JPLCACOSTA – ATP REVIEWER (AY 2018-2019)

BASED ON THE RECITATION, AND LECTURES OF ATTY. BATUNGBAKAL

1. What is a Contract of Partnership?
Art. 1767. By the CONTRACT OF PARTNERSHIP two or
more persons bind themselves:
1.) to contribute money, property, or industry to a common
fund,
2.) with the intention of dividing the profits among
themselves.
2. What is General Liability?
5. What if a partner uses money for another purpose other than
what the money is supposed to be for?
Art. 1788. A partner who has undertaken to contribute a sum
of money and fails to do so becomes a debtor for the interest
and damages from the time he should have complied with
his obligation.
The same rule applies to any amount he may have taken
from the partnership coffers, and his liability shall begin from
the time he converted the amount to his own use.

Partners are liable personally and subsidiarily for partnership 6. Capitalist Partner vs. Industrial Partner
debts to third persons.
Capitalist Partner Industrial Partner
3. What does the Principle of Delectus Personae presuppose?
Contributes money or Contributes his industry or
That no person shall become a partner of the partnership property personal service
without the consent of ALL the partners.
Cannot engage in the Cannot engage in any
4. What happens if a person promises to contribute and fails to same or similar enterprise business himself unless
unless there is stipulation there is a stipulation to the
do so?
to the contrary. contrary
Art. 1786. Every partner is a debtor of the partnership for Shares in the profits Receives a just and
whatever he may have promised to contribute thereto. according to agreement, if equitable share
there is none; pro-rata.
He shall also be bound for warranty in case of eviction with Is liable for the debts but not
regard to specific and determinate things which he may have Is liable for the debts and losses as between the
contributed to the partnership, in the same cases and in the losses up to his separate partners; but is liable to
same manner as the vendor is bound with respect to the property. losses with third persons
vendee. He shall also be liable for the fruits thereof from the without prejudice to
time they should have been delivered, without the need of reimbursement to the
any demand. Capitalist Partners.

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7. Article 1770 OF NCC 10. Universal Partnership of All Present Property vs. Universal
Partnership of All Profits
Art. 1770. A partnership must have a lawful object or
purpose, and must be established for the common benefit or UPPP UPAP
interest of the partners.
All present property actually Property, which the
belonging to the partners partners owned at the time
When an unlawful partnership is dissolved by a judicial
are contributed to the of the celebration of the
decree, the profits shall be confiscated in favor of the State, partnership which then contract, shall continue to
without prejudice to the provisions of the Penal Code becomes the common pertain to them. Only the
governing the confiscation of the instruments and effects of a property of all partners and USUFRUCT passing to the
crime. of the partnership partnership

8. What happens if real property is contributed? Only profits derived from All profits acquired through
the property contributed the industry or work of
Art. 1773. A contract of partnership is void, whenever become common property. partners become common
immovable property is contributed thereto, if an inventory of property
said property is not made, signed by the parties, and
attached to the public instrument.

11. Can a Corporation be a partner?

9. How does a partnership share in profits? NO, A corporation cannot be a partner. Unless its charter
allows it do so.
Art. 1797. The losses and profits shall be distributed in
conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of
each in the losses shall be in the same proportion.

In the absence of stipulation, the share of each partner in the

profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for
the losses. As for the profits, the industrial partner shall
receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed
capital, he shall also receive a share in the profits in
proportion to his capital.

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12. What are the obligations of a partner?
a. To Contribute what he promised to contribute
i. Art. 1786. Every partner is a debtor of the
partnership for whatever he may have
promised to contribute thereto.
He shall also be bound for warranty in case
of eviction with regard to specific and
determinate things which he may have
contributed to the partnership, in the same
cases and in the same manner as the
vendor is bound with respect to the vendee.
He shall also be liable for the fruits thereof
from the time they should have been
delivered, without the need of any demand.
ii. Art. 1787. When the capital or a part thereof
which a partner is bound to contribute
consists of goods, their appraisal must be
made in the manner prescribed in the
contract of partnership, and in the absence
of stipulation, it shall be made by experts
chosen by the partners, and according to
current prices, the subsequent changes
thereof being for account of the partnership.
(n)
iii. Art. 1788. A partner who has undertaken to
contribute a sum of money and fails to do so
becomes a debtor for the interest and
damages from the time he should have
complied with his obligation.
b. Not to engage in other business
c. To contribute additional capital
i. Art. 1791. If there is no agreement to the
contrary, in case of an imminent loss of the
business of the partnership, any partner who
refuses to contribute an additional share to
the capital, except an industrial partner, to
save the venture, shall he obliged to sell his
interest to the other partners
d. Obligation of a Managing Partner who collects
money
i. Art. 1792. If a partner authorized to manage
collects a demandable sum which was owed
to him in his own name, from a person who
owed the partnership another sum also
demandable, the sum thus collected shall be
applied to the two credits in proportion to
their amounts, even though he may have
given a receipt for his own credit only; but
should he have given it for the account of
the partnership credit, the amount shall be
fully applied to the latter.
The provisions of this article are understood
to be without prejudice to the right granted to
the other debtor by Article 1252, but only if
the personal credit of the partner should be
more onerous to him.
e. When a partner receives share in partnership
i. Art. 1793. A partner who has received, in
whole or in part, his share of a partnership
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credit, when the other partners have not
collected theirs, shall be obliged, if the
debtor should thereafter become insolvent,
to bring to the partnership capital what he
received even though he may have given
receipt for his share only.
f. Obligation of Partner to damages in Partnership
i. Art. 1794. Every partner is responsible to
the partnership for damages suffered by it
through his fault, and he cannot compensate
them with the profits and benefits which he
may have earned for the partnership by his
industry. However, the courts may equitably
lessen this responsibility if through the
partner's extraordinary efforts in other
activities of the partnership, unusual profits
have been realized.
g. To render information
i. Art. 1805. The partnership books shall be
kept, subject to any agreement between the
partners, at the principal place of business
of the partnership, and every partner shall at
any reasonable hour have access to and
may inspect and copy any of them.
ii. Art. 1806. Partners shall render on demand
true and full information of all things
affecting the partnership to any partner or
the legal representative of any deceased
partner or of any partner under legal
disability.
iii. Art. 1809. Any partner shall have the right to
a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the
partnership business or possession of its
property by his co-partners;
(2) If the right exists under the terms of any
agreement;
(3) As provided by article 1807;
(4) Whenever other circumstances render it
just and reasonable
h. Obligation when a partner becomes a trustee for the
Partnership
Art. 1807. Every partner must account to the
partnership for any benefit, and hold as
trustee for it any profits derived by him
without the consent of the other partners
from any transaction connected with the
formation, conduct, or liquidation of the
partnership or from any use by him of its
property.
i. Obligations of the Partnership to Partner
i. Art. 1796. The partnership shall be
responsible to every partner for the amounts
he may have disbursed on behalf of the
partnership and for the corresponding
interest, from the time the expense are
made; it shall also answer to each partner
for the obligations he may have contracted
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in good faith in the interest of the partnership
business, and for risks in consequence of its
management.
13. Is furnishing of Additional Capital mandatory?
Art. 1791. If there is no agreement to the contrary, in case of
an imminent loss of the business of the partnership, any
partner who refuses to contribute an additional share to the
capital, except an industrial partner, to save the venture,
shall he obliged to sell his interest to the other partners
14. Can a third person be delegated to decide the distribution of
losses and profits?
Art. 1798. If the partners have agreed to intrust to a third
person the designation of the share of each one in the profits
and losses, such designation may be impugned only when it
is manifestly inequitable. In no case may a partner who has
begun to execute the decision of the third person, or who
has not impugned the same within a period of three months
from the time he had knowledge thereof, complain of such
decision.
The designation of losses and profits cannot be intrusted to
one of the partners.
15. Can a partnership exclude a partner in profit or loss sharing?
Art. 1799. A stipulation which excludes one or more partners
from any share in the profits or losses is void.
16. What are the kinds of Managing Partner?
Art. 1800. The partner who has been appointed manager in
the articles of partnership may execute all acts of
administration despite the opposition of his partners, unless
he should act in bad faith; and his power is irrevocable
without just or lawful cause. The vote of the partners
representing the controlling interest shall be necessary for
such revocation of power.
A power granted after the partnership has been constituted
may be revoked at any time. (1692a)
Art. 1801. If two or more partners have been intrusted with
the management of the partnership without specification of
their respective duties, or without a stipulation that one of
them shall not act without the consent of all the others, each
one may separately execute all acts of administration, but if
any of them should oppose the acts of the others, the
decision of the majority shall prevail. In case of a tie, the
matter shall be decided by the partners owning the
controlling interest. (1693a)
Art. 1802. In case it should have been stipulated that none
of the managing partners shall act without the consent of the
others, the concurrence of all shall be necessary for the
validity of the acts, and the absence or disability of any one
of them cannot be alleged, unless there is imminent danger
of grave or irreparable injury to the partnership. (1694)
Art. 1803. When the manner of management has not been
agreed upon, the following rules shall be observed:
(1) All the partners shall be considered agents and whatever
any one of them may do alone shall bind the partnership,
without prejudice to the provisions of Article 1801.
(2) None of the partners may, without the consent of the
others, make any important alteration in the immovable
property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other
partners is manifestly prejudicial to the interest of the
partnership, the court's intervention may be sought.
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17. Article 1804 OF NCC
Art. 1804. Every partner may associate another person with
him in his share, but the associate shall not be admitted into
the partnership without the consent of all the other partners,
even if the partner having an associate should be a
manager.
18. Article 1805 OF NCC
Art. 1805. The partnership books shall be kept, subject to
any agreement between the partners, at the principal place
of business of the partnership, and every partner shall at any
reasonable hour have access to and may inspect and copy
any of them.
19. What are the Property Rights of a Partner?
Art. 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management.
20. What properties are covered by the property right of a
Partner?
Specific Partnership Property
21. What is the interest of a Partner in the Partnership?
Art. 1812. A partner's interest in the partnership is his share
of the profits and surplus.
22. Obligations of Partners with 3rd Persons?
Art. 1815. Every partnership shall operate under a firm
name, which may or may not include the name of one or
more of the partners.
Those who, not being members of the partnership, include
their names in the firm name, shall be subject to the liability
of a partner.
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.
23. May a deceased partner be still included in the Partnership
Name?
Yes. Provided that the public is notified of the death of the
concerned partner.
24. Are Industrial Partners liable for losses or debts? Why?
No. The law provides that in the absence of capital
contribution, an industrial partner is not liable for the losses
of the partnership. His efforts being rendered futile is
considered already a loss on his part.
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25. When is a Partnership bound by the acts of a Partner?
Art. 1818. Every partner is an agent of the partnership for
the purpose of its business, and the act of every partner,
including the execution in the partnership name of any
instrument, for apparently carrying on in the usual way the
business of the partnership of which he is a member binds
the partnership, unless the partner so acting has in fact no
authority to act for the partnership in the particular matter,
and the person with whom he is dealing has knowledge of
the fact that he has no such authority.
An act of a partner which is not apparently for the carrying on
of business of the partnership in the usual way does not bind
the partnership unless authorized by the other partners.
Except when authorized by the other partners or unless they
have abandoned the business, one or more but less than all
the partners have no authority to:
(1) Assign the partnership property in trust for creditors or on
the assignee's promise to pay the debts of the partnership;
(2) Dispose of the good-will of the business;
(3) Do any other act which would make it impossible to carry
on the ordinary business of a partnership;
(4) Confess a judgment;
(5) Enter into a compromise concerning a partnership claim
or liability;
(6) Submit a partnership claim or liability to arbitration;
(7) Renounce a claim of the partnership.
No act of a partner in contravention of a restriction on
authority shall bind the partnership to persons having
knowledge of the restriction.
26. What is a Partner by Estoppel?
Art. 1825. When a person, by words spoken or written or by
conduct, represents himself, or consents to another
representing him to anyone, as a partner in an existing
partnership or with one or more persons not actual partners,
he is liable to any such persons to whom such
representation has been made, who has, on the faith of such
representation, given credit to the actual or apparent
partnership, and if he has made such representation or
consented to its being made in a public manner he is liable
to such person, whether the representation has or has not
been made or communicated to such person so giving credit
by or with the knowledge of the apparent partner making the
representation or consenting to its being made:
(1) When a partnership liability results, he is liable as though
he were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata
with the other persons, if any, so consenting to the contract
or representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in
an existing partnership, or with one or more persons not
actual partners, he is an agent of the persons consenting to
such representation to bind them to the same extent and in
the same manner as though he were a partner in fact, with
respect to persons who rely upon the representation. When
all the members of the existing partnership consent to the
representation, a partnership act or obligation results; but in
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all other cases it is the joint act or obligation of the person 31. Differences between General & Limited
acting and the persons consenting to the representation. Partners/Partnerships

27. Requisites of a Partner by Estoppel? Limited Partnership General Partnership

Composed of one or Composed of general partners

a. That there be a misrepresentation
more general partners ONLY.
b. That the 3rd party relies on such representation in
and one or more limited
good faith partners – CANNOT BE
SOLELY BE
28. What are the liabilities of a Newly Admitted Partner? COMPOSED OF
LIMITED PARTNERS
Art. 1826. A person admitted as a partner into an existing
partnership is liable for all the obligations of the partnership
arising before his admission as though he had been a Limited partner may only General partner can contribute
partner when such obligations were incurred, except that this contribute cash or property or industry to the
liability shall be satisfied only out of partnership property, property but NOT partnership
unless there is a stipulation to the contrary. SERVICES
29. When is there a demise of a Partnership?
The limited partnership As a general rule, may be
Upon the dissolution. must be executed in a constituted in ANY FORM by
CERTIFICATE of limited contract or conduct of the
30. What is Winding Up for? partnership, duly signed partnership, UNLESS immovable
and sworn to by all the property is contributed
partners and
To settle obligations. RECORDED in the SEC

The name of a limited NO RESTRICTIONS on the

partner, as a general name of a general partner
rule, SHOULD NOT included in the firm name,
appear in the firm name EXCEPT in cases where the
general partner has died; to
Firm name MUST BE which the public must be notified
FOLLOWED by the word or there must be a cross followed
“limited” by the name of the said
deceased partner

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Retirement, death, Retirement, death, insanity or (2) To inspect profits and usual remedies
insanity or insolvency of insolvency of a general partner and copy at a surplus of the provided by law
a limited partner DOES DISSOLVES THE reasonable hour partnership. in the event of
NOT DISSOLVE THE PARTNERSHIP partnership fraud in the
PARTNERSHIP, for his books or any of (3) Right to management.
executor or administrator them. participate in the
shall have the rights of a management. (3) To receive
limited partner for the (3) To demand the assignor’s
purpose of selling his true and full (4) Right to interest in case
estate information of all reimbursement of dissolution.
things affecting for amounts
the partnership advanced to the (4) To require an
There is a REQUIRED May be a partnership with a term partnership and account of
to have a fixed term or a or a partnership by will (4) To demand a to indemnification partnership
particular undertaking; it formal account of for risks in affairs, but only
CANNOT BE a partnership consequence of in case the
partnership by will affairs whenever the management. partnership is
circumstances dissolved, and
render it just and (5) Access and such account
reasonable. inspect shall cover the
32. Is limited partnership created by mere consent? partnership period from the
(5) To ask for books. date only of the
NO. It must executed in a certificate of limited partnership, dissolution and last account
duly signed and sworn to by all partners and recorded in the winding up by (6) To know true agreed to by all
SEC decree of court. and full the partners.
information of all
33. Rights of General & Limited Partners & Assignee (6) To receive a things affecting
share of profits or the partnership.
other
Limited Partner General Partner Assignee
compensation by (7) The right to a
(1) To require (1) To possess (1) To receive in way of income. formal account of
that the specific accordance with partnership affairs
partnership partnership his contract the (7) To receive the under certain
books be kept at property for profits accruing return of his circumstances.
the principal partnership to the assigning contribution (8) The right to
place of business purposes. partner. provided the dissolve the
of the partnership partnership under
partnership. (2) To receive his (2) To avail assets are in certain
share in the himself of the conditions.

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excess of all its

liabilities. 39. Requisites of a Contract of Agency which will bind the
principal?
34. What is a Contract of Agency
a. Consent
Art. 1868. By the CONTRACT OF AGENCY a person binds b. Object
himself to render some service or to do something in c. Cause
representation or on behalf of another, with the consent or d. ACTS IN REPRESENTATION of the principal
authority of the latter. e. ACTS WITHIN THE SCOPE OF HIS AUTHORITY

35. Proponents in a Contract of Agency 40. Who is an undisclosed principal?

The principal and the agent. It is when the agent acts within the scope of his authority but
IN HIS OWN NAME
The principal is the one whom the agent represents; the
agent is the one who acts for and represents another. 41. What is the effect if the principal is undisclosed?

36. Characteristics of a Contract of Agency It shall be as if there was no principal, rendering the agent
PERSONALLY LIABLE; EXCEPT WHEN THE
a. Preparatory TRANSACTION INVOLVES A THING BELONGING TO
b. Fiduciary THE PRINCIPAL
c. Bilateral (but may also be unilateral)
d. Onerous (generally) 42. What may be delegated to the agent?
e. Representative relation
f. Nominate Acts which are not personal in nature, e.g. right to vote, right
g. Consensual to marry, making of a will, those which require to be done
h. Principal under oath and etc.

37. What do you mean by Principal Contract? 43. Nature of the relationship between Principal & Agent?

It is a contract that can stand alone. Fiduciary in nature.

38. Is a contract of agency compensable?

Art. 1875. Agency is PRESUMED TO BE FOR

COMPENSATION, unless there is proof to the contrary

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44. You were appointed as agent, then you just smiled, are you
now an agent?
YES.
Art. 1870. Acceptance by the agent may also be express, or
implied from his acts which carry out the agency, or from his
silence or inaction according to the circumstances.
45. What do you mean by Agency by Estoppel?
One who clothes another with APPARENT AUTHORITY AS
HIS AGENT, AND HOLDS HIM OUT TO THE PUBLIC AS
SUCH, CANNOT BE PERMITTED TO DENY THE
AUTHORITY OF SUCH PERSON IN GOOD FAITH, AND IN
THE HONEST BELIEF THAT HE IS WHAT HE APPEARS
TO BE
46. What are the obligations of an agent?
a. To obey all lawful orders and instructions of the
principal
b. To act with utmost good faith and loyalty
c. To exercise reasonable care, skill and diligence
d. To carry out the agency
e. To answer for damages which through his non-
performance the principal may suffer
f. To finish the business already begun on the death of
the principal
g. Observe diligence of a good father of a family in the
custody and preservation of the goods forwarded to
him by the owner
h. To advance necessary funds in case of stipulation
i. Not to carry out the agency if it would manifestly
result to loss or damage
j. To answer for damages should he prefer his interest
over the principal’s
k. Not to loan to himself unless the principal consents
to the same
l. To render account of his transactions and to deliver
whatever he may have received
m. To be responsible for the acts of his substitute
n. To pay interest on funds he has applied to his own
use
o. To act in accordance with the instructions
p. To inform the principal on authorized sale of credit
q. To distinguish goods by countermarks
r. To bear the risk of collection should he receive on
sale, a guarantee commission
s. To indemnify the principal for damages for his failure
to collect credits of his principal
t. To be responsible for fraud or negligence
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47. What is the diligence of a good father of a family?
Ordinary diligence or that diligence of a prudent man.
48. Modes of Extinguishment of an Agency?
Art. 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
(6) By the expiration of the period for which the
agency was constituted.
49. If the purpose of the agency has been accomplished does
the principal need to notify the agent of the extinguishment of
the Agency?
NO. The extinguishment is automatic.
50. May the principal unilaterally revoke the agency?
Generally, the principal may unilaterally revoke the agency.
51. Exceptions when the principal may not revoke the agency at
will?
Art. 1927. An agency cannot be revoked if a 1.) bilateral
contract depends upon it, or 2.) if it is the means of fulfilling
an obligation already contracted, or 3.) if a partner is
appointed manager of a partnership in the contract of
partnership and his removal from the management is
unjustifiable.
4.) when it is COUPLED WITH INTEREST
52. When is there an Agency “coupled with interest”?
If, for example there is an additional compensation on top of
your monthly salary as an agent.
EXACT SCENARIOS PROVIDED BY ATTY.
BATUNGBAKAL
(a) You are paid monthly as an employee as a broker – THIS
IS NOT AN EXAMPLE OF AGENCY COUPLED WITH
INTEREST, THE PRINCIPAL MAY REVOKE THE AGENCY
AT WILL.
(b) You are paid monthly as an employee as a broker, and in
addition you gain a certain compensation on each sale you
do as a broker – THIS IS AN AGENCY COUPLED WITH AN
INTEREST, THE PRINCIPAL MAY NOT UNILATERALLY
REVOKE THE AGENCY IN THIS CASE.
53. What do you mean by Civil Interdiction
Civil interdiction is a legal restraint upon a person incapable
of managing his estate, because of mental incapacity, from
signing any deed or doing any act to his own prejudice,
without the consent of his curator or interdictor.
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54. Is insolvency as a mode of extinguishment REQUIRE a court
declaration?
NO. Court declaration is not required.
55. Special Power of Attorney VS. General Power of Attorney
GPA is a power of attorney granted for the
ADMINISTRATION OF PROPERTY
SPA is a power of attorney which is required for the exercise
of SPECIFIC ACTS OR ACTS OF STRICT DOMINION
Art. 1878. Special powers of attorney are necessary in the
following cases:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to
obligations already in existence at the time the
agency was constituted;
(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an
action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration;
(6) To make gifts, except customary ones for charity
or those made to employees in the business
managed by the agent;
(7) To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the
things which are under administration;
(8) To lease any real property to another person for
more than one year;
(9) To bind the principal to render some service
without compensation;
(10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a guarantor or
surety;
(12) To create or convey real rights over immovable
property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted
before the agency;
(15) Any other act of strict dominion.
56. Doctrine of Apparent Authority
It is that power which though not actually granted, the
principal knowingly permits the agent to exercise or hold him
out as possessing as such.
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57. What is a Trust?
A fiduciary relationship between one person having an
equitable ownership in a property, and another owning the
legal title to such property, the equitable ownership of the
former entitling him to the performance of certain duties and
the exercise of certain powers by the latter for the benefit of
the former.
Art. 1440. A person who establishes a trust is called the
trustor; one in whom confidence is reposed as regards
property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.
58. Can the trustor be the beneficiary at the same time?
YES, no law prohibits such.
59. Kinds of Trusts
Art. 1441. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the
parties. Implied trusts come into being by operation of law.
60. Resulting Trust vs. Constructive Trust
RESULTING TRUSTS are those created through the intent
of the parties or implied by law from the nature of their
transaction; FOUND IN ARTICLES 1448, 1449, 1451, 1452
& 1453
Art. 1448. There is an implied trust when property is sold,
and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the
latter is the beneficiary. However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of the
one paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of the
child.
Art. 1449. There is also an implied trust when a donation is
made to a person but it appears that although the legal
estate is transmitted to the donee, he nevertheless is either
to have no beneficial interest or only a part thereof.
Art. 1451. When land passes by succession to any person
and he causes the legal title to be put in the name of
another, a trust is established by implication of law for the
benefit of the true owner.
Art. 1452. If two or more persons agree to purchase property
and by common consent the legal title is taken in the name
of one of them for the benefit of all, a trust is created by force
of law in favor of the others in proportion to the interest of
each.
Art. 1453. When property is conveyed to a person in reliance
upon his declared intention to hold it for, or transfer it to
another or the grantor, there is an implied trust in favor of the
person whose benefit is contemplated.
CONSTRUCTIVE TRUSTS are those created by law
irrespective of or even contrary to the intention of the parties
to promote justice, frustrate fraud and to prevent unjust
enrichment; FOUND IN ARTICLES 1450, 1454, 1455 &
1456
Art. 1450. If the price of a sale of property is loaned or paid
by one person for the benefit of another and the conveyance
is made to the lender or payor to secure the payment of the
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JPLCACOSTA – ATP REVIEWER (AY 2018-2019)
BASED ON THE RECITATION, AND LECTURES OF ATTY. BATUNGBAKAL

debt, a trust arises by operation of law in favor of the person

to whom the money is loaned or for whom its is paid. The
latter may redeem the property and compel a conveyance
thereof to him.

Art. 1454. If an absolute conveyance of property is made in

order to secure the performance of an obligation of the
grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by
the grantor when it becomes due, he may demand the
reconveyance of the property to him.

Art. 1455. When any trustee, guardian or other person

holding a fiduciary relationship uses trust funds for the
purchase of property and causes the conveyance to be
made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds
belong.

Art. 1456. If property is acquired through mistake or fraud,

the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from
whom the property comes.

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