Professional Documents
Culture Documents
A. LAW ON
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I. NATURE AND OBJECT OF AGENCY
1. Definition of Agency; Parties in an Agency Relationship (Art. 1868)
Under Article 1868, agency is a contract whereby a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter.
Spanish term for principal is mandante; and among the terms used for agent are
mandatario, factor, broker, attorney-in-fact, proxy, delegate or representative.
1
Unless otherwise indicated, all references to articles pertain to the New Civil Code of the Philippines.
2MCIAA v. Heirs of Gavina Jjordan, 778 SCRA 250 (2016).
3
Reiterated in Yu Eng Cho v. Pan American World Airways, 328 SCRA 717 (2000); Manila Memorial Park v. Linsangan, 443 SCRA 377
(2004); Eurotech Industrial Technologies v. Cuizon, 521 SCRA 584 (2007); Loadmasters Customs Services v. Glodel Brokerage Corp., 639
SCRA 69 (2011); Urban Bank v. Pena, 659 418 (2011); Westmont Investment Corp. v. Francis, Jr., 661 SCRA 787 (2011); Villoria v.
Continental Airlines, 663 SCRA 57 (2012); Jusayan v. Sombilla, 746 SCRA 437 (2015).
4
Urban Bank v. Pea, 659 SCRA 418 (2011).
In agency, principals personality is extended through the facility of the agent, who by legal
fiction becomes the principal, authorized to perform all acts which latter would have him do.
Such a relationship can only be effected with principals consent, which must not, in any way, be
compelled by law or by any court. xLitonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).
5
Amon Trading Corp. v. CA, 477 SCRA 552 (2005).
6A unilateral contract has been defined as A contract in which one party makes a promise or undertakes a performance. Thus, it was
observed that [M]any unilateral contacts are in reality gratuitous promises enforced for good reason with no element of bargain. [BLACKS
LAW DICTIONARY 326 (1990)] It is perhaps in this sense that agency is unilateral because it is the agent who undertakes the performance of
the agency. However, one must not forget that agency is still a contract with a bilateral character. Manresa explains: As regards whether
the agency has a unilateral or bilateral character, it is evident, in our considered opinion, from the point of view of the Code, that the totality of
cases involving agency will always be bilateral, not because, as one ordinarily supposes, there will be obligations exclusively for the agent
and rights exclusively for the principal. It is clear that at times it happens this way, but what is common in agency with other contracts is the
mutuality and the reciprocity that arises from the existence of an obligation against another obligation, a right against another right.11
MANRESA. COMENTARIOS AL CODIGO CIVIL ESPAOL 443 (1950)
7Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006); Villoria v. Continental Airlines, 663 SCRA 57 (2012).
8Tan v. Engineering Services, 498 SCRA 93 (2006); Country Bankers Insurance v Keppel Cebu Shipyard, 673 SCRA 427 (2012).
9Schmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
c. From Side of Third Parties/Public (Arts. 1873 and 1408; 1921 and 1922)
(i) Agency Is Not Presumed to Exist Since the basis for agency is representation, every
person dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent. xSafic Alcan & Cie. v. Imperial Vegetable Oil Co., Inc., 355 SCRA 559
(2001).CONSEQUENTLY:
The law does not make a presumption of agency and proving its existence, nature and
extent is incumbent upon the person alleging it. xYun Kwan Byung v. PAGCOR, 608
SCRA 107 (2009).12
Persons dealing with an agent must ascertain not only the fact of agency, but also the
nature and extent of his authorityhe must require the presentation of the power of
attorney, or the instructions as regards the agency. According to Art.1990 of New Civil
Code, insofar as third persons are concerned, an act is deemed to have been performed
within the scope of the agents authority, if such as is within the terms of the power of
attorney, as written. Salvador v. Rabaja, 749 SCRA 654 (2015).13
(ii) Agency by Estoppel With Respect to Third Parties Registered owner who placed in
the hands of another an executed deed of transfer of the registered land, has effectively
represented to a third party that the holder of such document is authorized to deal with the
property. xBlondeau v. Nano, 61 Phil. 625 (1935).14CONSEQUENTLY:
When owner of a hotel/caf business allows a person to use the title managing agent and allows such person to take charge of the
business during his prolonged absence, performing the duties usually entrusted to managing agent, then such owner is bound by the
act of such person. One who clothes another apparent authority as his agent, and holds him out to the public as such, can not be
12Nevada v. Casuga, 668 SCRA 441 (2012); Jusayan v. Sombilla, 746 SCRA 437 (2015).
13Woodschild Holdings, v. Roxas Electric and Construction Co., 436 SCRA 235 (2004); Manila Memorial Park v. Linsangan, 443 SCRA
377 (2004); Country Bankers Insurance v Keppel Cebu Shipyard, 673 SCRA 427 (2012); Umipig v. People, 677 SCRA 53 (2012); Recio v.
Heirs of Spouses Altamirano, 702 SCRA 137 (2013); Bautista-Spille v. NICORP Management and Dev. Corp., 773 SCRA 67 (2015).
14Domingo v. Robles, 453 SCRA 812 (2005).
When the law firm has allowed for quite a period the messenger of another office to receive mails and correspondence on their
behalf, an implied agency had been duly constituted, specially when there is no showing that counsel had objected to such practice
or took step to put a stop to it. xEquitable PCI-Bank v. Ku, 355 SCRA 309 (2001).
Agency by estoppel, which is similar to doctrine of apparent authority, requires proof of reliance upon the representations
made
purported principal,
by which needs proof that the representations predated the action taken by the relying third
party.
Country Bankers Insurance v Keppel Cebu Shipyard, 673 SCRA 427 (2012).
Assuming that Hojilla exceeded his authority, the respondents are still solidary liable
because they allowed Hojilla to act as though he had full powers by impliedly ratifying
his actions through action by omission. This is the import of the principle of agency by
estoppel or the doctrine of apparent authority, [t]he principal is bound by the acts of his
agent with the apparent authority which he knowingly permits the agent to assume, or
which he holds the agent out to the public as possessing. The respondents
acquiescence of Hojillas acts was made when they failed to repudiate the latters acts.
They knowingly permitted Hojilla to represent them and petitioners were clearly misled
into believing Hojillas authority. Republic v. Baez, 772 SCRA 297 (2015).
2. KINDS OF AGENCY
a. Based on Business or Transactions Encompassed (Art. 1876): General or Universal
Agency versus Special or Particular Agency
Siasat v. IAC, 139 SCRA 238 (1985) describes them as follows:
Universal Agent is authorized to do all acts for his principal which can lawfully be
delegated to an agent; such an agent may be said to have universal authority.
General Agent is authorized to do all acts pertaining to a business of a certain kind or at
a particular place, or all acts pertaining to a business of a particular class or series. He
has usually authority expressly conferred in general terms or in effect made general by
the usages, customs or nature of the business which he is authorized to transact.
Special Agent is authorized to do some particular act or to act upon some particular
occasion; he acts usually in accordance with specific instructions or under limitations
necessarily implied from the nature of the act to be done.
17San Juan Structural v. CA, 296 SCRA 631 (1998); AF Realty & Dev., Inc. v. Dieselman Freight Services Co., 373 SCRA 385 (2002);
Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003); Bautista-Spille v. NICORP Management and Dev. Corp., 773 SCRA 67
(2015); MCIAA v. Unchuan, 791 SCRA 581 (2016).
18Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).
19Estate of LinoOlaguer v. Ongjoco, 563 SCRA 373 (2008); Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v. Pajo-Reyes,
632 SCRA 400 (2010); Recio v. Heirs of the Spouses Altamirano, 702 SCRA 137 (2013); Bautista v. Spouses Jalandoni, 710 SCRA 670
(2013); MCIAA v. Unchuan, 791 SCRA 581 (2016).
1. General Obligation of Agent Who Accepts the Agency: Agent Bound to Carry Agency
to Its Completion for the Benefit of Principal(Art. 1884)
OTHERWISE: Agent Will Be Liable for Damages Which the Principal May Suffer Through
His Non-Performance.
COMPARE: Agent Who Withdraws From the Agency (Art. 1929): He Must Continue to Act
Until Principal Takes Necessary Steps to Meet Situation.
In Event of Death of Principal (Art. 1919[3]): Agent Must Finish Business
Already Begun Should Delay Entail Any Danger Even If Principals Death
Extinguishes Agency.
The provision is clear that an agent is bound to carry out the agency. The relationship
between principal and agent is a fiduciary one, demanding trust and confidence. It is the duty of
the agent to act in good faith for the advancement of the interests of the principal. In this case,
BPI had the obligation to carry out the agency by informing the beneficiary, who appeared
before BPI to withdraw funds of the insured who was BPI's depositor, not only of the existence
of the insurance contract but also the accompanying terms and conditions of the insurance
policy in order for the beneficiary to be able to properly and timely claim the benefit. BPI is
expected not only to provide utmost customer satisfaction in terms of its own products and
services but also to give assurance that its business concerns with its partner entities are
implemented accordingly.Bank of P.I. v. Laingo, 787 SCRA 541 (2016).
2. Obligation of Agent Who Declines Agency Who Has Custody of Goods: Agent Must
Observe Due Diligence in the Custody and Preservation of the Goods Until New
Agent Appointed(Art. 1885)
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3. DUTY OF OBEDIENCE
a. Agent Must Act In the Name of the Principal, Within the Scope of His Authority (Art.
1881)
(i) Act Deemed to Have Been Performed within the Scope of Agents Authority, If
Such Act Is Within the Terms of the Written Power of Attorney, Even If in Fact
the Agent Exceeded the Limits of the Authority According the Private
Understanding With the Principal(Art. 1900)
(ii) Authority of Agent Shall Not Be Deemed Exceeded If Performed in a Manner
More Advantageous to Principal.(Art. 1882)20
b. Primary Obligation of Agent Is to Carry Out Agency in Accordance with Principals
Instructions (Art. 1887)
If Agent Followed Instructions, Principal Cannot Set-up Agents Ignorance or
Circumstance which Principal Was/Ought to Have Been Aware Of (Art. 1899)
Pursuant principals instructions, agent purchased a piece of land in their names using the
sums given by principals, and thereafter principals had ratified the transaction and even
received profits arising from the investment in the land. Since there is nothing which would
indicate that agent failed to exercise reasonable care and diligence in the performance of his
duty, or that he undertook to guarantee the vendors title to the land purchased, the eventual
loss sustained by said principals from a defect in the title in the land cannot be a basis to hold
the agent personally liable for damages. xNepomuceno v. Heredia, 7 Phil 563 (1907).
When an agent in executing the orders and commissions of his principal carries out the
instructions he has received from his principal, and does not appear to have exceeded his
authority or to have acted with negligence, deceit or fraud, he cannot be held responsible for the
failure of his principal to accomplish the object of the agency. Agents, although they act in
representation of the principal, are not guarantors for the success of the business enterprise
they are asked to manage. xGuiterrez Hermanos v. Oria Hermanos, 30 Phil. 491 (1915).
When bank officers, acting as agent, had not only gone against the instructions, rules and
regulations of the bank in releasing loans to numerous borrowers who were not qualified, then
such bank officers are liable personally for the losses sustained by the bank. That bank had
also filed suits against the borrowers to recover the amounts given does not amount to
ratification of the acts done by the bank officers. xPNB v. Bagamaspad, 89 Phil. 365 (1951).
c. Effects of Acts Done Within the Scope of Agents Authority: Valid, and Principal Is the
One Liable; Agent Is Not Personally Liable(Art. 1881)
Under Art. 1881,when agent acts within the scope of authority, principal is bound by acts
effected in his behalf, whether or not third person dealing with the agent believes that the agent
has actual authority. xSargasso Const.& Dev. Corp. v. PPA, 623 SCRA 260 (2010).
The legal impact of Art.1881 which provides that the agent must act within the scope of his
authority, is that the gent is granted the right to affect the legal relations of his principal by the
performance of acts effectuated in accordance with the principal's manifestation of consent.
Pacific Rehouse Corp. v. EIB Securities, Inc., 633 SCRA 214 (2010).
d. Effects When Agents Act Beyond the Scope of His Authority: Unenforceable, Not
Void; UNLESS PRINCIPAL RATIFIES, WHICH MAKE IT VALID (Arts. 1317, 1403 and 1898)
When money received as a deposit by an agent is given to principal, with notice that it is the
money of the depositor, principal is bound to return to depositor, even if his agent was not
authorized to receive such deposit. [There has, in effect, ratification of the unauthorized act of
the agent, thereby binding the principal]. xCason v. Rickards, 5 Phil 639 (1906).
When the administrator enters into a contract that is outside of the scope of authority, the
contract would nevertheless not be an absolute nullity, but simply voidable [unenforceable!] at
the instance of the parties who had been improperly represented, and only such parties can
assert the nullity of said contracts as to them. xZayco v. Serra, 49 Phil 985 (1925).
Under Art. 1898, acts of an agent beyond the scope of his authority do not bind the principal,
unless the latter ratifies the same expressly or impliedly. When third person knows that the
agent was acting beyond his power or authority, the principal cannot be held liable for the acts
of the agent. If the said third person is aware of the limits of the authority, he is to blame, and is
Bombon v. CA, 212 SCRA 25 (1992); Gozun v. Mercado 511 SCRA 305 (2006).
4. DUTY OF DILIGENCE:
a. Agent Must Exercise Due Diligence in the Pursuit of the Principals Business
b. Agent Should Not Act If It Would Manifestly Result in Damage to Principal (Art. 1888)
c. Agent Also Liable Personally (with the Principal)for Fraud and Negligence Committed
in Pursuit of the Principals Affairs (Arts. 1884 and 1909)
The provision is clear that an agent is bound to carry out the agency. The relationship
existing between principal and agent is a fiduciary one, demanding conditions of trust and
confidence. It is the duty of the agent to act in good faith for the advancement of the interests of
the principal. In this case, BPI had the obligation to carry out the agency by informing the
beneficiary, who appeared before BPI to withdraw funds of the insured who was BPI's
depositor, not only of the existence of the insurance contract but also the accompanying terms
and conditions of the insurance policy in order for the beneficiary to be able to properly and
timely claim the benefit. xBank of P.I. v. Laingo, 787 SCRA 541 (2016).
What Shall Aggravate or Mitigate Liability Arising Out of Negligence Whether
Agency Was for a Compensation or Was Gratuitous
He who seeks to make agent liable has the burden to show that the losses and damage
were occasioned by his fault or negligence; mere allegation without substantiation is not enough
to make the agent personally liable. xHeredia v. Salina, 10 Phil 157 (1908).
While an agent who acts for a revealed principal does not become personally bound to the
other party, yet that rule does apply when the agent intercepted and appropriated for himself the
thing which the principal is bound to deliver, and thereby made the performance of the principal
impossible. The agent in any event must be precluded from doing any positive act that could
prevent performance on the part of his principal, otherwise the agent becomes liable also on the
contract. xPhil. National Bank v. Welsh Fairchild, 44 Phil 780 (1923).
Where holder of an exclusive and irrevocable power of attorney to make collections, failed to
collect the sums due to principal and thereby allowed the allotted funds to be exhausted by
other creditors, such agent has failed to act with the care of a good father of a family required
under Art. 1887 and became personally liable for the damages which the principal may suffer
through his non-performance. Phil. National Bank v. Manila Surety, 14 SCRA 776 (1965).
In stressing that it was acting only as a collecting agent, Metrobank seems to be suggesting
that as a mere agent it cannot be liable to the principal; this is not exactly true. On the contrary,
Art. 1909 clearly provides that the agent is responsible not only for fraud, but also for
negligence. xMetrobank v. Court of Appeals, 194 SCRA 169 (1991).
Provision in mortgage contract that in case of accident or loss, finance company shall make
a proper claim against insurance company, was in effect an agency, and under Art. 1884,
finance company was bound by its acceptance to carry out the agency. In spite of borrowers
instructions to make such claims, it insisted on having the vehicle repaired but eventually
resulting in loss of the insurance coverage, the finance company had breached its duty of
diligence, and must assume the damages suffered by borrower, and can no longer collect on
the balance of the mortgage loan.BA Finance v. CA, 201 SCRA 157 (1991).
It is well-settled that agent is also responsible for any negligence in performance of its
function (Art. 1909) and is liable for damages which principal may suffer by reason of its
negligent act. (Art. 1884).British Airways v. Court of Appeals, 285 SCRA 450 (1998).23
5. DUTY OF LOYALTY:
a. Agent Shall Be Liable for Damages Sustained by the Principal Where in Case of
Conflict-of-Interests Situations, He Should Prefer His Own Interest (Art. 1889)
b. Agent Is Prohibited from Buying Property Entrusted to Him for Administration or Sale
Without Principals Consent (Art. 1491[2]).
Where agent by means of misrepresentation of the condition of the market induces principal
to sell to him the property consigned to his custody at a price less than that for which he has
8. Liability When Two Or More Agents Appointed by the Same Principal: Responsibility
of Agents Not Solidary (Art. 1894)
EXCEPT :Where Two or More Agents Agree to Be Solidarily Bound (Art. 1895)
COMPARE: Two Principals with Common Agent Principals Solidarily Liable (Art. 1915)
When two letters of attorney are issued simultaneously to two different attorneys-in-fact, but
covering the same powers shows that it was not the principals intention that they should act
9. RULE ON LIABILITY RULES TO THIRD PARTIES: Agent Not Bound to Third Parties; It Is the
Principal Who Is Bound by the Contracts Entered Into By the Agent (Art. 1897)
A promissory note and mortgages executed by agent for and on behalf of his principal, in
accordance with a power of attorney, are valid, and as provided by Art. 1727, the principal must
fulfill the obligations contracted by the agent. xPNB v. Palma Gil, 55 Phil. 639 (1931).
The settlement or adjustment agent in the Philippines of a New York insurance company is
no different from any other agent from the point of view of his responsibility: whenever he
adjusts or settles a claim, he does it in behalf of his principal, and his action is binding upon his
principal, and the agent does not assume any personal liability, and he cannot be sued on his
own right; the recourse of the insured is to press his claim against the principal. xSalonga v.
Warner Barnes, 88 Phil 125 (1951).26
A resident agent, as a representative of the foreign insurance company, is tasked only to
receive legal processes on behalf of its principal and not to answer personally for the any
insurance claims. xSmith Bell v. Court of Appeals, 267 SCRA 530 (1997).
Where buyer effects payment of part of purchase price to one of sellers creditors pursuant to
the terms of the deed of sale, there is no subrogation that takes place, as the buyer then merely
acts as an agent of seller effecting payment that was due to the seller in favor of a third-party
creditor. xChemphil Export v. Court of Appeals, 251 SCRA 217 (1995).
Agents who have been authorized to sell parcels of land cannot claim personal damages in
the nature of unrealized commission where the buyer refuses to proceed with the sale. The
rendering of such service did not make them parties to the contracts of sale executed in behalf
of the latter. Since a contract may be violated only by the parties thereto as against each other,
the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must,
generally, either be parties to said contract. xUy v. Court of Appeals, 314 SCRA 69 (1999).27
A person acting as a mere representative of another acquires no rights whatsoever, nor does
he incur any liabilities arising from the said contract between his principal and another party.
xAngeles v. PNR, 500 SCRA 444 (2006).28
Art. 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally
liable to the party with whom he contracts; it is the principal who is liable on the contracts of the
agent. Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).29
Since, as a rule, the agency, as a contract, is binding only between the contradicting parties,
then only the parties, as well as the third person who transacts with the parties themselves, may
question the validity of the agency or the violation of the terms and conditions found therein.
xVillegas v. Lingan, 526 SCRA 63 (2007).
b. Agent Handling Various Goods for Different Owners (Art. 1904):He Must Distinguish
Them by Countermarks If Goods of Same Kind and Mark
PURPOSE: To Prevent Conflict of Interest Among Owners
COMPARE: Contracts of Deposit under Art. 1976:Depositary May Commingle Grain or
Other Articles of Similar Nature and Quality Ownership pro-rata
c. Commission Agent Cannot Sell on Credit Without Principals Consent (Art. 1905)
OTHERWISE: Considered as Cash Sales
Whether as an agency to sell or a contract of sale, liability of Green Valley is indubitable.
Adopting Green Valleys theory that the contract is an agency to sell, it is liable because it sold
on credit without authority from its principal. Under Art. 1905, without the express or implied
consent of principal, commission agent cannot sell on credit; should it do so principal may
demand from him payment in cash. Green Valley v. IAC, 133 SCRA 697 (1984).
d. When With Principals Authority to Sell on Credit: (Art. 1906)
Inform the Principal with Statement of Buyers Names;
Effect of Non-Compliance Considered Cash Sale
e. Effect When Agent Receives Guaranty or Del Credere Commissions (Art. 1907):
He Shall Bear the Risk of Collection
He Shall Pay Principal the Proceeds on Same Terms Agreed with Purchaser
f. Liability for Failure to Collect Principals Credit When Due (Art. 1908)
Liability for Damages
Unless Due Diligence Proven
1. OBLIGATIONS OF PRINCIPAL WITH THIRD PARTIES WITH WHOM THE AGENT CONTRACTS
a. The Principal Is Bound By the Contracts Entered Into by the Agent:
Entered Into in the Name of the Principal (Art. 1883)
Done Within Agents Scope of Authority (Art. 1897)
And Even When the Agent Acts with Negligence or Fraud (Art. 1909)
Where authorized agent failed to indicate in the mortgage that she was acting for and on
behalf of her principal; and the Real Estate Mortgage explicitly shows on its face that it was
signed by agent in her own name and in her own personal capacity. Thus, consistent with the
law on agency, the principal cannot be bound by the acts of the agent. The third-party bank has
no one to blame but itself: Not only did it act with undue haste when it granted and released the
loan in less than three days, it also acted negligently in preparing the Real Estate Mortgage as it
failed to indicate that agent was signing it for and on behalf of principal. xBucton v. Rural Bank
of El Salvador, Inc.,717 SCRA 278 (2014).
Since the general rule is that the principal is bound by the acts of his agent in the scope of
the agency, therefore when the agent had full authority to make the tax returns and file them,
together with the check payments, with the Collector of Internal Revenue on behalf of the
principal, then the effects of dishonesty of the agent must be borne by the principal, not by an
c. Principal Not Bound to Contracts Entered Into By Agent Outside of His Authority
(Arts. 1898 and 1910),
(i) When Principal Ratifies, Expressly or Impliedly (Art. 1901)
Where a sale of land is effected through an agent who made misrepresentations to the buyer
that the property can be delivered physically to the buyer when in fact it was in adverse
31Also Strong v. Repide, 6 Phil. 680 (1906); Deen v. Pacific Commercial Co., 42 Phil. 738 (1922); Veloso v. La Urbana, 58 Phil. 681
(1933); Pineda v. CA, 226 SCRA 754 (1993); Bacaltos Coal Mines v. CA, 245 SCRA 460 (1995); Litonjua, Jr. v. Eternit Corp., 490 SCRA 204
(2006); Escueta v. Lim, 512 SCRA 411 (2007); Soriamont Steamship Agencies v. Sprint Transport Services, 592 SCRA 622 (2009).
(ii) Third Person Cannot Set-up Facts of Agents Exceeding Authority Where Principal
Ratified or Signified Willingness to Ratify Agents Acts (Art. 1901)
Principal Should Be the One to Question Agents Lack/Excess of Authority
Power of Attorney (Must) Be Required by Third Party (Art. 1902)
Private or Secret Orders of Principal Do Not Prejudice Third Persons Who Relied
Upon Agents Power of Attorney or Principals Instruction(Art. 1902)
In an expropriation proceeding, the State cannot raise the alleged lack of authority of the
counsel of the owner to bind his client in a compromise agreement because such lack of
authority may be questioned only by the principal or client. [Since it is within the right or
prerogative of the principal to ratify even the unauthorized acts of the agent]. xCommissioner of
Public Highways v. San Diego, 31 SCRA 617 (1970)
(iii) Where Agent Acts in Excess of Authority, But the Principal Allowed Agent to Act as
Though Agent Had Full Powers (Art. 1911)
Doctrine of Apparent Authority
Where bank, by its acts and failure to act, has clearly clothed its manager with apparent
authority to sell a piece of land in the normal course of business, it is legally obliged to confirm
the transaction by issuing a board resolution to enable the buyers to register the property in
their names. xRural Bank of Milaor v. Ocfemia, 325 SCRA 99 (2000).
2. Rights of Persons Who Contracted for Same Thing, One With Principal and the Other
With Agent (Art. 1916):
That of Prior Date Is Preferred
3. Two or More Principals Appoint Agent for Common Transactions (Art. 1915)
a. Obligation of the Principals Is Solidary Because of Their Common Interest
COMPARE: Two or More Agents with One Principal Agents Obligation NOT Solidary,
unless otherwise expressed. (Art. 1894)
b. Any of the Principal May Validly Revoke Agents Authority (Art. 1925)
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire obligation.
The agent may recover the whole compensation from any one of the co-principals, as in this
case. xDe Castro v. Court of Appeals, 384 SCRA 607 (2002).
V. EXTINGUISHMENT OF AGENCY
1. Agency Extinguished By (Art. 1919):
a. Principals Express or Implied Revocation
b. Agents Withdrawal
c. Death, Civil Interdiction, Insanity or Insolvency of the Principal or the Agent
d. Dissolution of the Juridical Entity Which Entrusted or Accepted the Agency
e. Accomplishment of the Object or Purpose of the Agency
f. Expiration of the Period for Which Agency Was Constituted
3. IMPLIED REVOCATION
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a. Appointment of New Agent for Same Business/Transaction (Art. 1923)
Impliedly Revoked as to Agent Only
As to Third Persons, Notice to Them Is Necessary (Art. 1922)
In litigation, the fact that a second attorney enters an appearance on behalf of a litigant does
not authorize a presumption that the authority of the first attorney has been withdrawn. xAznar
v. Morris, 3 Phil. 636 (1904).
Where the father first gave a power of attorney over the business to his son, and
subsequently to the mother, without evidence showing that the son was informed of the power
of attorney to the mother, the transaction effected by the son pursuant to his power of attorney,
was valid and binding. xGarcia v. De Manzano, 39 Phil 577 (1919).
34Barrameda v. Barbara, 90 Phil. 718 (1952); Caisip v. Hon. Cabangon, 109 Phil. 150 (1952).
b. Acts Done by Agent Without Knowledge of Principals Death (Art. 1931):Acts Are Valid
Provided:
Agent Does Not Know of Death or Other Cause of Extinguishment of Agency;
Third Persons Must Also Be in Good Faith (Not Aware of Death or Other Cause).
Under Art. 1931, we must uphold the validity of the sale of the land effected by the agent
only after the death of the principal, when no evidence was adduced to show that at the time of
sale both the agent and the buyers were unaware of the death of the principal. xBauson v.
Panuyas, 105 Phil 795 (1959); xHerrera v. Uy Kim Guan, 1 SCRA 406 (1961).
8. Death of the Agent Extinguishes the Agency (Art. 1932): Obligation of Agents Heirs
in Case of Agents Death:
Notify Principal
Adopt Measures as Circumstances Demand in Principals Interest
A contract of management entered into by the Municipality with a private individual which
authorizes the latter to sell forest products is one of agency, and it extinguished by the death of
the agent, and his rights and obligations arising from the contract of agency are not
transmittable to his heirs. xTerrado v. Court of Appeals, 131 SCRA 373 (1984).
B. BUSINESS TRUSTS
I. NATURE AND CLASSIFICATION OF TRUSTS
1. Definition and Essential Characteristic of Trust (Art. 1440)
A trust is a fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the benefit
of another.36Its characteristics are: (a) it is a relationship; (b) it is a relationship of fiduciary
character; (c) It is a relationship with respect to property, not one involving merely personal
duties; (d) it involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another; and (e) it arises as a result of a manifestation
of intention to create the relationship. Morales v. Court of Appeals, 274 SCRA 282 (1997).
a. Trusts Are Based on Equity Principles (Common-law) (Art. 1442)
As trusts has been much more frequently applied in England and in the United States than in
Spain, we may draw freely upon American precedents in determining the effect of the
testamentary trust under consideration, especially so as the trusts known to American and
English equity jurisprudence are derived from the fidei-commissa of Roman law and are based
entirely upon Civil Law principles. xGovernment v. Abadilla, 46 Phil. 642 (1924).37
Article 1442 incorporates a large part of the American law on trusts, and thereby the
Philippine legal system will be amplified and will be rendered more suited to a just and equitable
solution of many questions. Report of the Code Commission, at p. 60.
35Superseded Pasno v. Ravina, 54 Phil. 382 (1930) and Del Rosario v. Abad, 104 Phil. 648 (1958).
36Huang
v. CA, 236 SCRA 429 (1994); Rizal Surety & Insurance Co. v. CA, 261 SCRA 69 (1996); Tala Realty Services v. Banco Filipino
Savings Bank, 392 SCRA 506 (2002); DBP v. COA, 422 SCRA 459 (2004); Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, 587 SCRA
417 (2009); Metropolitan Bank v. Board of Trustees of Riverside Mills Corp. Provident and Retirement Fund, 630 SCRA 360 (2010); PNB v.
Aznar, 649 SCRA 214 (2011); Torbela v. Rosario, 661 SCRA 633 (2011); Estate of Margarita D. Cabacungan v. Laigo, 655 SCRA 366
(2011); Advent Capital and Finance Corp. v. Alcantara, 664 SCRA 224 (2012); Goyanko v. UCPB, 690 SCRA 79 (2013).
37Miguel v. CA, 29 SCRA 760 (1969); Spouses Rosario v. CA, 310 SCRA 464 (1999).
2. Kinds of Trusts: (a) Express Trusts, and (b) Implied Trusts (Art. 1441)
Ramos v. Ramos, 61 SCRA 284, 298 (1974):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 either
expressly or impliedly evincing an intention to create a trust.38
Implied trusts are those which, without being expressed, are deducible from the nature of the
transactions as matters of intent, or which are superinduced on the transaction by operation of
law as matters of equity, independently of the particular intention of the parties. They are
ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).39
A resulting trust is raised or created by the act or construction of law, but in its more
restricted sense it is a trust raised by implication of law and presumed always to have been
contemplated by the parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance (89 C.J.S. 725). Arts.
1448 to 1455 are examples of resulting trusts.40
In a restricted sense, a constructive trust is a trust not created by any words, either
expressly or implied evincing a direct intention to create a trust, but by the construction of equity
in order to satisfy the demands of justice. It does not arise by agreement or intention but by
operation of law. If a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the defrauded party.
Constructive trust is not a trust in the technical sense.41
Trust is the right to beneficial enjoyment of property, legal title to which is vested in another
fiduciary relation that obliges trustee to deal with the property for the benefit of the beneficiary.
Express trust is created by intention of the trustor or of the parties, while implied trust comes
into being by operation of law. xTorbela v. Rosario, 661 SCRA 633 (2011).42
38
Spouses Rosario v. CA, 310 SCRA 464 (1999);Caezo v. Rojas, 538 SCRA 242 (2007); Pealber v. Ramos, 577 SCRA 509 (2009);
DBP v. COA, 422 SCRA 459 (2004).
39Salao v. Salao, 70 SCRA 65, 80 (1976); Tigno v. CA, 280 SCRA 271 (1997); Policarpio v. CA, 269 SCRA 344 (1997); Spouses Rosario
v. CA, 310 SCRA 464 (1999); Caezo v. Rojas, 538 SCRA 242 (2007); Pealber v. Ramos, 577 SCRA 509 (2009).
40Reiterated in Salao v. Salao, 70 SCRA 65 (1976). Constructive trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence,
obtains or hold the legal right to property which he ought not, in equity and good conscience, to hold. Spouses Rosario v. CA, 310 SCRA 464
(1999).
41Guy v. CA, 539 SCRA 584 (2007).
42Vda. De Esconde v. CA, 253 SCRA 66 (1996); Spouses Rosario v. CA, 310 SCRA 464 (1999); DBP v. COA, 422 SCRA 459 (2004);Guy
v. Court of Appeals, 539 SCRA 584 (2007);Metropolitan Bank v. Board of Trustees of Riverside Mills Corp. Provident and Retirement Fund,
630 SCRA 350 (2010).
43Ramos v. Ramos, 61 SCRA 284 (1974); Pealber v. Ramos, 577 SCRA 509 (2009).
44Filipinas Port Services v. Go, 518 SCRA 453 (2007); Caezo v. Rojas, 538 SCRA 242 (2007); Goyanko v. UCPB, 690 SCRA 79 (2013).
45DBP v. COA, 422 SCRA 459 (2004); Pealber v. Ramos, 577 SCRA 509 (2009).
46DBP v. COA, 422 SCRA459 (2004); Pealber v. Ramos, 577 SCRA 509 (2009).
c. Beneficiary (Arts. 1440 and 1446) Person for whose benefit the trust is created.47
In order that a trust may become effective there must, of course be a trustee and a cestui
que trust. The existence of an equivalent designated position in the testamentary trust to act as
trustee In regard to private trusts it is not always necessary the cestui que trust should be
named, or even be in esse at the time the trust is created in his favor. Thus a devise a father in
trust for accumulation for his children lawfully begotten at the time of his death has been held to
be good although the father had no children at the time of the vesting of the funds in him as
trustee. In charitable trusts such as the one here under discussion, the rule is still further
relaxed.Government v. Abadilla, 46 Phil. 642 (1924).
Acceptance by beneficiary of gratuitous trust is not subject to the rules for the formalities of
donations. Cristobal v. Gomez, 50 Phil. 810 (1927).
A person is considered as a beneficiary of a trust if there is a manifest intention to give such
a person the beneficial interest over the trust properties. Here, the trust agreement plainly
confer the status of beneficiary to the planholders, not to Legacy. The categorical declaration in
the agreement that Legacy bound itself to provide for the sound, prudent and efficient
management and administration of such portion of the collection for the benefit and account of
the planholders, through LBP (as the trustee) indicates that the intention of the trustor is to
make the planholders the beneficiaries of the trust properties, and not Legacy, which is left
without any iota of interest in the trust fund. This is consistent with the nature of a trust
arrangement, whereby there is a separation of interests in the subject matter of the trust, the
beneficiary having an equitable interest, and the trustee having an interest which is normally
legal interest.SEC v. Laigo, 768 SCRA 633 (2015).
d. The Corpus, Res, or Trust Estate
Where DBP establishes a pension trust for its officers and employees and appoints trustees
for the fund whereby the trust agreement transferred legal title over the income and properties
of the fund, the principal and income of the fund constitute the res or subject matter of the trust.
Since the trust agreement established the fund precisely so that it would eventually be sufficient
to pay for the retirement benefits of DBP officers and employees, then the income and profits
thereof cannot be booked by DBP as its own, and DBP cannot be directed by COA to treat such
income as it own. DBP v. COA, 422 SCRA 459 (2004).
47DBP v. COA, 422 SCRA459 (2004); Pealber v. Ramos, 577 SCRA 509 (2009).
48Lorenzo v. Posadas, 64 Phil. 353 (1937); Torbela v. Rosario, 661 SCRA 633 (2011); Goyanko v. UCPB, 690 SCRA 79 (2013).
a. Express Trust Over Immovables Cannot Be Proven by Parol Evidence (Art. 1443)
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. xMorales v. Court of Appeals, 274 SCRA 282 (1997).50
We find it clear that the plaintiffs alleged an express trust over an immovable, especially
since it is alleged that the trustor expressly told the defendants of his intention to establish the
trust. Such a situation definitely falls under Art. 1443, and cannot be proven by parol evidence.
xCuaycong v. Cuaycong, 21 SCRA 1192 (1967).51
b. Ultimately Existence of Express Trust Requires That Legal Title Is Held By One, and
the Equitable or Beneficial Title Is Held by Another (65 CORPUS JURIS 212)
What distinguishes a trust from other relations is the separation of legal title and equitable
ownership of the propertylegal title is vested in the fiduciary while equitable ownership is
vested in a cestui que trust. The petitioner alleged that the tax declaration of the land was
transferred to the name of Crispulo without her consent. Had it been her intention to create a
trust and make Crispulo her trustee, she would not have made an issue out of this because in a
trust agreement, legal title is vested in the trustee. Trustee would necessarily have the right to
transfer the tax declaration in his name and to pay the taxes on the propertythese acts would
be treated as beneficial to the cestui qui trust and would not amount to an adverse possession.
Express trust 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. Caezo v. Rojas, 538 SCRA 242, 255 (2007).
2. RESULTING TRUSTS
Resulting trusts are species of implied trusts that are presumed always to have been
contemplated by the parties intention, which can be found in the nature of their transaction
52Roa, Jr. v. CA, 123 SCRA 3 (1983).
53
Heirs of Moreno v. Mactan-Cebu Int.l Airport Authority, 413 SCRA 5023 (2003).
54Tigno v. CA, 280 SCRA 262 (1997); Morales v. CA, 274 SCRA 282 (1997).
55Aznar Brothers Realty Co. v. Aying, 458 SCRA 496 (2005); Spouses Rosario v. CA, 310 SCRA 464 (1999); Estate of Margarita D.
f. Donation of Property to a Donee Who Shall Have No Beneficial Title (Art. 1449)
Where father donates a piece of land in the name of the daughter but with verbal notice that
the other half would be held by her for the benefit of a younger brother, coupled with a deed of
waiver subsequently executed by the daughter that she held the land for the common benefit of
her brother, created an implied trust in favor of the brother under Art. 1449. Adaza v. Court of
Appeals, 171 SCRA 369 (1989). [Express trust?]
g. Land Passes By Succession But Heir Places Title in a Trustee (Art. 1451)
When the eldest sibling had registered land inherited from the parents in his name, he was
acting in a trust capacity and as representative of all his brothers and sisters. As a consequence
he is now holding the registered title thereto in a trust capacity, and it is proper for the court to
declare that the other siblings are entitled to their several pro rata shares. xSeverino v.
Severino, 44 Phil. 343 (1923); xCastro v. Castro, 57 Phil. 675 (1932).
In a situation where a Chinese resident had caused land to be placed in the name of the
trustee who was bound to hold the same for the benefit of the trustor and his family in the event
3. CONSTRUCTIVE TRUSTS
a. General Doctrines for Constructive Trusts
Constructive trust is a rule of equity, independent of the particular intentions of the parties.
Paringit v. Bajit, 631 SCRA 584 (2010). Therefore, in constructive trusts there is neither promise
nor fiduciary relations; the trustee does not recognize any trust, with no intent to hold property
for the beneficiary. Diaz v. Gorricho and Aguado, 103 Phil. 261 (1958).57
A constructive trust (trust ex maleficio, trust ex delicto, trust de son tort, an involuntary trust)
is a trust by operation of law which arises contrary to intention and in invitum, against one who,
by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or
by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in
any way against equity and good conscience, has obtained or holds the legal right to property
which he ought not, in equity and good conscience, hold and enjoy. xSumaoang v. Judge, RTC
Br. XXXI, Buimba, Nueva Ecija, 215 SCRA 136 (1992).58
Constructive trusts are fictions of equity that courts use as devices to remedy any situation in
which the holder of the legal title, the purported trustee, should not, in good conscience, retain
title over a property. xVda. de Ouano v. Republic, 642 SCRA 384 (2011).
This Court recognized unconventional implied trusts in contracts involving the purchase of
housing units by officers of tenants associations in breach of their obligations,59 the partitioning
of realty contrary to the terms of a compromise agreement,60 and the execution of a sales
contract indicating a buyer distinct from the provider of the purchase money.61 In all these cases,
the formal holders of title were deemed trustees obliged to transfer title to the beneficiaries in
whose favor the trusts were deemed created. We see no reason to bar the recognition of the
same obligation in a mortgage contract meeting the standards for the creation of an implied
trust. xJuan v. Yap, Sr., 646 SCRA 753 (2011).
CA, 149 SCRA 32 (1987); Mendizabel v. Apao, 482 SCRA 587 (2006); Heirs of Tabia v. CA, 516 SCRA 431 (2007); Pedrano v. Heirs of
Benedicto Pedrano, 539 SCRA 401 (2007); Heirs of Valeriano S. Concha, Sr. v. Lumocso, 540 SCRA 1 (2007); Leoveras v. Valdez, 652
SCRA 61 (2011); PNB v. Jumamoy, 655 SCRA 54 (2011); Toledo v. CA, 765 SCRA 104 (2015).
64Vda. De Esconde v. CA, 253 SCRA 66 (1996); Iglesia Filipina Independiente v. Heirs of Taeza, 715 SCRA 138 (2014).
65
A trustee cannot acquire by prescription the ownership of property entrusted to him (Palma v. Cristobal, 77 Phil. 712); an action to
compel a trustee to convey property registered in his name in trust for the benefit of the cestui qui trust does not prescribe (Manalang v.
Canlas, 94 Phil. 776; Cristobal v. Gomez, 50 Phil. 810); the defense of prescription cannot be set up in an action to recover property held by
a person in trust for the benefit of another (Sevilla v. Delos Angeles, 97 Phil. 875); property held in trust can be recovered by the beneficiary
regardless of the lapse of time (Marabilles v. Quito, 100 Phil. 64; Bancairen v. Diones, 98 Phil. 122, Juan v. Zuiga, 4 SCRA 1221; Vda de
Jacinto v. Vda. de Jacinto, 5 SCRA 370 (1962). Ramos v. Ramos, 61 SCRA 284, 299 (1974).
66Laguna v. Levantino, 71 Phil. 566 (1941); Sumira v. Vistan, 74 Phil. 138 (1943); Golfeo v. CA, 12 SCRA 199 (1964); Caladiao v. Santos,
Romero, 109 Phil. 500 (1960); De Pasion v. De Pasion, 112 Phil. 403;J.M. Tuazon & Co. v. Mandanagal, 4 SCRA 84 (1962); Alzona v.
Capunitan, 4 SCRA 450 (1962); Vda. De Jacinto v. Vda. De Jacinto, 5 SCRA 371 (1962); Gerona v. De Guzman, 11 SCRA 153 (1964);
Gonzales v. Jimenez, 13 SCRA 80 (1965); Fabian v. Fabian, 22 SCRA 231 (1968); Bueno v. Reyes, 27 SCRA 1179 (1969); Ramos v.
Ramos, 61 SCRA 284 (1974); Estate of Margarita D. Cabacungan, v. Laigo, 655 SCRA 366 (2011).
74Boaga v. Soler, 2 SCRA 755 (1961); J. M. Tuason& Co., Inc. v. Magdangal, 4 SCRA 123 (1962); Alzona v. Capunitan, 4 SCRA 450
(1962); Gonzales v. Jimenez, 13 SCRA 80 (1965); Cuaycong v. Cuaycong, 21 SCRA 1192 (1967); Varsity Hills v. Navarro, 43 SCRA 503
(1972); Escay v. CA, 61 SCRA 369 (1974); Carantes v. CA, 76 SCRA 514 (1977); Gonzales v. IAC, 204 SCRA 106 (1991); Pedrano v. Heirs
of Benedicto Pedrano, 539 SCRA 401 (2007); Cavile v. Litania-Hong, 581 SCRA 408 (2009); Heirsof Domingo Valientes v. Ramas, 638
SCRA 444 (2010).
75Diaz v. Gorricho and Aguado, 103 Phil. 261 (1958); Caezo v. Rojas, 538 SCRA 242 (2007).
76Estate of Margarita D. Cabacungan, v. Laigo, 655 SCRA 366 (2011).
77Armamento v. Guererro, 96 SCRA 178 (1980); Gonzales v. IAC, 204 SCRA106 (1991); Heirsof Domingo Valientes v. Ramas, 638 SCRA
444 (2010); PNB v. Jumamoy, 655 SCRA 54 (2011); Tiongco Yared v. Tiongco, 659 SCRA 545 (2011), Zuiga-Santos v. Santos-Gran, 738
SCRA 33 (2014); Toledo v. CA, 765 SCRA 104 (2015).
C. PARTNERSHIPS
I. HISTORICAL BACKGROUND
1. Old Branches of Partnership Law
Civil Partnerships Not pursued in mercantile manner, non-habitual or not pursued in the
regular course of business
Commercial Partnerships in pursuit of industry or commerce; characterized by habituality
or pursuit in the regular course of business
Distinguishing between civil and commercial partnerships was critical in the old set-up
because it determined the applicable rules for registration, personal liability of members, and
rights and manner of dissolution. Compaia Agricola de Ultramar v. Reyes, 4 Phil. 2 (1904).
Commercial Partnerships Were Deemed to Be, and
a. Subject to Code of Commerce
Provisions for, Merchants
A commercial partnership is distinguished from a civil one by the object to which it is devoted
and not by the manner with which it is organized. A commercial partnership has for its object the
pursuit of industry or commerce, and is then a merchant that must be governed by, and
comply with the registration requirements of, the Code of Commerce to lawfully come into
existence; it cannot choose to be organized under the Civil Code to make it a civil partnership.
Prautch v. Hernandez, 1 Phil. 705 (1903).
CONTRA: We are inclined to the belief that the respective codes, Civil and Commercial,
have adopted a complete system for the organization, control, continuance, liabilities,
dissolutions, and juristic personalities of associations organized under each. . . . that
associations organized under the different codes are governed by the provisions of the
respective codes. Compaia Agricola de Ultramar v. Reyes, 4 Phil. 2 (1904).
A commercial partnership that fails to register in the mercantile registry under Art. 119 of
Code of Commerce, does not become a juridical person with a personality distinct from those of
the individuals who composed it. Hung-Man-Yoc v.Kieng-Chiong-Seng, 6 Phil. 498 (1906);
Bourns v. Carman, 7 Phil. 117 (1906); Ang Seng Quen v. Te Chico, 7 Phil. 541 (1907).
CONSEQUENTLY:
It cannot maintain an action in its name, Prautch v. Hernandez, 1 Phil. 705 (1903); neither in the
name of one or more of the members on behalf of the associates; nevertheless the individual
members may sue jointly as individuals, and persons dealing with them in their joint capacity will not
be permitted to deny their right to do so. Prautch v. Jones, 8 Phil. 1 (1907); Ang Seng Quen v. Te
Chico, 12 Phil. 547 (1909).
Without a separate juridical personality, what was applicable was Art. 120 which made persons in
charge of the management of the association liable for the debts incurred by such partnership de
facto. Kwong-Wo-Sing v. Kieng-Chiong-Seng, 6 Phil. 498 (1906).
4. KINDS OF PARTNERSHIPS
a. As to Object (Art. 1776, 1st par.)
IV. PARTNERSHIP AS A JURIDICAL PERSON (Arts. 44(3), 45, 1768 and 1784)
1. CONSEQUENCES OFPARTNERSHIPBEING A JURIDICAL PERSON:
a. Entity Has Legal Capacity to Enter into Contracts and Incur Obligations (Art. 46)
b. It May Acquire Properties in Its Own Name (Arts. 46 and 1774)
c. It May Sue and Be Sued in Its Firm Name (Art. 46)
In a bankruptcy proceeding against a partnership, since it is a separate juridical person one
partner is not entitled to be made a party as an individual separate from the firm; yet precisely
because it is a juridical person, there can be proper service to the firm of court notices upon
service to any partner found within the jurisdiction of the court. xHSBC v. Jurado & Co., 2 Phil.
671 (1903).
2. FORMALITIES REQUIRED:
a. GENERAL RULE: Being Consensual in Character, a Partnership May Be Constituted in
Any Form (Art. 1771)
Old Civil Code and Code of Commerce: Third parties without knowledge of the partnerships
existence, who deal with the property registered in the name of one partner have a right to
expect effectivity of such transaction on the property, in spite of the protest of other partners and
partnership creditors. xBorja v. Addison, 44 Phil. 895 (1922).
b. EXCEPT: When Capital Contribution Is P3,000 or More:
AoP Must Appear in a Public Instrument; and
Registered with SEC.
BUT: Failure to Comply with Requirements Shall Not Affect the Liability of the
Partnership and Its Members to Third Persons (Art. 1784)
b. When Articles Kept Secret Among Members and One Member May Contract in His Own
Name (Art. 1775):
Shall Have No Separate Juridical Personality
Shall Be Governed by the Provisions Relating to Co-Ownership
d. RULE 3.02, Code of Professional Responsibility: The continued use of the name of a
deceased partner in a professional partnership is permissible, provided that the firm
indicates in all its communications that said partner is deceased.
The contention that Art. 1840 regulating the use of partnership name allows a partnership from
continuing its business under a firm name which includes the name of a deceased partner has
been denied when it comes to a law partnership on the following grounds: (a) it contravenes the
provision of Arts. 1815 and 1825, which impose liability on a person whose name is included in
the firm name, which cannot cover a deceased person who can no longer be subject to any
liability; (b) public relations value of the use of an old firm name can tend to create undue
advantages and disadvantages in the practice of the profession; (c) Art. 1840 covers dissolution
and winding up scenarios and cannot be taken to mean to cover firms that are intended as going
concerns, and cover more commercial partnerships; and (d) when it comes to other professions,
there is legislative authority for them to use in their firm names those of deceased partners. xIn
the Matter of the Petition for Authority to Continue Using Firm Names, 92 SCRA 1 (1979).
c. EQUITY RIGHTS: Right to Shares in Profits and Losses(Arts. 1810 and 1812)
VOID: Stipulation Excluding Partner from Sharing in Profits or Losses (Art. 1799)
b. All Partners Solidarily Liable with Partnership (Art. 1824) for Everything Chargeable to
the Partnership When Caused By:
Wrongful Act or Omission of Any Partner Acting
In the Partnerships Ordinary Course of Business; or
With Authority from the Other Partners(Art. 1822)
Partners Act or Misapplication of Properties of Third Parties
Where Partner Receives Property Acting With Apparent Authority; or
Partnership Received Property in the Ordinary Course of Business (Art. 1823)
Partners are solidarily liable for employees workmens compensation claims. xLiwanag and
Reyes v. Workmens Compensation Commission, 105 Phil. 741 (1959).
c. Newly Admitted Partner into an Existing Partnership Is Liable Only Out of Partnership
Property Shares and Contributions, for All the Obligations of the Partnership Arising
Before His Admission(Art. 1826)
d. Partnership Creditors Have Preference Over the Personal Creditors of Each of the
Partners as Regards the Partnership Property (Art. 1827)
Remedy of Partners Separate Creditors (Art. 1814):May Apply with the Courts That
Entered the Judgment Debt
To Charge the Debtors Equity Interests for the Payment from His Share in the
Profits or Any Other Money Due from the Partnership
Which Interest Charged May Be Redeemed at Any Time Before Foreclosure by the
Other Partners or the Partnership Itself
b. Substantial Compliance (Art. 1844): Limited Partnership Is Formed If There Has Been
Substantial Compliance in Good Faith With Requirements Mandated by Law
Substantial, rather than strict, compliance in good faith with the legal requirements is all that
is necessary for the formation of a limited partnership; otherwise, when there is not even
substantial compliance, the partnership becomes a general partnership as far as third persons
are concerned. Jo Chung Cang v. Pacific Commercial Co., 45 Phil. 142 (1923).
c. Effects of False Statement in Certificate (Art. 1847): One Who Suffers Loss By
Reliance on Such Statement May Hold Liable Any Party to the Certificate Who Knew
the Statement to Be False.
d. Cancellation or Amendment of Certificate (Arts. 1864 and 1865):
The Certificate Must Be Cancelled When:
Partnership Is Dissolved
There Cease to Be Limited Partners
Certificate Must Be Amended When (Art. 1849):
Change in: Firm Name, in Character of the Partnership Business, in the Period,
or a Time Is Fixed for Its Dissolution; Amount or Character of Contributions of
Limited Partners, in Time for Return of a Contribution
An Additional Limited Partner and/or General Partners Is Admitted, or a Person
Is Substituted as a Limited Partners
A General Partner Retires, Dies, Becomes Insolvent or Insane, or Is Under Civil
Interdiction and the Business Is Continued
A False or Erroneous Statement in Certificate or to Make a Change in Any Other
Statement in Order It Shall Accurately Represent Their Agreement.
4. LIMITED PARTNERS
a. He May Contribute Money or Property, But Never Service (Art. 1845)
b. Shall Not Be Liable As Such to the Obligations of the Partnership (Art.
1843);EXCEPT:
When He Allows His Surname to Be Part of the Partnership Name (Art. 1846)
He Takes Part in the Control of the Partnership Business (Art. 1848)
c. He Shall Have the Same Right as a General Partner to (Art. 1851):
D. JOINT VENTURES
I. JOINT VENTURES ARE SPECIES OF PARTNERSHIP
The prevailing school of thought in the Philippines is that joint ventures are species of
partnership, and issues arising are to be resolved under the Law on Partnerships. xHeirs of Tan
EngKee v. Court of Appeals, 341 SCRA 740 (2000).82
Generally understood to mean an organization formed for some temporary purpose, a joint
venture is likened to a particular partnership, Joint ventures are governed by the law on partnerships
which are, in turn, based on mutual agency or delectus personae. Applying therefore Art. 1813 of the
Civil Code, it is evident that (t)he transfer by a partner of his partnership interest does not make the
assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the
management of the partnership business or to receive anything except the assignee's
profits.Realubit v. Jaso, 658 SCRA 146 (2011).
A verbal JVA to incorporate a company that would hold parties shares and serve a business
vehicle for their food enterprise, is valid and binding. JVA created between them reciprocal
obligations that must be performed in order to fully consummate the contract and achieve the
purpose for which it was entered into. JVA is deemed extinguished through rescission under
Article 1192 in relation with Article 1191 of the Civil Code. Dueas must therefore return the P5
Million that Fong initially contributed since rescission requires mutual restitution. After rescission,
the parties must go back to their original status before they entered into the
agreement.Fong v. Dueas, 757 SCRA 412 (2015)
82Primelink Properties and Dev. Corp. v. Lazatin-Magat, 493 SCRA 444 (2006).
83http://www.neda.gov.ph/references/Guidelines/RevisedGuidelines.pdf
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