Manlapat v Salazar (1956)

Assignment of lease v sublease

o
o

Assignment: prohibited unless allowed

Sublease: allowed unless prohibited

It was a sublease. It is a valid agreement.

Nava v Yaptinchay

LEASE

There were notices prohibiting sublease

The agreement was a sublease.
Prohibition must be in the contract of lease. The notice
is not sufficient to prohibit sublease.

Sime Darby v Goodyear (2011)

Lease

The lessee assigned his leasehold right to a third party

without securing the consent of the lessor. When the
lessor refused to honor the agreement between the
lessee and the third party, third party asked for the
rescission of the deed of assignment.

Assignment is a subjective novation. the obligation of

the lessee is extinguished.

Awarded attys fees to Macgraphics. The suit was

baseless

Doctrine
Article 1649: The lessee cannot assign the lease without the
consent of the lessor, unless there is a stipulation to the
contrary.
The consent of the lessor to an assignment of lease may
indeed be given expressly or impliedly. It need not be given
simultaneously with that of the lessee and of the assignee.
Neither is it required to be in any specific or particular form.
It must, however, be clearly given.
Facts:
A billboard, owned by Macgraphics, was leased to Sime Darby
at a monthly rental of P120,000.
Sime Darby paid Macgraphics P1.2 million
representing the ten-month deposit which the latter
would apply to the last 10 months of the lease.
Sime Darby executed a MOA with Goodyear, whereby it
agreed to sell its tire manufacturing plants and other
assets to the latter for P1.5 billion. Goodyear improved
its offer to buy the assets of Sime Darby to P1.65 billion,
in consideration of the assignment by Sime Darby of
the receivables in connection with its billboard
advertising.
Sime Darby and Goodyear executed a deed entitled Deed of
Assignment, through which Sime Darby assigned its leasehold
rights and deposits made to Macgraphics pursuant to its lease
contract over the billboard. Sime Darby then notified
Macgraphics of the assignment.
After submitting a new design for the billboard to feature its
name and logo, Goodyear requested that Macgraphics submit
its proposed quotation for the production costs of the new

design. Macgraphics replied that the monthly rental of the

billboard is P250,000 and explained that the increase in
rental was because of the provisions and technical
aspects of the submitted design. Goodyear, due to budget
constraints, could not accept Macgraphics offer to integrate
the cost of changing the design to the monthly rental.
Goodyear stated that it intended to honor the P120,000
monthly rental rate given by Macgraphics to Sime Darby. It
requested Macgraphics to send its quotation for the simple
background repainting and re-lettering of the neon tubing.
Macgraphics informed Sime Darby that it
could not give its consent to the assignment of
lease to Goodyear. The transfer of Sime Darbys
leasehold rights to Goodyear would necessitate drastic
changes to the design and the structure of the neon
display of the billboard and would entail the
commitment of manpower and resources that it did not
foresee at the inception of the lease.
Macgraphics advised Goodyear that any advertising
service it intended to get from them would have to wait
until after the expiration or valid pre-termination of the
lease then existing with Sime Darby.
Goodyear demanded from Sime Darby partial
rescission of the Deed of Assignment and refund. As
Sime Darby refused to accede to Goodyears demand for partial
rescission, Goodyear commenced an action with the RTC.
Goodyear alleged that Sime Darby was unable to deliver the
object of the Deed of Assignment. Including Macgraphics as an
alternative defendant, Goodyear argued that should the court
find the partial rescission of the Deed of Assignment not
proper, it must be declared to have succeeded in the rights and
interest of Sime Darby in the contract of lease and
Macgraphics be ordered to pay it.

RTC rescinded the Deed of Assignment. Sime Darby should

have secured the consent of Macgraphics to the assignment of
the lease before it could be effective against the latter.
The contract of lease between Sime Darby and
Macgraphics made no mention of any clause
that would grant Sime Darby the right to
unilaterally assign the lease.
Thus, following Article 1649, absent any
stipulation to the contrary, the assignment of
the lease without the consent of Macgraphics
was not valid.
As Macgraphics was concerned, its relationship with
Goodyear was that of a new client. With Sime Darbys
failure to secure the consent of Macgraphics, it failed to
deliver the object of the Deed of Assignment. Thus,
Goodyear was entitled to demand rescission. CA
affirmed the RTC.
Issue:
Whether the negotiation between Macgraphics and Goodyear
shows Macgraphics implied consent to the assignment.
Ruling: No.
Article 1649: The lessee cannot assign the lease without the
consent of the lessor, unless there is a stipulation to the
contrary. In an assignment of a lease, there is a novation by
the substitution of the person of one of the parties
the lessee. The objective of the law in prohibiting the
assignment of the lease without the lessors consent is to
protect the owner or lessor of the property.
Extinctive novation requires 4 essential requisites:
(1) a previous valid obligation;

(2) an agreement of all parties concerned to a new

contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.
While the first requisite is present, the other requirements are
lacking.
The lease contract discloses no stipulation that Sime Darby
could assign the lease without the consent of Macgraphics.
There is no evidence to show that Macgraphics consented to
the assignment. Macgraphics was never part of the
negotiations between Sime Darby and Goodyear. Neither did it
give its conformity to the assignment after the execution of the
deed. The consent of the lessor to an assignment of
lease may indeed be given expressly or impliedly. It
need not be given simultaneously with that of the
lessee and of the assignee. Neither is it required to be
in any specific or particular form. It must, however,
be clearly given. In this case, it cannot be said that
Macgraphics gave its implied consent to the assignment of
lease. In a letter, Macgraphics made formal its refusal to give
consent to the assignment to Goodyear.
On the issue of whether or not the negotiations between
Macgraphics and Goodyear is a separate negotiation or still
included in the lease, the Court rules that from the very start of
the negotiations between Goodyear and Macgraphics, the
relationship between them, as far as Macgraphics is concerned,
was that of Goodyear as a new client. Nonetheless, whether the
negotiations is separate or included in the lease between Sime
Darby and Macgraphics, the fact remains that
Macgraphics did not give its consent to the
assignment of the lease.
There is no implied consent based on the factual backdrop of
this case. What transpired between Goodyear and Macgraphics

was a negotiation between a willing service provider and a

probable new client. Macgraphics and Goodyear never came to
terms as to the conditions that would govern their relationship.
While it is true, that Macgraphics and Goodyear exchanged
proposals, there was never a meeting of minds between them.
Contrary to the assertions of Sime Darby, the negotiations
between Macgraphics and Goodyear did not translate to
Macgraphics consent to the assignment. Negotiations is just a
part or a preliminary phase to the birth of an obligation.

Aludos v. Suerte (2012)

Re: Lease

There was a contract of sale, not a contract to sell

The contract is not valid without the consent of the
lessor
With respect to improvement, the assignment was valid
because there is no showing that it belongs to the city of
baguio.

Doctrine
The assignment of the leasehold rights over the two market
stalls was void since it was made without the consent of the
lessor, the Baguio City Government, as required under Article
1649 of the Civil Code.
Facts:
Sometime in January 1969, Lomises acquired from the Baguio
City Government the right to occupy two stalls in the Hangar
Market in Baguio City, as evidenced by a permit issued by the
City Treasurer.

On September 8, 1984, Lomises entered into an agreement

with respondent Johnny M. Suerte for the transfer of all
improvements and rights over the two market stalls (Stall Nos.
9 and 10) for the amount of P260,000.00. Johnny gave a down
payment of P45,000.00. Before full payment could be made,
Lomises backed out of the agreement and returned
the P68,000.00 to the mother and the father of Johnny.
Through a letter, Johnny protested the return of his money,
and insisted on the continuation and enforcement of his
agreement with Lomises. When Lomises refused Johnnys

protest, Johnny filed a complaint against Lomises before the

Regional Trial Court for specific performance with damages.
RTC nullified the agreement between Johnny and
Lomises for failure to secure the consent of the
Baguio City Government to the agreement. The RTC
found that Lomises was a mere lessee of the market stalls, and
the Baguio City Government was the owner-lessor of the stalls.

properties. For this reason, the CA remanded the case to the

RTC to determine the value of the improvements on the two
market stalls, existing at the time of the execution of the
agreement.
Issue:
Whether the assignment of leasehold rights is valid.
Held: No. it is void.

Under Article 1649 of the Civil Code, "[t]he lessee cannot

assign the lease without the consent of the lessor, unless there
is a stipulation to the contrary."
As the permit issued to Lomises did not contain any provision
that the lease of the market stalls could further be assigned,
and in the absence of the consent of the Baguio City
Government to the agreement, the RTC declared the
agreement between Lomises and Johnny null and void. RTC
ordered Lomises to return the down payment made by Johnny,
with interest of 12% per annum, computed from the time the
complaint was filed until the amount is fully paid. It dismissed
the parties claims for damages.
Lomises appealed to the CA, arguing that the real agreement
between the parties was merely one of loan, and not of
sale; he further claimed that the loan had been extinguished
upon the return of theP68,000.00 to Johnnys mother, Domes.
The CA rejected Lomises claim that the true agreement was
one of loan. The CA found that there were two
agreements entered into between Johnny and
Lomises: one was for the assignment of leasehold rights and
the other was for the sale of the improvements on the market
stalls. The CA agreed with the RTC that the assignment of the
leasehold rights was void for lack of consent of the lessor, the
Baguio City Government. The sale of the improvements,
however, was valid because these were Lomises private

Both the RTC and the CA correctly declared that the

assignment of the leasehold rights over the two market stalls
was void since it was made without the consent of the lessor,
the Baguio City Government, as required under Article 1649 of
the Civil Code. Neither party appears to have contested this
ruling.
Lomises, however, objects to the CA ruling upholding the
validity of the agreement insofar as it involved the sale of
improvements on the stalls. Lomises alleges that the sale
of the improvements should similarly be voided
because it was made without the consent of the
Baguio City Government, the owner of the
improvements, pursuant to the May 1, 1985 lease contract.
Lomises further claims that the stalls themselves are the only
improvements on the property and a transfer of the stalls
cannot be made without transferring the leasehold rights.
Hence, both the assignment of leasehold rights and the sale of
improvements should be voided.
The CA has already rejected the evidentiary value of the
May 1, 1985 lease contract between the Baguio City
Government and Lomises, as it was not formally
offered in evidence before the RTC; in fact, the CA
admonished Lomises lawyer, Atty. Lockey, for making
it appear that it was part of the records of the case.

Although the contract was referred to in Lomises

answer to Johnnys complaint and marked as Exhibit
2 in his pre-trial brief, a copy of it was never
attached. In fact, a copy of the May 1, 1985 lease
contract surfaced only after Lomises filed a motion
for reconsideration of the CA decision. What was
formally offered was the 1969 permit, which only stated
that Lomises was permitted to occupy a stall in the
Baguio City market and nothing else. In other
words, no evidence was presented and
formally offered showing that any and all
improvements in the market stalls shall be
owned by the Baguio City Government.
Likewise unsupported by evidence is Lomises claim
that the stalls themselves were the only
improvements. Hence, the CA found it proper to order the
remand of the case for the RTC to determine the value of the
improvements on the market stalls existing as of September 8,
1984. We agree with the CAs order of remand.

We note, however, that Lomises had already returned

the P68,000.00 and receipt of the amount has been
duly acknowledged by Johnnys mother, Domes.
Johnny testified on October 6, 1986 that the money was
still with his mother.

Thus, upon determination by the RTC of the actual

value of the improvements on the market stalls, the
heirs of Johnny Suerte should pay the ascertained value
of these improvements to Lomises, who shall thereafter

be required to execute the deed of sale over the

improvements in favor of the heirs of Johnny.

VSD Realty v. Uniwide (2012)

Re: Lease
The lessor was not the owner of the property. The
lessee erected 20M worth of building over the property.
Uniwide was invoking art 448 reimburse of useful
improvement.
Provision will not apply. A lessee cannot be a builder in
good faith. Otherwise, this would allow improvement
on the property without landlords consent. (what if
lessee put up an expensive property over the land and
the landlord cannot afford to reimburse the lessee?)
DOCTRINE
Uniwide cannot avail of the rights of a builder in good faith
under Article 448 of the Civil Code, in relation to Article 546
of the same Code, which provides for full reimbursement of
useful improvements and retention of the premises until
reimbursement is made, as the said provisions apply only to
a possessor in good faith who builds on land with the belief
that he is the owner thereof. It does not apply where ones
only interest is that of a lessee under a rental contract.
A tenant cannot be said to be a builder in good faith as he has
no pretension to be owner. It does not apply where ones only
interest is that of a lessee under a rental contract; otherwise,
it would always be in the power of the tenant to "improve" his
landlord out of his property.
FACTS
Petitioner VSD Realty and Development Corporation (VSD)
filed a Complaint for annulment of title and recovery of
possession of property against respondents Uniwide Sales, Inc.
(Uniwide) and Dolores Baello. Petitioner sought the
nullification of TCT No. (35788) 12754 in the name of Dolores
Baello and the recovery of possession of property that is being

occupied by Uniwide by virtue of a contract of lease with

Dolores Baello.
Petitioner alleged that it is the registered owner of a parcel of
land in question. Petitioner alleged that respondent Baello is
the holder and registered owner of a parcel of land covered by
a different TCT in the Province of Rizal. By virtue of the said
title, Baello claims ownership and has possession of the
property covered by petitioners title, and she entered into a
contract of lease with respondent Uniwide.
Petitioner alleged that its title is the correct, valid and
legal document that covers the subject property, since it
is the result of land registration proceedings in
accordance with law.
Petitioner alleged that Baellos title, is spurious and can
only be the result of falsification and illegal
machinations, and has no legal basis to establish any
right over the subject property.
Moreover, the technical description of Baellos title is
so general that it is impossible to determine with
certainty the exact location of the property covered by
it. Petitioner further alleged that the technical
description has no legal basis per the records of the
Lands Management Bureau and the Bureau of Lands.
Uniwide alleged that it entered into a Contract of Lease with
respondent Baello involving a parcel of land located in
Caloocan City, which property is covered by a TCT in the name
of Baello. As a consequence of the lease agreement, it
constructed a building worth at least P200,000,000.00 on the
said property. It prayed that judgment be rendered dismissing
the complaint for lack of cause of action against Uniwide;
declaring the contract of lease as valid and enforceable.

ISSUE: Whether or not the lease is valid and enforceable.

HELD: NO.
(The land was proven to be owned by petitioner)
Considering that Uniwide constructed a building on the
subject parcel of land, is Uniwide entitled to recover from VSD
the cost of its improvement on the land?
It is noted that when the contract of lease was executed,
Uniwide was unaware that the property leased by it
was owned by another person other than Dolores
Baello. Nevertheless, Uniwide cannot avail of the rights of a
builder in good faith under Article 448 of the Civil Code, in
relation to Article 546 of the same Code, which provides for
full reimbursement of useful improvements and retention of
the premises until reimbursement is made, as the said
provisions apply only to a possessor in good faith who builds
on land with the belief that he is the owner thereof. It does not
apply where ones only interest is that of a lessee under a rental
contract.
Parilla v. Pilar held:
Jurisprudence is replete with cases which
categorically declare that Article 448 covers only
cases in which the builders, sowers or planters believe
themselves to be owners of the land or, at least, have a
claim of title thereto, but not when the interest is
merely that of a holder, such as a mere tenant, agent
or usufructuary. A tenant cannot be said to be a
builder in good faith as he has no pretension to be
owner.
In a plethora of cases, this Court has held that Articles 448 of
the Civil Code, in relation to Article 546 of the same Code,
which allows full reimbursement of useful improvements and
retention of the premises until reimbursement is made, applies

only to a possessor in good faith, i.e., one who builds on land

with the belief that he is the owner thereof. It does not apply
where ones only interest is that of a lessee under a rental
contract; otherwise, it would always be in the power of the
tenant to "improve" his landlord out of his property.
Based on the foregoing, Uniwide cannot recover the cost of its
improvement on the land from VSD under Article 448 of the
Civil Code.
However, Uniwide should not be made to pay jointly and
severally with Baello just compensation for the occupancy and
use of petitioners land from June 8, 1995, the date of the filing
of the complaint, up to the finality of this Decision, since
Uniwide already paid rentals to Baello. However, Baello and
Uniwide may be held jointly and severally liable to VSD for the
payment of rentals from the finality of this Decision until the
possession of the subject property is returned to VSD, since
Uniwide would not yet have paid rentals during that time.

Inocencio vs Hospicio De San Jose

G.R. No. 201787
September 25, 2013
Carpio, J.

The court established that lease contract is as a general

rule is transmissible to heirs, unless there is a
stipulation to contrary
Cession v sublease
There are 2 contract subsisting. The original lease
contract and the sublease contract.

DOCTRINE
Lease contracts survive the death of the parties and continue
to bind the heirs except if the contract states otherwise.
FACTS
Hospicio de San Jose (HDSJ) leased a parcel of land to
German Inocenio. The lease contract was effective for 1 year
and was renewed several times. The last contract provides:
This contract is nontransferable unless prior consent of the
lessor is obtained in writing.
Inoncencio constructed two buildings which he subleased, he
designated his son, Ramon, to administer the property.
In 1990, Inocencio received a letter from HDSJ informing him
of the increased rentals which shall take effect in November
1990 instead of August, to give him ample time to make
necessary adjustments with his subleases.

2001: We acknowledge the fact that Hospicio de San Jose

has been accepting the payment of your rentals since the
demise of Mr. [German] Inocencio. Hence, an implied
contract of lease between the two of you exists. However,
since there is no stipulation as to the period of the
contract and you are paying a monthly rental to our
client, the period for the lease is on a month-to-month
basis
Ramon then sent a letter to HDSJ suggesting that the lease
contract be renegotiated for the welfare of the sublessees.
HDSJ then notified that the contract shall not be renewed as
Ramon has continually subleased the subject
premises to about 20 families without the knowledge
and consent of the lessor. HDSJ then refused to accept
Ramons payments
HDSJ filed a complaint for unlawful detainer against Ramon
and his sublessees. The complaint alleged that Ramon and his
sublessees have been illegally occupying the leased premises
since March 2001. They also asked for damages.
Ramon: HDSJ is estopped from raising the issue of nontransferability of the lease contract because it admitted in its
letter to Ramon that there is an existing lease agreement
between the parties, even after Germans death; There is no
prohibition against subleasing in the lease contract. Thus,
under Article 1650 of the Civil Code, Ramon is permitted to
sublease the premises

When Inocencio died, his son did not notify HDSJ

of such. His son started to collect the rentals from
the sublessees and paid the rentals to HDSJ.

MeTC: In favor of HDSJ. Held that the lease contract

could not be transmitted to Ramon as Inocencios heir
in view of the express stipulation found therein.
Ordered Inocencios and their subleesees to vacate

HDSKs property administrator notified Inocencios son

that HDSJ is terminating the lease contract effective March

RTC: Affirmed MeTC

CA: Affirmed RTC; modified award for damages

ISSUE
Whether or not the lease was transferrable
Whether or not the sublease contracts were invalid

nontransferable unless prior consent of the lessor is obtained

in writing. Section 6 refers to transfers inter vivos
and not transmissions mortis causa. What Section 6
seeks to avoid is for the lessee to substitute a third party in
place of the lessee without the lessors consent. This merely
reiterates what Article 1649 of the Civil Code provides.

Ruling:
The court ruled that lease contracts, by their nature, are not
personal. The general rule, therefore, is lease contracts
survive the death of the parties and continue to bind the
heirs except if the contract states otherwise. In Sui Man Hui
Chan v. Court of Appeals, we held that:
A lease contract is not essentially personal in
character. Thus, the rights and obligations therein are
transmissible to the heirs. The general rule, therefore,
is that heirs are bound by contracts entered into by
their predecessors-in-interest except when the rights
and obligations arising therefrom are not
transmissible by (1) their nature, (2) stipulation or (3)
provision of law. In the subject Contract of Lease, not
only were there no stipulations prohibiting any
transmission of rights, but its very terms and
conditions explicitly provided for the transmission of
the rights of the lessor and of the lessee to their
respective heirs and successors. The contract is the
law between the parties. The death of a party does not
excuse nonperformance of a contract, which involves
a property right, and the rights and obligations
thereunder pass to the successors or representatives of
the deceased. Similarly, nonperformance is not
excused by the death of the party when the other party
has a property interest in the subject matter of the
contract.
Section 6 of the lease contract provides that [t]his contract is

In any case, HDSJ also acknowledged that Ramon is its

month-to-month lessee. Thus, the death of German did not
terminate the lease contract executed with HDSJ, but instead
continued with Ramon as the lessee.
Assignment or transfer of lease, which is covered by
Article 1649 of the Civil Code, is different from a
sublease arrangement, which is governed by Article
1650 of the same Code. In a sublease, the lessee becomes in
turn a lessor to a sublessee. The sublessee then becomes
liable to pay rentals to the original lessee. However,
the juridical relation between the lessor and lessee is not
dissolved. The parties continue to be bound by the original
lease contract. Thus, in a sublease arrangement, there are at
least three parties and two distinct juridical relations.
Ramon had a right to sublease the premises since the
lease contract did not contain any stipulation
forbidding subleasing.
The buildings were constructed before Germans demise,
during the subsistence of a valid contract of lease. It does not
appear that HDSJ prohibited German from constructing the
buildings. Thus, HDSJ should have reimbursed German (or his
estate) half of the value of the improvements as of 2001. If
HDSJ is not willing to reimburse the Inocencios, then the
latter should be allowed to demolish the buildings

Antonio Locsin II v Mekeni Food Corporation (2013)

Del Castillo, J.
Re: Lease
DOCTRINE
In the absence of specific terms and conditions governing a
car plan agreement between the employer and employee
former may not retain the installment payments made by the
latter on the car plan and treat them as rents for the use of
the service vehicle, in the event that the employee ceases his
employment and is unable to complete the installment
payments on the vehicle. The underlying reason is that the
service vehicle was precisely used in the former' s business;
any personal benefit obtained by the employee from its use is
merely incidental.
FACTS
Respondent Mekeni Food Corp used to employ petitioner
Antonio Locsin II as the regional sales manager over the NCR
operations. As part of employees benefits, Mekeni offered
petitioner a car plan. Under the plan, half of the cost of the
vehicle shall be paid by the company and half to be deducted
from petitioners salary.
Petitioner resigned. A total of P112,500 had been deducted
from his monthly salary. In his resignation, he made an offer to
purchase the car. Parties did not agree to the terms thus
petitioner returned the vehicle. Petitioner made a personal and
written follow ups regarding his unpaid salaries, commissions,
benefits and offer to purchase his service vehicle. Mekani
replied that the car plan applied only to employees who have
been with the company for 5 years. If he still ops to purchase
the car, he has to pay P116,380.
Petitioner sued respondent for recovery of money claims
before the NLRC. In relation to the car plan, LA directed
respondent to turn over to petitioner the vehicle upon

petitioners payment of P100,435.84. NLRC overturned this

decision and ruled that petitioners amortization payments on
his the vehicle amounting to P112,500 should be reimburse. If
not, unjust enrichment should result as petitioner retains
possession and ownership over the vehicle.
Respondent appealed before CA, which treated petitioners
monthly contribution as rentals. It applied article 1484-1486 of
the civil code.
ISSUE
Whether it was proper for CA to treat petitioners
monthly contribution as rentals?
HELD: NO.
From the evidence on record, it is seen that the Mekeni car
plan offered to petitioner was subject to no other term or
condition than that Mekeni shall cover one-half of its value,
and petitioner shall in turn pay the other half through
deductions from his monthly salary.Mekeni has not shown, by
documentary evidence or otherwise, that there are other terms
and conditions governing its car plan agreement with
petitioner.
It was made clear in Elisco tool case (basis of CA) that
installments made on the car plan may be treated as rentals
only when there is an express stipulation in the car plan
agreement to such effect. It was therefore patent error for the
appellate court to assume that, even in the absence of express
stipulation, petitioners payments on the car plan may be
considered as rentals which need not be returned.
In the first place, there is precisely no stipulation to
such effect in their agreement.
Secondly, it may not be said that the car plan
arrangement between the parties was a benefit that the

petitioner enjoyed; on the contrary, it was an absolute

necessity in Mekenis business operations, which
benefit edit to the fullest extent.
In light of the foregoing, it is unfair to deny petitioner a refund
of all his contributions to the car plan. Under Article 22 of the
Civil Code.
Article 2142 of the same Code likewise clarifies that there are
certain lawful, voluntary and unilateral acts which give rise to
the juridical relation of quasi-contract, to the end that no one
shall be unjustly enriched or benefited at the expense of
another. In the absence of specific terms and conditions
governing the car plan arrangement between the petitioner
and Mekeni, a quasi-contractual relation was created between
them. Consequently, Mekeni may not enrich itself by charging
petitioner for the use of its vehicle which is otherwise
absolutely necessary to the full and effective promotion of its
business.
Conversely, petitioner cannot recover the monetary value of
Mekenis counterpart contribution to the cost of the vehicle;
that is not property or money that belongs to him, nor was it
intended to be given to him in lieu of the car plan. In other
words, Mekenis share of the vehicles cost was not part of
petitioners compensation package
There is unjust enrichment ''when a person unjustly
retains a benefit to the loss of another, or when a
person retains money or property of another against
the fundamental principles of justice, equity and good
conscience." The principle of unjust enrichment
requires two conditions: (1) that a person is benefited
without a valid basis or justification, and (2) that such
benefit is derived at the expense of another. The main
objective of the principle against unjust enrichment is

to prevent one from enriching himself at the expense

of another without just cause or consideration.

PARTNERSHIP

Yulo v. Yang
Re: Partnership: Existence
Facts:
Yang Chiao Seng proposed to Rosario Yulo, the formation of a
partnership between them to run and operate a theatre. The
principal conditions of the offer are:
(1) that Yang guarantees Yulo a monthly participation of
P3,000,
(2) that the partnership shall be for a period of 2 years and
6 months, with the condition that if xxx Yulo's right of
lease is terminated by the owner, then the partnership
shall be terminated even if the period has not yet
expired; xxx
The parties executed a partnership agreement establishing the
"Yang & Company, Limited," which was to exist from July 1,
1945 to December 31, 1947. The capital is fixed at P100,000;
P80,000 from Yang and P20,000 from Yulo. All gains and
profits are to be distributed among the partners in the same
proportion as their capital contribution and the liability of
Yulo, in case of loss, shall be limited to her capital
contribution.
They executed a supplementary agreement, extending the
partnership for a period of 3 years beginning January 1, 1948
to December 31, 1950. The benefits are to be divided between
them at the rate of 50-50 and after December 31, 1950, the
showhouse building shall belong exclusively to Yulo.
The land on which the theatre was constructed was
leased by Yulo from Emilia Carrion and Maria
Carrion Santa Marina. In the contract of lease, it was
stipulated that the lease shall continue for an indefinite

period of time, but that after 1 year the lease may be cancelled
by either party by written notice to the other party.
Yulo was notified of the owner's desire to cancel the
contract of lease.
Yulo brought a civil action to the CFI to declare the lease of the
premises. MTC ordered the ejectment of Yulo and
Yang. The judgment was appealed. In the CFI, the 2 cases
were heard jointly. The complaint of Yulo was dismissed. The
contract of lease was declared terminated. CA affirmed
the judgment.
Yulo demanded from Yang her share in the profits of
the business. Yang answered that he had to suspend the
payment (of the rentals) because of the pendency of the
ejectment suit by the owners of the land against Yulo. Yang
alleges that inasmuch as he is a sublessee and inasmuch as
Yulo has not paid to the lessors the rentals, he was retaining
the rentals to make good to the landowners the rentals due
from Yulo in arrears.
Yulo instituted this action alleging the existence of a
partnership between them and that Yang has refused
to pay her share. Yang alleges that the real agreement
between them was one of lease and not of partnership; that the
partnership was adopted as a subterfuge to get around the
prohibition contained in the contract of lease between the
owners and the plaintiff against the sublease of the said
property.
The court held that it is not true that a partnership was
created because Yang has not actually contributed the sum
mentioned in the Articles of Partnership, or any other amount;
that the real agreement is not of the partnership but one of the
lease for the reason that under the agreement Yulo did not
share either in the profits or in the losses of the business as

required by Article 1769 of the Civil Code; and that the fact that
Yulo was granted a "guaranteed participation" in the profits
also belies the supposed existence of a partnership between
them.
Issue:
Whether or not the written contracts, between Yulo and Yang,
are one of lease and not of partnership.
Ruling:
Yes. The agreement was a sublease, not a partnership. The
following are the requisites of partnership:
(1) two or more persons who 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.
(1) In the first place, Yulo did not furnish the supposed
P20,000 capital.
(2) In the second place, she did not furnish any help or
intervention in the management of the theatre.
(3) In the third place, it does not appear that she has ever
demanded from Yang any accounting of the expenses
and earnings of the business.
Were she really a partner, her first concern should have been
to find out how the business was progressing, whether the
expenses were legitimate, whether the earnings were correct,
etc. She was absolutely silent with respect to any of the acts
that a partner should have done; all that she did was to receive
her share of P3,000 a month, which can not be interpreted in
any manner than a payment for the use of the premises which
she had leased from the owners.

HEIRS OF JOSE LIM

G.R. No. 172690
March 3, 2010
Topic: Partnership; Existence
Doctrine:
Elfledo was not just a hired help but one of the partners in the
trucking business, active and visible in the running of its
affairs from day one until this ceased operations upon his
demise. The extent of his control, administration and
management of the partnership and its business, the fact that
its properties were placed in his name, and that he was not
paid salary or other compensation by the partners, are
indicative of the fact that Elfledo was a partner and a
controlling one at that.
Facts:
In 1980, the heirs of Jose Lim alleged that Jose Lim entered
into a partnership agreement with Jimmy Yu and Norberto Uy.
The three contributed P50,000.00 each and used the funds to
purchase a truck to start their trucking business. A year later
however, Jose Lim died. The eldest son of Jose Lim, Elfledo
Lim, took over the trucking business and under his
management, the trucking business prospered. Elfledo was
able to buy real properties in his name. From one truck, he
increased it to 9 trucks, all trucks were in his name however.
He also acquired other motor vehicles in his name.

In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a

heart attack. Elfledos wife, Juliet Lim, took over the properties
but she intimated to Jimmy and the heirs of Norberto that she
could not go on with the business. So the properties in the
partnership were divided among them.

Unfortunately, there is none in this case, because the alleged

partnership was never formally organized.
Now the other heirs of Jose Lim, represented by Elenito Lim,
required Juliet to do an accounting of all income, profits, and
properties from the estate of Elfledo Lim as they claimed that
they are co-owners thereof. Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his
properties from the partnership that Jose Lim formed with
Norberto and Jimmy. In court, Jimmy Yu testified that Jose
Lim was the partner and not Elfledo Lim. The heirs testified
that Elfledo was merely the driver of Jose Lim.

Issue:
Who is the partner between Jose Lim (father) and Elfledo
Lim (son)?

Held:
It is Elfledo Lim based on the evidence presented regardless of
Jimmy Yus testimony in court that Jose Lim was the partner.

If Jose Lim was the partner, then the partnership

would have been dissolved upon his death (in fact,
though the SC did not say so, I believe it should have been
dissolved upon Norbertos death in 1993). A partnership is
dissolved upon the death of the partner. Further, no evidence
was presented as to the articles of partnership or contract of
partnership
between
Jose,
Norberto
and
Jimmy.

But at any rate, the Supreme Court noted that based on the
functions performed by Elfledo, he is the actual partner.

The following circumstances tend to prove that Elfledo was

himself the partner of Jimmy and Norberto:

(1) Cresencia testified that Jose gave Elfledo P50,000.00,

as share in the partnership, on a date that coincided
with the payment of the initial capital in the
partnership;
(2) Elfledo ran the affairs of the partnership, wielding
absolute control, power and authority, without any
intervention or opposition whatsoever from any of
petitioners herein;
(3) all of the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo;
(4) Jimmy testified that Elfledo did not receive wages or
salaries from the partnership, indicating that what he
actually received were shares of the profits of the
business; and
(5) none of the heirs of Jose, the alleged partner,
demanded periodic accounting from Elfledo during his
lifetime. As repeatedly stressed in the case of Heirs of

Tan Eng Kee, a demand for periodic accounting is

evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show
that the real and personal properties acquired and registered
in the names of Elfledo and Juliet formed part of the estate of
Jose, having been derived from Joses alleged partnership with
Jimmy and Norberto.

Elfledo was not just a hired help but one of the

partners in the trucking business, active and visible in
the running of its affairs from day one until this ceased
operations upon his demise. The extent of his
control, administrationand management of the partnership
and its business, the fact that its properties were placed in his
name, and that he was not paid salary or other compensation
by the partners, are indicative of the fact that Elfledo was a
partner and a controlling one at that. It is apparent that the
other partners only contributed in the initial capital but had no
say thereafter on how the business was ran. Evidently it was
through Elfredos efforts and hard work that the partnership
was able to acquire more trucks and otherwise prosper. Even
the appellant participated in the affairs of the partnership
by acting as the bookkeeper sans salary.

Tiosejo v. Sps Ang

TOPIC: Partnership; Existence
DOCTRINE
A joint venture is considered in this jurisdiction as a form of
partnership and is, accordingly, governed by the law on
partnership. Under Article 1824 of the Civil Code of the
Philippines, all partners are solidarily liable with the
partnership for everything chargeable to the partnership,
including loss or injury caused to a third person or penalties
incurred due to any wrongful act or omission of any partner
acting in the ordinary course of the business of the
partnership or with the authority of his co-partners. Whether
innocent or guilty, all the partners are solidarily liable with
the partnership itself.
FACTS
Petitioner entered into a Joint Venture Agreement (JVA) with
Primetown Property Group, Inc. (PPGI) for the development of
a residential condominium project to be known as The
Meditel on the petitioners property. With petitioner
contributing the same property to the joint venture and PPGI
undertaking to develop the condominium, the JVA provided,
among other terms and conditions, that the developed units
shall be shared by petitioner and PPGI at a ratio of 17%-83%,
respectively.
While both parties were allowed, at their own individual
responsibility, to pre-sell the units pertaining to them, PPGI
further undertook to use all proceeds from the pre-selling of its
saleable units for the completion of the Condominium Project.
PPGI and respondents executed a Contract to sell over a unit
and also executed a Contract to Sell over a parking space for.
On 21 July 1999, respondents filed against petitioner and PPGI
the complaint for the rescission of the said Contracts to

Sell. Contending that they were assured by petitioner and

PPGI that the subject condominium unit and parking space
would be available for turn-over and occupancy in December
1998, respondents averred, among other matters, that in view
of the non-completion of the project according to said
representation, respondents instructed petitioner and PPGI to
stop depositing the post-dated checks they issued and to cancel
said Contracts to Sell; and, that despite several demands,
petitioner and PPGI have failed and refused to refund
theP611,519.52 they already paid under the circumstances.
Together with the refund of said amount and interests thereon
at the rate of 12% per annum, respondents prayed for the grant
of their claims for moral and exemplary damages as well as
attorneys fees and the costs.
Specifically denying the material allegations of the foregoing
complaint, PPGI filed its 7 September 1999 answer alleging
that the delay in the completion of the project was
attributable to the economic crisis which affected the
country at the time; that the unexpected and unforeseen
inflation as well as increase in interest rates and cost of
building materials constitute force majeure and were beyond
its control; that aware of its responsibilities, it offered several
alternatives to its buyers like respondents for a transfer of their
investment to its other feasible projects and for the amounts
they already paid to be considered as partial payment for the
replacement unit/s; and, that the complaint was prematurely
filed in view of the on-going negotiations it is undertaking with
its buyers and prospective joint venture partners. Aside from
the dismissal of the complaint, PPGI sought the readjustment
of the contract price and the grant of its counterclaims for
attorneys fees and litigation expenses.
Petitioner, however, denied liability calling attention to the fact
that its prestation under the JVA consisted in contributing the
property on which The Meditel was to be constructed,
petitioner asseverated that, by the terms of the JVA, each

party was individually responsible for the

marketing and sale of the units pertaining to its
share; that not being privy to the Contracts to Sell executed
by PPGI and respondents, it did not receive any portion of the
payments made by the latter; and, that without any
contributory fault and negligence on its part, PPGI breached
its undertakings under the JVA by failing to complete the
condominium project.
ISSUE: Whether the JVA between petitioner and respondent
has created a partnership.
HELD: YES.
Viewed in the light of the foregoing provision of the JVA,
petitioner cannot avoid liability by claiming that it was not in
any way privy to the Contracts to Sell executed by PPGI and
respondents.
As correctly argued by the latter, moreover, a joint venture
is considered in this jurisdiction as a form of
partnership and is, accordingly, governed by the law
on partnership.
Under Article 1824 of the Civil Code of the Philippines, all
partners are solidarily liable with the partnership for
everything chargeable to the partnership, including loss or
injury caused to a third person or penalties incurred due to any
wrongful act or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority
of his co-partners. Whether innocent or guilty, all the partners
are solidarily liable with the partnership itself.

REALUBIT VS JASO
G.R. No. 178782 September 21, 2011
TOPIC: EXISTENCE OF A PARTNERSHIP

Doctrine
A conveyance by a partner of his whole interest in the
partnership does not itself dissolve the partnership, or, as
against the other partners in the absence of agreement,
entitle the assignee, during the continuance of the
partnership, to interfere in the management or
administration of the partnership business or affairs, or to
require any information or account of partnership
transactions, or to inspect the partnership books; but it
merely entitles the assignee to receive in accordance with his
contracts the profits to which the assigning partners would
otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail
himself of the usual remedies.

Facts:
Petitioner Josefina Realubit (Josefina) entered into a Joint
Venture Agreement with Francis Eric Amaury Biondo
(Biondo), a French national, for the operation of an ice
manufacturing business.
However, Biondo subsequently
executed a Deed of Assignment dated 27 June 1997,
transferring all his rights and interests in the business in favor
of respondent Eden Jaso (Eden), the wife of respondent
Prosencio Jaso.

With Biondos eventual departure from the country, the

Spouses Jaso caused their lawyer to send Josefina a letter
dated 19 February 1998, apprising her of their acquisition of
said Frenchmans share in the business and formally
demanding an accounting and inventory thereof as well as the
remittance of their portion of its profits.
Faulting Josefina with unjustified failure to heed their
demand, the Spouses Jaso commenced the instant suit with
the filing of their Complaint against Josefina, her husband, Ike
Realubit (Ike), and their alleged dummies, for specific
performance, accounting, examination, audit and
inventory of assets and properties, dissolution of the
joint venture, appointment of a receiver and
damages.

The Spouses Realubit filed their Answer, specifically denying

the material allegations of the foregoing complaint. Claiming
that they have been engaged in the tube ice trading business
under a single proprietorship even before their
dealings with Biondo, the Spouses Realubit, in turn,
averred that their said business partner had left the
country in May 1997 and could not have executed the
Deed of Assignment which bears a signature
markedly different from that which he affixed on
their Joint Venture Agreement; that they refused the
Spouses Jasos demand in view of the dubious circumstances
surrounding their acquisition of Biondos share in the business
which was established at Don Antonio Heights,
Commonwealth Avenue, Quezon City; that said business had
already stopped operations on 13 January 1996 when its plant
shut down after its power supply was disconnected by
MERALCO for non-payment of utility bills; and, that it was
their own tube ice trading business which had been moved to
66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon

City that the Spouses Jaso mistook for the ice manufacturing
business established in partnership with Biondo.

The RTC decided in favor of the Jasos. The CA set aside the
decision of the RTC upon the following findings and
conclusions: (a) the Spouses Jaso validly acquired Biondos
share in the business which had been transferred to and
continued its operations at 66-C Cenacle Drive, Sanville
Subdivision, Project 6, Quezon City and not dissolved as
claimed by the Spouses Realubit; (b) absent showing of
Josefinas knowledge and consent to the transfer of Biondos
share, Eden cannot be considered as a partner in the business,
pursuant to Article 1813 of the Civil Code of the Philippines; (c)
while entitled to Biondos share in the profits of the business,
Eden cannot, however, interfere with the management of the
partnership, require information or account of its transactions
and inspect its books; (d) the partnership should first be
dissolved before Eden can seek an accounting of its
transactions and demand Biondos share in the business; and,
(e) the evidence adduced before the RTC do not support the
award of moral damages in favor of the Spouses Jaso.

Issue:
Whether the deed of assignment allow the respondents to seek
an accounting of its transactions and demand Biondos share
in the business

Ruling:

Generally understood to mean an organization formed for

some temporary purpose, a joint venture is likened to a
particular partnership or one which "has for its object
determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation." The
rule is settled that joint ventures are governed by the law on
partnerships which are, in turn, based on mutual agency or
delectus personae. Insofar as a partners conveyance of the
entirety of his interest in the partnership is concerned, Article
1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole

interest in the partnership does not itself dissolve the
partnership, or, as against the other partners in the
absence of agreement, entitle the assignee, during the
continuance of the partnership, to interfere in the
management or administration of the partnership
business or affairs, or to require any information or
account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee
to receive in accordance with his contracts the profits
to which the assigning partners would otherwise be
entitled. However, in case of fraud in the management
of the partnership, the assignee may avail himself of
the usual remedies.

In the case of a dissolution of the partnership, the

assignee is entitled to receive his assignors interest
and may require an account from the date only of the
last account agreed to by all the partners.

From the foregoing provision, it is evident that "(t)he

transfer by a partner of his partnership interest does
not make the assignee of such interest a partner of
the firm, nor entitle the assignee to interfere in the
management of the partnership business or to
receive anything except the assignees profits.

The assignment does not purport to transfer an interest in the

partnership, but only a future contingent right to a portion of
the ultimate residue as the assignor may become entitled to
receive by virtue of his proportionate interest in the
capital." Since a partners interest in the partnership includes
his share in the profits, we find that the CA committed no
reversible error in ruling that the Spouses Jaso are entitled to
Biondos share in the profits, despite Juanitas lack of consent
to the assignment of said Frenchmans interest in the joint
venture.

Although Eden did not, moreover, become a partner as a

consequence of the assignment and/or acquire the right to
require an accounting of the partnership business, the CA
correctly granted her prayer for dissolution of the joint venture
conformably with the right granted to the purchaser of a
partners interest under Article 1831 of the Civil Code.

Island Sales v Pioneers (1975)

Concepcion Jr, J.
Re: Partnership, Liabilities of partners
DOCTRINE
Being a civil partnership, by the express provisions of articles
1698 and 1137 of the Civil Code, the partners are not liable
each for the whole debt of the partnership. The liability is pro
rata.
FACTS
The defendant company, a general partnership, purchased
from the plaintiff a motor vehicle on the installment basis. For
this purpose it executed a promissory note for P9,440.00,
payable in twelve (12) equal monthly installments of P786.63.
One of the conditions of the contract was failure to pay any
of said installments as they fall due would render the
whole unpaid balance immediately due and
demandable.
Defendant company failed to pay an installment. the plaintiff
sued the defendant company for the unpaid balance
amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona,
Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were
included as co-defendants in their capacity as general partners
of the defendant company.
Daniel A. Guizona failed to file an answer and was
consequently declared in default. Subsequently, on motion of
the plaintiff, the complaint was dismissed insofar as the
defendant Romulo B. Lumauig is concerned.
When the case was called for hearing, the defendants and their
counsels failed to appear notwithstanding the notices sent to
them. Consequently, the trial court authorized the plaintiff to
present its evidence ex-parte, after which the trial court
rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved to

reconsider the decision claiming that since there are five (5)
general partners, the joint and subsidiary liability of each
partner should not exceed one-fifth ( 1/ 5 ) of the obligations of
the defendant company. But the trial court denied the said
motion notwithstanding the conformity of the plaintiff to limit
the liability of the defendants Daco and Sim to only one-fifth
( 1/ 5 ) of the obligations of the defendant company. Hence, this
appeal.
ISSUE
Whether or not the dismissal of the complaint to favor one of
the general partners of a partnership increases the joint and
subsidiary liability of each of the remaining partners for the
obligations of the partnership.
HELD: NO.
Article 1816 of the Civil Code provides:
Art. 1816. 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 in the name and
for the account of the partnership, under its signature
and by a person authorized to act for the partnership.
However, any partner may enter into a separate
obligation to perform a partnership contract.
In the instant case, there were five (5) general partners when
the promissory note in question was executed for and in behalf
of the partnership. Since the liability of the partners is pro rata,
the liability of the appellant Benjamin C. Daco shall be limited
to only one-fifth ( 1/ 5 ) of the obligations of the defendant
company. The fact that the complaint against the defendant
Romulo B. Lumauig was dismissed, upon motion of the
plaintiff, does not unmake the said Lumauig as a general

partner in the defendant company. In so moving to dismiss the

complaint, the plaintiff merely condoned Lumauig's individual
liability to the plaintiff.

Singsong v. Isabela Sawmill (1979)

Fernandez, J.
Re: Partnership, dissolution
DOCTRINE
As a rule, a contract cannot be assailed by one who is not a
party thereto. However, when a contract prejudices the rights
of a third person, he may file an action to annul the contract.
This Court has held that a person, who is not a party obliged
principally or subsidiarily under a contract, may exercised
an action for nullity of the contract if he is prejudiced in his
rights with respect to one of the contracting parties, and can
show detriment which would positively result to him from the
contract in which he has no intervention.
FACTS
In 1951, defendants Saldajeno, Garibay and Timoteo entered
into a contract of partnership under the firm name Isabela
Sawmill. In 1956 the Oppen, Esteban, Inc. sold to the
partnership a motor truck and two tractors. The partnership
was not able to pay their whole balance even after demand was
made.
One of the partners withdrew from the partnership
(Saldajeno). Garibay and Timoteo entered into a
memorandum agreement and assignment of rights and chattel
mortgage in favor of Saldajeno. This contract was a subject of a
separate case. Instead of terminating the said partnership it
was continued by the two remaining partners under the same
firm name.
Plaintiffs, as creditors of Isabela Sawmill, seeked the
annulment of the assignment of right with chattel mortgage
entered into by the withdrawing partner and the remaining
partners. The appellants contend that the chattel mortgage
may no longer be nullified because it had been judicially

approved and said chattel mortgage had been judicially

foreclosed.
ISSUE
Whether the partnership had already been terminated, thus
barring the creditors from running after the partnership.
HELD: NO.
It is true that the dissolution of a partnership is caused by any
partner ceasing to be associated in the carrying on of the
business. However, on dissolution, the partnershop is not
terminated but continuous until the winding up to the
business.
The remaining partners did not terminate the business of the
partnership "Isabela Sawmill". Instead of winding up the
business of the partnership, they continued the business still in
the name of said partnership. It is expressly stipulated in the
memorandum-agreement that the remaining partners had
constituted themselves as the partnership entity, the "Isabela
Sawmill".
There was no liquidation of the assets of the partnership.
The remaining partners, Leon Garibay and Timoteo
Tubungbanua, continued doing the business of the partnership
in the name of "Isabela Sawmill". They used the properties of
said partnership.
The properties mortgaged to Margarita G. Saldajeno by the
remaining partners, Leon Garibay and Timoteo Tubungbanua,
belonged to the partnership "Isabela Sawmill." The appellant,
Margarita G. Saldajeno, was correctly held liable by the trial
court because she purchased at public auction the properties of
the partnership which were mortgaged to her.
It does not appear that the withdrawal of Margarita G.
Saldajeno from the partnership was published in the

newspapers. The appellees and the public in general had a

right to expect that whatever, credit they extended to Leon
Garibay and Timoteo Tubungbanua doing the business in the
name of the partnership "Isabela Sawmill" could be enforced
against the proeprties of said partnership. The judicial
foreclosure of the chattel mortgage executed in favor of
Margarita G. Saldajeno did not relieve her from liability to the
creditors of the partnership.
The appellant, margrita G. Saldajeno, cannot
complain. She is partly to blame for not insisting on
the liquidaiton of the assets of the partnership. She
even agreed to let Leon Garibay and Timoteo Tubungbanua
continue doing the business of the partnership "Isabela
Sawmill" by entering into the memorandum-agreement with
them.
Although it may be presumed that Margarita G. Saldajeno had
action in good faith, the appellees aslo acted in good faith in
extending credit to the partnership. Where one of two innocent
persons must suffer, that person who gave occasion for the
damages to be caused must bear the consequences. Had
Margarita G. Saldajeno not entered into the memorandumagreement allowing Leon Garibay and Timoteo Tubungbanua
to continue doing the business of the aprtnership, the applees
would not have been misled into thinking that they were still
dealing with the partnership "Isabela Sawmill". Under the
facts, it is of no moment that technically speaking the
partnership "Isabela Sawmill" was dissolved by the withdrawal
therefrom of Margarita G. Saldajeno. The partnership was not
terminated and it continued doping business through the two
remaining partners.
The contention of the appellant that the appleees cannot bring
an action to annul the chattel mortgage of the propertiesof the
partnership executed by Leon Garibay and Timoteo
Tubungbanua in favor of Margarita G. Saldajeno has no merit.

As a rule, a contract cannot be assailed by one who is not a

party thereto. However, when a contract prejudices the rights
of a third person, he may file an action to annul the contract.
This Court has held that a person, who is not a party obliged
principally or subsidiarily under a contract, may exercised
an action for nullity of the contract if he is prejudiced in his
rights with respect to one of the contracting parties, and can
show detriment which would positively result to him from the
contract in which he has no intervention.
The plaintiffs-appellees were prejudiced in their rights by the
execution of the chattel mortgage over the properties of the
partnership "Isabela Sawmill" in favopr of Margarita G.
Saldajeno by the remaining partners, Leon Garibay and
Timoteo Tubungbanua. Hence, said appelees have a right to
file the action to nullify the chattel mortgage in question.

YOSHIZAKI v JOY TRAINING

G.R. No. 174978, July 31, 2013
Topic: Agency; Definition

properties. It averred that only a minority of the board,

composed of the spouses Johnson and Alexander Abadayan,
authorized the sale through the resolution.

Doctrine
At this point, we reiterate the established principle that
persons dealing with an agent must ascertain not only the
fact of agency, but also the nature and extent of the agents
authority.

After the presentation of their testimonial evidence, the

spouses Yoshizaki formally offered in evidence photocopies of
the resolution and certification, among others. Joy Training
objected to the formal offer of the photocopied resolution and
certification on the ground that they were not the best evidence
of their contents. In an Order dated May 18, 2004, the RTC
denied the admission of the offered copies. The RTC ruled in
favor of the spouses Yoshizaki. It found that Joy Training
owned the real properties. However, it held that the sale was
valid because Joy Training authorized the spouses Johnson to
sell the real properties.

Facts
Respondent Joy Training Center of Aurora, Inc. (Joy Training)
is a non-stock, non-profit religious educational institution. It
was the registered owner of a parcel of land designated as Lot
No. 125-L and was covered by Transfer Certificate of Title
(TCT) No. T-25334. On November 10, 1998, the spouses
Richard and Linda Johnson sold the real properties, a
Wrangler jeep, and other personal properties in favor of the
spouses Sally and Yoshio Yoshizaki. On the same date, a Deed
of Absolute Sale and a Deed of Sale of Motor Vehicle were
executed in favor of the spouses Yoshizaki. The spouses
Johnson were members of Joy Trainings board of trustees at
the time of sale. On December 7, 1998, TCT No. T-25334 was
cancelled and TCT No. T-26052 was issued in the name of the
spouses Yoshizaki.
On December 8, 1998, Joy Training, represented by its Acting
Chairperson Reuben V. Rubio, filed an action for the
Cancellation of Sales and Damages with prayer for the issuance
of a Temporary Restraining Order and/or Writ of Preliminary
Injunction against the spouses Yoshizaki and the spouses
Johnson before the Regional Trial Court of Baler, Aurora
(RTC). In the complaint, Joy Training alleged that the spouses
Johnson sold its properties without the requisite authority
from the board of directors. It assailed the validity of a board
resolution dated September 1, 1998[11] which purportedly
granted the spouses Johnson the authority to sell its real

The CA upheld the RTCs jurisdiction over the case but

reversed its ruling with respect to the sale of real properties. It
maintained that the present action is cognizable by the RTC
because it involves recovery of ownership from third parties. It
also ruled that the resolution is void because it was not
approved by a majority of the board of trustees. It
stated that under Section 25 of the Corporation Code, the basis
for determining the composition of the board of trustees is the
list fixed in the articles of incorporation.
ISSUES:
Whether or not there was a contract of agency to sell the real
properties between Joy Training and the spouses Johnson.
Held:
We find the petition unmeritorious. The RTC has jurisdiction
over disputes concerning the application of the Civil Code
Jurisdiction over the subject matter is the power to hear and
determine cases of the general class to which the proceedings
before a court belong. It is conferred by law. The allegations in
the complaint and the status or relationship of the parties

determine which court has jurisdiction over the nature of an

action. The same test applies in ascertaining whether a case
involves an intra-corporate controversy. The CA correctly ruled
that the RTC has jurisdiction over the present case. The
Supreme Court may review questions of fact in a petition for
review on certiorari when the findings of fact by the lower
courts are conflicting. We are aware that the issues at hand
require us to review the pieces of evidence presented by the
parties before the lower courts. As a general rule, a petition for
review on certiorari precludes this Court from entertaining
factual issues; we are not duty-bound to analyze again and
weigh the evidence introduced in and considered by the lower
courts. However, the present case falls under the recognized
exception that a review of the facts is warranted when the
findings of the lower courts are conflicting.

so used conveys such power, no such construction shall be

given the document. In the present case, Sally presents three
pieces of evidence which allegedly prove that Joy Training
specially authorized the spouses Johnson to sell the real
properties: (1) TCT No. T-25334, (2) the resolution, (3) and the
certification. We quote the pertinent portions of these
documents for a thorough examination of Sallys claim.

Accordingly, we will examine the relevant pieces of evidence

presented to the lower court. There is no contract of agency
between Joy Training and the spouses Johnson to sell the
parcel of land with its improvements

On the other hand, the fifth paragraph of the certification

provides: Further, Richard A. and Linda J[.] Johnson were
given FULL AUTHORITY for ALL SIGNATORY purposes for
the corporation on ANY and all matters and decisions
regarding the property and ministry here. They will follow
guidelines set forth according to their appointment and
ministerial and missionary training and in that, they will
formulate and come up with by-laws which will address and
serve as governing papers over the center and corporation.
They are to issue monthly and quarterly statements to all
members of the corporation. The resolution states: We, the
undersigned Board of Trustees (in majority) have authorized
the sale of land and building owned by spouses Richard A. and
Linda J[.] Johnson (as described in the title SN No. 5102156
filed with the Province of Aurora last 5th day of March, 1998.
These proceeds are going to pay outstanding loans against the
project and the dissolution of the corporation shall follow the
sale. This is a religious, non-profit corporation and no profits
or stocks are issued.[38] (emphasis ours) The above
documents do not convince us of the existence of the contract
of agency to sell the real properties. TCT No. T-25334 merely

Article 1868 of the Civil Code defines a contract of agency as a

contract whereby 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. It may be
express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without
authority. The special power of attorney mandated by law must
be one that expressly mentions a sale or that includes a sale as
a necessary ingredient of the authorized act.
We unequivocably declared in Cosmic Lumber Corporation v.
Court of Appeals that a special power of attorney must express
the powers of the agent in clear and unmistakable language for
the principal to confer the right upon an agent to sell real
estate. When there is any reasonable doubt that the language

TCT No. T-25334, entered in the Registry of Deeds on March

5, 1998, states: A parcel of land x x x is registered in
accordance with the provisions of the Property Registration
Decree in the name of JOY TRAINING CENTER OF AURORA,
INC., Rep. by Sps. RICHARD A. JOHNSON and LINDA S.
JOHNSON, both of legal age, U.S. Citizen, and residents of
P.O. Box 3246, Shawnee, Ks 66203, U.S.A.

states that Joy Training is represented by the spouses Johnson.

The title does not explicitly confer to the spouses Johnson the
authority to sell the parcel of land and the building thereon.
Moreover, the phrase Rep. by Sps. Richard A. Johnson and
LINDA S. JOHNSON only means that the spouses Johnson
represented Joy Training in land registration. The lower courts
should not have relied on the resolution and the certification in
resolving the case. The spouses Yoshizaki did not produce the
original documents during trial. They also failed to show that
the production of pieces of secondary evidence falls under the
exceptions enumerated in Section 3, Rule 130 of the Rules of
Court.
Thus, the general rule that no evidence shall be admissible
other than the original document itself when the subject of
inquiry is the contents of a document applies. Nonetheless, if
only to erase doubts on the issues surrounding this case, we
declare that even if we consider the photocopied resolution
and certification, this Court will still arrive at the same
conclusion.
We adhere to the CAs position that the basis for
determining the board of trustees composition is the trustees
as fixed in the articles of incorporation and not the actual
members of the board. The second paragraph of Section 25 of
the Corporation Code expressly provides that a majority of the
number of trustees as fixed in the articles of incorporation
shall constitute a quorum for the transaction of corporate
business. The contract of sale is unenforceable Necessarily,
the absence of a contract of agency renders the contract of sale
unenforceable; Joy Training effectively did not enter into a
valid contract of sale with the spouses Yoshizaki. Sally cannot
also claim that she was a buyer in good faith. She
misapprehended the rule that persons dealing with a
registered land have the legal right to rely on the face of the
title and to dispense with the need to inquire further, except
when the party concerned has actual knowledge of facts and

circumstances that would impel a reasonably cautious man to

make such inquiry. This rule applies when the ownership of a
parcel of land is disputed and not when the fact of agency is
contested.
At this point, we reiterate the established principle that
persons dealing with an agent must ascertain not only the fact
of agency, but also the nature and extent of the agents
authority. Sally bought the real properties at her own risk; she
bears the risk of injury occasioned by her transaction with the
spouses Johnson.
CA decision affirmed, petition denied.

NFA v. IAC (April 5, 1990)

TOPIC: Agency; Scope of Authority
DOCTRINE
The agent's apparent representation yields to the principal's
true representation and that, in reality and in effect, the
contract must be considered as entered into between the
principal and the third person. Art. 1883. If an agent acts in
his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have
such persons against the principal. In such case the agent is
the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except
when the contract involves things belonging to the principal .
The provision of this article, however, shall be understood to
be without prejudice to the actions between the principal and
agent.
FACTS: Gil Medalla, as commission agent of the plaintiff
Superior Shipping Corporation (SSC), entered into a contract
for hire of ship known as "MV Sea Runner" with defendant
National Grains Authority to transport on the "MV Sea
Runner" 8,550 sacks of rice belonging to defendant NGA from
the port of San Jose, Occidental Mindoro, to Malabon, Metro
Manila.
Upon completion of the delivery of rice at its destination,
plaintiff (SSC) wrote a letter requesting defendant NGA that it
be allowed to collect the amount stated in its statement of
account. The statement of account included not only a claim
for freightage but also claims for demurrage and stevedoring
charges amounting to P93,538.70.
SSC wrote again defendant NGA, this time specifically
requesting that the payment for freightage and other charges
be made to it and not to defendant Medalla because SSC was
the owner of the vessel "MV Sea Runner". In reply, defendant

NGA informed SSC that it could not grant its request because
the contract to transport the rice was entered into by
defendant NGA and defendant Medalla who did not disclose
that he was acting as a mere agent of plaintiff. Defendant NGA
paid defendant Medalla the sum of P25,974.90, for freight
services in connection with the shipment of 8,550 sacks of rice.
Plaintiff wrote defendant Medalla demanding that he turn over
to plaintiff the amount of P27,000.00 paid to him by
defendant NFA. Defendant Medalla, however, "ignored the
demand." Plaintiff was therefore constrained to file the instant
complaint.
Defendant-appellant National Food Authority admitted that it
entered into a contract with Gil Medalla whereby plaintiffs
vessel "MV Sea Runner" transported 8,550 sacks of rice of said
defendant from San Jose, Mindoro to Manila. For services
rendered, the National Food Authority paid Gil Medalla
P27,000.00 for freightage.
ISSUE: Whether or not Medalla is an agent of NFA.
HELD: YES.
It is contended by petitioner NFA that it is not liable under the
exception to the rule (Art. 1883) since it had no knowledge of
the fact of agency between respondent Superior Shipping and
Medalla at the time when the contract was entered into
between them (NFA and Medalla). Petitioner submits that
"(A)n undisclosed principal cannot maintain an action upon a
contract made by his agent unless such principal was disclosed
in such contract. One who deals with an agent acquires no
right against the undisclosed principal."
Petitioner NFA's contention holds no water. It is an
undisputed fact that Gil Medalla was a commission agent of
respondent Superior Shipping Corporation which owned the
vessel "MV Sea Runner" that transported the sacks of rice
belonging to petitioner NFA. The context of the law is clear.

Art. 1883, which is the applicable law in the case at bar

provides:
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the persons
with whom the agent has contracted; neither have
such persons against the principal.
In such case the agent is the one directly bound in
favor of the person with whom he has contracted, as if
the transaction were his own, except when the
contract involves things belonging to the principal .
The provision of this article shall be understood to be
without prejudice to the actions between the principal
and agent.
Consequently, when things belonging to the principal (in this
case, Superior Shipping Corporation) are dealt with, the agent
is bound to the principal although he does not assume the
character of such agent and appears acting in his own name. In
other words, the agent's apparent representation yields to the
principal's true representation and that, in reality and in effect,
the contract must be considered as entered into between the
principal and the third person (SyJuco and Viardo v. SyJuco,
40 Phil. 634). Corollarily, if the principal can be obliged to
perform his duties under the contract, then it can also demand
the enforcement of its rights arising from the contract.

Urban Bank, Inc. v. Magdaleno M. Pena

GR No. 145817
October 19, 2011
2nd Division
Sereno, J.:
Doctrine:
In a contract of agency, agents bind themslevs to render some
service or to do something in representation or on behalf of the
principal, with the consent or authority of the latter. The basis
of agency is representation. The elements are: (1) the
relationship is established by the parties consent, express or
implied; (2) the ibject is the execution of a juridical act in
relation to a 3rd person; (3) agents act as representatives and
not for themselves; and (d) agents act within the scope of their
authority. Agency cannot be presumed; its existence, nature
and extent must be proved by the person alleging it.
FACTS:
1. Pena was a former stockholder, director and corporate
secretary of Isabel Sugar Company, Inc. (ISCI). ISCI
owned a parcel of land in Pasay.
2. In 1984, ISCI leased the property for 10 years.
3. The lessee (unidentified in the case) subleased the land
without ISCIs consent. The sublessees established a
total of 23 commercial establishments.
4. A few months before the expiration of the lease
contract, the lessee and the sublessees were informed
that the contract will not be renewed.
5. Before the expiration, ISCI and Urban Bank executed a
contract to sell where Urban Bank will pay a total of P
241 million in installments.
6. Pena, who was the director and corporate sec. of ISCI
that time, was instructed by ISCI to take possession
over the property. ISCIs president. Mr. Montilla, faxed
a letter to Pena, confirming that Pena is ISCIs agent in
handling the eviction of the properties tenants.

7. Subsequently, the land was transferred to Urban Bank

via a deed of absolute sale.
8. In the exercise of his authority as the agent of ISCI,
Pena handled the eviction of the tenants.
9. However, the tenants questioned the authority of Pena
in evicting them. Hence, they asked ISCI to show
Penas authority. ISCI in turn asked Urban Bank to
issue a formal authority for Pena as the agent (now of
the Bank).
10. However, Urban Banl denied that Pena is its agent. It
claimed that Pena is still ISCIs lawyer and agent.
11. Meanwhile, Pena as agent of ISCI filed a complaint
for injunction against the tenants who were trying to
appropriate the subject lot, despite the fact that Urban
Bank already owned the property.
12. The trial court issued a TRO in favor of Pena in behalf
of ISCI. However, the judge later recalled the TRO
upon knowing that the property no longer belonged to
ISCI, but to Urban Bank.
13. From the very beginning, Pena was not informed of the
sale of the lot to Urban Bank until the dissolution of the
TRO.
14. Pena was later informed by Urban Bank that it is
retaining his services in protecting the Banks newlyacquired property. Pena demanded 10% of the
propertys market value as compensation/attorneys
fees. However, there was no writtten agreement to this
effect.
15. Despite the Banks confirmation that Pena is their
lawyer and agent, ISCI informed the Bank that ISCI
will pay for Penas services.
16. Upon knowing that ISCI is no longer the owner of the
property, Pena sought for the dismissal of the
injunction complaint filed in behalf of ISCI since the
property was already transferred to the Bank. Pena
filed a complaint anew in behalf of the Bank.

17. Through Penas efforts, the tenants agreed to leave the

property for a consideration of P 1.5 million. Pena paid
for the amount.
18. After the property was finally restored to the Banks
possession, Pena demanded from the Bank the
payment of the 10% of the propertys market value plus
other expenses. However, the Bank refused to pay.
19. Hence, Pena filed a complaint for recovery of agents
compensation, damages, expenses and attorneys fees
with RTC Bago City. The Bank and six of the directors
of the Bank were named defendants.
20. In their answer, the Bank claimed that it is ISCI that is
liable for the payment of his services.
21. RTC Bago City ruled in favor of Pena, finding that a
contract of agency was created between him
and the Bank. The trial court ruled that the Bank and
the directors are solidarily liable to Pena for P 28
million.
22. On appeal, the CA reversed the decision of the trial
court, ruling that there was no agency between
Pena and the Bank. However, CA orderd the Bank to
reimburse Pena for his services in the amount of P 3
million.
ISSUE:
1. Whether there was an (oral) contract of agency between
Urban Bank and Pena, and whether it is liable to Pena
for the services he rendered in their favor based on the
contract of agency?
2. Was Pena also an agent of ISCI at the time he was
constitited by Urban Bank as an agent also?
HOLDING:
1. There was an agency relationship between the Bank
and Pena (oral contract of agency arising out of the
correspondence between them), but the Banks liability

is not based on the oral contract but on the principle of

unjust enrichment and quantum meruit.
2. Yes. At some point, Pena had two principals, ISCI and
the Bank. Pena was an agent of ISCI and the Bank.
RATIO:
1.In a contract of agency, agents bind themslevs to render
some service or to do something in representation or on behalf
of the principal, with the consent or authority of the latter. The
basis of agency is representation. The elements are: (1) the
relationship is established by the parties consent, express or
implied; (2) the ibject is the execution of a juridical act in
relation to a 3rd person; (3) agents act as representatives and
not for themselves; and (d) agents act within the scope of their
authority. Agency cannot be presumed; its existence, nature
and extent must be proved by the person alleging it.
In this case, Urban Bank constituted Pena as its agent to
secure possession of the disputed property in Pasay. It must be
noted however that from the negotiation of the sale contract up
to its consummation, Pena did not render service to the Bank,
but rather to ISCI. The contract between ISCI and Urban Bank
obligated ISCI to deliver the property to the Bank. In
fuilfillment thereof, Pena was asked by ISCI to facilitate the
transfer. And despite the Banks knowledge that Pena was
acting on behalf of ISCI, the Bank later on constituted Pena as
its own agent.
2. From the time the Bank informed Pena that it is constituting
Pena as its agents up to the successful acquisition of possession
of the lot, the Bank ratified and acquiesced to Penas actions in
representation of ISCI, until Pena came to know of the transfer
to the Bank. What happened, essentially, is that at least two
principals (ISCI and Urban) have granted a power of attorney
to an agent for a common transaction (the acquisition of the

Pasay property from the tenants). This provided in Article 1925

of the Civil Code. The agency relationship between an agent
and 2 principals may even be considered extinguished if the
object or the purpose of the agency is accomplished. Here,
Pena, at some point, was the agent of both ISCI and Urban
Bank. Since the agency between ISCI and Pena continued, ISCI
must shoulder Penas agency fee and reiumbursement of costs.
On the other hand, there is no evidence that Urban Bank
agreed to pay Pena a specific percentage of amount for his
services. Thus, the basis of Urban Banks liability to pay Pena
for his services is unjust enrichment and quantum meruit.
DISPOSITIVE: the peitition is denied. Urban Bank is ordered
to pay Pena P 3,000, 000 for expenses and P 1.5 million as
compensation for his services, based on unjust enrichment and
quantum meruit.

Country Bankers v Keppel (2012)

Petron v Spouses Jovero (2012)

An agent must act within the scope of his authority.

SPA is necessary

Rule on agency by estoppel does not apply

Viloria v. Continental Airlines (2012)

Topic: Agency, Scope of Authority
Doctrine: The essential elements of agency are: (1) there is
consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a
representative and not for himself, and (4) the agent acts
within the scope of his authority. Agency is basically
personal, representative, and derivative in nature. The
authority of the agent to act emanates from the powers
granted to him by his principal; his act is the act of the
principal if done within the scope of the authority.
Qui facit per alium facit se. "He who acts through another
acts himself." As categorically provided under Article 1869 of
the Civil Code, "[a]gency may be express, or implied from the
acts of the principal, from his silence or lack of action, or his
failure to repudiate the agency, knowing that another person
is acting on his behalf without authority."
Facts:
Fernando agreed to buy airline tickets on board CAI after
Margaret Mager of Holiday Travel (HT) agency informed him
that there were no available seats at Amtrak. Subsequently,
Fernando requested Mager to reschedule their flight. Mager
informed him that flights to Newark, New Jersey, USA via CAI
were fully booked and offered the alternative flight via Frontier
Air. Since alternative flight would be more costly and would
mean traveling by night, Fernando opted to request for a
refund. Mager denied his request as said tickets were nonrefundable. When Fernando saw an Amtrak station near by, he
made inquiries and was told that there were seats available
anytime. Fernando confronted Mager with the Amtrak tickets,
telling her that she had misled them into buying CAI tickets by
misrepresenting that Amtrak was already fully booked.

Fernando reiterated his demand for a refund but Mager denied

it. Fernando sent a letter to CAI demanding a refund.
Continental Micronesia denied his request and advised him
that he may take said tickets to any CAI ticketing location for
re-issuance of new tickets. When Fernando went to CAIs
ticketing office to have the tickets replaced by a single round
trip ticket to Los Angeles under his name, he was informed
that Lourdes ticket was non-transferable, thus, cannot be used
for the purchase of a ticket in his favor. Sps. Viloria filed a
complaint against CAI. CAI interposed, among other things,
that it should not be liable for Magers acts because she was
not aCAI employee. Citing Articles 1868 and 1869 of the Civil
Code, RTC-Antipolo City ruled that Mager was CAIs agent,
hence, bound by her bad faith and misrepresentation. On
appeal, the Court of Appeals (CA) reversed RTC-Antipolo
Citys decision and ruled that CAI cannot be held liable for
Magers act in the absence of any proof that a principal-agent
relationship existed between CAI and HT, as the contract was
not an agency but that of a sale. Hence, this petition.
Issue:
Whether or not a principal-agent relationship existed between
CAI and Holiday Travel; and assuming that an agency
relationship existed between the two, would CAI be bound by
the acts of HTs agents and employees such as Mager?
Held:
Yes. SC ruled that there was principal-agent relationship
because all the elements of an agency existed between CAI and
HT. The first and second elements were present as CAI did not
deny that it concluded an agreement with HT, whereby the
latter would enter into contracts of carriage with third persons
on CAIs behalf. The third element was present as it was
undisputed that HT merely acted in a representative capacity
and it was CAI and not HT who was bound by the contracts of
carriage entered into by the latter on its behalf. The fourth
element was also present considering that CAI had not made

any allegation that HT exceeded the authority that was granted

to it. In fact, CAI consistently maintained validity of the
contracts of carriage that HT executed with Sps. Viloria and
that Mager was not guilty of fraudulent misrepresentation. SC,
as early as 1970, had already formulated the guidelines that
would aid in differentiating the two contracts.
In Commissioner of Internal Revenue v. Constantino, SC
extrapolated that the primordial differentiating consideration
between the two contracts is the transfer of ownership or title
over the property subject of the contract. In an agency, the
principal retains ownership and control over the property and
the agent merely acts on the principals behalf and under his
instructions in furtherance of the objectives for which the
agency was established. On the other hand, the contract is
clearly a sale if the parties intended that the delivery of the
property will effect a relinquishment of title, control and
ownership in such a way that the recipient may do with the
property as he pleases. That the principal is bound by all the
obligations contracted by the agent within the scope of the
authority granted to him is clearly provided under Article 1910
of the Civil Code and this constitutes the very notion of agency.
As to the subsequent issue on whether or not CAI would be
bound by the acts of HTs agents, SC mentioned that an
examination of its pronouncements in China Air Lines, Ltd. v.
Court of Appeals, et al. [264 Phil15 (1990)] will reveal that an
airline company is not completely exonerated from any
liability for the tort committed by its agents employees.
A prior determination of the nature of the passengers cause of
action is necessary. If the passengers cause of action against
the airline company is premised on culpa aquiliana or quasidelict for a tort committed by the employee of the airline
companys agent, there must be an independent showing that
the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct committed
by the employee of its agent. The mere fact that the employee

of the airline companys agent has committed a tort is not

sufficient to hold the airline company liable. There is no
vinculum juris between the airline company and its agents
employees and the contractual relationship between the airline
company and its agent does not operate to create a juridical tie
between the airline company and its agents employees. Article
2180 of the Civil Code does not make the principal vicariously
liable for the tort committed by its agents employees and the
principal-agency relationship per se does not make the
principal a party to such tort; hence, the need to prove the
principals own fault or negligence. On the other hand, if the
passengers cause of action for damages against the airline
company is based on contractual breach or culpa contractual,
it is not necessary that there be evidence of the airline
companys fault or negligence. As SC stated in China Air Lines,
"in an action based on a breach of contract of carriage, the
aggrieved party does not have to prove that the common
carrier was at fault or was negligent. All that he has to prove is
the existence of the contract and the fact of its nonperformance by the carrier."
SC denied the petition.

Recio v. Altamirano (July 24, 2013)

TOPIC: Agency; Scope of Authority
DOCTRINE:
Given the expressed requirement under the Articles 1874 and
1878 of the Civil Code that there must be a written authority
to sell an immovable property; otherwise no agency will be
created.
FACTS:
In the 1950s, Nene Recio, mother of Reman Recio, leased from
the Altamiranos a parcel of land with improvement in Lipa
City, Batangas. The land was inherited by the Altamiranos
from their parents.
In 1988, the Altamiranos offered to sell the land to the Recio.
However, it did not materialize due to the fault of the
Altamiranos. In 1994, the Altamiranos renewed Nenas option
to buy the subject property. The petitioner conducted a series
of negotiations with respondent Alejandro who introduced
himself as representing the other heirs.
After the said negotiations, the Altamiranos through Alejandro
entered into an oral contract of sale with the petitioner over
the subject property. Under this oral contract of sale, the
Recios made partial payments which payments was received
and acknowledged by Alejandro. However, Alejandro refused
to accept the payment of the balance. He kept avoiding the
Recios.
The Recios filed a case for specific performance with damages
to compel Alejandro to execute the absolute deed of sale.
Pending the return of summons, the Recios found out that
Alejandro sold the land to Spouses Lajarca.
RTC ruled in favor the Recios. It ruled that the
sale between Alejandro and Lajarca is null void.

Alejandro was ordered to execute the absolute

deed of sale in favor of the Recios.
CA affirmed with modifications. The Deed of Sale,
dated February 26, 1998, between the Altamiranos and
the Lajarca Spouses was declared NULL and VOID as
far as the aliquot share of Alejandro Altamirano is
concerned; Reman Recio was DECLARED a co-owner
of the Spouses Lauro and Marcelina Lajarca over the
property his share being that which previously
corresponds to the aliquot share of Alejandro
Altamirano.
Hence, this petition. Essentially, the Recios argued that they
should be awarded the whole parcel of land and not only the
share of Alejandro because Alejandro represented the coowners in the verbal sale of the land.
ISSUE: Whether or not Alejandro had the authority to sell the
land in behalf of the co-owners.
HELD: NO
As to the validity of the verbal sale- IT IS VALID.
A valid contract of sale requires: (a) a meeting of minds of the
parties to transfer ownership of the thing sold in exchange for
a price; (b) the subject matter, which must be a possible thing;
and (c) the price certain in money or its equivalent.
In the instant case, all these elements are present. The records
disclose that the Altamiranos were the ones who offered to sell
the property to Nena but the transaction did not push through
due to the fault of the respondents. Thereafter, the petitioner
renewed Nenas option to purchase the property to which
Alejandro, as the representative of the Altamiranos verbally
agreed. The determinate subject matter is Lot No. 3, which is
covered under TCT No. T-102563 and located at No. 39 10 de
Julio Street (now Esteban Mayo Street), Lipa City, Batangas.

The price agreed for the sale of the property was Five Hundred
Thousand Pesos (P500,000.00). It cannot be denied that the
oral contract of sale entered into between the petitioner and
Alejandro was valid.
As to Alejandros authority to sell the land
The CA found that it was only Alejandro who agreed to the
sale. There is no evidence to show that the other co-owners
consented to Alejandros sale transaction with the petitioner.
Hence, for want of authority to sell Lot No. 3, the CA ruled that
Alejandro only sold his aliquot share of the subject property to
the petitioner.
In Alcantara v. Nido,the Court emphasized the requirement of
an SPA before an agent may sell an immovable property. In the
said case, Revelen was the owner of the subject land. Her
mother, respondent Brigida Nido accepted the petitioners
offer to buy Revelens land at Two Hundred Pesos (P200.00)
per sq m. However, Nido was only authorized verbally by
Revelen. Thus, the Court declared the sale of the said land null
and void under Articles 1874 and 1878 of the Civil Code.
Articles 1874 and 1878 of the Civil Code explicitly provide:
Art. 1874. When a sale of a piece of land or any
interest therein is through an agent, the authority of
the latter shall be in writing; otherwise, the sale shall
be void.
Art. 1878. Special powers of attorney are necessary in
the following cases:
x x x x (5) To enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration;

The petitioner insists that the authority of Alejandro to

represent his co-heirs in the contract of sale entered into with
the petitioner had been adequately proven during the trial. He
alleges that the other Altamiranos are deemed to have
knowledge of the contract of sale entered into by Alejandro
with the petitioner since all of them, either personally or
through their authorized representatives participated in the
sale transaction with the Spouses Lajarca involving the same
property covered by TCT No. T-102563. In fact, said TCT even
contained a notice of lis pendens which should have called
their attention that there was a case involving the property.
Moreover, the petitioner points out that Alejandro represented
a considerable majority of the co-owners as can be observed
from other transaction and documents, i.e., three (3) Deeds of
Sale executed in favor of the Spouses Lajarca and the two other
buyers of the parcels of land co-owned by the Altamiranos.
The petitioners contentions are untenable. Given the
expressed requirement under the Articles 1874 and 1878 of the
Civil Code that there must be a written authority to sell an
immovable property, the petitioners arguments must fail. The
petitioner asserts that since TCT contained a notice of lis
pendens, the Altamiranos very well knew of the earlier sale to
him by Alejandro. While this may be true, it does not negate
the fact that Alejandro did not have any SPA. It was a finding
that need not be disturbed that Alejandro had no authority
from his co-owners to sell the subject property.
Moreover, the fact that Alejandro allegedly represented a
majority of the co-owners in the transaction with the Spouses
Lajarca, is of no moment. The Court cannot just simply assume
that Alejandro had the same authority when he transacted with
the petitioner.

YOSHIZAKI v JOY TRAINING

G.R. No. 174978, July 31, 2013
Topic: Agency; Scope of Authority
Doctrine: At this point, we reiterate the established principle
that persons dealing with an agent must ascertain not only
the fact of agency, but also the nature and extent of the
agents authority.
Held:
We find the petition unmeritorious. The RTC has jurisdiction
over disputes concerning the application of the Civil Code
Jurisdiction over the subject matter is the power to hear and
determine cases of the general class to which the proceedings
before a court belong. It is conferred by law. The allegations in
the complaint and the status or relationship of the parties
determine which court has jurisdiction over the nature of an
action. The same test applies in ascertaining whether a case
involves an intra-corporate controversy. The CA correctly ruled
that the RTC has jurisdiction over the present case. The
Supreme Court may review questions of fact in a petition for
review on certiorari when the findings of fact by the lower
courts are conflicting. We are aware that the issues at hand
require us to review the pieces of evidence presented by the
parties before the lower courts. As a general rule, a petition for
review on certiorari precludes this Court from entertaining
factual issues; we are not duty-bound to analyze again and
weigh the evidence introduced in and considered by the lower
courts. However, the present case falls under the recognized
exception that a review of the facts is warranted when the
findings of the lower courts are conflicting.
Accordingly, we will examine the relevant pieces of evidence
presented to the lower court. There is no contract of agency
between Joy Training and the spouses Johnson to sell the
parcel of land with its improvements

Article 1868 of the Civil Code defines a contract of agency as a

contract whereby 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. It may be
express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without
authority. The special power of attorney mandated by law must
be one that expressly mentions a sale or that includes a sale as
a necessary ingredient of the authorized act.
We unequivocably declared in Cosmic Lumber
Corporation v. Court of Appeals that a special power of
attorney must express the powers of the agent in clear and
unmistakable language for the principal to confer the right
upon an agent to sell real estate. When there is any reasonable
doubt that the language so used conveys such power, no such
construction shall be given the document. In the present case,
Sally presents three pieces of evidence which allegedly prove
that Joy Training specially authorized the spouses Johnson to
sell the real properties: (1) TCT No. T-25334, (2) the
resolution, (3) and the certification. We quote the pertinent
portions of these documents for a thorough examination of
Sallys claim.
TCT No. T-25334, entered in the Registry of Deeds on March
5, 1998, states: A parcel of land x x x is registered in
accordance with the provisions of the Property Registration
Decree in the name of JOY TRAINING CENTER OF AURORA,
INC., Rep. by Sps. RICHARD A. JOHNSON and LINDA S.
JOHNSON, both of legal age, U.S. Citizen, and residents of
P.O. Box 3246, Shawnee, Ks 66203, U.S.A.
On the other hand, the fifth paragraph of the certification
provides: Further, Richard A. and Linda J[.] Johnson were
given FULL AUTHORITY for ALL SIGNATORY purposes for
the corporation on ANY and all matters and decisions

regarding the property and ministry here. They will follow

guidelines set forth according to their appointment and
ministerial and missionary training and in that, they will
formulate and come up with by-laws which will address and
serve as governing papers over the center and corporation.
They are to issue monthly and quarterly statements to all
members of the corporation. The resolution states: We, the
undersigned Board of Trustees (in majority) have authorized
the sale of land and building owned by spouses Richard A. and
Linda J[.] Johnson (as described in the title SN No. 5102156
filed with the Province of Aurora last 5th day of March, 1998.
These proceeds are going to pay outstanding loans against the
project and the dissolution of the corporation shall follow the
sale. This is a religious, non-profit corporation and no profits
or stocks are issued.[38] (emphasis ours) The above
documents do not convince us of the existence of the contract
of agency to sell the real properties. TCT No. T-25334 merely
states that Joy Training is represented by the spouses Johnson.
The title does not explicitly confer to the spouses Johnson the
authority to sell the parcel of land and the building thereon.
Moreover, the phrase Rep. by Sps. Richard A. Johnson and
LINDA S. JOHNSON only means that the spouses Johnson
represented Joy Training in land registration. The lower courts
should not have relied on the resolution and the certification in
resolving the case. The spouses Yoshizaki did not produce the
original documents during trial. They also failed to show that
the production of pieces of secondary evidence falls under the
exceptions enumerated in Section 3, Rule 130 of the Rules of
Court.
Thus, the general rule that no evidence shall be admissible
other than the original document itself when the subject of
inquiry is the contents of a document applies. Nonetheless, if
only to erase doubts on the issues surrounding this case, we
declare that even if we consider the photocopied resolution
and certification, this Court will still arrive at the same
conclusion.

We adhere to the CAs position that the basis for determining

the board of trustees composition is the trustees as fixed in the
articles of incorporation and not the actual members of the
board. The second paragraph of Section 25 of the Corporation
Code expressly provides that a majority of the number of
trustees as fixed in the articles of incorporation shall constitute
a quorum for the transaction of corporate business. The
contract of sale is unenforceable Necessarily, the absence of a
contract of agency renders the contract of sale unenforceable;
Joy Training effectively did not enter into a valid contract of
sale with the spouses Yoshizaki. Sally cannot also claim that
she was a buyer in good faith. She misapprehended the rule
that persons dealing with a registered land have the legal right
to rely on the face of the title and to dispense with the need to
inquire further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry. This rule
applies when the ownership of a parcel of land is disputed and
not when the fact of agency is contested.
At this point, we reiterate the established principle that
persons dealing with an agent must ascertain not only the fact
of agency, but also the nature and extent of the agents
authority. Sally bought the real properties at her own risk; she
bears the risk of injury occasioned by her transaction with the
spouses Johnson.
CA decision affirmed, petition denied.

Patrimonio v Gutierrez (2014)

Brion, J.
Re: Agency, scope of authority
DOCTRINE
Contracts of Agency May be Oral Unless The Law Requires a
Specific Form. Article 1878 paragraph 7 of the Civil Code
expressly requires a special power of authority before an
agent can loan or borrow money in behalf of the principal.
The authority to enter into a loan can never be presumed.
FACTS
Respondent Napoleon Gutierrez, a sports columnist, and
Petitioner Alvin Patrimonio, basketball player, entered into a
business venture under the name of Slam Dunk Corporation
(Slum Dunk), a production outfit that produced mini-concerts
and shows related to basketball. Petitioner was already then a
decorated professional basketball player while Gutierrez was a
well-known sports columnist.
In the course of their business, the petitioner pre-signed
several blank to answer for the expenses of Slam Dunk. They
were entrusted to Gutierrez with the specific instruction not to
fill them out without previous notification to and approval by
the petitioner. The arrangement was made so that petitioner
could verify the validity of the payment and make the proper
arrangements to fund the account.
In 1993, without the petitioners knowledge and consent,
Gutierrez went to Marasigan (the petitioners former
teammate), to secure a loan in the amount of P200,000.00 on
the excuse that the petitioner needed the money for the
construction of his house. Marasigan acceded to Gutierrez
request and gave him P200,000.00 sometime in February
1994. Gutierrez simultaneously delivered to Marasigan one of
the blank checks pre-signed by petitioner and filled out with
the words "Cash" "Two Hundred Thousand Pesos Only", and

the amount of "P200,000.00".

Marasigan deposited the check but it was dishonored for the
reason "ACCOUNT CLOSED." Marasigan sought recovery
from Gutierrez, to no avail. He filed a criminal case for
violation of B.P. 22 against the petitioner.
Petitioner filed a Complaint for Declaration of Nullity of Loan
and Recovery of Damages against Gutierrez and co-respondent
Marasigan. He completely denied authorizing the loan or the
checks negotiation, and asserted that he was not privy to the
parties loan agreement. Only Marasigan filed his answer to the
complaint. Gutierrez was declared in default.
ISSUE
Whether the contract of loan may be nullified
HELD:
YES. Contracts of Agency May be Oral Unless The
Law Requires a Specific Form. The Contract of Loan
Entered Into by Gutierrez in Behalf of the Petitioner
Should be Nullified for Being Void; Petitioner is Not
Bound by the Contract of Loan.
The petitioner seeks to nullify the contract of loan on the
ground that he never authorized the borrowing of money. He
points to Article 1878, paragraph 7 of the Civil Code, which
explicitly requires a written authority when the loan is
contracted through an agent. The petitioner contends
that absent such authority in writing, he should not be held
liable for the face value of the check because he was not a party
or privy to the agreement.
Contracts of Agency May be Oral Unless The Law
Requires a Specific Form
Article 1868 of the Civil Code defines a contract of

agency as a contract whereby 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." Agency may be
express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate
the agency, knowing that another person is acting on
his behalf without authority.
As a general rule, a contract of agency may be oral.
However, it must be written when the law requires a
specific form, for example, in a sale of a piece of land or
any interest therein through an agent. Article 1878
paragraph 7 of the Civil Code expressly
requires a special power of authority before
an agent can loan or borrow money in behalf
of the principal.
Article 1878 does not state that the authority be in
writing. As long as the mandate is express, such
authority may be either oral or written. We
unequivocably declared in Lim Pin v. Liao Tian, et al.,
that the requirement under Article 1878 of the Civil
Code refers to the nature of the authorization
and not to its form. Be that as it may, the authority
must be duly established by competent and convincing
evidence other than the self serving assertion of the
party claiming that such authority was verbally given,
thus:
A mandate may be either oral or written, the
one vital thing being that it shall be express.
And more recently, We stated that, if the
special authority is not written, then it must be
duly established by evidence.
The Contract of Loan Entered Into by Gutierrez in

Behalf of the Petitioner Should be Nullified for Being

Void; Petitioner is Not Bound by the Contract of
Loan.
A review of the records reveals that Gutierrez
did not have any authority to borrow money in
behalf of the petitioner. Records do not show
that the petitioner executed any special power
of attorney (SPA) in favor of Gutierrez. In fact,
the petitioners testimony confirmed that he
never authorized Gutierrez (or anyone for that
matter), whether verbally or in writing, to
borrow money in his behalf, nor was he aware
of any such transaction.
Marasigan however submits that the petitioners acts of
pre-signing the blank checks and releasing them to
Gutierrez suffice to establish that the petitioner had
authorized Gutierrez to fill them out and contract the
loan in his behalf. Marasigans submission fails to
persuade
us.
In
the
absence
of
any
authorization, Gutierrez could not enter into a
contract of loan in behalf of the petitioner.
In the absence of any showing of any agency relations
or special authority to act for and in behalf of the
petitioner, the loan agreement Gutierrez entered into
with Marasigan is null and void. Thus, the petitioner is
not bound by the parties loan agreement.
Furthermore, that the petitioner entrusted the blank
pre-signed checks to Gutierrez is not legally sufficient
because the authority to enter into a loan can
never be presumed. The contract of agency and the
special fiduciary relationship inherent in this contract
must exist as a matter of fact. The person alleging it has
the burden of proof to show, not only the fact of agency,

but also its nature and extent.

True, the petitioner had issued several pre-signed checks to
Gutierrez, one of which fell into the hands of Marasigan. This
act, however, does not constitute sufficient authority to borrow
money in his behalf and neither should it be construed as
petitioners grant of consent to the parties loan agreement.
Without any evidence to prove Gutierrez authority, the
petitioners signature in the check cannot be taken, even
remotely, as sufficient authorization, much less, consent to the
contract of loan. Without the consent given by one party in a
purported contract, such contract could not have been
perfected; there simply was no contract to speak of.

Dela Rama SS v Tan (1956)

PEREZ v PNB
July 30, 1966 17 SCRA 835
Topic: Agency; Extinguishment
Doctrine: The argument that foreclosure by the Bank under
its power of sale is barred upon death of the debtor, because
agency is extinguished by the death of the principal, under
Article 1732 of the Civil Code of 1889 and Article 1919 of the
Civil Code of the Philippines, neglects to take into account
that the power to foreclose is not an ordinary agency that
contemplates exclusively the representation of the principal
by the agent but is primarily an authority conferred upon the
mortgagee for the latter's own protection. It is, in fact, an
ancillary stipulation supported by the same causa or
consideration for the mortgage and forms an essential and
inseparable part of that bilateral agreement. As can be seen
in the preceding quotations from Pasno vs. Ravina, 54 Phil.
382, both the majority and the dissenting opinions conceded
that the power to foreclose extrajudicially survived the death
of the mortgagor, even under the law prior to the Civil Code
of the Philippines now in force.
Facts:
On August 29, 1939, Vicente Perez mortgaged a Lot of the
Kabankalan Cadastre, to the appellant Philippine National
Bank, Bacolod Branch, in order to secure payment of a loan of
P2,500, plus interest, payable in yearly installments. On
October 7, 1942, Vicente Perez, mortgagor, died intestate,
survived by his widow and children (appellees herein). At that
time, there was an outstanding balance of P1,917.00, and
corresponding interest, on the mortgage indebtedness.

On October 18, 1956, the widow of Perez instituted Special

Proceedings for the settlement of the estate of Vicente Perez.
The widow was appointed Administratrix and notice to
creditors was duly published. The Bank did not file a claim.
The project of partition was submitted on July 18, 1956; it was
approved and the properties distributed accordingly.

It appears also that, as early as March of 1947, the widow of the

late Vicente Perez inquired by letter from the Bank the status
of her husband's account; and she was informed that there was
an outstanding balance thereon of P2,758.84 earning a daily
interest of P0.4488. She was furnished a copy of the mortgage
and, on April 2, 1947, a copy of the Tax Declaration.

On January 2, 1963, the Bank, pursuant to authority granted it

in the mortgage deed, caused the mortgaged properties to be
extrajudicially foreclosed. The Provincial Sheriff accordingly
sold the Lot at auction, and it was purchased by the Bank. In
the ordinary course after the lapse of the year of redemption,
Old Certificate of Title and new Certificate, was issued in the
name of the Bank. The widow and heirs were not notified.

Three months later, on August 15, 1962, the widow and heirs of
Vicente Perez instituted this case against the Bank in the court
below, seeking to annul the extra-judicial foreclosure sale and
the transfer of the Certificate of Title as well as to recover
damages, claiming that the Bank had acted illegally and in bad
faith. The Bank answered, denying the charges. After trial, the
court a quo, on December 15, 1962, rendered judgment.

Wherefore, the trial court declared null and void the extrajudicial foreclosure sale to the Bank.
Issue:
WON agency is extinguished upon death of the mortgagor
Held:
The argument that foreclosure by the Bank under its
power of sale is barred upon death of the debtor, because
agency is extinguished by the death of the principal, under
Article 1732 of the Civil Code of 1889 and Article 1919 of the
Civil Code of the Philippines, neglects to take into account that
the power to foreclose is not an ordinary agency that
contemplates exclusively the representation of the principal by
the agent but is primarily an authority conferred upon the
mortgagee for the latter's own protection. It is, in fact, an
ancillary stipulation supported by the same causa or
consideration for the mortgage and forms an essential and
inseparable part of that bilateral agreement. As can be seen in
the preceding quotations from Pasno vs. Ravina, 54 Phil. 382,
both the majority and the dissenting opinions conceded that
the power to foreclose extrajudicially survived the death of the
mortgagor, even under the law prior to the Civil Code of the
Philippines now in force.

Nevertheless, while upholding the validity of the appellant

Bank's foreclosure, We can not close our eyes to the fact that
the Bank was apprised since 1947 of the death of its debtor,
Vicente Perez, yet it failed and neglected to give notice of the
foreclosure to the latter's widow and heirs as expressly found
by the court a quo. Such failure, in effect, prevented them from
blocking the foreclosure through seasonable payment, as well

as impeded their effectuating a seasonable redemption. In view

of these circumstances, it is our view that both justice and
equity would be served by permitting herein appellees to
redeem the foreclosed property within a reasonable time, by
paying the capital and interest of the indebtedness up to the
time of redemption, plus foreclosure and useful expenses, less
any rents and profits obtained by the Bank from and after the
same entered into its possession.

Wherefore, the judgment appealed from is hereby modified, as

follows:
(1) Declaring valid and effective the extra-judicial
foreclosure of the mortgage over Lot 286-E of the
Kabankalan Cadastre;
(2) Upholding and confirming the cancellation of
Transfer Certificate of Title No. 29350 of the Registry
of Deeds of Occidental Negros in the name of the late
Vicente Perez, as well as its replacement by Certificate
of Title T-32066 of the same Registry in the name of
appellant Philippine National Bank;
(3) Declaring the appellees herein, widow and other
heirs of Vicente Perez entitled to redeem the property
in question by paying or tendering to the Bank the
capital of the debt of Vicente Perez, with the stipulated
interest to the date of foreclosure, plus interest
thereafter at 12% per annum; and reimbursing the
Bank the value of any useful expenditures on the said
property but deducting from the amounts thus payable
the value of any rents and profits derived by the
appellee National Bank from the property in question.

Such payment to be made within sixty (60) days after

the balance is determined by the court of origin.

Neither party to recover damages or costs.

Lim v. Saban (2004)

TOPIC: Agency; Extinguishment
DOCTRINE
A principal cannot revoke the agency after the transaction
subject of the agency has already been accomplished. The
Court held that it would be in the height of injustice to permit
the principal to terminate the contract of agency to the
prejudice of the agent when he had already reaped the
benefits of the latters efforts.
FACTS
The late Eduardo Ybaez (Ybaez) entered into an Agreement
and Authority to Negotiate and Sell (Agency Agreement) with
respondent Florencio Saban (Saban). Under the said
agreement, Ybaez authorized Saban to look for a buyer of the
lot for P200,000.00 and to mark up the selling price to include
the amounts needed for payment of taxes, transfer of title and
other expenses incident to the sale, as well as Sabans
commission for the sale.
Through Sabans efforts, Ybaez and his wife were able to sell
the lot to the petitioner Genevieve Lim (Lim) and the spouses
Benjamin and Lourdes Lim at the price of P600,000.00,
inclusive of taxes and other incidental expenses of the sale.
Later on, Ybaez sent a letter to Lim asking Lim to cancel all
the checks issued by latter in Sabans favor but rather to
extend another partial payment for the lot in his (Ybaezs)
favor.
After the four checks in Sabans favor were dishonored, he filed
a Complaint for collection of sum of money and damages
against Ybaez and Lim. In his Complaint, Saban alleged that
Lim and spouses Lim agreed to purchase the lot for
P600,000.00, i.e., with a mark-up of P400,000.00 from the
price set by Ybaez. Of the total purchase price, P200,000.00

went to Ybaez, P50,000.00 allegedly went to Lims agent, and

P113,257.00 was given to Saban to cover taxes and other
expenses incidental to the sale.In his Answer, Ybaez claimed
that Saban was not entitled to any commission because he
concealed the actual selling price from him and he was not a
licensed real estate broker. Lim, for her part, argued that she
was not privy to the agreement between Ybaez and Saban,
and that she issued stop payment orders for the three checks
because Ybaez requested her to pay directly to him, instead of
coursing it through Saban.
RTC dismissed Sabans complaint, declaring the four
(4) checks issued by Lim as stale and non-negotiable,
and absolving Lim from any liability towards Saban.
CA reversed RTCs ruling and held that Saban was
entitled to his commission amounting to P236,743.00.
ISSUE: Whether there was a valid revocation of the agency
between Ybaez and Saban.

HELD: None.
The Court affirms the appellate courts finding that the
agency was not revoked since Ybaez requested that Lim
make stop payment orders for the checks payable to Saban
only after the consummation of the sale on March 10, 1994. At
that time, Saban had already performed his obligation as
Ybaezs agent when, through his (Sabans) efforts, Ybaez
executed the Deed of Absolute Sale of the lot with Lim and the
Spouses Lim.
To deprive Saban of his commission subsequent to the sale
which was consummated through his efforts would be a breach
of his contract of agency with Ybaez which expressly states
that Saban would be entitled to any excess in the purchase
price after deducting the P200,000.00 due to Ybaez and the
transfer taxes and other incidental expenses of the sale.
The Court held that it would be in the height of injustice to
permit the principal to terminate the contract of agency to the
prejudice of the agent when he had already reaped the benefits
of the latters efforts.