Professional Documents
Culture Documents
PARTNERSHIP
By the contract of partnership two or more
persons bind themselves to contribute money,
property or industry to a common fund, with
the intention of dividing the profits among
themselves.
EXECUTIVE COMMITTEE:
EZEKIEL JOSHUA VILLENA overall chairperson, MINISTER MOISES DU chairperson for academics, DJOANIVIE JOMARE
JUNASA chairperson for hotel operations, MARIE MICAELA STA. ANA vice-chairperson for operations, MIKHAIL MAVERICK
TUMACDER vice-chairperson for secretariat, JACKIE LOU LAMUG vice-chairperson for finance, DIANA JEAN TUAZON vicechairperson for edp, JASSEN RALPH LEE vice-chairperson for logistics
SUBJECT COMMITTEE:
JESUS ERICK STA. BARBARA subject chair, APRIL ROSE JAVIER assistant subject chair, KRISYL CANCINO edp, INA
BEATRIZ DE VERA and GWYNETH ALIGA persons and family relations, HARLY JAYSON REYES property, IVA FREYRITZ
ERICA CAYABAN wills and succession, JESUS ERICK STA. BARBARA obligations and contracts, DIORY RABAJANTE sales
and lease, STEPHANIE GARAY and JESUS ERICK STA. BARBARA partnership, agency and trust, RUSKIN PRINCIPE credit
transactions, DIANA FAJARDO and GERWIN PANGHULAN torts and damages, MAY KRISTINE ARELLANO and RAMIL
AUSTRIA land titles and deeds, MA. ANGELA BONIFACIO and ANTHONY VILLAMOR conflict of laws
MEMBERS:
Veda Marie Vedan, Jecky Lamug, Angeli Adriano, Errol Albano, Princess Parreas, Katrine Paula Suyat, Venice Buagin,
Marviglyn Mindo, Mary Jane Perez, Rozzalie Gonzales, Dorothy Kate Punzalan, Ednalyn Saron, Frances Dyan Lim, Katrina
Kalaw, Maria Katrina Rivera, Aizza Gonzales, Kathlyn Jane Cainday, Art John Arongat, , Jose Angelo David, Mei Suyat, Daryl
Ann Tan, Raynan Larosa, Kamille Deanne Lagasca, Karell Marie Lascano, Frances Dyan Lim, Maris Donna Kwok, Mark
Joseph Ayo, Hansel Moraa, Paul Joseph Mercado, Ian Michel Geonanga
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
be considered partners as to Cath even if they
are not really partners (See De Leon, p. 32)
1. Co-ownership of a property does not itself
establish a partnership, even though the
co-owners share in the profits derived from
the incident of joint ownership.
Reason: The law does not imply a
partnership between co-owners or copossesors because of the fact that they
develop or operate a common property,
since they may rightfully do this by virtue
of their respective titles or common
dominion over the property. (De Leon, p.
32)
Example: Atoy and Joey inherited from
their father an apartment which is leased
to third persons. They are merely coowners and not partners.
2. Sharing of gross returns alone does not
indicate a partnership, whether or not the
persons sharing them have a joint or
common right or interest in any property
from which the returns are derived.
Reason: When a business is carried on in
behalf of a given person as a partner, he is
conceived as being interested in its
failures as well as its successes; it is the
chance of gain or loss which characterizes
a business. Take note that in a
partnership, the partners share profits
AFTER satisfying all of the partnerships
liabilities. (De Leon, p. 37-38)
Example: Atoy, owner of a passenger
jeepney, agrees with Jerick, a driver, that
the latter shall have full control and use of
the jeepney to carry passengers, pay for
gasoline and oil, and shoulder the cost of
repairs, and that the gross receipts are to
be divided between them. No partnership
is established as no sharing of profits is
contemplated.
Note: To regard the petitioners as having
formed an unregistered partnership would
result in oppressive taxation. Their original
purpose was to divide the lots for
residential purposes, but they were
compelled to resell because of the high
cost of construction. There must be an
unmistakable
intention
to
form
a
partnership or joint venture (Obillos v. CIR,
et al., 135 SCRA 436; Pascual v. CIR, 166
SCRA 560).
278
279
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
B. Real Property
Where immovable property or real rights
are contributed, regardless of the value
thereof:
a. The CONTRACT ITSELF must be in
writing in a public instrument
b. An
inventory
of
the
property
contributed, signed by the parties is
attached to the public instrument
(Article 1773). Otherwise, if there is no
inventory contract of partnership is
void and no juridical personality.
Moreover, to be effective against third
parties, the partnership must also be
registered in the Registry of Property
of the province where the real property
contributed is found.
Reason: The execution of a public
instrument would be useless if there is
no
inventory
of
the
property
contributed, because without its
designation and description, they
cannot be subject to inscription in the
Registry of property. This will result in
fraud to those who contract with the
partnership in the belief of the efficacy
of the guaranty in which the
immovables may consist. (5 Tolentino,
p. 326)
Note:
The
more
important
consideration is that the real property
was contributed, in which case an
inventory of the contributed property
duly signed by the parties should be
attached to the public instrument, or
else there is legally no partnership to
speak of (Litonjua, Jr. v. Litonjua, Sr.,
et al., G.R. Nos. 166299-300,
December 13, 2005). Art. 1773
applies also if aside from real
property, cash or personal property is
contributed. The inventory, however,
need not include the personalty. (5
Paras 566)
c.
280
Partnership
and
Co-ownership
Distinguished (CJP3-D2AFT)
Partnership
Co-Ownership
Creation
Always created by a
contract, either express
or implied
Juridical personality
Has a juridical
personality separate and Has no juridical
distinct from that of each personality
partner
Purpose
Common enjoyment of a
thing or right;
Realization of profits
Duration
An agreement to keep
the thing undivided for
more than 10 years is not
allowed
Dissolution
Death or incapacity of a
partner dissolves the
partnership
Death or incapacity of a
co-owner does not
necessarily dissolve the
co-ownership
Agency or Representation
As a rule, there is mutual As a rule, there is no
agency
mutual representation
Form
In general there is no
required form (See
exceptions)
No public instrument is
needed even if real
property is the object of
the co-ownership
Transfer of interests
A partner may not
dispose of his individual
interest in the partnership A co-owner can dispose
so as to make the
of his share without the
assignee a partner
consent of the others
without unanimous
consent
Corporation
Creation
Created
agreement
by
Number of incorporators
Requires at least five
incorporators (except a
corporation sole)
Partnership
Partnership may be
established for any
period of time stipulated
by the partners
Management
When management is
not agreed upon, every Vested in the board of
partner is an agent of the directors or trustees
partnership
Effect of mismanagement
A partner as such can
sue a co-partner who
mismanages
Right of succession
No such right
Transferability of interest
Partner cannot transfer
his interest in the
partnership so as to
make the transferee a
partner without the
unanimous consent of all
the existing partners
Stockholder has
generally the right to
transfer his shares
without prior consent of
the other stockholders
Term of existence
Firm name
Corporation may adopt
Limited partnership is
any name provided it is
required by law to add
not the same as or
the word Ltd. to its
similar to any registered
name
firm name
Dissolution
May be dissolved at any Can only be dissolved
time by any or all of the with the consent of the
partners
State
Governing Law
Powers
Can exercise only the
May exercise any power
powers expressly
authorized by the
granted by law or implied
partners
from those granted or
incident to its existence
Corporation
the
JOINT VENTURE
An association of persons or companies jointly
undertaking some commercial enterprise;
generally all contribute assets and share risks
(Kilosbayan, Incorporated v. Guingona, Jr.
GR. No. 118910 November 16, 1995).
Requisites:
1. A community of interest in the
performance of the subject matter;
2. A right to direct and govern the policy in
connection therewith;
3. Duty to share profits and losses.
Note:
Under the Civil Code, a partnership may
be particular or universal, and a particular
partnership may have for its object a
specific undertaking.
Hence, a joint
venture may be treated like any other
contract, innominate in nature to be
regulated and governed primarily by the
stipulations of the parties thereto and
suppletorily by the general provisions of
the Civil Code on obligations and
contracts, by rules governing the most
analogous contracts and by the customs
of the place.
The main distinction in common law
jurisdiction
is
that
partnership
contemplates a general business with
some degree of continuity, while joint
venture is formed for the execution of a
single transaction and is thus of temporary
nature
281
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
CLASSIFICATIONS OF PARTNERSHIP:
2
(OLDER-P )
1. As to Object:
a. Universal partnership
i. Of all present property
ii. Of profits
b. Particular partnership
2. As to Liability of partners:
a. General partnership
b. Limited partnership
3. As to Duration:
a. Partnership at will
Note: A partnership that does not fix
its term is a partnership at will. The
birth and life of a partnership at will is
predicated on the mutual desire and
consent of the partners. Verily, any
one of the partners may, at his sole
pleasure, dictate the dissolution of the
partnership at will. He must, however,
act in good faith, not that the
attendance of bad faith can prevent
the dissolution of the partnership but
that it can result in a liability for
damages (Ortega, et al. v. CA, et al.,
SCRA 529).
b. Partnership with a fixed period
4. As to legality of Existence:
a. De jure partnership
b. De facto partnership
5. As to Representation to others:
a. Ordinary or real partnership
b. Ostensible or partnership by estoppel
6. As to Publicity:
a. Secret partnership
b. Notorious or open partnership
7. As to Purpose:
a. Commercial or trading
b. Professional or non-trading
PROFESSIONAL PARTNERSHIP
Under Art. 1767, two or more persons may
also form a partnership for the exercise of A
PROFESSION. A profession has been
defined as a group of men pursuing a learned
art as a common calling in the spirit of public
service. (De Leon, p. 10)
A partnership that has for its object the
exercise of A PROFESSION is a particular
partnership (Art. 1783). This is one case
where a partnership is composed entirely of
industrial partners, (See 4 Tolentino, p. 329)
282
UNIVERSAL PARTNERSHIP
A. Universal Partnership of All Present
Property One wherein the partners
contribute all the property which actually
belong to them to a common fund, with the
intention of dividing the same among
themselves, as well as all the profits which
they may acquire therewith (Art. 1778).
The property which belongs to each of
the partners at the time of the
constitution
of
the
partnership,
becomes the common property of all
the partners, as well as the profits
which they may acquire therewith.
As a rule, aside from the contributed
properties only the PROFITS of the
contributed COMMON PROPERTY
(not other profits) are included. Thus,
should a partner SUBSEQUENTLY
acquire a property as remuneration for
his work, such property and its fruits
are not to be enjoyed by the universal
partnership
of
all
PRESENT
property.(5 Paras, p. 573)
However, profits from other sources
may become COMMON, only if there
is a stipulation to such effect. (5
Paras, p. 573)
Unless otherwise stipulated in the
articles of universal partnership it will
be presumed to be a partnership of
profits.
Future
properties
cannot
be
contributed.
Thus,
property
subsequently
acquired
by
(1)
inheritance, (2) legacy or (3) donation
cannot be included by stipulation
except the fruits thereof.
B. Universal Partnership of Profits One
which comprises all that the partners may
acquire by their industry or work during the
existence of the partnership and the
usufruct of movable or immovable property
which each of the partners may posses at
the time of the celebration of the contract
(Art. 1780).
283
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
a. Expelled partner one who is
expelled from the partnership by the
other partner/s for a valid cause.
b. Expelling partner partner who
caused the expulsion of a partner for a
valid cause.
Capitalist
and
Industrial
2
Distinguished (CP L)
Capitalist Partner
Partner
Industrial Partner
Contribution
Contributes money or
property
Profits
Shares in the profits
according to agreement Receives a just and
thereon; if none, pro
equitable share
rata to his contribution
Losses
1.
2.
3.
Exempted as to losses
as between partners;
but is liable to third
persons, without
prejudice to
reimbursement from the
capitalist partners
Note: Only in the
difference representing
the net profits does the
industrial partner share.
But if, on the contrary,
the losses exceeded the
income, the industrial
partner does not share
in the losses (Santos v.
Sps. Reyes, G.R. No.
135813, October 25,
2001).
OBLIGATIONS OF PARTNERS
PARTNERSHIP TERM
A partnership begins from the moment of the
execution of the contract, unless it is otherwise
stipulated (Art. 1784).
284
285
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
Note that the industrial partners are
exempted as he is already giving his entire
industry.
Every
partner
is
responsible to the partnership for
damages suffered by it through his fault.
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
partners EXTRAORDINARY efforts in
other activities of the partnership,
UNUSUAL profits have been realized (Art.
1794).
286
287
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
General Rule: Each one may
execute all acts of administration
Exceptions: If any such partner
should oppose,
i. Decision of the MAJORITY of
the managing partners shall
prevail
ii. In case of a tie, decision of the
partners
having
the
CONTROLLING INTEREST
shall prevail, provided that
they are also managers (5
Paras, p.601)
The right to oppose is not given
to non-managers because in
appointing their other partners
as
managers,
they
have
stripped themselves of all
participation
in
the
administration.
In case of an irreconcilable
deadlock, those who vote
against the contract shall
prevail, the same having been
entered into without authority.
b. With STIPULATION requiring
unanimity of action (Art. 1802)
General rule: Unanimous consent
of ALL the managing partners
(even if one of the managers is
absent or incapacitated) shall be
necessary for the validity of the
acts and absence or disability of
any managing partner cannot be
alleged
Exception: When there is an
imminent danger of grave or
irreparable
injury
to
the
partnership
The requirement of previous
approval applies only to execution
of formal contracts in writing and
not to routine transactions, such
as ordinary purchases and sales
for a firm engaged in the buying
and selling merchandise of all
kinds, which naturally come within
the scope of the general authority
of the manager of a business (5
Tolentino, p.342)
B. When manner of management has not
been agreed upon (Art. 1803)
288
Alteration
contemplates
useful
expenses, not necessary ones.
In case of conflict, the rules provided
by Art. 1801 shall govern
Management participation
of
289
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
other court possessed of jurisdiction) and
ask that Joes interest the partnership be
charged for the payment to her of
whatever has not been paid by him with
interest thereon (5 Paras, p.624).
Act
binds
the
Dominion
or
290
iv.
v.
vi.
vii.
c.
Acts in contravention of a
restriction on authority
Partnership is not liable to
third persons having actual or
presumptive knowledge of the
restrictions
291
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
faith of such representation given credit to the
partnership.
No preference is given to creditors who
relied on the existence of the fictitious firm.
(5 Paras, p.652)
iii.
DISSOLUTION
292
iv.
b. In CONTRAVENTION OF THE
AGREEMENT between the partners,
where the circumstances do not
permit a dissolution under any other
provision of this article, by the express
will of ANY partner at any time;
c. By any event which MAKES IT
UNLAWFUL for the business of the
partnership to be carried on or for the
members to carry it on in partnership;
Take note, however, that if the
business or the object had been
unlawful from the very beginning,
the firm never had juridical
personality.
d. When a SPECIFIC thing which a
partner had promised to contribute to
the partnership, perishes BEFORE the
delivery; IN ANY CASE by the loss of
the thing, when the partner who
contributed it having reserved the
ownership
thereof,
has
only
transferred to the partnership the use
or enjoyment of the same; but the
partnership shall NOT be dissolved by
the loss of the thing when it occurs
AFTER the partnership has acquired
the ownership thereof;
Reason: The partnership is dissolved
because the partner has NOT or is
deemed to have not given his
contribution.
e. By the DEATH of any partner;
293
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
dissolution had not been
published in a newspaper
of general circulation
b. When partnership is NOT bound
to third persons after dissolution
i. Where
partnership
was
dissolved because it was
unlawful to carry on the
business, except when the act
is for winding up
ii. Where the acting partner in
the transaction has become
insolvent
iii. Where
the
partner
is
unauthorized to wind up,
except if the transaction is
with third persons in good faith
(same
circumstances
as
defined above)
iv. Where act is NOT appropriate
for winding up or for
completing
unfinished
transactions
v. Completely NEW transaction
which
would
bind
the
partnership if dissolution had
not taken place with third
persons in bad faith
UPON
294
One formed by two or more persons having as
members one or more general partners and
295
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
MANAGEMENT
PARTNERSHIP
OF
A
partner
LIMITED
has
no
General Partner/
Partnership
296
Limited Partner/
Partnership
General Partner/
Partnership
partnership
Limited partner has no
share in the
management of a
limited partnership and
renders himself liable to
partnership creditors as
a general partner if he
takes part in the control
of the business
Extent of liability
Limited partners liability
extends only to his
capital contribution
General partner is
personally liable for
partnership obligations
Firm name
Firm name must be
followed by the word
limited
No such requirement
No such prohibition in
the case of a limited
partner
who
is
considered
a
mere
contributor
to
the
partnership
General
partner
is
prohibited
from
engaging in a business
which is of the SAME
kind of business in
which the partnership is
engaged, if he is a
capitalist partner, or in
ANY of business for
himself if he is an
industrial partner
Contribution
Limited partner must
General partner may
contribute
cash
or
contribute
money,
property
to
the
property or industry to
partnership
but
not
the partnership
services
Creation
General Partner/
Partnership
Limited partnership is
created
by
the
members
after
substantial compliance
in good faith with the
requirements set forth
by law
General partnership, as
a general rule, may be
constituted in any form
by contract or conduct of
the partnership
Transferability of interest
Limited
partners
interest
is
freely
assignable,
with
assignee acquiring all
the rights of the limited
partner
subject
to
certain qualifications
General
partners
interest
in
the
partnership may not be
assigned as to make the
assignee a new partner
without the consent of
the
other
partners,
although
he
may
associate a third person
with him in his share
of
c.
Retirement,
death,
insanity or insolvency of
a
general
partner
dissolves
the
partnership
ALLOWABLE TRANSACTIONS OF A
LIMITED PARTNER (Art. 1854)
1. Transacting other business with the
partnership
2. Receiving a pro rata share of the
partnership assets with the general
creditors if he is NOT also a general
partner
3. Granting loans to the partnership
Note: In transacting a business with the
partnership as a non-member, the limited
partner is considered a non-partner creditor
PROHIBITED
TRANSACTIONS
OF
A
LIMITED PARTNER (Art. 1854)
1. Receiving or holding as collateral security
any partnership property; or
2. Receiving any payment, conveyance, or
release from liability if it will prejudice the
partnership creditors
Note:
297
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
Violation of the prohibition will give rise to
the presumption that it has been made to
defraud partnership creditors
The prohibition is NOT ABSOLUTE, there
is no such prohibition if the partnership
assets are sufficient to discharge
partnership liabilities to persons not
claiming as general or limited partners.
DISSOLUTION
OF
A
LIMITED
PARTNERSHIP
1. Retirement, death, insolvency, insanity, or
2
civil interdiction (CDI R) of a GENERAL
PARTNER
Unless the business is continued by
remaining general partners (under a
right so to do stated in the certificate
or with the consent of all members)
(Art. 1860)
2. Liability as trustee
a. Specific property stated in the
certificate as contributed by him, but
which was not contributed or which
has been wrongfully returned; AND
b. Money or other property wrongfully
paid or conveyed to him on account of
his contribution
Note: These liabilities can be waived or
compromised only by consent of ALL the
members; but a waiver or compromise shall
NOT affect the right of a creditor of a
partnership who extended credit or whose
claim arose after the filling and before the
cancellation or amendment of the certificate, to
enforce such liabilities.
298
AN
AGENCY
299
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
al., G.R. No. 158585, December 13,
2005).
FORMS OF AGENCY
1. Express
2. Implied
a. From the acts of the principal
b. From his silence or lack of action
c. Failure to repudiate the agency
knowing that another person is acting
on his behalf without authority (Art.
1869).
Sale
Agency
and
Distinguished
Agency
Lease
of
Services
Lease Of Services
Principle of
Principle of employment
representation is applied. is applied.
Extinguished at will of the Concurrence of parties is
principal.
necessary.
300
Agent exercises
discretionary power
Employee exercises
ministerial functions only
Preparatory contract
Principal contract
Special Agent
Scope of Authority
Usually authorized to do
all acts connected with
the business or
employment in which he
is engaged.
Authorized to do only
acts in pursuance of
particular instructions or
with restrictions
necessarily implied from
the acts to be done
Continuity
Conducts a series of
transactions involving a
continuity of service.
Termination of Authority
Apparent authority does
not terminate by the
mere revocation of his
authority without notice
to the third party
Mere revocation is
effective to terminate the
authority as to third
persons because the
third person has a duty to
inquire
301
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
general terms, it is limited only to acts of
administrations. (Dominion Insurance Corp. v.
CA, G.R. No. 129919, February 6, 2002)
Acts of administration are those which do
not imply the authority to alienate (De
Leon, p.436)
SPECIAL POWER OF ATTORNEY (SPA)
An instrument in writing by which one person,
as principal, appoints another as his agent and
confers upon him the authority to perform
certain specified acts or kinds of acts on behalf
of the principal.
Art. 1878 does not state that the special
authority be in writing (De Leon, p.443)
However, should the law require that such
special authority be in writing in order for the
same or the resulting contract to be valid or
enforceable, such requirement is absolute and
indispensable.
Note: It need not be notarized; except where it
is executed in a foreign country, must be
certified in accordance with the Rules of Court.
Instances Where SPA is Necessary (Art.
1878) (PECWEM-LLB-BOCARO)
1. To make payments as are not usually
considered as acts of administration;
2. To effect novations which put an end to
obligations already in existence at time the
agency was constituted;
3. To compromise, submit questions to
arbitration, renounce the right to appeal
from a judgment, waive objections to the
venue of an action or 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.
Note: The authority of an agent to execute
a contract of sale of real estate must be
conferred in writing and must give him
specific authority, either to conduct the
general business of the principal or to
execute a binding contract containing
terms and conditions which are in the
contract he did execute. The express
mandate required by law to enable an
appointee of an agency (couched) in
general terms to sell must be one that
expressly mentions a sale or that includes
a sale as a necessary ingredient of the act
mentioned. For the principal to confer the
right upon an agent to sell real estate, a
power of attorney must so express the
powers of the agent in clear and
302
303
CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
3. To exercise reasonable care, skill and
diligence
SPECIFIC OBLIGATIONS OF AN AGENT TO
2
PRINCIPAL (CAFO-A DALARPD-IBIR)
1. To carry out the agency which he has
accepted (Art. 1884)
2. To answer for damages which through his
performance the principal may suffer (Art.
1884)
3. To finish the business already begun on
the death of the principal should delay
entail any danger (Art. 1884)
4. To observe diligence of a good father of a
family in the custody and preservation of
the goods forwarded to him by the owner
in case he declines an agency, until an
agent is appointed (Art. 1885)
5. To advance the necessary funds should
there be a stipulation to do so (Art. 1886)
6. To act in accordance with the instructions
of the principal, and in default thereof, to
do all that a good father of a family would
do (Art. 1887)
7. Not to carry out the agency if its execution
would manifestly result in loss or damage
to the principal (Art. 1888)
8. To answer for damages if there being a
conflict between his interest and those of
the principal, he should prefer his own
(Art. 1889)
9. Not to loan to himself if he has been
authorized to lend money at interest (Art.
1890)
10. To render an account of his transactions
and to deliver to the principal whatever he
may have received by virtue of the agency
(Art. 1891)
Note: A stipulation exempting the agent
from the obligation to render an account
shall be VOID (Art. 1891).
Obligation to account not applicable
(MIL):
a. The duty embodied in Art. 1891 will
not apply if the agent or broker acted
only as a middleman with the task of
merely bringing together the vendor
and the vendee, who themselves
thereafter will negotiate on the terms
and conditions of the transaction
(Domingo vs. Domingo, 42 SCRA 131
1971).
b. Neither would the rule apply if the
agent or broker had informed the
principal of the gift or bonus or profit
he received from the purchaser and
his principal did not object thereto.
(Ibid.)
304
c.
Authority
The sum total of the
powers committed or
permitted to the agent
by the principal, may be
limited in scope and
such limitations are
themselves a part of the
authority
Relates to the subject
with which the agent is
empowered to deal or
the kind of business or
transactions upon which
he is empowered to act
Limitations of authority
are operative as against
those who have or are
charged with knowledge
of them and ignorance
of the authority will not
be any excuse (see Art.
1900).
Contemplated to be
made known to the third
person dealing with the
agent. Third persons
must therefore verify or
investigate the authority.
Where
instructions are ambiguous, the agent is
not chargeable with disobedience or its
consequences in case he makes an
honest mistake and adopts a construction
different from that intended by the
principal. It is the duty of the principal to
couch his instructions in clear terms.
3. Insubstantial departure An agent may
not be said to have breached the agency
contract by reason of an insubstantial
departure from the principals instructions,
which does not affect the result.
SCOPE OF AGENTS AUTHORITY AS TO
THIRD PERSONS (Art. 1900)
Includes not only the actual authorization
conferred upon the agent by his principal, but
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also that which was apparently or impliedly
delegated to him.
1. Where authority not in writing very
person dealing with an assumed agent is
put upon inquiry and must discover upon
his peril, if he would hold the principal
liable, not only the fact of the agency but
the nature and extent of the authority of
the agent.
Note: If he does not make such inquiry, he
is chargeable with knowledge of the
agents authority, and his ignorance of that
authority will not be any excuse (Pineda v.
CA, 45 SCAD 30, 226 SCRA 754).
2. Where authority in writing such person is
not required to inquire further than the
terms of the written power of attorney.
METHODS
OF
BROADENING
AND
RESTRICTING
AGENTS
AUTHORITY
(IUNDE)
1. By implication
2. By usage and custom
Except:
a. Where it is sought to vary the terms of
an express authorization;
b. Where it is sought thereby to dispose
with a legal requirement enacted for
the principals benefit;
c. Where it is sought thereby to change a
rule of law or as to dispense with a
formality required by law; and
d. Where it is sought to vary an essential
quality of the agency relationship.
3. By necessity
Requisites:
a. The emergency really exists;
b. The agent is unable to communicate
with the principal;
c. The agents enlarged authority is
exercised for the principals protection;
and
d. The means adopted are reasonable
under the circumstances.
4. By certain doctrines
a. Of apparent authority;
b. Of liability by estoppel; and
c. Of ratification.
5. By the rule of ejusdem generis.
Third partys liabilities toward agent (CBIT)
1. Where the agent contracts in his own
name for an undisclosed principal, in
306
General Obligations of Principal to Agent
Duties and liabilities of the principal are
primarily based upon the contract and the
validity of the contract between them
SPECIFIC OBLIGATIONS OF PRINCIPAL
TO AGENT (CARIP)
1. To comply with all the obligations which
the agent may have contracted within the
scope of his authority and in the name of
the principal (Art. 1910)
2. To advance to the agent, should the latter
so request, the sums necessary for the
execution of the agency (Art. 1912)
3. To reimburse the agent for what the latter
has advanced (plus interest), even if the
business was not successful, provided the
agent was free from fault (Art. 1912)
4. To indemnify the agent for all the
damages, which the execution of the
agency may have caused the latter without
fault or negligence on his part (Art. 1913)
Note: The agent may retain in pledge the
things which are the object of the agency
until
the
principal
effects
this
reimbursement and pays the indemnity
(Art. 1914). Unlike contractual pledges,
however, the agent is not entitled to the
excess in case the things are sold to
satisfy is claim and the proceeds thereof
are more than the amount due (De Leon,
p. 602)
5. To pay the agent the compensation
agreed upon, or if no compensation was
specified, the reasonable value of the
agents services
Note: Even when the agent has exceeded
his authority, the principal is solidarily
liable with the agent if the former allowed
the latter to act as though he had full
powers. (Art. 1911).
LIABILITY FOR AGENTS ILLICIT ACTS
Rule: Where the fault or crime committed by
agent is not in the performance of an
obligation of the principal, the latter is not
bound by the illicit act of the agent, even if it is
not done in connection with his functions.
Exceptions:
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CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
1. Where the delict or the quasi-delict was
committed by the agent because of
defective instructions from the principal, or
due to the lack of necessary vigilance or
supervision on his part, the principal is
liable for his own negligence;
2. When the agent secures a contract
through fraud, or makes a fraudulent
alienation, or executes a simulated
contract, all of these acts are imputable to
the principal as if done by him, because
the illicit act is inseparable from the
transaction executed for him.
3. When the crime consists in the
performance of an act which is within the
powers of the agent, but becomes criminal
only because of the manner in which the
agent has performed it, the principal is
liable to third persons who act in good
faith. (5 Tolentino, p.426)
APPARENT AUTHORITY
That which though not actually granted, the
principal knowingly permits the agent to
exercise or holds him out as possessing. It is
founded in the conscious permission of acts
beyond the powers granted.
ESTOPPEL BY PRINCIPAL
Where the principal, by his culpable
negligence, permits his agent to exercise
power not granted to him, even though the
principal has no notice or knowledge of the
conduct of the agent.
Note: In implied agency, there is an actual
agency. The principal alone is liable. In agency
by estoppel, the authority of the agent is not
real but only apparent. If the estoppel is
caused by the principal, he is liable to any third
person who relied on the misrepresentation. If
the estoppel is caused by the agent, then the
agent alone is liable.
308
IMPLIED
REVOCATION
MAY
BE
EFFECTED:
1. By the act of the principal in appointing
another agent for the same business or
transaction (Art. 1923);
2. By the act of the principal in directly
managing the business entrusted to the
agent (Art. 1924); or
3. By the act the principal in subsequently
granting a special power of attorney as
regards the same business to another
agent, where he had previously granted a
general power of attorney to one agent
(Art. 1926).
A special power is not revoked by a
subsequent general power of attorney
given to another agent, unless the
latter refers also to the act authorized
under the special power, (5 Tolentino,
p.436)
AGENT MAY WITHDRAW FROM THE
AGENCY
1. Must give notice to the principal
2. Must indemnify should the principal suffer
damages by reason of the withdrawal
unless the agent should base his
withdrawal from the impossibility of
continuing the performance of the agency
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CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
without grave detriment to himself (Art.
1928).
Note: The agent, even if he should withdraw
from the agency for a valid reason, must
continue to act until principal has had
reasonable opportunity to take the necessary
steps to meet the situation (Art. 1929).
Instances When Death of the Principal Does
Not Terminate Agency
1. If the agency has been constituted in the
common interest of the principal and the
agent
2. If it has been constituted in the interest of
a third person who has accepted the
stipulation in his favor (Art. 1930).
AGENCY COUPLED WITH AN INTEREST
An agency wherein the agent has acquired
some interest of his own in the execution of
the authority granted to him, in addition to his
mere interest in the contract of employment
with the resulting gains.
Donation
There is a transfer of
An existing legal
property as well as the
relationship and involves disposition of both legal
the separation of legal
and equitable ownership
and equitable title
except in cases of gifts in
trust.
The beneficiary of a trust
may demand
performance of the
obligation without having
formally accepted the
benefit of the trust in
public document, upon
mere acquiescence in
the formation of the trust
and acceptance under
the second paragraph of
Art. 1311 (stipulations
pour autrui).
310
Contract
A legal obligation based
on an undertaking
supported by a
consideration, which
obligation may or may
not be fiduciary in
character.
Trust
Debt
PROOF OF TRUST
General Rule: Trust whether express or
implied may be proved by parol or oral
evidence.
Exception: An express trust over an
immovable or any interest therein (Art. 1443).
This latter requirement is not for validity but for
purposes of proof.
NECESSITY OF ACCEPTANCE FOR THE
CREATION AND VALIDITY OF A TRUST
RELATIONSHIP
1. Acceptance of the trustee
Not necessary to its existence and
validity since if he declines, the courts
will appoint a trustee to fill the office
that he declines (see Sec. 3 Rule 98
of the Rules of Court).
Note: But a trustees acceptance of an
express trust is necessary to charge him
with the office of the trustee and the
administration of the trust and to vest the
legal title in him.
2. Acceptance of the beneficiary
Essential to the creation and validity of
a trust. However, such acceptance is
presumed if there is no proof to the
contrary and the trust does not impose
any onerous condition upon the
beneficiary.
REQUISITES OF A TRUSTEE TO CLAIM
TITLE BY PRESCRIPTION (RK-CP)
1. He has performed open and unequivocal
acts of repudiation
2. Such positive acts of repudiation have
been made known to the beneficiary or the
cestui que trust
3. The evidence thereon should be clear and
convincing and
4. The period fixed by law has expired (10
years from the time that the repudiation is
made known to the beneficiary in cases of
express trust or resulting trust while 10
years from the time a constructive trust
arises).
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CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
Note: The reckoning point is repudiation of
the trust by the trustee because from that
moment his possession becomes adverse
which gives rise to a cause of action.
A mere silent possession by the trustee
unaccompanied by acts amounting to an
ouster of the cestui que trust cannot be
construed as an adverse possession.
Mere collection of the rents and profits by
the trustee and erecting fences and
buildings adapted for cultivation of the land
held in trust are not equivalent to
unequivocal acts of ouster of the cestui
que trust (Laguna v. Levantino, 71 Phil.
566; Valdez v. Olorga, 51 SCRA 71,
1976).
The
existence
of
express
trusts
concerning real property may not be
established by parol evidence (Art. 1443).
It must be proven by some writing or deed.
Bare allegations do not constitute
evidence
adequate
to
support
a
conclusion. They are not equivalent to
proof under the Rules of Court (Filipinas
Port Services, Inc. v. Go. GR No. 161886.
March 16, 2007).
Respondents cannot rely on the fact that
the Torrens title was issued in the name of
Epifanio and the other heirs of Jose. It has
been held that a trustee who obtains a
Torrens title over property held in trust by
him for another cannot repudiate the trust
by relying on the registration. (Sotto v.
Teves, 175 SCRA 343 (1978). The rule
requires a clear repudiation of the trust
duly communicated by the beneficiary.
The only act that can be construed as
repudiation was when respondents filed
the petition for reconstitution in October
1993. And since petitioners filed their
complaint in January 1995, their cause of
action has not yet prescribed, laches
cannot be attributed to them.
While implied trusts may be proved by oral
evidence,
the
evidence
must
be
trustworthy and received by the courts with
extreme caution, and should not be made
to rest on loose, equivocal or indefinite
declarations. The proof should be as fully
convincing as if the acts giving rise to the
trust obligation are proven by an authentic
document (Filipinas Port Services Inc. v.
Go, supra).
312
Express
Trust
and
Distinguished (CPR):
Express Trust
Implied
Trust
Implied Trust
As to Creation
Created by the intention
of the parties
As to Proof of trust
An express trust over an
immovable property or
any interest therein
cannot be proved by
parol evidence
In constructive trusts,
even if there is no
repudiation, laches may
bar an action to enforce
an implied trust
Exception: if there is
concealment
Resulting
and
Distinguished
Resulting Trust
Constructive
Trust
Constructive Trust
Prescriptive period:
The 10 year prescriptive
period shall be counted
from the time repudiation
is made known to
beneficiary.
Examples:
Illustrated in Articles
Illustrated in Articles
1448, 1449, 1451, 1452,
1450, 1454, 1455, 1456
1453
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CIVIL LAW
PARTNERSHIP, AGENCY AND TRUST
a. The trustee has performed unequivocal
acts of repudiation amounting to an ouster
of the cestui que trust.
b. Such positive acts of repudiation have
been made know to the cestui que trust;
and
c. Evidence thereon is clear and positive
(Vda. De Cabrera v. CA, GR No. 108547.
February 3, 1997).
Other Examples of Implied Trust:
1. The registration of land under Torrens in
the name of one person do not bar
evidence to show it was only held in trust
for another.
2. Certificate of registration of vehicle placed
in the name of a person although the price
was not paid by him but by another.
3. One arising from the agents willful
violation of the trust reposed in him by the
principal by buying for himself the property
he was supposed to buy for the principal
who designated and appointed him to
negotiate with the owner.
4. In consonance with the trust fund doctrine
in Corporation Law, the assets of the
corporation, as represented by the capital
stock, are regarded as trust fund to be
maintained unimpaired for the payment of
corporate creditors.
COMPROMISE
A compromise is a contract whereby the
parties, by making reciprocal concessions,
avoid litigation or put an end to one already
commenced (Art. 2028)
Requisites:
1. Uncertainty of juridical relation;
2. An agreement to eliminate the uncertainty
through
reciprocal
concessions
(5
Tolentino, p.485)
Kinds:
1. Judcial-end a pending litigation
2. Extra-judicial- to prevent a litigation from
arising.
Characteristics:
1. Consensual
2. Reciprocal
3. Onerous
4. Nominate
5. Accessory (in the sense that a prior
conflict is presupposed)
Questions on Which There Can be NO Valid
Compromise
1. The civil status of persons;
314