Agency & Trust Case Digests

CASE NO.
1
Eurotech Industrial Technologies, Inc. v. Edwin Cuizon, Erwin Cuizon
G.R. No. 167552, April 23, 2007
FACTS
- Petitioner is engaged in the importation and distribution of various European industrial
equipment for customers in the Philippines.
- One of petitioners customers is Impact Systems Sales (ISS), a sole proprietorship
owned by respondent Erwin Cuizon (ERWIN) (NOTE: since its a sole
proprietorship, the principal may be ERWIN or ISS). EDWIN is the manager of ISS
and was impleaded in the court in that capacity.
- January to April 1995: petitioner soled to ISS various products allegedly amounting to
P91,338. Respondents also sought to buy from petitioner on unit of sludge pump
valued at P250K. Respondents made a down payment of P50K for said sludge
pump.
- Petitioner refused to deliver the sludge pump to respondents without the latter first
having settled their indebtedness.
- June 28, 1995, respondent EDWIN and Alberto the Jesus, general manager of petitioner,
executed an Assignment of receivables in favor of petitioner. The document stated
that the assignor (EDWIN in his capacity as manager of ISS) had oustanding
receivables from Toledo Power Corp amounting to P365K and that it conveyed said
receivables to assignee (petitioner).
- Following the assignment, the sludge pump was delivered to respondents.
- Respondents, despite the Deed of Assignment, proceeded to collect from Toledo Power
Corp the amount of P365K (evidenced by a Check Voucher and an official receipt
dated August 15, 1995). This was done without the knowledge of petitioner.
- Petitioner made several demands upon respondents to pay their obligation.
Respondents were only able to make partial payments.
- June 11, 1996: Through counsel, petitioner sent a final demand letter stating that
respondents obligations stood at P295K excluding interests and attorneys fees.
- Petitioner filed a complaint for sum of money, damages, with application for
preliminary attachment with the RTC, Cebu City.
- The RTC granted the prayer for the issuance of writ of preliminary attachment.
- CONTENTION OF RESPONDENT: EDWIN alleged that he is not a real party of interest
because he was acting as a mere agent of his principal (ISS) and that in his
transactions with the petitioner, the latter was aware of that fact.
- CONTENTION OF PETITIONER: EDWIN exceeded his authority as an agent and should
bear the effect of the deed of assignment
- RTC: January 29, 2002 dropped respondent EDWIN as a party defendant on the
ground that he was acting on behalf of ISS in the June 28, 1995 transaction, that the
principal (ISS) ratified the act and that petitioner knew about said ratification.
Petitioner cannot claim that the subject contract was entered into by EDWIN in
excess of his powers since ISS made a down payment of P50K two days later
(implied ratification).
- CA: Affirmed decision of RTC
EDWIN acted within his authority as an agent. He did not acquire or incur any liability
arising from the Deed of Assignment. Therefore, he is not a real party in interest in this
case. The SC sustain his exclusion from the suit.
(NOTE: the parties admit of the existence of the agency and all its elements: (1)
consent of the parties to establish the relationship, (2) 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, (4) the agent acts within the scope of his authority)
In a contract of agency, an agent is not personally liable to the party with whom he
contracts. However, there are two instances when an agent is personally liable to a
third person: (a) when he expressly binds himself to the obligation or (b) when he
exceeds his authority and he does not give the other party sufficient notice of his
powers. EDWIN does not fall within either instance. The Deed of Assignment clearly
stated that EDWIN signed thereon as the sales manager of ISS. The position of sales
managers presupposes the grant of broad powers necessary to conduct the business of
the principal. In the absence of a contrary agreement, a managing agent can enter into
contracts that he deems reasonably necessary for the protection of the interests of the
principal entrusted to him.
EDWIn acted within his authority when he signed the Deed of Assignment. Petitioner
had refused to deliver the sludge pump until full payment. It can be assumed that ISS
needed the pump for its business since it paid the down payment of P50K and
persisted in negotiating with the petitioner (culminating in the execution of the Deed
ofi Assignment). EDWINs participation in the deed was reasonably necessary in order
for him to protect the business of ISS. Had he not acted in the way he did, the business
of ISS would have been adversely affected.
It was also noted that petitioner sought to recover from both ERWIN and EDWIN
(agent). Under Art. 1897, NCC, a party may recover from the principal if the agent
acted within his authority, or from the agent in the instances mentioned above.
However, the law does not provide that, in case of excess authority by the agent, the
third party can recover from both principal and agent.
CASE NO. 2
RALLOS v FELIX GO CHAN & SONS REALTY CORPORATION
G.R. No. L-24332, January 31, 1978
FACTS:
1.
2.
ISSUES
- W/N respondent EDWIN was an agent acting on behalf of ISS, incurred no personal
liability and should be dropped as defendant from the instant case.
3.
4.
RULING
5.
6.
The petition is DENIED and the decision of the RTC is AFFIRMED.
AGENCY AND TRUST CASE DIGESTS
Concepcion and Gerundia Rallos were sisters and registered co-owners of a

parcel of land.
In 1954, they executed an SPA in favor of their brother, Simeon Rallos,
authorizing him to sell for and in their behalf the said parcel of land.
On March 1955, Concepcion died.
On September 1955, Simeon sold the undivided shares of his sisters to Felix
Go Chan and Sons realty Corp.
The deed of sale was registered and the previous TCT was cancelled.
On May 1956, Ramon Rallos, as administrator of the Intestate Estate of
Concepcion, filed a complaint with the CFI of Cebu, praying:
a. that the sale be declared unenforceable, and said share be reconveyed to
the deceased estate;
ATTY. JOSH CAROL VENTURA
b.
7.
8.
9.
that the TCT issued in the name of Felix Go Chan and Sons Realty
Corporation be cancelled; and
c. that the plaintiff be indemnified by way of attorneys fees and payment of
costs of suit.
The Trial Court- declared that the absolute sale is null and void, insofar as the
pro-indiviso share of Concepcion in the property, cancel the TCT issued to
Felix Go Chan and Sons Realty Corp., and sentencing the defendant Juan
Borromeo, the administrator of the estate of Simeon Rallos, to pay the plaintiff
(estate of Concepcion).
Felix Go Chan and Sons Realty Corp, appealed to the CA, and resolved in favor
of the corporation.
Ramon Rallos filed MR but was denied, hence this petition.
ISSUE:
WON the sale of the undivided share of Concepcion Rallos valid when it was executed
by her agent after Concepcions (principal) death.
HELD:
NO. The sale is null and void.
Extinguishment of Agency:
The general rule in Article 1919 of the NCC is that death is one of the causes for the
extinguishment of agency. There being an integration of the personality of the principal
into that of the agent, it is not possible for the representation to continue once the
death of either is established.
There are certain exceptions,
a.
b.
that the agency is couple with an interest (Article 1930)

the agent acted without knowledge of the death of the principal, and that the
3rd person who contracted with the agent acted in good faith. (Article 1931)
In this case, Article 1930 is not involved because admittedly the SPA executed in favor
of Simeon was not coupled with an interest. However, under Article 1931, an act done
by the agent after the death of the principal is valid and effective if the 2 conditions
mentioned concur. It was established that Simeon Rallos had knowledge of his
principals death (Concepcion) when he made the sale, Article 1931 will not apply. The
general rule shall apply then that any act of an agent after the death of the principal is
void ab initio. Simeons act of selling the share of Concepcion after her death is
therefore null and void.
Revocation by principal distinguished from revocation by operation of law:
The respondent argued that no notice of the death was annotated on the OCT
regarding the death of Concepcion hence the heirs must suffer the consequences of
such omission. The SC ruled that although a revocation of a power of attorney to be
effective must be communicated to the parties concerned, yet a revocation by
operation of law, such as death of the principal is, as a rule, instantaneously effective
inasmuch as by legal fiction the agents exercise of authority is regarded as an
execution of the principals continuing will. With death, the principals will ceases or is
terminated; the source of authority is extinguished.
Agency:
The relationship of agency is whereby one party called the principal (mandate),
authorizes another, called the agent (mandatario), to act for and his behalf in
transactions with 3rd persons.
The essential elements of agency are:
a.
b.
c.
d.
there is consent, express or implied, of the parties to establish the

relationship;
the object is the execution of a juridical act in relation to a third person;
the agent acts as a representative and not for himself; and
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 per se. He who acts through another acts himself.
DISPOSITION:
in view of all the foregoing, we set aside the decision of respondent appellate court,
and affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the CFI of
Cebu, quoted in pages 2 and 3 of this Opinion, with cost against respondent
corporation at all instances. So ordered.
CASE NO. 3
Inland Reality Investment Service, Inc. vs. CA
G.R. No. 76969, June 9, 1997
FACTS:
Herein petitioner, Inland Reality Investment Service, Inc., was engaged in a

real estate business and brokerage. Herein respondent, Araneta Inc., was selling its
9,800 shares in Archeticts Building, Inc. The latter, thru its assistant general manager,
herein co-respondent, J. Armando Eduque, granted to petitioners a 30-day authority to
sell said stocks at P1,500 per share or for a total of P9,800,000. Petitioners were able to
look for prospective buyers, among them was Stanford Microsystems, Inc. which
counter-proposed that the stocks should be sold to them at P1,000 per share payable
in five years with an interest of 12% per annum.
Upon petitioners receipt of the counter-proposal, Inland Reality notified the
respondents. However, the latter replied that the price was too low and suggested that
plaintiffs see if the price and terms of payment could be improved upon by Stanford.
Thereafter, the authority to sell was extended several times: (1) October, 2, 1975 for
30 days from said date, (2) October 28, 1975 for 30 days from said date, and (3)
December 2, 1975 for 30 days from said date.
On July 8, 1977, petitioner finally sold the 9,800 shares of stock in Architects'
Bldg., Inc. to Stanford Microsystems, Inc. for P13,500,000.00. On September 6, 1977,
plaintiffs demanded formally from respondents, through a letter of demand, for
payment of their 5% broker's commission at P13,500,000.00 or a total amount
of P675,000.00 x x x which was declined by respondents on the ground that the claim
has no factual or legal basis. Respondents contend that, after their authority to sell
expired thirty (30) days from December 2, 1975, or on January 1, 1976, petitioners
abandoned the sales transaction and were no longer privy to the consummation and
documentation thereof. Petitioners interposed that Greogorio Araneta III, in behalf of

Araneta, Inc., renewed that authority to sell granted to the petitioners for another 30
days after the last extension stated above.
RTC: Dismissed the petitioners complaint for collection of unpaid brokers
commission.
CA: Dismissed the petioners appeal. CA found the contention of the
respondents meritorious. There was nothing in the record or in the testimonial
evidence that the authority extended 30 days from the last date of extension was ever
reserved nor extended, nor has there been any communication made to defendants
that the plaintiff was actually negotiating with Stanford a better price than what was
previously offered by it.
ISSUE: Whether or not plaintiffs are entitled to brokers commission regardless of the
expiration of their contract of agency and their authority to sell.
Facts:
Angeles filed a complaint on April 1, 1997 for Specific Performance with Damages
against Doles, alleging that Doles was indebted to her by personal loan in the amount
of P405,430.00. On October 5, 1996, by virtue of a Deed of Absolute Sale, Doles ceded
to Angeles a parcel of land in order to satisfy her loan, and that this was mortgaged to
National Home Mortgaged Finance Corporation (NHMFC) to secure another loan of
Doles to the entity, with the condition that Angeles shall assume the undue balance
and pay the monthly amortization. Angeles then learned that Doles had incurred
arrearages but denied and refused to pay the same. Angeles also alleged that Doles
refused to remit the rent collected from the tenant occupying the property, and also
refused to cooperate with NHMFC for the transfer of the title of the property.
RULING:
SC ruled in favor of the respondents. . From September 16, 1975 to January 1,
1976, when petitioners' authority to sell was subsisting, if at all, petitioners had
nothing to show that they actively served their principal's interests, pursued to sell the
shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the sale
to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more
than one (1) year and five (5) months between the expiration of petitioners' authority
to sell and the consummation of the sale to Stanford, to be a significant index of
petitioners' non-participation in the really critical events leading to the consummation
of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking
price, the finalization of the terms and conditions of the sale, the drafting of the deed
of sale, the processing of pertinent documents, and the delivery of the shares of stock
to Stanford. Certainly, when the lapse of the period of more than one (1) year and five
(5) months between the expiration of petitioners' authority to sell and the
consummation of the sale, is viewed in the context of the utter lack of evidence of
petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during
that period and in the subsequent processing of the documents pertinent to said sale,
it becomes undeniable that the respondent Court of Appeals did not at all err in
affirming the trial court's dismissal of petitioners' claim for unpaid brokerage
commission.
Doles denied that she borrowed money from Angeles, but only that she referred her
friends to Angeles whom she knew to be engaged in the business of lending money in
exchange of personal checks through her capitalist Arsenio Pua. She also averred that
some of her friends borrowed money from Angeles and issued personal checks in
payment of the loans, but the checks bounced for insufficiency of funds. Although she
tried to assist Angeles to collect from the borrowers, she could no longer locate them.
Because of this, Angeles became furious and threatened her with a criminal case. Thus,
Doles alleged that she was forced to issue eight checks amounting to P350,000 to
answer to the bounced checks of the borrowers she referred, and although she
informed Angeles that they were not sufficiently funded, the latter still deposited the
checks and such were dishonored. Under the threat of a criminal case for violation of
BP 22, Doles alleged that she was forced to execute the Absolute Deed of Sale over her
property, that there was no valid consideration, that she did not appear before a notary
public, and that the CTC on the deed was not hers.
RTC Ruling:
Sale was void for lack of cause or consideration. Angeles admission that the borrowers
are friends of Doles and that the checks issued by them in payment of the loan negates
the cause or consideration of the contract of sale between Angeles and Doles.
Moreover, property is not solely owned by Doles.
CASE NO. 4
Doles v. Angeles, 492 SCRA 607 (2006); AGENCY IS A PREPARATORY
CONTRACT
CA Ruling:
RTC decision is reversed and set aside. Doles is really the borrower and in turn would
re-lend the amount to her friends. Hence, the deed of absolute sale was supported by
valid consideration. All transactions were made by and between Doles and Angeles,
and Doles friends never presented themselves to respondent. In fact, the money
borrowed was deposited in Doles bank account, and payments for the loan were
deposited by Doles to the bank account of Angeles. Doles herself admitted that she
was re-lending the money loaned from Angeles to other individuals for profit.
Doles filed for Motion for Reconsideration with the CA, arguing that Angeles
categorically admitted in open court that she acted only as agent of Arsenio Pua, the
principal financier, and hence she has no legal capacity to sue Doles. Motion was
denied.
With respect to the admission of petitioner that she is "re-lending" the money loaned
from respondent to other individuals for profit, it must be stressed that the manner in
which the parties designate the relationship is not controlling. It will be an agency
whether the parties understood the exact nature of the relation or not.
That both parties acted as mere agents is shown by the undisputed fact that the
friends of petitioner issued checks in payment of the loan in the name of Pua. If it is
true that petitioner was "re-lending", then the checks should have been drawn in her
name and not directly paid to Pua.
The finding of the CA that the disbursements and payments for the loan were made
through the bank accounts of Doles and Angeles, it is merely for reasons of
convenience and practical utility.
Issue:
Whether or not the Deed of Absolute Sale was supported by valid cause or
consideration
With regards to the conveyance of the property and the condition that Angeles shall
assume the balance of the mortgage loan, the petitioner nor her father did not hold
any direct interest on the property in question so as to validly constitute a mortgage
thereon and to effect the delivery of the object of the sale. What is worse, there is a
notation that the TCT itself has been "cancelled."
Held:
No, the deed was not supported by valid cause or consideration.
Doles is merely the agent of the debtors, some of whom are her friends and others
were merely referred. On the other hand, Angeles is estopped to deny that she herself
acted only as an agent of Arsenio Pua, her disclosed principal. In this case, Doles knew
that the financier of Angeles is Pua; and Angeles knew that the borrowers are friends of
Doles.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. The complaint is DISMISSED.
CASE NO. 5
The Shell Company of the Philippines, LTD. vs. Firemens Insurance Company
Newark, New Jersey Commercial Casualty Insurance Co., Salvador Sision,
Porfirio de la Fuente & CA
FACTS:
The CA is incorrect when it considered the fact that the "supposed friends of Doles, the
actual borrowers, did not present themselves to Angeles" as evidence that negates the
agency relationshipit is sufficient that Doles disclosed to Angeles that the former was
acting in behalf of her principals, her friends whom she referred.
On September 3, 1947, Salvador Sison brought his Plymouth car to the Shell
Gasoline and Service Station for washing, greasing and spraying. After more than an
hour of washing and greasing, the job was about to be completed except for an
ungreased portion underneath the vehicle which could not be reached. So, the lifter
was lowered a little by Alfonso Adriano and while doing so, the car for unknown reason
accidentally fell and suffered damage.
The owner of the car forth with notified the insurers who ordered their adjustor
to investigate the said incident and was brought to the Philippine Motors Inc. The car
was restored to running condition after repairs which amounted to P 1651.88 and
returned to the owner who assigned his right to collect to the Firemens Insurance
Company and the Commercial Casualty Insurance Company.
On December 6, 1947 the owners and the insurers brought an action against
Shell and Porfirio de la fuente (operator) in the Court of First Instance to recover from
them, jointly and severally the sum mentioned above.
entered into by and between the plaintiff, as party of the first part, and J. Parsons (to
whose rights and obligations the present defendant later subrogated itself), as party of
the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH
MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS
IN THE VISAYAN ISLANDS.
The Trial court dismissed the complaint but the CA reversed and sentenced
the defendant to pay the sum with legal interests and costs.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the
Visayan Islands to J. Parsons under the following conditions:
ISSUE:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's
establishment in Iloilo, and shall invoice them at the same price he has fixed for sales,
in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of
the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by
the dozen, whether of the same or of different styles.
WON the CA was correct in concluding that Porfirio Dela Fuente is an agent and not an
independent contractor of the Shell Company.
RULING:
Yes. The court assented to the reasoning given by the CA. As explained, where
the operator of a gasoline and service station owed his position to the company and
the latter could remove him or terminate his services at will; that the service station
belonged to the company and bore its tradename and the operator sold only the
products of the company; that the equipment used by the operator belonged to the
company and were just loaned to the operator and the company took charge of their
repair and maintenance; that an employee of the company supervised the operator
and conducted periodic inspection of the company's gasoline and service station; that
the price of the products sold by the operator was fixed by the company and not by the
operator; and that the receipts signed by the operator indicated that he was a mere
agent. The operator is an agent of the company and not an independent
contractor.
Applying the law on agency, it was stated that the act of the agent or his
employees acting within the scope of his authority is the act of the principal, the
breach of the undertaking by the agent, in the case, is one for which the principal is
answerable. Moreover, the company undertook to "answer and see to it that the
equipments are in good running order and usable condition;" and the Court of Appeals
found that the Company's mechanic failed to do its job or was negligent so the
company must answer for the negligent act of its mechanic which was the cause of the
fall of the car from the hydraulic lifter. So here the court affirmed the judgment of the
CA .
On the other note, it is noteworthy to include that in determining the
nature of a contracts, courts are not bound to rely upon the name or title given by
the contracting parties. Should there be a controversy as to what they really had
intended to enter into and should performance conflict with the name or title
given the contract by the parties, the former must prevail over the later.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period
of sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and
the freight, insurance, and cost of unloading from the vessel at the point where the
beds are received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said
payment when made shall be considered as a prompt payment, and as such a
deduction of 2 per cent shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr. Parsons may
deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any
alteration in price which he may plan to make in respect to his beds, and agrees that if
on the date when such alteration takes effect he should have any order pending to be
served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price
thereby be lowered, but shall not be affected by said alteration if the price thereby be
increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the
beds at the price at which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of
both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga
assumes the obligation to offer and give thepreference to Mr. Parsons in case anyone
should apply for the exclusive agency for any island not comprisedwith the Visayan
group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of
"Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents,
and shall immediately report such action to Mr. Quiroga for his approval.
CASE NO. 6
QUIROGA VS PARSONS (AGENCY DIFFERENTIATED FROM SALE)
Facts:
1. CONTENTS OF THE CONTRACT
On January 24, 1911, in the City of Manila, a contract in the following tenor was
ART. 4. This contract is made for an unlimited period, and may be terminated by either
of the contracting parties on a previous notice of ninety days to the other party.
2. VIOLATIONS OF THE CONTRACT

Of the three causes of action alleged by the plaintiff in his complaint, only two of them
constitute the subject matter of this appeal and both substantially amount to the
averment that the defendant violated the following obligations:

a. not to sell the beds at higher prices than those of the invoices;
b. to have an open establishment in Iloilo;
c. itself to conduct the agency;
d. to keep the beds on public exhibition, and
e. to pay for the advertisement expenses for the same;
f. and to order the beds by the dozen and in no other manner.
As may be seen, with the exception of the obligation on the part of the defendant to
order the beds by the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth in the contract. But
the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo,
and that said obligations are implied in a contract of commercial agency.
ISSUE: Whether or not the defendant, by reason of the contract transcribed was a
purchaser or an agent of the plaintiff for the sale of his beds.
HELD:
In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter,
is that the plaintiff was to furnish the defendant with the beds which the latter might
order, at the price stipulated, and that the defendant was to pay the price in the
manner stipulated. The price agreed upon was the one determined by the plaintiff for
the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to
their class. Payment was to be made at the end of sixty days, or before, at the
plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases
an additional discount was to be allowed for prompt payment. These are precisely the
essential features of a contract of purchase and sale. There was the obligation on the
part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their
price. These features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the thing to a
third person, and if he does not succeed in selling it, he returns it. By virtue of the
contract between the plaintiff and the defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant
and the plaintiff is one of purchase and sale, in order to show that it was not one made
on the basis of a commission on sales, as the plaintiff claims it was, for these contracts
are incompatible with each other. But, besides, examining the clauses of this contract,
none of them is found that substantially supports the plaintiff's contention. Not a single
one of these clauses necessarily conveys the idea of an agency. The words commission
on sales used in clause (A) of article 1 mean nothing else, as stated in the contract
itself, than a mere discount on the invoice price. The word agency, also used in articles
2 and 3, only expresses that the defendant was the only one that could sell the
plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least
that can be said is that they are not incompatible with the contract of purchase and
sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of
the defendant corporation and who established and managed the latter's business in
Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble
with the defendant, had maintained a civil suit against it, and had even accused one of
its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted
the contract Exhibit A, and, when questioned as to what was his purpose in contracting
with the plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it was Mariano
Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even
supposing that Ernesto Vidal has stated the truth, his statement as to what was his
idea in contracting with the plaintiff is of no importance, inasmuch as the agreements
contained in Exhibit A which he claims to have drafted, constitute, as we have said, a
contract of purchase and sale, and not one of commercial agency. This only means that
Ernesto Vidal was mistaken in his classification of the contract. But it must be
understood that a contract is what the law defines it to be, and not what it is called by
the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it
could not sell; that, without previous notice, it forwarded to the defendant the beds
that it wanted; and that the defendant received its commission for the beds sold by the
plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the
part of both of them, there was mutual tolerance in the performance of the contract in
disregard of its terms; and it gives no right to have the contract considered, not as the
parties stipulated it, but as they performed it. Only the acts of the contracting parties,
subsequent to, and in connection with, the execution of the contract, must be
considered for the purpose of interpreting the contract, when such interpretation is
necessary, but not when, as inconsidered for the purpose of interpreting the contract,
when such interpretation is necessary, but not when, as in the instant case, its
essential agreements are clearly set forth and plainly show that the contract belongs to
a certain kind and not to another. Furthermore, the return made was of certain brass
beds, and was not effected in exchange for the price paid for them, but was for other
beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior
consent with respect to said beds, which shows that it was not considered that the
defendant had a right, by virtue of the contract, to make this return. As regards the
shipment of beds without previous notice, it is insinuated in the record that these brass
beds were precisely the ones so shipped, and that, for this very reason, the plaintiff
agreed to their return. And with respect to the so-called commissions, we have said
that they merely constituted a discount on the invoice price, and the reason for
applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was
because, as the defendant obligated itself in the contract to incur the expenses of
advertisement of the plaintiff's beds, such sales were to be considered as a result of
that advertisement.
In respect to the defendant's obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only entitle the plaintiff to
disregard the orders which the defendant might place under other conditions; but if the
plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between
the plaintiff and the defendant was one of purchase and sale, and that the
obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.
CASE NO. 7
Schmid and Oberly, Inc. v. RJL Martinez Fishing Corp.
G.R. No. 75198, October 18, 1988
Nature of Sale
Facts:
At the outset, it must be understood that a contract is what the law defines it to be,
considering its essential elements, and not what it is caged by the contracting parties.
There was a misapprehension of facts in the RTC and CA, so SC reopened the facts
again. (SC facts nani).
RJL Martinez Fishing Corp (RJL Martinez) is engaged in deep-sea fishing, and in the
course of its business needed electrical generators for the operation of its business.It
then negotiated with Schmid&Oberly (Schmid) who is engaged in the business of
selling electric generators of different brands. The two parties had two different
transactions. The first transaction resulted in the sale of 3 Nagata generators which
came from Schmids stockroom. Schmid invoiced the said sale.
The second transaction involves 12 Nagata generators which give rise to the
controversy. As RJL Martinez was canvassing for generators, Schmid gave the former a
quotation for 12 Nagata generators. The parties agreed that the mode of payment
would be through an irrevocable letter of credit in favor of Nagata, Co. (the
manufacturer of the generators).
Accordingly, on November 20,1975, SCHMID transmitted to NAGATA CO. an orderfor
the twelve (12) generators to be shipped directly to RJL MARTINEZ. NAGATA CO.
thereafter sent RJL MARTINEZ the bill of lading and its own invoiceand, in accordance
with the order, shipped the generators directly to RJL MARTINEZ. The invoice states
that "one (1) case of 'NAGATA' AC Generators" consisting of twelve sets wasbought
by order and for account risk of Messrs. RJL Martinez Fishing Corporation.
For its efforts, SCHMID received from NAGATA CO. a commission of $1,752.00 for the
sale of the twelve generators to RJL MARTINEZ.
All fifteen (15) generators subject of the two transactions burned out after continuous
use. RJL MARTINEZ informed SCHMID about this development. In turn, SCHMID brought
the matter to the attention of NAGATA CO. In July 1976, NAGATA CO. sent two technical
representatives who made an ocular inspection and conducted tests on some of the
burned out generators, which by then had been delivered to the premises of SCHMID. It
was found out that the description of the generators (in the quotation and invoice) was
5 KVA, but the generators turned out to be actually only 4 KVA.
SCHMID replaced the three (3) generators subject of the first sale with generators of a
different brand. As for the 12 others, Nagata, Co. only repaired 3, while the remaining 9
remained unrepaired. As a result, RJL Martinez sued Schmid.
In its defense, Schmid refuses liability on the account that it was not the seller for the
12 generators.
Both the trial court and the Court of Appeals upheld the contention of RJL MARTINEZ
that SCHMID was the vendor in the second transaction and was liable under its
warranty. Accordingly, the courts a quo rendered judgment in favor of RJL MARTINEZ.
Hence, the instant recourse to this Court.
Issue:WON the second transaction between RJL Martinez and Schmid was a sale, or
Schmid was merely an indent (broker/ intermediary) of RJL Martinez and Nagata, Co.
Held: SCHMID was merely an indentor, not a vendor in the second
transaction.
It has been said that the essence of the contract of sale is transfer of title or agreement
to transfer it for a price paid or promised. If such transfer puts the transferee in the
attitude or position of an owner and makes him liable to the transferor as a debtor for
the agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is, a sale.
What is an Indentor:
On the other hand, there is no statutory definition of "indent" in this jurisdiction.
However, the Rules and Regulations to Implement Presidential Decree No. 1789 (the
Omnibus Investments Code) lumps "indentors" together with "commercial brokers" and
"commission merchants" in this manner:
... A foreign firm which does business through the middlemen acting in their
own names, such asindentors, commercial brokers or commission merchants,
shall not be deemed doing business in the Philippines. But such indentors,
commercial brokers or commission merchants shall be the ones deemed to be
doing business in the Philippines.
Therefore, an indentor is a middlemen in the same class as commercial brokers and
commission merchants. To get an Idea of what an indentor is, a look at the definition of
those in his class may prove helpful.
A broker is generally defined as one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has no concern;
the negotiator between other parties, never acting in his own name but in the name of
those who employed him; he is strictly a middleman and for some purpose the agent of
both parties.
A broker is one whose occupation it is to bring parties together to bargain, or to
bargain for them, in matters of trade, commerce or navigation.
Judge Storey, in his work on Agency, defines a broker as an agent employed to make
bargains and contracts between other persons, in matters of trade, commerce or
navigation, for compensation commonly called brokerage.
Commission Merchant:
A commission merchant is one engaged in the purchase or sale for another of personal
property which, for this purpose, is placed in his possession and at his disposal. He
maintains a relation not only with his principal and the purchasers or vendors, but also
with the property which is subject matter of the transaction.
Thus, the chief feature of a commercial broker and a commercial merchant is that in
effecting a sale, they are merely intermediaries or middle-men, and act in a certain
sense as the agent of both parties to the transaction.
In this case however, there was no express agreement between the parties that
Schmid warrants in anyway the condition of the generators, hence the court did not
make the latter liable for any warranty.
Indent Relationships
Webster defines an indent as "a purchase order for goods especially when sent from a
foreign country. It would appear that there are three parties to an indent transaction,
namely, the buyer, the indentor, and the supplier who is usually a non-resident
manufacturer residing in the country where the goods are to be bought. An indentor
may therefore be best described as one who, for compensation, acts as a middleman in
bringing about a purchase and sale of goods between a foreign supplier and a local
purchaser.
CASE NO. 8
HARRY E. KEELER ELECTRIC CO., INC., vs. DOMINGO RODRIGUEZ
In the case at bar:

The evidences show that RJL Martinez admitted that Schmid was merely an indent for
the purchase of the 12 generators. The evidence also show that RJL MARTINEZ paid
directly NAGATA CO, for the generators, and that the latter company itself invoiced the
sale, and shipped the generators directly to the former. The only participation of
SCHMID was to act as an intermediary or middleman between NAGATA CO. and RJL
MARTINEZ, by procuring an order from RJL MARTINEZ and forwarding the same to
NAGATA CO. for which the company received a commission from NAGATA CO.
The above transaction is significantly different from the first transaction wherein
SCHMID delivered the goods from its own stock (which it had itself imported from
NAGATA CO.), issued its own invoice, and collected payment directly from the
purchaser.
RJL Martinez still insists that Schmid was a seller, and not a mere broker because when
the latter was informed of the defects, it acted immediately, provided tools, labor, and
equipment to resolve the matter. The SC however said that: no indentor will just fold its
hands when a client complains about the goods it has bought upon the indentor's
mediation. In its desire to promote the product of the seller and to retain the goodwill
of the buyer, a prudent indentor desirous of maintaining his business would have to act
considerably towards his clients.Note that in contrast to its act of replacing the three
(3) generators subject of the first transaction, SCHMID did not replace any of the
twelve (12) generators, but merely rendered assistance to both RJL TINES and NAGATA
CO. so that the latter could repair the defective generators.
Liability for Warranty
However, even as SCHMID was merely an indentor, there was nothing to prevent it
from voluntarily warranting that twelve (12) generators subject of the second
transaction are free from any hidden defects. In other words, SCHMID may be held
answerable for some other contractual obligation, if indeed it had so bound itself. As
stated above, an indentor is to some extent an agent of both the vendor and the
vendee. As such agent, therefore, he may expressly obligate himself to undertake the
obligations of his principal.
1. BURDEN OF PROOF. The defendant, having alleged that the plaintiffsold and
delivered the plant to him, and that he paid the purchase price to the plaintiff, it
devolved upon him to prove such payment by a preponderance of the evidence.
2. TO WHOM PAYMENT SHOULD BE MADE. Payment must be made to the person in

whose favor the obligation is constituted, or to another authorized to receive it in his
name. (Article 1162, Civil Code.)
3. ID. The repayment of a debt must be made to the person in whose favor the
obligation is constituted, to another expressly authorized to receive the payment, in
his name. (Ormachea Tin-Congco vs. Trillana, 13 Phil., 194.)
4. DUTIES OF PERSONS DEALING WITH AN ASSUMED AGENT. Persons dealing with an

assumed agent, whether the assumed agency be a general or special one, rare bound
at their peril, if they would, if they would hold the principal, to ascertain not only the
fact of the agency but the nature and extent of the authority, and in case either is
controverted, the burden of proof is upon them to establish it.
5. AGENT ALONE CANNOT ENLARGE HIS AUTHORITY. The agent alone remove
limitations or waive conditions imposed by his principal. To charge the principal in such
a case, the principal's consent or concurrence must be shown.
6. PAYMENT AT OWN RISK. Where a person in making payment solely relied upon
the representation of an agent a to his authority to receive and receipt for the money,
such payment is made at his own risk, and where the agent was not so authorized,
such payment is not a valid defense against the principal.
The plaintiff is a domestic corporation with its principal office in the city of Manila and
engaged in the electrical business, and among other things in the sale of what is
known as the "Matthews" electric plant, and the defendant is a resident of Talisay,
Occidental Negros, and A. C. Montelibano was a resident of Iloilo.
Montelibano approached plaintiff at its Manila office, claiming that he was from Iloilo
and lived with Governor Yulo; that he could find purchaser for the "Matthews" plant,
and was told by the plaintiff that for any plant that he could sell or any customer that
he could find he would be paid a commission of 10 per cent for his services, if the sale
was consummated. Montelibano interviews the defendant, and, through his efforts, one
of the "Matthews" plants was sold by the plaintiff to the defendant, and was shipped
from Manila to Iloilo, and later installed on defendant's premises after which, without
the knowledge of the plaintiff, the defendant paid the purchase price to Montelibano.
As a result, plaintiff commenced this action against the defendant, alleging that about
August 18, 1920, it sold and delivered to the defendant the electric plant at the agreed
price of P2,513.55 no part of which has been paid, the demands judgment for the
amount with interest from October 20, 1920.
It appears from the testimony of H. E. Keeler that he was president of the plaintiff
company and that the plant in question was shipped from Manila to Iloilo and
consigned to the plaintiff itself, and that at the time of the shipment the plaintiff sent
Juan Cenar, one of its employees, with the shipment, for the purpose of installing the
plant on defendant's premises. That plaintiff gave Cenar a statement of the account,
including some extras and the expenses of the mechanic, making a total of P2,563,95.
That Montelibano had no authority from the plaintiff to receive or receipt for money.
That in truth and in fact his services were limited and confined to the finding of
purchasers for the "Matthews" plant to whom the plaintiff would later make and
consummate the sale. That Montelibano was not an electrician, could not install the
plant and did not know anything about its mechanism.
Cenar, testified that he went with shipment of the plant from Manila to Iloilo, for the
purpose of installing, testing it, and to see that everything was satisfactory. That he
was there about nine days, and that he installed the plant, and that it was tested and
approved by the defendant. He also says that he personally took with him the
statement of account of the plaintiff against the defendant. That after the plant was
installed and approved, he delivered it to the defendant and returned to Manila.
The only testimony on the part of the defendant is that of himself in the form of a
deposition in which he says that Montelibano sold and delivered the plant to him, and
"was the one who ordered the installation of that electrical plant," and he introduced in
evidence as part of his deposition a statement and receipt which Montelibano signed to
whom he paid the money.
There is nothing on the face of the receipt to show that Montelibano was the agent of,
or that he was acting for, the plaintiff. It was his personal receipt and his own personal
signature. Outside of the fact that Montelibano received the money and signed this
receipt, there is no evidence that he had any authority, real or apparent, to receive or
receipt for the money. Neither is there any evidence that the plaintiff ever delivered the
statement to Montelibano, or authorized anyone to deliver it to him, and it is very
apparent that the statement in question is the one which was delivered by the plaintiff
to Cenar, and is the one which Cenar delivered to the defendant at the request of the
defendant.
This claim must be for the expenses of Cenar in going to Iloilo from Manila and return,
to install the plant, and is strong evidence that it was Cenar and not Montelibano who
installed the plant. If Montelibano installed the plant, as defendant claims, there would
not have been any necessity for Cenar to make this trip at the expense of the
defendant. After Cenar's return to Manila, the plaintiff wrote a letter to the defendant
requesting the payment of its account.
This is in direct conflict with the receipted statement, which the defendant offered in
evidence, signed by Montelibano. That shows upon its face that it was an itemized
statement of the account of plaintiff with the defendant. Again, it will be noted that the
receipt which Montelibano signed is not dated, and it does not show when the money
was paid: Speaking of Montelibano, the defendant also testified: "and he assured me
that he was duly authorized to collect the value of the electrical plant." This shows
upon its face that the question of Montelibano's authority to receive the money must
have been discussed between them, and that, in making the payment, defendant
relied upon Montelibano's own statements and representation, as to his authority, to

receipt for the money.
CASE NO. 9
Bad Faith of an Agent
Coleongco vs. Claparols
In the final analysis, the plant was sold by the plaintiff to the defendant, and was
consigned by the plaintiff to the plaintiff at Iloilo where it was installed by Cenar, acting
for, and representing, the plaintiff, whose expense for the trip is included in, and made
a part of, the bill which was receipted by Montelibano.
Facts:
There is no evidence that the plaintiff ever delivered any statements to Montelibano, or
that he was authorized to receive or receipt for the money, and defendant's own
telegram shows that the plaintiff "did not present bill" to defendant. He now claims that
at the very time this telegram was sent, he had the receipt of Montelibano for the
money upon the identical statement of account which it is admitted the plaintiff did
render to the defendant.
Article 1162 of the Civil Code provides:

Payment must be made to the persons in whose favor the obligation is
constituted, or to another authorized to receive it in his name.
And article 1727 provides:
Two days after the execution of the basic agreement, Exhibit "B", on April 27,
1953, Claparols executed in favor of Coleongco, at the latter's behest a
special power of attorney (Exhibit C) to open and negotiate letters of credit,
to sign contracts, bills of lading, invoices, and papers covering transactions; to
represent appellee and the nail factory; and to accept payments and cash
advances from dealers and distributors. Thereafter, Coleongco also became the
assistant manager of the factory, and took over its business transactions, while
Claparols devoted most of his time to the nail manufacture processes.
Around mid-November of 1956- Claparols was disagreeably surprised by

service of an alias writ of execution to enforce a judgment obtained against him
by the Philippine National Bank, despite the fact that on the preceding
September he had submitted an amortization plan to settle the account. Worried
and alarmed, Claparols immediately left for Manila to confer with the bank
authorities. Upon arrival, he learned to his dismay that the execution had been
procured because of derogatory information against appellee that had reached
the bank from his associate, appellant Coleongco.
The principal shall be liable as to matters with respect to which the agent has
exceeded his authority only when he ratifies the same expressly or by
implication.
Applying the above rules, the testimony is conclusive that the plaintiff never authorized
Montelibano to receive or receipt for money in its behalf, and that the defendant had
no right to assume by any act or deed of the plaintiff that Montelibano was authorized
to receive the money, and that the defendant made the payment at his own risk and
on the sole representations of Montelibano that he was authorized to receipt for the
money.
Eduardo L. Claparols, operated a factory for the manufacture of nails in

Talisay, Occidental Negros, under the style of "Claparols Steel & Nail
Plant". The raw material, nail wire, was imported from foreign sources,
specially from Belgium; and Claparols had a regular dollar allocation therefor,
granted by the Import Control Commission and the Central Bank. The marketing
of the nails was handled by the "ABCD Commercial" of Bacolod, which was
owned by a Chinaman named Kho To.1wph1
Losses compelled Claparols in 1953 to look for someone to finance his
imports of nail wires. At first, Kho To agreed to do the financing, but on
April 25, 1953, the Chinaman introduced his compadre, appellant Vicente
Coleongco, to the appellee, recommending said appellant to be the financier in
the stead of Kho To. . Claparols agreed, and on April 25 of that year a contract
(Exhibit B) was perfected between them whereby Coleongco undertook to
finance and put up the funds required for the importation of the nail wire, which
Claparols bound himself to convert into nails at his plant.
. It was agreed that Coleongco would have the exclusive distribution
of the product, and the "absolute care in the marketing of these nails
and the promotion of sales all over the Philippines", except the
Davao Agency; that Coleongco would "share the control of all the
cash" from sales or deposited in banks; that he would have a
representative in the management; that all contracts and
transactions should be jointly approved by both parties; that proper
books would be kept and annual accounts rendered; and that profits
and losses would be shared "on a 50-50 basis". The contract was
renewed from one year to year until 1958, and Coleongco's share
subsequently increased by 5% of the net profit of the factory.
10
On July 6, 1956, Coleongco , without Claparols knowledge, had

written to the bank in connection with the verbal offer for the
acquisition by me of the whole interest of Mr. Eduardo L. Claparols in
the Claparols Steel & Nail Plant and the Claparols Hollow Blocks
Factory" (Exhibit 36);
and later, on October 29, 1956, Coleongco had written again the
bank another letter (Exhibit 35), also behind the back of appellee,
wherein Coleongco charged Claparols with taking machines
mortgaged to the bank, and added
In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not

serious in meeting his obligations with your bank, otherwise he had not taken
these machines and equipments a sign of bad faith since the factory is
making a satisfactory profit of my administration
In the meantime, Claparols had found in the factory files certain correspondence
in February, 1955 between Coleongco and the nail dealer Kho To whereby the
former proposed to Kho that the latter should cut his monthly advances to
Claparols from P2,000 to P1,000 a month, because
I think it is time that we do our plan to take advantage of the difficulties of Eddie
with the banks for our benefit. If we can squeeze him more. I am sure that we
can extend our contract with him before it ends next year, and perhaps on
better terms. If we play well our cards we might yet own his factory (Exhibit 32);
and conformably to Coleongco's proposal, Kho To had written to Claparols that
"due to present business conditions" the latter could only be allowed to draw
P1,000 a month beginning April, 1955 (Exhibit 33).
As the parties could not amicably settle their accounts, Coleongco filed a suit
against Claparols charging breach of contract, asking for accounting, and
praying for P528,762.19 as damages, and attorney's fees, to which Claparols
answered, denying the charge, and counter-claiming for the rescission of the
agreement with Coleongco for P561,387.99 by way of damages. After trial, the
court rendered judgment, as stated at the beginning of this opinion.
RULING og CFI of Negros Occidental (in its Civil Case No. 4170)
dismissed plaintiff's action for damages, and ordered him to pay
defendant Eduardo Claparols the amount of P81,387.27 plus legal
interest from the filing of the counterclaim till payment thereof;
P50,000 as moral and compensatory damages suffered by defendant;
and cost.
Coleongco appeled and contended that the power of attorney (Exhibit "C")
was made to protect his interest under the financing agreement (Exhibit "B")
and was one coupled with an interest that the appellee Claparols had no legal
power to revoke.
ISSUE:
Whether or not the Claparols has legal basis to revoke the power of attorney.
HELD:
Yes . The financing agreement itself already contained clauses for the protection of
appellant's interest, and did not call for the execution of any power of attorney in favor
of Coleongco. But granting appellant's view, it must not be forgotten that a power
of attorney can be made irrevocable by contract only in the sense that the
principal may not recall it at his pleasure; but coupled with interest or not,
the authority certainly can be revoked for a just cause, such as when the
attorney-in-fact betrays the interest of the principal, as happened in this
case. It is not open to serious doubt that the irrevocability of the power of
attorney may not be used to shield the perpetration of acts in bad faith,
breach of confidence, or betrayal of trust, by the agent for that would
amount to holding that a power coupled with an interest authorizes the
agent to commit frauds against the principal.
Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all obligations, and that any waiver
of action for future fraud is void. It is also on this principle that the Civil Code, in its
Article 1800, declares that the powers of a partner, appointed as manager, in the
articles of co-partnership are irrevocable without just or lawful cause; and an agent
with power coupled with an interest can not stand on better ground than such a
partner in so far as irrevocability of the power is concerned.
That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the
record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36)
attempting to undermine the credit of the principal and to acquire the factory of the
latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To
(Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to
Claparols on account of nail sales in order to squeeze said appellee and compel him to
extend the contract entitling Coleongco to share in the profits of the nail factory on
better terms, and ultimately "own his factory", a plan carried out by Kho's letter,
Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo
Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to
his own benefit; and the surreptitious disposition of the Yates band resaw machine in
favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in
July and August of 1956, are plain acts of deliberate sabotage by the agent that fully
justified the revocation of the power of attorney (Exhibit "C") by Claparols and his
demand for an accounting from his agent Coleongco.
Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and
36), claiming that Claparols' mal-administration of the business endangered the
security for the advances that he had made under the financing contract (Exhibit "B").
But if that were the case, it is to be expected that Coleongco would have first protested
to Claparols himself, which he never did. Appellant likewise denies the authorship of
the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the
11
machinery of the factory. Between the testimony of Agsam and Claparols and that of
Coleongco, the court below whose to believe the former, and we see no reason to alter
the lower court's conclusion on the value of the evidence before it, considering that
Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan
outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility
of Coleongco is affected adversely by his own admission of his having been previously
convicted of estafa (t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even
disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals
Coleongco's lack of business scruples, the clear preponderance of evidence is against
appellant.
ISSUE: In what capacity the appellant made the sales of the subject merchandise to
local buyers.
CASE NO. 10
This is an appeal that seeks to determine whether a trader tax paid by the
appellant under oath was legally enforceable.
Plaintiff offered a price to Shaw Wallace & Co. of Calcutta for a certain
merchandize;
The latter accepted the offer;
Subsequently, plaintiff entered into a contract of sale with home buyers where the
former fixed a price higher than that agreed upon by the former with Calcutta;
After the contract was entered into, Calcutta instructed plaintiff to send the goods
to, and draw a draft on the home buyers.
The draft contains the price agreed between the plaintiff and home buyers, which
was drawn against the local bank in accordance with the letter of guarantee
executed by the plaintiff and the home buyers.
After receiving the draft and the shipping documents, the local bank released the
merchandise to the buyer by virtue of a trust receipt.
The draft was paid by the buyers to the bank, and the proceeds of the draft were
received by Calcutta.
Calcutta paid the plaintiff the difference between the price agreed upon between
the latter and plaintiff, and that price for which the merchandise was sold to the
home buyers.
The Court decided the case stating that the appellant in the above transactions
should be considered as a trader, in accordance with the provisions of Article
1459 of the Revised Administrative Code, which provides:
. "SEC 1459. Percentage sales tax on merchants. - All merchants HEREIN Specifically
Exempted Shall not pay a tax of one per centum on the gross value of the
commodities in money, goods, wares, and merchandise sold, bartered, Exchanged, or
consigned abroad by them, Such tax to be based on the current selling price or value
of the things in question at the time They are disposed of or consigned, Whether
Consisting of raw materials or of manufactured or partially manufactured products, and
Whether of domestic or foreign origin. The tax upon things consigned abroad Shall be
refunded upon satisfactory proof of the return thereof to the Philippine Islands unsold.
"Merchants, as used here, means a person engaged in the sale, barter, or exchange of
personal property of whatever character. Except as specially provided, the term
includes manufacturers of articles Who Sell Their Own production, and commission
merchants Having establishments of Their own for the keeping and disposal of goods
Of which sales or exchanges are effected, but does not include merchandise brokers.
The appellant contends that the Court erred in failing to declare that she had
bought the goods of Shaw Wallace & Co. of Calcutta, India, and had sold to local
buyers on their own, and they acted as merchant transactions above and as such
should pay tax.
The contention of the appellant is that she acted in such transactions as a trade
corridor.
To address this question, we must consider not the legal relationship between the
appellant and local buyers but the relationships mediated between the appellant
and Shaw Wallace & Co. Of Calcutta, because transactions with that firm began
and ended the same.
The contention of the appellant is that she acted in such transactions as a broker.
HELD:
The broker never hires in name but in that of his client. In this case, Kerr &
Company entered into a contract of sale when it offered to buy certain goods at a
price that Shaw Wallace & Co. of Calcutta accepted.
Never mind that the goods have not passed into the possession of Kerr &
Company because the what is necessary is the consent given for the contract of
sale to be perfected being a consensual contract.
After the contract of sale, Kerr & Company, on its own behalf, agreed to sell to the
home buyers. Therefore, Kerr & Company, contracts with local merchants on its
own name independently, after the transaction with Shaw Wallace. Evidenced by
the fact that the former offers to the home buyers a price different from that it
offered to Shaw Wallace.
The broker executes the transaction with a third party on behalf of his client,
based on a fixed commission determined. In this case, Kerr & Company and Shaw
Wallace & Company at no time had set a commission which would effect the sale
of goods to local merchants.
Kerr & Company made after the sale of goods to local buyers for a higher price
than had been agreed with Shaw Wallace & Company, charging the difference to
their advantage, a difference that can not be conceptualized as a commission
because he amount charged depended solely from Kerr & Company, according to
the price she had set for it to goods sold.
A commission is a bit of money to be concluded between the broker and the
client, which is not true in this case because the price difference inures to the
benefit of Kerr solely to the exclusion of Shaw Wallace.
The broker does not guarantee payment of the goods it sells to a third party,
because it's only a mediator who deals in getting the concerned parties are
understood in a business or trade or business navigation issues.
In the present case, Kerr & Company guarantee to Shaw Wallace & Company to
pay drafts drawn by this company against 108 local buyers.
In addition, in the case of breach of Kerr & Company the contract awarded to local
buyers, they would have no recourse whatsoever to go against Shaw Wallace &
Company to require this company to fulfill the contract.
The facts show that Kerr & Company first contract in its own name with Shaw
Wallace & Company, and later also contract in its own name with local buyers.
All these considerations demonstrate the same and only one proposition: Kerr &
Company contract in its own name and for its own account with Shaw Wallace &
12
Company as a trader, and sold as a merchant in his own name; and therefore is
subject to tax trader.
so that the properties could be offered for sale to prospective buyers. Glanville later
showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a letter, Marquez declared
that he was authorized to sell the properties for P27,000,000.00 and that the terms of
the sale were subject to negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo
Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the
property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings
offer and relayed the same to Delsaux in Belgium, but the latter did not respond.
On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/
counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987
that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss
decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing
obligations prior to final liquidation."
CASE NO. 11
EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,
vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION),
ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY,
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville,
and in a Letter that the Litonjua siblings had accepted the counter-proposal of Delsaux.
He also stated that the Litonjua siblings would confirm full payment within 90 days
after execution and preparation of all documents of sale, together with the necessary
governmental clearances
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank
& Trust Company.
Facts:
The Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws. Since 1950, it had been engaged in the manufacture of roofing
materials and pipe products. Its manufacturing operations were conducted on eight
parcels of land. The properties, located in Mandaluyong City, Metro Manila, were
covered by Transfer Certificates of Title under the name of Far East Bank & Trust
Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and registered under the laws of Belgium.
Jack Glanville, an Australian citizen, was the General Manager and President of EC,
while Claude Frederick Delsaux was the Regional Director for Asia of ESAC. Both had
their offices in Belgium.
The management of ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country. The Committee for Asia of
ESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of the
eight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez
Marquez and the Litonjua brothers inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had
met with the buyer, which had given him the impression that "he is prepared to press
for a satisfactory conclusion to the sale."
He also emphasized to Delsaux that the buyers were concerned because they would
incur expenses in bank commitment fees as a consequence of prolonged period of
inaction.
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of
the Philippines, the political situation in the Philippines had improved. Marquez
received a telephone call from Glanville, advising that the sale would no longer
proceed. Glanville followed it up with a Letter dated May 7, 1987, confirming that he
had been instructed by his principal to inform Marquez that "the decision has been
taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated."
13
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC
Regional Office had decided not to proceed with the sale of the subject land, to wit:
The Committee for Asia of our Group met recently (meeting every six months)
and examined the position as far as the Philippines are (sic) concerned.
Considering [the] new political situation since the departure of MR. MARCOS
and a certain stabilization in the Philippines, the Committee has decided not
to stop our operations in Manila. In fact, production has started again last
week
When apprised of this development, the Litonjuas, through counsel, wrote EC,
demanding payment for damages they had suffered on account of the aborted sale.
EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC
(now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company,
and ESAC
In their answer to the complaint, EC and ESAC alleged that the Board and stockholders
of EC never approved any resolution to sell subject properties nor authorized Marquez
to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own
personal making which did not bind EC.
RTC: The trial court rendered judgment in favor of defendants and dismissed the
amended complaint.
The trial court declared that since the authority of the agents/realtors was not in
writing, the sale is void and not merely unenforceable, and as such, could not have
been ratified by the principal.
The Litonjuas appealed the decision to the CA, alleging that Marquez acted merely as a
broker or go-between and not as agent of the corporation; hence, it was not necessary
for him to be empowered as such by any written authority. They further claimed that
an agency by estoppel was created when the corporation clothed Marquez with
apparent authority to negotiate for the sale of the properties. However, since it was a
bilateral contract to buy and sell, it was equivalent to a perfected contract of sale,
which the corporation was obliged to consummate.
CA rendered judgment affirming the decision of the RTC
Petitioners assert that there was no need for a written authority from the Board of
Directors of EC for Marquez to validly act as broker/middleman/intermediary. As broker,
Marquez was not an ordinary agent because his authority was of a special and limited
character in most respects. His only job as a broker was to look for a buyer and to bring
together the parties to the transaction. He was not authorized to sell the properties or
to make a binding contract to respondent EC;
Petitioners posit that the testimonial and documentary evidence on record amply
shows that Glanville, who was the President and General Manager of respondent EC,
and Delsaux, who was the Managing Director for ESAC Asia, had the necessary
authority to sell the subject property or, at least, had been allowed by respondent EC
to hold themselves out in the public as having the power to sell the subject properties.
Ruling:
The petition has no merit. While a corporation may appoint agents to negotiate for the
sale of its real properties, the final say will have to be with the board of directors
through its officers and agents as authorized by a board resolution or by its by-laws.
An unauthorized act of an officer of the corporation is not binding on it unless the
latter ratifies the same expressly or impliedly by its board of directors. Any sale of real
property of a corporation by a person purporting to be an agent thereof but without
written authority from the corporation is null and void. The declarations of the agent
alone are generally insufficient to establish the fact or extent of his/her authority.
By the contract of agency, a person binds himself to render some service or to do
something in representation on behalf of another, with the consent or authority of the
latter. Consent of both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act for him; the agent must intend to accept
the authority and act on it, and the intention of the parties must find expression either
in words or conduct between them.
An agency may be expressed or implied from the act 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. Acceptance by the agent may be expressed, or
implied from his acts which carry out the agency, or from his silence or inaction
according to the circumstances.
Agency may be oral unless the law requires a specific form. However, to create or
convey real rights over immovable property, a special power of attorney is necessary.
Thus, when a sale of a piece of land or any portion thereof is through an agent, the
authority of the latter shall be in writing, otherwise, the sale shall be void.
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any
resolution of the Board of Directors of respondent EC empowering Marquez, Glanville or
Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight
parcels of land owned by respondent EC including the improvements thereon. The bare
fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock
of respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim
that he had likewise been authorized by respondent EC to sell the parcels of land.
While Glanville was the President and General Manager of respondent EC, and Adams
and Delsaux were members of its Board of Directors, the three acted for and in behalf
of respondent ESAC, and not as duly authorized agents of respondent EC; a board
14
resolution evincing the grant of such authority is needed to bind EC to any agreement
regarding the sale of the subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind respondent EC.
An agency by estoppel, which is similar to the doctrine of apparent authority, requires

proof of reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance. Such proof is lacking in this case
Admittedly, respondent ESAC owned 90% of the shares of stocks of respondent EC;
however, the mere fact that a corporation owns a majority of the shares of stocks of
another, or even all of such shares of stocks, taken alone, will not justify their being
treated as one corporation.
Neither may respondent EC be deemed to have ratified the transactions between the
petitioners and respondent ESAC, through Glanville, Delsaux and Marquez. The
transactions and the various communications inter se were never submitted to the
Board of Directors of respondent EC for ratification.
In an agent-principal relationship, the personality of the principal is extended through

the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such a relationship
can only be effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court.
CASE NO. 12
The petitioners cannot feign ignorance of the absence of any regular and valid
authority of respondent EC empowering Adams, Glanville or Delsaux to offer the
properties for sale and to sell the said properties to the petitioners. A person dealing
with a known agent is not authorized, under any circumstances, blindly to trust the
agents; statements as to the extent of his powers; such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the
agent acts within the scope of his authority. Persons dealing with an assumed agent are
bound at their peril, and if they would hold the principal liable, the burden of proof is
upon them to prove it. In this case, the petitioners failed to discharge their burden;
hence, petitioners are not entitled to damages from respondent EC.
More so, Marquez had no authority to bind respondent EC to sell the subject properties.
A real estate broker is one who negotiates the sale of real properties. His business,
generally speaking, is only to find a purchaser who is willing to buy the land upon
terms fixed by the owner. He has no authority to bind the principal by signing a
contract of sale. Indeed, an authority to find a purchaser of real property does not
include an authority to sell.
Equally barren of merit is petitioners contention that respondent EC is estopped to
deny the existence of a principal-agency relationship between it and Glanville or
Delsaux. For an agency by estoppel to exist, the following must be established:
(1) the principal manifested a representation of the agents authority or knowlingly
allowed the agent to assume such authority;
(2) the third person, in good faith, relied upon such representation;
(3) relying upon such representation, such third person has changed his position to
his detriment.
LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR.,

represented by their Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners,
vs.ALLIED BANKING CORPORATION, Respondent.
G.R. No. 171460
July 24, 2007
Facts:Perla executed a Special Power of Attorney (SPA) in favor of her
husband, Julian D. Mercado (Julian) over several pieces of real property registered
under her name, authorizing the latter to perform the following acts:1. To act in my
behalf, to sell, alienate, mortgage, lease and deal otherwise over the different parcels
of land described hereinafter x xx2. To sign for and in my behalf any act of strict
dominion or ownership any sale, disposition, mortgage, lease or any other transactions
including quit-claims, waiver and relinquishment of rights x xx3. To exercise any or all
acts of strict dominion or ownership over the above-mentioned properties, rights and
interest therein.
On the strength of the aforesaid SPA, Julian obtained a loan from the
respondent. Still using the subject property as security, Julian obtained an additional
loan from the respondent.
It appears, however, that there was no property identified in the SPA and registered
with the Registry of Deeds. What was identified in the SPA instead was the property
different from the one used as security for loan.
Julian defaulted on the payment of his loan obligations. Thus, respondent
initiated extra-judicial foreclosure proceedings over the subject property which was
subsequently sold at public auction wherein the respondent was declared as the
highest bidder.Petitioners initiated an action for the annulment of REM constituted over
the subject property on the ground that the same was not covered by the SPA and that
the said SPA, at the time the loan obligations were contracted, no longer had force and
effect since it was previously revoked by Perla. In the absence of authority to do so, the
REM constituted by Julian over the subject property was null and void; thus, petitioners
likewise prayed that the subsequent extra-judicial foreclosure proceedings and the
auction sale of the subject property be also nullified.
Issues: (1) Whether or not there was a valid mortgage constituted over
subject property.
(2) Whether or not there was a valid revocation of SPA.
(3) Construction of powers of attorney.
15
Rulings:(1) In the case at bar, it was Julian who obtained the loan obligations
from respondent which he secured with the mortgage of the subject property. The
property mortgaged was owned by his wife, Perla, considered a third party to the loan
obligations between Julian and respondent. It was, thus, a situation recognized by the
last paragraph of Article 2085 of the Civil Code that third persons who are not parties
to the principal obligation may secure the latter by pledging or mortgaging their own
property.There is no question therefore that Julian was vested with the power to
mortgage the pieces of property identified in the SPA, however, the subject property
was not among those enumerated therein.Julian was not conferred by Perla with the
authority to mortgage the subject property under the terms of the SPA, the real estate
mortgages Julian executed over the said property are therefore unenforceable.
(2) The said SPA was revoked by virtue of a public instrument executed by
Perla. To address respondents assertion that the said revocation was unenforceable
against it as a third party to the SPA and as one who relied on the same in good faith,
the rule is that an agency is extinguished, among others, by its revocation (Article
1999, New Civil Code of the Philippines). The principal may revoke the agency at will,
and compel the agent to return the document evidencing the agency. Such revocation
may be express or implied (Article 1920, supra).
(3) Rule of strict construction- where the terms of the contract are clear as to
leave no room for interpretation, resort to circumstantial evidence to ascertain the true
intent of the parties, is not countenanced. The law is that if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control. The clear terms of the contract should never be
the subject matter of interpretation. Equally relevant is the rule that a power of
attorney must be strictly construed and pursued. The instrument will be held to grant
only those powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.Where powers and duties are specified and
defined in an instrument, all such powers and duties are limited and are confined to
those which are specified and defined, and all other powers and duties are excluded.
Qualification of the rule- this is but in accord with the disinclination of courts
to enlarge the authority granted beyond the powers expressly given and those which
incidentally flow or derive therefrom as being usual and reasonably necessary and
proper for the performance of such express powers.
CASE NO. 13
NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN TONG, and JOSE
JUAN TONG, in his personal capacity, petitioners, vs.
FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFO LAZARTE and
NEMESIO TONOCANTE, respondents .
Petition for Review of the of the Court of Appeals and of its Resolutions
reversing the Decisions and of the Office of the President.
FACTS:
Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the
owners of three (3) parcels of land in Iloilo City. In 1955 the landholding was
subdivided into one hundred ten (110) sub-lots covered and was processed and
approved as "residential" or "subdivision" by the National Urban Planning
Commission (NUPC). 7 On May 24, 1955 the Bureau of Lands approved the
corresponding subdivision plan for purposes of developing the said property into a lowAGENCY AND TRUST CASE DIGESTS
cost residential community which the spouses referred to as the Bacaling-Moreno

Subdivision. In 1957, a real estate was granted to the spouses Bacaling by the
Government Service Insurance System (GSIS) for the development of the subdivision
secured by a real estate mortgage over their parcels of land including the 110 sub-lots.
The Bacalings failed to pay and the mortgage was foreclosed by the GSIS. Nelita
Bacaling in 1989 was able to restore to herself ownership of the sub-lots. According to
the findings of the Office of the President, in 1972 and thereafter, respondents
Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante
clandestinely entered and occupied the entire one hundred ten (110) sub-lots and
sowed the lots as if the same were their own, and altered the roads, drainage,
boundaries and monuments established thereon. Respondents, on the other hand,
claim that in 1964 they were legally instituted by Bacaling's administrator/overseer as
tenant-tillers of the subject parcels of land on sharing basis. In 1974, their relationship
with the landowner was changed to one of leasehold. They religiously delivered their
rental payments to Bacaling as agricultural lessor. In 1980, they secured certificates of
land transfer in their names for the 110 sub-lots. They have made various payments to
the Land Bank of the Philippines as amortizing owners-cultivators of their respective
tillage.
In 1977, the City Council of Iloilo enacted Zoning Ordinance No. 212
declaring the one hundred ten (110) sub-lots as "residential" and "nonagricultural,"
which was consistent with the conversion effected in 1955 by the NUPC and the Bureau
of Lands. In 1978, Nelita Bacaling was able to register the subject property as the
Bacaling-Moreno Subdivision with the National Housing Authority and to obtain
therefrom a license to sell the subject 110 sub-lots comprising the said subdivision to
consummate the original and abiding design to develop a low-cost residential
community. In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan
and Victoria Siady, bought from Nelita Bacaling the subject 110 sub- lots. The said sale
was effected after Bacaling has repurchased the subject property from the GSIS. To
secure performance of the contract of absolute sale and facilitate the transfer of title of
the lots to Jose Juan Tong, Bacaling appointed him in 1992 as her attorney-in-fact,
under an irrevocable special power of attorney.
Following the sale, petitioner Tong (together with Bacaling) filed an action
against respondents for allegedly entering and occupying the lots. Respondents in their
answer alleged that they were instituted as tenant-tillers before the property was
subdivided into 110 sub-lots and that they have in their possession certificates of land
transfer. The DAR dismissed the petition on the ground that there had been no
legitimate conversion of the classification of the 110 sub-lots from agricultural to
residential prior to October 21, 1972 when Operation Land Transfer under P.D. No.
72 took effect. Bacaling and Tong appealed to the DAR Central Oce but their
appeal was similarly rejected. Bacaling and Tong appealed to the Oce of the
President (OP) which reversed them in toto. The order of the Regional Director, DAR
Region VI, as well as the orders of the DAR Secretary were REVERSED AND SET
ASIDE and subject landholdings declared exempt from coverage of the CARL.
The Certificates of Land Transfer (CLTs) issued to the appellees are hereby cancelled.
Respondents elevated the OP Decision to the Court of Appeals on a petition for
review. During the pendency of the appeal with the Court of Appeals, Bacaling revoked
the special power of attorney and admitted the status of respondents as her tenants.
The appellate court, without ruling on the lack of material interest in the case,
reversed the OP Decision and validated the certificates of land transfer of
respondents. Motion for its reconsideration was denied. Hence this petition for review
on certiorari. After 10 years, petitioner Nelita Bacaling resurrected her manifestation
with the Court of Appeals and moved to withdraw/dismiss the present petition on the
ground that the irrevocable power of attorney in favor of petitioner Jose Juan Tong
had been nullified by her, that Tong lacked the authority to appear before this
Court and that respondents were tenants of the one hundred ten (110) sub-lots which
were allegedly agricultural and not residential pieces of realty.
16
ISSUE:
(1) Does petitioner Tong have the requisite interest to litigate this petition for review on
certiorari? ;
(2) Are the respondents agricultural lessees? ; and
(3) Are the 110 sub-lots classified for residential use by the NUPC and the Bureau of
Lands prior to October 21, 1972 covered by the Operation Land Transfer under P.D. No.
72?
HELD:
Yes, there should be no doubt that as transferee through a contract of sale
and as the attorney-in-fact of Nelita Bacaling under an irrevocable special power of
attorney, petitioner Tong stands to be benefited or injured by the judgment in the
instant case as well as the orders and decisions in the proceedings a quo. The deed of
sale states that petitioner Tong and his co-sellers have fully paid for the subject parcels
of land. The said payment has been duly received by Bacaling. When a party adopts a
certain theory in the court below, he will not be permitted to change his theory on
appeal, for to permit him to do so would not only be unfair to the other party but it
would also be offensive to the basic rules of fair play, justice and due process. Bacaling
cannot revoke at will the irrevocable special power of attorney which she had duly
executed in favor of petitioner Jose Juan Tong and duly acknowledged before a notary
public. The agency is one coupled with interest which is explicitly irrevocable
since the deed of agency was prepared and signed and/or accepted by petitioner Tong
and Bacaling with a view to completing the performance of the contract of sale of the
110 sub-lots. It is for this reason that the mandate of the agency constituted Tong as
the real party-in-interest to remove all clouds on the title of Bacaling and to effect the
transfer of the aforesaid lots in the name of the vendees. The fiduciary relationship
inherent in ordinary contracts of agency is replaced by material consideration which in
the type of agency herein established bars the removal or dismissal of petitioner Tong
as Bacaling's attorney-in-fact on the ground of alleged fraud in the performance of the
contract of agency. Bacaling cannot vest in herself just like in ordinary contracts the
unilateral authority of determining the existence and gravity of grounds to justify the
rescission of the irrevocable special power of attorney. The reason is that it is one
coupled with an interest, the agency having been created for the mutual interest of the
agent and the principal.
No. It lacks the requisites in order to have a valid agricultural leasehold
relationship. GSIS, not Bacaling, was the owner of the subject properties from 1961 up
to 1989 as a result of the foreclosure and confirmation of the sale of the subject
properties. The agreement to till the land was not with GSIS, the real landowner. There
is no showing that GSIS consented to such tenancy relationship nor is there proof that
GSIS received a share in the harvest of the tenants. Consequently, the respondents
cannot claim security of tenure and other rights accorded by our agrarian laws
considering that they have not been validly instituted as agricultural lessees of the
subject parcels of land. And from the time Bacaling recovered the subject properties
from GSIS up to the time the former changed her legal position in the instant case,
Bacaling has consistently disclaimed respondents as her alleged tenants.
Yes. The sub-lots have been officially classified as residential since 1955. The
classification began when the NUPC and the Bureau of Lands approved the subdivision
of the original three (3) parcels of land into 110 sub-lots each covered with transfer
certificates of title. The City Council of Iloilo also recognized the residential
classification of the same 110 sub-lots when it passed the Land Use Plan and Zoning
Ordinance. In 1990, Bacaling sold the same parcels of land to petitioner Tong who
bought the property for residential and not agricultural purposes. Clearly, both
intention and overt actions show the classification of the 110 sub-lots for residential
use. One cannot imagine Nelita Bacaling borrowing the substantial amount of
P600,000.00 from the GSIS and spending P250,000.00 for the purpose of developing
and subdividing the original 3 parcels of land into 110 homelots, with individual
transfer certificates of title ready and available for sale, if her purported desire were to
keep the landholding for agricultural purposes. One cannot also deny the consistent
official government action which decreed the said 110 sub-lots for several times
beginning in 1955 and in accordance with relevant laws and regulations, the said
landholding was reserved as a residential subdivision.
By virtue of the official classification made by NUPC and the other circumstances
convincingly proved herein, the only fair and legally acceptable decision in the instant
case would be to declare, as we now indeed rule, that the 110 sub-lots are truly
residential in character as well as in purpose and are thus excluded from the coverage
of P.D. No. 27.
The Certificates of Land Transfer (CLT) issued in respondents' names are not
valid. The respondents cannot rely on said CLTS as proof of security of tenure. It is well
settled that the certificates of land transfer are not absolute evidence of ownership of
the subject lots and consequently do not bar the finding that their issuance is void from
inception since they cover residential lands contrary to the mandate of P.D. No. 27. It
follows from the fact of nullity of the certificates of land transfer in respondents' names
that the respondents are not entitled to occupy and possess the 110 sub-lots or
portions thereof without the consent of the owner, herein petitioner Tong.
Petition for Review is GRANTED.
1. The certificates of land transfer over the 110 sub-lots located in the name of
respondents and/or their successors-in-interest are hereby DECLARED VOID AB INITIO.
The 110 sub-lots are declared outside the coverage and operation of P.D. No. 27 and
other land reform laws.
2. The CA Decision and its Resolution denying petitioners' Motion for Reconsideration
are REVERSED AND SET ASIDE.
3. The Decision of the Office of the President are REINSTATED with the modification in
that the respondents are not entitled to disturbance compensation; and
4. Respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and
Nemesio Tonocante together with their assigns and successors-in-interest are ordered
to vacate and surrender peacefully the possession of the 110 sub-lots to petitioner Jose
Juan Tong within 30 days from notice of this Decision.
CASE NO. 14
[G.R. No. 112872. April 19, 2001]
THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the
Administratrix, SYLVIA S. TY, petitioner, vs. COURT OF APPEALS, HON.
ILDEFONSO E. GASCON, and ALEJANDRO B. TY, respondents.
Facts:
Petitioner Sylvia S. Ty was married to Alexander T. Ty, Son of private respondent
Alejandro B. Ty.
17
Alexander died of leukemia and was survived by his wife, petitioner Sylvia, and
only child, Krizia Katrina. In the settlement of his estate, petitioner was appointed
administratrix of her late husbands intestate estate.
Petitioner filed a motion for leave to sell or mortgage estate property in order to
generate funds for the payment of deficiency estate taxes in the sum of P4,714,560.00.
Private respondent filed two complaints for the recovery of the properties that
were included in the inventory in the RTC of Quezon City and for the declaration of the
nullity of the deed of absolute sale of the shares of stock he executed in favor of the
deceased. A Civil Case was also filed for the recovery of the pieces of property that
were placed in the name of deceased which were sought to be sold out, mortgaged, or
disposed of by petitioner.
Private respondent claimed that the properties were acquired through his money,
without any cause or consideration from deceased Alexander.
Motions to dismiss were filed by petitioner. Both motions alleged lack of
jurisdiction for the trial court, claiming that the cases involved intra-corporate disputes
cognizable by the (SEC). Another ground is that there is an express trust between
private respondent Alejandro and his deceased son Alexander.
RTC denied the motion. CA also dismissed the petitions for certiorari for lack of
merit.
Issue: WON RTC has jurisdiction to try the case.

WON an express trust exist between Alejandro and Alexander.
the property for him and his siblings. Such transfer having been effected without cause
of consideration, a resulting trust was created.
If a trust was then created, it was an implied, not an express trust, which may be
proven by oral evidence and it matters not whether property is real or personal.
Express trust are those that are created by the direct and positive acts of the
parties, by some writing or deed or will or by words evidencing an intention to create a
trust. On the other hand, implied trusts are those which, without being expressed, are
deducible from the nature of the transaction by operation of law as matters of equity,
independently of the particular intention of the parties.
Petitioners assertion that private respondents action is barred by the statute of

limitations is erroneous. The statue of limitations cannot apply in this case.Resulting
trusts generally do not prescribe except when the trustee repudiates the trust. Further,
an action to reconvey will not prescribe so long as the property stands in the name of
the trustee. To allow prescription would be to permit a trustee to acquire title against
his principal and the true owner.
Petition for Certiorari is dismissed.

CASE NO. 15
Topic: Perpetual Trust
Orendain v. Trusteeship of Dona Margarita Rodriguez (G.R. No. 168660- June
30, 2009)
Petitioners: Hilarion Jr and Enrico Orendain, represented by Fe Orendain
(HEIRS OF HILARION ORENDAIN)
Respondent: Trusteeship of Dona Margarita Rodriguez
Ruling:
First Issue: Yes. It should also be noted that under the newly enacted Securities
Regulation Code (Republic Act No. 8799), this issue is now moot and academic because
whether or not the issue is intra-corporate, it is the regional trial court and no longer
the SEC that takes cognizance of the controversy.
Case: [Originally] Petition for certiorari (Rule 65) [But was later on change by SC to
Petition for Review on Certiorari under Rule 45, stating that the original motion
was erroneously labeled] assailing the Order of the RTC Manila which denied
petitioners Motion to Dissolve the Trusteeship of the Estate of Doa Margarita
Rodriguez.
FACTS:
Second Issue: No. Private respondent contends that the pieces of property were
transferred in the name of the deceased Alexander for the purpose of taking care of
On July 19, 1960, the decedent, Doa Margarita Rodriguez, died in Manila, leaving a
last will and testament. In September, the will was admitted to probate and in 1962,
CFI Manila approved the project of partition presented by the executor of the will. There
were no compulsory heirs so it was free to dispose the properties w/o regard to
legitimes. Some testamentary dispositions contemplated the creation of a trust to
18
manage the income from her properties for distribution to beneficiaries specified in the
will, to wit:
the trust estate should be deposited in a bank and should be devoted for the purposes
specifically indicated in the clauses 12, 13 and 24.
1. Clause 2 instructed the creation of trust;
ISSUES:
2. Clause 3 instructed that the remaining income from specified properties, after the
necessary deductions for expenses, including the estate tax, be deposited in a fund
with a bank;
WON trusteeship of the properties can be dissolved using Arts. 867 and 870
3. Clause 10 enumerated the properties to be placed in trust for perpetual

administration (pangasiwaan sa habang panahon);
4. Clauses 11 and 12 directed how the income from the properties ought to be
divided among, and distributed to the different beneficiaries; and
5. Clause 24 instructed the administrators to provide medical support to certain
beneficiaries, to be deducted from the fund deposits in the bank mentioned in
Clauses 2 and 3.
Citing the case of Rodriguez, etc., et al. v. CA, et al., [with regard to Clause 10] that the
clause on perpetual administration is valid only insofar as the first 20 year period is
concerned so as not to violate Art.870 of the NCC. The Rodriguez case also mentioned
that the will of the testatrix is the law, and must be given effect. Its interpretation
must be so as to give effect and make operative the disposition in the will.
However, 4 decades have passed hence petitioners Orendain now assail that the ruling
in the Rodriguez case is now contrary to the Civil Code provision 870. Hence they move
to dissolve the decedents estate.
RTC Decision:
Art.870 is not applicable in this present motion to dissolve. While it is true that the
clause 10 shall be void because of the lapse of 20 years, it cannot cause the invalidity
of clause 12, 13 and 24. What is declared void by 870 is the testamentary disposition
of the prohibiting alienation after the twenty year period. Hence, the trustees may
dispose of the properties left by the testatrix in order to carry out the latters
testamentary disposition (in other clauses).
As to the question as to whether a trust can be perpetual, the same finds support in
Article 1013[,] paragraph 4 of the Civil Code, which provides that "the Court, at the
instance of an interested party or its motion, may order the establishment of a
permanent trust so that only the income from the property shall be used." In the
present case, the testatrix directed that all the twenty five (25) pieces of property
listed in the tenth clause should be placed under the trusteeship and should be
perpetually administered by the trustees and a certain percentage of the income from
WON RTC ruled correctly in stating that the Civil Code provisions are not applicable in
this case
WON Art 1013 (4) was properly applied
HELD:
The petition is impressed with merit.
Clause 10 created a perpetual trust for the administration of her properties and the
income accruing therefrom, for specified beneficiaries. Some properties were listed and
in fact, decedent forbade alienation or mortgage of the properties, but only sought to
bequeath the income derived therefrom to various sets of beneficiaries.
In the previously quoted case of Rodriguez, the court only said that the wishes of the
testatrix must be upheld because the 20 year period has not yet lapsed. BUT IN THIS
CASE, the period has undoubtedly lapsed. Even with this lapse of period, RTC still
ruled otherwise.
Plainly, the RTC was mistaken in denying petitioners motion to dissolve and ordering
the disposition of the properties in Clause 10 according to the testatrixs wishes. As
regards these properties, intestacy should apply as the decedent did not institute an
heir therefor. Article 782, in relation to paragraph 2, Article 960 of the Civil Code,
provides:
Art. 782. An heir is a person called to the succession either by the provision of a will or
by operation of law.
Art. 960. Legal or intestate succession takes place:
(2) When the will does not institute an heir to, or dispose of all the property belonging
to the testator. In such case, legal succession shall take place only with respect to the
property of which the testator has not disposed;
We find as erroneous the RTCs holding that paragraph 4, Article 1013 of the same code
specifically allows a perpetual trust, because this provision of law is inapplicable.
19
Under this article, the allowance for a permanent trust, approved by a court of
law, covers property inherited by the State by virtue of intestate succession.
The article cannot be applied to dispose of herein decedents properties.
RULING: Petition granted, RTC decision set aside.

Remanded to lower court to determine the ff:
1. The properties listed in Clause 10 of the will, constituting the perpetual
trust, which are still within reach and have not been disposed of as yet; and
2. The intestate heirs of the decedent, with the nearest relative of the
deceased entitled to inherit the remaining properties.
Note: Even with the dissolution of the trust, the petitioners are not necessarily declared
as intestate heirs of decedent. Remanding the case to the RTC, trial court must make
the determination of heirship and all others claiming to be heirs must prove their
status.
PAZ GARCIA vda. de MAPA, * SEGUNDO MAPA, PRISCILLA M. MONZON,

TERESA MAPA, IGNACIO SALAZAR AND JOSE SALAZAR, petitioners, vs. COURT
OF APPEALS, LUIS HIDROSOLLO and TEODORO HIDROSOLLO, in their own
behalf and as Joint Administrators of the testate estate of Ludovico
Hidrosollo, and VICTORIA ** HIDROSOLLO, CORAZON HIDROSOLLO, ROSARIO
HIDROSOLLO and MAGDALENA HIDROSOLLO, respondents
Facts:
ISSUE:
WON a Trust is created.
HELD:
Yes, a careful perusal and scrutiny of the pertinent provisions of Concepcion Mapa
de Hidrosollo's Will reveal that she intended to create a trust in favor of both
petitioners and private respondents. Thus, under paragraph 8 of the Will, Ludovico
Hidrosollo was instituted as sole and universal heir to the rest of the properties not
covered by the legacies in the preceding paragraphs. Under paragraph 9, however,
said Ludovico Hidrosollo was charged (encargo) with the obligation to deliver the
rest of the estate in equal parts to the Mapa, Salazar and Hidrosollo nephews and
nieces.
Art. 1444, The Civil Code of the Philippines provides that No particular words
are required for the creation of an express trust, it being sufficient that a trust is
clearly intended
CASE NO. 16
Hidrosollo, so that the controverted properties became part of his own estate
subject of settlement in Special Proceedings No. 52229.
The lower court ruled that a trust was created over the properties of
petitioners' claim. Thus, the lower court ordered respondents or whoever of
the rest of therein defendants had disposition of the properties to reconvey
the same in favor of petitioners, to render an accounting of the income of said
properties and to deliver to petitioners the net proceeds of such income.
The court of appeals reversed the decision of the lower court and
ruled instead that no trust nor fideicommissary substitution was created in
Concepcion Mapa de Hidrosollo's Will and that petitioners' claim was barred by
a final judgment, i.e., the order denying their motion to intervene in Special
Proceedings No. 52229 from which no appeal was taken.
The deceased Concepcion Mapa de Hidrosollo, in her last will and testament
dated June 2, 1951 and admitted to probate in Special Proceedings No. 46015,
instituted Ludovico Hidrosollo as universal heir to the residue of her estate
with the obligation as trustee to hold the same in trust for petitioners herein
who are nephews and nieces of the deceased Concepcion Mapa de Hidrosollo
and for the respondents who are nephews and nieces of Ludovico Hidrosollo;
That Ludovico, however, died without fulfilling the obligation so that the estate
of Concepcion formed part of the estate of Ludovico.
Petitioners Paz Garcia Vda. de Mapa, et al. instituted Civil Case No.
59566 before the then Court of First Instance of Manila to recover from the
estate of the late Ludovico Hidrosollo the properties left by the late
Concepcion Mapa de Hidrosollo.
Respondents, in their Answer, denied the existence of a trust and
alleged that Ludovico Hidrosollo, being the surviving spouse of the deceased
Concepcion Mapa de Hidrosollo became the latter's universal heir when she
died without descendants or ascendants; that as such universal heir, Ludovico
stepped into the rights, title and claims of the deceased Concepcion Mapa de
In the instant case although the word "trust" itself does not appear in the Will, the
testatrix's intent to create one is nonetheless clearly demonstrated by the
stipulations in her Will. In designating her husband Ludovico Hidrosollo as universal
and sole heir with the obligation to deliver the properties to petitioners and private
respondents, she intended that the legal title should vest in him, and in
significantly referring to petitioners and private respondents as "beneficiarios," she
intended that the beneficial or equitable interest to these properties should repose
in them. To our mind, these designations, coupled with the other provisions for coownership and joint administration of the properties, as well as the other
conditions imposed by the testatrix effectively created a trust in favor of the
parties over the properties adverted to in the Will.
CASE NO. 17
[G.R. No. 181844. September 29, 2010.]
SPS. FELIPE & JOSEFA PARINGIT, petitioner, vs. MARCIANA P. BAJIT, ADOLIO
PARINGIT & ROSARIO PARINGIT ORDOO, respondents.
This case is about the existence of an implied trust in a transaction where a property
was bought by one sibling supposedly for the benefit of all. The other siblings now want
20
to recover their share in the property by reimbursing their brother for their share in the
purchase price.
2.WoN the CA erred in failing to hold that Marciana, et al.'s right of action was barred
by prescription or laches.
FACTS
Spouses Julian&Aurelia Paringit leased a lot on Norma Street, Sampaloc, Manila from
Terocel Realty, Inc. They built their home there & raised five children;Florencio,
Felipe, Marciana, Adolio, &Rosario. Aurelia passed away.
1984 - Terocel Realty offered to sell the lot to Julian for their long occupancy, but he did
not have enough money at the time. Julian sought help from his children but only Felipe
& wife Josefa had the financial resources at that time. Julian executed a deed of
assignment of leasehold right in favor of Felipe & Josefa that would enable them to
acquire the lot. The latter bought the same from Terocel Realty to be paid in
installments. Thenafter the realty company executed a Deed of Absolute Sale in their
favor & turned over the title to them.
1985 - Due to issues regarding the ownership of the lot, Julian executed an affidavit
clarifying the nature of Felipe & Josefa's purchase of the lot. Claiming that it was
bought for the benefit of all his children. Expressing their concurrence with his affidavit,
Marciana, Rosario, & Adolio (Marciana, et al.) signed the same. Josefa also signed the
affidavit for Felipe who was in Saudi. Florencio did not sign.
1987 -Felipe & Josefa registered their purchase of the lot,& a TCTwas issued in their
names.Despite this, the spouses moved to another house on the same
street.Marciana, et al. continued to freely occupy the lot with their families. This was
the situation when Julian died in 1994. HcaDTE
1995 -Felipe & Josefa sent a demand letter to Marciana, et al., asking them to pay
rentals from March 1990 to December 1995.Marciana, et al., refused to pay or reply to
the letter, believing that they had the right to occupy the house & lot, it being their
inheritance. Felipe & Josefa filed an ejectment suit against them which prospered,
resulting in the ejectment of Marciana, et al. Shortly after, Felipe & Josefa moved into
the same.
HELD
Implied trust under Article 1450 presupposes a situation where a person,
using his own funds, buys property on behalf of another, who in the meantime
may not have the funds to purchase it. Title to the property is for the time being
placed in the name of the trustee, the person who pays for it, until he is
reimbursed by the beneficiary, the person for whom the trustee bought the l&. It is
only after the beneficiary reimburses the trustee of the purchase price that the
former can compel conveyance of the property from the latter.
The circumstances of this case are actually what implied trust is about. Although no
express agreement covered Felipe &Josefa's purchase of the lot for the siblings & their
father, it came about by operation of law & is protected by it. The nature of the
transaction established the implied trust & this in turn gave rise to the rights &
obligations provided by law. Implied trust is a rule of equity, independent of the
particular intention of the parties.
Evidence shows that Felipe &Josefa bought the lot for the benefit of Julian & his
children, rather than for themselves. Thus:
1st. When Terocel Realty granted them the right to acquire the lots, that right
technically belonged to Julian & all his children. If Julian really intended to sell the
entire house & assign the right to acquire the lot to Felipe & Josefa, he would have
arranged for Felipe's other siblings to give their conformity as co-owners to such sale.
And if Felipe & Josefa intended to buy the lot for themselves, they would have, knowing
that Felipe's siblings co-owned the same.
Marciana, et al., filed the present action against Felipe & Josefa for annulment of title &
reconveyance of property before the RTC.Felipe denied knowledge of the agreement
among the siblings that the property would devolve to them all.Josefaclaimed that she
signed the affidavit only because Marciana, et al., were going to get mad at her had
she refused, and that she signed the document only to prove having received it.
Marciana, et al., insists that the agreement was that Felipe & Josefa would acquire the
lot for the benefit of all the siblings. They even tried to reimburse the spouses for their
shares in the lot's price.And denied pressuring Josefa into signing the document in
question.
2004 - RTC rendered a decision, finding the evidence of Marciana, et al., insufficient to
prove by preponderance of evidence that Felipe & Josefa bought the subject lot for all
of the siblings.
2007 - CA reversed the decision of the RTC & ordering Felipe & Josefa to reconvey to
Marciana, et al., their proportionate share in the lot upon reimbursement of what the
spouses paid to acquire it plus legal interest.
ISSUE/S
1.WoN the CA erred in finding that Felipe & Josefa purchased the subject lot under an
implied trust for the benefit of all the children of Julian
21
2nd. Julian said in his affidavit that Felipe & Josefa bought the lot from Terocel Realty on
Felipe & Josefa also claim that Marciana, et al.'s action was barred by laches has no
his behalf & on behalf of his other children. Felipe & Josefa advanced the payment
basis. Laches is defined as the failure or neglect, for an unreasonable & unexplained
because Julian & his other children did not then have the money needed to meet the
length of time, to do that which, by exercising due diligence could or should have been
realty company's deadline for the purchase. Julian added that his other children were to
done earlier.Marciana, et al., had no reason to file an earlier suit against Felipe & Josefa
reimburse Felipe for the money he
since the latter had not bothered them
Petitioners Complaint:
Respondents Answer:
advanced for them.
despite their purchase of the lot in their
names. Only about 12 years later when they
Felipe, acting through his wife,
1. She bought the parcel of land
1. Contrary to the petitioner's
wrote their demand letter did the spouses
countersigned Julian's affidavit in the
in 1939 from Crisogono
claim, it was her husband,
take an adverse attitude against Marciana, et
manner the other siblings did. The
Limpiado, although the
Crispulo Rojas, who bought
al. The latter filed their action to annul Felipe
document expressly acknowledged the
transaction was not reduced
the property from
& Josefa's title & have the same transferred
parties' intention to establish an implied
into writing. Thereafter, she
Crisogono Limpiado in 1948,
to their names not too long later on July 24,
trust between them. Josefa claims that she
immediately took possession
which accounts for the tax
1996.
signed the document only to show that she
of the property.
declaration being in Crispulo's
received a copy of it. But her signature did
name. From then on, until his
not indicate that fact. She signed the
death in 1978, Crispulo
document s.
possessed and cultivated the
2. When she and her husband
property.
CASE NO. 18
rd
left
for
Mindanao
in
1948,
3 . If Felipe & Josefa really believe their
Caezo v. Rojas, G.R. No. 148788,
she
entrusted
the
said
land
allegations, then their moving out of the
[November 23, 2007], 563 PHIL 551-572
to her father, Crispulo Rojas,
house in 1988 & letting Marciana, et
Principle/s: Trusts, Laches, Estoppel en
2.
Upon
his
death,
the
who
took
possession
of,
and
al., continue to occupy the house does not
pais
cultivated,
the
property.
property
was
included
in
make sense. Unless the lot was actually
his estate, which was
acquired only in trust for Julian & all the
administered by a special
children. TCIDSa
FACTS:
administrator.
3.
In
1980,
she
found
out
that
4th. Felipe & Josefa demanded rent only a
the respondent, her
The subject property is an unregistered land
year after Julian's death. This shows that for
stepmother, was in
with an area of 4,169 square meters, situated
over 10 years, Felipe & Josefa respected the
3. The petitioner, as heir, even
possession of the property
at Higatangan, Naval, Biliran.
right of the siblings to reside on the
and was cultivating the
received her share in the
property. This is incompatible with their
same.
produce of the estate.
January 29, 1997- Petitioner Soledad Caezo
claim that they bought the house & lot for
filed a Complaint for the recovery of real
themselves back in 1984.
property plus damages with the MTC of
4. She also discovered that the
4. She also argued that the fact
In the matter concerning the prescription of
Naval, Biliran, against her father's second
the action to recover their portions of the
tax declaration over the
that petitioner filed the
wife, respondent Concepcion Rojas.
house & lot, an implied trust prescribes
property was already in the
complaint only in 1997 means
within 10 years from the time the right of
name of Crispulo Rojas.
that she had already
July 3, 1998 - the MTC rendered a
action accrues. A right of action implies
abandoned her right over the
Decision in favor of the petitioner,
the existence of a cause of action & a cause
property.
making her the real and lawful owner of
of action has three elements: a) the
the land.
existence of a right in plaintiff's favor; b) defendant's obligation to respect such
right;&c) defendant's act or omission that violates the plaintiff's right. Only when the
last element occurs or takes place can it be said in law that a cause of action has
arisen.
MTC Findings:
In an implied trust, the beneficiary's cause of action arises when the trustee
repudiates the trust, not when the trust was created. The registration of the lot
in their names could not be said to have repudiated the implied trust by that
registration. Their purchase of the land& registration of its title in their names are not
incompatible with implied trust. It was understood that they did this for the benefit of
Julian & all the children.
Assuming arguendo that Felipe & Josefa's registration of the lot in their names
constituted a hostile act or a violation of the implied trust, Marciana, et al., had 10
years or until January of 1997 within which to bring their action. They filed such action
in July 1996 well within the period allowed them.
1. Gave credence to the testimony of the petitioners' two witnesses attesting to

the fact that Crisogono Limpiado sold the property to the petitioner in 1939.
2. Found no evidence to show that Crispulo Rojas bought the property from
Crisogono Limpiado in 1948.
3. Held that the 1948 tax declaration in Crispulo's name had little
significance on respondent's claim, considering that in 1948, the "country
was then rehabilitating itself from the ravages of the Second World War" and
"the government was more interested in the increase in tax collection than
the observance of the niceties of law."
22
The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran.
ii.
Crispulo adversely possessed the same property from 1948

until his death in 1978;
October 12, 1998 - the RTC reversed the MTC decision on the ground that the action
had already prescribed and acquisitive prescription had set in. Stating further that The
said property remains as the legitime of Concepcion Rojas and her children.
iii.
upon his death in 1978, the property was included in his estate, the
proceeds of which were distributed among his heirs.
December 14, 1998 - acting on petitioner's motion for reconsideration, the RTC
amended its original decision.
RTC Findings after Motion for Recon:
It held that the action had not yet prescribed considering that the petitioner merely
entrusted the property to her father. The ten-year prescriptive period for the recovery
of a property held in trust would commence to run only from the time the trustee
repudiates the trust. Found that there is no evidence on record showing that Crispulo
Rojas ever ousted the petitioner from the
property.
April 25, 1999 - The respondent filed a
motion to reconsider the Amended Decision
but the RTC denied the same in an Order.
September 7, 2000 - Respondent filed a
petition for review with the CA, which
reversed the Amended Decision of the RTC.
CA Findings:
1. The petitioner's inaction for several
years casts a serious doubt on her
claim of ownership over the parcel of
land.
a)
b)
It noted that 17 years lapsed since

she discovered that respondent
was in adverse possession of the
property before she instituted an
action to recover the same.
ISSUES:
Respondents Answer:
Prescription and laches

are unavailing because
there was an express trust
relationship between the
petitioner and Crispulo
Rojas and his heirs, and
express trusts do not
prescribe.
Asserts that the complaint is barred by

prescription, laches and estoppel.
Even assuming that it was

not an express trust, there
was a resulting trust
which generally does
not prescribe unless
there is repudiation by
the trustee.
From 1948 until his death in 1978, Crispulo

cultivated the property and was in adverse,
peaceful and continuous possession thereof in the
concept of owner.
It took the petitioner 49 years from 1948 before
she filed the complaint for recovery of the property
in 1997.
Granting that it was only in 1980 that she found
out that the respondent adversely possessed the
property, still petitioner allowed 17 years to
elapse before she asserted her alleged right
over the property.
And during the probate proceedings, the petitioner did not even contest the
inclusion of the property in the estate of Crispulo Rojas.
To Support Conclusion, said Court cited the ff. Circumstances:

i.
Hence, this Petition for Review.
Petioners Argument:
2. Convinced that Crispulo Rojas owned the property, having bought the same
from Crisogono Limpiado in 1948.
a)
3. And further held that, assuming that there was an implied trust between
the petitioner and her father over the property, her right of action to
recover the same would still be barred by prescription since 49 years
had already lapsed since Crispulo adversely possessed the contested
property in 1948.
the property was declared for taxation purposes in Crispulo's name and
he had been paying the taxes thereon from 1948 until his death in
1978;
1. Whether there is an existence of

Trust over the Property - Express or
Implied between the petitioner and
her father?
2. Whether or not the petitioners right of
action to recover the property is barred by
prescription or laches and/or estoppel?
HELD:
1. There is None. A trust is the legal
relationship between one person
having an equitable ownership of
property and another person 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.
Trusts are either express or implied. Express

trusts are those which are created by the
direct and positive acts of the parties, by
some writing or deed, or will, or by words evincing an intention to create a trust.
Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or, independently, of the particular
intention of the parties, as being superinduced on the transaction by operation of law
basically by reason of equity. (either be a resulting trust or a constructive trust).
As a rule, however, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements.
*The presence of the following elements must be proved:
(1) a trustor or settlor who executes the instrument creating the trust;
(2) a trustee, who is the person expressly designated to carry out the trust;
(3) the trust res, consisting of duly identified and definite real properties; and
23
(4) the cestui que trust, or beneficiaries whose identity must be clear.
Accordingly, it was incumbent upon petitioner to prove the existence of the trust
relationship. And petitioner sadly failed to discharge that burden.
The existence of express trusts concerning real property may not be established by
parol evidence. It must be proven by some writing or deed. In this case, the only
evidence to support the claim that an express trust existed between the petitioner and
her father was the self-serving testimony of the petitioner. Bare allegations do not
constitute evidence adequate to support a conclusion. They are not equivalent to proof.
Although no particular words are required for the creation of an express trust, a clear
intention to create a trust must be shown; and the proof of fiduciary relationship must
be clear and convincing. The creation of an express trust must be manifested
with reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other
interpretations.
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. Trustworthy evidence is required
because oral evidence can easily be fabricated. In order to establish an implied trust in
real property by parol evidence, the proof should be as fully convincing as if the acts
giving rise to the trust obligation are proven by an authentic document. An implied
trust, in fine, cannot be established upon vague and inconclusive proof. In the present
case, there was no evidence of any transaction between the petitioner and her father
from which it can be inferred that a resulting trust was intended. The petitioner
testified only to the effect
existence of a trust because profit-sharing per se, does not necessarily translate to a
trust relation.
In light of the disquisitions, we hold that there was no express trust or resulting
trustestablished between the petitioner and her father. Thus, in the absence of a trust
relation, we can only conclude that Crispulo's uninterrupted possession of the
subject \property for 49 years, coupled with the performance of acts of ownership, such
as payment of real estate taxes, ripened into ownership.
2.1. Yes. Petitioner is guilty of Estopel.
The principle of estoppel in pais applies when by one's acts, representations,
admissions, or silence when there is a need to speak out one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and the
latter rightfully relies and acts on such belief, so as to be prejudiced if the former is
permitted to deny the existence of those facts. Such a situation obtains in the instant
case.
2.2. Yes, the action is barred of Laches.
The petitioner allegedly discovered that the property was being possessed by the
respondent in 1980. However, it was only in 1997 that she filed the action to recover
the property. Laches is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to it has either abandoned or
declined to assert it.
WHEREFORE, the petition is DENIED. CA is AFFIRMED.
that her agreement with her father was that she will be given a share in the produce of
the property. This allegation, standing alone as it does, is inadequate to establish the
24

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Agency &amp; Trust Case Digests

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CASE NO.

The petition is DENIED and the decision of the RTC is AFFIRMED.

AGENCY AND TRUST CASE DIGESTS

Concepcion and Gerundia Rallos were sisters and registered co-owners of a

that the agency is couple with an interest (Article 1930)

AGENCY AND TRUST CASE DIGESTS

there is consent, express or implied, of the parties to establish the

Agency is basically personal, representative, and derivative in nature. The authority of

Herein petitioner, Inland Reality Investment Service, Inc., was engaged in a

documentation thereof. Petitioners interposed that Greogorio Araneta III, in behalf of

AGENCY AND TRUST CASE DIGESTS

ATTY. JOSH CAROL VENTURA

2. VIOLATIONS OF THE CONTRACT

averment that the defendant violated the following obligations:

G.R. No. 75198, October 18, 1988

In the case at bar:

AGENCY AND TRUST CASE DIGESTS

2. TO WHOM PAYMENT SHOULD BE MADE. Payment must be made to the person in

4. DUTIES OF PERSONS DEALING WITH AN ASSUMED AGENT. Persons dealing with an

AGENCY AND TRUST CASE DIGESTS

relied upon Montelibano's own statements and representation, as to his authority, to

Article 1162 of the Civil Code provides:

And article 1727 provides:

Around mid-November of 1956- Claparols was disagreeably surprised by

AGENCY AND TRUST CASE DIGESTS

Eduardo L. Claparols, operated a factory for the manufacture of nails in

ATTY. JOSH CAROL VENTURA

On July 6, 1956, Coleongco , without Claparols knowledge, had

In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not

ATTY. JOSH CAROL VENTURA

An agency by estoppel, which is similar to the doctrine of apparent authority, requires

In an agent-principal relationship, the personality of the principal is extended through

AGENCY AND TRUST CASE DIGESTS

LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR.,

ATTY. JOSH CAROL VENTURA

cost residential community which the spouses referred to as the Bacaling-Moreno

ATTY. JOSH CAROL VENTURA

Issue: WON RTC has jurisdiction to try the case.

Petitioners assertion that private respondents action is barred by the statute of

Petition for Certiorari is dismissed.

1. Clause 2 instructed the creation of trust;

3. Clause 10 enumerated the properties to be placed in trust for perpetual

ATTY. JOSH CAROL VENTURA

RULING: Petition granted, RTC decision set aside.

PAZ GARCIA vda. de MAPA, * SEGUNDO MAPA, PRISCILLA M. MONZON,

ATTY. JOSH CAROL VENTURA

1. Gave credence to the testimony of the petitioners' two witnesses attesting to

ATTY. JOSH CAROL VENTURA

Crispulo adversely possessed the same property from 1948

It noted that 17 years lapsed since

Prescription and laches

Asserts that the complaint is barred by

Even assuming that it was

From 1948 until his death in 1978, Crispulo

To Support Conclusion, said Court cited the ff. Circumstances:

Hence, this Petition for Review.

1. Whether there is an existence of

Trusts are either express or implied. Express

AGENCY AND TRUST CASE DIGESTS

ATTY. JOSH CAROL VENTURA

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