Partnership, Agency & Trust Digest Compilation

Power to Dissolve Partnership
MARJORIE TOCAO & WILLIAM BELO v CA & NENITA ANAY

YNARES-SANTIAGO, J p:
FACTS:
Nenita Anay, a former marketing adviser of Technolux Bangkok, accepted
an offer from William Belo and Marjorie Tocao, to become an industrial
partner to a business venture/partnership. The business, Geminese
Enterprises, a sole-proprietorship registered in Tocaos name, would be a
distributorship of cookware, and would benefit from Anays expertise and
knowledge and her connection with a kitchenware manufacturer in the US.
The partnership also agreed to use her name in securing distributorship of
cookware from such manufacturer. Anay eventually became Vice-President
for sales. She organized administrative staff and sales force. Her profits,
as agreed (but not reduced into writing) would comprise of:
1. 10% of annual net profits
2. 6% of overall weekly production
3. 30% of the sales she would make
4. 2% for her demonstration services.
On the other hand, Tocao was the president and general manager of
Geminese, while Belo acted as the capitalist.
With the written consent of Tocao, Anay accepted the invitation of their
manufacturer to attend a distributor/dealer meeting in Wisconsin. Upon her
return, Anay learned that Tocao had written a letter to the Cubao sales
office to the effect that she was no longer the vice-president of Geminese,
and was now barred from holding office and conducting demonstrations in
the offices. Anay, failing to get a response from Belo, demanded for the
commission due her and an audit of the company, to determine her share
in the net profits.
In their answer, petitioners claimed that Anay was not a partner because
1. there was no such agreement in writing;
2. Geminese was the sole proprietorship of Tocao
3. Anay merely acted as marketing demonstrator for an agreed
renumeration
Therefore, her complaint should have been lodged w/ the DOLE and not w/
the regular court.
Boom Bayani
San Beda College Alabang
ISSUE: WHETHER OR NOT A PARTNERSHIP EXISTS

HELD: YES. As ruled by the RTC, affirmed by both the CA & SC, a
partnership exists among Belo, Tocao and Anay. The law provides that a
partnership must fulfill these requisites:
1. 2/more persons bind themselves to contribute money, property or
industry to a common fund; &
2. intention on the part of the partners to divide the profits among
themselves.
It may be constituted on any form.
In the case at hand, Belo, and Tocao contributed money to the business
while Anay contributed her expertise in order that they may divide the
profits by way of commissions. The fact that the agreement was not in
writing is of no moment because Art 1771 provides that a partnership may
be constituted in any form. Even if the business was registered solely
under Tocao, is not definitive of whether it is a sole proprietorship or a
partnership for what it involves is merely the business name and style of
Geminese.
Therefore, GEMINESE Enterprises is a partnership business.
ISSUE 2: WHETHER OR NOT ANAY IS A PARTNER and THEREFORE HAD
THE RIGHT TO DEMAND A FORMAL ACCOUNTING AND TO HER SHARE IN
THE NET PROFITS.
RTC: a partner who is excluded wrongfully from a partnership is an
innocent partner. Hence, the guilty partner must give him his due upon
the dissolution of the partnership as well as damages or share in the
profits "realized from the appropriation of the partnership business and
goodwill." An innocent partner thus possesses "pecuniary interest in
every existing contract that was incomplete and in the trade name of the
co-partnership and assets at the time he was wrongfully expelled."
CA: Affirmed
HELD: YES. Petitioners admit that Anay had the expertise to engage in the
business of distributorship of cookware. Anay contributed her expertise to
the partnership and hence, she was the industrial or managing partner. It
was through her reputation that the partnership was able to open a
Boom Bayani
distributorship under the US manufacturer; it was even admitted by the

petitioners that Anays contribution was indispensable to the success of the
business. There was no employer-employee relationship and the fact that
they all receive profits by way of commission and not by way of wages
proves such fact.
Therefore, being a partner, Anay had the right to demand for a formal
accounting of the business and to receive her share in the net profits.
ISSUE 3: WHETHER OR NOT A PARTNER HAS THE POWER TO DISSOLVE
A PARTNERSHIP
(Wala ito sa decisions ng RTC at CA pero sinabi lang ng SC)
HELD: YES. The law provides that any one of the partners may, at his sole
pleasure, dictate a dissolution of the partnership at will. He must, however,
act in good faith, not that the attendance of bad faith can prevent the
dissolution of the partnership but that it can result in a liability for damages.
In the case at hand, as petitioner Tocao learned the ropes of the
distributer business, and in order to reap the profits for herself and Belo,
she unilaterally excluded Anay from the partnership. This shows that Tocao
was in bad faith. While she had the power to exclude Anay from the
partnership, thereby dissolving Geminese, this is not a right that would
exempt her from liability to pay damages to the innocent partner (Anay),
for such unjustified dissolution.
Existence of Partnership Disputed
HEIRS OF TAN ENG KEE v CA & BENGUET LUMBER COMPANY,
represented by its President TAN ENG LAY
DE LEON, JR., J p:
FACTS:
Petitioners filed a complaint for the accounting of the partnership assents,
dissolution, winding up and liquidation and equal distribution of the net
assets of Benguet Lumber. According to them, their late father, Tan Eng
Kee, and his brother Tan Eng Lay, pooling their resources together,
entered into a joint venture partnership engaged in the business of selling
Boom Bayani
lumber and hardware and construction supplies. The brothers jointly

managed the business until Kees death.
However, Tan Eng Lay denied partnership with Kee, averring that the
business was solely his and his brother Kee, was merely an employee and
not a partner. Lay presented into evidence business payrolls where Kees
name appears as an employee, as well as his SSS coverage as an
employee. The business was registered as a sole proprietorship under Lays
name.
ISSUE: WHETHER OR NOT KEE WAS A PARTNER
RTC: YES.
CA: NO. Partnership presupposes the following elements:1) a
contract, either oral or written. However, if it involves real property
or where the capital is P3,000.00 or more, the execution of a
contract is necessary; 2) the capacity of the parties to execute the
contract; 3) money property or industry contribution; 4) community
of funds and interest, mentioning equality of the partners or one
having a proportionate share in the benefits; and 5) intention to
divide the profits, being the true test of the partnership. The
intention to join in the business venture for the purpose of
obtaining profits thereafter to be divided, must be established. We
cannot see these elements from the testimonial evidence of the
appellees.
SC: NO
Plaintiffs claim that their father was a partner in respondents business for
the following reasons:
1. Kee conducted the affairs of the business alongside Lay during Kees
lifetime;
2. They gave orders to the employees
3. They prepared orders from suppliers
4. Their families stayed together at the Benguet Lumber compound
5. All their children were employed in the business in different capacities.
The court cited that a contract of partnership must establish that 2/more
persons bound themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among themselves.
Boom Bayani
The agreement need not be formally reduced into writing, since the law
allows the oral constitution of partnership, save in 2 instances:
1. When immovable property or real rights are contributed; &
2. When the partnership has a capital of P3,000 or more.
In both instances, a public instrument is required. An inventory to be
signed by the parties & attached to the public instrument is also
indispensable to the validity of the partnership whenever immovable
property is contributed to the partnership. Undoubtedly, the best evidence
would have been the contract of partnership itself, or the articles of
partnership.
In the case at hand, there was none. The alleged partnership was never
formalized. The plaintiffs failed to substantiate their claim of partnership
between the Tan brothers.
A demand for periodic accounting is also evidence of partnership. In this
case, the court found it quite odd, that despite the 40 years the
partnership was allegedly in existence, Tan Eng Kee never asked for an
accounting from his brother. The essence of partnership is that partners
share in the profits and losses. Each partner has the right to demand an
accounting as long as the partnership exists. Kee had gone too long to take
care of an ordinary concern of a partner to be plausible.
Therefore, although it is clear Tan Eng Kee was involved in Benguet
Lumber company, he was not a partner, but merely an employee. The
payrolls presented by Lay and the failure of plaintiffs to offer evidence that
their father received profits from Benguet Lumber Co as his share and not
merely his wage led the court to such conclusion.
Co-ownership or Co-possession
LORENZO OA, & HEIRS OF JULIA BUNALES v COMMISSIONER of
INTERNAL REVENUE
BARREDO, J p:
FACTS:
Boom Bayani
Julia Bunales died intestate in 1944, leaving her spouse Lorenzo Ona and
her 5 children. Lorenzo was appointed administrator of the estate. He
submitted the project of partition, which was approved by the court. He
was also appointed as guardian of the children (who were all minors at the
time) and of their property.
The project of partition shows:
1. The heirs have undivided interest in 10 parcels of land (valued at
P87,860), 6 houses (P17,590)
2. They also have the same interest in an undetermined amount to be
collected from the War Damage Commission (later, they received
from such commission P50k, but it was not divided but used instead
to rehabilitate their common properties)
3. Of the 10 parcels of land, 2 were acquired after the death of Julia,
with money borrowed from the Ph Trust Company in the amount of
P72,173.
4. The estate shares equally with Lorenzo, in the obligation of P94,973
consisting of loans contracted by the latter with the approval of the
court.
Although the project of partition was approved by the court in 1949, no
attempt was made to divide the properties. Instead, they remained under
the management of Lorenzo, who used the properties by leasing or selling
them and investing the income and sales proceeds in real properties and
securities. As a result, the petitioners properties and investments gradually
increased from P105,450 to P480,005.20 in 7 years. The incomes are
recorded in the books of account kept by Lorenzo, where the
corresponding shares of the petitioners in the net income are also known.
The petitioners never received their share of the income/profits because
they allowed Lorenzo to continue using said shares as part of their
common fund.
The commissioner of internal revenue decided that the petitioners formed
an unregistered partnership and therefore, subject to the corporate income
tax. He made an assessment for the years 1955 and 1956.
ISSUE: WHETHER THERE WAS A CO-OWNERSHIP OF AN UNREGISTERED
PARTNERSHIP
Boom Bayani
HELD by Tax Court & affirmed by SC: UNREGISTERED PARTNERSHIP.

Partnership is defined by law as a situation where 2/more persons bound
themselves to contribute money, property or industry to a common fund
with the intention of dividing the profits among themselves. In the case at
bar, the heirs, notwithstanding a court-approved project of partition, never
divided the subject properties. Instead, they allowed their father and the
administrator to use their inherited properties and the profits derived
therefrom as a common fund in the undertaking of several transactions or
in business, with the intention of deriving profit to be shared by them
proportionally, such act was tantamount to actually contributing such
incomes to a common fund. Therefore, in effect, they formed an
unregistered partnership.
ISSUE: WHEN DID THE PARTNERSHIP START? AT THE DEATH OF THE
DECEDENT, OR AT THE TIME OF THE APPROVAL OF PARTITION?
HELD: AT THE TIME OF THE APPROVAL OF THE PARTITION. In cases of
inheritance, the heirs are co-owners of the undivided property of the
decedent. This is a time where an administrator may be appointed to hold
the property for them pending partition. But from the moment of partition,
the heirs are entitled already to their respective definite shares of the
estate & the incomes thereof, for each of them to manage and dispose of
as exclusively his own without the intervention of the other heirs and
accordingly each heir becomes liable for the taxes in connection therewith.
If after such partition, he allows his share to be used with the intent of
making profit thereby in proportion to his share, there can be no doubt
that, even if no document or instrument were executed for the purpose, an
unregistered partnership is formed. In the case at bar, the heirs were coowners from the time of Julias death in 1949. But an unregistered
partnership was formed upon the approval by the court of the project of
partition submitted by Lorenzo, the administrator of the estate and the
heirs, letting him manage the property and use it in order to derive profits
to be distributed among them proportionally.
Co-ownership or Co-possession
JOSE GATCHALIAN, ET AL. v THE COLLECTOR OF INTERNAL
REVENUE
IMPERIAL, J p:
Boom Bayani
FACTS:
The plaintiffs, are a group of 15 persons who consolidated their money to
purchase 1 ticket from the National Charity Sweeepstakes Office at 2 pesos.
Said ticket was personally purchased by Gatchalian and registered in the
name of Jose Gatchalian and Company. Such ticket won the 3rd prize in the
amount of P50,000. A check was drawn in favor of Jose Gatchalian and
Company against the PNB and cashed by Jose Gatchalian and Company.
Not long after, income tax examiner Alfredo David required Gatchalian to
file the income tax return covering the prize won. David made an
assessment requesting payment for the sum of P1,499.94.
The plaintiffs requested for tax exemption, but was denied. To prevent a
levy from being made against them, they paid the tax due under protest.
ISSUE: WHETHER THE PLAINTIFFS FORMED A PARTNERSHIP and
therefore liable for income tax, or MERELY A COMMUNITY OF PROPERTY
WITHOUT A PERSONALITY OF ITS OWN and therefore exempt from such
payment
CFI: Case dismissed. No partnership, merely co-ownership
SC: The plaintiffs formed a PARTNERSHIP.
Partnership is defined by law as a situation where 2/more persons bound
themselves to contribute money, property or industry to a common fund
with the intention of dividing the profits among themselves. In this case,
15 people, including Gatchalian, pooled their money to a common fund to
buy a sweepstakes ticket, with the intention of dividing the prize in case
the ticket wins a prize. Therefore, there was a partnership formed. As such,
they are liable to pay income tax for the profit the partnership earned.
Failure to Return Partnership Money Received
CARMEN LIWANAG v CA & the People of the Ph
ROMERO, J:
FACTS:
Petitioner and a certain Thelma Tabligan asked Isidora Rosales to join
them in the business of buying and selling cigarettes. Rosales agreed.
Under their agreement, Rosales would give the money needed to buy the
cigarettes while Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission to her if the goods are sold. Otherwise,
Boom Bayani
the money would be returned to Rosales. The amounts advanced to

Liwanag and Tabligan totaled to P633,650.
At first, Liwanag and Tabligan made regular reports to Rosales on the
progress of the transactions. But when they stopped reporting to Rosales
and the latter failed to obtain information from them, the latter suspected
that the money was being misappropriated. She filed a case of estafa
against Liwanag.
Liwanag asserts that the intention of the parties was to enter into a
contract of partnership , where in Rosales would contribute the funds while
she would buy and sell the cigarettes and later divide the profits between
them. She also argues that the transaction can also be interpreted as a
simple loan. Therefore, there is only civil liability and not one that would
amount to a criminal case of estafa.
ISSUE: WHETHER OR NOT LIWANAG IS GUILTY OF ESTAFA
RTC: Guilty as charged
HELD: YES. A contract of partnership was indeed entered into by and
between the parties, it has been held that when money or property have
been received by a partner for a specific purpose, and he later
misappropriated it, such partner is guilty of estafa. In the case at hand,
Liwanag was given the money by Rosales assuming as partner, received
such money for the specific purpose of buying cigarettes in the course of
their business. And her act of failing to return the money/profit to Rosales
and misappropriating it, she is guilty of estafa as a partner.
Prohibition against engaging in business/Formal accounting

EVANGELISTA & CO., DOMINGO C. EVANGELISTA JR., CONCHITA
B. NAVARRO AND LEONARDA ATIENZA ABAD SANTOS v ESTRELLA
ABAD SANTOS
FACTS:
Evangelista & Co., a co-partnership, was formed Oc wherein Estrella
Abad Santos was the industrial partner and petitioners Domingo
Evangelista, Leonarda Atienza Abad Santos and Conchita Navarro were the
original capitalist partners with a contribution of P17,500 each. Articles
Boom Bayani
provided that profits and losses shall be divided and distributed among
partners in proportion of 70% for the first 3 partners and 30% for the
fourth partner, Estrella Abad Santos. Estrella filed a suit against petitioners
for her exclusion in dividing of dividends and refusal to examine
partnership books. Defendants denied declaring dividends and alleged that
Articles of Co-Partnership did not express true agreement: Estrella was not
an industrial partner and that her share of 30% would only be realized by
the partnership until full payment of loan from Rehabilitation Finance
Corporation (RFC) in sum of P30,000, to which Estrella had signed a
promissory note as co-maker and mortgaged her property as security.
ISSUE: WHETHER ABAD SANTOS IS AN INDUSTRIAL PARTNER OR
MERELY A PROFIT SHARER ENTITLED TO 30% OF NET PROFITS
HELD:
Yes. Abad Santis is an industrial partner and is therefore entitled to her
share of the profits. CA upheld RTC decision in declaring her an industrial
partner.
1767 provides that by contract of partnership two or more persons bind
themselves, to contribute money, property or industry to a common fund,
with the intention of dividing the profits among themselves. It does not
specify the kind of industry that a partner may contribute. Hence, services
may legitimately be considered as contribution to the common fund.
In this case, CA did not consider the Articles of Co-Partnership as

conclusive evidence but considered it together with other evidence, which
show that Estrella is an industrial partner estopping the appellants because
they all bear the imprint of their knowledge and consent, and there is no
proof that they protested against or opposed their contents prior to filling
of their answer. Even if Articles did not hold true intent, act of filing their
answer after 8 years (from June 1955 to February 1964) showed that they
did nothing to correct the alleged false agreement.
Another article, 1789, reads that an industrial partner cannot engage in

business for himself, unless partnership expressly permits him to do so;
Boom Bayani
and if he should do so, capitalist partners may either exclude him from the
firm or avail themselves of the benefits which he may have obtained in
violation of this provision, with right to damages in either case.
Estrella Abad Santos has been, and up to present is, one of the judges of
the City Court of Manila, devoting all her time to the performance of duties
of her public office. Even so, she has rendered services for appellants
without which they would not have been able to operate the business of
the partnership. There was no pretense that she was engaged in any
business antagonistc to the company, since being a Judge cannot be
characterized as a business. It was only after the filing of the complaint
that appellants exercised their right of exclusion by alleging that they
reached an agreement excluding Estrella as an alleged industrial partner on
the ground that she never contributed her industry and still is the judge of
City Court. However, having always known that she is a City Judge even
before she joined the company, appellants are estopped considering it took
them so many years before excluding her as per the allegations.
Lastly, according to 1299, any partner shall have the right to a formal
account as to partnership affairs: a) if he is wrongfully excluded from the
partnership business or possession of its property by his co-partners, b) if
right exsists under terms of any agreement, c) as provided by 1807 and d)
whenever other circumstances render it just and reasonable.
Having established that Estrella is an industrial partner and that she was
deprived of her rights in the partnership, it is only just that as industrial
partner, she has the right to demand for a formal accounting, to receive
her share in net profits and to check the books.
Individual liability of partners
PNB v SEVERO EUGENIO LO ET. AL SEVERO EUGENIO LO, NG
KHEY LING and YEP SENG
FACTS:
Boom Bayani
Appellants (Severo Lo, Ng Ling and Yep Seng), together with JA Say Ping,
Ko Hun, On Ke Lam and Co Peng, formed a commercial partnership of Tai
Sing & Co, with a capital of P40,000 composed of partners contributions.
In the Articles, partnership was to last for 5 years, engaged for buy and
sell of merchandise, goods, Chinese and Japanese products in Iloilo or in
any part of the Philippines they might desire.
On Ke Lam, under a power of attorney executed in his favor by Say Ping,
obtained a loan of P8,000 from PNB. As security, he mortgaged a certain
personal property of Tai Sing & Co.
This credit was renewed several times.
Ke Lam also executed a chattel mortgage in favor of PNB, for a loan of
P20,000 at 9% interest per annum.
Yap Seng, Severo Lo, On Ke Lam and Ng Ling (Ng Lim represented by
Pineda Tayenko), executed a power of attorney in favor of Sy Tit by virtue
of Sy Tit representing Tai Sing & Co obtained a credit of P20,000 from
PNB.
They executed a chattel mortgage on certain personal property belong to
Tai Sing & Co.
Defendants using the commercial credit in a current account from PNB had
a debit balance of this account as follows
Outstanding as of June 1922 is P16,518.74
With 9% interest (P3,720.86)
Total: 20,239.86
Severo Lo, in his defense, claims that Tai Sing & Co was not a general
partnership, and that commercial credit had not been authorized by the
company board of directors. Later on, Severo Lo, Ng Ling and Yep Seng
admit that defendant association former by them is a general partnership.
They agreed upon Tai Sing & Co as the firm name instead of using their
own surnames.
Boom Bayani
Appellants allege that property as is not included in the partnership assets

cannot be seized until after partnership property has been exhausted. The
records show that partnership property described in the mortgage no
longer existed at the tine of filing of complaint nor has its existence proven,
nor was it offered to plaintiff for sale.
ISSUE: DOES THE ANOMALOUS ADOPTION OF FIRM NAME AFFECT THE
LIABILITY OF GENERAL PARTNERS TO 3RD PARTIES?
HELD:
No, anomalous adoption of firm name does not affect the liability to third
parties.
According to 127 of Code of Commerce, all members of a general
partnership, be they managing partners or not, shall be personally and
solidarily liable with all their property, for the results of transactions made
in the name and for the account of the partnership, under the signature of
the latter and by person authorized to use it.
The object of the provision in requiring a general partnership to transact
business under the name of all its members, of several of them, or of one
only, is to protect the public from imposition and frauda protection of
creditors rather than of partners themselves. Doctrine must be construed
as rendering contracts made in violation of it unlawful and unenforceable
only as between the partners and at the instance of the violating party, but
not with depriving innocent parties of their rights who have dealt with
offenders in ignorance of having violated the law. Contracts entered into by
commercial associations defectively organized are valid when voluntarily
executed by parties.
This provision applies strongly to the obligations contacted by the

defendants, for they formed a partnership with was registered in the
mercantile register and carried on business contracting debts with PNB.
Boom Bayani
Liability for debts of an industrial partner

LA COMPANIA MARITIMA v FRANCISCO MUNOZ et. al
FACTS
Francisco Munoz, Emilio Munoz and Rafael Naval formed an ordinary
partnership named Francisco Munoz and Sons for carrying mercantile
business in Albay. Francisco Munoz was the capitalist partner while Emilio
Munoz and Rafael Naval were the industrial partners. The articles of
partnership refer to it as an ordinary, general mercantile partnership.
Appellees claim that Emilio Munoz contributed nothing to the partnership
because no yearly or monthly salary was assigned to him, that he
contributed nothing and received nothing from the partnership and that he
was excluded from the management of business.
Articles of partnership say that All profits shall be distributed, on
completion of 5 years, for capitalist partner Francisco Munoz, 1/8 for
Emilio and remaining for Rafael Naval.
Emilio was to receive at the end of 5 years 1/8th of profits. If the
contention of the appellees were sound, it would result that, where the
articles provided a distribution of profits but did not assign any specific
salary to an industrial partner during that time, he would not be a member
of the partnership.
ISSUE: WHETHER OR NOT AN INDUSTRIAL PARTNER IN A GENERAL
PARTNERSHIP IS LIABLE TO 3RD PERSONS FOR DEBTS CONTRACTED BY
THE PARTNERSHIP
HELD:
Yes, industrial partners are liable to third persons for debts of firm.
The Code of Commerce provides: should there not have been stated in
the articles of partnership the portion of profits to be received, profits shall
be divided pro rata. Partners who have not contributed any capital, but
giving their services, will receive same amount as partner who contributed
the smallest capital.
Boom Bayani
On the other hand, 141 states losses shall be charged in same proportion
among partners who have contributed capital without including those who
have not, unless by special agreement the latter have been constituted as
participants therein.
Losses do not only describe losses per se but also liabilities and obligations
to third persons.
These provisions support the provision the articles of partnership in the
case at hand. In the limited partnership, there is a difference between
general and special partners. However, there is no distinction in a general
partnershipall partners are general partners. There is nothing in the Code
which says that industrial partners shall only be general partners nor
capitals only general.
127 of Code of Commerce says, all members of the general co-partnership,

be managing partners or not of the same, are liable personally and in
solidum with all their property for results of transactions made in the name
and for account of partnership, under signature of latter, and by a person
authorized to make use thereof. It is said that this provision is
contradictory to 141 and that appellees claim that 141 fixes the liability of
industrial partners to third persons for obligations of the company. 141
provides that a capitalist partners will only be liable proportionately to his
contribution to the partnership while 127 depicts that partners are liable for
all debts regardless of amount of contribution.
141 relates exclusively to the settlement of partnership affairs among the
partners themselves. It has nothing to do with liability of partners to third
persons. Each industrial partner is liable to third persons for debts of firm.
Industrial partners have a voice in the management of business, if no
manager has been named in the articles. They share in profits and as to
third persons it is no more than right they should share in the obligations.
If he paid debts out of his own private property, when partnership affairs
are settled, he is entitled to credit for amount paid. If there is not enough
property in the partnership to pay him, the capitalist partners must pay him.
Boom Bayani
In the case at hand, if at the end of the 5-year period of the existence of
the partnership and during liquidation and there had been more losses
than gains, Francisco Munoz shall pay such losses or pay them to the
industrial partners if they shall have been compelled to disburse their own
money in payment of debts of partnership.
Conveyance of real property belonging to partnership

SANTIAGO SYJUCO v HON. JOSE CASTRO, PRESIDING JUDGE OF
RTC NCR and PARTNERSHIP OF HEIRS OF HUGO LIM
FACTS:
Eugenio Lim and brothers and sister collectively called The Lims
borrowed from Santiago Syjuco Inc P800,000. Loan and gave security.
Additional loans on same security were obtained by the Lims, totaling to
P2,460,000, exclusive of interest and security. 2 other properties were
brought into the mortgage as additional security. Lims failed to pay despite
demands. Syjuco sought extrajudicial foreclosure. The Lims, in their
defense countered that 1) the mortgage was void for being usurious; and
2) lack of proper publication of the notice of foreclosure.
The extrajudicial foreclosure was granted by the trial court and authorized
the private sale of the properties.
Lims contend that the mortgaged property were contributions to the
partnership and was already partnership property when the partners,
without authority, mortgaged them to Syjuco
ISSUE: WHETHER OR NOT PARTNERS MAY MORTGAGE PARTNERSHIP
PROPERTY
HELD:
Yes. The court found the Lims to have acted in bad faith.
Boom Bayani
According to 1432 of Civil Code, property of owner who knowingly permits

another to sell or encumber the property, without disclosing his title or
objecting to transaction, is estopped to set up his title or interest as against
a person who has been misled to his injury.
The properties in question were never registered with the Register of
Deeds in the name of the partnership and remained in the names of the
partners. The original mortgage deed was executed by them as owners.
Thus there is no dispute that the Lims knew of the mortgage before its
execution. There is estoppel.
Therefore, if partnership was inescapably chargeable with knowledge of
mortgage executed by all partners, its silence and failure to impugn
mortgage within reasonable time will estop them in attempting to avoid the
mortgaged as unauthorized.
There is no reason to distinguish between the Lims as individuals and the
partnership itself because the individuals constituted the entire
membership of the latter. Despite concealment of existence of partnership,
it was that the partnership which was the real party in interest in all actions,
it was actually represented by all individual members and consequently,
their accts cannot be deemed to simply be individual acts but in fact, those
of the partnership. It being disputable that matter of partnerships being
the owner could have been raised in relation to those expressly made
issuable in the first action, it follows that matter could not be relitigated in
the last action.
Therefore, Lims acted in bad faith and with intent to defraud presenting
actuations that were to stave off clandestine filing and prosecution of
action subject to present petition.
Distribution of profits and losses
CHOITHRAM RAMNANI AND/OR NIRMLA RAMNANI AND MOTI
RAMNANI vs. CA, SPOUSES ISHWAR AND SONYA RAMNANI AND
OVERSEASE HOLDING
FACTS:
Boom Bayani
Ishwar and Sonya Ramnani has their business in New York. They executed
a general power of attorney to Navalry and Choithram as attorneys in fact
to manage and conduct their business in the Philippines.
Choithram purchased 2 parcels of land from Ortigas & Company Ltd.
Partnership. He paid the installments. Buildings were erected on the land
through a P100,000 loan. These buildings were leased out. But fire broke
out and 2 of the buildings were destroyed.
Ishwar asked Choithram for accounting of income and losses but
Choithram failed and refused to render accounting, that led Ishwar to
revoke the general power of attorney.
Choithram transferred all rights and interests of Ishwar and Sonya in favor
of his daughter in law, Nirmla Ramnani.
Ishwar and Sonya filed a complaint against Choitram and Nirmla for
reconveyance of said properties and payment of damages. Trial court
dismissed complaint on ground that cash remittance was made before
execution of general power of attorney.
Another issue is the claim of Choithram that because he was a British

citizen, he arranged the purchase of properties in the name of Ishwar who
was an American citizen and who was then qualified to purchase property
in the Philippines under Parity Amendment.
CA reversed RTC. Choitram was estopped in pais or by deed from claiming
an interest over properties due to his admissions from a) power of attorney,
b) agreements, c) contract of lease.
During pendency of case, Choithram made several attempts to dispose his
property by way of donation and also mortgaged properties under litigation
for $3,000,000 to a shell partnership with capital of 100 USD.
ISSUE: WHAT IS THE DISTRIBUTION OF PROFITS OF LOSSES BETWEEN
THE PARTIES
HELD:
Boom Bayani
Justice and equity dictate that two share equally the fruit of their joint
investment and efforts.
We have a situation where two brothers are engaged in a business
ventureone furnished the capital and other contributed his industry and
talent. Justice and equity dictate that two share equally the fruit of their
joint investment and efforts. Perhaps this Solomonic solution may pave the
way towards their reconciliation. Both would stand to gain. No one would
end up the loser. After all, blood is thicker than water. However, due to
Choithrams devious machinations and schemes to dispose the properties
to deprive spouses Ishwar any means to recover any award the Court may
grant in their favor, he shall be liable for moral and exemplary damages.
ANTONIO B. BALTAZAR, vs. HONORABLE OMBUDSMAN, EULOGIO
M. MARIANO, JOSE D. JIMENEZ, JR., TORIBIO E. ILAO, JR. and
ERNESTO R. SALENGA
FACTS:
Paciencia Regala owns a seven hectare fishpond located at Sasmuan,
Pampanga. Her Attorney-in-Fact Faustino R. Mercado leased the fishpond
fto Eduardo Lapid for a three year period. Lessee Eduardo Lapid in turn
sub-leased the fishpond to Rafael Lopez during the last seven months of
the original lease. Respondent Ernesto Salenga was hired by Eduardo Lapid
as fishpond watchman. In the sub-lease, Rafael Lopez rehired respondent
Salenga.
Meanwhile, on March 11, 1993, respondent Salenga, demand letter to
Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of his
share in the harvest.
Sub-lessee Rafael Lopez wrote a letter to Salenga informing the him that
for the last two months of the sub-lease, he had given the rights over the
fishpond to Mario Palad and Ambit Perez. Salenga to file a Complaint
before the Provincial Agrarian Reform Adjudication Board (PARAB) for
Maintenance of Peaceful Possession, Collection of Sum of Money and
Supervision of Harvest.
Pending resolution of the case, Faustino Mercado, as
the instant case was instituted by petitioner Antonio Baltazar, an alleged
nephew of Faustino Mercado, through a Complaint-Affidavit against private
respondents before the Office of the Ombudsman. Petitioner charged
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private respondents of conspiracy through the issuance of the TRO in

allowing respondent Salenga to retain possession of the fishpond, operate
it, harvest the produce, and keep the sales under the safekeeping of other
private respondents. Moreover, petitioner maintains that respondent Ilao,
Jr. had no jurisdiction to hear and act on the case filed by respondent
Salenga as there was no tenancy relation between respondent Salenga and
Rafael L. Lopez, and thus, the complaint was dismissible on its face.
ISSUE: WHETHER OR NOT AGENCY CAN BE FURTHER DELEGATED
HELD:
No. Agency cannot be further delegated
Petitioner asserts that he is duly authorized by Faustino Mercado to
institute the suit by virtue of a Special Power of Attorney from Faustino
Mercado. However, such SPA is unavailing for petitioner. For one,
petitioner's principal, Faustino Mercado, is an agent himself and as such
cannot further delegate his agency to another. Otherwise put, an agent
cannot delegate to another the same agency. The legal maxim potestas
delegata non delegare potest; a power once delegated cannot be redelegated, while applied primarily in political law to the exercise of
legislative power, is a principle of agency. For another, a re-delegation of
the agency would be detrimental to the principal as the second agent has
no privity of contract with the former. In the instant case, petitioner has no
privity of contract with Paciencia Regala, owner of the fishpond and
principal of Faustino Mercado.
Moreover, while the Civil Code under Article 1892 37 allows the agent to
appoint a substitute, such is not the situation in the instant case. The SPA
clearly delegates the agency to petitioner to pursue the case and not
merely as a substitute. Besides, it is clear in the aforecited Article that what
is allowed is a substitute and not a delegation of the agency.
Clearly, petitioner is neither a real party in interest with regard to the
agrarian case, nor is he a real party in interest in the criminal proceedings
conducted by the Ombudsman as elevated to the Sandiganbayan. He is not
a party who will be benefited or injured by the results of both cases.
ELMO MUASQUE, v COURT OF APPEALS, CELESTINO GALAN,
TROPICAL COMMERCIAL COMPANY and RAMON PONS
Boom Bayani
FACTS:
The present controversy began when petitioner Muasque in behalf of the
partnership of "Galan and Muasque" as Contractor entered into a written
contract with respondent Tropical for remodelling the respondent's Cebu
branch building. A total amount of P25,000.00 was to be paid under the
contract for the entire services of the Contractor.
The first payment made by respondent Tropical was in the form of a check
for P7,000.00 in the name of the petitioner. Petitioner, however, indorsed
the check in favor of respondent Galan to enable the latter to deposit it in
the bank and pay for the materials and labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his
personal use so that when the second check in the amount of P6,000.00
came and Galan asked the petitioner to indorse it again, the petitioner
refused.
The check was withheld from the petitioner. Since Galan informed the
Cebu branch of Tropical that there was a "misunderstanding" between him
and petitioner, respondent Tropical changed the name of the payee in the
second check from Muasque to "Galan and Associates" which was the
duly registered name of the partnership between Galan and petitioner and
under which name a permit to do construction business was issued by the
mayor of Cebu City. This enabled Galan to encash the second check.
Meanwhile, as alleged by the petitioner, the construction continued
through his sole efforts. He stated that he borrowed some P12,000.00 from
his friend, Mr. Espina and although the expenses had reached the amount
of P29,000.00 because of the failure of Galan to pay what was partly due
the laborers and partly due for the materials, the construction work was
finished ahead of schedule with the total expenditure reaching P34,000.00.
The two remaining checks, each in the amount of P6,000.00, were
subsequently given to the petitioner alone with the last check being given
pursuant to a court order.
As stated earlier, the petitioner filed a complaint for payment of sum of
money and damages against the respondents
Both the trial and appellate courts not only absolved respondents Tropical
and its Cebu Manager, Pons, from any liability but they also held the
petitioner together with respondent Galan, liable to the intervenors Cebu
Southern Hardware Company and Blue Diamond Glass Palace for the credit
which the intervenors extended to the partnership of petitioner and Galan.
Boom Bayani
ISSUE: WHETHERE OR NOT A PARTNERSHIP EXISTED BETWEEN

PETITIONER AND RESPONDENT GALAN
HELD:
Yes. The records will show that the petitioner entered into a contract with
Tropical for the renovation of the latter's building on behalf of the
partnership of "Galan and Muasque." This is readily seen in the first
paragraph of the contract.
There is nothing in the records to indicate that the partnership organized
by the two men was not a genuine one. If there was a falling out or
misunderstanding between the partners, such does not convert the
partnership into a sham organization.
Likewise, when Muasque received the first payment of Tropical in the
amount of P7,000.00 with a check made out in his name, he indorsed the
check in favor of Galan. Respondent Tropical therefore, had every right to
presume that the petitioner and Galan were true partners. If they were not
partners as petitioner claims, then he has only himself to blame for making
the relationship appear otherwise, not only to Tropical but to their other
creditors as well. The payments made to the partnership were, therefore,
valid payments.
ISSUE 2: WHETHER OR NOT GALAN WAS GUILTY IN MALVERSING THE
FUNDS OF THE PARTNERSHIP
HELD:
Yes, the records show that there is an existing judgment against
respondent Galan, holding him liable for the total amount of P7,000,00 in
favor of Eden Hardware which extended credit to the partnership aside
from the P2,000.00 he already paid to Universal Lumber.
We, however, take exception to the ruling of the appellate court that the
trial court's ordering petitioner and Galan to pay the credits of Blue
Diamond and Cebu Southern Hardware "jointly and severally" is plain error
since the liability of partners under the law to third persons for contracts
executed in connection with partnership business is only pro rata under Art.
1816, of the Civil Code.
Boom Bayani
While it is true that under Article 1816 of the Civil Code, "All partners,
including industrial ones, shall be liable pro rata with all their property and
after all the partnership assets have been exhausted, for the contracts
which may be entered into the name and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. . . .", this provision should be construed together with Article
1824 which provides that: "All partners are liable solidarily with the
partnership for everything chargeable to the partnership under Articles
1822 and 1823." In short, while the liability of the partners are merely joint
in transactions entered into by the partnership, a third person who
transacted with said partnership can hold the partners solidarily liable for
the whole obligation if the case of the third person falls under Articles 1822
or 1823.
ISSUE 3: WHEHTER OR NOT THERE WAS PAYMENT MADE TO THE
PARTNERSHIP THRU GALAN
HELD:
Yes. The payment made by Tropical to Galan was a good payment which
binds both Galan and the petitioner. Since the two were partners when the
debts were incurred, they are also both liable to third persons who
extended credit to their partnership. In the case of George Litton v. Hill and
Ceron, et al., we ruled:
"There is a general presumption that each individual partner is an
authorized agent for the firm and that he has authority to bind the firm in
carrying on the partnership transactions."
"The presumption is sufficient to permit third persons to hold the firm liable
on transactions entered into by one of members of the firm acting
apparently in its behalf and within the scope of his authority."
In the case at bar the respondent Tropical had every reason to believe that
a partnership existed between the petitioner and Galan and no fault or
error can be imputed against it for making payments to "Galan and
Associates" and delivering the same to Galan because as far as it was
concerned, Galan was a true partner with real authority to transact on
behalf of the partnership with which it was dealing. This is even more true
in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace
who supplied materials on credit to the partnership. Thus, it is but fair that
Boom Bayani
the consequences of any wrongful act committed by any of the partners

therein should be answered solidarily by all the partners and the
partnership as a whole.
However, as between the partners Muasque and Galan, justice also
dictates that Muasque be reimbursed by Galan for the payments made by
the former representing the liability of their partnership to herein
intervenors, as it was satisfactorily established that Galan acted in bad faith
in his dealings with Muasque as a partner.
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs.
EDWIN CUIZON and ERWIN CUIZON, respondents.
Facts: Petitioner is engaged in the business of importation and distribution
of various European industrial equipment for customers here in the
Philippines. One of its customers is Impact Systems Sales ("Impact
Systems") which is a sole proprietorship owned by respondent Erwin
Cuizon (Erwin) Respondent Edwin is the sales manager of Impact Systems.
P91,338.00. The Cuizons sought to buy from petitioner one unit of sludge
pump valued at P250,000.00 with respondents making a down payment of
fifty thousand pesos (P50,000.00). When the sludge pump arrived from the
United Kingdom, petitioner refused to deliver the same to respondents
without their having fully settled their indebtedness to petitioner. Thus, on
28 June 1995, respondent EDWIN and Alberto de Jesus, general manager
of petitioner, executed a Deed of Assignment of receivables in favor of
petitioner, in the amount of 365k from Toledo Power Corp.
Following the execution of the Deed of Assignment, petitioner delivered to
respondents the sludge pump.
Allegedly unbeknownst to petitioner, respondents, despite the existence of
the Deed of Assignment, proceeded to collect from Toledo Power Company
the amount of P365,135.29 as evidenced by Check Voucher No. 0933
prepared by said power company and an official receipt dated 15 August
1995 issued by Impact Systems. Alarmed by this development, petitioner
made several demands upon respondents to pay their obligations. As a
result, respondents were able to make partial payments to petitioner. On 7
October 1996, petitioner's counsel sent respondents a final demand letter
wherein it was stated that as of 11 June 1996, respondents' total
Boom Bayani
obligations stood at P295,000.00 excluding interests and attorney's fees.

Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money.
Edwin, for his defense, alleged that he is not a real party in interest in this
case as he was acting merely as an agent of his principal, which was the
Impact Systems, and cannot therefore be held liable.
Petitioner, on the other hand, posits that Edwin bound himself by
exceeding the limit of his authority as an agent without giving him
sufficient notice of his powers.
ISSUE: WHETHER OR NOT RESPONDENT EDWIN EXCEEDED HIS
AUTHORITY IN SIGNING THE DEED OF ASSIGNMENT THEREBY BINDING
HIMSELF PERSONALLY TO PAY THE OBLIGATIONS OF PETITIONER
HELD: No, Edwin did not exceed his authority as an agent in signing the
said deed of assignment.
Article 1897 provides that an agent, who acts as such, is not personally
liable to the party with whom he contracts, with 2 exceptions. The first is
when he expressly binds himself to the obligation and the second is when
he exceeds his authority. In the last instance, the agent can be held liable
if he does not give the third party sufficient notice of his powers.
The Deed of Assignment clearly states that respondent EDWIN signed
thereon as the sales manager of Impact Systems. As discussed elsewhere,
the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus: In the
absence of an agreement to the contrary, a managing agent may enter
into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. . . .
Applying the foregoing to the present case, we hold that Edwin Cuizon
acted well-within his authority when he signed the Deed of Assignment. To
recall, petitioner refused to deliver the one unit of sludge pump unless it
received, in full, the payment for Impact Systems' indebtedness. We may
very well assume that Impact Systems desperately needed the sludge
pump for its business since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995, it still persisted in
negotiating with petitioner which culminated in the execution of the Deed
of Assignment of its receivables from Toledo Power Company on 28 June
Boom Bayani
1995. The significant amount of time spent on the negotiation for the sale
of the sludge pump underscores Impact Systems' perseverance to get hold
of the said equipment. There is, therefore, no doubt in our mind that
respondent EDWIN's participation in the Deed of Assignment was
"reasonably necessary" or was required in order for him to protect the
business of his principal. Had he not acted in the way he did, the business
of his principal would have been adversely affected and he would have
violated his fiduciary relation with his principal.
We likewise take note of the fact that in this case, petitioner is seeking to
recover both from respondents ERWIN, the principal, and EDWIN, the
agent. It is well to state here that Article 1897 of the New Civil Code upon
which petitioner anchors its claim against respondent EDWIN "does not
hold that in case of excess of authority, both the agent and the principal
are liable to the other contracting party." To reiterate, the first part of
Article 1897 declares that the principal is liable in cases when the agent
acted within the bounds of his authority. Under this, the agent is
completely absolved of any liability. The second part of the said provision
presents the situations when the agent himself becomes liable to a third
party when he expressly binds himself or he exceeds the limits of his
authority without giving notice of his powers to the third person. However,
it must be pointed out that in case of excess of authority by the agent, like
what petitioner claims exists here, the law does not say that a third person
can recover from both the principal and the agent.
As we declare that respondent EDWIN acted within his authority as an
agent, who did not acquire any right nor incur any liability arising from the
Deed of Assignment, it follows that he is not a real party in interest who
should be impleaded in this case. A real party in interest is one who
"stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit." In this respect, we sustain his exclusion
as a defendant in the suit before the court a quo.
Boom Bayani
DELUAO v CASTEEL
FACTS:
Nicanor Casteel has repeatedly filed fishpond covering a big tract of
swampy land in Malalag, Davao City. Having been denied 3 times, Casteel
filed a motion for reconsideration and while the motion was pending
resolution, he was advised by the district forester of Davao he must file a
new application. So he filed a new fishpond application. Meanwhile, several
applications were submitted by other persons of the area covered by
Casteels application. They were Aradillos, Carpio, and Cacam.
Because of the threat poised upon his position by the above applicants,
Casteel realized the urgent necessity of expanding his occupation by
constructing dikes and cultivating marketable fishes, in order to prevent
squatters from usurping the land. But lacking financial resources, he
sought financial aid from his uncle Felipe Deluao who extended loans to
him.
Despite the finding in the investigation that Casteel had already introduced
improvements on portions applied by him, the Director of Fisheries rejected
Casteels application requiring him to remove all the improvements which
he had introduced in the land.
In 1949, Inocencia Deluao and Nicanor Casteel executed a contract
denominated as a contract of service whereby Deluao hires and
employes Casteel. Inocencia Deluao also executed an SPA in favour of
Jessica Donesa to represent her in the administration of the fishponds. The
Director of Fisheries rejected the application by Deluao but the latter
reiterated his claim by filing two administrative cases. Subsequently,
Casteels application was given due course and the latter forbade Inocencia
Deluao from further administering the fishpond and ejected Jessica Donesa
in the premises. Alleging violation of the contract of service, spouses
Deluao filed an action for specific performance and damages against
Casteel.
Boom Bayani
ISSUE: WHETHER OR NOT THE CONTRACT OF SERVICE BETWEEN

DELUAO AND CASTEEL RESULTED IN A CONTRACT OF PARTNERSHIP
BETWEEN THEM
HELD: Yes. The contract of service between Deluao and Casteel can be
construed as one of partnership, divided into two parts - namely, a
contract of partnership, to exploit the fishpond pending its award to either
Felipe Deluao or Nicanor Casteel, and a contract of partnership to divide
the fishpond between them after such award. The first is valid, the second
illegal. It is well to note that when the appellee Inocencia Deluao and the
appellant entered into the so-called "contract of service", there were two
pending applications over the fishpond. One was Casteel's which was
appealed by him to the Secretary of Agriculture and Natural Resources
after it was disallowed by the Director of Fisheries. The other was Felipe
Deluao's application over the same area which was likewise rejected by the
Director of Fisheries. The evidence preponderates in favor of the view that
the initial intention of the parties was not to form a co-ownership but to
establish a partnership Inocencia Deluao as capitalist partner and
Casteel as industrial partner the ultimate undertaking of which was to
divide into two equal parts such portion of the fishpond as might have
been developed by the amount extended by the plaintiffs-appellees, with
the further provision that Casteel should reimburse the expenses incurred
by the appellees over one-half of the fishpond that would pertain to him.
The arrangement under the so-called "contract of service" continued until
the decisions were issued by the Secretary of Agriculture and Natural
Resources in DANR Cases 353 and 353-B. This development, by itself,
brought about the dissolution of the partnership. Art. 1830(3) of the Civil
Code enumerates, as one of the causes for the dissolution of a partnership,
". . . any event which makes it unlawful for the business of the partnership
to be carried on or for the members to carry it on in partnership." The
approval of the appellant's fishpond application by the decisions in DANR
Cases 353 and 353-B brought to the fore several provisions of law which
made the continuation of the partnership unlawful and therefore caused its
ipso facto dissolution. Act 4003, known as the Fisheries Act, prohibits the
holder of a fishpond permit (the permittee) from transferring or subletting
the fishpond granted to him, without the previous consent or approval of
the Secretary of Agriculture and Natural Resources. The Public Land Act
also provides that "The lessee shall not assign, encumber, or sublet his
Boom Bayani
rights without the consent of the Secretary of Agriculture and Commerce,

and the violation of this condition shall avoid the contract. Finally, section
37 of Administrative Order No. 14 of the Secretary of Agriculture and
Natural Resources issued in August 1937, prohibits a transfer or sublease
unless first approved by the Director of Lands and under such terms and
conditions as he may prescribe. Since the partnership had for its object the
division into two equal parts of the fishpond between the appellees and the
appellant after it shall have been awarded to the latter, and therefore it
envisaged the unauthorized transfer of one-half thereof to parties other
than the applicant Casteel, it was dissolved by the approval of his
application and the award to him of the fishpond. The approval was an
event which made it unlawful for the business of the partnership to be
carried on or for the members to carry it on in partnership.
LIM TANHU v RAMOLETE
FACTS:
Tan Put alleged that she "is the widow of Tee Hoon Lim Po Chuan, who
was a partner in the commercial partnership, Glory Commercial Company
with Antonio Lim Tanhu and Alfonso Ng Sua, and that defendants Antonio
Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong
Leonardo, through fraud and machination, took actual and active
management of the partnership and although Tee Hoon Lim Po Chuan was
the manager of Glory Commercial Company, defendants managed to use
the funds of the partnership to purchase lands and buildings in the cities of
Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla
and that after the death of Tee Hoon Lim Po Chuan, the defendants,
without liquidation, continued the business of Glory Commercial Company,
by purportedly organizing a corporation known as the Glory Commercial
Company, Incorporated.
Tan Put on several occasions after the death of her husband, has asked
defendants of the above-mentioned properties and for the liquidation of
the business of the defunct partnership. She prayed that judgment be
rendered ordering the defendants to render an accounting of the real and
personal properties of the Glory Commercial Company including those
registered in the names of the defendants and other persons.
Boom Bayani
In a single answer with counterclaim, defendants denied specifically the

allegation that respondent Tan is the widow of Tee Hoon. And according to
them, that proper liquidation had been regularly made of the business of
the partnership and Tee Hoon used to receive his just share until his death,
as a result of which the partnership was dissolved and what corresponded
to him were all given to his wife and children
ISSUE: WHETHER OR NOT THE PARTNERSHIP CONTINUED AFTER THE
DEATH OF PO CHUAN, ENTITLING HIS HEIR TO DEMAND ACCOUNTING
HELD: No. This theory about Po Chuan having been actively managing the
partnership up to his death is a substantial deviation from the allegation in
the amended complaint to the effect that the defendants, through fraud
and machination, took actual and active management of the partnership
and although Tee Hoon Lim Po Chuan was the manager of Glory
Commercial Co., defendants managed to use the funds of the partnership
to purchase lands and buildings etc. and should not have been permitted
to be proven by the hearing officer, who naturally did not know any better.
Moreover, it is very significant that according to the very tax declarations
and land titles listed in the decision, most if not all of the properties
supposed to have been acquired by the defendants Lim Tanhu and Ng Sua
with funds of the partnership appear to have been transferred to their
names only in 1969 or later, that is, long after the partnership had been
automatically dissolved as a result of the death of Po Chuan. Accordingly,
defendants have no obligation to account to anyone for such acquisitions in
the absence of clear proof that they had violated the trust of Po Chuan
during the existence of the partnership. Besides, assuming there has not
yet been any liquidation of the partnership, contrary to the allegation of
the defendants, then Glory Commercial Co. would have the status of a
partnership in liquidation and the only right plaintiff could have would be to
what might result after such liquidation to belong to the deceased partner,
and before this is finished, it is impossible to determine, what rights or
interests, if any, the deceased had (Bearneza vs. Deqoilla, 43 Phil. 237). In
other words, no specific amounts or properties may be adjudicated to the
heir or legal representative of the deceased partner without the liquidation
being first terminated.
Agency: Criminal Act or Acts Prohibited by Law
Boom Bayani
EDWARD C. ONG v THE COURT OF APPEALS AND THE

PEOPLE OF THE PHILIPPINES CARPIO, J p:
FACTS:
Petitioner Edward Ong, representing ARMAGRI International Corporation
("ARMAGRI"), applied for a letter of credit for P2,532,500.00 with
SOLIDBANK Corporation ("Bank") to finance the purchase of differential
assemblies from Metropole Industrial Sales. He executed a trust receipt
acknowledging receipt from the Bank of the goods valued at P2,532,500.00.
Later on, aslo representing ARMAGRI he executed another letter of credit

for P2,050,000.00 to finance the purchase of merchandise from Fertiphil
Corporation. The Bank approved the application, opened the letter of credit
and paid to Fertiphil Corporation the amount of P2,050,000.00. Petitioner,
signing for ARMAGRI, executed another trust receipt in favor of the Bank
acknowledging receipt of the merchandise.
Both trust receipts contained the same stipulations, wherein ARMAGRI
undertook to account for the goods held in trust for the Bank, or if the
goods are sold, to turn over the proceeds to the Bank; and to keep the
proceeds in the form of money, bills or receivables as the separate
property of the Bank or to return the goods upon demand by the Bank, if
not sold.
Petitioner signed alone the foregoing additional undertaking in the Trust
Receipt for P2,253,500.00, while both petitioner and Benito Ong signed the
additional undertaking in the Trust Receipt for P2,050,000.00.
When the trust receipts became due and demandable, ARMAGRI failed to
pay or deliver the goods to the Bank despite several demand letters.
Consequently, as of 31 May 1991, the unpaid account under the first trust
receipt amounted to P1,527,180.66, while the unpaid account under the
second trust receipt amounted to P1,449,395.71.
The Court of Appeals held that although petitioner is neither a director nor
an officer of ARMAGRI, he certainly comes within the term "employees or
other . . . persons therein responsible for the offense" in Section 13 of the
Boom Bayani
Trust Receipts Law, because the Corporation cannot by itself transact

business and sign documents and it is impossible to impose the penalty of
imprisonment on it.
The Court of Appeals held petitioner liable for his failure to account to the
entruster Bank what he undertook to perform under the trust receipts.
Based on the representations of petitioner, the Bank accepted the trust
receipts and, consequently, expected petitioner to return or account for the
goods entrusted. The prosecution need not even prove that petitioner is
occupying a position in ARMAGRI in the nature of an officer or similar
position to hold him the "person(s) therein responsible for the offense."
That the his participation is merely incidental is not material and it need
not even be proved that he personally received and misappropriated the
goods subject of the trust receipts.
The bank is not obliged to determine if the goods came into the actual
possession of the entrustee. Trust receipts are issued to facilitate the
purchase of merchandise. To obligate the bank to examine the fact of
actual possession by the entrustee of the goods subject of every trust
receipt will greatly impede commercial transactions.
ISSUE: WHETHER OR NOT PETITIONER ACTED AS AGENT AND SIGNED
FOR THE ENTRUSTEE CORPORATION, AND WAS NECESSARILY THE ONE
RESPONSIBLE FOR THE OFFENSE; AND
HELD:
Petitioner contends that he merely acted as an agent of ARMAGRI.
Petitioner asserts that nowhere in the trust receipts did he assume
personal responsibility for the undertakings of ARMAGRI which was the
entrustee.
The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn
over the proceeds of the sale of the goods, or (2) return the goods covered
by the trust receipts if the goods are not sold. The mere failure to account
or return gives rise to the crime which is malum prohibitum. There is no
requirement to prove intent to defraud.
Boom Bayani
In the instant case, the Bank was the entruster while ARMAGRI was the
entrustee. Being the entrustee, ARMAGRI was the one responsible to
account for the goods or its proceeds in case of sale. However, the criminal
liability for violation of the Trust Receipts Law falls on the human agent
responsible for the violation. Petitioner, who admits being the agent of
ARMAGRI, is the person responsible for the offense for two reasons. First,
petitioner is the signatory to the trust receipts, the loan applications and
the letters of credit. Second, despite being the signatory to the trust
receipts and the other documents, petitioner did not explain or show why
he is not responsible for the failure to turn over the proceeds of the sale or
account for the goods covered by the trust receipts.
Under the law, mere failure by the entrustee to account for the goods
received in trust constitutes estafa.
While he acted on behalf of ARMAGRI, when a person commits a crime, he
cannot escape liability by claiming to have acted in behalf of another. Being
a signatory in the trust receipts as relied by the Bank, made him a direct
participant and person responsible for the offense.
Boom Bayani
Knowledge of Agent imputed to the Principal

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC., v
NATIONAL LABOR RELATIONS COMMISSION, Second
Division; HON. ERNESTO S. DINOPOL, in his capacity as
Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City
and DIVINA A. MONTEHERMOZO
CARPIO MORALES, J p:
FACTS:
Petitioner, Sunace International Management Services (Sunace), a
corporation duly organized and existing under the laws of the Philippines,
deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper
under a 12-month contract effective February 1, 1997. The deployment
was with the assistance of a Taiwanese broker, Edmund Wang, President
of Jet Crown International Co., Ltd. After her 12-month contract expired on
February 1, 1998, Divina continued working for her Taiwanese employer
for two more years, after which she returned to the Philippines.
Shortly after her return, Divina filed a complaint before the NLRC against
Sunace, one Adelaide Perez, the Taiwanese broker, and the employerforeign principal alleging that she was jailed for three months and that she
was underpaid, And that Sunace was liable because despite its knowledge
of the extension of Divinas contract, it did not credit to her the amounts
due her for such extension and the refund for her 2 year savings.
Sunace on the other hand, alleged that Divinas 2-year extension of her
contract was without its knowledge and consent, hence, it had no liability
attaching to any claim arising therefrom.
The Labor Arbiter, rejected Sunace's claim that the extension of Divina's
contract for two more years was without its knowledge and consent
because Sunace and Edmund Wang have not stopped communicating with
each other and yet the matter of the contract's extension and Sunace's
alleged non-consent thereto has not been categorically established.
Boom Bayani
ISSUE: WHETHER OR NOT SUNACE IS LIABLE FOR THE CLAIM IF DIVINA

DUE TO ITS KNOWLEDGE AS AN AGENT
HELD: No. That Sunace continually communicated with the foreign
"principal" and therefore was aware of and had consented to the execution
of the extension of the contract is misplaced. The message does not
provide evidence that Sunace was privy to the new contract executed after
the expiration on February 1, 1998 of the original contract. That Sunace
and the Taiwanese broker communicated regarding Divinas allegedly
withheld savings does not mean that Sunace ratified the extension of the
contract.
The theory of imputed knowledge ascribes the knowledge of the
agent to the principal and not the other way around. The
knowledge of the principal-foreign employer cannot, therefore, be
imputed to the agent, Sunace.
There being no substantial proof that Sunace knew of and
consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto and consequently
liable thereunder.
The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with 3rd persons.
The Taiwanese broker revoked its agency with Sunace from the
time it directly dealt with Divina.
Agency copuled with interest
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, v THE
COURT OF APPEALS, TOURIST WORLD SERVICE, INC.,
ELISEO S. CANILAO, and SEGUNDINA NOGUERA
SARMIENTO, J p:
FACTS:
Boom Bayani
Private Respondent Segundina Noguera entered into a contract of lease

with Tourist World Service represented by Canilao, wherein the latter
leased the premises of Noguera for its use as a branch office.
In the said contract, Lina Sevilla held himself solidarily liable with Tourist
World for the payment of the monthly rental. Sevilla ran the branch office
when it opened.
Due to an information that came to the knowledge of Tourist World that
Sevilla is involved in a rival firm, and to losses, Tourist world, through 2
resolutions, closed its branch office, and terminated the lease contract with
Noguera.
Canilao went over to the branch office, and, being unable to contact Sevilla,
padlocked the premises to protect the interests of the Tourist World
Service. When neither the Sevilla nor any of her employees could enter
the locked premises, they filed for preliminary injunction
ISSUE: WHETHER OR NOT SEVILLA WAS A MERE EMPLOYEE AND NOT AN

AGENT
HELD: Agent.
Tourist World Service, Inc., insists that Lina Sevilla was a mere employee,
being "branch manager" of its Ermita "branch" office and that inferentially,
she had no say on the lease executed with the private respondent,
Segundina Noguera.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
Ermita office, she must have done so pursuant to a contract of agency. It
is the essence of this contract that the agent renders services "in
representation or on behalf of another."
In this case, Sevilla solicited airline fares, but she did so for and on behalf
of her principal, Tourist World Service, Inc. As compensation, she received
4% of the proceeds in the concept of commissions. And as we said, Sevilla
herself, based on her letter of November 28, 1961, presumed her
principal's authority as owner of the business undertaking. We are
convinced, considering the circumstances and from the respondent Court's
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recital of facts, that the parties had contemplated a principal-agent

relationship, rather than a joint management or a partnership.
But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked
at will. The reason is that it is one couple with an interest, the agency
having been created for the mutual interst of the agent and the principal.
It appears that Sevilla is a bona fide travel agent herself, and as such, she
had acquired an interest in the business entrusted to her. Moreover, she
had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not limited to the commissions she
earned as a result of her business transactions, but one that extends to the
very subject matter of the power of management delegated to her.
It is an agency coupled with interest, and therefore cannot be revoked at
will by the principal, without being liable for damages.
Exclusive distributor as agent
ALFRED HAHN, v COURT OF APPEALS and BAYERISCHE
MOTOREN WERKE AKTIENGESELLSCHAFT (BMW).
Ponente: MENDOZA, J p:
FACTS:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name
and style "Hahn-Manila". On the other hand, private respondent Bayerische
Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign
corporation existing under the laws of the former Federal Republic of
Germany, with principal office at Munich, Germany.
The petitioner executed in favor of private respondent a "Deed of
Assignment with Special Power of Attorney," constituting the latter its
exclusive dealer of motor vehicles of its brand.
Boom Bayani
According to their agreement, the parties "continue[d] business relations as

has been usual in the past without a formal contract." But in a meeting
with a BMW representative and the president of Columbia Motors
Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was
arranging to grant the exclusive dealership of BMW cars and products to
CMC, which had expressed interest in acquiring the same. The petitioner
received confirmation of the information from BMW which, in a letter,
expressed dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating services,
and inadequate showroom and warehouse facilities, and petitioner's
alleged failure to comply with the standards for an exclusive BMW dealer.
Nonetheless, BMW expressed willingness to continue business relations
with the petitioner on the basis of a "standard BMW importer" contract,
otherwise, it said, if this was not acceptable to petitioner, BMW would have
no alternative but to terminate petitioner's exclusive dealership.
Petitioner protested, claiming that the termination of his exclusive

dealership would be a breach of the Deed of Assignment. Hahn insisted
that as long as the assignment of its trademark and device subsisted, he
remained BMW's exclusive dealer in the Philippines because the assignment
was made in consideration of the exclusive dealership. In the same letter
petitioner explained that the decline in sales was due to lower prices
offered for BMW cars in the United States and the fact that few customers
returned for repairs and servicing because of the durability of BMW parts
and the efficiency of petitioner's service.
Because of Hahn's insistence on the former business relations, BMW
withdrew its offer of a "standard importer contract" and terminated the
exclusive dealer relationship. At a conference of BMW Regional Importers
held in Singapore, Hahn was surprised to find Alvarez among those invited
from the Asian region. BMW proposed that Hahn and CMC jointly import
and distribute BMW cars and parts.
Hahn found the proposal unacceptable. He filed a complaint for specific
performance and damages against BMW to compel it to continue the
exclusive dealership.
BMW moved to dismiss the case, contending that the trial court did not
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acquire jurisdiction, it being a foreign corporation.

Hahn opposed the motion, arguing that BMW was doing business in the
Philippines through him as its agent, as shown by the fact that BMW
invoices and order forms were used to document his transactions; that he
gave warranties as exclusive BMW dealer; that BMW officials periodically
inspected standards of service rendered by him; and that he was described
in service booklets and international publications of BMW as a "BMW
Importer" or "BMW Trading Company" in the Philippines.
The Court of Appeals ruled that BMW was not doing business in the
country and, therefore, jurisdiction over it could not be acquired through
service of summons on the DTI pursuant to Rule 14, Section 14. The court
upheld private respondent's contention that Hahn acted in his own name
and for his own account and independently of BMW, based on Alfred
Hahn's allegations that he had invested his own money and resources in
establishing BMW's goodwill in the Philippines and on BMW's claim that
Hahn sold products other than those of BMW. It held that petitioner was a
mere indentor or broker and not an agent through whom private
respondent BMW transacted business in the Philippines. Consequently, the
Court of Appeals dismissed petitioner's complaint against BMW.
ISSUE: WHETHER OR NOT HAHN IS THE AGENT OF BMW, PROVING THAT

BMW IS DOING BUSINESS IN THE PHILIPPINES
HELD: BMW is doing business in the Philippines, through its agent, Hahn.
The Court of Appeals held that petitioner Alfred Hahn acted in
his own name and for his own account and not as agent or
distributor in the Philippines of BMW on the ground that "he
alone had contacts with individuals or entities interested in
acquiring BMW vehicles. Independence characterizes Hahn's
undertakings for which reason he is to be considered, under
governing statutes, as doing business."
As the above quoted allegations of the amended complaint show, however,
there is nothing to support the appellate court's finding that Hahn solicited
orders alone and for his own account and without "interference from, let
alone direction of, BMW." To the contrary, Hahn claimed he took orders for
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BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW
fixed the down payment and pricing charges, notified Hahn of the
scheduled production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment was made
by the buyer directly to BMW. Title to cars purchased passed directly to the
buyer and Hahn never paid for the purchase price of BMW cars sold in the
Philippines. Hahn was credited with a commission equal to 14% of the
purchase price upon the invoicing of a vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered in the
Philippines and serviced by him, Hahn received an additional 3% of the full
purchase price. Hahn performed after-sale services, including, warranty
services. for which he received reimbursement from BMW. All orders were
on invoices and forms of BMW. )
These allegations were substantially admitted by BMW which, in its petition

for certiorari before the Court of Appeals, stated:
9.4.As soon as the vehicles are fully manufactured and
full payment of the purchase prices are made, the
vehicles are shipped to the Philippines. (The payments
may be made by the purchasers or third-persons or even
by Hahn.) The bills of lading are made up in the name of
the purchasers, but Hahn-Manila is therein indicated as
the person to be notified.
9.5.It is Hahn who picks up the vehicles from the
Philippine ports, for purposes of conducting pre-delivery
inspections. Thereafter, he delivers the vehicles to the
purchasers.
9.6.As soon as BMW invoices the vehicle ordered, Hahn is
credited with a commission of fourteen percent (14%) of
the full purchase price thereof, and as soon as he
confirms in writing, that the vehicles have been registered
in the Philippines and have been serviced by him, he will
receive an additional three percent (3%) of the full
purchase prices as commission.
Boom Bayani
Contrary to CAs conclusion, this arrangement shows an agency.

The agent receives a commission upon the successful conclusion of
a sale. On the other hand, a broker earns his pay merely by
bringing the buyer and the seller together, even if no sale is
eventually made.
The fact that Hahn invested his own money to put up these service centers
and showrooms does not necessarily prove that he is not an agent of BMW.
For as already noted, there are facts in the record which suggest that BMW
exercised control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with BMW standards
and specifications.
Authority of Counsel as Agent

TIRSO UYTENGSU III, v ATTY. JOSEPH M. BADUEL
TINGA, J p:
FACTS:
Complainant Tirso III, is one among other heirs of Tirso Uytengsu,
Jr. He and his co-heirs had a pending patent application. He alleges
that sometime in December 1998 respondent requested him to sign
a special power of attorney (SPA) authorizing Luis Wee (Wee)
and/or Thomas Jacobo (Jacobo) to claim, demand, acknowledge
and receive on his behalf the certificates of title from the Register
of Deeds, General Santos City, Department of Environment and
Natural Resources and from any government office or agency due
to complainant and his co-heirs by reason of their application for
Homestead Patent.
He refused to sign the SPA because he wanted to obtain the documents
personally. Subsequently though, before he could get the title and other
documents, complainant learned that respondent caused to have the SPA
Boom Bayani
signed by Connie U. Kokseng (Kokseng), the former guardian of the heirs

of Tirso Uytengsu, Jr.
Complainant maintains that the document signed by Kokseng was the
same SPA which was presented to him for signature by respondent. As a
result, the titles and other documents were received and taken by other
persons without his or his co-heirs' knowledge and consent.
Complainant contends that respondent atty was the one who prepared,
notarized and stood witness to the said SPA, and that atty was aware that
Koksengs guardianship had ceased when the RTC terminated it over his
youngest sibling. And that respondent caused said SPA to be executed by
Kokseng to the damage and prejudice of the Heirs of Tirso, Jr.
In his answer, respondent claims that petitioners allegations were purely
hearsay.
This Court referred the case to the Integrated Bar of the Philippines (IBP)
for investigation, report and recommendation. Moreover, Kokseng had
legal basis to execute the SPA in favor of a substitute, the records showing
that complainant and his co-heirs have constituted Kokseng as their
attorney-in-fact for the purpose of filing the homestead application.
ISSUE: WHETHER OR NOT RESPONDENT ATTY BADUEL IS AN AGENT OF
TIRSO III AND HIS CO-HEIRS
HELD: Yes. The respondent was found to be the counsel of complainants in
the homestead patent application of Tirso Jr. Therefore, without any
evidence to show that complainant or his co-heirs withdrew such authority
from respondent, the latter himself can even claim the certificates of titles
and other documents with regard to the homestead patents.
The relation of attorney and client is in many respects one of agency and
the general rules of ordinary agency apply to such relation. The extnt of
authority of a lawyer, when acting on behalf of his client outside of court,
is measured by the same test as that which is applied to an ordinary agent.
Such being the case, even respondent himself can acquire the certificates
of title and other documents without need of an SPA from complainant and
his co-heirs.
Boom Bayani
In the case at bar, other than the bare assertions of complainant, the
evidence presented by the latter does not suffice to tip the scale of justice
to his side.
The hearsay rule provides that no assertion offered as testimony can be
received unless it is or has been open to test by cross-examination or an
opportunity for cross-examination, except as provided otherwise by the
rules on evidence, by rules of court, or by statute.
He did not submit to this Court or to the IBP any witness or documentary
evidence to support his claim that respondent has indeed caused the
execution of the disputed special power of attorney. Furthermore,
complainant in his reply to respondent's comment stated that he has a
credible witness in the person of Edward U. Kokseng, son of Kokseng, who
has first hand knowledge of Kokseng's signing of the SPA. However, he
failed to present his witness before the IBP or submitted an affidavit of his
witness to affirm his allegations. Neither did he present any witness,
whether expert nor otherwise, to attest to the genuineness of the signature
of respondent which was allegedly found in the SPA, if that was his
objective.
Authority of Counsel as Agent
J-PHIL MARINE, INC and/or JESUS CANDAVA and NORMAN
SHIPPING SERVICES v NLRC and WARLITO DUMALAOG
CARPIO-MORALES, J p:
Dumalaog who served as a cook aboard vessels plying overseas filed
before the NLRC a complaint against petitioners for unpaid money claims,
moral and exemplary damages with an aggregate amount of P864,343.30
plus P117,557.60 interest and P195,928.66 in attorneys fees. According to
him, he had contracted enlargement of the heart and thyroid in the
discharge of his duties as a cook, which rendered him disabled.
The Labor Arbiter dismissed the petition for lack of merit, but the NLRC
reversed the Labor Arbiters decision and awarded US$50,000.00 disability
benefit to Dumalaog. The CA dismissed the appeal of J-Phil which led them
to file a petition for certiorari before the SC.
Boom Bayani
However, during the pendency of this case, Dumalaog, against the advice
and without the presence and assistance of his counsel, entered into a
compromise agreement with the petitioners. He signed a Quitclaim and
Release subscribed and sworn before the labor arbiter.
Dumalaogs counsel then filed an opposition and objection to the
absolution of the petitioners from having to pay Dumalaog the total
amount of US$50,000,00 or P2.3M. He added that there being already a
payment f P450k, it should be deducted from the judgment award of
P2.3M and petitioners should pay the remaining balance thereof. He
further added that the P450k given to Dumalaog as full and final
settlement is unconscionably low.
ISSUE 1: W/N COMPROMISE AGREEMENT IS VALID EVEN IF EXECUTED BY
THE RESPONDENT AGAINST THE ADVISE AND WITHOUT THE
ASSISTANCE OF HIS COUNSEL
HELD: YES. A compromise agreement is valid as long as it was voluntarily
agreed upon and not obtained through fraud, misrepresentation or
coercion (Labor Code). In this case, Dumalaog signed the waiver
voluntarily. His counsel need not be present at the time of the signing.
ISSUE: W/N THE ACT OF THE COUNSEL AS AGENT IN ASSAILING THE
COMPROMISE AGREEMENT ENTERED INTO BY THE PRINCIPAL ARE
DEEMED ACTS OF THE PRINCIPAL HIMSELF
HELD: NO.
The law on Agency provides that the acts of an agent are deemed the acts
of the principal only if the agent acts within the scope of his authority.
A client has the right to compromise a suit without the intervention of his
lawyer except only if such compromise is entered into with the intent of
defrauding the lawyer of the fees justly due him.
In this case, it is clearly seen that the agents acts - assailing the
compromise agreement - are contradictory to the previous valid acts of his
principal the signing of the compromise agreement. There is no showing
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that the respondent intended to defraud his counsel of his fees. The
respondents counsel acted beyond the scope of his authority.
Evasion of commission in bad faith
GENEVIEVE LIM, vs. FLORENCIO SABAN
TINGA, J p:
The late Eduardo Ybaez (Ybaez), who was the owner of a 1,000-square
meter lot in Cebu City (the "lot"), entered into an Agency Agreement with
respondent Florencio Saban (Saban). Under the Agency Agreement,
Ybaez authorized Saban to look for a buyer of the lot for P200,000.00 and
to mark up the selling price including taxes, transfer of title, other
expenses and Sabans commission.
Through Sabans efforts, Ybaez and his wife were able to sell the lot to
Genevive Lim. Bet ween Lim and Ybanez, the purchase price was P200k.
But unbeknownst to Ybanez, Saban was able to mark up the price at Lim
P600,000.00. Upon learning this, Ybaez then sent a letter to Lim to cancel
checks and to "extend another partial payment" in Ybanezs name..
The commission checks were dishonored when Saban tried to encash them,
which led Saban to file a complaint for collection of sum of money.
Ybanez denied liability contending that Saban was not entitled to his
commission because he was not a licensed real estate broker and for his
concealment of the actual selling price.
ISSUE: WHETHER OR NOT SABAN IS ENTITLED TO RECEIVE HIS
COMMISSION
HELD:
Yes, Saban is entitled to receive his commission. It has been held that it is
unjustified to terminate the contract of agency to the prejudice of the
broker when he had already reaped the benefits of the brokers efforts.
The act of Ybanez telling the vendee to stop payment of the checks
comprising Sabans commission did not revoke the agency although such is
not coupled with interest in favor of Saban. The Agency agreement
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between them stated that Saban could keep the margin he is able to obtain
as long as he can find a buyer of the lot being sold by Ybanez at 200k
exclusive of taxes and fees.
In an agency coupled with an interest, the agents interest must be in the
subject matter and not merely an interest in the exercise of the power
because it entitles him to compensation. When an agents interest is
confined to earning his agreed compensation, the agency is not coupled
with an interest, since an agents interest is an ordinary incident of the
agency relationship.
Here, the only interest Saban had in the subject matter is his agreed
compensation. Thus, the agency is revocable.
GPA/SPA
FRANCISCO A. VELOSO, petitioner, vs. COURT OF APPEALS,
AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L.
ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF MANILA
TORRES, JR., J p:
Petitioner Francisco Veloso was the registered owner of a lot in Tondo,
Manila. The title was cancelled and a new one was issued in the name of
Aglaloma B. Escario, married to Gregorio L. Escario.
Petitioner Veloso filed an action for annulment of documents, reconveyance
of property with damages and preliminary injunction and/or restraining
order, alleging that he was the absolute owner of the subject property and
he never authorized anybody, not even his wife, to sell it. He alleged that
when his wife, Irma, left for abroad, he found out that his copy was
missing. Upon verification with the Register of Deeds, he discovered that
his title was already canceled in favor of defendant Aglaloma Escario. The
transfer of property was supported by a General Power of Attorney and
Deed of Absolute Sale, executed by Irma Veloso, wife of the petitioner and
appearing as his attorney-in-fact, and defendant Aglaloma Escario.
Petitioner denied having executed the power of attorney and alleged that
his signature was falsified. He also denied having seen or even known
Rosemarie Reyes and Imelda Santos, the supposed witnesses in the
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execution of the power of attorney. He vehemently denied having met or

transacted with the defendant. Thus, he contended that the sale of the
property, and the subsequent transfer thereof, were null and void. He,
therefore, prayed that a temporary restraining order be issued to prevent
the transfer of the subject property; that the General Power of Attorney,
the Deed of Absolute Sale and the Transfer Certificate of Title be annulled;
and the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in
good faith and denied any knowledge of the alleged irregularity. She
allegedly relied on the general power of attorney of Irma Veloso which was
sufficient in form and substance and was duly notarized. She contended
that plaintiff (herein petitioner), had no cause of action against her. In
seeking for the declaration of nullity of the documents, the real party in
interest was Irma Veloso, the wife of the plaintiff.
During the trial Francisco Veloso testified that he acquired the subject
property from the Philippine Building Corporation, as evidenced by a Deed
of Sale. He married Irma Lazatin on January 20, 1962. Hence, the property
did not belong to their conjugal partnership. Plaintiff further asserted that
he did not sign the power of attorney and as proof that his signature was
falsified, he presented three Allied Bank Checks which allegedly bore his
genuine signature.
Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the
execution of the general power of attorney. He attested that he did not
sign thereon, and the same was never entered in his Notarial Register.
In the decision of the trial court, defendant Aglaloma Escaro was
adjudged the lawful owner of the property as she was deemed an innocent
purchaser for value. The assailed general power of attorney was held to
be valid and sufficient for the purpose. The trial court ruled that there was
no need for a special power of attorney when the special power was
already mentioned in the general one. It also declared that plaintiff failed
to substantiate his allegation of fraud. The court also stressed that plaintiff
was not entirely blameless for although he admitted to be the only person
who had access to the title and other important documents, his wife was
still able to possess the copy.
Boom Bayani
ISSUE: WHETHER OR NOT THE ASSAILED GPA WAS VALID

HELD: Yes. An examination of the records showed that the assailed power
of attorney was valid and regular on its face. It was notarized and as such,
it carries the evidentiary weight conferred upon it with respect to its due
execution. While it is true that it was denominated as a general power of
attorney, a perusal thereof revealed that it stated an authority to sell. Thus,
there was no need to execute a separate and special power of attorney
since the general power of attorney had expressly authorized the agent or
attorney in fact the power to sell the subject property. The special power
of attorney can be included in the general power when it is specified
therein the act or transaction for which the special power is required.
The general power of attorney was accepted by the Register of Deeds
when the title to the subject property was canceled and transferred in the
name of private respondent.
Whether the instrument be denominated as general power of attorney
or special power of attorney, what matters is the extent of the power or
powers contemplated upon the agent or attorney in fact. If the power is
couched in general terms, then such power cannot go beyond acts of
administration. However, where the power to sell is specific, it not being
merely implied, much less couched in general terms, there can not be any
doubt that the attorney in fact may execute a valid sale. An instrument
may be captioned as special power of attorney but if the powers granted
are couched in general terms without mentioning any specific power to sell
or mortgage or to do other specific acts of strict dominion, then in that
case only acts of administration may be deemed conferred.
In petitioner's allegation of forgery. Mere variance of the signatures cannot
be considered as conclusive proof that the same were forged. Forgery
cannot be presumed. Petitioner failed to prove his allegation and simply
relied on the apparent difference of the signatures. His denial had not
established that the signature on the power of attorney was not his.
We agree with the conclusion of the lower court that private respondent
was an innocent purchaser for value. Respondent Aglaloma relied on the
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power of attorney presented by petitioners wife, Irma. Being the wife of

the owner and having with her the title of the property, there was no
reason for the private respondent not to believe in her authority. Moreover,
the power of attorney was notarized and as such, carried with it the
presumption of its due execution. Thus, having had no inkling on any
irregularity and having no participation thereof, private respondent was a
buyer in good faith.
In re: General Power of Attorney/Special Power of Attorney
ESTATE OF LINO OLAGUER, Represented by Linda O. Olaguer, and
LINDA O. MONTAYRE, vs. EMILIANO M. ONGJOCO.
CHICO-NAZARIO, J p:
FACTS:
The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O.
Trinidad, Lina Olaguer and Ma. Linda O. Montayre are the legitimate
children of the spouses Lino Olaguer and defendant Olivia P. Olaguer.
Lino died, and a Special Proceeding for probate of will was filed wherein
Olivia P. Olaguer was appointed as administrator pursuant to the will. Later,
defendant Eduardo Olaguer was appointed as co-administrator.
Defendant Olivia married defendant Jose A. Olaguer.
In the order of the probate court, some properties of the estate were
authorized to be sold to pay obligations of the estate. Pursuant to this
authority, administrators Olivia and Eduardo sold to Pastor Bacani twelve
parcels of land, approved by the Probate Court.
The following dayPastor Bacani sold back to Eduardo and Olivia, one of the
twelve lots he bought the day before.
Olivia Special Power of Attorney in favor of her new husband Jose,
authorizing the latter to "sell, mortgage, assign, transfer, endorse and
deliver" the properties, by virtue of which, some parcels of lots were sold.
The remaining were distributed to the children of Jose and Olivia, leaving
the heirs of Olivia to Lino no land to inherit.
Boom Bayani
Hence the children of Lino filed an action for the Annulment of Sales of
Real Property and/or Cancellation of Titles of the lands sold by Jose,
pursuant to the SPA executed by their mother.
ISSUE: WHETHER OR NOT THE SALE WAS VALID PURSUANT TO A
GENERAL POWER OF ATTORNEY
HELD: Yes. Ongjoco was able to present a general power of attorney that
was executed by Virgilio Olaguer. While the law requires a special power of
attorney, the general power of attorney was sufficient in this case, as Jose
A. Olaguer was expressly empowered to sell any of Virgilio's properties;
and to sign, execute, acknowledge and deliver any agreement therefor.
Even if a document is designated as a general power of attorney, the
requirement of a special power of attorney is met if there is a clear
mandate from the principal specifically authorizing the performance of the
act. The special power of attorney can be included in the general power
when the act or transaction for which the special power is required is
specified therein.
On its face, the written power of attorney contained the signature of
Virgilio Olaguer and was duly notarized. As such, the same is considered a
public document and it has in its favor the presumption of authenticity and
due execution, which can only be contradicted by clear and convincing
evidence.
No evidence was presented to overcome the presumption in favor of the
duly notarized power of attorney. Neither was there a showing of any
circumstance involving the said document that would arouse the suspicion
of respondent and spur him to inquire beyond its four corners, in the
exercise of that reasonable degree of prudence required of a man in a
similar situation. We therefore rule that respondent Ongjoco had every
right to rely on the power of attorney in entering into the contracts of sale
of with Jose A. Olaguer. c
Highest Loyalty Required
VICENTE DOMINGO represented by his heirs v GREGORIO
DOMINGO
MAKASIAR, J p:
Boom Bayani
Petitioner Vicente granted Gregorio, a real estate broker, the exclusive

agency to sell his lot in Piedad Estate at P2.00/sq.m. or for P176,954, with
a commission of 5% on the total price.
Gregorio authorized a certain Teofilo Purisima to look for a buyer,
promising him of the 5% commission. Teofilo introduced Oscar de Leon
to Gregorio as a prospective buyer.
Oscar made an initial offer, which was very low. Vicente directed Gregorio
to tell Oscar to raise his offer. After several meetings between Gregorio
and Oscar, the latter raised his offer to P1.20/sq.m or P109k, which Vicente
accepted.
Oscar issued to Vicente, a check for P1k representing earnest money,P300
of which Vicente advanced to Gregorio. Also, pursuant to his promise to
Gregorio, Oscar gave him as a gift, the sum of P1k for succeeding in
persuading Vicente to accept his offer. This gift was not disclosed by
Gregorio to Vicente.
Later on, Gregorio was informed by Oscar that he could no longer buy the
lot for his failure to receive his money from his brother in the US; but he
was willing to forfeit the earnest money he gave to Vicente and the P1k gift
he gave Gregorio.
After several weeks of not seeing Oscar, Gregorio became suspicious and
went to the Register of Deeds, where he discovered that a deed of sale
was executed by Oscars wife selling their house in Cubao to Vicente.
Apparently, it was a part of the purchase price of the Vicentes lot, which
Oscar is (still) buying.
Upon being confronted by Gregorio, Oscar told him that it was Vicentes
idea to cut Gregorio out of the transaction. Vicente, for his part, stated that
Gregorio is not entitled to the 5% commission because it was not
Gregorios buyer (Oscar) who was buying the property, but Oscars wife.
obvious circumvention naman!
ISSUE: WHETHER THE FAILURE OF GREGORIO TO DISCLOSE TO VICENTE
THE PAYMENT TO HIM BY OSCAR OF P1K AS GIFT FOR HAVING
Boom Bayani
PERSUADED VICENTE TO REDUCE THE PURCHASE PRICE FROM P2 TO

P1.20/sq.m., SO CONSTITUTES FRAUD AS TO CAUSE A FORFEITURE OF
HIS 5% COMMISSION ON THE SALE PRICE
HELD: YES.
The laws on agency state:
1891. (1)Every agent is bound to render an account of his transactions and
to deliver to the principal whatever he may have received by virtue of the
agency, even though it may not be owing to the principal.
(2) Every stipulation exempting the agent from the obligation to
render an account shall be void.
Par (2) stresses the HIGHEST LOYALTY that is required of an agent.
The duties & liabilities of a broker to his employer are essentially those
which an agent owes to his principal. An agent who takes a secret profit in
the nature of a bonus/gratuity or personal benefit from a vendee, w/o
revealing the same to his principal, the vendor is guilty of BREACH OF
LOYALTY and forfeits his right to collect the commission from his principal,
even though his principal does not suffer any injury by reason of such
breach of fidelity, or that he obtained better results or that the agency is
gratuitous, or that usage/custom allows it. By taking such profit, the agent
thereby assumes a position wholly inconsistent with that being an agent for
his principal, who has a right to treat him, insofar as the commission is
concerned, as if no agency had existed. The agent is also liable for ESTAFA
for failure to deliver to his principal the total amount collected by him in
behalf of his principal. The agent is accountable for all the profits he
received. If he makes a profit out of the agency for himself in excess of his
lawful compensation, he may be held as a TRUSTEE for the principal with
regard to the excess.
In this case, Gregorio, beyond the knowledge of Vicente, his principal,
negotiated a secret profit with the buyer, Oscar. This act of Gregorio is a
BREACH of LOYALTY required of an agent to his principal. He is also liable
for ESTAFA for failing to deliver such amount to Vicente.
ISSUE 2: W/N GREGORIO, BEING MERELY A BROKER, IS LIABLE AS AN
AGENT
HELD: YES. 1891 will not apply if the agent/broker acted only as a
middleman with the task of merely bringing together the vender and
Boom Bayani
vendee, who themselves thereafter will negotiate on the terms &

conditions of the transaction.
In this case, Gregorio was not merely a middleman. He was the broker and
agent of Vicente. He negotiated with Oscar in behalf of his principal.
When agent exceeds his authority
NATIONAL POWER CORPORATION v. NATIONAL
MERCHANDISING CORPORATION and DOMESTIC INSURANCE
COMPANY OF THE PHILIPPINES
FACTS:
NPC and NMC (representing New York supplier, International Commodities
Corp) executed contract for NPCs purchase of 4000 tons of crude sulfur
(from NMC) for its Fertilizer Plant in Iligan City. DIC executed a
performance bond, to guarantee the sellers obligations.
Contract stipulates NMC would deliver the sulfur at Iligan City within 60
days from notice of the establishment in its favor of a letter of credit for
$212,120. Failure of delivery would subject the seller and its surety to
liquidated damages at 2/5 of 1% of full contract price for first 30 days of
default and 4/5the of 1% for every day after until complete delivery. NPC
advised John Z. Sycip (NMC President) letter of credit for $212,120 which
would expire on January 1957. Notice of that letter of credit was, received
by cable by the New York firm on November 1956. Thus, the deadline for
the delivery of the sulfur was January 15, 1957. NMC bid or offer provides
that it was "responsible for the availability of bottom or vessel" and that it
"guarantees the availability of bottom or vessel to ship the quantity of
sulfur within the time specified in this bid."
The New York supplier was not able to deliver the sulfur due to its inability
to secure shipping space. NPC fertilizer plant shut down because there was
no sulfur. General manager of the NPC advised NMC and the DIC that
"non-availability of bottom or vessel" was not a fortuitous event that would
excuse non-performance.
Boom Bayani
NMC: it was incumbent upon NPC to inquire into extent of agents authority.
Failure to do so waives claim of liquidated damages. Sycip (President) said
he had no choice but finalize the contract because NPC would forfeit bidder
bond in sum of P45,100 posted by DIC if contract not formalized.
NPC:
ISSUE: WHETHER OR NOT NMC ACTED BEYOND AUTHORITY FOR
VIOLATING THE PRINCIPALS OF ITS PRINCIPAL
HELD: Yes. NMC acted beyond authority because it violated the following
instructions of the principal
1. Delivery of the sulfur should be "C & F Manila", not "C & F Iligan City"
2. Sale be subject to the availability of a steamer
3. Seller should be allowed to withdraw right away the full amount of
the letter of credit and not merely 80%.
NMC should have advised NPC of limitations on its authority to negotiate
sale.
NMC is liable for damages. 1897 states that agent who exceeds the limits
of his authority without giving the party with whom he contracts sufficient
notice of his powers is personally liable to such party.
Even before the contract of sale was signed NMC was already aware that
its principal was having difficulties in booking shipping space. New York
supplier advised NMC that the latter should not sign the contract unless it
NMC wished to assume sole responsibility for the shipment. New York
corporation also informed NMC that since NMC acted contrary to instruction,
former disclaimed responsibility for contract and contract rested on NMC. It
never authorized the contract.
Rule that every person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent would apply in this case if
the principal is sought to be held liable on the contract entered into by the
agent. In this case, agent was expressly repudiated by the principal.
Because the agent took chances, it exceeded its authority and in effect
acted in its own name.
1897 is complimented by 1898 providing that "if the agent contracts in the
name of the principal, exceeding the scope of his authority, and the
Boom Bayani
principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the
principal."
NMC never disclosed to the NPC the cabled or written instructions of its
principal. It acted in its own name and not as agent and it is, therefore,
bound by the contract of sale which, however, is not enforceable against
its principal.
Thus, as 1897 and 1898 bound NMC under contract of sale, it follows that
it is also bound by stipulation for liquidated damages. In effect, NMC also
became the principal of DICs performance bond. DIC acted as surety for
NMC. Rule is that "want of authority of the person who executes an
obligation as the agent or representative of the principal will not, as a
general rule, affect the suretys liability thereon, especially in the absence
of fraud, even though the obligation is not binding on the principal".
When agents exceeds his authority
DEVELOPMENT BANK OF THE PHILIPPINES, v COURT OF APPEALS
and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION
INSURANCE POOL.
QUIASON, J p:
FACTS:
Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan with the Development Bank of the Philippines (DBP),
Basilan Branch. As the principal mortgagor, Dans, then 76 years of age,
was advised by DBP to obtain a mortgage redemption insurance (MRI) with
the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
However, DBP, knowing form having been informed by DBP MRI Pool that
Dans has not qualified for the insurance for being over its age limit of 60
years old, did not inform Dans. Instead, it released the loan to Dans,
deducting premium and service fee.
Dans died. Upon claim by Candida, DBP relayed claim to MRI Pool. The
latter notified DBP again of Danss ineligibility from the coverage.
Boom Bayani
DBP informed Candida of the disapproval of her late husband's MRI

application. The DBP offered to refund the premium of P1,476.00 and
subsequently an annex gratia settlement of P30,000, both of which refused
by Candida.
ISSUE: WHETHER OR NOT DBP, AS AN AGENT OF DBP MRI POOL
EXCEEDED ITS AUTHORITY.
HELD: Yes, DBP exceeded its authority when, even knowing that Dans
application would inevitably be disapproved for being disqualified from the
coverage of the MRI Pool, it released the loan to Dans.
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts
as such is not personally liable to the party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
DBP was not authorized to accept applications for MRI when its clients are
more than 60years old. DBP exceeded its authority as an agent when it
accepted Dans application for MRI by collecting the premium and
deducting agents commission and service fee.
The liability of an agent who exceeds the scope of his authority depends
upon whether the third person is aware of the limits of the agent's powers.
If the third person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the agent, then the latter
is liable for damages to him. The rule that the agent is liable when he acts
without authority is founded upon the supposition that there has been
some wrong or omission on his part either in misrepresenting, or in
affirming, or concealing the authority under which he assumes to act.
There is no showing that Dans knew of the limitation on DBP's authority to
solicit applications for MRI, which makes the DBP liable for damages.
When Agent Exceeds his Authority
SAFIC ALCAN & CIE v IMPERIAL VEGETABLE OIL CO., INC.
YNARES-SANTIAGO, J p:
Petitioner Safic Alcan (SAC) is a French corporation engaged in the
international purchase, sale & trading of coconut oil. SAC has entered into
Boom Bayani
several transactions with respondent IVO, whereby SAC would purchase

and IVO would deliver crude coconut oil products. But in 1987, IVO failed
to deliver the coconut oil previously agreed upon, which prompted SAC to
sue IVO.
In its defense, IVO contended that its president, Monteverde, acted beyond
his authority (ULTRA VIRES) when he entered into speculative contracts
with SAC. IVO presented its by-laws prohibiting its officers from entering
into contracts which are speculative in nature as in this case according to
them for the reason that at the time the Monteverde entered into an
agreement obligating IVO to deliver such coconut oil products, the
coconuts are not even growing at that time and are yet to be harvested.
Hence, the 1986 contracts are sales of mere expectations and this is
something prohibited by the by-laws and the Board of Directors of IVO.
SAC insists that there is implied agency between IVO and Monteverde
because the latter has been transacting for IVO with SAC since 1985.
ISSUE: W/N MONTEVERDE EXCEEDED HIS AUTHORITY
HELD: YES.
IVO successfully proved that the recent contract entered into by
Monteverde with SAC was speculative as it was clear that IVO could not
possibly comply with the obligation of delivering coconut oil to SAC. By
entering into a speculative contract in behalf of IVO, Monteverde, the
agent exceeded his authority by doing what is prohibited by the company
by-laws.
ISSUE 2: W/N THERE WAS IMPLIED AGENCY
HELD: NO.
The mere fact that Monteverde had been transacting in behalf of IVO with
SAC for years does not imply an agency as regards the recent contract. In
the recent contract, the situation was highly speculative. In fact,
Monteverde did not present such contracts to the board for ratification, nor
record them in the company books.
Estoppel
FILIPINAS LIFE ASSURANCE, v CLEMENTE PEDROSO and
TERESITA PEDROSO
Boom Bayani
FACTS:
Teresita Pedroso is a policyholder of a 20-year endowment life insurance
issued Filipinas Life Assurance Company (Filipinas Life). Renato Valle was
her insurance agent who collected her monthly premiums. Valle informed
Pedroso that Filipinas Life Escolta had an investment promo for
policyholders entitling them to earh 8& prepaid interest for amounts
deposited on a monthly basis.
Convinced, Teresita invested and issued a post-dated check of P10,000. In
return, Valle issued a personal check of P800 for 8% prepaid interest and a
Filipinas Life Agents Receipt. Teresita called Escolta Brach and talked to
Alacantara (administrative assistant) and Apretrior (branch manager) who
confirmed the promotion. Relying on these representatives and agent Valle,
Pedroso waited for the maturity of her initial investment. True enough, her
deposit was returned to her upon a written request for refund. Pedroso more
investments in varying amounts. She even persuaded a friend, Jennifer N.
Palacio, also a Filipinas Life insurance policyholder, to invest in the
program. However, when Pedroso and Palacio tried to withdraw their
investment, Valle refused to return it. They were not even to recover the
amounts even after going to Filipinas Life Escolta Branch, Valle having
disappeared.
ISSUE: WHETHER FILIPINAS WAS LIABLE THROUGH THE ACTIONS OF
VALLE
HELD: Yes. Filipinas does not dispute Valle as its agent.
By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent
or authority of the latter.
The general rule is that the principal is responsible for the acts of its agent
done within the scope of its authority, and should bear the damage caused
to third persons. When the agent exceeds his authority, the agent
becomes personally liable for the damage. But even when the agent
exceeds his authority, the principal is still solidarily liable together with the
agent if the principal allowed the agent to act as though the agent had full
powers.
Pedroso and Palacio investments were received by Valle and remitted to
Boom Bayani
Filipinas Life, using Filipinas Lifes official receipts, whose authenticity were
not disputed. When respondents sought confirmation, Alcantara, holding a
supervisory position, and Apetrior, the branch manager, confirmed that
Valle had authority. While it is true that a person dealing with an agent is
put upon inquiry and must discover at his own peril the agents authority,
in this case, respondents did exercise due diligence in removing all doubts
and in confirming the validity of the representations made by Valle.
Filipinas Life cannot profess ignorance of Valles acts. Even if Valles
representations were beyond his authority as a debit/insurance agent,
Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified
Valles acts. It cannot even be denied that Filipinas Life benefited from the
investments deposited by Valle in the account of Filipinas Life. In our
considered view, Filipinas Life had clothed Valle with apparent authority;
hence, it is now estopped to deny said authority. Innocent third persons
should not be prejudiced if the principal failed to adopt the needed
measures to prevent misrepresentation, much more so if the principal
ratified his agents acts beyond the latters authority. The act of the agent
is considered that of the principal itself.
Estoppel to Deny
NORMA B. DOMINGO, v YOLANDA ROBLES; and MICHAEL
MALABANAN ROBLES, MARICON MALABANAN ROBLES, MICHELLE
MALABANAN ROBLES, All Minors Represented by Their Mother,
YOLANDA ROBLES
PANGANIBAN, J p:
FACTS:
Petitioner and her husband, Valentino Domingo, were the registered
owners of a lot in Marikina. The spouses were having a house build on said
lot but the construction was halted allegedly for failure of the husband to
send the funds. So, Norma decided to sell the property.
A friend, Flor Bacani, volunteered to act as her agent in selling the lot.
Trusting Bacani, Norma delivered her Owners Duplicate of the TCT
covering the lot. Later, upon being informed by Bacani that the title was
lost, Norma filed a petition for its reconstitution thru Bacani, giving the
latter, all her receipts of payment for real estate taxes. At the same time,
Boom Bayani
Bacani asked Norma to sign what she recalled was a record of exhibits.
Thereafter, Bacani disappeared.
When Norma visited the lot, she was surprised to see the Robleses starting
to build a house on her lot. When she verified with the Register of Deeds,
it was revealed that the reconstituted Transfer Certificate of Title had
already been cancelled with the registration of a Deed of Absolute Sale
signed by Norma B. Domingo and her husband Valentino Domingo, as
sellers, and [Respondent] Yolanda Robles, for herself and representing the
other minor [respondents], as buyers. As a consequence, a Transfer
Certificate of Title in the name of [Respondent] Robles.
Claiming not to have met any of the [respondents] nor having signed any
sale over the property in favor of anybody (her husband being abroad at
the time), [petitioner] assumed that the Deed of Absolute Sale is a forgery
and, therefore, could not validly transfer ownership of the lot to the
[respondents]. Hence, the case for the nullity thereof and its
reconveyance was filed by Norma.
The Robleses claimed to be buyers in good faith and for value. They
narrate that the subject lot was offered to them by Flor Bacani, as the
agent of the owners; that after some time when they were already
prepared to buy the lot, Bacani introduced to them the supposed owners
and agreed on the sale; Bacani and the introduced seller presented a Deed
of Absolute Sale already signed by Valentino and Norma Domingo needing
only her (Robles) signature. Presented likewise at that meeting, where
she paid full purchase price, was the original of the owners duplicate of
Transfer Certificate of Title.
ISSUE: WHETHER OR NOT THE ROBLESES WERE INNOCENT PURCHASERS
FOR VALUE
HELD: Yes. Petitioner failed to convince the trial court that the person with
whom Respondent Yolanda Robles transacted was in fact not Valentino
Domingo. Except for her insistence that her husband was out of the
country, petitioner failed to present any other clear and convincing
evidence that Valentino was not present at the time of the sale. Bare
allegations, unsubstantiated by evidence, are not equivalent to proof.
Boom Bayani
Petitioner now stresses the issue of good faith on the part of respondents.
In the absence of a finding of fraud and a consequent finding of
authenticity and due execution of the Deed of Absolute Sale, a discussion
of whether respondents were purchasers in good faith is wholly
unnecessary. Without a clear and persuasive substantiation of bad faith, a
presumption of good faith in their favor stands.
The sale was admittedly made with the aid of Bacani, petitioners agent,
who had with him the original of the owners duplicate Certificate of Title to
the property, free from any liens or encumbrances. The signatures of
Spouses Domingo, the registered owners, appear on the Deed of Absolute
Sale. Petitioners husband met with Respondent Yolanda Robles and
received payment for the property. The registered owner who places in the
hands of another an executed document of transfer of registered land
effectively represents to a third party that the holder of such document is
authorized to deal with the property.
Estoppel to deny
RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIO,
FELICISIMO OCFEMIA, RENATO OCFEMIA JR., and WINSTON
OCFEMIA, respondents.
Ponente: PANGANIBAN, J p
Several parcels of land were mortgaged by the respondents during the
lifetime of the their grandparents to the Rural bank of Milaor. Petitioner
Rural Bank has foreclosed on 7 parcels of land and the ownership was
transferred with the petitioner bank upon failure of the Ocfemias to redeem.
Out of the seven parcels of land that were foreclosed, five of them are in
the possession of the respondents because these five parcels of land were
sold back by the petitioner bank to the respondents.
However, the title to those five parcels of land cannot be transferred in the
name of the parents of Merife Nino, because the prior sale between their
parents and the bank were not registered. The Register of deeds, on the
other hand, required the board resolution of the petitioner bank confirming
Boom Bayani
both the Deed of sale and the authority of the bank manager, Fe S. Tena,
to enter such transaction in order to register the sale.
The petitioner bank upon repeated request by the respondents for the
required resolution, refused repeatedly, stating various reasons and asking
for requirements. Respondents initiated the present case in order to
compel petitioner bank to issue the needed resolution as it is their only way
to have the titles transferred to their name, as they needed to mortgage
the lot to pay for medical expenses for their mother.
ISSUE: WHETHER OR NOT THE PETITIONER BANK IS ESTOPPED TO DENY
THE APPLICATION OF RESPONDENTS BY THE ACT OF ITS MANAGER AND
HELD: Yes. A bank is liable to innocent third persons where representation
is made in the course of its normal business by an agent like manager
Tena, even though such agent was abusing her authority. The bank has a
clear legal duty to issue the board resolution sought by respondents.
Indeed, when one of herein respondents, Marife S. Nino, went to the bank
to ask for the board resolution, she was merely told to bring the receipts.
The bank failed to categorically declare that Tena (the manager of the
Bank) had no authority.
Therefore, the bank is estopped from questioning the authority of the bank
manager to enter into the contract of sale. If a corporation knowingly
permits one of its officers or any other agent to act within the scope of an
apparent authority, it holds the agent out to the public as possessing the
power to do those acts; thus, the corporation will, as against anyone who
has in good faith dealt with it through such agent, be estopped from
denying the agent's authority.
Unquestionably, petitioner has authorized Tena to enter into the Deed of
Sale. Accordingly, it has a clear legal duty to issue the board resolution
sought by respondents. Having authorized her to sell the property, it
behooves the bank to confirm the Deed of Sale so that the buyers may
enjoy its full use.
Actual Knowledge
Boom Bayani
AIR FRANCE v CA, JOSE GANA (deceased), CLARA GANA, RAMON

GANA, MANUEL GANA, MA. TERESA GANA, ROBERTO GANA, JAIME
JAVIER GANA, CLOTILDE VDA. DE AREVALO and EMILY SAN JUAN
MELENCIO-HERRERA J p:
Sometime in February 1970, Jose Gana and hi family purchased from AIR
FRANCE through Imperial Travels Inc, a duly authorizied travel agent, 9
open-dated air passage tickets for the Manila/Osaka/Tokyo/Manila route.
They paid in US$ at the then prevailing exchange rate of P3.90 per
US$1.00, plus travel tax of P100 per passenger.
April 1970, AIR FRANCE substituted the aforementioned tickets with other
tickets for the same route, this time having and expiration date of May 8,
1971.
January 1971, the Ganas have not used the tickets. Jose Gana sought the
assistance of Teresita Manucdoc, a secretary of the Sta. Clara Lumber
Company where Jose was the Director & Treasurer, for the extension of
the validity of their tickets. Teresita enlisted the help of Lee Ella, Manager
of the Ph Travel Bureau. Ella sent the tickets to the Office Manager of AIR
FRANCE. But the tickets were returned to Ella, who was informed that the
extension was not possible unless the fare differentials resulting from the
increase in fares and travel tax were paid. Ella returned the tickets to
Teresita and informed her of the impossibility of extension.
In the meantime the GANAS had scheduled their departure on May 7, 1971
or 1 day before the expiration date on their tickets. In the morning of that
day, Teresita requested Ella to arrange the revalidation of the tickets. Ella
gave the same negative answer and warned her that although the tickets
could be used by the GANAS that day, they would no longer be valid for
the rest of the trip having expired on the 8th. Teresita replied that it would
be up to the GANAS to make the arrangements. With that assurance from
Teresita, Ella attached validating stickers for the first leg of 2nd leg of the
flight. He did not attempt to contact AIR FRANCE anymore due to time
constraints.
As warned by Ella, the airlines for the May 8th leg of the GANASs flight
onwards refused to honor their tickets, forcing them to buy new ones and
Boom Bayani
to ask their relatives to buy for them so they could return to the Manila for
the last leg of their flight.
August 1971, GANAS filed a complaint for damages arising from breach of
contract of carriage against AIR FRANCE.
AIR FRANCE denied liability, stating that they were not guilty of fraud or
bad faith because their travel agent Ella, has informed or notified Teresita
(agent of the GANAS) of the consequential risks of utilizing their expired
tickets.
In turn, the GANAS argue that it would be unfair to charge them with
automatic knowledge or notice of conditions in contracts of adhesion, as in
this case.
ISSUE: W/N NOTICE TO TERESITA WOULD CONSTITUTE NOTICE TO THE
GANAS
HELD: YES.
The laws of agency state that notice to the agent is notice to the principal.
To all legal intents and purposes, Teresita was the agent of the GANAS and
notice to her of the rejection of the request for extension of the validity of
the tickets was notice to the GANAS, her principal.
Revocation
PHILIPPINE NATIONAL BANK vs. IAC
FACTS:
On March 20, 1968, Leticia de la Vina-Sepe executed a real estate
mortgage in favor of PNB, San Carlos Branch, over a lot registered in her
name to secure the payment of a sugar crop loan of P3,400. Later, Leticia
Sepe, acting as attorney-in-fact for her brother-in-law, private respondent
Romeo Alcedo, executed an amended real estate mortgage to include his
(Alcedo's) Lot as additional collateral for Sepe's increased loan. Leticia Sepe
and private respondent Alcedo verbally agreed to split fifty-fifty (50-50) the
proceeds of the loan (p. 94, Rollo) but failing to receive his one-half share
from her, Alcedo wrote a letter on May 12,1970 to the PNB, San Carlos
Branch, revoking the Special Power of Attorney which he had given to
Boom Bayani
Leticia Sepe to mortgage his Lot.

PNB Branch Manager, Jose T. Gellegani, advised Alcedo that his land had
already been included as collateral for Sepe's sugar crop loan, which the
latter had already availed of, nevertheless, he assured Alcedo that the bank
would exclude his lot as collateral for Sepe's forthcoming sugar crop loan.
On the same day, PNB advised Sepe in writing to replace Alcedos lot with
another collateral of equal or higher value. But despite the above advice
from PNB, Sepe was still able to obtain an additional loan from PNB
increasing her debt on the security of Alcedo's property as collateral.
Sepe failed to pay the loan, and Alcedo, upon being informed of such fact
by the bank, and being told that he had 6 months to pay Sepes loan to
prevent foreclosure, he sued Sepe for collection of sum of money and
injunction.
Meanwhile, PNB was able to foreclose on the property and acquire the
property in the auction sale for being the highest bidder.
In answer to Alcedos amended complaint, the Bank contended that it was
justified in granting Sepe an additional loan although Alcedo informed the
Bank that he was revoking the Special Power of Attorney he gave Sepe
because the revocation was not formalized in accordance with law and
therefore, the revocation of the Special Power of Attorney by Alcedo did
not impair the real estate mortgage earlier executed by Sepe in favor of
the Bank.
ISSUE: WHETHER OR NOT PNB VALIDLY FORECLOSED ON ALCEDOS LOT
DESPITE THE LATTERS REVOCATION OF SPA AUTHORIZING SEPE TO
MORTGAGE HIS PROPERTY
HELD: No.
While Article 1358 of the New Civil Code requires that the revocation of
Alcedo's Special Power of Attorney to mortgage his property should appear
in a public instrument, nevertheless, a revocation embodied in a private
writing is valid and binding between the parties.
The PNB acted with bad faith in proceeding against Alcedo's property to
satisfy Sepe's unpaid 1971-72 sugar crop loan. The extrajudicial foreclosure
being null and void ab initio, the certificate of sale which the Sheriff
Boom Bayani
delivered to PNB as the highest bidder at the sale is also null and void
Agency Coupled with Interest

Philex Mining Corporation vs Commissioner of Internal Revenue
P: Carpio-Morales
FACTS:
Petitioner Philex entered into an agreement POWER of ATTORNEY with
Baguio Gold Mining Corporation for the former to manage the latters
mining claim know as the Sto. Mine. Over the years, petitioner withdrew
from the management of the mine due to continuing losses. The parties
executed a Compromise Dation in Payment, wherein the debt of Baguio
amounted to Php. 112,136,000.00, which the petitioner agreed to deduct
from its gross income as loss on the settlement of receivables from Baguio
Gold against reserves and allowances.
BIR did not allow such deduction for bad debt. Petitioner claims that such
amount was in a nature of a loan pursuant to a contract of agency
evidenced by the power of attorney executed by them, and is therefore
deductible from their income tax. Court of Tax Appeals (CTA), as affirmed
by the CA, rejected the claim and held that it is a partnership rather than
an agency.
ISSUE: WHETHER OR NOT THERE AN AGENCY, AND IF IN THE
AFFIRMATIVE, IS IT ONE COUPLED WITH AN INTEREST
HELD: No. The Power of Attorney (PA) is the instrument that is material
in determining the true nature of the business relationship between
petitioner and Baguio. An examination of the said PA reveals that a
partnership or joint venture was indeed intended by the parties. While a
corporation like the petitioner cannot generally enter into a contract of
partnership unless authorized by law or its charter, it has been held that it
may enter into a joint venture, which is akin to a particular partnership.
The PA indicates that the parties had intended to create a partnership and
establish a common fund for the purpose. They also had a joint interest in
the profits of the business as shown by the 50-50 sharing of income of the
mine.
Boom Bayani
Moreover, 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
that depends upon it or the mutual interest of both principal and agent.
In this case the non-revocation or non-withdrawal under the PA applies to
the advances made by the petitioner who is the agent and not the principal
under the contract. Thus, there is no agency that can be inferred from the
contract.
TRUSTS: Fiduciary Character

THE ESTATE OF HILARIO RUIZ, EDMOND RUIZ, Executor v CA, MA.
PILAR RUIZ-MONTES, MA. CATHRYN RUIZ, CANDICE ALBERTINE
RUIZ, MA. ANGELINE RUIZ and THE PRESIDING JUDGE OF THE
RTC OF PASIG, BRANCH 156
PUNO, J p:
Hilario Ruiz executed a holographic will naming his heirs his only son,
Edmond, his adopted daughter, private respondent Pilar, and his 3
granddaughters, all children of Edmond. His assets were in terms of
substantial cash, personal and real properties. He named Edmond executor
of his estate.
When Hilario died, the cash component of his estate was distributed
among the heirs in accordance with his will. Strangely, Edmond, as
executor, did not take any action for the probate of his fathers will.
4 years after the testators death, Pilar filed a petition for the probate and
approval of Hilarios will and for the issuance of letters of testamentary to
Edmond, to which the latter opposed on the ground that the will was
executed under undue influence.
Edmond leased out to 3rd persons one of the properties of the estate a
house and lot in Valle Verde.
The probate court ordered Edmond to deposit the rental payments
representing 1year lease totaling to P540,000, which he did after deducting
Boom Bayani
repair and maintenance expenses. The court admitted to will to probate

and ordered the issuance of letters testamentary to Edmond on the
condition of a bond of P50k.
Petitioner Testate Estate, with Edmond as executor filed an Ex-parte
motion for release of funds, which was denied by the court. Instead, the
probate court ordered the release of the rent payments and the delivery of
the titles to and possession of the properties bequeathed to the 3
granddaughters.
Petitioner assails the order of the probate court, claiming that it deprived
him of his right as an executor to take possession of all the real and
personal properties of the estate.
ISSUE: W/N AN EXECUTOR OF AN ESTATE HAS A RIGHT OF OWNERSHIP
AND POSSESSION OF THE ESTATE
HELD: NO.
The right of an executor or administrator to the possession and
management of the real and personal properties of the deceased is not
absolute and can only be exercised as long as it is necessary for the
payment of the debts and expenses of administration.
The court reminded the petitioner that his right of ownership over the
properties of his father is merely inchoate as long as the estate has not
been fully settled and partitioned. As executor, he is a mere trustee of his
fathers estate. The funds of the estate in his hands are trust funds and he
is held to the duties and responsibilities of a trustee of the highest order.
He cannot unilaterally assign to himself and possess all his parents
properties and the fruits thereof without first submitting an inventory and
appraisal of all real and personal properties of the deceased, rendering a
true account of his administration, the expenses of administration, the
amount of the obligations and estate tax, all of which are subject to a
determination by the court as to their veracity, proprietary and justness.
Boom Bayani
Intention to create Trust

ANITA UNGAB-VALEROSO, joined in by her husband,
RUSELO VALEROSO, v AMANCIA UNGAB-GRADO, FELIX
UNGAB, represented by his son ROSENDO UNGAB,
ESPENILA UNGAB-JAICTIN and RUSTICINA UNGABTAMALA,
QUISUMBING, J p:
FACTS:
The late Timoteo Ungab was the registered owner of a land in Binuni,
Kolambugan, covered by an OCT. Petitioner Anita Ungab is Timoteos only
child. Respondents are the brother and heirs of Timoteos other siblings.
The heirs of Ciriaco Ungab filed a complaint in the Court of First Instance
(CFI) of Iligan City, against the brothers, sisters and heirs of Timoteo for
the partition, accounting and reconveyance of the subject land. When the
case was called for trial, the parties submitted a written compromise
agreement. The CFI rendered judgment adopting in toto the compromise
agreement.
The parties did not have the land partitioned but divided the proceeds of
the land in accordance with the decision.
Respondents then filed against petitioners Anita and her husband Ruselo
Valeroso, a complaint for recovery of possession, partition, enforcement of
compromise agreement and damages with the RTC of Iligan City.
During the pre-trial, respondents presented in court
1. the affidavit of Timoteo acknowledging that he co-owned with his
brothers and sisters, Simeona, Eugenia, Lorenzo, Lazaro, Felix and
Margarito, a parcel of land in Binuni, Kolambugan, Lanao under
Homestead Application;
2. Affidavit of Acknowledgment of Anita and her mother Aurelia
acknowledging the rights of Simeona, Lazaro, Felix and Margarito as
co-owners of the land.
Anita claims to exclusively own the land as sole heir of Timoteo.
ISSUE: WHETHER OR NOT THERE IS AN INTENT FOR ANITA TO CREATE
TRUST WITH THER FATHERS SIBLINGS
Boom Bayani
HELD: Yes. The execution of the Affidavit of Acknowledgment and the

compromise agreement established an EXPRESS TRUST wherein
respondents, as trustors, reposed their confidence on petitioner Anita and
her mother as trustees, that they will hold theland subject of the coownership. There are no particular words required in the creation of an
express trust, it being sufficient that a trust is clearly intended.
Implied Trust
FELOMINA ABELLANA, petitioner vs SPOUSES PONCE and RD
BUTUAN CITY, respondents.
FACTS:
Petitioner Filomena, aunt of private respondent Lucila once, purchased an
agricultural lot with the intention of giving said lot to her niece,
Lucila. Thus, Lucila was designated as the buyer. Subsequently, Filomena
applied for the issuance of title in the name of her niece. Title remained in
possession of Filomena who developed the lot and paid the real property
taxes.
But then, the relationship between the aunt and niece turned sour. Hence,
Filomena filed the instant case for revocation of implied trust to recover
legal title over the property.
Lucila claims that upon learning that a CT has already been issued in her
name, that she tried to obtain the same from her aunt. But upon being
informed that Filomena had already given her such title, she thought that
she just might have misplaced it and therefore applied for the
reconstitution and issuance of another CT in her name.
ISSUE: WHETHER OR NOT THERE WAS IMPLIED TRUST
HELD: No. There was no Implied trust. As proven by testimony, Felomina
was the buyer and the one who paid the purchase price. The fact that it
was Abellana who bought the lot was further bolstered by her possession
for TCT and tax declaration in Lucilas name, receipts of real property taxes
Boom Bayani
in her own name and the survey plan of the lot.

The concept of implied trusts (1448) is that the existence of a trust
relationship is inferred in order to effect the presumed intention of the
parties. Thus, one of the recognized exceptions to the establishment of an
implied trust is where a contrary intention is proved.
In Abellanas mind, the execution of a deed with Lucila was an act of
generosity. She displayed her unequivocal intention to transfer ownership
and not merely to constitute her as a trustee. It was only when their
relationship soured that she sought to revoke the donation on the theory of
implied trust. There is nothing to revoke because the donation was never
perfected.
In declaring Lucila as the owner of the disputed lot, the Court of Appeals
applied, among others, the second sentence of Article 1448 which states
if the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there is a gift in favor of the
child. Said presumption also arises where the property is given to a person
to whom the person paying the price stands in loco parentis or as a
substitute parent.
This is not applicable here because 1) it was not established that Abellana
stood as a substitute parent of Lucila; 2)Even assuming that she did, the
donation is still void because the transfer and acceptance was not
embodied in a public instrument.
Provision merely raised a presumption that the conveyance was a gift but
does not exempt parties from complying with the formalities of a donation.
Repudiation of Trust
Pangan vs Court of Appeals
P: J. Changco
FACTS:
Petitioners, by virtue of their continuous and exclusive possession of a land
through their grandfather, applied for the registration of their lot in their
name and after proper publication, their application was approved. The
Boom Bayani
herein private respondent filed a petition to set aside the said decision
based on the evidence she presented. This evidence sought to show that
the land was inherited by Leon Hilario's three children, but the son,
Felicisimo, waived his right thereto and thereby made his two sisters,
Silvestra and Catalina, its exclusive co-owners. As Catalina's daughter, she
was entitled to one-half of the property, the other half going to Silvestra's
heirs, the petitioners herein and the latter's grandchildren.
The trial court issued an order dismissing the opposition and reinstating its
original order. It stated that whatever rights Teodora might have had over
the property had been forfeited by extinctive prescription. CA reversed on
the ground that the appellees had not clearly proved that they had
acquired the property by prescription. Hence, the appellant was entitled to
one-half of the property as heir, conformably to her opposition in the court
a quo.
Private respondent argued she could not have lost the land through
extinctive prescription because it was held by them in trust for her. In
other words, their possession, while adverse to the rest of the world, was
not against Teodora herself, whose share they held in implied trust for her
as a co-owner of the land, and whose fruits their father shared with her
occasionally, or at least promised her she would get eventually.
ISSUE: WHETHER OR NOT THERE IS REPUDIATION OF TRUST
HELD: There is clear repudiation of a trust when one who is an apparent
administrator of property causes the cancellation of the title thereto in the
name of the apparent beneficiaries and gets a new certificate of title in his
own name. It is only when the defendants, alleged co-owners of the
property in question, executed a deed of partition and on the strength
thereof obtained the cancellation of the title in the name of their
predecessor and the issuance of a new one wherein they appear as the
new owners of a definite area each, thereby in effect denying or
repudiating the ownership of one of the plaintiffs over his alleged share in
the entire lot, that the statute of limitations started to run for the purposes
of the action instituted by the latter seeking a declaration of the existence
of the co-ownership and of their rights thereunder.
The established evidence clearly shows that the subject land was inherited
by the petitioners and the private respondent as co-heirs of their common
Boom Bayani
ancestor, Leon Hilario, whose possession they continued to acquire

prescriptive title over the property. That possession was originally in the
name of all the heirs, including Teodora Garcia, who in fact had been
assured by Tomas Pangan, the petitioners' father, that she would get the
share to which she was entitled.
The petitioners have not proved that their possession excluded their coowner and aunt or that they derived their title from a separate conveyance
to them of the property by Leon Hilario. Parenthetically, such a conveyance,
if it existed, would be questionable as it might have deprived Leon's other
children of their legitime. In any case, the petitioners appear to have
arrogated the entire property to themselves upon their father's death
sometime in 1942 or at the latest in 1965 when they sought to register the
land in their names to the exclusion of Teodora Garcia.
In re: Precriptibility of action

MELCHOR CARO, vs. SUSANA SUCALDITO
CALLEJO, SR., J.
FACTS:
Gregorio Caro bought a parcel of land from Ruperto Gepilano. Thereafter,
he sold a portion of the said lot to his son Melchor Caro, as evidenced by a
Deed of Definite Sale.
Melchor Caro applied for a free patent covering the said area of the
property which he bought from his father. The application was, however,
opposed by Deogracias de la Cruz. Regional Director rendered a Decision
canceling the said application, thusly:
This is a claim of Deogracias de la Cruz to Lot No. 4512, Pls-775 of Calaya,

Nueva Valencia, Guimaras, covered by the above-noted application of
Melchor Caro.
Boom Bayani
In the investigation, respondent claims preferential rights over the land as

he acquired it through sale from his father Gregorio Caro who had likewise
bought the land from Ruperto Cepellano in 1953. On the other hand,
protestant De la Cruz testified that the land in controversy was bought by
him from Cipriano Gallego in 1965; that he thereafter occupied, possessed
and improved the land by planting coconut trees; and that in 1968 he was
forcibly driven out by Gregorio Caro from the land in question.
Verification of the records disclosed that the land which was actually sold to
Gregorio Caro by Ruperto Gepellano. The description and physical identity
of the lot is basically different and distinct from the land in question.
Moreover, Ruperto Cepellano in his affidavit testified that what he sold to
Gregorio Caro is a land distinct and different from the land in question.
Susana R. Sucaldito, as the buyer, filed an Application for a Free Patent
covering the said lot, and was issued Free Patent. Consequently, the
Register of Deeds of Iloilo City issued Original Certificate of Title (OCT) in
her favor. Sucaldito then filed a Petition for Writ of Possession before the
RTC of Iloilo City, which was granted in an Order.
Thereafter, Caro filed a Complaint against Sucaldito for Annulment of Title,
Decision, Free Patent and/or Recovery of Ownership and/or Possession
with Damages before the RTC of Iloilo City. He later filed an amended
complaint, alleging that he was the owner of the subject lot, and had been
in possession of the same since 1953 and/or even prior thereto in the
concept of owner, adversely, openly, continuously and notoriously. He
further alleged that the said lot had been declared for tax purposes in his
name and that of his predecessors-in-interest, and that the corresponding
land taxes had been paid therefor. He claimed that lot had actually been
divided into two lots; Sucaldito had actually been claiming one of which,
and which was located two kilometers away. He lamented that despite the
overwhelming evidence proving his ownership and possession of the said
property, the Bureau of Lands did not award it to him.
Caro further alleged that since the issuance of the free patent over the
subject lot in favor of Sucaldito was wrongful and fraudulent, she had no
right whatsoever over the subject lot. Hence, as a trustee of a
constructive trust, she was obliged to return the same to him as the lawful
owner.
ISSUE: WHETHER OR NOT CARO HAD LEGAL STANDING TO FILE PRESENT
Boom Bayani
ACTION
HELD: No. Under Section 2, Rule 3 of the Rules of Court, every action must
be prosecuted or defended in the name of the REAL PARTY-IN-INTEREST
or one "who stands to be benefited or injured by the judgment in the suit."
Corollarily, LEGAL STANDING has been defined as a personal and
substantial interest in the case, such that the party has sustained or will
sustain direct injury as a result of the challenged act. Interest means a
material interest in issue that is affected by the questioned act or
instrument, as distinguished from a mere incidental interest in the question
involved.
Clearly then, a suit filed by one who is not a party-in-interest must be
dismissed. In this case, the petitioner, not being the owner of the disputed
property but a mere applicant for a free patent, cannot thus be considered
as a party-in-interest with personality to file an action for reconveyance.
As held in Lucas v. Durian: the proper party to bring the action was the
government, to which the property would revert.
As declared in Nebrada v. Heirs of Alivio: plaintiff, being a mere homestead
applicant, was not the real party-in-interest to institute an action for
reconveyance.
If the suit is not brought in the name of or against the real party-in-interest,
a motion to dismiss may be filed on the ground that the complaint states
no cause of action. In fact, a final judgment may be invalidated if the real
party-in-interest are not included. Final judgments are nullified when
indispensable parties are not impleaded.
In the present dispute, only the State can file a suit for reconveyance of
public land. Therefore, not being the owners of the land but mere
applicants for sales patents thereon. respondents have no personality to
file the suit. Neither will they be directly affected by the judgment in such a
suit.
Boom Bayani

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Power to Dissolve Partnership

MARJORIE TOCAO & WILLIAM BELO v CA & NENITA ANAY

ISSUE: WHETHER OR NOT A PARTNERSHIP EXISTS

distributorship under the US manufacturer; it was even admitted by the

lumber and hardware and construction supplies. The brothers jointly

HELD by Tax Court & affirmed by SC: UNREGISTERED PARTNERSHIP.

the money would be returned to Rosales. The amounts advanced to

Prohibition against engaging in business/Formal accounting

In this case, CA did not consider the Articles of Co-Partnership as

Another article, 1789, reads that an industrial partner cannot engage in

Appellants allege that property as is not included in the partnership assets

This provision applies strongly to the obligations contacted by the

Liability for debts of an industrial partner

127 of Code of Commerce says, all members of the general co-partnership,

Conveyance of real property belonging to partnership

According to 1432 of Civil Code, property of owner who knowingly permits

Another issue is the claim of Choithram that because he was a British

private respondents of conspiracy through the issuance of the TRO in

ISSUE: WHETHERE OR NOT A PARTNERSHIP EXISTED BETWEEN

the consequences of any wrongful act committed by any of the partners

obligations stood at P295,000.00 excluding interests and attorney's fees.

ISSUE: WHETHER OR NOT THE CONTRACT OF SERVICE BETWEEN

rights without the consent of the Secretary of Agriculture and Commerce,

In a single answer with counterclaim, defendants denied specifically the

EDWARD C. ONG v THE COURT OF APPEALS AND THE

Later on, aslo representing ARMAGRI he executed another letter of credit

Trust Receipts Law, because the Corporation cannot by itself transact

Knowledge of Agent imputed to the Principal

ISSUE: WHETHER OR NOT SUNACE IS LIABLE FOR THE CLAIM IF DIVINA

Private Respondent Segundina Noguera entered into a contract of lease

ISSUE: WHETHER OR NOT SEVILLA WAS A MERE EMPLOYEE AND NOT AN

recital of facts, that the parties had contemplated a principal-agent

According to their agreement, the parties "continue[d] business relations as

Petitioner protested, claiming that the termination of his exclusive

acquire jurisdiction, it being a foreign corporation.

ISSUE: WHETHER OR NOT HAHN IS THE AGENT OF BMW, PROVING THAT

These allegations were substantially admitted by BMW which, in its petition

Contrary to CAs conclusion, this arrangement shows an agency.

Authority of Counsel as Agent

signed by Connie U. Kokseng (Kokseng), the former guardian of the heirs

execution of the power of attorney. He vehemently denied having met or

ISSUE: WHETHER OR NOT THE ASSAILED GPA WAS VALID

power of attorney presented by petitioners wife, Irma. Being the wife of

Petitioner Vicente granted Gregorio, a real estate broker, the exclusive

PERSUADED VICENTE TO REDUCE THE PURCHASE PRICE FROM P2 TO

vendee, who themselves thereafter will negotiate on the terms &

DBP informed Candida of the disapproval of her late husband's MRI

several transactions with respondent IVO, whereby SAC would purchase

AIR FRANCE v CA, JOSE GANA (deceased), CLARA GANA, RAMON

Leticia Sepe to mortgage his Lot.

Agency Coupled with Interest

Moreover, in an agency coupled with interest, it is the agency that cannot

TRUSTS: Fiduciary Character

repair and maintenance expenses. The court admitted to will to probate

Intention to create Trust

HELD: Yes. The execution of the Affidavit of Acknowledgment and the

in her own name and the survey plan of the lot.

ancestor, Leon Hilario, whose possession they continued to acquire

In re: Precriptibility of action

This is a claim of Deogracias de la Cruz to Lot No. 4512, Pls-775 of Calaya,

In the investigation, respondent claims preferential rights over the land as

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Partnership, Agency & Trust Digest Compilation

Partnership, Agency & Trust Digest Compilation