the principal has thisabsolute right to revo&e the agency, the agent can not ob2ect thereto neither may he claimdamages arising from such revocation, unless it is shown that such was done in order to evade thepayment of agentGs commission. "he act of a contractor, who, after e%ecuting powers of attorney infavor another empowering the latter to collect whatever amounts may be due to him from the>overnment, and thereafter demanded and collected from the government the money thecollection of which he entrusted to his attorney$in$fact, constituted revocation of the agency infavor of the attorney$in$fact. ;ew Manila "um(er Co.$ !nc. v. Repu(lic of the Philippines , 1(* )hil.

8!' +16(-. C-S "oin v. Co%rt o( *ppeals, 2!! SCRA #89 (!==2+.1'

Damages are generally not awarded to the agent for the revocation of the agency, and thecase at bar is not one falling under the e%ception mentioned, which is to evade the payment of theagentGs commission. C-S "oin v. Co%rt o( *ppeals, 2!! SCRA #89 (!==2+.

/. Ge&er-1 P'Ber '% Att'r&e0 Is Re7'@e4 50 - S3e/i-1 O&e Gr-&te4 t' A&'ter Ae&t,As Re-r4s te S3e/i-1 M-tter I&7'17e4 i& te L-tter (Art. !=2*+

@ven though a period is stipulated during which the agent or employee is to hold his position inthe service of the owner or head of a mercantile establishment, yet the latter may, for any of thespecial reasons specified in Art. 3(( of the Code of Commerce, dismiss such agent or employeeeven before the termination of the period. 1arretto v. Santa Marina, !6 )hil ''( +113-.

A special power of attorney giving the son the authority to sell the principals properties isdeemed revo&ed by a subse


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(2+ For Revocation to rej%#ice 1he$, 6otice Is 6ee#e#

(#+ C'm3-re> '((ect o( Special 6otice or %blic *#vertise$ent re> *ppoint$ent an#Revocation o( *ent(Art. !)8#+.

4here the principal had e%pressly revo&ed the power of the agent to handle the affairs of thebusiness, but such revocation was not conveyed to a long$standing client to whom the agent had

been specifically endorsed in the past by the principal, the revocation was not deemed effectiveas to such client and the contracts entered into by the agent in the name of the principal after therevocation would still be valid and binding against the principal. Rallos v. 5anco, 2 Pi1 2*=(!=!!+.

n a case covering a power of attorney to deal with the general public, the fact that therevocation was advertised in a newspaper of general circulation would be sufficient warning tothird persons. Rammani v. Court of Appeals, 16 #C/A *31 +11-.

5. We& Re7'/-ti'& '% Ae&tKs Ge&er-1 P'Bers E%%e/ti7e A-i&st Tir4 Pers'&s (Art.!=22+

Re(ers to *ency Create# to 4eal ith the General %blic

Revocation ;ill not rej%#ice 1hir# ersons ;ho 4eal ith the *ent inGoo# Faith an# ;itho%t ?nole#e o( Revocation

7oever 6otice o( Revocation in a 6espaper o( General Circ%lation Is

S%((icient ;arnin

4here a principal has been engaged, through his agent, in a series of purchase and selltransactions with a merchant, and purported suspended the agent without informing themerchant, the suspension of the agent could not wor& to the detriment of the merchant, thus"here is no convincing proof in the record that the orders given by the plaintiff to its agent+>utierre7- had ever been communicated to the defendant. "he defendant had a perfect right tobelieve, until otherwise informed, that the agent of the plaintiff, in his purchase of abaca andother effects, was still representing the plaintiff in said transactions. "he Court also foundanomalous the position ta&en by the principal whereby he was willing to ratify the acts of the

agent in selling goods to the merchant, but unwilling to ratify the agentGs acts in purchasing goodsfrom the same merchant. Cia. :en. e )o(acos v. ia(a, !( )hil 3!1 +111-.

4hile Art. 1308 of Civil Code re


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4. O51i-ti'& '% Ae&t t' C'&ti&?e t' A/t E7e& A%ter Wit4r-Bi& Fr'm Ae&/0 (Art.!=2=+

'ven I( *ent ;ith#ras (ro$ the *ency (or a ali# Reason, 7e -%st

Contin%e to *ct@

Until rincipal has ha# reasonable opport%nity to 1ake 6ecessary Steps to

-eet Sit%ation@

(!+ C'm3-re>*ent 4eclines the *ency(Art. !))

5. E%%e/t '% A/ts D'&e 50 Ae&t Wit'?t &'B1e4e '% Pri&/i3-1Ks De-t (Art. !=#!+

(!+*cts *re ali# rovi#e#>

(i+ *ent 4oes 6ot ?no o( 4eath or Other Ca%se o( 'xtin%ish$ent o(*ency@

(ii+ 1hir# erson 4ealin ith *ent -%st *lso Be in Goo# Faith 26ot *are o(4eath or Other Ca%se3

Under Article 131 of the Civil Code, we must uphold the validity of the sale of the landeffected by the agent only after the death of the principal, when no evidence was adduced to

show that at the time of sale both the agent and the buyers were unaware of the death of theprincipal. 1uason v. Panuyas, 1(0 )hil *0 +10-. Reiterated in Herrera v. 0y im :uan, 1#C/A '(6 +161-.

). De-t '% te Ae&t Eti&?ises te Ae&/0

-. O51i-ti'& '% Ae&tKs Heirs i& C-se '% Ae&tKs De-t (Art. !=#2+>

(!+ 6oti(y rincipal

(2+*#opt -eas%res as Circ%$stances 4e$an# in rincipal9s Interest

NOTE> I% Pri&/i3-1 Dies, te L-B Is Si1e&t '& Weter His Heirs H-7e A&0O51i-ti'& t' N'ti%0 te Ae&t

15Also 1arrameda v. 1ar(ara, ( )hil. *18 +10!- Caisip v. Hon. Ca(angon, 1( )hil. 10( +10!-.



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"he contract of agency establishes a purely personal relationship between the principal and theagent, such that the agency is e%tinguished by the death of the agent, and his rights and obligationsarising from the contract of agency are not transmittable to his heirs. 1erra#o v. Co%rt o( *ppeals,!#! SCRA #8# (!=)9+.



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B. BUSINESSTRUSTS

I. NATUREANDCLASSIFICATIONOFTRUSTS

!. De%i&iti'& -&4 Esse&ti-1 C-r-/teristi/ '% Tr?st (Art. !99+

A trust is the legal relationship between one person having an e


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5ur Civil Code defines an e%press trust as one created by the intention of the trustor or of theparties, and an implied trust as one that comes into being by operation of law. =Article 1''1I @%presstrusts are those created by the direct and positive acts of the parties, by some writing or deed or will orby words evidencing an intention to create a trust. . . .4e find it clear that the plaintiffs alleged ane%press trust over an immovable, especially since it is alleged that the trustor e'pressly told thedefendants of his intention to establish the trust. #uch a situation definitely falls under Article 1''3 of theCivil Code. Cuaycong v. Cuaycong, !1 #C/A 11! +16*-.

@%press trusts are those which are created by the direct and positive acts of the parties, by somewriting or deed, or will, or by words either e%pressly or impliedly evincing an intention to create a trust.+8 C.N.#. *!!-. Ramos v. Ramos, 61 #C/A !8', !8 +1*'-.!(

n )amayo v. Calle#o, the Court recogni7ed that a trust may have a constructive or implied naturein the beginning, but the registered owner;s subse

agreement. @pifanio affirmed the lot brought in his name was co$owned by him, as one of the heirsof Nose, and his uncle "ran


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/. U&i1-ter-1 -&4 Prim-ri10 O&er'?s (/-& 5e Gr-t?it'?s+

4. Fi4?/i-r0

"he 2uridical concept of a trust, which in a broad sense involves, arises from, or is the result of,a fiduciary relation between the trustee and the cestui 9ue trust as regards certain propertyOreal,personal, funds or money, or choses in actionOmust not be confused with an action for specificperformance. "hus, when claimants to several parcels of land withdraw their claims in court relyingon the assurance and promise of Hulo made in open court that he would convey the lots claimedafter the proceedings had terminated, then a trust or a fiduciary relation between them arose, orresulted therefrom, or was created thereby. A trustee cannot invo&e the statute of limitations to barthe action and defeat the rights of the cestuis 9ue trustent. acheco v. *rro, )< Pi1.


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A testamentary trust was created by a provision in the will whereby the testator proposed tocreate trust for the benefit of a secondary school to be established in the town of "ayabas, namingas trustee the ayutamineto of the town or if there be no ayutamiento, then the civil governor of the)rovince of "ayabas. :overnment of P.!. v. A(adilla, '6 )hil. 6'! +1!'-.

Although the will e%ecuted by the testator did not use the words trust or trustee, but theintention to create one is clear since he ordered in his will that certain of his properties be &ept

together undisposed during a fi%ed period, for a stated purpose. o particular or technical wordsare re


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4. 1he Corp%s or the Res

4here D) establishes a pension trust for its officers and employees and appoints trusteesfor the fund whereby the trust agreement transferred legal title over the income and properties ofthe fund, then the principal and the income of the fund together constitute the res or sub2ectmatter of the trust. #ince the trust agreement established the fund precisely so that it wouldeventually be sufficient to pay for the retirement benefits of D) officers and employees, then the

income and profits thereof cannot be boo&ed by D) as its own, and D) cannot be directed byC5A to treat such income as it own. 4B v. CO*, 922 SCRA9ome7, 0( )hil. 81(-, or that the defense ofprescription cannot be set up in an action to recover property held by a person in trust for the benefitof another +#evilla vs. Delos Angeles, * )hil. 8*0-, or that property held in trust can be recoveredby the beneficiary regardless of the lapse of time +Jarabilles vs. uito, 1(( )hil. 6' ancairen vs.Diones, 8 )hil. 1!!, 1!6 Nuan vs. VuWiga, 6! 5.>. 1301 ' #C/A 1!!1 Nacinto vs. Nacinto, E$1*0*, Jay !1, 16!. #ee "amayo vs. Call2o, 1'* )hil. 31, 31*-. Q "he =foregoingIrule appliessorricho and Aguado, 1(3 )hil. !61, !66+108- Eaguna v. Eevantino, *1)hil. 066 #umira vs. Kistan, *' )hil. 138 >olfeo vs. Court of Appeals,63 5.>. '80,1! #C/A

25Pilapil v. Heirs of Ma'imino R. 1riones, 01' #C/A 1* +!((*- Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-.



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1 Caladiao vs. #antos,63 5.>. 106,1( #C/A 61-. Ramos v. Ramos, 61 #C/A !8', !+1*'-.

III. IMPLIEDTRUSTS

!. Listi& '% Im31ie4 Tr?sts N't E/1?si7e> F'?&4e4 '& E?it0 (Art. !998+."he concept of implied trusts is that from the facts and circumstances of a given case the

e%istence of a trust relationship is inferred in order to effect the presumed +in this case it is evene%pressed- intention of the parties or to satisfy the demands of 2ustice or to protect against fraud.Padilla v. Court of Appeals, 03 #C/A 168 +1*3-.

mplied trusts are those which, without being e%pressed, are deducible from the nature of thetransactions as matters of intent$ or which are superinduced on the transaction by operation of law asmatters of e9uity$ independently of the particular intention of the parties. "hey are ordinarilysubdivided into resulting and constructive trusts +8 C.N.#. *!!-. Ra$os v. Ra$os, *! SCRA 2)9,2=) (!=89+.!6

-. Res?1ti& Tr?sts

"he rule of imprescriptibility of an action to recover property held in trust may possible apply to aresulting trust as long as the trustee has not repudiated the trust. A resulting trust is broadly definedas a trust which is raised or created by the act or construction of law, but in its more restricted senseit is a trust raised by implication of law and presumed always to have (een contemplated (y the

parties$ the intention as to which is to be found in the nature of their transaction, but not e%pressedin the deed or instrument of conveyance +8 C.N.#. *!0-. @%amples of resulting trusts are found inarticle=sI 1''8 to 1''0 of the Civil Code. Ra$os v. Ra$os, *! SCRA 2)9 (!=89+.!*

/esulting trusts are based on the e


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right to property which he ought not, in e


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the beneficiary reimburses the trustee of the purchase price that the former can compel conveyanceof the property from the latter. arinit v. Bajit,*#! SCRA

n a situation where a Chinese resident had caused land to be placed in the name of the trusteewho was bound to hold the same for the benefit of the trustor and his family in the event of death, theapplication of the doctrine of implied trust under Article 1'01 by the heirs of the trustor cannot beupheld. "his contention must fail because the prohibition against an alien from owning lands of thepublic domain is absolute and not even an implied trust can be permitted to arise on e


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land for the same price and upon the same terms as those on which the purchase was made for theland sold to the wife of said employee passed to them as what might be regarded as e


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petitioners may still be compelled under the law to reconvey the property to respondents. asi!o v.-onterroyo, 4here a mother and her minor daughter inherited a large tract of land, and had itapplied for cadastral survey, but title was issued only in the name of the mother, courts of e


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"he Court has held that for ac


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registered in the name of the buyer, the contract is void, and the action to see& the declaration ofnullity is imprescriptible under Article 1'1( of the Civil Code, and is not to be governed by theprinciples of implied trust. Maca(a((ad v. Masirag$ 0*6 #C/A *( +!((-.

Close Relationship an# Contin%e# Reconition o( 1r%st Relationship? 5n the other hand,laches, being rooted in e


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there is concealment of the facts giving rise to the trust. +Dia7, et al. vs. >orricho, 1(3 )hil. !61-Continuous recognition of a resulting trust, however, precludes any defense of laches in a suit todeclare and enforce the trust. . . . "he beneficiary of a resulting trust may, therefore, without pre2udiceto his right to enforce the trust, prefer the trust to persist and demand no conveyance from thetrustee. Heirs of milio Candelaria v. "ucia Romero, 1( )hil. 0(( +16(-.

"he case at bar involves an implied or constructive trust upon the defendant$appellees. "he

Court of Appeals declared that ldefonsa held in trust the X legally belonging to the plaintiffs of whichcondition, the defendants had full &nowledge. "he sale made by ldefonsa in favor of the defendants,was not void or ine%istent contract, action on which is imprescriptible +Art. 1'0(, .C.C.-. t isvoidable, at most, and as such in valid until revo&ed within the time prescribed by law for itrevocation, and that is undoubtedly the reason why the Court of Appeals pronounced that theAppellees had the right to as& for a reconveyance of their share, unless the action is barred byprescription. )he prescripti(ility of an action for reconveyance (ased on implied or constructive trust$is now a settled 9uestion in this #urisdiction. !t prescri(es in ten >IG? years +oWaga v. #oler, >./. o.E$10*1*, 3( Nune 161 N. J. "uason M Co., nc. v. Jagdangal, >./. o. E$1003, 3( Nan. 16!-.

Al*ona v. Capunitan and Reyes, ' #C/A '0( +16!-.

4eci#e# j%st $onths later>f a person obtains legal title to property by fraud or concealment, aconstructive trust is created in favor of the defrauded party and the latter has the right to vindicate theproperty regardless of the lapse of time. "he rule that registration of real property under the "orrens

system had the effect of a constructive notice to the whole world cannot be availed of when thepurpose of the action is to compel a trustee to convey the property registered in his name for thebenefit of the cestui 9ue trust. !n other words$ the defense of prescription cannot (e set up in anaction to enforce a trust. 2,e need not reiterate those cases holding imprescripti(le the action toenforce a trust. =Castro vs. Castro, 0* )hil. 6*0 Cristobal vs. >ome7, 0( )hil. 81I. A different viewcould encourage fraud and permit one person un2ustly to enrich himself at the e%pense of another.%uan v. Du/iga, ' #C/A 1!!1 +16!-.

4here the administrator of the estate of the decedent had been duly instituted as the sole heir inthe will of the decedent which was duly probated, even assuming that the administrator had acted astrustee for the other heirs, the obtaining of the transfer certificates of titles in the administratorGs nameof all registered land of the estate would constitute an open and clear repudiation of any trust, andthe lapse of more than twenty yearsG open and adverse possession as owner would certainly sufficeto vest title by prescription in said administrator. "ope* v. :on*aga, 1( #C/A 16* +1*'-.

n constructive trusts among co$heirs or co$owners, the prescriptive period begins on the datewhen the trustee registers the deed that see&s to e%clude the cestuis 9ue trustantfrom title to theproperty and see&ing to have new title issued only in trusteeGs name. Castrillo v. Court of Appeals, 1(#C/A 0' +16'-.

4here the owner of an unregistered land had sold the property to another under a sale with aright of repurchase but was never able to e%ercise the right of repurchase, the registration by theseller of the property in his name under the "orrens system was done in bad faith, and he is deemedto have constituted himself as trustee for the buyer of the property to whom ownership wasconsolidated and who had been in possession thereof for many years. "he action of the buyer or hissuccessors$in$interest to have a reconveyance of the title even when filed more than twenty yearsafter the seller had obtained title thereto was imprescriptible. Under Act 1( +the old Code of Civil)rocedure-, section 38, which is the governing statute, prescription does not apply to continuing and

subsisting trusts so that actions against a trustee to recover trust property held by him areimprescriptible. Actions for the reconveyance of property wrongfully registered are of this category.Caladiao v. 8da de 1las, 1( #C/A 61 +16'-.

"he petitioners and private respondents were co$heirs, and the petitionerGs action for partitionand reconveyance was based upon a constructive trust resulting from fraud, the Court held that thediscovery of the fraud is deemed to have ta&en place, in the case at bar, on Nune !3, 1'8, whensaid instrument was filed with the /egister of Deeds and new certificates of title were issued in thename of respondents e%clusively, for the registration of the deed of e%tra$2udicial settlementconstituted constructive notice to the whole word. :erona v. e :u*man, 11 #C/A 103 +16'-.

Although as a general rule, an action for partition among co$heirs does not prescribe, this is trueonly as long as the defendants do not hold the property in


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E$110*8, 1' Jay 108 N.J. "ua7on M Co., nc. v. Jagdangal, E$1003, 3( Nanuary 16! Eope7 v.>on7aga, E$18*88, 31 Nanuary 16'-. :erona v. Carmen de :u*man, 11 #C/A 103 +16'-.

esides, even assuming the alleged trust to be an implied one, the right alleged by plaintiffswould have already prescribed since starting in 136 when the trustor died, plaintiffs had alreadybeen allegedly refused by the aforesaid defendants in their demands over the land, and the complaintwas filed only in 161Omore than the 1($year period of prescription for the enforcement of such

rights under the trust. t is settled that the right to enforce an implied trust in oneGs favor prescribes inten +1(- years. =>on7ales v. Nimene7, E$1(*3, 3( Nan. 160.I Cuaycong v. Cuaycong, !1 #C/A11!, 118 +16*-.

4hile there are some decisions which hold that an action upon a trust is imprescriptible, withoutdistinguishing between e%press and implied trust, the better rule, as laid down by the #upreme Courtin other decisions, is that prescription does supervene where the trust is merely an implied one.1ueno v. Reyes, !* #C/A 11* +16-.

Actions on implied and constructive trusts +as distinguished from e%press ones- are e%tinguishedby laches or prescription of ten years.8arsity Hills v. avarro, '3 #C/A 0(3 +1!!-.

"he rule of imprescriptibility of the action to recover property held in trust may possibly apply toresulting trusts as long as the trustee has not repudiated the trust +Beirs of Candelaria vs. /omero,1( )hil. 0((, 0(!$3 Jaritne7 vs. >raWo, '! )hil. 30 uencamino vs. Jatias, 63 5.>. 11(33, 16#C/A 8'-. Ramos v. Ramos, 61 #C/A !8' +1*'-.

"he rule of imprescriptibility does not apply to constructive trusts, and was therefore misappliedto constructive trusts in >eronimo and sidoro vs. ava and A


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C. PARTNERSHIPS

I. HISTORICAL$ACGROUND

!. O14 $r-&/es '% P-rt&ersi3 L-B

Ci7i1 P-rt&ersi3s+not pursued in mercantile manner non$habitual or not inthe regular pursuit of (usiness-

C'mmer/i-1 P-rt&ersi3s+in pursuit of industry or commerce characteri7edby ha(itualityor in the regular pursuit of (usiness-

Distinction between civil and commercial partnerships was critical under the old set$up becauseit determined the applicable rules for registration, personal liability of members, and the rights andmanner of dissolution. Compa/ia Agricola de 0ltramar v. Reyes, ' )hil. !, 11 +1('-.

(-+ C'mmer/i-1 3-rt&ersi3s Bere 4eeme4 t' 5e, -&4 s?56e/t t' C'4e '%C'mmer/e 3r'7isi'&s %'r, mer/-&ts>

A commercial or mercantile partnership has for its ob2ect the pursuit of industry orcommerce, and is then a merchant that must necessarily be governed by the Code ofCommerce and must comply with the registration re 4e are inclined to the belief that the respective codes, Civil and Commercial,have adopted a complete system for the organi7ation, control, continuance, liabilities,dissolutions, and 2uristic personalities of associations organi7ed under each. . . . t is ouropinion that associations organi7ed under the different codes are governed by the provisionsof the respective codes. Compa/ia Agricola de 0ltramar v. Reyes, ' )hil. ! +1('-.

A commercial partnership that fails to register its articles of partnership in the mercantile

registry in accordance with Art. 11 of the Code of Commerce, does not become a 2uridicalperson with a personality distinct from those of the individuals who composed it. Ang Seng6uen v. )e Chico, * )hil. 0'1 +1(*-1ourns v. Carman, * )hil. 11* +1(6-Hung=Man=+ocv.ieng=Chiong=Seng, 6 )hil. '8 +1(6-.3*

Conse:%ently>

t cannot maintain an action in its name Prautch v. Hernande*, 1 )hil. *(0+1(3-

either in the name of one or more of the members on behalf of hisassociates nevertheless the individual members may sue 2ointly as individuals, andpersons dealing with them in their 2oint capacity will not be permitted to deny their right todo so. Prautch$ etc. v. %ones, 8 )hil. 1, ! +1(*-Ang Seng 6uen v. )e Chico, 1! )hil.0'* +1(-.

4ithout a separate 2uridical personality, what was applicable was Art. 1!(which made persons in charge of the management of the association liable for the debtsincurred by such partnership de facto. wong=,o=Sing v. ieng=Chiong=Seng, 6 )hil.'8 +1(6-.

(5+ F'r /'mi& i&t' eiste&/e5e/'mi& - 6?ri4i/-1 3ers'&, reistr-ti'& B-s te@e0 e1eme&t %'r /'mmer/i-1 3-rt&ersi3s (Arts. !!)"!!=, C'4e '% C'mmer/e+,Bi1e it B-s mere 3er%e/ti'& '% te /'&tr-/t %'r /i7i1 3-rt&ersi3s>

4hen the partnership business is in laundry, it is essentially a civil partnership andgoverned by the provisions of the Civil Code, and it e%isted validly even when no formalpartnership agreement was entered into and registered, and thereby the obligations of thepartners for partnership debts would bepro=rata. ietrich v. 7reeman,18 )hil. 3'1 +111-.

(/+ F'r 3-rt&ersi3 4e5ts, /'mmer/i-1 3-rt&ers Bere s'1i4-ri10 1i-51e, albeits?5si4i-ri10, Bi1e /i7i1 3-rt&ers Bere 3rim-ri10 5?t '&10 6'i&t10 1i-51e>

n a civil partnership, each member is not bound to pay all the debts of the concern, butsimply hispro ratashare, Co=Pitco v. +ulo, 8 )hil. 0'' +1(*-.

n a commercial partnership, although the partners are only subsidiarily liable + i.e.$ theyen2oy the benefit of e%cussion- they are liable solidarily, 8iuda de Chan iaco v. Peng, 03)hil. (6 +1!8- both the partnership and the separate partners may be 2oined in one action,but the private property of the partners cannot be ta&en in payment of the partnership debtsuntil the common property of the firm has been e%hausted. "a Compa/ia Maritima v. Mu/o*, )hil. 3!6 +1(*- and their right of e%cussion is deemed already satisfied where at the timethe 2udgment is e%ecuted against the partnership they are unable to show that there are still

37Ang Seng 6uen v. )e Chico, * )hil. 0'1 +1(*- 1ourns v. Carman, * )hil. 11* +1(6-.



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partnership assets, or when a writ of e%ecution against the partnership has been returned notfully satisfied, e los Reyes v. "u-(an, 30 )hil. *0* +116- P;1 v. "o, 0( )hil. 8(! +1!*-.

II. NATUREANDATTRI$UTESOFTHEPARTNERSHIP

!. De%i&iti'& '% P-rt&ersi3 (Art. !8*8+

2. TRI"LEVELEISTENCELEGALRELATIONSHIPSINAPARTNERSHIPSETTING

-. RI-*RI"5*CO61R*C1U*"R'"*1IO6S7I (Arts. !8*8, !88! -&4 !8)9+

5. S'*R*1')URI4IC*"'RSO6*"I15*S17'-'4IU-1OURSU'BUSI6'SS(Art. !8*)+

/. U64'R"5I6GBUSI6'SS'61'RRIS'*S17'RI-*R5OB)'C1I'

4hen the original partners sell their e J'i&t 3?rs?it '% - 3r'%essi'& 4'&e tr'? - 3r'%essi'&-1 3-rt&ersi3.

(i+* partnership $%st be establishe# (or the co$$on bene(it or interest o( theparties(Art. !88+.

(ii+* stip%lation excl%#in a partner (ro$ participation in the pro(its an# losses isvoi#(Art. !8==+.

2)he o(taining of profit or gain from the (usiness to (e carried on3is the very reason for thee%istence of a partnership it is the element that distinguishes the contract of partnership fromvoluntary religious or social organi7ations. 7ernande* v. e la Rosa, 1 )hil. 6*1 +1(3-.

An agreement between two persons to operate a coc&pit, by which one is to contribute hisservices and the other to provide the capital, the profits to be divided between them, constitutesa partnership. n this case, that he performed services in connection with the business and thatdefendant not only rendered an accounting of the business and paid him his share of the profits,were competent proof to establish the partnership. uterte v. Rallos, ! )hil. 0( +1(3-.

. . . where the society is not constituted for the purpose of gain, it does not fall within thisarticle of the Civil Code =on partnershipsI. #uch an organi7ation is fully covered by the Eaw ofAssociations of 188*, but that law was never e%tended to the )hilippine slands. Council of RedMen v. 8eterans Army, * )hil. 680 +1(*-.

/. CONSIDERATION> Un#ertakin to Contrib%te -oney, roperty or In#%stry to aCo$$on F%n#

4.P-rti/?1-r R?1es '& Testi& Per%e/te4 P-rt&ersi3 (Art. !8*=-

Although the e%istence of a partnership cannot be established by general reputation, rumor,or hearsay, nonetheless, a verbal partnership is valid and may be proven by competentevidence, and the intention of the parties, to form a partnership may be gathered from the factsand ascertained from their language and conduct, and once so established should be giveneffect. iel v. state of P.S. Sa(ert, '6 )hil. 13 +1!'-.

"he issue as to whether there is a partnership between the parties is a factual matter.Alic(usan v. Court of Appeals, !6 #C/A 336 +1*-.

4hen members of the same family lease out to #B@EE a family commercial lot for theestablishment of a gasoline station, and invested the advanced rentals and deposits to allow one



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of their members to use the amounts as the registered dealer of #B@EE under the latterGs policyof one station, one dealer, and that the registered dealer had accounted for the operations tothe other members of the family, there was indeed a partnership formed among themselves, forwhich the registered dealer can be compelled to e%ecute the covering articles of partnership, foraccounting and distribution of the shares in profits of the other partners.'stanislao, )r. v.Co%rt o( *ppeals, !* SCRA )# (!=))+.

4hen facts proven show that purported partner never furnished the supposed )!(,(((capital, nor rendered any help or intervention in the management of the purported partnershipbusiness, much less demanded an accounting of its affairs and its earnings, there was neverintended a real partnership despite the articles of partnership e%ecuted. All that the purportedpartner did was to receive her share of )3,((( a month, which can not be interpreted in anymanner than a payment for the use of the premises which she had leased from the owners, andwas in accordance with the original letter of defendant +@%h. A-, which shows that both partiesconsidered themselves as lessor$lessee under a contract of lease. 5%lo v. 5an Chiao Sen,!* Pi1. !!! (!=


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Despite the agreement that astida was to receive 309 of the profit from the businessof mi%ing and distributing fertili7er registered in the name of Jen7i M Co., there was neverany contract of partnership constituted between them based on the following &ey elements+a- there was never any common fund created between the parties, since the entirebusiness as well as the e%penses and disbursements for operating it were entirely for theaccount of Jen7i M Co. +b- there was no provision in the agreement for reimbursing Jen7iM Co. in case there should be no profits at the end of the year and +c- the fertili7er businesswas 2ust one of the many lines of business of Jen7i M Co., and there were no separateboo&s and no separate ban& accounts &ept for that particular line of business. "hearrangement was deemed to be one of employment, with astida contributing his servicesto manage the particular line of business of Jen7i M Co.Basti#a v. -en+i an# Co.,


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foundation and essence of that partnership. ts continued e%istence is, in turn, dependent on theconstancy of that mutual resolve, along with each partnerGs capability to give, it, and the absenceof a cause for dissolution provided by the law itself. Ortea v. Co%rt o( *ppeals, 29< SCRA


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e. )ob Contractin or S%bcontractin

Nob contracting or subcontracting refers to an arrangement whereby a principal agrees to farmout with a contractor or subcontractor the performance of a specific 2ob, wor& or service within adefinite or predetermined period, regardless of whether such 2ob, wor& or service is to beperformed or completed within or outside the premises of the principal. "he rules on 2obcontracting are inapposite where the contract, far from being a 2ob contracting arrangement, is in

essence a business partnership that parta&es of the nature of a 2oint venture. )rave/o v.1o(ongon 1anana :rowers Multi=Purpose Cooperative, 08 #C/A !* +!((-.

%. Corporations

. Cooperatives

IV. PARTNERSHIPASPRIMARILYACONTRACTUALRELATIONSHIP

!. Esse&ti-1 C-r-/teristi/s '% te C'&tr-/t '% P-rt&ersi3(Art. !8*8+

-. 6o$inate an# rincipal

f the contract contains the elements of common fund and 2oint interest in the profits, thepartnership relation results, and the law fi%es the incidents of this relation if the parties fail to do so.

t is of no importance that the parties have failed to reach an agreement with respect to the minordetails of contract. "hese details pertain to the accidental and not to the essential part of thecontract of partnership. Fernan#e+ v. 4ela Rosa, ! Pi1. *8! (!=2+.

(i+* artnership -%st 7ave a "a(%l Object or %rpose(Art. !88+.

"he contract of partnership to divide the fishpond between the parties after the administrativeagency shall have approved the arrangement became illegal under the Risheries Act. As such,it cannot be made sub2ect to any suspensive condition the fulfillment of which could allegedlyma&e the ultimate underta&ing therein a demandable obligation. t is an elementary rule in lawthat a partnership cannot be formed for an illegal purpose or one contrary to public policy andthat where the ob2ect of a partnership is the prosecution of an illegal business or one which iscontrary to public policy, the partnership is void. eluao v. Casteel, ! #C/A 30( +16-.

Under Art. 1666 of the old Civil Code, an action to declare a partnership as an unlawfulpartnership does not re


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Ol# Civil Co#e an# Co#e o( Co$$erce>"hird parties without &now

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