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ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 1

AGENCY

SECTION ONE. NATURE AND OBJECT OF AGENCY


SECTION THREE. POWERS AND OBLIGATIONS OF THE AGENT.
1|Rallos v. Felix Go Chan & Sons Realty Corp.| G.R. No. L-24332........ 3
2 | Bordador v. Luz | G.R. No. 130148.................................................................. 3 3.1 | BA Finance vs. CA | GR No. 82040.....................31
3 | Orient Air Services v. Court of Appeals | G.R. No. 76931 .......................... 5 3.2 | British Airways vs. CA | GR No. 121824..............33
4 | Eurotech Industrial Technologies, Inc. v. Cuizon | G.R. No. 167552........ 5 3.3| Cervantes vs. CA | GR No. 125138.................................34
6 | Domingo v. Domingo | G.R. No. L-30573..................................................... 6 3.4| Borja, Sr. vs. Sulyap, Inc. | GR No. 150718............................................34
7| Manotok Bros, Inc. vs. CA | GR No. 94753........................................... 7 3.5 | Gozun vs. Mercado | GR No. 167812........................................36
8 | Inland Realty vs. CA | GR 76969............................. 8 3.6 | Sazon vs. Vasquez-Menancio | GR No. 192085.........................................37
9 | Tan vs. Gullas | G.R. No. 143978............................. 9 3.7 | Hernandez vs. Hernandez | GR 158576.................................................37
9 | Medrano vs. CA | GR No. 150678........................... 10 3.8| Escueta vs. Lim | GR No. 137162.........................................................37
11 | Litonjua vs. Eternit Corp. | GR No. 144805............................................ 11 3.9 | Serona vs. CA | GR No. 130423..................................................................37
3.10 | Municipal Council of Iloilo vs. Evangelista | GR No. L-32977.................40
SECTION TWO. FORMS AND KINDS OF AGENCY 3.11 | Chemphil Export vs. CA | GR Nos. 112438-39...................................4 0
3.12 | Uy vs. CA | GR No. 120465.........................................................41
2.1 | Rallos vs. Yangco | GR No. 6906...................................... 11 3.13 | Angeles vs. PNR | GR No. 150128..............................................41
2.2 | Litonjua vs. Fernandez | GR No. 148116............... 12 3.14 | NAPOCOR vs. NAMERCO | GR No. L-33819 and L-22897.................41
2.3 | Aggabao vs. Parulan, Jr. | G.R. No. 165803...................... 13 3.15 | DBP vs. CA | GR No. L-109937......................................................42
2.4 | Dominion Insurance Corporation vs. CA | G. R. No. 129919.......... 14 3.16 | Eugenio vs. CA | GR No. 103737....................................................43
2.5 | Veloso vs. CA | G.R. No. 102737................................. 15 3.17 | Toyota Shaw vs. CA | L-116650.............................................................44
2.6 | Pineda vs. CA | GR. No. 105562 .............................................. 17 3.18 | Bacaltos Coal Mines vs. CA | GR No. 114091....................................45
2.7 | Home Insurance Co. vs. USL | GR L-25593............................................. 18 3.19 | Yu Eng Cho vs. PANAM | G.R. No. 123560.............................46
2.8 | Estate of Liano Olaguer vs. Ongjoco | GR No. 173312.................... 19 3.20 | Manila Memorial Park Cemetery, Inc. vs. Linsangan | GR No. 151319...46
2.9 |Bautista vs. Spouses Jalandoni | GR No. 171464................................20 3.21 | Green Valley vs. IAC | GR No. L-49395......................................46
2.10 | Gutierrez Hermanos vs. Orense | GR No. L-9188....................... 21
2.11 | Cosmic Lumber vs. CA | GR No. 114311.................................. 23 SECTION FOUR. OBLIGATIONS OF THE PRINCIPAL
2.12 | Pahud vs. CA | GR No. 160346.................................................. 25
2.13 | Yoshizaki vs. Joy Training Center of Aurora, Inc. | G.R. No. 174978.....27 4.1 | Bucton vs. Rural Bank of El Salvador, Inc. | GR No. 179625............53
2.14 | City-Lite Realty Corp. vs. CA | GR No. 138639.................................30 4.2 | Panlilio vs. Citibank | GR No. 156335...........................................40
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4.3| Cuison vs. CA | GR No. 88539 ...................... 40


.4.4 | Pleasantville Development vs. CA | GR No. 79688.......................... 41
4.5 | Filipinas Life Assurance Co. vs. Pedroso | GR No. 159489............. 42
4.6 | Manila Remnant Co., Inc. vs. CA | GR No. 82978............................. 43
4.7 | Hahn vs. CA | GR No. 113074........................................ 45
4.8. Albaladejo y Cia vs. PRC | GR L-20726................................. 46
4.9 | De Castro vs. CA | GR No. 115838....................................... 47

SECTION FIVE. EXTINGUISHMENT OF AGENCY

5.1 | Garcia vs. De Manzano | GR L-13414................................... 48


5.2 | CMS Logging vs. CA | GR No. 41420............................. 49
5.3. Dy Buncio & Co. vs. Ong Guan Ca | GR No 40681........................ 49
5.4 | Republic vs. Evangelista | GR No. 156015................................. 50
5.5 | Sevilla vs. CA | G.R. Nos. 41182-83....................................... 50
5.6 | Valenzuela vs. CA | GR No. 83122................................... 51
5.7. National Sugar Trading vs. PNB | GR No. 151218........................ 52
5.8. Ching vs. Bantolo | GR No. 177086................................ 53
5.9 | Coleongco vs. Claparols | L-18616............................................. 54
5.10| Lustan vs. CA | GR No. 111924........................................... 55
5.11| Perez vs. PNB | GR No. 21813............................................. 56
5.12| Terrado vs. CA | GR No. 58794........................................... 57
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ISSUE: Whether or not the sale fell within the exception to the general rule
SECTION ONE that death extinguishes the authority of the agent?
RULING: Yes, the sale is void!

1. RAMON RALLOS, Administrator of the Estate of CONCEPCION The court held that no one may contract in the name of another without
RALLOS, vs. FELIX GO CHAN & SONS REALTY being authorized by the latter, or unless he has by law a right to represent him
CORPORATION and COURT OF APPEALS, G.R. No. L-24332 (ARTICLE 1317 of the Civil Code) Simons authority as agent was extinguished
January 31, 1978, upon Concolacions death.

The sale did not fall under the exceptions to the general rule that death ipso
FACTS: jure extinguishes the authority of the agent! Article 1913 inapplicable since SPA in favor of Simon
Rallos was not coupled with interest and ARTICLE 1931 inapplicable because Rallos knew of
Concepcion and Gerundia Rallos were sisters and registered co-owners of principal Concepcions death! For ARTICLE 1931 to apply, both requirements must be
a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered present laws on agency, the terms of which are clear and unmistakable leaving no room for an
by Transfer Certificate of Title No. 11116 of the Registry of Cebu.They executed interpretation contrary to its tenor, should apply, the law provides that death of
a special power of attorney in favor of their brother, Simeon Rallos, authorizing the principal ipso jure extinguishes the authority of the agent to sell rendering the
him to sell such land for and in their behalf. sale to a third person in good faith unenforceable unless at the agent had no
After Concepcion died, Simeon Rallos sold the undivided shares of his knowledge of the principals death at that time /exception under ARTICLE 1931.
sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation
for the sum of P10, 686.90. New TCTs were issued to the latter. Sale was null and void.
Petitioner Ramon Rallos, administrator of the Intestate Estate
of Concepcion filed acomplaint praying (1) that the sale of the undivided share of 2. JOSE BORDADOR and LYDIA BORDADOR, vs. BRIGIDA D.
the deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, G.R. No.
reconveyed to herestate; (2) that the Certificate of 'title issued in the name of Felix 130148. December 15, 1997
Go Chan & SonsRealty Corporation be cancelled and another title be issued in the FACTS:
names of thecorporation and the "Intestate estate of Concepcion Rallos" in equal
undivided and(3) that plaintiff be indemnified by way of attorney's fees and Petitioners were engaged in the business of purchase and sale of jewelry
payment of costs of suit. and respondent Brigida Luz, also known as Aida Luz, was their regular customer.
CFI ruled that the Sale of land was null and void insofar as the one-half
pro-indiviso share of Concepcion Rallos On several occasions, respondent Deganos, brother of Luz, received
CA: CFI Decision reversed, upheld the sale of Concepcions share. several pieces of gold and jewelry from petitioners amounting to P382, 816. These
MR: denied items and their prices were indicated in seventeen receipts covering the same. 11
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of the receipts stated that they were received for a certain Aquino, a niece of ISSUE: Whether or not Luz are liable to petitioners for the latters claim for
Deganos, and the remaining 6 receipts indicated that they were received for Luz. money and damages?
Deganos was supposed to sell the items at a profit and thereafter remit the RULING: No
proceeds and return the unsold items to Bordador. Deganos remitted only the sum
of P53, 207. He neither paid the balance of the sales proceeds, nor did he return Evidence does not support the theory of Bordador that Deganos was an
any unsold item to petitioners. agent of Luz and that the latter should consequently be held solidarily liable with
Deganos in his obligation to petitioners.
The total of his unpaid account to Bordador, including interest, reached
the sum of P725, 463.98. Petitioners eventually filed a complaint in the barangay The basis for agency is representation. Here, there is no showing that Luz
court against Deganos to recover said amount. consented to the acts of Deganos or authorized him to act on her behalf, much
less with respect to the particular transactions involved.
In the barangay proceedings, Luz, who was not impleaded in the cases,
appeared as a witness for Deganos and ultimately, she and her husband, together It was grossly and inexcusably negligent of petitioner to entrust to
with Deganos signed a compromise agreement with petitioners. Deganos, not once or twice but on at least six occasions as evidenced by 6 receipts,
several pieces of jewelry of substantial value without requiring a written
In that compromise agreement, Deganos obligated himself to pay authorization from his alleged principal.
petitioners, on installment basis , the balance of his account plus interest thereon.
However, he failed to comply with his aforestated undertakings. A person dealing with an agent is put upon inquiry and must discover upon
his peril the authority of the agent.
Petitioners instituted a complaint for recovery of sum of money and
damages, with an application for preliminary attachment against Deganos and Luz. Records show that neither an express nor an implied agency was proven
to have existed between Deganos and Luz. Evidently, Bordador who were
Deganos and Luz was also charged with estafa negligent in their transactions with Deganos cannot seek relief from the effects of
their negligence by conjuring a supposed agency relation between the two
During the trial of the civil cae, petitioners claimed that Deganos acted as respondents where no evidence supports such claim.
agent of Luz when received the subject items of jewelry, and because he failed to
pay for the same, Luz, as principal, and her spouse are solidarily liable with him The trial court also found that it was petitioner Lydia Bordador who
indicated in the receipts that the items were received by Deganos for Evelyn
Trial court ruled that only Deganos was liable to Bordador for the amount Aquino and Brigida D. Luz. [7]Said court was persuaded that Brigida D. Luz was
and damages claimed. It held that while Luz did have transactions with petitioners behind Deganos, but because there was no memorandum to this effect, the
in the past, the items involved were already paid for and all that Luz owed agreement between the parties was unenforceable under the Statute of
Bordador was the sum or P21, 483 representing interest on the principal account Frauds. Absent the required memorandum or any written document connecting
which she had previously paid for. the respondent Luz spouses with the subject receipts, or authorizing Deganos to
act on their behalf, the alleged agreement between petitioners and Brigida D. Luz
CA affirmed RTCs decision
was unenforceable.
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3. ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, vs. 1. Yes. Orient Air was entitled to an overriding commission based on total
COURT OF APPEALS and AMERICAN AIR-LINES flown revenue. American Air's perception that Orient Air was remiss or in default
INCORPORATED, G.R. No. 76933, May 29, 1991 of its obligations under the Agreement was, in fact, a situation where the latter
acted in accordance with the Agreementthat of retaining from the sales
FACTS: proceeds its accrued commissions before remitting the balance to American Air.
Since the latter was still obligated to Orient Air by way of such commissions.
American Air, an air carrier offering passenger and air cargo Orient Air was clearly justified in retaining and refusing to remit the sums claimed
transportation, entered into a General Sales Agency Agreement with Orient Air, by American Air. The latter's termination of the Agreement was, therefore,
authorizing the latter to act as its exclusive general sales agent for the sale of without cause and basis, for which it should be held liable to Orient Air.
air passenger transportation.
2. No. CA in effect compels American Air to extend its personality to
Orient air failed to remit the net proceeds of sales for several months Orient Air. Such would be violative of the principles and essence of agency,
prompting American Air to undertake the collection of the proceeds of tickets defined by law as a contract whereby "a person binds himself to render some
sold originally by Orient Air and terminating their agreement. American air service or to do something in representation or on behalf of another, WITH THE
instituted suit against Orient Air for the settlement of past outstanding funds in CONSENTOR AUTHORITY OF THE LATTER. In an agent-principal
possession of the latter. Orient Air contended that because of the unpaid relationship, the personality of the principal is extended through the facility of the
overriding commissions it retained the sales proceeds before remitting the balance agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to
to American Air. American Air contended that the sale must be made by Orient perform all acts which the latter would have him do. Such a relationship can only
Air and the sale must be done with the use of American Air's ticket stocks in order be effected with the consent of the principal, which must not, in any way, be
for it to be entitled to the overriding commission. compelled by law or by any court.

On the other hand, Orient Air contends that the contractual stipulation 4. EUROTECH INDUSTRIAL TECHNOLOGIES, INC., - versus
of a 3% overriding commission covers the total revenue of American Air and not EDWIN CUIZON and ERWIN CUIZON,
merely that derived from ticketed sales undertaken by Orient Air because it was G.R. No. 167552 April 23, 2007
an exclusive General Sales Agent. CA held that Orient Air is entitled
to commissions and ordered American Airto reinstate Orient Air as its General FACTS:
Sales Agent From January to April 1995, petitioner sold to Impact Systems various
products allegedly amounting to P91, 338.00 pesos. Subsequently, respondents
ISSUE: 1. Whether or not Orient Air is entitled to commissions. sought to buy from petitioner one unit of sludge pump valued at P250, 000.00
with respondents making a down payment of P50, 000.00. When the sludge pump
2. Whether CA is correct in ordering reinstatement of Orient Air as arrived from the United Kingdom, petitioner refused to deliver the same to
an agent. respondents without their having fully settled their indebtedness to petitioner.
Thus, on 28 June 1995, respondent Edwin and Alberto de Jesus, general manager
RULING:
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of petitioner, executed a Deed of Assignment of receivables in favor of petitioner. agent.Respondent Edwin Cuizon acted within his authority as an agent, who did
Impact systems are owed by Erwin Cuizon. not acquire any right nor incur any liability arising from the Deed of Assignment,
it follows that he is not a real party in interest who should be impleaded in this
Despite the existence of the Deed of Assignment, respondents proceeded case. A real party in interest is one who stands to be benefited or injured by the
to collect from Toledo Power Company the amount of P365, 135.29. Alarmed by judgment in the suit, or the party entitled to the avails of the suit. In this respect,
this development, petitioner made several demands upon respondents to pay their we sustain his exclusion as a defendant in the suit before the court a quo.
obligations. As a result, respondents were able to make partial payments to
petitioner. On 7 October 1996, petitioner's counsel sent respondents a final 5. VICENTE M. DOMINGO, represented by his heirs, ANTONINA
demand letter wherein it was stated that as of 11 June 1996, respondents' total RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR,
obligations stood at P295, 000.00 excluding interests and attorney's fees. Because AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO,
of respondents' failure to abide by said final demand letter, petitioner instituted a all surnamed DOMINGO, petitioners-appellants, vs. GREGORIO
complaint for sum of money, damages, with application for preliminary M. DOMINGO, respondent-appellee, TEOFILO P.
attachment against herein respondents PURISIMA, intervenor-respondent. G.R. No. L-30573 October 29,
1971
By way of special and affirmative defenses, respondent EDWIN alleged
that he is not a real party in interest in this case. According to him, he was acting
as mere agent of his principal, which was the Impact Systems, in his transaction FACTS:
with petitioner and the latter was very much aware of this fact.
On June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real
ISSUE: Whether or not the act of Edwin Cuizon as sales manager in signing estate broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an
the Deed of Assignment binds his principal Impact Systems? area of about 88,477 square meters at the rate of P2.00 per square meter (or for
P176,954.00) with a commission of 5% on the total price, if the property is sold
RULING: Yes, the act of Edwin in signing the Deed of Assignment binds by Vicente or by anyone else during the 30-day duration of the agency or if the
Impact Systems property is sold by Vicente within three months from the termination of the
agency to a purchaser to whom it was submitted by Gregorio during the
The Supreme Court held that in a contract of agency, a person binds continuance of the agency with notice to Vicente. The said agency contract was in
himself to render some service or to do something in representation or on behalf triplicate, one copy was given to Vicente, while the original and another copy were
of another with the latter's consent. Its purpose is to extend the personality of the retained by Gregorio.
principal or the party for whom another acts and from whom he or she derives
the authority to act. It is said that the basis of agency is representation, that is, the On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima
agent acts for and on behalf of the principal on matters within the scope of his to look for a buyer, promising him one-half of the 5% commission. Thereafter,
authority and said acts have the same legal effect as if they were personally Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
executed by the principal.
In this case at hand, the parties do not dispute the existence of the agency Oscar de Leon submitted a written offer which was very much lower than
relationship between respondents ERWIN as principal and EDWIN as the price of P2.00 per square meter. Vicente directed Gregorio to tell Oscar de
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Leon to raise his offer. After several conferences between Gregorio and Oscar de commission because he sold the property not to Gregorio's buyer, Oscar de Leon,
Leon, the latter raised his offer to P109, 000.00 on June 20 and Vicente agreed. but to another buyer, Amparo Diaz, wife of Oscar de Leon

Upon demand of Vicente, Oscar de Leon issued to him a check in the ISSUE: Whether Gregorio was entitled to receive the 5% commission?
amount of P1, 000.00 as earnest money, after which Vicente advanced to Gregorio
the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the RULING: No, Gregorio is not entitled to receive the 5% commission.
property at P1.20 per square meter in another letter. Subsequently, Vicente asked
for an additional amount of P1, 000.00 as earnest money, which Oscar de Leon The Supreme Court held that the law imposes upon the agent the absolute
promised to deliver to him. obligation to make a full disclosure or complete account to his principal of all his
transactions and other material facts relevant to the agency, so much so that the
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina law as amended does not countenance any stipulation exempting the agent from
the sum of 1,000.00 for succeeding in persuading Vicente to sell his lot at P1.20 such an obligation and considers such an exemption as void.
per square meter or a total in round figure of P109, 000.00. This gift of P1, 000.00
was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the Hence, by taking such profit or bonus or gift or propina from the vendee,
additional amount of P1, 000.00 by way of earnest money. the agent thereby assumes a position wholly inconsistent with that of being an
agent for his principal, who has a right to treat him, insofar as his Commission is
When the deed of sale was not executed on August 1, 1956 as stipulated concerned, as if no agency had existed. The fact that the principal may have been
nor on August 16, 1956 as extended by Vicente, Oscar told Gregorio that he did benefited by the valuable services of the said agent does not exculpate the agent
not receive his money from his brother in the United States, for which reason he who has only himself to blame for such a result by reason of his treachery or
was giving up the negotiation including the amount of P 1,000 given as earnest perfidy.
money to Vicente and the P 1,000 given to Gregorio as propina or gift.

When Oscar did not see him after several weeks, Gregorio sensed 6. Manotok Bros., Inc. vs CA | GR no. 94753 (221 SCRA 224) | 7 April
something fishy. So, he went to Vicente and read a portion to the effect that 1993
Vicente was still committed to pay him 5% commission. Vicente grabbed the
original of the document and tore it to pieces. FACTS:

From his meeting with Vicente, Gregorio proceeded to the office of the Manotok Brothers, Inc. is the owner of a certain parcel of land and
Register of Deeds of Quezon City, where he discovered a deed of sale executed building. The land was leased by the City of Manila and used by the Claro M.
on September 17, 1956 by Amparo Diaz. Recto High School, at M.F. Jhocson Street, Sampaloc Manila. They authorized a
certain Salvador Salumbiga to negotiate with the City of Manila the sale of the
Upon thus learning that Vicente sold his property to the same buyer, Oscar aforementioned property in the amount of P425,000.00. In the same writing,
de Leon and his wife, he demanded in writing payment of his commission on the Manotok agreed to pay Salumbiga a five percent (5%) commission in the event the
sale price of P109, 000.00.Vicente stated that Gregorio is not entitled to the 5% sale is finally consummated and paid. The Municipal Board of the City of Manila
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eventually passed Ordinance No. 6603, appropriating the sum of P410,816.00 for After receiving a proposal letter from the Inalnd Realty, Stanford Microsystem,
the purchase of the property which private respondent was authorized to sell. Inc. a Prospective buyer, counter-proposed to nuy the shares. The authority to sell
Notwithstanding the realization of the sale, Salumbiga never received any given to Inland Realty by Gregorio Araneta Inc. was extended for three times. On
commission, which should have amounted to P20,554.50. This was due to the july 8, 1977, Inland Realty finally sold the shares of stock in Architects Building
refusal of petitioner to pay private respondent said amount as the former does not Inc. to Stanford Microsystems, Inc. for 13.5M. thereafter, Inland Realty sent a
recognize the latter's role as agent in the transaction. demand letter to Gregorio Araneta, Inc., for the Payment of their 5% Brokers
Commission which was declined by Gregorio Araneta Inc., claiming that that after
Issue: Whether or not Salvador Salumbiga was entitled to the 5% agents their authority to sell expired 30 days where the petitioners were no longerprivy to
commission? the consummation of the sale.
Inland Realty filed as case in RTC for the collection of its broker commission from
Holding and Ratio Decidendi Gregorio Araneta Inc. however, the RTC dismissed the case. CA also dismissed
the petition since the inland realtys contract of agency and autjprity to sell already
The Court ruled that when there is a close, proximate and causal expired.
connection between the agent's efforts and labor and the principal's sale of his
property, the agent is entitled to a commission. They agreed with the respondent Issue: Whether or not the Inland realty was entiled to the brokers
Court that the City of Manila ultimately became the purchaser of petitioner's commission upon the expiration of the contract of agency and authority to
property mainly through the efforts of private respondent. Without discounting sell?
the fact that when Municipal Ordinance No. 6603 was signed by the City Mayor
on May 17, 1968, private respondent's authority had already expired, it is to be Holding and ratio Decidendi
noted that the ordinance was approved on April 26, 1968 when private
respondent's authorization was still in force. Moreover, the approval by the City Inland Realty was not entitled to the Brokers Commission since the
Mayor came only three days after the expiration of private respondent's authority. petitioner was not efficient in procuring cause in bringing about the sale on July,
It is also worth emphasizing that from the records, the only party given a written 7, 1977. Inland Realty had nothing to show that they performed substantial acts
authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was that led to the consummation of the sale to Stanford of Araneta, Incs shares in
private respondent. Architects. Inland Realty failed in selling said shares under the terms and
agreements set out by Araneta, Inc.
7. Inland realty vs. CA | GR No. 76969 273 SCRA 70 | 9 June 1997
The Court of Appeals cannot be faulted for emphasizing the lapse of more
FACTS: 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
Inland realty Invetsment Services, Inc. is a corporation engaged in the real index of petitioners' non-participation in the really critical events leading to the
estate business and brokages. Gregotio Araneta Inc., through its Assistant Manger consummation of said sale, i.e., the negotiations to convince Stanford to sell at
Armando Eduque, granted Inland Realty the Authority to sell on a first comoe Araneta, Inc.'s asking price, the finalization of the terms and conditions of the sale,
first served basis the holdings of Gregorio Araneta, Inc.
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the drafting of the deed of sale, the processing of pertinent documents, and the admitted that petitioners were in his office on July 3, 1992, but only to ask for the
delivery of the shares of stock to Stanford. reimbursement of their cellular phone expenses.

8. Tan vs Gullas GR no. 143978 33 SCRA 334 | December 3 2002 | Issue: Whether or not the petitioner was entitled to their commission?
Justice Ynares-Santiago
Holding and Ration Decidendi
FACTS:
There was no dispute as to the role that petitioners played in the
Spouses Eduardo and Norma Gullas, were the registered owners of a transaction. At the very least, petitioners set the sale in motion. They were not able
parcel of land in the Municipality of Minglanilla, Province of Cebu. On June 29, to participate in its consummation only because they were prevented from doing
1992, they executed a special power of attorney authorizing Manuel B. Tan, a so by the acts of the private respondents.
licensed real estate broker, and his associates Gregg M. Tecson and Alexander
Saldaa, to negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) The Supreme Court ruled that an agent receives a commission upon the
per square meter, at a commission of 3% of the gross price. The power of attorney successful conclusion of a sale. On the other hand, a broker earns his pay merely
was non-exclusive and effective for one month from June 29, 1992. by bringing the buyer and the seller together, even if no sale is eventually made.
Clearly, therefore, petitioners, as brokers, should be entitled to the commission
Tan accompanied Sisters Michaela Kim and Azucena Gaviola, whether or not the sale of the property subject matter of the contract was
representing the Sisters of Mary, to see Eduardo Gullas in his office at the concluded through their efforts.
University of Visayas. The Sisters, who had already seen and inspected the land,
found the same suitable for their purpose and expressed their desire to buy it.[8] 9. Medrano vs. CA | GR No. 150678 452 SCRA 77 | 18 February 2005
However, they requested that the selling price be reduced to Five Hundred Thirty
Pesos (P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) FACTS:
per square meter. Private respondent Eduardo Gullas referred the prospective
buyers to his wife. Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a
bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor,
It was the first time that the buyers came to know that private respondent a cousin-in-law, to look for a buyer of a foreclosed asset of the bank, a 17-hectare
Eduardo Gullas was the owner of the property. The land was subsequently bought mango plantation priced at P2,200,000.00, located in Ibaan, Batangas.
by the sisters. However, the Gullas refused to pay Tan their commission. This was
on the ground that they were not the efficient procuring cause in bringing about Mr. Dominador Lee, a businessman from Makati City, was a client of
the consummation of the sale because another broker, Roberto Pacana, introduced respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The two met
the property to the Sisters of Mary ahead of the petitioners. Private respondents through a previous transaction where Lee responded to an ad in a newspaper put
maintained that when petitioners introduced the buyers to private respondent up by Borbon for an 8-hectare property in Lubo, Batangas, planted with atis trees.
Eduardo Gullas, the former were already decided in buying the property through Lee expressed that he preferred a land with mango trees instead. Borbon promised
Pacana, who had been paid his commission. Private respondent Eduardo Gullas
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 10

to get back to him as soon as she would be able to find a property according to his The brokers were entitled to the commission. The Supreme Court that the
specifications. aggrieved brokers were the procuring causes in the transaction although they did
not participate in the negotiation of the sale. Armed with an authority to procure
Borbon relayed to her business associates and friends that she had a ready a purchaser and with a license to act as broker, we see no reason why the
buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a respondents cannot recover compensation for their efforts when, in fact, they are
mango plantation which was up for sale. She told Flor to confer with Medrano the procuring cause of the sale.
and to give them a written authority to negotiate the sale of the property.
Procuring cause is meant to be the proximate cause. The term procuring
Upon being informed by Flor that Medrano was selling his mango orchard, cause, in describing a brokers activity, refers to a cause originating a series of events
Borbon lost no time in informing Lee that they had found a property according to which, without break in their continuity, result in accomplishment of prime
his specifications. An ocular inspection of the property together with Lee was objective of the employment of the broker producing a purchaser ready, willing
immediately planned; unfortunately, it never pushed through for reasons beyond and able to buy real estate on the owners terms.
the respondents control. Since Lee was in a hurry to see the property, he asked the
respondents the exact address and the directions on how to reach Ibaan, Batangas. A broker will be regarded as the procuring cause of a sale, so as to be
The respondents thereupon instructed him to look for Teresa Ganzon, an officer entitled to commission, if his efforts are the foundation on which the negotiations
of the Ibaan Rural Bank and the person to talk to regarding the property. While resulting in a sale are begun. The broker must be the efficient agent or the
the letter-authority issued in favor of the respondents was non-exclusive, no procuring cause of the sale. The means employed by him and his efforts must
evidence was adduced to show that there were other persons, aside from the result in the sale. He must find the purchaser, and the sale must proceed from his
respondents, who informed Lee about the property for sale. Ganzon testified that efforts acting as broker. Indeed, the evidence on record shows that the
no advertisement was made announcing the sale of the lot, nor did she give any respondents were instrumental in the sale of the property to Lee. Without their
authority to other brokers/agents to sell the subject property. intervention, no sale could have been consummated. They were the ones who set
the sale of the subject land in motion.
However, despite of the respondents participation in finding a buyer for
the petitioners property, the petitioners refuse to pay them commission, asserting
that they are not the efficient procuring cause of the sale. It was alleged that they
since they did not participate in the negotiation of the sale, they were thus not
entitled to their commission. 10. Litonjua vs Etermit Corp. | GR No. 144805 452 SCRA 77 | 18
February 2005
Issue: Whether or not the brokers are entitled to commission for the sale of
the subject property? FACTS:

Holding and ratio Decidendi The Eternit Corporation (EC) manufactures roofing materials and pipe
products. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation registered under the laws
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 11

of Belgium. Glanville was the General Manager and President of EC, while contract of sale. Indeed, an authority to find a purchaser of real property does not
Delsauxwas the Regional Director for Asia of ESAC. In 1986, because of the include an authority to sell.
political situation in the Philippines the management of ESAC wanted to stop its
operations and to dispose the land in Mandaluyong City. They engaged the services
of realtor/broker Lauro G. Marquez. Marquez thereafter offered the land to SECTION TWO
Eduardo B. Litonjua, Jr. for P27,000,000.00. Litonjua counter offered
P20,000,000.00 cash. Marquez apprisedGlanville & Delsaux of the offer. Delsaux
sent a telex stating that, based on the "Belgian/Swiss decision," the final offer was
11. Rallos vs Yangco G.R. No. 6906 (20 Phil 269) September 27,
"US$1,000,000.00 andP2,500,000.00. The Litonjua brothers deposited
1911 Justice Moreland
US$1,000,000.00 with the Security Bank & Trust Company, and drafted an Escrow
Agreement to expeditethe sale.Meanwhile, with the assumption of Corazon C. FACTS:
Aquino as President, the politicalsituation improved. Marquez received a letter
from Delsaux that the ESAC Regional Office decided not to proceed with the sale. Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907
When informed of this, the Litonjuas, filed a complaint for specific performance offering a consignment agreement. In such letter, Yangco made known that he
and payment for damages on account of the aborted sale. Both the trial court and conferred upon Florentino Collantes a public power of attorney notarized by
appellate court rendered judgment in favor of defendants and dismissed the Mr.Perfecto Salas Rodriguez dated November 16, 1907 to perform in his name
complaint. The lower court declared that since the authority of the agents/realtors and on his behalf all acts necessary for carrying out his plans.
was not in writing, the sale is void and not merely unenforceable.
Accepting this invitation, the plaintiffs proceeded to do a considerable
Issue: Whether or not the written authority from the Eternit was necessary business with the defendant through the said Collantes, as his factor, sending to
before the sale can be perfected? him as agent for the defendant a good deal of produce to be sold on commission.
Later, and in the month of February, 1909, the plaintiffs sent to the said Collantes,
Holding and Ration Decidendi as agent for the defendant, 218 bundles of tobacco in the leaf to be sold on
commission, as had been other produce previously. The said Collantes received
It appears that Marquez acted not only as real estate broker for the said tobacco and sold it for the sum of P1,744. The charges for such sale were
petitioners but also as their agent. As gleaned from the letter of Marquez to P206.96. leaving in the hands of said Collantes the sum of P1,537.08 belonging to
Glanville, on February 26, 1987, he confirmed, for and in behalf of the petitioners, the plaintiffs. This sum was apparently, converted to his own use by said agent.
that the latter had accepted such offer to sell the land and the improvements
thereon. It appears, however, that prior to the sending of said tobacco the
The Supreme Court agrees with the ruling of the appellate court that defendant had severed his relations with Collantes and that the latter was no longer
Marquez had no authority to bind respondent EC to sell the subject properties. A acting as his factor. This fact was not known to the plaintiffs and it is conceded
real estate broker is one who negotiates the sale of real properties. His business, in the case that no notice of any kind was given by the defendant to the plaintiffs
generally speaking, is only to find a purchaser who is willing to buy the land upon of the termination of the relations between the defendant and his agent. The
terms fixed by the owner. He has no authority to bind the principal by signing a defendant refused to pay the said sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time the said tobacco was received and sold by
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 12

Collantes he was acting personally and not as agent of the defendant. This action authorized by respondent Fernandez to offer the property for sale. The petitioners,
was brought to recover said sum. thereafter, made two ocular inspections of the property, in the course of which
they saw some people gathering coconuts.
ISSUE: Whether or not Yangco is liable to Rallos for having failed to notify In the afternoon of November 27, 1995, the petitioners met with
that Collantes was no longer in his employ? respondent Fernandez and the two brokers at the petitioners office in
Mandaluyong City. The petitioners and respondent Fernandez agreed that the
petitioners would buy the property consisting of 36,742 square meters, for the
RULING: price of P150 per square meter, or the total sum of P5,098,500. They also agreed
Yes, Yangco is liable. Having advertised the fact that Collantes was his that the owners would shoulder the capital gains tax, transfer tax and the expenses
agent and having given them a special invitation to deal with such agent, it was the for the documentation of the sale. The petitioners and respondent Fernandez also
duty of the defendant on the termination of the relationship of principal and agent agreed to meet on December 8, 1995 to finalize the sale.
to give due and timely notice thereof to the plaintiffs. Failing to do so, he is
responsible to them for whatever goods may have been in good faith and without It was also agreed upon that on the said date, respondent Fernandez would
negligence sent to the agent without knowledge, actual or constructive, of the present a special power of attorney executed by the owners of the property,
termination of such relationship. authorizing her to sell the property for and in their behalf, and to execute a deed
of absolute sale thereon. The petitioners would also remit the purchase price to
the owners, through respondent Fernandez.

However, only Agapito Fisico attended the meeting. He informed the


petitioners that respondent Fernandez was encountering some problems with the
tenants and was trying to work out a settlement with them. After a few weeks of
waiting, the petitioners wrote respondent Fernandez on January 5, 1995,
12. Litonjua vs Fernandez G.R. No. 148116 (427 SCRA 478) April demanding that their transaction be finalized by January 30, 1996. When the
14, 2004 Justice Callejo Sr., petitioners received no response from respondent Fernandez, the petitioners sent
her another Letter dated February 1, 1996, asking that the Deed of Absolute Sale
covering the property be executed in accordance with their verbal agreement dated
FACTS: November 27, 1995. The petitioners also demanded the turnover of the subject
properties to them within fifteen days from receipt of the said letter otherwise,
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico
they would have no option but to protect their interest through legal means.
who worked as brokers, offered to sell to the petitioners, Antonio K. Litonjua and
Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and 36766.
Respondent Fernandez wrote the petitioners on February 14, 1996,
The petitioners were shown a locator plan and copies of the titles showing that the
clarifying that their claims are not true. On April 2, 1996, the petitioners filed the
owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively. The brokers told the petitioners that they were
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 13

instant complaint for specific performance with damages against respondent


Fernandez and the registered owners of the property. 13. Aggabao vs Parulan Jr.G.R. No. 165803 (629 SCRA 562)
September 1, 2010 Justice Bersamin
The trial court rendered judgement in favor of petitioners while the
appellate court reversed the decision. FACTS:

ISSUE: Whether or not the letter signed by Respondent Fernandez is In January 1991, real estate broker Marta K. Atanacio offered the property
binding on the registered owners of the subject properties? to spouses Aggabao, who initially did not show interest due to the rundown
condition of the improvements. But Atanacios persistence prevailed upon them,
RULING: so that on February 2, 1991, they and Atanacio met with Ma. Elena at the site of
the property. During their meeting, Ma. Elena showed to them the owners original
No. The Letter relied upon by the petitioners was signed by respondent copy of TCT No. 63376, a certified true copy of TCT No. 63377, three tax
Fernandez alone, without any authority from the respondents-owners. There is no declarations, and a copy of the special power of attorney (SPA) dated January 7,
evidence on record that the respondents-owners ratified all the actuations of 1991 executed by Dionisio, authorizing Ma. Elena, to sell the property. Before the
respondent Fernandez in connection with her dealings with the petitioners. As meeting ended, they paid P20, 000.00 as earnest money, for which Ma. Elena
such, said letter is not binding on the respondents as owners of the subject executed a handwritten Receipt of Earnest Money, whereby the parties stipulated
properties. that: (a) they would pay an additional payment of P130,000.00 on February 4,1991
(b) they would pay the balance of the bank loan of the respondents amounting to
Article 1878 of the New Civil Code provides that a special power of P650,000.00 on or before February 15, 1991 and (c) they would make the final
attorney is necessary to enter into any contract, by which the ownership of an payment of P700,000.00 once Ma. Elena turned over the property on March 31,
immovable is transmitted or acquired either gratuitously or for a valuable 1991.
consideration, or to create or convey real rights over immovable property, or for
any other act of strict dominion. Any sale of real property by one purporting to be On March 18, 1991, the petitioners delivered the final amount of
the agent of the registered owner without any authority therefor in writing from P700,000.00 to Ma. Elena, who executed a deed of absolute sale in their favor.
the said owner is null and void. The declarations of the agent alone are generally However, Ma. Elena did not turn over the owners duplicate copy of TCT
insufficient to establish the fact or extent of her authority. No. 63376, claiming that said copy was in the possession of a relative who was
then in Hongkong. She assured them that the owners duplicate copy of TCT No.
In this case, the only evidence adduced by the petitioners to prove that 63376 would be turned over after a week.
respondent Fernandez was authorized by the respondents owners is the testimony
of petitioner Antonio Litonjua that respondent Fernandez openly represented On March 19, 1991, TCT No. 63377 was cancelled and a new one was
herself to be the representative of the respondents owners, and that she promised issued in the name of the petitioners. Ma. Elena did not turn over the duplicate
to present to the petitioners on December 8, 1996 a written authority to sell the owners copy of TCT No. 63376 as promised. In due time, the petitioners learned
properties. that the duplicate owners copy of TCT No. 63376 had been all along in the custody
of Atty. Jeremy Z. Parulan, who appeared to hold an SPA executed by his brother
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 14

Dionisio authorizing him to sell both lots. At Atanacios instance, the petitioners Nonetheless, the Supreme court stress that the power of administration
met on March 25, 1991 with Atty. Parulan at the Manila Peninsula. For that does not include acts of disposition or encumbrance, which are acts of strict
meeting, they were accompanied by one Atty. Olandesca. They recalled that Atty. ownership. As such, an authority to dispose cannot proceed from an authority to
Parulan smugly demanded P800,000.00 in exchange for the duplicate owners copy administer, and vice versa, for the two powers may only be exercised by an agent
of TCT No. 63376, because Atty. Parulan represented the current value of the by following the provisions on agency of the Civil Code (from Article 1876 to
property to be P1.5 million. As a counteroffer, however, they tendered Article 1878). Specifically, the apparent authority of Atty. Parulan, being a special
P250,000.00, which Atty. Parulan declined, giving them only until April 5, 1991 to agency, was limited to the sale of the property in question, and did not include or
decide. extend to the power to administer the property.

Hearing nothing more from the petitioners, Atty. Parulan decided to call
them on April 5, 14. Dominion Insurance Corp. vs CAG.R. No. 129919 (376 SCRA
1991, but they informed him that they had already fully paid to Ma. Elena. 239) February 6, 2002 Justice Pardo

Thus, on April 15, 1991, Dionisio, through Atty. Parulan, commenced an FACTS:
action, praying for the declaration of the nullity of the deed of absolute sale
executed by Ma. Elena, and the cancellation of the title issued to the petitioners by On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case
virtue thereof. No. 8855 for sum of money against defendant Dominion Insurance Corporation.
Plaintiff sought to recover thereunder the sum of P156, 473.90 which he claimed
The RTC ruled in favor of Plaintiff Parulan and declared the sale of both to have advanced in his capacity as manager of defendant to satisfy certain claims
lots null and void, declaring that the SPA in the hands of Elena was a forgery. The filed by defendants clients. In its traverse, defendant denied any liability to plaintiff
CA affirmed the decision of the RTC. and asserted a counterclaim for P249, 672.53, representing premiums that plaintiff
allegedly failed to remit.
ISSUE: Whether or not the sale of the conjugal party executed without the
consent of Dionisio valid on the ground that his power of administration The terms of the agreement read:
had been delegated to his brother through an SPA?
That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a
RULING: corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines, xxx represented by the undersigned as Regional
No, the sale is not valid. The petitioners failed to substantiate their Manager, xxx do hereby appoint RSG Guevarra Insurance Services represented by
contention that Dionisio, while holding the administration over the property, had Mr. Rodolfo Guevarra xxx to be our Agency Manager in San Fdo., for our
delegated to his brother, Atty. Parulan, the administration of the property, place and stead, to do and perform the following acts and things:
considering that they did not present in court the SPA granting to Atty. Parulan
the authority for the administration. 1. To conduct, sign, manager (sic), carry on and transact Bonding and
Insurance business as usually pertain to a Agency Office, or FIRE,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 15

MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING No. A perusal of the Special Power of Attorney would show that
with the right, upon our prior written consent, to appoint agents and petitioner (represented by third-party defendant Austria) and respondent Guevarra
subagents. intended to enter into a principal-agent relationship. Despite the word special in
2. To accept, underwrite and subscribed (sic) cover notes or Policies of the title of the document, the contents reveal that what was constituted was
Insurance and Bonds for and on our behalf. actually a general agency
3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and
transfer for and receive and give effectual receipts and discharge for all The agency comprises all the business of the principal, but, couched in
money to which the FIRST CONTINENTAL ASSURANCE general terms, it is limited only to acts of administration. A general power permits
COMPANY, INC., may hereafter become due, owing payable or the agent to do all acts for which the law does not require a special power. Thus,
transferable to said Corporation by reason of or in connection with the the acts enumerated in or similar to those enumerated in the Special Power of
abovementioned appointment. Attorney do not require a special power of attorney.
4. To receive notices, summons, and legal processes for and in behalf of
the FIRST CONTINENTAL ASSURANCE COMPANY, INC., in The payment of claims is not an act of administration. The settlement of
connection with actions and all legal proceedings against the said claims is not included among the acts enumerated in the Special Power of
Corporation. Attorney, neither is it of a character similar to the acts enumerated therein. A
special power of attorney is required before respondent Guevarra could settle the
Respondent Guevarras authority to settle claims is embodied in the insurance claims of the insured.
Memorandum of Management Agreement[23] dated February 18, 1987 which
enumerates the scope of respondent Guevarras duties and responsibilities as Respondent Guevarra was authorized to pay the claim of the insured, but
agency manager for San Fernando, Pampanga, as follows: the payment shall come from the revolving fund or collection in his possession.
Having deviated from the instructions of the principal, the expenses that
1. You are hereby given authority to settle and dispose of all motor car claims in respondent Guevarra incurred in the settlement of the claims of the insured may
the amount of P5,000.00 with prior approval of the Regional Office.2. Full not be reimbursed from petitioner Dominion.
authority is given you on TPPI claims settlement. Respondent Guevarras
authority is further limited by the written standard authority to pay, which states
that the payment shall come from respondent Guevarras revolving fund or 15. Veloso vs CAG.R. No. 102737 (260 SCRA 593) August 21, 1996
collection. Justice Torres Jr.

ISSUE: Whether or not respondent Guevarra acted within his authority as FACTS:
agent for petitioner in accordance with the Special Power of Attorney?
Petitioner Francisco Veloso was the owner of a parcel of land situated in
RULING: the district of Tondo, Manila, with an area of one hundred seventy seven (177)
square meters and covered by Transfer Certificate of Title No. 49138 issued by the
Registry of Deeds of Manila. The title was registered in the name of Francisco A.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 16

Veloso, single, on October 4, 1957. The said title was subsequently canceled and a documents, the real party in interest was Irma Veloso, the wife of the plaintiff. She
new one, Transfer Certificate of Title No. 180685, was issued in the name of should have been impleaded in the case. In fact, Plaintiffs cause of action should
Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988. have been against his wife, Irma.

On August 24, 1988, petitioner Veloso filed an action for annulment of ISSUE: Whether or not the general power of attorney is valid and regular on
documents, reconveyance of property with damages and preliminary injunction its face?
and/or restraining order. The complaint, docketed as Civil Case No. 8845926, was
raffled to the Regional Trial Court, Branch 45, Manila. Petitioner alleged therein RULING:
that he was the absolute owner of the subject property and he never authorized
anybody, not even his wife, to sell it. He alleged that he was in possession of the Yes. An examination of the records showed that the assailed power of
title but when his wife, Irma, left for abroad, he found out that his copy was attorney was valid and regular on its face. It was notarized and as such, it carries
missing. He then verified with the Registry of Deeds of Manila and there he the evidentiary weight conferred upon it with respect to its due execution. While
discovered that his title was already canceled in favor of defendant Aglaloma it is true that it was denominated as a general power of attorney, a perusal thereof
Escario. The transfer of property was supported by a General Power of Attorney revealed that it stated an authority to sell.
dated November 29, 1985 and Deed of Absolute Sale, dated November 2, 1987,
executed by Irma Veloso, wife of the petitioner and appearing as his attorneyinfact, Thus, there was no need to execute a separate and special power of
and defendant Aglaloma Escario. attorney since the general power of attorney had expressly authorized the agent or
attorney in fact the power to sell the subject property. The special power of
Petitioner Veloso, however, denied having executed the power of attorney attorney can be included in the general power when it is specified therein the act
and alleged that his signature was falsified. He also denied having seen or even or transaction for which the special power is required.
known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the Whether the instrument be denominated as general power of attorney or
execution of the power of attorney. He vehemently denied having met or special power of attorney, what matters is the extent of the power or powers
transacted with the defendant. Thus, he contended that the sale of the property, contemplated upon the agent or attorney in fact. If the power is couched in general
and the subsequent transfer thereof, were null and void. Petitioner Veloso, terms, then such power cannot go beyond acts of administration. However, where
therefore, prayed that a temporary restraining order be issued to prevent the the power to sell is specific, it not being merely implied, much less couched in
transfer of the subject property that the General Power of Attorney, the Deed of general terms, there can not be any doubt that the attorney in fact may execute a
Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled and valid sale. An instrument may be captioned as special power of attorney but if the
the subject property be reconveyed to him. powers granted are couched in general terms without mentioning any specific
power to sell or mortgage or to do other specific acts of strict dominion, then in
Defendant Aglaloma Escario in her answer alleged that she was a buyer in that case only acts of administration may be deemed conferred.
good faith and denied any knowledge of the alleged irregularity. She allegedly relied
on the general power of attorney of Irma Veloso which was sufficient in form and
substance and was duly notarized. She contended that plaintiff (herein petitioner), 16. Pineda vs CAG.R. No. 105562 (226 SCRA 754) September 27,
had no cause of action against her. In seeking for the declaration of nullity of the 1993 Justice Davide Jr.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 17

to Mr. Mariano Urbano, Assistant Department Manager for Group


FACTS: Administration Department of respondent-appellant. Capt. Nuval, upon receipt
of these checks from the treasurer, who happened to be his son-in-law, endorsed
On 23 September 1983, Prime Marine Services, Inc., a crewing/manning and deposited them in his account with the Commercial Bank of Manila, now
outfit, procured Group PoIicy No. G004694 from respondent-appellant Insular Boston Bank.
Life Assurance Co., Ltd. to provide life insurance coverage to its sea-based
employees enrolled under the plan. On 17 February 1986, during the effectivity of On 3 July 1989, after complainants-appellees learned that they were
the policy, six covered employees of the PMSI perished at sea when their vessel, entitled, as beneficiaries, to life insurance benefits under a group policy with
M/V Nemos, a Greek cargo vessel, sunk somewhere in El Jadida, Morocco. They respondent-appellant, they sought to recover these benefits from Insular Life but
were survived by complainants-appellees, the beneficiaries under the policy. the latter denied their claim on the ground that the liability to complainants-
appellees was already extinguished upon delivery to and receipt by PMSI of the six
Following the tragic demise of their loved ones, complainants-appellees (6) checks issued in their names.
sought to claim death benefits due them and, for this purpose, they approached
the President and General Manager of PMSI, Capt. Roberto Nuval. Capt. Nuval ISSUE: Whether or not the power of attorney relied upon by Insular Life
evinced willingness to assist complainants-appellees to recover Overseas Workers sufficient to convey absolute authority to Capt. Nuval to collect the
Welfare Administration (OWWA) benefits from the POEA and to work for the insurance proceeds?
increase of their PANDIMAN and other benefits arising from the deaths of their
husbands/sons. They were thus made to execute, with the exception of the
spouses Alarcon, special powers of attorney authorizing Capt. Nuval to, among RULING:
others, "follow up, ask, demand, collect and receive" for their benefit indemnities
of sums of money due them relative to the sinking of M/V Nemos. By virtue of No. The special powers of attorney "do not contain in unequivocal and
these written powers of attorney, complainants-appellees were able to receive their clear terms authority to Capt. Nuval to obtain, receive, receipt from respondent
respective death benefits. Unknown to them, however, the PMSI, in its capacity as company insurance proceeds arising from the death of the seaman-insured. On
employer and policyholder of the life insurance of its deceased workers, filed with the contrary, the said powers of attorney are couched in terms which could easily
respondent-appellant formal claims for and in behalf of the beneficiaries, through arouse suspicion of an ordinary man."
its President, Capt. Nuval. Among the documents submitted by the latter for the
processing of the claims were five special powers of attorney executed by There is nothing in the law which mandates a specific or special power of
complainants-appellees. attorney to be executed to collect insurance proceeds. Such authority is not
included in the enumeration of Art. 1878 of the New Civil Code. Neither does the
On the basis of these and other documents duly submitted, respondent- Supreme Court perceive collection of insurance claims as an act of strict dominion
appellant drew against its account with the Bank of the Philippine Islands on 27 as to require a special power of attorney.
May 1986 six (6) checks, four for P200,00.00 each, one for P50,000.00 and another
for P40,00.00, payable to the order of complainants-appellees. These checks were The person dealing with an agent must also act with ordinary prudence
released to the treasurer of PMSI upon instructions of Capt. Nuval over the phone and reasonable diligence. Obviously, if he knows or has good reason to believe
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 18

that the agent is exceeding his authority, he cannot claim protection. So if the and receive and give effectual receipts and discharge for all money to which the company may
suggestions of probable limitations be of such a clear and reasonable quality, or if hereafter become due, owing payable or transferable to said corporation by reason of or in
the character assumed by the agent is of such a suspicious or unreasonable nature, connection with the above-mentioned appointment. to receive notices, summons, and legal processes
or if the authority which he seeks to exercise is of such an unusual or improbable for and in behalf of the first continental assurance company, inc., in connection with actions and
character, as would suffice to put an ordinarily prudent man upon his guard, the all legal proceedings against the said corporation.
party dealing with him may not shut his eyes to the real state of the case, but should
either refuse to deal with the agent at all, or should ascertain from the principal the The trial court rendered judgement in favor of Rodolfo S. Guevarra.
true condition of affairs. The Court of Appeals promulgated a decision affirming that of the trial
court.
17. DOMINION INSURANCE CORPORATION VS. CA G. R. NO. ISSUE: Whether respondent Guevarra acted within his authority as agent
129919, FEBRUARY 6, 2002 for petitioner?
FACTS: RULING:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. Even though the contact entered into by Guevarra and Dominion was
No. 8855 for sum of money against defendant Dominion Insurance Corporation. with the word special the contents of the document was actually a general
Plaintiff sought to recover thereunder the sum of P156,473.90 which he claimed agency. A general power permits the agent to do all acts for which the law does
to have advanced in his capacity as manager of defendant to satisfy certain claims not require a special power and the contents in the document did not require a
filed by defendants clients. special power of attorney.
The Special Power of Attorney executed between the petitioner, Art 1878 of the civil code provides instances when a special power of
represented by third-party defendant Austria, and respondent Gueverra intended attorney is required.: 1) To make such payment as are not usually considered as acts of
to enter into a principal-agent relationship. administration. 2) Any other act of dominion.
The terms of the agreement read that the First Continental Assurance Company,
Inc appointed RSG Guevarra Insurance Services represented by Mr. The payment of claims is not an act of administration which requires a
RodolfoGuevarra xxx to be our Agency Manager in San Fdo., for our place and special power of attorney before Guevarra could settle the insurance claims of the
stead, to do and perform the following acts and things: insured.
to conduct, sign, manager (sic), carry on and transact bonding and insurance business as usually Also Guevarra was instructed that the payment for the insured must come
pertain to a agency office, or fire, marine, motor car, personal accident, and bonding with the right, from the revolving fund or collection in his possession, Gueverra should not have
upon our prior written consent, to appoint agents and sub-agents. paid the insured through his own capacity.
to accept, underwrite and subscribed (sic) cover notes or policies of insurance and bonds for and
on our behalf. to demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 19

Under 1918 of civil code an agent who acted in contravention of the


principals instruction the principal will not be liable for the expenses incurred by The consignee claimed the P2,605.64 worth of damage from the Bureau
the agent. Although a Special Power of Attorney was issued by the insurance of Customs, the United Lines Company owner of the vessel, and the Home
company to its agency manager, it wordings show that it sought only to establish Insurance Company which had insured the cargo. The latter paid the claim and
an agency that comprises all the business of the principal within the designated demanded reimbursement from either arrastre operator or the carrier.
locality, but couched in general terms, and consequently was limited only to acts When both rejected the claim, the Home Insurance Company filed an action
of administration. against the Republic of the Philippines, the Bureau of Customs and the United
States Lines, in the alternative, for the recovery of P2,605.64, with interest plus
A general power permits the agent to do all acts for which the law does costs.
not require a special power. Thus, the acts enumerated in or similar to those
enumerated in the Special Power of Attorney (i.e., really a general power of On the date set for pre-trial, only the counsel for the plaintiff appeared,
attorney) did not require a special power of attorney, and could only cover acts of who upon being asked for written authority to compromise, assured the court that
administration. though he had no written authority, he had such authority verbally given by the
plaintiff. On the same day, the court dismissed the case for failure of the plaintiff
In the case of the area manager of an insurance company, it was held that to appear at the pre-trial conference.
the payment of claims is not an act of administration, and that since the settlement
of claims was not included among the acts enumerated in the Special Power of ISSUE: Whether or not the lower court correctly dismiss the case for failure
Attorney issued by the insurance company, nor is of a character similar to the acts of the plaintiff to appear at the pre-trial conference who allegedly gave his
enumerated therein, then a special power of attorney was required before such area attorney a verbal authority to compromise?
manager could settle the insurance claims of the insured.
Consequently, the amounts paid by the area manager to settle such claims cannot RULING:
be reimbursed from the principal insurance company.
YES. The lower court was correct in dismissing the case. True, said counsel
asserted that he had verbal authority to compromise the case. The Rules, however,
18. HOME INSURANCE CO. VS. USL, GR L-25593, 15 NOVEMBER require, for attorneys to compromise the litigation of their clients, a special
1967 authority (Section 23, Rule 138, Rules of Court).

FACTS: And while the same does not state that the special authority be in writing,
the court has every reason to expect, that, if not in writing, the same be duly
Sometime in 1964, SS "Pioneer Moon" arrived in Manila and discharged established by evidence other than the self-serving assertion of counsel himself
unto the custody of the Bureau of Customs, as arrastre operator, two hundred that such authority was verbally given to him.
(200) cartons of carbonized adding machine rolls consigned to Burroughs,
Limited. When the cargo was delivered to the consignee, however, several cartons For, authority to compromise cannot lightly be presumed. And if, with
were damaged. good reason, the judge is not satisfied that said authority exists, as in this case,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 20

dismissal of the suit for non-appearance of plaintiff in pre-trial is sanctioned by


the Rules. The dismissal should therefore be sustained in toto, with respect to all By virtue of this Special Power of Attorney, on March 1, 1967, Jose A.
the defendants. Olaguer as Attorney-in-Fact of Estanislao Olaguer mortgaged Lots 7589, 7593 and
7396 to defendant PNB as security for a loan of 10,000 Pesos. The mortgage was
19. ESTATE OF LIANO OLAGUER VS. ONGJOCO, GR NO. 173312 foreclosed by the PNB on June 13, 1973 and the properties mortgage were sold at
26 AUGUST 2008 public auction to PNB. On December 10, 1990, the PNB transferred the
properties to the Republic of the Philippines pursuant to Exec. Order No. 407
FACTS: dated June 14, 1990 for agrarian reform purposes.

The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. On October 29, 1966, Estanislao Olaguer executed a General Power of
Trinidad, Lina Olaguer and Ma. Linda O. Montayre are the legitimate children of Attorney in favor of Jose A. Olaguer, authorizing the latter to exercise general
the spouses Lino Olaguer and defendant Olivia P. Olaguer. Lino Olaguer died on control and supervision over all of his business and properties, and among others,
October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in to sell or mortgage any of his properties.
the then Court of First Instance of Albay. Defendant Olivia P. Olaguer was On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 the
appointed as administrator pursuant to the will. Later, defendant Eduardo Olaguer 10 parcels of land he bought from Olivia P. Olaguer and Eduardo Olaguer.
was appointed as coadministrator. On October 15, 1959 defendant Olivia P. On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso
Olaguer got married to defendant Jose A. Olaguer before the then Justice of the and other valuable consideration 2 parcels of land which have a total area of 2.5
Peace of Sto. Domingo (Libog) Albay. On January 24, 1965 they were married in hectares.
church.
On June 5, 1968, Estanislao Olaguer sold another 2 lots to Jose A. Olaguer
In the order of the probate court dated April 4, 1961, some properties of for 1 Peso and other valuable consideration.
the estate were authorized to be sold to pay obligations of the estate. On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao
Relying upon the order, but without prior notice or permission from the Probate Olaguer sold to his son Virgilio Olaguer for 1 Peso and other valuable
Court, defendants Olivia P. Olaguer and Eduardo Olaguer on November 1, 1965 consideration.
sold to Estanislao Olaguer 10 parcels of land. The sale to was approved by the
Probate Court on November 12, 1965. On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No.
4521 and Lot No. 4522 for 1,000 Pesos.
On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney
Attorney in favor of defendant Jose A. Olaguer, authorizing the latter to "sell, in favor of Jose A. Olaguer authorizing the latter to exercise general control and
mortgage, assign, transfer, endorse and deliver" of 6 properties. supervision over all of his business and properties and among others, to sell or
mortgage the same.
On the same date, Estanislao Olaguer executed a Special Power of
Attorney in favor of Jose A. Olaguer authorizing the latter to "sell, mortgage,
assign, transfer, endorse and deliver" the 9 properties.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 21

Olivia P. Olaguer and Eduardo Olaguer were removed as administrators sufficient in this case, as Jose A. Olaguer was expressly empowered to sell any of
of the estate and on February 12, 1980, plaintiff Ma. Linda Olaguer Montayre was Virgilio's properties and to sign, execute, acknowledge and deliver any agreement
appointed administrator by the Probate Court. therefor.Even if a document is designated as a general power of attorney, the
requirement of a special power of attorney is met if there is a clear mandate from
The decedent Lino Olaguer have had three marriages. He was first married the principal specifically authorizing the performance of the act.
to Margarita Ofemaria who died April 6, 1925. His second wife was Gloria
Buenaventura who died on July 2, 1937. The third wife was the defendant Olivia The special power of attorney can be included in the general power when
P. Olaguer. the act or transaction for which the special power is required is specified therein.
On its face, the written power of attorney contained the signature of Virgilio
Jose Olaguer acting upon the general power of attorney sold 8 parcels of Olaguer and was duly notarized. As such, the same is considered a public
land to Emilio Ongjoco. document and it has in its favor the presumption of authenticity and due execution,
which can only be contradicted by clear and convincing evidence.
On 28 January 1980, the Estate of Lino Olaguer filed an action for the
Annulment of Sales of Real Property and/or Cancellation of Titles in the then According to the provisions of Article 1874 of the Civil Code on Agency,
Court of First Instance of Albay. The plaintiffs therein alleged that the sales of the when the sale of a piece of land or any interest therein is made through an agent,
following properties belonging to the Estate of Lino Olaguer to Estanislao the authority of the latter shall be in writing. Absent this requirement, the sale shall
Olaguer were absolutely simulated or fictitious, the plaintiffs likewise prayed that be void. Also, under Article 1878,a special power of attorney is necessary in order
the resulting Transfer Certificates of Title issued to Jose Olaguer, Virgilio Olaguer, for an agent to enter into a contract by which the ownership of an immovable
Cipriano Duran and the PNB be annulled. property is transmitted or acquired, either gratuitously or for a valuable
consideration.
ISSUE: Whether General Power of Attorney was sufficient to effect the sale
of the subject properties? 20. LITONJUA VS. FERNANDEZ, GR NO. 148116, 14 APRIL 2004

RULING: FACTS:

Yes, the general power of attorney was sufficient The Supreme Court held Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico
that while the law requires a special power of attorney, the general power of who worked as brokers, offered to sell to the petitioners, Antonio K. Litonjua and
attorney was sufficient in this case, as Jose A. Olaguer was expressly empowered Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and 36766.
to sell any of Virgilio's properties; and to sign, execute, acknowledge and deliver The petitioners were shown a locator plan and copies of the titles showing that the
any agreement therefor. owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively.
As regards Lots Nos. 76D, 76E, 76F and 76G, Ongjoco was able to
present a general power of attorney that was executed by Virgilio Olaguer. While The brokers told the petitioners that they were authorized by respondent
the law requires a special power of attorney, the general power of attorney was Fernandez to offer the property for sale. The petitioners, thereafter, made two
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 22

ocular inspections of the property, in the course of which they saw some people
gathering coconuts. Article 1878 of the New Civil Code provides that a special power of
attorney is necessary to enter into any contract by which the ownership of an
In the afternoon of November 27, 1995, the petitioners met with immovable is transmitted or acquired either gratuitously or for a valuable
respondent Fernandez and the two brokers at the petitioners office in consideration or to create or convey real rights over immovable property, or for
Mandaluyong City.The petitioners and respondent Fernandez agreed that the any other act of strict dominion. Any sale of real property by one purporting to be
petitioners would buy the property consisting of 36,742 square meters, for the the agent of the registered owner without any authority therefor in writing from
price of P150 per square meter, or the total sum of P5,098,500. They also agreed the said owner is null and void. The declarations of the agent alone are generally
that the owners would shoulder the capital gains tax, transfer tax and the expenses insufficient to establish the fact or extent of her authority.
for the documentation of the sale. The petitioners and respondent Fernandez also
agreed to meet on December 8, 1995 to finalize the sale. In this case, the only evidence adduced by the petitioners to prove that
respondent Fernandez was authorized by the respondents-owners is the testimony
It was also agreed upon that on the said date, respondent Fernandez would of petitioner Antonio Litonjua that respondent Fernandez openly represented
present a special power of attorney executed by the owners of the property, herself to be the representative of the respondents-owners, and that she promised
authorizing her to sell the property for and in their behalf, and to execute a deed to present to the petitioners on December 8, 1996 a written authority to sell the
of absolute sale thereon. The petitioners would also remit the purchase price to properties.
the owners, through respondent Fernandez. The settled rule is that persons dealing with an assumed agent are bound
However, only Agapito Fisico attended the meeting. He informed the at their peril, and if they would hold the principal liable, to ascertain not only the
petitioners that respondent Fernandez was encountering some problems with the fact of agency but also the nature and extent of authority, and in case either is
tenants and was trying to work out a settlement with them. After a few weeks of controverted, the burden of proof is upon them to prove it. In this case,
waiting, the petitioners wrote respondent Fernandez on January 5, 1995, respondent Fernandez specifically denied that she was authorized by the
demanding that their transaction be finalized by January 30, 1996. respondents-owners to sell the properties, both in her answer to the complaint and
when she testified. The Letter dated January 16, 1996 relied upon by the petitioners
ISSUE: Whether or not the letter signed by Fernandez alone without any was signed by respondent Fernandez alone, without any authority from the
authority from the respondents-owners binding on the latter as owners of respondents-owners.
the subject properties?
There is no evidence on record that the respondents-owners ratified all the
RULING: actuations of respondent Fernandez in connection with her dealings with the
petitioners. As such, said letter is not binding on the respondents as owners of the
No. In this case, we agree with the findings of the appellate court that there subject properties.
was no perfected contract of sale between the respondents-owners, as sellers, and
the petitioners, as buyers. There is no documentary evidence on record that the
respondents-owners specifically authorized respondent Fernandez to sell their 21. BAUTISTA VS. SPOUSES JALANDONI, GR NO. 171464, 27
properties to another, including the petitioners. NOVEMBER 2013
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 23

The RTC, nonetheless, found MCC a mortgagee in good faith and upheld
FACTS: the validity of the mortgage contract between Spouses Bautista and MCC.

In May 1997, the Spouses Jalandoni applied for a loan with a commercial ISSUE: Whether or not Nasino has the authority to negotiate for the
bank and, as a security thereof, they offered to constitute a real estate mortgage Spouses Jalandoni in the contract of sale made to Spouses Bautista?
over the two lots they were allegedly the absolute owners of.
After a routine credit investigation, it was discovered that their titles over the two
lots had been cancelled and new TCTs were issued in the names of Spouses RULING:
Baustista. Upon further investigation, they found out that the bases for the
cancellation of their titles were two deeds of absolute sale,7 dated April 4, 1996 No. Article 1874 and Aritcle 1875 (5) explicitly require a written authority
and May 4, 1996, purportedly executed and signed by them in favor of Spouses when the sale of a piece of land is through an agent, whether the sale is gratuitously
Baustista. or for a valuable consideration.
Articles 1874 of the Civil Code provides: When a sale of a piece of land or any
Spouses Bautista claimed that in March 1996, a certain Teresita Nasino interest therein is through an agent, the authority of the latter shall be in writing;
(Nasino) offered to Eliseo Baustista (Eliseo) two parcels of land located in otherwise, the sale shall be void.
Muntinlupa City; that the parcels of land were sold at a bargain price because the Likewise, A1iicle 1878 paragraph 5 of the Civil Code specifically mandates that the
owners were in dire need of money; that upon their request, Nasino showed them authority of the agent to sell a real property must be conferred in writing, to wit:
the photocopies of the titles covering the subject lands; that Nasino told them that Art. 1878. Special powers of attorney are necessary in the following cases:
she would negotiate with the Spouses Jalandoni, prepare the necessary documents (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired
and cause the registration of the sale with the Register of Deeds; and that since either gratuitously or for a valuable consideration;
Nasino was a wife of a friend, Spouses Baustista trusted her and gave her the
authority to negotiate with Spouses Jalandoni on their behalf. Absent such authority in writing, the sale is null and void.

On December 17, 2004, the RTC rendered judgment declaring the sale of In the case at bar, it is undisputed that the sale of the subject lots to
the subject lots void. Spouses Bautista was void. Based on the records, Nasino had no written authority
from Spouses Jalandoni to sell the subject lots. The testimony of Eliseo that
The RTC explained that Nasino had no authority to negotiate for the Nasino was empowered by a special power of attorney to sell the subject lots was
Spouses Jalandoni, much less to receive the consideration of the sale. Spouses bereft of merit as the alleged special power attorney was neither presented in co
Bautista were not innocent purchasers in good faith and for value for their failure urt nor was it referred to in the deeds of absolute sale. Bare allegations,
to personally verify the original copies of the titles of the subject properties and to unsubstantiated by evidence, are not equivalent to proof under the Rules of Court.
ascertain the authority of Nasino since they were not dealing with the registered
owner. In additon Spouses Bautista cannot be deemed purchasers in good faith.
There were several circumstances that should have placed them on guard and
prompted them to conduct an investigation that went beyond the face of the title
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 24

of the subject lots. Their failure to take the necessary steps to determine the status a provision giving Duran the right to repurchase it for the same price within a
of the subject lots and the extent of Nasinos authority puts them into bad light. period of four years from the date of the said instrument.
Orense continued occupying the land by virtue of a contract of lease. After the
Spouses Bautistas claim of good faith is negated by their failure to verify lapse of four years, Gutierrez asked Orense to deliver the property to the company
the extent and nature of Nasinos authority. Since Spouses Bautista did not deal and to pay rentals for the use of the property.
with the registered owners but with Nasino, who merely represented herself to be
their agent, they should have scrutinized all factual circumstances necessary to Orense refused to do so. He claimed that the sale was void because it was
determine her authority to insure that there are no flaws in her title or her capacity done without his authority and that he did not authorize his nephew to enter into
to transfer the land. They should not have merely relied on her verbal such contract.
representation that she was selling the subject lots on behalf of Spouses Jalandoni. During trial, Orense was presented as witness of the defense. He states
Moreover, Eliseos claim that he did not require Nasino to give him a copy that the sale was done with his knowledge and consent. Because of such testimony,
of the special power of attorney because he trusted her is unacceptable. Well it was ascertained that he did give his nephew, Duran, authority to convey the land.
settled is the rule that persons dealing with an assumed agency are bound at their Duran was acquitted of criminal charges and the company demanded that Orense
peril, if they would hold the principal liable, to ascertain not only the fact of agency execute the proper deed of conveyance of the property.
but also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it. ISSUE: Whether or not Orense is bound by Durans act of selling the
formers property?
As stated, Spouses Bautistas failure to observe the required degree of
caution in ascertaining the genuineness and extent of Nasinos authority is RULING:
tantamount to bad faith that precludes them from claiming the rights of a
purchaser in good faith. Yes. It was proven during trial that he gave his consent to the sale. Such
act of Orense impliedly conferred to Duran the power of agency. The principal
must therefore fulfill all the obligations contracted by the agent, who acted within
22. GUTIERREZ HERMANOS VS. ORENSE, GR NO. L-9188 04 the scope of his jurisdiction.
DECEMBER 1914 Where the nephew in his own name sold a parcel of land with a masonry house
constructed thereon to the company, when in fact it was property owned by the
FACTS: uncle, but in the estafa case filed by the company against the nephew, the uncle
swore under oath that he had authorized his nephew to sell the property, the uncle
On and before Februaru 14, 1907, Engracio Orense had been the owner can be compelled in the civil action to execute the deed of sale covering the
of a parcel of land in Guinobatan, Albay. property.

On February 14, 1907, Jose Duran, a nephew of Orense, sold the property It having been proven at the trial that he gave his consent to the said sale,
for P1,500 to Gutierrez Hermanos, with Orenses knowledge and consent, it follows that the defendant conferred verbal, or at least implied, power of agency
executed before a notary a public instrument. The said public instrument contained
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 25

upon his nephew Duran, who accepted it in the same way by selling the said CivilCase No. D-10459 Petitioner asserts that it was only when the summons in Civil Case No.
property. D-10459 for the revival of judgment was served upon it that it came to know of the compromise
agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon
The principal must therefore fulfill all the obligations contracted by the which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon
agent, who acted within the scope of his authority. learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise agreement was void.

ISSUE: Whether Villamil-Estrada exceeded her authority as specified in the SPA?

23. COSMIC LUMBER CORPORATION vs. CA and PEREZ, RULING:


G.R. No. 114311 November 29, 1996 The authority granted Villamil-Estrada under the special power of attorney was explicit
FACTS: and exclusionary. The alienation by sale of an immovable certainly cannot be deemed protective
of the right of petitioner more so when the land was being sold for a price of P80.00per square
Cosmic Lumber Corporation through its General Manager executed on 28 January1985 meter, much less than its assessed value of P250.00 per square meter, which was not even received
a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact among others by the corporation.
to initiate, institute and file any court action for the ejectment of third persons and/or squatters of
the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to When the sale of a piece of land or any interest thereon is through an agent, the authority
remove their houses and vacate the premises in order that the corporation may take material of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to
possession of the entire lot, and for this purpose, to appear at the pre-trial execute a contract for the sale of real estate must be conferred in writing and must give him specific
conference and enter into any stipulation of facts and or compromise agreement so far as it shall authority. A special power of attorney is necessary to enter into any contract by which the
protect the rights and interest of the corporation in the aforementioned lots. ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration. The express mandate required by law to enable an appointee of an agency
On 11 March 1985, Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted (couched) in general terms to sell must be one that expressly mentions a sale
an action for the ejectment of private respondent Isidro Perez and recover the possession of a or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer
portion of Lot No. 443. the right upon an agent to sell real estate, a power of attorney must so express the powers of the
agent in clear and unmistakable language. When there is any reasonable doubt that the language
On November 25, 1985 Villamil-Estrada entered into a Compromise Agreement with so used conveys such power, no such construction shall be given the document. It is therefore
respondent Perez and on November 27, 1985 the "Compromise Agreement" was clear that by selling to respondent Perez a portion of petitioner's land through a compromise
approved by the trial court and judgment was rendered in accordance the terms. agreement,Villamil-Estrada acted without or in obvious authority. The sale Ip so jure is
Although the decision became final and executor, it was not executed within the 5-year period consequently void. So is the compromise agreement. This being the case, the judgment based
from date of its finality allegedly due to the failure of petitioner to produce the owner's duplicate thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving
copy of Title No. 37649 needed to segregate from Lot No. 443 which is the portion sold by the petitioner's motion for reconsideration, the nullity of the settlement between Villamil-Estrada and
attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement.
Thus on January 25, 1993 respondent filed a complaint to revive the judgment, docketed as
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 26

Perez impaired the jurisdiction of the trial court to render its decision based on the compromise By virtue of these written powers of attorney, complainants-appellees were
agreement. able to receive their respective death benefits.
In Alviar v Court of First Instance of La Union, the Court held --As the Unknown to them, however, PMSI, in its capacity as employer and
judgment inquestion is null and void ab initio, it is evident that the court acquired no policyholder of the life insurance of its deceased workers, filed with Insular Life
jurisdiction to render it, much less to order the execution thereof . . . formal claims for and in behalf of the beneficiaries, through Capt. Nuval. On the
basis of the five special powers of attorney, Insular Life drew against its account
six (6) checks, four for P200,000.00 each, one for P50,000.00 and another for
Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his P40,000.00 payable to the order of complainants-appellees. Capt. Nuval, upon
own exclusive benefit, he is not really acting for the principal but is really acting for receipt of these checks endorsed and deposited them in his own account. When
himself, entirely outside the scope of his agency. Indeed, the basic tenets of agency rest on the the complainants-appellees learned that they were entitled, as beneficiaries, to life
highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert insurance benefits under a group policy, they sought to recover these benefits from
his authority to his own personal advantage, and his act in secret hostility to the interests of his Insular Life but the latter denied their claim on the ground that the liability to
principal transcends the power afforded him. WHEREFORE, the petition is GRANTED. complainants-appellees was already extinguished.
ISSUE: Whether or not Insular Life is bound by the misconduct of the
employer?
24. LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA
ALARCON, DINA LORENA AYO, CELIA CALUMBAG and RULING:
LUCIA LONTOK, vs. HON. COURT OF APPEALS and THE A cursory reading of the questioned powers of attorney would disclose
INSULAR LIFE ASSURANCE COMPANY, LIMITED. that they do not contain in clear and unequivocal terms authority to Captain Nuval
FACTS: to obtain, receive, receipt from respondent company insurance proceed arising
from the death of the seaman-insured. On the contrary, the said powers of attorney
This is an action for the payment of insurance claims and prayer are couched in terms which could easily arouse suspicion of an ordinary man.
for administrative sanctions. Prime Marine Services, Inc. (PMSI), a
crewing/manning outfit, procured a Group Policy from Insular Life Assurance Thus: We are convinced that the employer is the agent of the insurer in
Co., Ltd. to provide life insurance coverage to its sea-based employees. During the performing the duties of administering group insurance policies. It cannot be said
effectively of the policy, six covered employees perished at sea when their vessel that the employer acts entirely for its own benefit or for the benefit of its
sunk. employees in undertaking administrative functions. While a reduced premium may
result if the employer relieves the insurer of these tasks, and this, of course, is
They were survived by the complainants-appellees, the beneficiaries under advantageous to the employer and the employees, the insurer also enjoys
the policy. The beneficiaries, except the spouses Alarcon, executed special powers significant advantages from the arrangement.
of attorney authorizing Capt. Nuval, President and General Manager of PMSI, to , among
others, follow up, ask, demand, collect and receive for their benefit indemnities of sums The reduction in the premium which results from employer-administration
of money due them relative to the sinking of the vessel. permits the insurer to realize a larger volume of sales, and at the same time the
insurers own administrative costs are markedly reduced.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 27

The most persuasive rationale for adopting the view that the employer acts stocks of Eternit Corp. were owned by Eteroutremer S.A. Corporation (ESAC), a
as the agent of the insurer, however, is that the employee has no knowledge of or corporation organized and registered under the laws of Belgium. Jack Glanville, an
control over the employer's actions in handling the policy or its administration. An Australian citizen, was the General Manager and President of Eternit Corp., while
agency relationship is based upon consent by one person that another shall actin Claude Frederick Delsaux was the Regional Director for Asia of ESAC.
his behalf and be subject to his control. It is clear from the evidence regarding
procedural techniques here that the insurer-employer relationship meets this
agency test with regard to the administration of the policy, whereas that between In 1986, the management of ESAC grew concerned about the political
the employer and its employees fails to reflect true agency. The insurer directs the situation in the Philippines and wanted to stop its operations in the country.
performance of the employer's administrative acts, and if these duties are not The Committee for Asia of ESAC instructed Michael Adams, a member
undertaken properly the insurer is in a position to exercise more constricted of Eternit Corp.s Board of Directors, to dispose of the eight parcels
control over the employer's conduct. of land. Adams engaged the services of realtor/broker Lauro G.
In Neider vs Continental Assurance Company which was cited in Elfstrom it Marquez so that the properties could be offered for sale to prospective
was held that: the employer owes to the employee the duty of good faith and due care buyers.
in attending to the policy, and that the employer should make clear to the employee Marquez offered the parcels of land and the improvements thereon to
anything required of him to keep the policy in effect, and the time that the Eduardo B. Litonjua, Jr. of the Litonjua
obligations are due. In its position as administrator of the policy, we feel also that &Company, Inc. Marquez declared that he was
the employer should be considered as the agent of the insurer, and any omission a u t h o r i z e d t o s e l l t h e p r o p e r t i e s f o r P27,000,000.00 and that the terms
of duty to the employee in its administration should be attributable to the insurer of the sale were subject to negotiation.
In the light of the above disquisitions and after an examination of the facts Eduardo Litonjua, Jr. responded to the offer. Marquez showed the
of this case, we hold that PMSI, through its President and General Manager, Capt. property to Eduardo Litonjua, Jr.,
Nuval, acted as the agent of Insular Life. The latter is thus bound by the and his brother Antonio K. Litonjua.
misconduct of its agent
The Litonjua siblings offered to buy the property
f o r P20,000,000.00 in cash.
25. Eduardo Litonjua, Jr. and Antonio Litonjua Marquez apprised Glanville of the Litonjua siblings offer and relayed
vs. Eternit Corp. (Eteroutremer, S.A. and Far East Bank & Trust the same to Delsaux in Belgium, but the latter did not respond. Glanville telexed
Co. G.R. No. 144805 June 8, 2006 Delsaux in Belgium, inquiring on his position/ counterproposal to the offer of the
FACTS: Litonjua siblings. Delsaux sent a telex to Glanville stating that,
based on the Belgian/Swiss decision, the final offer was
Eternit Corp. is engaged in the manufacture of ro US$1,000,000.00 andP2,500,000.00 to cover all existing obligations prior
o f i n g m a t e r i a l s a n d p i p e p r o d u c t s . I t s manufacturing operations to final liquidation.
were conducted on 8 parcels of land located in Mandaluyong City, covered by
TCTs with Far East Bank & Trust Company, as trustee. 90% of the shares of
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 28

Litonjua, Jr. accepted the counterproposal of Delsaux. when authorized either by its by-laws or by its board resolution,
M a r q u e z c o n f e r r e d w i t h G l a n v i l l e , a n d confirmed that the Litonjua through its officers or agents in the normal course of business. The
siblings had accepted the counter-proposal of Delsaux. He also stated that the general principles of agency govern the relation between the corporation
Litonjua siblings would confirm full payment within 90 days after execution and and its officers or agents, subject to the articles of incorporation, by-laws, or
preparation of all documents of sale, together with the necessary governmental relevant provisions of law.
clearances.

The property of a corporation is not the property of the stockholders or


The Litonjua brothers deposited the amount of US$1,000,000.00 members, and as such, may not be sold without express authority from the board
with the Security Bank & Trust Company, Ermita Branch, and drafted of directors. Physical acts, like the offering of the properties of the corporation for
an Escrow Agreement to expedite the sale. sale, or the acceptance of a counter-offer of prospective buyers of such properties
and the execution of the deed of sale covering such property, can be performed
With the assumption of Corazon Aquino as President of RP, the political by the corporation only by officers or agents duly authorized for the
situation in the Philippines had improved. Marquez received a telephone purpose by corporate by-laws or by specific acts of the board of directors.
call from Glanville, advising that the sale would no longer proceed. Absent such valid delegation/authorization, the rule is that the declarations of an
Glanville followed it up with a letter, confirming that he had been instructed by individual director relating to the affairs of the corporation, but not in the course
his principal to inform Marquez that the decision has been taken at a of, or connected with, the performance of authorized duties of such
Board Meeting not to sell the properties on which Eternit Corp. is situated. director, are not binding on the corporation.
When apprised of this development, the Litonjuas, through counsel, wrote While a corporation may appoint agents to negotiate for the sale of its real
Eternit Corp., demanding payment for damages they had suffered on account of properties, the final say will have to be with the board of directors through
the aborted sale. EC, however, rejected their demand. its officers and agents as authorized by a board resolution or by its by-
laws.30 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
ISSUE: WON Marquez, Glanville, and Delsaux were authorized by directors. Any sale of real property of a corporation by a person purporting
respondent Eternit Corp. to act as its agents relative to the sale of the to be an agent thereof but without written authority from the corporation is
properties of Eternit Corp., and if so, what are the boundaries of their null and void.
authority as agents?
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
RULING: that another person is acting on his behalf without authority.
Acceptance by the agent may be expressed, or implied from his acts
No. A corporation is a juridical person separate and distinct from its members or which carry out the agency, or from his silence or inaction according to the
stockholders and is not affected by the personal rights, obligations and circumstances. Agency may be oral unless the law requires a specific form.
transactions of the latter. It may act only through its board of directors or,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 29

However, to create or convey real rights over immovable property, a Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of
special power of attorney is necessary. Undivided Shares conveying in favor of petitioners their respective shares .
Eufemia also signed the deed on behalf of her four (4) other co-heirs, Only
The Litonjuas failed to adduce in evidence any resolution of the Isabelita has the Power of attorney while the other three (3) co-heirs has no written
Board of Directors of Eternit Corp. empowering Marquez, Glanville or consent authorizing such sale. It was not notarized.
Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the 8
parcels of land owned by Eternit Corp. including the improvements thereon. The The Pahuds paid the accounts into the Los Baos Rural Bank where the
bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares property was mortgaged. The bank issued a release of mortgage and turned over
of stock of respondent ESAC cannot be used as basis for Litonjuas claim that he the ownership Pahuds, the Pahuds made more payments to Eufemia and her
had likewise been authorized by Eternit Corp. to sell the parcels of land. siblings. When Eufemia and her co-heirs drafted an extra-judicial settlement of
While Glanville was the President and General Manager of Eternit Corp., estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it.
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 Virgilio's co-heirs filed a complaint for judicial partition of the subject
Eternit Corp.; a board resolution evincing the grant of such authority property before the RTC of Calamba, Laguna.In the course of the proceedings
is needed to bind Eternit Corp. to any agreement regarding the sale of the subject for judicial partition, a Compromise Agreement was signed with seven (7) of the
properties. Such board resolution is not a mere formality but is a condition sine co-heirs agreeing to sell their undivided shares to Virgilio .. The compromise
qua non to bind Eternit Corp.Requisites of an agency by estoppels: (1) the agreement was, however, not approved by the trial court because Atty. Dimetrio
principal manifested a representation of the agents authority or knowingly allowed Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the agreement
the agent to assume such authority; because he knew of the previous sale made to the Pahuds.
(2) the third person, in good faith, relied upon such representation;
(3) relying upon such representation, such third person has changed his position Eufemia acknowledged having received the payments from Virgilio.
to his detriment. Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia
Ocampo (Belarminos) . The Belarminos immediately constructed a building on
the subject property.
26. PURITA PAHUD VS. CA, G.R. NO. 160346, AUGUST 25, 2009
Alarmed by the ongoing construction on the lot they purchased, the
FACTS: Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had
sold the property to the Belarminos. Then the Pahuds filed a complaint in
Spouses Pedro San Agustin and Agatona Genil were able to acquire a 246- intervention in the pending case for judicial partition.
square meter parcel of land situated in Barangay Anos, Los Baos, Laguna and
covered by Original Certificate of Title . Agatona Genil and Pedro San Agustin ISSUE: Whether or not the sale of the subject property by Eufemia and co-
died , left with children: respondents, Eufemia, Raul, Ferdinand, Zenaida, heirs are valid?
Milagros, Minerva, Isabelita and Virgilio.
RULING:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 30

RULING:
The sale made by Eufemia, Isabelita and her two brothers to the
Pahuds should be valid only with respect to the authorized share of Eufemia The Supreme Court ruled that there was no contract of agency between
While the sale with respect to the other portion of the lot representing the shares Joy Training and the spouses Johnson to sell the parcel of land with its
of Zenaida, Milagros, and Minerva, is void because Eufemia could not dispose of improvements. Art. 1868 of the Civil Code defines a contract of agency as a
the interest of her co-heirs in the said lot absent any written authority from the contract whereby a person binds himself to render some service or to do
latter, as required by law. something in representation or on behalf of another, with the consent or authority
of the latter.

27. Sally Yoshizaki, vs. Joy Training Center of Aurora, Inc., G.R. No. It may be express, or implied from the acts of the principal, from his
174978; July 31, 2013 silence or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority.
FACTS:
In this case, the presented evidence did not convince the SC of the
Richard and Linda Johnson were members of Joy Trainings Board of existence of the contract of agency to sell the real properties.
Trustees who sold the real properties, a wrangler jeep, and other personal
properties in favor of the spouses Sally and Yoshio Yoshizaki. The certification is a mere general power of attorney which comprises all
of Joy training. Art. 1877 of the Civil Code clearly states that an agency couched
Joy Training filed an action for cancellation of sales alleging that the in general terms comprises only acts of administration, even if the principal should
spouses Johnson is without the requisite authority from the Board of Directors. state that he withholds no power or that the agent may execute such acts as he
The RTC ruled in favor of the spouses Yoshizaki. may authorize as general and unlimited management.
It found that Joy Training owned the real properties and it authorized he
spouses Johnson to sell the real properties.
28. CITY-LITE REALTY CORPORATION, vs. COURT OF
It recognized that there were only five actual members of the board of APPEALS and F.P. HOLDINGS & REALTY CORP., et al. G.R.
trustees; consequently, a majority of the board of trustees validly authorized the No. 138639. February 10, 2000
It also ruled that the sale of personal properties was valid because they FACTS:
were registered in the spouses Johnsons name.
Private Respondent F.P. Holdings and Realty Corporation (F.P. Holdings),
The CA upheld the RTCs jurisdiction over the case but reversed its ruling formerly the Sparta Holdings Inc, was the registered owner of a parcel of land
with respect to the sale of real properties. It also ruled that the resolution is void situated along E. Rodriguez Avenue, Quezon City also known as the Violago
because it was not approved by a majority of the board of trustees. Property or the San Lorenzo Ruiz Commercial Center, with an area of 71,754
sqm.
ISSUE: Was there a contract of agency to sell the real properties between
Joy Training and the spouses Johnson? The property was offered for sale to the general public through the
circulation of a sales brochure containing the description of the property and the
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 31

asking price of P6,250/sqm with terms of payment negotiable. In addition, ISSUE: W/N there was a perfected contract of sale between City-Lite and
brokers commission was 2% of selling price, net of withholding taxes and other respondent F.P. HOLDINGS because of a lack of definite agreement on
charges. Contact person was Meldin Al G. Roy, Metro Drug Inc. the manner of paying the purchase price and that Metro Drug and Meldin
Al G. Roy were not authorized to sell the property to City-Lite, and that the
The front portion consisting of 9,192 sqm is the subject of this litigation authority of Roy was only limited to that of mere liaison or contact person?
RULING:
Al G. Roy sent a sales brochure, together with the location plan and copy of the No, Roy is a mere contact person.
TCT to Atty. Gelacio Mamaril, a practicing lawyer and a licensed real estate broker.
Mamaril passed in turn passed on these documents to Antonio Teng, Executive Art. 1874 of NCC: When the sale of a piece of land or any interest therein
Vice President, and Atty Victor Villanueva, Legal Counsel of City-Lite is through an agent, the authority of the latter shall be in writing, otherwise, the
sale shall be void.
City-Lite conveyed its interest to purchase a portion or one-half (1/2) of
the front lot of the Violago Property Apparently, Roy subsequently informed The absence of authority to sell can be determined from the written
City-Lites representative that it would take time to subdivide the lot and F.P. memorandum issued by respondent F.P. HOLDINGS President requesting Metro
HOLDINGS was not receptive to the purchase of only half of the front lot Drugs assistance in finding buyers for the property
Atty. Mamaril wrote Metro Drug (Al G. Roy) expressing City-Lites desire The Memorandum indicates that Meldin G. Roy and/or Metro Drug was
to buy the entire front lot of the subject property instead of only half thereof only to assist F.P. Holdings in looking for buyers and referring to them possible
provided the asking price of P6,250/sqm was reduced and that payment be in prospects whom they were supposed to endorse to F.P. Holdings.
installment for a certain period
But the final evaluation, appraisal and acceptance of the transaction could
The parties reached an agreement and Roy agreed to sell the property to be made only by F.P. Holdings. In other words, Roy and/or Metro Drug was only
City-Lite provided only the latter submit its acceptance in writing to the terms and a contact person with no authority to conclude a sale of the property
conditions of the sale
Roy and/or Metro Drug was a mere broker and Roy/s only job was to
For some reason or another and despite demand, F.P. HOLDINGS bring parties the parties together for a possible transaction
refused to execute the corresponding deed of sale in favor of City-Lite of the front
lot of the property The Supreme Court ruled that due to the lack of a written authority to sell
the Violago Property on the part of Roy and/or Metro Drug, the sale should be
Trial court ruled in favor of City-Lite ordering F.P. HOLDINGS to as it is declared null and void
execute a deed of sale of the property in favor of the former for the total
consideration of P55,056,250 payable as follows: P15 M as downpayment to be
payable immediately upon execution of the deed of sale and the balance within 6 SECTION THREE
months from downpayment without interest
29. BA Finance vs. CA GR No. 82040 (201 SCRA 157) 27 August 1991
CA reversed TCs decision
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 32

FACTS:
The Cuadys wrote B.A. Finance Corporation requesting the latter to
Private respondents Manuel Cuady and Lilia Cuady acquired from pursue their prior instruction of enforcing the total loss provision in the insurance
Supercars, Inc. a credit of P39,574.80, which covered the cost of a unit of four- coverage. When B.A. Finance Corporation did not respond favorably to their
door sedan, Ford Escort 1300 on July 15, 1977. A promissory note was executed request, the Cuadys stopped paying their monthly installments on the promissory
by private respondents in favor of Supercars, Inc., obligating themselves to pay note .
the latter or order the sum of P39,574.80, inclusive of interest at 14% per annum, ISSUE: WON B.A. Finance Corporation is bound by its acceptance to carry
payable on monthly installments of P1,098.00 starting August 16, 1977, and on the out the agency, and is liable for damages which, through its non-
16th day of the next 35 months from September 16, 1977 until full payment performance, the principal may suffer?
thereof. It was also stipulated that a penalty of P10.00 for every month of late
installment will be paid. To incur no delays in payment and secure compliance of RULING:
the obligation, said spouses constituted a chattel mortgage.
Yes. B.A. Finance Corporation is bound by its acceptance to carry out the
On July 25, 1977, the promissory note, together with the chattel mortgage agency, and is liable for damages which, through its non-performance, the Cuadys,
were assigned to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15 the principal may suffer. B.A. Finance Corporation was subrogated to the rights
to the B.A. Finance Corporation, thus leaving an unpaid balance of P2,344.65 as and obligations of Supercars, Inc. when the Supercars assigned the promissory
of July 18, 1980. In addition thereto, the Cuadys owe B.A. Finance Corporation note, together with the chattel mortgage constituted on the motor vehicle in
P460.00 representing penalties or surcharges for tardy monthly installments. question in favor of B.A.. Consequently, B.A. Finance Corporation is bound by
the terms and conditions of the chattel mortgage executed between the Cuadys
When the Cuadys failed to renew insurance coverage of said motor vehicle, and Supercars, Inc.
the B.A. Finance Corporation, as the assignee of the mortgage, obtained the
renewal of its insurance coverage for the year 1980 with Zenith Insurance Under the deed of chattel mortgage, B.A. Finance was constituted
Corporation. Under the terms and conditions of the said insurance coverage, any attorney-in-fact with full power and authority to file, follow-up, prosecute,
loss under the policy shall be payable to the B.A. Finance Corporation. On April compromise or settle insurance claims; to sign execute and deliver the
18, 1980, the motor vehicle met an accident and was badly damaged. It was corresponding papers, receipts and documents to the Insurance Company as may
reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance be necessary to prove the claim, and to collect from the latter the proceeds of
Corporation. insurance to the extent of its interests, in the event that the mortgaged car suffers
any loss or damage.
The Cuadys asked the B.A. Finance Corporation to consider the same as a
total loss, and to claim from the insurer the face value of the car insurance policy In granting B.A. Finance Corporation said powers and prerogatives, the
and apply the same to the payment of their remaining account and give them the Cuady spouses created in the former's favor an agency. When the finance company
surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A. executes a mortgage contract that contains a provision that in the event of accident
Finance Corporation prevailed upon the former to just have the car repaired. Not or loss, it shall make a proper claim against the insurance company, was in effect
long thereafter, however, the car bogged down. an agency relation, and that under Article 1884, the finance company was bound
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 33

by its acceptance to carry out the agency, and in spite of the instructions of the damages and 20% for attorneys fees and cost of the action. This decision was
borrowers to make such claims instead insisted on having the vehicle repaired but affirmed by CA.
eventually resulting in loss of the insurance coverage, the finance company had
breached its duty of diligence, and must assume the damages suffered by the ISSUE: WON British Airways is liable for the negligence of it agent, PAL?
borrowers, and consequently can no longer collect on the balance of the mortgage
loan secured thereby. RULING:

30. BRITISH AIRWAYS VS. CA, GR No. 121824 (285 SCRA 450), 29 Yes. The SC ruled in the affirmative.
JANUARY 1998 Settled is the rule that an agent is also responsible for the negligence in the
performance of its function (Art. 1909 of the Civil Code) and is liable for the
FACTS: damages which the principal may suffer by reason of its negligent act (Art. 1884
of the Civil Code).
On April 16, 1989, Gop Mahtani, private respondent, had decided to visit
his relatives in Bombay, India. He obtained the services of Mr. Gumar to arrange BA is liable for the negligence of its agent, PAL. The court observed that
his travel plans. A ticket from British Airways (BA) was purchased. Since BA had the contract of air transportation was exclusively between the Mahtani and BA,
no direct flights from Manila to Bombay, Gop Mahtani took a flight to Hong Kong the latter merely endorsing the Manila to Hong Kong connecting flight to Bombay
via PAL, and upon arriving in Hong Kong he took a connecting flight to Bombay with the PAL, acts as it agent. It is undeniable that in transporting Mahtani from
on board BA. Before departure, Mahtani checked in at PAL counter his two pieces Manila to Hong Kong by PAL acted as BAs agent. BA and PAL moreover, are
of luggage containing his clothing and personal effects, confident that upon members of International Air Transport Association (IATA), wherein member
reaching Hong Kong, the same would be transferred to the BA f light bound for airlines are regarded as agents of each other in the issuance of tickets and other
Bombay. Upon arrival in Bombay, Mahtani discovered that his luggage was matters pertaining to their relationship. The contractual relationship between BA
missing and that upon inquiry from the BA representatives, he was told that the and PAL is one of agency.
same might have been diverted to London. After waiting patiently for 1 week, BA
finally advised him to file a claim by accomplishing the "Property Irregularity 31. CERVANTES VS CA, GR No. 125138 (304 SCRA 25), 02 MARCH
Report. 1999

In the Philippines, on June 11, 1990 Mahtani filed his complaint for FACTS:
damages and attorney's fees against BA and Mr.Gumar before the RTC. He alleged
that the reason for the non-transfer of the luggage was due to the PALs late arrival Cervantes bought a round trip ticket for Manila-Honolulu-Los Angeles-
in Hong Kong, thus leaving hardly for the proper transfer of his luggage to BA Honolulu-Manila to PAL on March 27, 1989. This ticket expressly provides that 1
aircraft bound for Bombay. The RTC rendered its decision in favor of Mahtani. year from issuance or until March 27, 1990 it will be expired. The ticket was issued
BA is ordered to pay Mahtani P7,000 for the value of the 2 suitcases of $400 and in compliance with a Compromise Agreement entered between PAL and
for the value of the contents of the luggage P50,000 and for moral and exemplary Cervantes. On March 3, 1990, 4 days before the expiry date, Cervantes used it. He
arrived in LA on the same day and immediately booked his return flight ticket with
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 34

the PALs office which was confirmed for April 2, 1990 flight. However, he the PAL agents did to his advantage. The said agents, according to the Court of
learned that the same PAL plane would make a stop-over in San Francisco, so he Appeals, acted without authority when they confirmed the flights of the petitioner.
made arrangements with PALs agent for him to board flight in San Francisco
instead of boarding in LA. Cervantes believed that everything was set for his return Under Article 1989 of the New Civil Code, the acts an agent beyond the
to PH upon confirmation of PALs agent. On said return date, when he checked scope of his authority do not bind the principal, unless the latter ratifies the same
in at PAL counter, he was not allowed to board the arranged flight due to the expressly or impliedly. Furthermore, when the third person (herein petitioner)
expiration of the validity of the ticket. PAL personel made annotation on his ticket knows that the agent was acting beyond his power or authority, the principal
TICKET NOT ACCEPTED DUE TO EXPIRATION OF THE VALIDITY. cannot be held liable for the acts of the agent. If the said third person is aware of
Aggrived, Cervantes filed a complaint for damages for Breach of Contract of such limits of authority, he is to blame, and is not entitled to recover damages from
Carriage. RTC dismissed the case which was upheld by the CA. the agent, unless the latter undertook to secure the principal's ratification.

ISSUE: WON the act of the PAL agents in confirming the ticket of
Cervantes extended the period of validity? 32. BORJA VS SULYAP, GR No. 150718 (399 SCRA 601), 26 MARCH
2003
RULING:
FACTS:
No. The SC ruled in the negative. The plane ticket itself provides that it is
not valid after March 27, 1990. It is also stipulated in paragraph 8 of the Conditions A contract of lease involving a one-story office building located at New
of Contract that this ticket is good for carriage for one year from date of issue, Manila, Quezon City was entered upon by the petitioner-owner Borja, as lessor,
except as otherwise provided. Cervantes theorized that the confirmation by the and respondent Sulyap, Inc., as lessee. Sulyap paid advance rentals, association
PAL's agents in Los Angeles and San Francisco changed the compromise dues and deposits pursuant to lease. Upon the expiration of the contract of lease,
agreement between the parties. He was aware of the risk that his ticket could respondent demanded for the return of the same, but the owner Borja declined.
expire, as it did, before he returned to the Philippines. The 2 personnel from PAL Thus, a complaint for sum of money against Borja was filed by Sulyap with the
did not have an authority to extend the validity of the ticket. Cervantes knew this RTC of QC.
from the start when he called up the Legal Department of appellee in the
Philippines before he left for the United States of America. He had firsthand Both parties entered into and submitted to the trial court a Compromise
knowledge that the ticket in question would expire on March 27, 1990 and that to agreements stating that Borja is bound to return the advances and deposit and in
secure an extension, he would have to file a written request for extension at the case any amount due is not paid within the period stated shall earn interest until
PAL's office in the Philippines. fully paid plus the attorneys fee. But, Borja failed to pay said amounts. So Sulyap
filed a writ of execution. Thus, the Borja filed a motion for the quashal of said
However, despite this knowledge, he persisted to use the ticket in question. writ. But this time, he contended that there was fraud in the execution of the
Since the PAL agents are not privy to the said Agreement and Cervantes knew that compromise agreement when he was assisted by Atty. Leonardo Cruz, and that
a written request to the legal counsel of PAL was necessary, he cannot use what the agreement is void. Said compromise agreement contained no stipulation as to
the payment of 2% monthly interest and 25% attorneys fee in case of default in
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 35

payment. He alleged that his former counsel, Atty. Cruz, removed the page of the judgment reproducing the full text of the compromise agreement he never raised
genuine compromise agreement where he affixed his signature and fraudulently the issue of the fraudulent inclusion of the penalty clause in their agreement. It
attached the same to the compromise agreement submitted to the court. So it was also noted that petitioner is a doctor of medicine. He must have read and
could make appear that the penalty clause embodied therein was consented. understood the contents of the judgment on compromise. In fact he filed, without
the assistance of counsel, a motion praying that a certain amount be withheld from
Sulyap then presented Atty. Cruz as witness, who declared that the his total obligation and instead be applied to the expenses for the repair of the
petitioner gave his consent to the inclusion of the penalty clause of 2% monthly leased premises which was allegedly vandalized by the private respondent
interest and 25% attorneys fees in the compromise agreement. He added that the
compromise agreement approved by the court was in fact signed by the petitioner Even assuming that Atty. Leonardo Cruz exceeded his authority in
inside the courtroom before the same was submitted for approval. Atty. Cruz inserting the penalty clause, the status of the said clause is not void but merely
stressed that the penalty clause of 2% interest per month until full payment of the voidable, i.e., capable of being ratified. Indeed, petitioners failure to question the
amount due, plus 25% thereof as attorneys fees, in case of default in payment, was inclusion of the 2% monthly interest and 25% attorneys fees in the judicial
actually chosen by the petitioner. compromise despite several opportunities to do so was tantamount to ratification.
Hence, he is estopped from assailing the validity thereof.
The trial court ruled in favored of Sulyap because it gave credence to the
testimony of Atty. Cruz and even noted that it was more than one year from receipt
of the judgment on compromise when he questioned the inclusion of the
penalty clause in the approved compromise agreement despite several 33. JESUS M. GOZUN VS. JOSE TEOFILO T. MERCADO
opportunities to raise said objection. a.k.a.DON PEPITO MERCADO, GR No. 167812 (511 SCRA 305),
19 DECEMBER 2006
ISSUE: WON the petitioner Borja is bound by the penalty clause in the
compromise agreement? FACTS:

RULING: During the local elections of 1995, Don Pepito, the respondent, vied for
gubernatorial post in Pampanga. Upon Gozuns request, the petitioner, owner of
YES. Borja is bound by the penalty clause in the compromise agreement. JMG Publishing House, a printing shop located in San Fernando, Pampanga,
While a judicial compromise may be annulled or modified on the ground of submitted to Don Pepito draft samples and price quotation of campaign materials.
vitiated consent or forgery, we find that the testimony of the petitioner failed By petitioners (Gozun) claim, respondents wife had told him that respondent
to establish the attendance of fraud. No evidence was presented by petitioner (Don Pepito) already approved his price quotation, and thus, Gozun could start
other than his bare allegation that his former counsel fraudulently attached the printing the campaign materials, hence, he did print campaign materials like
page of the genuine compromise agreement where he affixed his signature to posters bearing respondents photograph, leaflets containing the slate of party
the compromise agreement submitted to the court. candidates, sample ballots, poll watcher identification cards, and stickers.
However, petitioner availed of the services and facilities of Metro Angeles Printing
Petitioner cannot feign ignorance of the existence of the penalty clause in and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and
the compromise agreement approved by the court. When he received the
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 36

mother Epifania Macalino Gozun, due to the urgency and limited time to do said render some service or to do something in representation or on behalf of another,
job order. with the consent or authority of the latter. (Art. 1898 of the Civil Code) Contracts
entered into in the name of another person by one who has been given no
In the meantime, on March 31, 1995, respondents sister-in-law, Lilian authority or legal representation or who has acted beyond his powers are classified
Soriano obtained from petitioner "cash advance" of P253,000 purportedly for the as unauthorized contract sand are declared unenforceable, unless they are ratified.
allowances, seminars and for other related expenses of poll watchers. It was
acknowledged on petitioners 1995 diary receipt of the amount said Lilians cash Generally, the agency may be oral, unless the law requires a specific
advance. form. However, a special power of attorney is necessary for an agent to, as in this
case, borrow money, unless it be urgent and indispensable for the preservation of
However, aside from the partial payment amounting to Php 1 million, the things which are under administration (Art. 1878 of the Civil Code). Since
Mercado failed to settle the total amount of Php 2,177,906 he owed to Gozun. nothing in this case involves the preservation of things under administration, a
The debt included the cash advance obtained by Lilian. determination of whether Soriano had the special authority to borrow money on
behalf of respondent is in order.
This prompted the Gozun to file a complaint for collection of sum of
money. In his defense, Don Pepito claimed that he was not aware of the said It is a settled rule that in order to bind the principal by a mortgage on real
liability. He purportedly thought that the campaign materials printed were property executed by an agent, it must upon its face purport to be made, signed
donations from third parties. and sealed in the name of the principal, otherwise, it will bind the agent only. It is
not enough merely that the agent was in fact authorized to make the mortgage, if
The trial court ruled in favour of Gozun, however, reversed by the Court he has not acted in the name of the principal.
of Appeals.

As to the cash advance obtained by Lilian, the court ruled that there was 34. VICENTE M. DOMINGO, vs. GREGORIO M. DOMINGO. G.R.
no evidence that she was authorized by Don Pepito to scrounge money on his No. L-30573 October 29, 1971
behalf. Even on the acknowledgement receipt, which she signed, she did not See case number 5 at Section 1.
specify in what capacity she received the money. Therefore, it held that the
Gozuns claim for Php 253,000 was unenforceable.
35. Sazon vs. Vasquez-Menancio | GR No. 192085 (666 SCRA 707) 22
ISSUE: WON Lilian R. Soriano was sanctioned by Don Pepito to receive February 2012 |Justice Sereno
the cash advance from Gozun?
FACTS:
RULING:
Respondent Letecia Vasquez-Menancio, a US resident, entrusted the
No. Lilian was not empowered to receive the cash advance from Gozun. management, care and preservation of several of her nine (9) properties to
(Art. 1868 of the Civil Code) By the contract of agency a person binds himself to petitioner Caridad Sazon.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 37

Letecia claimed that the said lots were all productive, and all the fruits and income
accruing therefrom were apparently received by Caridad. In contrast, Caridad Petitioner claims that in the course of her administration of the properties,
alleged that several of the properties do not produce any fruit nor generate any the letters she sent to respondent should be considered as a fulfillment of her
income. She claimed that any supposed income derived therefrom was not even obligation, as respondents agent, to render an accounting of her administration.
sufficient to answer for all the expenses incurred to maintain them. Both the RTC and the CA found these letters insufficient. We agree. Petitioner
was the administrator of respondents properties for 18 years or from 1979 to
Letecia further averred that despite repeated demands, Caridad failed to render a 1997, and four letters within 18 years can hardly be considered as sufficient to keep
proper accounting and to remit the owners share of the profits. Thus, sometime the principal informed and updated of the condition and status of the latters
in October 1997, she filed a complaint against Carida praying that the lower court properties.
will order her to render an accounting and remit all the fruits and income the latter
received from the properties as administrator.
In her defense, Caridad averred that she can turn over the possession of certain 3
lots because they were allegedly subject of valid lease agreements. It appeared that 36. Hernandez vs. Hernandez | GR 158576 645 SCRA 24 | 9 March 2011
when the petitioner entered into these agreements, she acted within her authority
as Letecias agent. FACTS
In its decision, the RTC ruled in favour of Letecia, and the same was affirmed by
the CA. On 11 November 1993, the owners of the Hernandez property, which includes
petitioner Cornelia Hernandez, executed a letter indicating: (1) respondent Cecilio
ISSUE: Whether or not the agent fulfilled her obligation in rendering the Hernandez as the representative of the owners of the land; and (2) the
accounting of properties? compensation he gets in doing such job. Such property was subject of an
expropriation case for a DPWH project. During the course of the expropriation
Holding and Ratio: proceedings, an Order was issued by the RTC, Cecilio was appointed as one of the
commissioners in the expropriation case. On 18 October 1996, Cornelia, and her
Yes. Petitioner insisted, however, that Article 1891 of the Civil Code other co-owners who were also signatories of the 11 November 1993 letter,
contains a few of the obligations owed by an agent to his principal, viz: executed an irrevocable Special Power of Attorney (SPA) appointing Cecilio
Art. 1891. Every agent is bound to render an account of his transactions and to Hernandez as their "true and lawful attorney" with respect to the expropriation of
deliver to the principal whatever he may have received by virtue of the agency, the subject property. There was no mention of the compensation scheme for
even though it may not be owing to the principal. Cecilio, the attorney-in-fact. The just compensation for the condemned properties
Every stipulation exempting the agent from the obligation to render an account was fixed subsequently, with Cornelias share amounting to P7,321,500.00the
shall be void. amount a pro-indiviso owner is to receive. At this point, Cecilios SPA was revoked
by Cornelia. On 7 February 2000, however, Cornelia received from Cecilio a check
It is evident that the reason behind the failure of petitioner to render an amounting to P1,123,000.00. The check was accompanied by a Receipt and
accounting to respondent is immaterial. What is important is that the former fulfill Quitclaim document in favor of Cecilio. In essence it states that: (1) the amount
her duty to render an account of the relevant transactions she entered into as received will be the share of Cornelia in the just compensation paid by the
respondents agent. government in the expropriated property; (2) in consideration of the payment, it
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 38

will release and forever discharge Cecilio from any action, damages, claims or prevented his performance of his duties under the SPA. Cecilio could not have
demands; and (3) Cornelia will not institute any action and will not pursue her been a hearing officer and a defendant at the same time. Indeed, Cecilio foisted
complaint or opposition to the release to Cecilio or his heirs or assigns. fraud on both the Court and the Hernandezs when, after his appointment as
In a Letter dated 22 June 2000 after she learned of her true share in the commissioner, he accepted the appointment by the Hernandez to "represent" and
expropriation proceedings Cornelia demanded the accounting of the proceeds.The "sue for" them.
letter was left unanswered. She then decided to have the courts settle the issue.A
Complaint for the Annulment of Quitclaim and Recovery of Sum of Money and
Damages was filed before the RTC. Cecilio was declared in default, but this was 37. COSMIC LUMBER CORPORATION V CA
reversed by the CA. FACTS:
Cosmic Corporation, through its General Manager executed a Special
ISSUE Whether or not the agent exceeded the scope of her authority? Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact to
initiate, institute and file any court action for the ejectment of third persons and/or
Holding and Ratio Decidendi squatters of the entire lot 9127 and 443 for the said squatters to remove their
houses and vacate the premises in order that the corporation may take material
A contract where consent is given through mistake, violence, intimidation, undue possession of the entire lot
influence, or fraud is voidable. In determining whether consent is vitiated by any
of the circumstances mentioned, courts are given a wide latitude in weighing the Paz G. Villamil Estrada, by virtue of her power of attorney, instituted an
facts or circumstances in a given case and in deciding in their favor what they action for the ejectment of private respondent Isidro Perez and recover the
believe to have actually occurred, considering the age, physical infirmity, possession of a portion of lot 443 before the RTC
intelligence, relationship, and the conduct of the parties at the time of the making Estrada entered into a Compromise Agreement with Perez, the terms and
of the contract and subsequent thereto. Here, the service contract of 11 November conditions such as:
1993 (appointing Cecilio as representative), as well as the quitclaim and receipt, are
voidable the first due to mistake, the second due to fraud. First, the service contract In order for Perez to buy the said lot he is presently occupying, he has
gave Cecilio compensation based on "1998 skyrocketing" prices that essentially to pay to plaintiff through Estada the sum of P26,640 computed at P80/square
will give Cecilio 83.07% of the just compensation due Cornelia as the co-owner of meter and that Cosmic Lumber recognizes ownership and possession of Perez by
the land. No evidence on record would show that Cornelia agreed, by way of the virtue of this compromise agreement over said portion of 333 sqm of lot 443 and
11 November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale of her whatever expenses of subdivision, registration and other incidental expenses shall
land. Second, quitclaims are also contracts and can be voided if there was fraud or be shouldered by Perez
intimidation that leads to lack of consent. The facts show that a simple accounting
Although the agreement was approved by the trial court and the decision
of the proceeds of the just compensation will be enough to satisfy the curiosity of
became final and executory it was not executed within the 5 year period from date
Cornelia. However, Cecilio did not disclose the truth and instead of coming up
of its finality allegedly due to the failure of Cosmic Lumber to produce the owners
with the request of his aunt, he made a contract intended to bar Cornelia from
duplicate copy of title needed to segregate from lot 443 the portion sold by the
recovering any further sum of money from the sale of her property. Moreover,
attorney-in-fact, Paz Estrada to Perez under the compromise agreement
when Cecilio accepted the position as commissioner, he created a barrier that
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 39

be conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
ISSUE: Whether or not there is a contract of agency between Cosmic and conditions which are in the contract he did execute
Lumber, principal and Paz Estrada, agent thus binding the principal over
the compromise agreement made by the agent to a third person, Perez in For the principal to confer the right upon an agent to sell real estate, a
selling the portion of the said property? power of attorney must so express the powers of the agent in clear and
unmistakable language
It is therefore clear that by selling to Perez a portion of Cosmic Lumbers
RULING: land through a compromise agreement, Villamil-Estrada acted without or in
No. The authority granted Villamil-Estrada under the special power of obvious authority. The sale ipso jure is consequently void and so is the
attorney was explicit and exclusionary: for her to institute any action in court to compromise agreement. This being the case, the judgment based thereon is
eject all persons found on lots number 9127 and 443 so that Cosmic Lumber could necessarily void
take material possession thereof and for this purpose, to appear at the pre-trial and When an agent is engaged in the perpetration of a fraud upon his principal
enter into any stipulation of facts and/or compromise agreement but only insofar for his own exclusive benefit, he is not really acting for the principal but is really
as this was protective of the rights and interests of Cosmic Lumber in the property acting for himself, entirely outside the scope of his agency
Nowhere in this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell neither the subject property nor a portion thereof. 38. BRITISH AIRWAYS VS CA
Neither can a conferment of the power to sell be validly inferred from the See: Case Number 31
specific authority to enter into a compromise agreement because of the explicit
limitation fixed by the grantor that the compromise entered into shall only be so 39. ESCUETA VS LIM. G.R. No. 137162 January 24, 2007.
far as it shall protect the rights and interest of the corporation in the FACTS:
aforementioned lots.
This case involves 10 lots owned by Ignacio Rubio and the Heirs of
In the context of special investiture of powers to Villamil-Estrada, Baloloy allegedly sold by Virginia Rubio Lim to Rufina Lim. Rufina avers that she
alienation by sale of an immovable certainly cannot be deemed protective of the
paid 102, 169.86 and 450, 000 respectively to Rubio and the heirs of Baloloy as
right of Cosmic Lumber to physically possess the same, more so when the land
partial payment for these lots with the understanding that the Certificate of Title
was being sold for a price of P80/sqm , very much less than its assessed value of
will be delivered to her upon payment of the balance.
P250/sqm and considering further that plaintiff never received the proceeds of
the sale However both Rubio and the heirs refused her payment and did not
deliver the Certificate of Title. Thus, Rufina was constrained to file an action which
When the sale of a piece of land or any interest thereon is through an agent,
originally sought to remove cloud or quiet title to real property with a prayer for
the authority of the latter shall be in writing; otherwise, the sale should be void.
the issuance of Preliminary Injunction and a hold-departure order against Rubio
Thus, the authority of an agent to execute a contract for the sale of real estate must
which was later amended to include Specific Performance and Damages.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 40

Corazon Escueta was impleaded for allegedly purchasing the same lots in Leonida Quilatan delivered several pieces of jewelry to Virginia Serona to
spite of her knowledge that the same were already sold and for executing a be sold on commission basis. It was agreed upon that the jewelry will be returned
simulated Deed of Sale which raised doubts and cloud over Rufinas title. The heirs within 30 days if not sold. Virginia failed to pay for the sold items, thus Leonida
of Baloloy and Rubio denied the allegations and claimed among others, that required her to execute an acknowledgment receipt indicating their agreement and
Virginia Lim was never authorized to sell the lots as it was in fact Patricia Lllamas, the total amount due which was later signed by Virginia, and a certain Rufina
Rubios daughter, who had this authority. Navarete as witness.
The Baloloys and Rubio failed to appear at the pre-trial and were Unknown to Leonida, Virginia entrusted the jewelries to Marichu
declared in default. Their motion to lift the order of default having been denied, Labrador also to be sold on commission basis. Virginia failed to collect from
they appealed to the Court of Appeals which was likewise denied. Hence this Marichu as the person whom she sold these jewelries to absconded. Consequently,
petition. Virginia failed to pay Leonida. Thus, an information for Estafa was filed against
the former alleging that she misappropriated the proceeds of the jewelries and
ISSUE: Whether or not Rubio is bound by the contract of sale considering converted the same for her personal use and benefit. The Trial Court subsequently
that he did not authorize Virginia to transact on his behalf? found Virginia guilty of Estafa and upon appeal, the Court of Appeals merely
RULING: affirmed this decision. Hence this petition.

Yes, Rubio is bound by the Contract of Sale. The Court cited Art. 1892 ISSUE: Whether or not there was abuse of confidence when Virginia
which provides that an agent may appoint a substitute if the principal has not entrusted the jewelry to Marichu?
prohibited him from doing so, but he shall be responsible for the acts of the RULING:
substitute when he has not given the power to appoint oneApplying this
provision to the special power of attorney executed by Ignacio No, the Court held that Virginia did not ipso facto commit Estafa through
conversion or misappropriation by delivering the jewelries to Marichu, her sub-
Rubio in favor of Patricia Llamas, it is clear that she is not prohibited from agent and that it must be pointed out that the law on agency allows the
appointing a substitute. By authorizing Virginia Lim to sell the subject properties appointment by an agent of a substitute or sub-agent in the absence of express
Patricia merely acted within the limits of her authority. However, she will be held agreement to the contrary between the agent and the principal under the
responsible for the act of the sub-agent, among which is precisely the sale in favor provisions of Art. 1892. The appointment of Marichu as sub-agent was not
of the Rufina. expressly prohibited by Leonida as the acknowledgment receipt does not contain
Virginia Serona vs Court of Appeals. G.R. No. 130423. November 18, 2002. any such limitation. Neither does it appear that Virginia was verbally forbidden.
Thus, the act of entrusting the jewelry is not characterized by abuse of
confidence, was not proscribed and is in fact legally sanctioned.

40. SERONA VS CA, G.R. No. 130423. November 18, 2002. 41. ESCUETA VS LIM. G.R. No. 137162 January 24, 2007.
FACTS: FACTS:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 41

See facts in case number 39 of section 3.


ISSUE: Whether the contract of sale between petitioners and respondent is 42. MUNICIPAL COUNCIL OF ILOILO VS EVANGELISTA
valid?
FACTS:
RULING: In a previous case, Tan Ong Tze sought to recover the value of a strip of
land belonging to her which was taken by the municipality to widen a public street.
Yes, the Court held that in even assuming that Virginia Lim had no The judgment entitled her to 42, 966.40. When the judgment became final and
authority to sell the subject properties, the contract she executed in favor of executory, Atty. Jose Evangelista as counsel for the Intestate Estate of Atty. Jose
respondent is not void, but simply unenforceable, under the second paragraph of Ma. Arroyo, filed a claim for payment of fees for professional services that he and
Article 1317 of the Civil Code which reads: Atty. Arroyo rendered in the said case.

Art. 1317. A contract entered into in the name of another by one who At the hearing, several other claimants appeared, including Atty. Antero
has no authority or legal representation, or who has acted beyond his powers, shall Soriano who claimed that Tan Boon Tiong- one of Tan Ong Tzes attorney-in-
be unenforceable, unless it is ratified, expressly or impliedly, by the person on fact assigned the amount to him and that he in turn assigned this amount to
whose behalf it has been executed, before it is revoked by the other contracting Mauricio Cruz & Co. Inc. The Court ordered that the atty.s lien in the amount of
party. 15% of the judgment be recorded in favor of Jose Evangelista and directed the
municipality to file an interpleader against the claiming parties PNB, Antero
Ignacio Rubio merely denies the contract of sale and claims without Soriano, Jose Ma. Arroyo represented by Jose Evangelista. The CFI declared the
substantiation, that what he received was a loan, not the down payment for the deed of assignment of the credit valid and binding.
sale of the subject properties. His acceptance and encashment of the check, As such the municipal treasurer with the approval of the auditor of the
however, constituted ratification of the contract of sale and "produce the effects provincial treasurer of Iloilo and of the Executive Bureau, paid the late Antero
of an express power of agency." His action implies that he waived his right of Soriano the amount of P6,000 in part payment of the judgment. The municipal
action to avoid the contract, and, consequently, it also implies the tacit, if not treasurer of Iloilo deposited a total of 12,000 with the Clerk of Court of the CFI
express, confirmation of the said sale effected" by Virginia Lim in favor of of Iloilo. Consequently the judgment for 42,966.40 was reduced to 30,966.40.
respondent. Hence this petition.
In addition, the Baloloys have ratified the contract of sale when they ISSUE: Whether or not the assignment by Tan Boon Tiong as attorney in
accepted and enjoyed its benefits. The doctrine of estoppel applicable here is not fact of Tan Ong Tze to Atty. Antero Soriano of all her interests was valid?
only that which prohibits a party from assuming inconsistent positions, based on
RULING:
the principle of election, but that which precludes him from repudiating an
obligation voluntarily assumed after having accepted benefits therefrom. To Yes, the Court held that the Deed of Assignment in favor of Antero
countenance such repudiation would be contrary to equity, and would put a Soriano was valid as Tan Boon Tiong was authorized to employ and contract for
premium on fraud or misrepresentation. the services of lawyers upon such condition as he may deem convenient to defend
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 42

Tan Ong Tzes interest and as such was impliedly empowered to pay the lawyers Ferro Chemicals Inc. for 79M. It was agreed upon that the purchase price shall
fees for services rendered in the interest of the principal. be paid directly to Security Bank. But SBTC refused the payment as it was not
sufficient, as such the payment was consigned to the RTC.
Likewise with regard to the failure of the other attorney-in-fact Tan Montano
to consent to the Deed of Assignment, Tan Boon Tiong being authorized to pay
Ferro in turn assigned the rights to said stock to Chemphil Export &
in the name of the principal-the very fact that different letters of attorney were
Import (CEIC) which was registered in the corporate books of CEIC and the
given to each of these representatives show that it was not the principals intention
corresponding stock certificates were issued to it.
that they should act jointly in order to make their acts valid.
When Garcia failed to comply with the compromise agreement the
consortium caused the shares of stocks to be sold on execution. The Consortium
43. CHEMPIL EXPORT VS CA acquired the same and a certificate of sale was issued in the name of the bank
FACTS: consortium. The consortium filed a motion to order the corporate secretary of
Chemphil to enter in its stock and transfer books the sheriff's certificate of sale
This is a consolidation of two petitions for review filed by Dynetics Inc. which was granted. As such CEIC filed a motion to intervene on the ground that
and Antonio Gracia; one sought the judicial declaration, construction and it was the rightful owner of the shares. The trial court granted CEIC's motion
interpretation of the validity of a Surety Agreement that they entered into with allowing it to intervene. The consortium filed a manifestation and motion to lift
the Consortium of banks while the other sought declaratory relief and/or this order which was denied. The consortium and PCIB filed separate motions for
injunction against Security Bank & Trust Co. In both cases Dynetics and Garcia reconsideration which was likewise denied thus the consortium appealed to the
lost. The Consortium and SBTC filed their respective counterclaims with prayer Court of Appeals which ordered the consolidation of these cases.
for the issuance of writ of attachment which the Trial Court granted and while
the writ in favor of SBTC was lifted, it was subsequently reinstated. Consequently, ISSUE: Whether or not CEIC had been subrogated to the rights of SBTC,
various properties owned by Dynetics and Garcia were garnished including its predecessor in interest?
Garcias shares of stocks in CIP/ Chemphil.
PCIB which in a previous case against CEIC sought the annulment of a RULING:
Court of Appeals decision, filed a motion to dismiss the complaint of Dynetics
and Garcia for lack of interest to prosecute and to submit its counterclaims for No, the Court held that by definition subrogation is the transfer of all
decision. The motion to dismiss was granted but the motion to submit its rights of the creditor to a third person who substitutes him in all his rights. But
counterclaim for decision was denied. The Consortium filed motions for when Ferro issued a check in favor of SBTC it was in fact paying with Garcias
reconsideration which were denied. The consortium thus appealed to the Court money, no longer with its own because said amount was part of the purchase price
of Appeals and while the same was pending, they entered into a compromise which Ferro owed Garcia in payment for the sale of the disputed shares.
agreement with Garcia where it was stipulated that Garcia will pay 145M which
shall earn interest of eighteen percent from the date of the compromise. Since the money used to discharge Garcia's debt rightfully belonged to him,
FCI cannot be considered a third party payor under Art. 1302 (2). It was but a
It appears that a year before, Garcia sold the same shares of stock to conduit, or as aptly categorized, merely an agent as defined in Art. 1868. By the
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 43

contract of agency a person binds himself to render some service or to do Upon appeal by petitioners, the Court of Appeals reversed the decision of
something in representation or on behalf of another, with the consent or authority the RTC and entered new one dismissing the complaint. It held that since there
of the latter. FCI was merely fulfilling its obligation under the aforementioned was justifiable basis cancelling the sale, it saw no reason for the award of damages.
Deed of Sale.
ISSUE: Were the petitioners the real parties in interest?
The money paid by Ferro to SBTC thus properly belonged to Garcia. It is RULING:
as if Garcia paid his own debt to SBTC through a third party, which was Ferro.
No, petitioners are not parties to the contract of sale between their
44. UY vs. COURT OF APPEALS, G.R. No. 120465, 314 SCRA 69, 09 principals and NHA. They are mere agents of the owners of the land subject sale
September 1999 of the sale. As agents, they only render some service or do something in
representation or on behalf of their principals. The rendering of such service did not
FACTS: 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
Petitioners William Uy and Rodel Roxas are agents to authorized to sell
parties-in-interest, either as plaintiff or defendant, in an action upon that contract
eight (8) parcels of land by the owners. By virtue of such authority, petitioners
must, generally, either be parties to said contract.
offered to sell the lands, located at Benguet to respondent National Housing
Authority (NHA) to be utilized and developed as housing project.
NHA passed a resolution approving the acquisition of said lands with an 45. ANGELES vs. PNR, G.R. No. 150128, 500 SCRA 444, 31 August 2006
area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands. FACTS:
However, only five (5) were paid for by NHA because of the report it received
from the Land Geosciences Bureau of the DENR that the remaining area is On May 5, 1980, respondent Philippine National Railways (PNR)
located at an active landslide area and therefore, not suitable for development into informed a certain Gaudencio Romualdez that it has accepted the latters to buy,
a housing project. on an AS IS WHERE IS basis, the PNRs scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton,
The NHA issued two (2) resolutions cancelling the sale over the three (3) respectively, for the total amount of P96,600.00 Romualdez authorized Lizette R.
parcels of land and subsequently offered the amount of P1.255 million to the Wijanco-Angeles, the wife of petitioner Laureano Angeles to be his representative
landowners as daos perjuicious. in the withdrawal of the scrap/unserviceable rails. The PNR granted said request
and allowed Lizette to withdraw scrap/unserviceable rail in Murcia, Capas and San
Petitioners filed before Regional Trial Court (RTC) a Complaint for Miguel, Tarlac instead in Pampanga. However, the PNR subsequently suspended
Damages against NHA and its General Manager Robert Balao. After trial, the RTC the withdrawal in view of what it considered as documentary discrepancies coupled
rendered a decision declaring the cancellation of the contract to be justified and by reported pilferages of over P500,000.00 worth of PNR scrap properties in
awarded damages to plaintiffs in the sum of P1.255 million, the same amount Tarlac.
initially offered by NHA to petitioners as damages.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 44

Consequently, the spouses Angeles demanded the refund of the amount 46. NATIONAL POWER CORPORATION vs. NAMERCO, G.R.
of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery Nos. L-33819 & L-33897 117 SCRA 789, 23 October 1982
receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already
been withdrawn which, at P2,100 per metric ton, were worth of P114,781.80, an FACTS:
amount that exceed the claim for refund.
On October 17, 1956, plaintiff National Power Corporation (NPC) and
On August 10, 1988, the spouses Angeles file suit against PNR and its defendant National Merchandising Corporation (NAMERCO), as the
corporate secretary, Rodolfo Flores, among others, for specific performance and representative of the International Commodities Corporation, executed a contract
damages before RTC of Quezon City, and praying that PNR be directed to deliver for the purchase by the NPC from the New York firm of four thousand long tons
46 metric tons of scrap/unserviceable rails and to pay them damages and attorneys of crude sulfur with a stipulation for liquidated damages in case of breach.
fees. Meanwhile, Lizette passed away and was substituted by her heirs, among
Defendant-appellant Domestic Insurance Company executed a
whom is her husband, herein petitioner Laureano Angeles.
performance bond in favor of NPC to guarantee the sellers obligation. In entering
On April 16, 1996, the trial court, on the postulate that the spouses Angeles into another contract, NAMERCO, however, did not disclose to NPC that
are not the real parties-in-interest, rendered judgment dismissing their complaint NAMERCOs principal, in a cables instruction, stated that the sale was subject to
for lack of cause of action. As held by the court, Lizette was merely a representative availability of steamer, and contrary to its principals instruction, NAMERCO
of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him agreed that non-availability of a steamer was not a justification for non-payment
and not an assignee to the latters rights with respect to the award. Upon appeal, of liquidated damages.
the CA affirmed the trial courts decision.
The New York supplier was not able to deliver the sulfur due to its inability
ISSUE: Whether or not the petitioner merely an agent or assignee of the to secure shipping space. Consequently, the Government Corporate Counsel
rights of Romualdez interest in the scrap rails awarded? rescinded the contract of sale due to the suppliers non-performance of its
obligations, and demanded payment of liquidated damages from both
RULING: NAMERCO and the surety. Thereafter, NPC sued for recovery of the stipulated
liquidated damages. After trial, the Court of First Instance rendered judgment
Lizette was not an assignee, but merely an agent whose authority was ordering the defendants-appellants to pay solidarity to the NPC reduced liquidated
limited to the withdrawal of the scrap rails, hence, without personality to sue. damages with interest.
Where agency exists, the third partys (PNR) liability on a contract is to the ISSUE: Whether NAMERCO exceeded its authority?
principal and not to the agent and the relationship of the third party to the principal
is the same as that in a contract in which there is no agent. Normally, the agent has RULING:
neither rights nor liabilities as against the third party. He cannot thus sue and be
sued on the contract. Since a contract may be violated only by the parties thereto Yes, NAMERCO exceeded their authority. Article 1897 implies that the
as against each other, the real party-in-interest, either as plaintiff or defendant in agent who acts in excess of his authority is personally liable to the party with whom
an action upon that contract must, generally, be a contracting party. he contracted. And that the rule is complimented by Article 1898 of the Civil Code
which provides that if the agent contracts, in the name of the principal, exceeding
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 45

the scope of his authority, and the principal does not ratify the contract, it shall be which a loan could have been granted by the agent. Guaranty is not presumed, it
void if the party with whom the agent contracted is aware of the limits of the must be expressed and cannot be extended beyond its specified limits. In one case,
powers granted by the principal. NAMERCO never disclosed to the NPC the where it appears that a wife gave her husband power of attorney to loan money,
cabled or written instructions of its principal. For that reason and because this Court ruled that such fact did not authorized him to make her liable as a surety
NAMERCO exceeded the limits of its authority, it virtually acted in its own name for the payment of the debt of a third persons. The rule is clear that an agent who
and not as agent and it is, therefore, bound by the contract of sale which, however, exceeds his authority is personally liable for damaged.
it not enforceable against its principal. If, as contemplated in Articles 1897 and
1898, NAMERCO is bound under the contract of sale, then it follows that it is 48. Pineda vs. Court of Appeals, G.R. No. 105562, 226 SCRA 754, 27
bound by the stipulation for liquidated damages in the contract. September 1993

47. BA Finance vs. Court of Appeals, G.R. No. 94566, 211 SCRA 112, 03 FACTS:
July 1992
Prime Marine Services, Inc. (PMSI) obtained a group insurance policy for
FACTS: its sailors. During the effectivity of the policy, six covered employees of the PMSI
perished at sea when their vessel sunk somewhere in Morocco. Petitioners sought
Renato Gaytano, doing business under the name Gebbs International, to claim death benefits due to them and asked for assistance with the President
applied for and was granted a loan with respondent Traders Royal Bank. Philip and General Manager of PMSI, Captain Roberto Nuval. They were made to
Wong as credit administrator of BA Finance Corporation for and in behalf of the execute, with the exception of the spouses, Alarcon, special powers of attorney
latter undertook to guarantee the loan of the Gaytano spouses. authorizing Captain Nuval to follow up, ask, demand, collect and receive for
their benefit indemnities of sums money due to them.
Partial payments were made on the loan leaving an unpaid balance which
the Gaytano spouses refused to pay. Respondent bank filed with the trial court Petitioners were able to receive their respect death benefits. Unknown to
complaint for sum of money against the Gaytano spouses and petitioner them, however, the PMSI, in its capacity as employer and policyholder of the life
Corporation as alternative defendant. insurance of its deceased workers, filed with the Insular Life (respondent) formal
claims for and in behalf of the beneficiaries, through Captain Nuval. Insular issued
The trial court rendered a decision in favor of the plaintiff and against checks payable to the order of the petitioners. These checks were released to the
Gaytano spouses. Not satisfied with the decision the respondent bank appealed treasurer of PMSI, and upon instructions by Captain Nuval, it was deposited in his
with the Court of Appeals, modifying the decision of the trial court, wherein personal account.
Gaytano spouses and BA Finance Corp., were solidarily liable.
Petitioners learned that they were entitled, as beneficiaries, to life insurance
ISSUE: Whether Philip Wong as agent who exceeded his authority is liable? benefits under a group policy but when they sought to recover these benefits, their
claims was denied on the ground that the liability to petitioners was already
RULING:
extinguished upon delivery to and receipt by PMSI.
The special power to approve loans does not carry with it the power to
ISSUE: Whether or not Insular Life acted with negligence?
bind the principal to a contract of guaranty even to the extent of the amount for
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 46

RULING: of the deceased must receive the amount equivalent of the loan. DBP also offered
and ex gratia for settlement worth Php 30, 000. Mrs. Dans refused to take the
Yes. The practice in group insurance business, which is consistent with the offer. The decision of the RTC rendered in favor of the family of the deceased and
jurisprudence thereon in the State of California from whose laws our Insurance against DBP. However, DBP appealed to the court.
Code has been mainly patterned, is that the employer-policyholder who takes out
the insurance for its officers and employees, is the agent of the insurer who has ISSUE: Whether or not the DBP MRI Pool should be held liable on the
authority to collect the proceeds from the insurer. In this case, the insurer, through ground that the contract was already perfected?
the negligence of its agent, allowed a purported attorney-in-fact whose instrument RULING:
does not clearly show such power to collect the proceeds, it was liable therefore
under the doctrine that the principal is bound by the misconduct of its agent. No. DBP MRI Pool is not liable. Though the power to approve the
insurance is lodged to the pool, the DBP MRI Pool did not approve the application
49. BA Finance vs. CA GR No. 82040 (201 SCRA 157) 27 August 1991 of the deceased. There was no perfected contract between the insurance pool and
See case number 29 Mr. Dans.
50. DEVELOPMENT BANK OF THE PHILIPPINES, petitioner DBP was wearing two legal hats: as a lender and insurance agent. As an
vs. Court of Appeals and the ESTATE OF THE LATE JUAN B. insurance agent, DBP made believed that the family already fulfilled the
DANS, represented by CANDIDA G. DANS, and the DBP requirements for the said insurance although DBP had a full knowledge that the
MORTGAGE REDEMPTION INSURANCE POOL, respondents. application would never be approved. DBP acted beyond the scope of its authority
for accepting applications for MRI. If the third person who contracted is unaware
FACTS:
of the authority conferred by the principal on the agent and he has been deceived,
Juan B. Dans, 76 years of age, together with his family, applied for a loan the latter is liable for damages. The limits of the agency carries with it the
worth Php 500, 000 at the Development Bank of the Philipppines on May 1987. implication that a deception was perpetratedArticles 19-21 come into play.
The loan was approved by the bank dated August 4, 1987 but in the reduced
However, DBP is not entitled to compensate the family of the deceased
amount of Php 300, 000. Mr. Dans was advised by DBP to obtain a mortgage
with the entire value of the insurance policy. Speculative damages are too remote
redemption insurance at DBP MRI pool. DBP deducted the amount to be paid
to be included in the cost of damages. Mr. Dans is entitled only to moral damages.
for MRI Premium that is worth Php 1476.00. The insurance of Mr. Dans, less the
Such damages do not need a proof of pecuniary loss for assessment. The court
DBP service fee of 10%, was credited by DBP to the savings account of DBP
granted only moral damages (Php 50, 000) plus attorney feess (Php 10, 000) and
MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
the reimbursement of the MRI fees with legal interest from the date of the filing
On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified of the complaint until fully paid.
DBP was not eligible for the coverage of insurance for he was beyond the
51. BA Finance vs. CA GR No. 82040 (201 SCRA 157) 27 August 1991
maximum age of 60. The wife, Candida, filed a complaint to the Regional Trial
See case number 29
Court Branch I Basilan against DBP and DBP MRI pool for Collection of Sum
of Money with Damages. Prior to that, DBP offered the administratrix (Mrs. 52. NORA S. EUGENIO and ALFREDO Y. EUGENIO,
Dans) a refund of the MRI payment but she refused for insisting that the family vs. HON. COURT OF APPEALS and PEPSI-COLA BOTTLING
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 47

COMPANY OF THE PHILIPPINES, INC., G.R. No. 103737 since Estrada was nowhere to be found and Pepsi failed to comply with the
December 15, 1994 pertinent rules for the admission of the evidence by which it sought to prove its
contentions.
FACTS:
Pepsi therefore was unable to rebut the aforestated presumptions in favor
Nora Eugenio was a dealer of Pepsi. She had one store in Marikina but of valid payment by petitioners, In relation to Agency: Assuming in this case that
had a regular charge account in Q.C. And Muntinlupa. Her husband Alfredo used Pepsi never received the amounts reflected in the TPR's, Pepsi still failed to prove
to be a route manager for Pepsi in its Q.C. Plant. Pepsi filed a complaint for a sum that Estrada (its duly authorized agent) did not receive the amounts. In so far as
of money against Eugenio spouses. since according to them the spouses (1) had Eugenio is concerned, their obligation is extinguished when they paid Estrada
an outstanding balance since it purchased and received on credit various products using Pepsi's official receipt.
from both its Q.C. and Muntinlupa plant and (2) had an unpaid obligation for the
loaned empties from Pepsi. They contend that the total outstanding account was The substantive law is that payment shall be made to the person in whose
P94,651.xx. Eugenio's in their defense presented four Trade Provisional Receipts favor the obligation has been constituted, or his successor in interest, or any person
(TPR) allegedly issued to and received by them from Pepsi's Route Manager authorized to receive it. *TPR: Trade Provisional Receipts are bound and given in
(Malate Warehouse) Jovencio Estrada showing that they paid a total sum of booklets to the company sales representatives, under proper acknowledgement by
P80,500.xx. They also claim that the signature of Nora Eugenio in a Sales Invoice them and with a record of the distribution thereof. After every transaction, when
(85366) for the amount of P5,631.xx which was included in the computation of a collection is made the customer is given by the sales representative a copy of the
their debt was falsified. Therefore, without these errors, petitioner contend that TPR, that is, the triplicate copy or customer's copy, properly filled up to reflect the
(1) they do not have any outstanding debt, and (2) it is Pepsi who owes them completed transactions. All unused TPR's,as well as the collections made, are
P3,546.02. RTC found in favor of Pepsi. CA affirmed the decision. turned over by the sales representative to the appropriate company officer.
ISSUE: W/N the amounts in the TPR should be credited in favor of the 53. TOYOTA SHAW, INC., vs.COURT OF APPEALS and LUNA L.
spouses.? SOSA, G.R. No. L-116650 May 23, 1995
RULING:
FACTS:
CA decision is annulled and set-aside. Pepsi is ordered to pay Eugenio.
Background: Eugenio submitted the TPR's to Atty. Rosario (Pepsi's lawyer). Luna L. Sosa & Popong Bernardo, an agent of Toyota Shaw, entered into
Thereafter, Rosario ordered Daniel Azurin (asst.personnel manager) to conduct an agreement stating that Luna Sosa will give P100K as downpayment for a yellow
an investigation to verify the claim of the petitioners. According to Azurin, Estrada light ace which Toyota will release on June 17. It was agreed that the balance would
denied that he issued and signed the TPR's. Azurin testified to this in Court be paid through financing by BA. On June 17, Mr Sosa was not able to get the car
(However, Estrada never did. He failed to appear and was never found. because according to Bernardo, nasulot ng iba but as it turns out, the credit
financing was not approved by BA. Toyota then gave Mr Sosa the option to
Therefore, his testimony- as told by Azurin- is barred by the Hearsay purchase the unit by paying full price in cash but Sosa refused. Furthermore, Mr.
Evidence Rule). Furthermore, the investigation conducted was really more of an Sosa claims that Popong Bernardo acted in his authority as agent of Toyota,
interview without any safeguards and did not give Eugenio opportunity to object thereby binding Toyota in the agreement that they executed.
or cross-examine Estrada. The other points of Estrada (and Pepsi) were all invalid
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 48

ISSUE: W/N the agreement could bind Toyota? (hereinafter SMC), represented by Francisco B. Manzon, Jr., its "SAVP and
Director, Plant Operations-Mandaue" Thereunder, Savellon claims that Bacaltos
RULING: Coal Mines is the owner of the vessel M/V Premship II and that for P650,000.00
No.The title of the agreement between the two parties was to be paid within seven days after the execution of the contract, it "lets, demises"
AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO OF the vessel to charterer SMC "for three round trips to Davao."
TOYOTA SHAW INC, therefore, Popong Bernardo was acting on his personal
capacity and did not represent Toyota in said agreement, something that Mr. Sosa Petitioners alleged that Savellon was not their Chief Operating Officer and
should have been aware of. Mr. Sosa knew that Popong Bernado was only a sales that the powers granted to him are only those clearly expressed in the
representative of Toyota, and thus, a mere agent and was therefore limited in his Authorization which do dot include the power to enter into any contract with
authority to enter into contracts of sale of Toyotas vehicles. SMC.
A person dealing with an agent is put upon inquiry and must discover upon ISSUE: Whether or not Savellon was duly authorized by the petitioners to
his peril the authority of the agent. enter into the Trip Charter Party?

54. BACALTOS COALMINES Vs.THE HONORABLE COURT OF


APPEALS, G.R. No. 114091, JUNE 29, 1995 RULING:
FACTS:
NO., The broadest scope of Savellons authority is limited to the use of
In an Authorization petitioner Bacaltos authorized Savellon, to use the the coal operating contract an the clase cannot contemplate any other power not
coal operating contract of Bacaltos Coal Mine of which he is the proprietor. For included in the enumeration or which are unrelated either to the power to use the
any legitimate purpose that it may serve particularly coal operating contract or to those already enumerated.
(1) To acquire purchase orders for and in behalf of BACALTOS COAL
MINES;(2) To engage in trading under the style of BACALTOS COAL 55. Yu Eng Cho vs. PANAM | G.R. No. 123560 (328 SCRA 717) | 27
MINES/RENE SAVELLON;(3) To collect all receivables due or in arrears from March 2000
people or companies having dealings under BACALTOS COAL MINES/RENE
SAVELLON;(4) To extend to any person or company by substitution the same FACTS:
extent of authority that is granted to Rene Savellon;(5) In connection with the Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles
preceeding paragraphs to execute and sign documents, contracts, and other Marketing. In connection with [this] business, he travels from time to time to
pertinent papers. Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets
from defendant Claudia Tagunicar who represented herself to be an agent of
On 19 October 1988 a Trip Charter Party was executed "by and between defendant Tourist World Services, Inc. (TWSI). After calling up Canilao of TWSI,
BACALTOS COAL MINES, represented by its Chief Operating Officer, RENE defendant Tagunicar told plaintiffs that their flight is now confirmed all the way.
ROSEL SAVELLON" and private respondent San Miguel Corporation Thereafter, she attached the confirmation stickers on the plane tickets. A few days
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 49

before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am ISSUE: WON TWSI and Pan Am be held liable as principals?
office to verify the status of the flight. According to said Adrian Yu, personnel of
defendant Pan Am told him over the phone that plaintiffs' booking[s] are RULING:
confirmed. No, TWSI and Pan Am should not be held liable for the acts of Tagunicar
Upon their arrival in Tokyo, they called up Pan-Am office for who represented herself as their agent.
reconfirmation of their flight to San Francisco. Said office, however, informed It is a settled rule that persons dealing with an assumed agent are bound at
them that their names are not in the manifest. Since plaintiffs were supposed to their peril, if they would hold the principal liable, to ascertain not only the fact of
leave on the 29th of July, 1978, and could not remain in Japan for more than 72 agency but also the nature and extent of authority, and in case either is
hours, they were constrained to agree to accept airline tickets for Taipei instead, controverted, the burden of proof is upon them to establish it.
per advise of JAL officials. This is the only option left to them because Northwest
Airlines was then on strike, hence, there was no chance for the plaintiffs to obtain In the case at bar, petitioners rely on the affidavit of respondent Tagunicar
airline seats to the United States within 72 hours. Plaintiffs paid for these tickets. where she stated that she is an authorized agent of TWSI. This purported
admission of respondent Tagunicar cannot be used by petitioners to prove their
Upon their return to Manila, a complaint for damages was filed by agency relationship. At any rate, even if such affidavit is to be given any probative
petitioners against private respondents Pan American World Airways, Inc. (Pan value, the existence of the agency relationship cannot be established on its sole
Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia basis. The declarations of the agent alone are generally insufficient to establish the
Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and fact or extent of his authority.
hotel accommodations when petitioners were compelled to stay in Hongkong and
then in Tokyo by reason of the non-confirmation of their booking with Pan-Am. In addition, as between the negative allegation of respondents Canilao and
Tagunicar that neither is an agent nor principal of the other, and the affirmative
The trial court held that the defendants jointly and severally liable, except allegation of petitioners that an agency relationship exists, it is the latter who have
defendant Julieta Canilao. On appeal, the CA held private respondent Tagunicar the burden of evidence to prove their allegation, 19 failing in which, their claim
solely liable therefor, and absolving respondents Pan Am and TWSI from any and must necessarily fail.
all liability,
We stress that respondent Tagunicar categorically denied in open court
Petitioners still asserted that Tagunicar is a sub-agent of TWSI while TWSI that she is a duly authorized agent of TWSI, and declared that she is an
is a duly authorized ticketing agent of Pan Am. Proceeding from this premise, they independent travel agent. We have consistently ruled that in case of conflict
contend that TWSI and Pan Am should be held liable as principals for the acts of between statements in the affidavit and testimonial declarations, the latter
Tagunicar. Petitioners stubbornly insist that the existence of the agency command greater weight.
relationship has been established by the judicial admissions allegedly made by
respondents herein, to wit: (1) the admission made by Pan Am in its Answer that The documents presented by the petitioner cannot justify the decision that
TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary,
she admitted that she is a duly authorized agent of TWSI; and (3) the admission Tagunicar testified that when she pays TWSI, she already deducts in advance her
made by Canilao that TWSI received commissions from ticket sales made by commission and merely gives the net amount to TWSI. From all sides of the legal
Tagunicar.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 50

prism, the transaction is simply a contract of sale wherein Tagunicar buys airline verbal agreement dated November 27,1995. The petitioners also demanded the
tickets from TWSI and then sells it at a premium to her clients. turnover of the subject properties to them within fifteen days from receipt of the
said letter; otherwise, they would have no option but to protect their interest
56. Litonjua vs. Fernandez | GR No. 148116 ( 427 SCRA 478) | 14 April through legal means.
2004
Fernandez, however rejected the claims of the petitioner.
FACTS:
On April 12, 1996, the petitioners filed the instant Complaint for specific
Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered performance with damages against respondent Fernandez and the registered
to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua, Jr., the owners of the property.
parcels of land.
After trial on the merits, the trial court rendered judgment in favor of the
The owners of the properties were represented by Mary Mediatrix petitioners .
Fernandez and Gregorio T. Eleosida, respectively. The brokers told the petitioners
that they were authorized by respondent Fernandez to offer the property for sale. The appellate court promulgated its decision reversing and setting aside
the judgment of the trial court and dismissing the petitioners complaint, as well as
The petitioners and respondent Fernandez agreed that the petitioners the respondents counterclaim.
would buy the property consisting of 36,742 square meters, for the price of P150
per square meter, or the total sum of P5,098,500. They also agreed that the owners ISSUE/S:
would shoulder the capital gains tax, transfer tax and the expenses for the
documentation of the sale. Whether or not the agent acted within the scope of his authority?
Whether or not Fernandez has the authority to sell the property?
The petitioners and respondent Fernandez also agreed to meet on
December 8, 1995 to finalize the sale. It was also agreed upon that on the said RULING:
date, respondent Fernandez would present a special power of attorney executed No. The settled rule is that persons dealing with an assumed agent are
by the owners of the property, authorizing her to sell the property for and in their bound at their peril, and if they would hold the principal liable, to ascertain not
behalf, and to execute a deed of absolute sale thereon. The petitioners would also only the fact of agency but also the nature and extent of authority, and in case
remit the purchase price to the owners, through respondent Fernandez. However, either is controverted, the burden of proof is upon them to prove it. In this case,
only Agapito Fisico attended the meeting. He informed the petitioners that respondent Fernandez specifically denied that she was authorized by the
respondent Fernandez was encountering some problems with the tenants and was respondents-owners to sell the properties, both in her answer to the complaint and
trying to work out a settlement with them. After a few weeks of waiting, the when she testified. The Letter dated January 16, 1996 relied upon by the
petitioners wrote respondent Fernandez on January 5, 1995, demanding that their petitioners was signed by respondent Fernandez alone, without any authority from
transaction be finalized by January 30, 1996.
the respondents-owners. There is no evidence on record that the respondents-
When the petitioners received no response from respondent Fernandez, owners ratified all the actuations of respondent Fernandez in connection with her
the petitioners sent her another Letter dated February 1, 1996, asking that the dealings with the petitioners. As such, said letter is not binding on the respondents
Deed of Absolute Sale covering the property be executed in accordance with their as owners of the subject properties.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 51

Held: of arrearages. MMPCI stated that Baluyot was not an agent but an independent
contractor, and as such was not authorized to represent MMPCI or to use its name
No. The Civil Code provides that a special power of attorney is necessary except as to the extent expressly stated in the Agency Manager Agreement.
to enter into any contract involving immovable property or real rights. Any sale of
real property by one purporting to be the registered owner's agent must show his ISSUE/S: Whether or not a contract of agency exists between Baluyot and
authority in writing otherwise the sale is null and void. The agent's declarations MMPCI?
alone are generally insufficient to establish his authority. In this case, there's no
documentary evidence to show Property X's owners specifically authorized RULING:
Fernandez to sell Property X to Litonjua. Fernandez specifically denied authority NO. The acts of an agent beyond the scope of his authority do not bind
to sell Property X. The purported letter Fernandez sent Litonjua representing the principal, unless he ratifies them, expressly or impliedly. Only the principal can
herself to have authority to do so is signed by Fernandez alone. Further, Property ratify; the agent cannot ratify his own unauthorized acts.
X's owners never ratified any of Fernandez's actions.
Moreover, the principal must have knowledge of the acts he is to ratify.
57. Manila Memorial Park Cemetery, Inc. vs. Linsangan | GR No. No ratification can be implied in the instant case. Atty. Linsangan failed to show
151319 443 SCRA 377 | 2 November 2004 that MMPCI had knowledge of the arrangement. As far as MMPCI is concerned,
FACTS: the contract price was P132,250.00, as stated in the Offer to Purchase signed by
Atty. Linsangan and MMPCI's authorized officer. Likewise, this Court does not
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden find favor in the Court of Appeals' findings that "the authority of defendant
State at the Holy Cross Memorial Park owned by petitioner (MMPCI). According Baluyot may not have been expressly conferred upon her; however, the same may
to Baluyot, a former owner of a memorial lot under Contract No. 25012 was no have been derived impliedly by habit or custom which may have been an accepted
longer interested in acquiring the lot and had opted to sell his rights subject to practice in their company in a long period of time." A perusal of the records of the
reimbursement of the amounts he already paid. The contract was for P95,000.00. case fails to show any indication that there was such a habit or custom in MMPCI
Baluyot reassured Atty. Linsangan that once reimbursement is made to the former that allows its agents to enter into agreements for lower prices of its interment
buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave spaces, nor to assume a portion of the purchase price of the interment spaces sold
Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer at such lower price. No evidence was ever presented to this effect.
and to complete the down payment to MMPCI. Baluyot issued handwritten and
typewritten receipts for these payments. Baluyot verbally advised Atty. Linsangan 58. Green Valley vs. IAC | GR No. L-49395 133 SCRA 697 | 26
that Contract No. 28660 was cancelled for reasons the latter could not explain, and December 1984 | Justice Abad Santos
presented to him another proposal for the purchase of an equivalent property. FACTS:
He refused the new proposal and insisted that Baluyot and MMPCI honor E.R. Squibb and Sons Phil. Corp. appointed petitioner Green Valley
their undertaking. For the alleged failure of MMPCI and Baluyot to conform to Poultry and Alliend Products Inc. as a non-exclusive distributor for Squibb
their agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Veterinary Products. However, Green Valley defaulted in the payment of goods
Damages against the former. For its part, MMPCI alleged that Contract No. 28660 delivered by Squibbs. This prompted the latter to file a collection suit. The lower
was cancelled conformably with the terms of the contract because of non-payment court ruled in favour of Squibbs, which was affirmed by the Court of Appeals.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 52

Green Valley claimed that the contract with Squibb was a mere agency to Petitioner Nicanora G. Bucton owned a parcel of land in Cagayan De Oro
sell; that it never purchased goods from Squibb; that the goods received were on City, the title of which was borrowed by Erlinda Concepcion on the pretext that
consignment only with the obligation to turn over the proceeds, less its she was only going to show it to an interested buyer.
commission, or to return the goods ff not sold, and since it had sold the goods but
had not been able to collect from the purchasers thereof, the action was premature. Little did Bucton knew that Concepcion used the said title to mortgage the
formers house lot as security for a Php 30,000 loan she sought to obtain from
Upon the other hand, Squibb claimed that the contract was one of sale so Rural Bank of El Salvador. Inc., Misamis Oriental thru an SPA allegedly executed
that Green Valley was obligated to pay for the goods received upon the expiration by Bucton. Bucton defaulted in payment. Consequently, Buctons house and lot
of the 60-day credit period. Both lower courts ruled that there was a contract of were foreclosed.
sale.
Aggrieved, Bucton filed with RTC a case for annulment of mortgage,
ISSUE/S: Should Green Valley be held liable for selling on credit? Does the foreclosure and SPA against Concepcion, the bank and the sheriff who foreclosed
distinction whether the contract was that of sale or contract to sell material her property.
to its liability?
Bucton furthermore alleged that she cannot be held liable as both the
RULING: promissory note and the real estate mortgage were signed by Concepcion in her
own personal capacity. The lower court ruled in favor of Bucton. However, the
Yes, Green Valley is liable. The Supreme Court held that whether viewed same was reversed by the CA, declaring that although the promissory note and
as an agency to sell or as a contract of sale, the liability of Green Valley is REM did not indicate that Concepcion was signing for an on behalf of her
indubitable. Adopting Green Valley's theory that the contract is an agency to sell, principal, Bucton is estopped from denying liability since it was her negligence in
it is liable because it sold on credit without authority from its principal. The Civil handling her title over to Concepcion that caused the loss.
Code has a provision exactly in point. It reads:
ISSUE/S: Whether or not the Real Estate Mortgage was entered into by
Art. 1905. The commission agent cannot, without the express or implied Concepcion in her personal capacity?
consent of the principal, sell on credit. Should he do so, the principal may demand
from him payment in cash, but the commission agent shall be entitled to any RULING:
interest or benefit, which may result from such sale.
Yes. For the principal to be bound by a deed executed by an agent, the
deed must be signed by the agent for and in behalf of his principal.
SECTION FOUR In this case, the authorized agent failed to indicate in the mortgage that she
was acting for and on behalf of her principal. The Real Estate Mortgage, explicitly
59. Bucton vs. Rural Bank of El Salvador, Inc. | GR No. 179625 24 shows on its face, that it was signed by Concepcion in her own name and in her
February 2014 own personal capacity. In fact, there is nothing in the document to show that she
FACTS: was acting or signing as an agent of petitioner. Thus, consistent with the law on
agency and established jurisprudence, petitioner cannot be bound by the acts of
Concepcion. At this point, we find it significant to mention that respondent bank
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 53

has no one to blame but itself. Not only did it act with undue haste when it granted the transaction entered into by the agent on their behalf, absent any proof that the
and released the loan in less than three days, it also acted negligently in preparing latter acted beyond its authority. Concomitant to this obligation is that the
the Real Estate Mortgage as it failed to indicate that Concepcion was signing it for principal also assumes the risks that may arise from the transaction. Indeed, as in
and on behalf of petitioner. We need not belabor that the words "as attorney-in- the instant case, bank regulations prohibit banks from guaranteeing profits or the
fact of," "as agent of," or "for and on behalf of," are vital in order for the principal principal in an investment management account.
to be bound by the acts of his agent. Without these words, any mortgage, although
signed by the agent, cannot bind the principal as it is considered to have been
signed by the agent in his personal capacity. 61. MANILA MEMORIAL PARK CEMETERY, INC., vs.
60. PANLILIO VS. CITIBANK N.A. (G.R. No. 156335 November 28, LINSANGAN (G.R. No. 151319 November 22, 2004)
2007)
FACTS:
FACTS:
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden
Spouses Raul and Amalia Panlilio's initial intention was to invest money in State at the Holy Cross Memorial Park owned by petitioner (MMPCI).
a Citibank product which had a high interest but since it was not available, they According to Baluyot, a former owner of a memorial lot under Contract
put their PhP1,000,000.00 in a savings account instead. More than a month later, No. 25012 was no longer interested in acquiring the lot and had opted to sell his
petitioners placed another amount of PhP2,134,635.87 in the Citibanks Long- rights subject to reimbursement of the amounts he already paid. The contract was
Term Commercial Paper (LTCP), a debt instrument that paid a high interest, for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is
issued by the corporation Camella and Palmera Homes (C&P Homes). Months made to the former buyer, the contract would be transferred to him. Atty.
after signing with the debt instrument and after receiving interests, petitioners Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be
contested the investment contract and demanded that the respondent bank to reimbursed to the original buyer and to complete the down payment to MMPCI.
return their investment money. This happened when newspaper reports came out
that C&P Homes' stock had plunged in value. Baluyot issued handwritten and typewritten receipts for these payments.
Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
ISSUES: for reasons the latter could not explain, and presented to him another proposal for
the purchase of an equivalent property. He refused the new proposal and insisted
that Baluyot and MMPCI honor their undertaking.
Whether the investment contract creates a trusteeship or agency.
Whether the respondent is under the obligation to return the For the alleged failure of MMPCI and Baluyot to conform to their
investment money of the petitioners. agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Damages
against the former. For its part, MMPCI alleged that Contract No. 28660 was
RULING: cancelled conformably with the terms of the contract because of non-payment of
Having bound themselves under the contract of agency, petitioners as arrearages. MMPCI stated that Baluyot was not an agent but an independent
principals in an agency relationship are solely obliged to observe the solemnity of
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 54

contractor, and as such was not authorized to represent MMPCI or to use its name Kue Cuison is a sole proprietorship engaged in the purchase and sale of
except as to the extent expressly stated in the Agency Manager Agreement. newsprint, bond paper and scrap. Valiant Investment Associates delivered various
kinds of paper products to a certain Tan. The deliveries were made by Valiant
ISSUE: Whether or not a contract of agency exists between Baluyot and pursuant to orders allegedly placed by Tiac who was then employed in the Binondo
MMPCI? office of petitioner. Upon delivery, Tan paid for the merchandise by issuing several
checks payable to cash at the specific request of Tiac. In turn, Tiac issued nine (9)
RULING: postdated checks to Valiant as payment for the paper products. Unfortunately, sad
checks were later dishonored by the drawee bank.
NO. The acts of an agent beyond the scope of his authority do not bind
the principal, unless he ratifies them, expressly or impliedly. Only the principal can Thereafter, Valiant made several demands upon petitioner to pay for the
ratify; the agent cannot ratify his own unauthorized acts. Moreover, the principal merchandise in question, claiming that Tiac was duly authorized by petitioner as
must have knowledge of the acts he is to ratify. No ratification can be implied in the manager of his Binondo office, to enter into the questioned transactions with
the instant case. Valiant and Tan. Petitioner denied any involvement in the transaction entered into
Atty. Linsangan failed to show that MMPCI had knowledge of the by Tiac and refused to pay Valiant.
arrangement. As far as MMPCI is concerned, the contract price was P132,250.00,
as stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI's
Left with no recourse, private respondent filed an action against petitioner
authorized officer. Likewise, this Court does not find favor in the Court of
for the collection of sum of money representing the price of the merchandise.
Appeals' findings that "the authority of defendant Baluyot may not have been
After due hearing, the trial court dismissed the complaint against petitioner for
expressly conferred upon her; however, the same may have been derived impliedly
lack of merit. On appeal, however, the decision of the trial court was modified,
by habit or custom which may have been an accepted practice in their company in
but was in effect reversed by the CA. CA ordered petitioner to pay Valiant with
a long period of time."
the sum plus interest, AF and costs.
A perusal of the records of the case fails to show any indication that there
was such a habit or custom in MMPCI that allows its agents to enter into ISSUE: Whether or not Tiac possessed the required authority from
agreements for lower prices of its interment spaces, nor to assume a portion of the petitioner sufficient to hold the latter liable for the disputed transaction?
purchase price of the interment spaces sold at such lower price. No evidence was
ever presented to this effect. RULING:

YES. As to the merits of the case, it is a well-established rule that one who
clothes another with apparent authority as his agent and holds him out to the
62. CUISON vs. CA (G.R. No. 88539 October 26, 1993) public as such cannot be permitted to deny the authority of such person to act as
his agent, to the prejudice of innocent third parties dealing with such person in
FACTS: good faith and in the honest belief that he is what he appears to be.It matters not
whether the representations are intentional or merely negligent so long as
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 55

innocent, third persons relied upon such representations in good faith and for Finally, although it may appear that Tiac defrauded his principal (petitioner) in not
value. turning over the proceeds of the transaction to the latter, such fact cannot in any
way relieve nor exonerate petitioner of his liability to private respondent. For it is
Article 1911 of the Civil Code provides:Even when the agent has an equitable maxim that as between two innocent parties, the one who made it
exceeded his authority, the principal is solidarily liable with the agent if the former possible for the wrong to be done should be the one to bear the resulting loss.
allowed the latter to act as though he had full powers.

The above-quoted article is intended to protect the rights of innocent


persons. In such a situation, both the principal and the agent may be considered
as joint tortfeasors whose liability is joint and solidary.

It is evident from the records that by his own acts and admission, petitioner
held out Tiac to the public as the manager of his store in Binondo. More 63. PLEASANTVILLE DEVELOPMENT CORPORATION VS.
particularly, petitioner explicitly introduced to Villanueva, Valiants manager, as his CA(G.R. No. 79688 February 1, 1996)
(petitioners) branch manager as testified to by Villanueva. Secondly, Tan, who has
FACTS:
been doing business with petitioner for quite a while, also testified that she knew
Tiac to be the manager of the Binondo branch. Even petitioner admitted his close
Edith Robillo purchased from Pleasantville Development Corporation,
relationship with Tiu Huy Tiac when he said that they are like brothers There
herein petitioner a parcel of land at Pleasantville Subdivision, Bacolod City. The
was thus no reason for anybody especially those transacting business with
property was designated as Lot 9, Phase II. In 1975, herein respondent Eldred
petitioner to even doubt the authority of Tiac as his manager in the Binondo
Jardinico bought the said subject lot from the former purchaser. Eldred later
branch.
discovered that the property he purchased had improvements introduced therein
by respondent Wilson Kee. Kee on the other hand bought on installments Lot 8
Tiac, therefore, by petitioners own representations and manifestations, of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI) which is the
became an agent of petitioner by estoppel, an admission or representation is exclusive real estate agent of the petitioner. Under the contract Keewas allowed to
rendered conclusive upon the person making it, and cannot be denied or disproved take possession of the property even before full payment of the price.
as against the person relying thereon (Article 1431, Civil Code of the Philippines).
A party cannot be allowed to go back on his own acts and representations to the CTTEI through an employee, Zenaida Octaviano accompanied Kees wife
prejudice of the other party who, in good faith, relied upon them. Taken in this Donabelle to inspect Lot No. 8. Octaviano however mistakenly pointed towards
light,. petitioner is liable for the transaction entered into by Tiac on his behalf. Lot 9. Hence spouses Kee had their residence, an auto repair shop, a store and
Thus, even when the agent has exceeded his authority, the principal is solidarily other improvements constructed on the wrong lot. Upon discovery of the blunder
liable with the agent if the former allowed the latter to fact as though he had full both Kee and Jardinico tried to reach an amicable settlement but they failed.
powers (Article 1911 Civil Code), as in the case at bar. Jardinico demanded that the improvements be removed but as Kee refused,
Jardinico filed acomplaint for ejectment with damages against Kee at the Municipal
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 56

Trial Court in Cities (MTCC) of Bacolod City. Kee filed a third-party complaint Pleasantvilles liability lies in the negligence of its agent CTTEI. For such
against herein petitioner and CTTEI. The MTCC found that the error was negligence, Pleasantvilles should be held liable for damages. The extent and/or
attributable to CTTEI also since at present the contract withKee has rescinded for amount of damages to be awarded is a factual issue which should be determined
Kees failure to pay installments. Kee no longer had any right over the subject after evidence is adduced. However, there is no showing that such evidence was
property and must pay rentals for its use. actually presented in the trial court; hence no damages could be awarded.

The Regional Trial Court (RTC) of Bacolod City ruled that petitioner and 64. MANILA MEMORIAL PARK CEMETERY, INC., vs.
CTTEI were not at fault or were not negligent. It argued that Kee was a builder in LINSANGAN (G.R. No. 151319 November 22, 2004)
bad faith. Even if assuming that he was in good faith, he was no longer so and See case number 61
must pay rentals from the time that he was given notice to vacate the lot. The
Court of Appeals ruled that Kee was a builder in good faith as he was unaware of
the mix-up when he constructed the improvements. It was in fact due to the
negligence and wrongful delivery of CTTEI which included its principal the herein 65. Filipinas Life Assurance Co. (Now Ayala Life Assurance, Inc.) v
petitioner. It further ruled that the award of rental was without basis. Pending the Clemente Pedroso, Teresita Pedroso and Jennifer Palacio, G.R. No.
resolution of the case at the Court of Appeals Jardinico and Kee entered into a 159489, February 04, 2008
deed of sale, wherein Lot 9 was sold to Kee. In the said deed a provision stating FACTS:
that regardless of the outcome of the decision, such shall not be pursued by the
parties and shall be considered dismissed and without effect. The appellate court Teresita Pedroso is a policyholder of a 20-year endowment life insurance
was not informed of this deal. issued by Filipinas Life Assurance Co. Pedroso claims Renato Valle was her
insurance agent since 1972 and Valle collected her monthly premiums. In the first
week of January 1977, Valle told her that the Filipinas Life Escolta Office was
ISSUE: Whether or not CTTEI is liable for the acts of its agent for the holding a promotional investment program for policyholders. It was offering 8%
damage caused to the third party? prepaid interest a month for certain amounts deposited on a monthly basis.
RULING: Enticed, she initially invested and issued a post-dated check for P10, 000. In return,
Valle issued Pedroso his personal check forP800 for the 8% prepaid interest and
The principal is responsible for the acts of the agent, done within the scope a Filipinas Life Agent receipt.
of his authority, and should bear the damage caused to third persons. On the other
hand, the agent who exceeds his authority is personally liable for the damages. In Pedroso called the Escolta office and talked to Francisco Alcantara, the
the present case, CTTEI was acting within its authority as the sole real estate administrative assistant, who referred her to the branch manager,
representative of Pleasantville when it made the delivery to Kee. In acting within Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior
its scope of authority, it was, however, negligent. It is this negligence that is the confirmed that there was such a promotion. She was even told she couldpush
basis of Pleasantvilles liability, as principal of CTTEI, per Articles 1909 and 1910 through with the check she issued. From the records, the check, with the
of the Civil Code. endorsement of Alcantara at the back, was deposited in the account of Filipinas
Life with the Commercial Bank and Trust Company, Escolta Branch.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 57

Relying on the representations made by Filipinas Lifes duly authorized rity, the agent becomespersonally liable for the damage. But even when the agent
representatives Apetrior andAlcantara, as well as having known agent Valle for exceeds his authority, the principal is still solidarily liable together with the agent
quite some time, Pedroso waited for the maturity of her initial if the principal allowed the agent to act as though the agent had full powers. The
investment. A month after, her investment of P10,000 was returned to her after acts of an agent beyond the scope of his authority do not bind the principal, unless
shemade a written request for its refund. To collect the amount, Pedroso the principal ratifies them, expressly or impliedly.
personally went to the Escoltabranch where Alcantara gave her the P10,000 in
cash. After a second investment, she made 7 to 8more investments in varying The adoption or confirmation by one person of an act performed on his
amounts, totaling P37,000 but at a lower rate of 5% prepaid interest a month. behalf by anotherwithout authority
Upon maturity of Pedrosos subsequent investments, Valle would
Even if Valles representations were beyond his authority as a
take back from Pedroso thecorresponding agents receipt he issued to the latter.
debit/insurance agent, Filipinas Lifethru Alcantara and Apetrior expressly and
Pedroso told respondent Jennifer Palacio, also knowingly ratified Valles acts. Filipinas Life benefited fromthe investments
a Filipinas Life insurance policyholder, about theinvestment plan. Palacio deposited by Valle in the account of Filipinas Life.
made a total investment of P49,550 but at only 5% prepaid interest.However,
66. THE MANILA REMNANT CO., INC vs. THE HONORABLE
when Pedroso tried to withdraw her investment, Valle did not want to return
COURT OF APPEALS, OSCAR VENTANILLA, JR. and
some P17,000worth of it. Palacio also tried to withdraw hers, but Filipinas Life,
CARMEN GLORIA DIAZ
despite demands, refused to return her money.
ISSUE: WON Filipinas Life is jointly and severally liable with Apetrior and FACTS:
Alcantara on the claim of Pedroso and Palacio or WON its agent Renato
Valle is solely liable to Pedroso and Palacio? Petitioner Manila Remnant Co., Inc. is the owns parcels of land situated in
Quezon City and constituting the Capital Homes Subdivision Nos. I and II. Manila
RULING: Remnant and A.U. Valencia & Co. Inc. entered into a contract entitled
"Confirmation of Land Development and Sales Contract" to formalize a prior
Yes. While it is true that a person dealing with an agent is put upon inquiry verbal agreement whereby A.U. Valencia and Co., Inc. was to develop the
andmust discover at his own peril the agents authority, in this case, Pedroso and aforesaid subdivision for a consideration of 15.5% commision. At that time the
Palacio did exercise due diligence in removing all doubts and in confirming the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was
validity of the representations made by Valle. Artemio U. Valencia. Manila Remnant thru A.U. Valencia and Co. executed two
"contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C.
Filipinas Life, as the principal, is liable for obligations contracted by its
Ventanilla and Carmen Gloria Diaz. Ten days after the signing of the contracts
agent Valle. By the contract of agency, a person binds himself to render some
with the Ventanillas, Artemio U. Valencia, without the knowledge of the Ventanilla
service or to do something in representation or on behalf of another, with the
couple, sold Lots 1 and 2 of Block 17 again, to Carlos Crisostomo, one of his sales
consent or authority of the latter. The general rule is that the principal is
agents without any consideration. Artemio Valencia then transmitted the fictitious
responsible for the acts of its agent done within the scope of its authority, and
Crisostomo contracts to Manila Remnant while he kept in his files the contracts
shouldbearthedamage caused to third persons. When the agent exceeds his autho
to sell in favor of the Ventanillas. All the amounts paid by the Ventanillas were
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 58

deposited in Valencia's bank account. Upon orders of Artemio Valencia, the


monthly payments of the Ventanillas were remitted to Manila Remnant as The trial court found that Manila Remnant could have not been dragged
payments of Crisostomo for which the former issued receipts in favor of into this suit without the fraudulent manipulations of Valencia. Subsequently,
Crisostomo. Manila Remnant and A.U. Valencia and Co. elevated the lower court's decision to
the Court of Appeals through separate appeals. On October 13, 1987, the
General Manager Karl Landahl, wrote Artemio Valencia informing him Appellate Court affirmed in toto the decision of the lower court. Reconsideration
that Manila Remnant was terminating its existing collection agreement with his sought by petitioner Manila Remnant was denied, hence the instant petition.
firm on account of the considerable amount of discrepancies and irregularities. As
a consequence, Artemio Valencia was removed as President by the Board of ISSUE: Whether or not petitioner Manila Remnant should be RULING:
Directors of Manila Remnant. Therefore, Valencia stopped transmitting solidarily liable together with A.U. Valencia and Co. and Carlos Crisostomo
Ventanilla's monthly installments. A.U. Valencia and Co. sued Manila Remnant to for the payment of moral, exemplary damages and attorney's fees in favor
impugn the abrogation of their agency agreement. The court ordered all lot buyers of the Ventanillas?
to deposit their monthly amortizations with the court. But A.U. Valencia and Co.
wrote the Ventanillas that it was still authorized by the court to collect the monthly RULING:
amortizations and requested them to continue remitting their amortizations with
the assurance that said payments would be deposited later in court. YES. In the case at bar, the Valencia realty firm had clearly overstepped
the bounds of its authority as agent and for that matter, even the law when
Thereafter, the trial court issued an order prohibiting A.U. Valencia and it undertook the double sale of the disputed lots. Such being the case, the principal,
Co. from collecting the monthly installments. Valencia complied with the court's Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil
order of submitting the list of all his clients but said list excluded the name of the Code which states that "(t)he agent who acts as such is not personally liable to that
Ventanillas. Manila Remnant caused the publication in the Times Journal of a notice party with whom he contracts, unless he expressly binds himself or exceeds the
cancelling the contracts to sell of some lot buyers. To prevent the effective limits of his authority without giving such party sufficient notice of his powers."
cancellation of their contracts, Artemio Valencia filed a complaint for specific However, the unique relationship existing between the principal and the agent at
performance with damages against Manila Remnant the time of the dual sale must be underscored. Bear in mind that the president then
of both firms was Artemio U. Valencia, the individual directly responsible for the
The Ventanillas, believing that they had already remitted enough money sale scam. Hence, despite the fact that the double sale was beyond the power of
went directly to Manila Remnant and offered to pay the entire outstanding balance the agent, Manila Remnant as principal was chargeable with the knowledge or
of the purchase price. Unfortunately, they discovered from Gloria Caballes that constructive notice of that fact and not having done anything to correct such an
their names did not appear in the records of A.U. Valencia and Co. as lot buyers. irregularity was deemed to have ratified the same. More in point, we find that by
Also, Manila Remnant refused the offer of the Ventanillas to pay for the remainder the principle of estoppel, Manila Remnant is deemed to have allowed its agent to
of the contract price. The Ventanillas then commenced an action for specific act as though it had plenary powers.
performance, annulment of deeds and damages against Manila Remnant, A.U.
Valencia and Co. and Carlos Crisostomo. Article 1911 of the Civil Code provides: "Even when the agent has exceeded
his authority, the principal is solidarily liable with the agent if the former
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 59

allowed the latter to act as though he had full powers." In such a situation, Alfred Hahn is a Filipino citizen doing business under the name
both the principal and the agent may be considered as joint feasors whose liability and style "Hahn-Manila." On the other hand, BMW is a nonresident
is joint and solidary (Verzosa vs. Lim, 45 Phil. 416). In essence, therefore, the basis foreign corporation existing under the laws of the former Federal
for Manila Remnant's solidary liability is estoppel which, in turn, is rooted in the Republic of Germany. On March 7, 1967, Hahn executed in favor of BMW a
principal's neglectfulness in failing to properly supervise and control the affairs of "Deed of Assignment with Special Power of Attorney". Per the agreement, the
its agent and to adopt the needed measures to prevent further misrepresentation. parties "continue[d] business relations as has been usual in the past without a
As a consequence, Manila Remnant is considered estopped from pleading the truth formal contract." BUT on February 16, 1993, in a meeting with a
that it had no direct hand in the deception employed by its agent. That the principal BMW representative and the president of Columbia Motors Corporation
might not have had actual knowledge of the agent's misdeed is of no moment. (CMC), Jose Alvarez, Hahn was informed that BMW was arranging to grant the
exclusive dealership of BMW cars and products to CMC, which had expressed
interest in acquiring the same.
67. LITONJUA JR VS ETERNITY CORP, G.R. No. 144805; June 8,
2006, PONENTE: Callejo, Sr.
See Section 1 case On February 24, 1993, Hahn received confirmation of the information
from BMW which, in a letter, expressed dissatisfaction with various aspects of
Hahn's business, mentioning among other things, decline in sales, deteriorating
68. MANOTOK BROTHERS, INC. VS. COURT OF APPEALS, G.R. No. services, and inadequate showroom and warehouse facilities, and petitioner's
94753, April 7, 1993., Campos Jr., J. alleged failure to comply with the standards for an exclusive BMW dealer.
See Section 1 case Nonetheless, BMW expressed willingness to continue business relations with
Hahn on the basis of a "standard BMW importer" contract, otherwise, it said, if
this was not acceptable to Hahn,
BMW would have no alternative but to terminate Hahn's exclusive dealership
effective June 30, 1993.
Hahn protested, claiming that the termination of his exclusive dealership
would be a breach of the Deed of Assignment. Hahn insisted that as long as the
assignment of its trademark and device subsisted, he remained BMW's exclusive
dealer in the Philippines because the assignment was made in consideration of
69. ALFRED HAHN, vs. COURT OF APPEALS and the exclusive dealership. BMW terminated Hahns exclusive dealership, and
BAYERISCHE MOTOREN WERKE suggested that Hahn and CMC jointly import and distribute BMW cars in
AKTIENGESELLSCHAFT (BMW), G.R. No. 113074 January 22, the Philippines. Thus, Hahn filed a complaint for specific performance
1997 and damages, application for temporary restraining order and for writs
of preliminary, mandatory and prohibitory injunction against BMW. RTC granted
FACTS: said prayers.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 60

BMW CONTENTIONS: BMW moved to dismiss the case, contending received reimbursement from BMW. This arrangement shows an agency. An agent
that the trial court did not acquire jurisdiction over it through the service of receives a commission upon the successful conclusion of a sale. On the other
summons on the Department of Trade and Industry, because it (BMW) was a hand, a broker earns his pay merely by bringing the buyer and the seller together,
foreign corporation and it was not doing business in the Philippines. It contended even if no sale is eventually made.
that the execution of the Deed of Assignment was an isolated transaction; that
Hahn was not its agent because the latter undertook to assemble and sell BMW
cars and products without the participation of BMW and sold other products; and 70. |DOMINION INSURANCE CORPORATION VS. COURT OF
that Hahn was an indentor or middleman transacting business in his own APPEALS| G. R. No. 129919, February 06, 2002| PARDO, J.:
name and for his own account. Hahns contention, BMW was doing business in
FACTS:
the Philippines through him as its agent, as shown by the fact that BMW invoices
and order forms were used to document his transactions; that he gave warranties
as exclusive BMW dealer; that BMW officials periodically inspected standards of On January 25, 1991, Rodolfo S. Guevarra instituted Civil Case for sum of
service rendered by him; and that he was described in service booklets and money against Dominion Insurance Corporation (DIC). Guevarra sought to
international publications of BMW as a "BMW Importer" or "BMW Trading recover the sum of P156,473.90 which he claimed to have advanced in his capacity
Company" in the Philippines. CA enjoined the RTC from further deciding the as manager of defendant to satisfy certain claims filed by DICs clients.
case. CA ruling: dismissed the complaint.
In its traverse, DIC denied any liability to Guevarra and asserted a counterclaim
for P249,672.53, representing premiums that Guevarra allegedly failed to remit.

ISSUE: Whether or not Hahn is an agent of BMW? When the case was called for pre-trial, but only Guevarra appeared.
Guevarra moved that the DIC be declared in default for its failure to appear in
RULING: court despite due notice.
YES, Hahn is an agent of BMW and not a broker. Finding the motion meritorious and considering that the pre-trial conference has
Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon been repeatedly postponed on motion of the DIC, the corporation has been
receipt of the orders, BMW fixed the down payment and pricing charges, notified declared in default.
Hahn of the scheduled production month
for the orders, and reconfirmed the orders by signing and returning to Hahn the On November 18, 1992, the court a quo rendered judgment:
acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars
purchased passed directly to the buyer and Hahn never paid for the purchase price DIC to pay Guevarra the sum of P156,473.90 representing the total amount
of BMW cars sold in the Philippines. Hahn was credited with a commission equal advanced by Guevarra in the payment of the claims of DICs clients
to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered in the Philippines On December 14, 1992, DIC appealed the decision to the Court of Appeals.
and serviced by him, Hahn received an additional 3% of the full purchase price.
Hahn performed after-sale services, including, warranty services, for which he
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 61

On July 19, 1996, the Court of Appeals promulgated a decision affirming that of Article 1878, Civil Code, enumerates the instances when a special power
the trial court. of attorney is required. The pertinent portion that applies to this case provides
that: Article 1878. Special powers of attorney are necessary in the
following cases:(1) To make such payments as are not usually considered as acts
ISSUE: of administration; (15) Any other act of strict dominion.

(1) Whether or not Guevarra acted within his authority as agent for DIC, The payment of claims is not an act of administration. The settlement of
and claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein. A
(2) Whether Guevarra is entitled to reimbursement of amounts he paid out special power of attorney is required before Guevarra could settle the insurance
of his personal money in settling the claims of several insured? claims of the insured.

HOLDING and RATIO: But Guevarras authority to settle claims is embodied in the Memorandum
of Management Agreement dated February 18, 1987 which enumerates the scope
Yes, Guevarra acted within his authority as agent for DIC. of Guevarras duties and responsibilities as agency manager as follows:
By the contract of agency, a person binds himself to render some service xxx xxx xxx
or to do something in representation or on behalf of another, with the consent or
authority of the latter. The basis for agency is representation. On the part of the
principal, there must be an actual intention to appoint or an intention naturally 1. You are hereby given authority to settle and dispose of all motor car claims in
inferrable from his words or actions; and on the part of the agent, there must be the amount of P5,000.00 with prior approval of the Regional Office.
an intention to accept the appointment and act on it, and in the absence of such
intent, there is generally no agency. 2. Full authority is given you on TPPI claims settlement.

A perusal of the Special Power of Attorney would show that DIC and xxx xxx xxx
Guevarra intended to enter into a principal-agent relationship. Despite the word
In settling the claims mentioned above, respondent Guevarras authority
special in the title of the document, the contents reveal that what was constituted
is further limited by the written standard authority to pay, which states that the
was actually a general agency.
payment shall come from Guevarras revolving fund or collection.
The agency comprises all the business of the principal, but, couched in
The instruction of DIC as the principal could not be any clearer. Guevarra
general terms, it is limited only to acts of administration.
was authorized to pay the claim of the insured, but the payment shall come from
A general power permits the agent to do all acts for which the law does the revolving fund or collection in his possession.
not require a special power.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 62

Yes, Guevarra is entitled to reimbursement of amounts he paid out Albaladejo y Cia., S. en C, instituted an action to recover a sum of money
of his personal money in settling the claims of several insured. from the Philippine Refining Co. (RPC), as successor to the Visayan Refining Co.,
two causes of action being stated in the complaint. Upon hearing the cause the
Having deviated from the instructions of the principal, the expenses that trial judge absolved the RPC from the first cause of action but gave judgment for
Guevarra incurred in the settlement of the claims of the insured may not be the Albaladejo to recover the sum of P49,626.68, with costs, upon the second
reimbursed from petitioner Dominion. This conclusion is in accord with Article cause of action. From this judgment the Albaladejo appealed with respect to the
1918, Civil Code, which states that: action taken upon the first cause of action, and the RPC appealed with respect to
the action taken upon the second cause of action.
The principal is not liable for the expenses incurred by the agent in the following
cases:(1) If the agent acted in contravention of the principals instructions, unless Albaladejo y Cia. is a limited partnership, engaged in the buying and selling
the latter should wish to avail himself of the benefits derived from the contract; of the products of the country, especially copra.
xxx xxx xxx The Visayan Refining Co. is a corporation engaged in operating its
extensive plant for the manufacture of coconut oil.
However, while the law on agency prohibits respondent Guevarra from
obtaining reimbursement, his right to recover may still be justified under the On August 28, 1918, the Albaladejo made a contract with the Visayan
general law on obligations and contracts. Refining Co., that during the year therein contemplated, Albaladejo shall buy copra
extensively for the Visayan Refining Co. At the end of said year both parties found
Article 1236, second paragraph, Civil Code, provides:Whoever pays for
themselves satisfied with the existing arrangement, and they therefore continued
another may demand from the debtor what he has paid, except that if he paid
by tacit consent to govern their future relations by the same agreement. In this
without the knowledge or against the will of the debtor, he can recover only insofar
situation affairs remained until July 9, 1920, when the Visayan Refining Co. closed
as the payment has been beneficial to the debtor.
down its factory at Opon and withdrew from the copra market.
In this case, when the risk insured against occurred, DICs liability as
When the contract was originally made, Albaladejo apparently had only
insurer arose. This obligation was extinguished when Guevarra paid the claims and
one commercial establishment, i. e., that at Legaspi; but the large requirements of
obtained Release of Claim Loss and Subrogation Receipts from the insured who
the Visayan Refining Co. for copra appeared so far to justify the extension of the
were paid.
plaintiff's business that during the course of the next two or three years it
Thus, to the extent that the obligation of the DIC has been extinguished, established some twenty agencies, or subagencies, in various ports and places of
Guevarra may demand for reimbursement from his principal. To rule otherwise the Province of Albay and neighboring provinces.
would result in unjust enrichment of Dominion Insurance Corporation.
After the Visayan Refining Co. had ceased to buy copra, of which fact the
71. |ALBALADEJO VS. THE PHILIPPINE REFINING CO., | G.R. Albaladejo was duly notified, the supplies of copra already purchased by the
No. 20726, December 20, 1923|STREET, J.: Albaladejo were gradually shipped out and accepted by the Visayan Refining Co.,
and in the course of the next eight or ten months the accounts between the two
parties were liquidated. The last account rendered by the Visayan Refining Co. to
FACTS:
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the Albaladejo was for the month of April, 1921, and it showed a balance of P288 October, 1920, the Albaladejo added an additional agency at Gubat to the twenty
in favor of the defendant. Under date of June 25, 1921, Albaladejo addressed a or more already in existence.
letter from Legaspi to the Philippine Refining Co. (which had now succeeded to
the rights and liabilities of the Visayan Refining Co.), expressing its approval of As a second cause of action Albaladejo seeks to recover the sum of
said account. In this letter no dissatisfaction was expressed by the Visayan Refining P110,000, the alleged amount expended by Albaladejo in maintaining and
Co.) as to the state of affairs between the parties; but about six weeks thereafter extending its organization as above stated. As a basis for the Visayan Refining Cos
the present action was begun. liability in this respect it is alleged that said organization was maintained and
extended at the express request, or requirement, of the defendant, in conjunction
In the course of the appealed decision the trial judge makes a careful with repeated assurances that the defendant would soon resume activity as a
examination of the proof relative to the movements of the fleet of boats purchaser of copra.
maintained by the Visayan Refining Co. for the purpose of collecting copra from
the various ports where it was gathered for said company, as well as of the With reference to this cause of action the trial judge found that the
movements of other boats chartered or hired by said company for the same Albaladejo, as claimed, had incurred expenses at the request of the Visayan
purpose; and upon consideration of all the facts revealed in evidence, the Trial Refining Co and upon its representation that the plaintiff would be fully
Court found that the Visayan Refining Co. had used reasonable promptitude in its compensated therefor in the future. Instead, however, of allowing the Albaladejo
efforts to get out the copra from the places where it had been deposited for the entire amount claimed, his Honor gave judgment for only thirty per centum of
shipment, notwithstanding occasional irregularities due at times to the condition said amount, in view of the fact that the plaintiff's transactions in copra had
of the weather as related to transportation by sea and at other times to the inability amounted in the past only to about thirty per centum of the total business
of the Visayan Refining Co. to dispatch boats to the more remote ports. This transacted by it. Estimated upon this basis, the amount recognized as constituting
finding of the trial judge, that no negligence of the kind alleged can properly be a just claim was found to be P49,626.68, and for this amount judgment was
imputed to the Visayan Refining Co., is in our opinion supported by the proof. rendered against the defendant.

It appears that in the first six months of the year 1919, the Albaladejo ISSUE:Whether or not Visayan Refining Co is liable for Albaladejos
found that its transactions with the Visayan Refining Co. had not been productive expenses in maintaining and extending its organization for the purchase of
of reasonable profit, a circumstance which Albaladejo attributed to loss of weight copra in the period between July, 1920, to July, 1921?
or shrinkage in. the copra from the time of purchase to its arrival at Opon; and the
matter was taken up with the officials of said company, with the result that a HOLDING and RATIO:
bounty amounting to P15,610.41 was paid to the plaintiff by the Visayan Refining
Co. No, such liability does not exist.

As already stated purchases of copra by the Visayan Refining Co were The contention is advanced that the contract between the Albaladejo and
suspended in the month of July, 1920. At this time the Albaladejo had an expensive the Visayan Refining Co. created the relation of principal and agent between the
organization which had been built up chiefly, we suppose, with a view to the parties, and reliance is placed upon article 1729 of the Civil Code which requires
buying of copra; and this organization was maintained practically intact for nearly the principal to indemnify the agent for damages incurred in carrying out the
a year after the suspension of purchases by the Visayan Refining Co. Indeed in agency.
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Attentive perusal of the contract is, however, convincing to the effect that Constante authorized Artigo to act as agent in the sale of two lots in
the relation between the parties was not that of principal and agent in so far as Cubao, Quezon City. The handwritten authorization letter signed by Constante
relates to the purchase of copra by Albaladejo. It is true that the Visayan Refining clearly established a contract of agency between Constante and Artigo. Thus,
Co. made Albaladejo one of its instruments for the collection of copra; but it is Artigo sought prospective buyers and found Times Transit Corporation. Artigo
clear that in making its purchases from the producers Albaladejo was buying upon facilitated the negotiations which eventually led to the sale of the two lots.
its own account and that when it turned over the copra to the Visayan Refining
Co., pursuant to that agreement, a second sale was effected. The Trial Court and Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the contract of agency; that
The contract declared that during the continuance of the contract, the Artigos complaint is not dismissible for failure to implead as indispensable parties
Visayan Refining Co. would not appoint any other agent for the purchase of copra the other co-owners of the two lots; and that it is not necessary to implead the
in Legaspi; and this gives rise indirectly to the inference that the Albaladejo was other co-owners since the action is exclusively based on a contract of agency
considered its buying agent. But the use of this term in one clause of the contract between Artigo and Constante.
cannot dominate the real nature of the agreement as revealed in other clauses, no
less than in the caption of the agreement itself. In some of the trade letters also ISSUE: Whether or not co-principals are solidary liable in a contract of
the various instrumentalities used by the Visayan Refining Co. for the collection agency?
of copra are spoken of as agents. But this designation was evidently used for
convenience; and it is very clear that in its activities as a buyer the Albaladejo was HOLDING and RATIO:
acting upon its own account and not as agent, in the legal sense, of the Visayan
Refining Co. The title to all of the copra purchased by the Albaladejo undoubtedly Yes, for solidarity of the obligation, as in the liability of co-principals in a
remained in it until it was delivered by way of subsequent sale to said company. contract of agency, each obligor may be compelled to pay the entire obligation.

For the reasons stated, no liability on the part of the Visayan Refining Co The De Castros argue that Artigos complaint should have been dismissed
is shown upon the Albaladejo 's second cause of action, and the judgment of the for failure to implead all the co-owners of the two lots. The De Castros claim that
trial court on this part of the case is erroneous. Artigo always knew that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom Constante merely represented.
The appealed judgment will therefore be affirmed in so far as it absolves The De Castros contend that failure to implead such indispensable parties is fatal
the defendant from the first cause of action and will be reversed in so far as it gives to the complaint since Artigo, as agent of all the four co-owners, would be paid
judgment against the defendant upon the second cause of action; and the with funds co-owned by the four co-owners.
defendant will be completely absolved from the complaint.
The De Castros contentions are devoid of legal basis.
72. |DE CASTRO VS. COURT OF APPEALS |G.R. No. 115838, July
18, 2002| CARPIO, J.: An indispensable party is one whose interest will be affected by the courts
action in the litigation, and without whom no final determination of the case can
FACTS: be had. The joinder of indispensable parties is mandatory and courts cannot
proceed without their presence. Whenever it appears to the court in the course of
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a proceeding that an indispensable party has not been joined, it is the duty of the effects of negotiorum gestio with respect to the others. And if the power granted
court to stop the trial and order the inclusion of such party. includes various transactions some of which are common and others are not, only
those interested in each transaction shall be liable for it.
However, the rule on mandatory joinder of indispensable parties is not
applicable to the instant case. 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
There is no dispute that Constante appointed Artigo in a handwritten note pay the entire obligation. The agent may recover the whole compensation from
dated January 24, 1984 to sell the properties of the De Castros for P23 million at any one of the co-principals, as in this case.
a 5 percent commission.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any
Constante signed the note as owner and as representative of the other co- of the solidary debtors. This article reads: Art. 1216. The creditor may proceed
owners. Under this note, a contract of agency was clearly constituted between against any one of the solidary debtors or some or all of them simultaneously. The
Constante and Artigo. Whether Constante appointed Artigo as agent, in demand made against one of them shall not be an obstacle to those which may
Constantes individual or representative capacity, or both, the De Castros cannot subsequently be directed against the others, so long as the debt has not been fully
seek the dismissal of the case for failure to implead the other co-owners as collected.
indispensable parties. The De Castros admit that the other co-owners are solidarily
liable under the contract of agency, citing Article 1915 of the Civil Code, which SECTION FIVE
reads: Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the 73. |GARCIA VS. DE MANZANO, |G.R. No. 13414, February 04,
consequences of the agency. 1919|MOIR, J.

The solidary liability of the four co-owners, however, militates against the
De Castros theory that the other co-owners should be impleaded as indispensable FACTS:
parties. A noted commentator explained Article 1915 thus Narciso Lopez Manzano was a merchant in Atimonan, Tayabas, who went
The rule in this article applies even when the appointments were made by the to Spain in May, 1910, and died there the 8th of September, 1913. He gave a
principals in separate acts, provided that they are for the same transaction. The general power-of-attorney to his son, Angel L. Manzano on the 9th of February,
solidarity arises from the common interest of the principals, and not from the act 1910, and on the 25th of March a second general power-of-attorney to his wife,
of constituting the agency. By virtue of this solidarity, the agent can recover from Josefa Samson.
any principal the whole compensation and indemnity owing to him by the others.
The parties, however, may, by express agreement, negate this solidary Manzano was the owner of a half interest in a small steamer, the San
responsibility. The solidarity does not disappear by the mere partition effected by Nicolas, the other half being owned by Ocejo, Perez & Co., with whom there was
the principals after the accomplishment of the agency. a partnership agreement to run the steamer for a few years. When this period
expired Ocejo, Perez & Co., refused to continue the contract and demanded that
If the undertaking is one in which several are interested, but only some Manzano buy or sell. As he did not want to sell at the price offered and could not
create the agency, only the latter are solidarily liable, without prejudice to the buy, Juan Garcia bought the half interest held by Ocejo, Perez & Co., on the 15th
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 66

of October, 1910. Angel L. Manzano, acting under his power-of-attorney, sold in There is no proof in the record that the first agent, the son, knew of the
July, 1911, the other half of the boat to the Garcia. power-of-attorney to his mother.
On the 23d of July, 1912, Angel L. Manzano, by virtue of the power-of- It was necessary under the law for the defendants, in order to establish
attorney from his father, Narciso L. Manzano, executed a contract, by which Juan their counterclaim, to prove that the son had notice of the second power-of-
Garcia agreed to extend a credit to Narciso L. Manzano in the sum of P12,000, attorney. They have not done so, and it must be considered that Angel L. Manzano
and this credit was used by the house of Manzano. To secure it a mortgage was was acting under a valid power-of-attorney from his father which had riot been
given in the same document on three parcels of land in Atimonan, with their legally revoked on the date of the sale of the half interest in the steamer to the
improvements. plaintiff's son, which half interest was legally inherited by the plaintiffs.
The defendants also filed a counter-claim against Juan Garcia and his wife, The defendant's next argument is that the power-of attorney, if valid, does
Conception Castro, in which they allege that Narciso L. Manzano was the owner not authorize the sale of the half interest in the boat to the plaintiff.
of one-half of the small steamer San Nicolas and Juan Garcia the owner of the
other half; that Garcia taking advantage of the youth and inexperience of Angel L. There is no pretense that the boat was not sold for a fair price, there is no
Manzano falsely and maliciously made him believe that he had authority under the denial that the value was received in full, but the defendants allege that the power-
power of-attorney from his father to sell the half interest in the San Nicolas, and of-attorney under which Angel L. Manzano acted, even if a valid power, did not
that he did so. That Angel L. Manzano had no authority to sell the interest in the authorize the sale of the boat, and they want it back with one-half of the profits
steamer, but that since the date of said sale, July, 1912, the plaintiff had illegally derived from its use by the plaintiff.
appropriated all rents and profits of the boat to his own use, which amount to
P30,000 per year, after paying for all repairs, etc., and they ask the court to absolve The power-of-attorney authorizes the sale of real property, the buying of
them from the complaint, to declare them the owners of one-half of the steamer real property and mortgaging the same, the borrowing of money and in fact is
San Nicolas, and to order the plaintiffs to render a detailed account of all the general and complete.
profits received from the San Nicolas, arid to order one half of the profits paid to
The power does not expressly state that the agent may sell the boat, but a
the defendants.
power so full and complete and authorizing the sale of real property; must
necessarily carry with it the right to sell a half interest in a small boat. The record
ISSUE: Whether or not that the power of attorney executed in favor of the further shows the sale was necessary in order to get money or a credit without
wife revoked the one to the son? which it would be impossible to continue the business which was being conducted
in the name of Narciso L. Manzano and for his benefit.
HOLDING and RATIO:
The Court consider that the authorization is so complete that it carries
"The appointment of a new agent for the same business produces a
revocation of the previous agency from the day on which notice was given to the with it full authority to sell the one-half interest in the boat which was then owned
by Narciso L. Manzano.
former agent, excepting the provisions of the next preceding article"
74. CMS LOGGING VS. COURT OF APPEALS|G.R. No. L-41420,
July 10, 1992|NOCON, J.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 67

sales made by CMS was P42,630.82,[6] thus impliedly admitting that it retained the
FACTS: amount alleged by CMS.
CMS is a forest concessionaire engaged in the logging business, while In dismissing the complaint, the trial court ruled that no evidence was
DRACOR is engaged in the business of exporting and selling logs and lumber. On presented to show that Shinko received the commission of U.S. $77,264.67 arising
August 28, 1957, CMS and DRACOR entered into a contract of agency whereby from the sale of CMS's logs in Japan, though the trial court stated that "Shinko
the former appointed the latter as its exclusive export and sales agent for all logs was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-
that the former may produce, for a period of five (5) years. 1)."[7] The counterclaim was likewise dismissed, as it was shown that DRACOR
had waived its rights to the balance of its commission in a letter dated February 2,
About six months prior to the expiration of the agreement, while on a trip 1963 to Atty. Carlos Moran Sison, president of CMS.[8] From said decision, only
to Tokyo, Japan, CMS's president, Atty. Carlos Moran Sison, and general manager CMS appealed to the Court of Appeals.
and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had
used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or The Court of Appeals, affirmed the dismissal of the complaint since "[t]he
liaison officer in selling CMS's logs in Japan for which Shinko earned a commission trial court could not have made a categorical finding that Shinko collected
of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this commissions from the buyers of Sison's logs in Japan, and could not have held
arrangement, Shinko was able to collect a total of U.S. $77,264.67.[3] that Sison is entitled to recover from Dracor the amount collected by Shinko as
commissions, plaintiff-appellant having failed to prove by competent evidence its
CMS claimed that this commission paid to Shinko was in violation of the claims."
agreement and that it (CMS) is entitled to this amount as part of the proceeds of
the sale of the logs. CMS contended that since DRACOR had been paid the 5% ISSUE: Whether or not the principal may revoke a contract of agency at
commission under the agreement, it is no longer entitled to the additional will, and may be availed of even if the period fixed in the contract of agency
commission paid to Shinko as this tantamount to DRACOR receiving double
as not yet expired?
compensation for the services it rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 HOLDING and RATIO:
or P2,883,351.90,[4] directly to several firms in Japan without the aid or Yes, the principal may revoke a contract of agency at will, and may be
intervention of DRACOR. availed of even prior to the expiration of the contract of agency.
CMS sued DRACOR for the commission received by Shinko and for The Court find merit in CMS's contention that the appellate court erred in
moral and exemplary damages, while DRACOR counterclaimed for its holding that DRACOR was entitled to its commission from the sales made by
commission, amounting to P144,167.59, from the sales made by CMS of logs to CMS to Japanese firms.
Japanese firms. In its reply, CMS averred as a defense to the counterclaim that
DRACOR had retained the sum of P101.167.59 as part of its commission for the The principal may revoke a contract of agency at will, and such revocation
sales made by CMS. Thus, as its counterclaim to DRACOR's counterclaim, CMS may be express, or implied,[20] and may be availed of even if the period fixed in
demanded DRACOR return the amount it unlawfully retained. DRACOR later the contract of agency as not yet expired. As the principal has this absolute right
filed an amended counterclaim, alleging that the balance of its commission on the to revoke the agency, the agent cannot object thereto; neither may he claim
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 68

damages arising from such revocation, unless it is shown that such was done in See Case Number 74
order to evade the payment of agent's commission.
In the case at bar, CMS appointed DRACOR as its agent for the sale of its 76. DY BUNCIO & COMPANY INC. vs ONG GUAN CAN ET. AL./
logs to Japanese firms. Yet, during the existence of the contract of agency, G.R. NO. L-40681 / 2 October 1934 / Justice Hull
DRACOR admitted that CMS sold its logs directly to several Japanese firms. This
act constituted an implied revocation of the contract of agency under Article 1924 FACTS:
of the Civil Code, which provides:
This is a suit over a rice mill and camarin situated at Dao, Province of
"Art. 1924 - The agency is revoked if the principal directly manages the business Capiz. Plaintiff claims that the property belongs to its judgment debtor, Ong Guan
entrusted to the agent, dealing directly with third persons." Can, while defendants Juan Tong and Pua Giok Eng claim as owner and lessee of
the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr.
In New Manila Lumber Company, Inc. vs. Republic of the Philippines,
this Court ruled that the act of a contractor, who, after executing powers of After trial the Court of First Instance of Capiz held that the deed was
attorney in favor of another empowering the latter to collect whatever amounts invalid and that the property was subject to the execution which has been levied
may be due to him from the Government, and thereafter demanded and collected on said properties by the judgment creditor of the owner. Defendants Juan Tong
from the government the money the collection of which he entrusted to his and Pua Giok bring this appeal and insist that the deed of the 31st of July, 1931,
attorney-in-fact, constituted revocation of the agency in favor of the attorney-in- is valid.
fact.
The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong
Since the contract of agency was revoked by CMS when its sold its logs Guan Can, the proprietor of the commercial firm of Ong Guan Can & Sons, sells
to Japanese firms without the intervention of DRACOR, the latter is no longer the rice-mill and camarin for P13,000 and gives as his authority the power of
entitled to its commission from the proceeds of such sale and is not entitled to attorney dated the 23d of May, 1928, a copy of this public instrument being
retain whatever moneys it may have received as its commission for said attached to the deed and recorded with the deed in the office of the register of
transactions. Neither would DRACOR be entitled to collect damages from CMS, deeds of Capiz. The receipt of the money acknowledged in the deed was to the
since damages are generally not awarded to the agent for the revocation of the agent, and the deed was signed by the agent in his own name and without any
agency, and the case at bar is not one falling under the exception mentioned, which words indicating that he was signing it for the principal.
is to evade the payment of the agent's commission.
Leaving aside the irregularities of the deed and coming to the power of
The Court reversed the ruling of the Court of Appeals with regard to attorney referred to in the deed and registered therewith, it is at once seen that it
DRACOR's right to retain the amount of P101,536.77 as part of its commission is not a general power of attorney but a limited one and does not give the express
from the sale of logs by CMS, and hold that DRACOR has no right to its power to alienate the properties in question. (Article 1713 of the Civil Code.)
commission.
Appellants claim that this defect is cured by Exhibit 1, which purports to
75. CMS LOGGING VS. COURT OF APPEALS|G.R. No. L-41420, be a general power of attorney given to the same agent in 1920.
July 10, 1992|NOCON, J.
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ISSUE: also alleged that petitioner Calimlim assigned about 80 military personnel to guard
the area and encamp thereon to intimidate Legaspi and other occupants of the area
WoN the disputed land is subject to execution and attachment? from going near the subject land.
RULING: On February 15, 2000, Legaspi executed a special power of attorney (SPA)
appointing his nephew, private respondent Gutierrez, as his attorney-in-fact.
Yes. Article 1732 of the Civil Code is silent over the partial termination of Gutierrez was given the power to deal with the treasure hunting activities on
an agency. The making and accepting of a new power of attorney, whether it Legaspis land and to file charges against those who may enter it without the latters
enlarges or decreases the power of the agent under a prior power of attorney, must authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be found
be held to supplant and revoke the latter when the two are inconsistent. If the new in the land.
appointment with limited powers does not revoke the general power of attorney,
the execution of the second power of attorney would be a mere futile On February 29, 2000, Gutierrez filed a case for damages and injunction
gesture.lawphi1.net against petitioners for illegally entering Legaspis land. He hired the legal services
of Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza
The title of Ong Guan Can not having been divested by the so-called deed shall be entitled to 30% of Legaspis share in whatever treasure may be found in
of July 31, 1931, his properties are subject to attachment and execution. the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance
fee per court hearing and defray all expenses for the cost of the litigation.
A special power of attorney giving the son the authority to sell the
principals property is deemed revoked by a subsequent general power of attorney On March 14, 2000, petitioners filed a Motion to Dismiss contending: first,
that does not give such power to the son, and any sale effected thereafter by the there is no real party-in-interest as the SPA of Gutierrez to bring the suit was
son in the name of the father would be void. already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of
Revocation.
77. REPUBLIC vs. EVANGELISTA / G.R. NO. 156015 / 11 August
2005 / Justice Puno On March 23, 2000, the trial court granted private respondents application
for a writ of preliminary injunction on the ground that he SPA granted to Gutierrez
FACTS:
continues to be valid.
The Complaint alleged that private respondent Legaspi is the owner of a On appeal, the Court of Appeals affirmed the decision of the trial court.
land located in Bigte, Norzagaray, Bulacan. In November 1999, petitioner
Calimlim, representing the Republic of the Philippines, and as then head of the Issue:
Intelligence Service of the Armed Forces of the Philippines and the Presidential
Security Group, entered into a Memorandum of Agreement (MOA) with one WoN the contract of agency between Legaspi and Guiterrez has been
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in effectively revocked by Legaspi?
Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness. It
was further alleged that thereafter, Reyes, together with petitioners, started, Ruling:
digging, tunneling and blasting works on the said land of Legaspi. The complaint
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No. petitioners claim that the special power of attorney of Gutierrez to protect Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez
represent Legaspi has already been revoked by the latter. Private respondent hired the services of Atty. Adaza to prosecute the case for damages and injunction
Gutierrez, however, contends that the unilateral revocation is invalid as his agency against petitioners. As payment for legal services, Gutierrez agreed to assign to
is coupled with interest. Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered in the
subject land. It is clear that the treasure that may be found in the land is the subject
The Court agrees with private respondent. matter of the agency; that under the SPA, Gutierrez can enter into contract for the
legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest
Art. 1868 of the Civil Code provides that by the contract of agency, an
in the subject matter of the agency, i.e., in the treasures that may be found in the
agent binds himself to render some service or do something in representation or
land. This bilateral contract depends on the agency and thus renders it as one
on behalf of another, known as the principal, with the consent or authority of the
coupled with interest, irrevocable at the sole will of the principal Legaspi. When
latter.
an agency is constituted as a clause in a bilateral contract, that is, when the agency
A contract of agency is generally revocable as it is a personal contract of is inserted in another agreement, the agency ceases to be revocable at the pleasure
representation based on trust and confidence reposed by the principal on his agent. of the principal as the agency shall now follow the condition of the bilateral
As the power of the agent to act depends on the will and license of the principal agreement. Consequently, the Deed of Revocation executed by Legaspi has no
he represents, the power of the agent ceases when the will or permission is effect. The authority of Gutierrez to file and continue with the prosecution of the
withdrawn by the principal. Thus, generally, the agency may be revoked by the case at bar is unaffected.
principal at will.
However, an exception to the revocability of a contract of agency is when
78. SEVILLA vs. CA / G.R. NO. L- 41182-3 / 16 April 1988 / Justice
it is coupled with interest, i.e., if a bilateral contract depends upon the agency. The
Sarmento
reason for its irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal but also that of FACTS:
the agent and third persons which are affected. Hence, the law provides that in
such cases, the agency cannot be revoked at the sole will of the principal. On the strength of a contract (Exhibit A for the appellant Exhibit 2 for
the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
In the case at bar, we agree with the finding of the trial and appellate courts Noguera, party of the first part; the Tourist World Service, Inc., represented by
that the agency granted by Legaspi to Gutierrez is coupled with interest as a Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as
bilateral contract depends on it. It is clear from the records that Gutierrez was appellants, the Tourist World Service, Inc. leased the premises belonging to the
given by Legaspi, inter alia, the power to manage the treasure hunting activities in party of the first part at Mabini St., Manila for the former-s use as a branch office.
the subject land; to file any case against anyone who enters the land without In the said contract the party of the third part held herself solidarily liable with the
authority from Legaspi; to engage the services of lawyers to carry out the agency; party of the part for the prompt payment of the monthly rental agreed on. When
and, to dig for any treasure within the land and enter into agreements relative the branch office was opened, the same was run by the herein appellant Una 0.
thereto. It was likewise agreed upon that Gutierrez shall be entitled to 40% of Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in
whatever treasure may be found in the land. Pursuant to this authority and to
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on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be The trial court held for the private respondent on the premise that the
withheld by the Tourist World Service, Inc. private respondent, Tourist World Service, Inc., being the true lessee, it was within
its prerogative to terminate the lease and padlock the premises. It likewise found
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with a rival Inc. and as such, she was bound by the acts of her employer. The respondent
firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, Court of Appeal rendered an affirmance.
the Tourist World Service considered closing down its office. This was firmed up
by two resolutions of the board of directors of Tourist World Service, Inc. dated ISSUE:
Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager
and vice-president of the Tourist World Service, Inc., Ermita Branch, and the WoN the private respondent has the prerogative to terminate the lease and
second,authorizing the corporate secretary to receive the properties of the Tourist padlock the premisses since Lina Sevilla is a mere employee of the private
World Service then located at the said branch office. It further appears that on Jan. respondent and was bound by the acts of her employer?
3, 1962, the contract with the appellees for the use of the Branch Office premises
was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees Ruling:
no longer used it. As a matter of fact appellants used it since Nov. 1961. Because No. It is the Court's considered opinion, that when the petitioner, Lina
of this, and to comply with the mandate of the Tourist World Service, the Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
corporate secretary Gabino Canilao went over to the branch office, and, finding Ermita office, she must have done so pursuant to a contract of agency. It is the
the premises locked, and, being unable to contact Lina Sevilla, he padlocked the essence of this contract that the agent renders services "in representation or on
premises on June 4, 1962 to protect the interests of the Tourist World Service. behalf of another. In the case at bar, Sevilla solicited airline fares, but she did so
When neither the appellant Lina Sevilla nor any of her employees could enter the for and on behalf of her principal, Tourist World Service, Inc. As compensation,
locked premises, a complaint wall filed by the herein appellants against the she received 4% of the proceeds in the concept of commissions. And as we said,
appellees with a prayer for the issuance of mandatory preliminary injunction. Both Sevilla herself based on her letter of November 28, 1961, pre-assumed her
appellees answered with counterclaims. For apparent lack of interest of the parties principal's authority as owner of the business undertaking. We are convinced,
therein, the trial court ordered the dismissal of the case without prejudice. considering the circumstances and from the respondent Court's recital of facts,
The appellee Segundina Noguera sought reconsideration of the order that the ties had contemplated a principal agent relationship, rather than a joint
dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, managament or a partnership.
granted permitting her to present evidence in support of her counterclaim. But unlike simple grants of a power of attorney, the agency that we hereby
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture declare to be compatible with the intent of the parties, cannot be revoked at will.
was entered into by and between her and appellee TWS with offices at the Ermita The reason is that it is one coupled with an interest, the agency having been created
branch office and that she was not an employee of the TWS to the end that her for mutual interest, of the agent and the principal. It appears that Lina Sevilla is a
relationship with TWS was one of a joint business venture. bona fide travel agent herself, and as such, she had acquired an interest in the
business entrusted to her. Moreover, she had assumed a personal obligation for
the operation thereof, holding herself solidarily liable for the payment of rentals.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 72

She continued the business, using her own name, after Tourist World had stopped conformity to your alternative proposal regarding the payment of the commission
further operations. Her interest, obviously, is not to the commissions she earned due me. However, I have no choice for to do otherwise would be violative of the
as a result of her business transactions, but one that extends to the very subject Agency Agreement executed between our goodselves." (Exhibit B-1)
matter of the power of management delegated to her. It is an agency that, as we
said, cannot be revoked at the pleasure of the principal. Accordingly, the Because of the refusal of Valenzuela, Philamgen and its officers, namely:
revocation complained of should entitle the petitioner, Lina Sevilla, to damages. Bienvenido Aragon, Carlos Catolico and Robert E. Parnell took drastic action
against Valenzuela. They: (a) reversed the commission due him by not crediting in
79. VALENZUELA vs CA / G.R. NO. 83122 / 19 October 1990 his account the commission earned from the Delta Motors, Inc. insurance (Exhibit
"J" and "2"); (b) placed agency transactions on a cash and carry basis; (c) threatened
FACTS: the cancellation of policies issued by his agency (Exhibits "H" to "H-2"); and (d)
started to leak out news that Valenzuela has a substantial account with Philamgen.
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent All of these acts resulted in the decline of his business as insurance agent (Exhibits
of private respondent Philippine American General Insurance Company, Inc. "N", "O", "K" and "K-8"). Then on December 27, 1978, Philamgen terminated
(Philamgen for short) since 1965. As such, he was authorized to solicit and sell in the General Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial
behalf of Philamgen all kinds of non-life insurance, and in consideration of services Court dated June 23, 1986, Civil Case No. 121126, Annex I, Petition).
rendered was entitled to receive the full agent's commission of 32.5% from
Philamgen under the scheduled commission rates (Exhibits "A" and "1"). From The petitioners sought relief by filing the complaint against the private
1973 to 1975, Valenzuela solicited marine insurance from one of his clients, the respondents in the court a quo (Complaint of January 24, 1979, Annex "F"
Delta Motors, Inc. (Division of Electronics Airconditioning and Refrigeration) in Petition). After due proceedings, the trial court found:
the amount of P4.4 Million from which he was entitled to a commission of 32%
(Exhibit "B"). However, Valenzuela did not receive his full commission which xxx xxx xxx
amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta
Motors. During the period 1976 to 1978, premium payments amounting to Defendants tried to justify the termination of plaintiff Arturo P.
P1,946,886.00 were paid directly to Philamgen and Valenzuela's commission to Valenzuela as one of defendant PHILAMGEN's General Agent by making it
which he is entitled amounted to P632,737.00. appear that plaintiff Arturo P. Valenzuela has a substantial account with defendant
PHILAMGEN particularly Delta Motors, Inc.'s Account, thereby prejudicing
In 1977, Philamgen started to become interested in and expressed its intent defendant PHILAMGEN's interest (Exhibits 6,"11","11- "12- A"and"13-A").
to share in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-
fifty basis (Exhibit "C"). Valenzuela refused (Exhibit "D"). Defendants also invoked the provisions of the Civil Code of the
Philippines (Article 1868) and the provisions of the General Agency Agreement as
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon their basis for terminating plaintiff Arturo P. Valenzuela as one of their General
insisted on the sharing of the commission with Valenzuela (Exhibit E). This was Agents.
followed by another sharing proposal dated June 1, 1978. On June 16,1978,
Valenzuela firmly reiterated his objection to the proposals of respondents stating In its questioned decision the Court of Appeals observed that:
that: "It is with great reluctance that I have to decline upon request to signify my
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In any event the principal's power to revoke an agency at will is so business that Valenzuela had built up, developed and nurtured to profitability
pervasive, that the Supreme Court has consistently held that termination may be through over thirteen (13) years of patient work and perseverance. When
effected even if the principal acts in bad faith, subject only to the principal's liability Valenzuela refused to share his commission in the Delta account, the boom
for damages. suddenly fell on him.
The lower court, however, thought the termination of Valenzuela as The private respondents by the simple expedient of terminating the
General Agent improper because the record will show the principal cause of the General Agency Agreement appropriated the entire insurance business of
termination of the plaintiff as General Agent of defendant Philamgen was his Valenzuela. With the termination of the General Agency Agreement, Valenzuela
refusal to share his Delta commission. would no longer be entitled to commission on the renewal of insurance policies of
clients sourced from his agency. Worse, despite the termination of the agency,
ISSUE: Philamgen continued to hold Valenzuela jointly and severally liable with the
insured for unpaid premiums. Under these circumstances, it is clear that
WoN Philamgen and/or its officers can be held liable for damages due to Valenzuela had an interest in the continuation of the agency when it was
the termination of the General Agency Agreement it entered into with the unceremoniously terminated not only because of the commissions he should
petitioners? continue to receive from the insurance business he has solicited and procured but
RULING: also for the fact that by the very acts of the respondents, he was made liable to
Philamgen in the event the insured fail to pay the premiums due. They are
Yes. After a painstaking review of the entire records of the case and the estopped by their own positive averments and claims for damages. Therefore, the
findings of facts of both the court a quo and respondent appellate court, the court respondents cannot state that the agency relationship between Valenzuela and
is constrained to affirm the trial court's findings and rule for the petitioners. Philamgen is not coupled with interest. "There may be cases in which an agent has
been induced to assume a responsibility or incur a liability, in reliance upon the
It is also evident from the records that the agency involving petitioner and continuance of the authority under such circumstances that, if the authority be
private respondent is one "coupled with an interest," and, therefore, should not be withdrawn, the agent will be exposed to personal loss or liability".
freely revocable at the unilateral will of the latter.
Furthermore, there is an exception to the principle that an agency is
In the insurance business in the Philippines, the most difficult and revocable at will and that is when the agency has been given not only for the
frustrating period is the solicitation and persuasion of the prospective clients to interest of the principal but for the interest of third persons or for the mutual
buy insurance policies. Normally, agents would encounter much embarrassment, interest of the principal and the agent. In these cases, it is evident that the agency
difficulties, and oftentimes frustrations in the solicitation and procurement of the ceases to be freely revocable by the sole will of the principal.
insurance policies. To sell policies, an agent exerts great effort, patience,
perseverance, ingenuity, tact, imagination, time and money. In the case of 80. |National Sugar Trading vs. PNB |G.R. No. 151218|January 28,
Valenzuela, he was able to build up an Agency from scratch in 1965 to a highly 2003| Justice Ynares-Santiago|
productive enterprise with gross billings of about Two Million Five Hundred
Thousand Pesos (P2,500,000.00) premiums per annum. The records sustain the FACTS:
finding that the private respondent started to covet a share of the insurance
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Sometime in February 1974, then President Ferdinand E. Marcos issued Despite the liquidation scheme, NASUTRA/PHILSUCOM still failed to
Presidential Decree No. 388 constituting the Philippine Sugar Commission remit the interest payments to PNB and its branches, which interests amounted to
(PHILSUCOM), as the sole buying and selling agent of sugar on the quedan permit P65, 412,245.84 in 1986. As a result thereof, then President Marcos issued PD
level. 2005 dissolving NASUTRA effective January 31, 1986. NASUTRA's records of
its sugar trading operations, however, were destroyed during the Edsa Revolution
In November of the same year, PD 579 was issued, authorizing the in February 1986.
Philippine Exchange Company, Inc. (PHILEXCHANGE), a wholly owned
subsidiary of Philippine National Bank (PNB) to serve as the marketing agent of On May 28, 1986, then President Corazon C. Aquino issued Executive
PHILSUCOM. Pursuant to PD 579, PHILEXCHANGE's purchases of sugar Order (EO) No. 18 creating the Sugar Regulatory Administration (SRA) and
shall be financed by PNB and the proceeds of sugar trading operations of abolishing PHILSUCOM. All the assets and records of PHILSUCOM including
PHILEXCHANGE shall be used to pay its liabilities with PNB. its beneficial interests over the assets of NASUTRA were transferred to SRA.
Similarly, in February 1975, PD 659 was issued, constituting
PHILEXCHANGE and/or PNB as the exclusive sugar trading agencies of the On January 24, 1989, before the completion of the three-year winding up
government for buying sugar from planters or millers and selling or exporting period, NASUTRA established a trusteeship to liquidate and settle its accounts.
them. PNB then extended loans to PHILEXCHANGE for the latter's sugar This notwithstanding, NASUTRA still defaulted in the payment of its loans
trading operations. amounting to P389, 246,324.60 (principal and accrued interest) to PNB.

At first, PHILEXCHANGE religiously paid its obligations to PNB by In the meantime, PNB received remittances from foreign banks totaling
depositing the proceeds of the sale of sugar with the bank. Subsequently, however, US$36,564,558.90 or the equivalent of P696, 281,405.09 representing the proceeds
with the fall of sugar prices in the world market, PHILEXCHANGE defaulted in of NASUTRA's sugar exports. Said remittances were then applied by PNB to the
the payments of its loans amounting to P206, 070,172.57. unpaid accounts of NASUTRA/PHILSUCOM with PNB and
PHILEXCHANGE.
In July 1977, the National Sugar Trading Corporation (NASUTRA)
replaced PHILEXCHANGE as the marketing agent of PHILSUCOM. Subsequently, PNB applied the P19, 688,763.29 to PHILSUCOM's
Accordingly, PHILEXCHANGE sold and turned over all sugar quedans to account with PHILEXCHANGE which in turn was applied to
NASUTRA. However, no physical inventory of the sugar covered by the quedans PHILEXCHANGE's account with PNB.
was made.
Accordingly, NASUTRA requested PNB to furnish it with the necessary
To finance its sugar trading operations, NASUTRA applied for and was
documents and/or explanation concerning the disposition/application,
granted a P408 Million Revolving Credit Line by PNB in 1981. Every time
accounting and restitution of the remittances in question.
NASUTRA availed of the credit line, its Executive Vice-President, Jose Unson,
executed a promissory note in favor of PNB.
Dissatisfied, and believing that PNB failed to provide them with said
documents, NASUTRA and SRA filed a petition for arbitration with the
Department of Justice which held that the act of PNB was valid and legal. Both
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 75

parties appealed before the Office of the President which affirmed the decision of the agreement entered into by NASUTRA/SRA and PNB must be respected and
the Secretary of Justice. have the force of law between them.

Thereafter, petitioners filed a petition for review with the Court of Therefore, the act of PNB in offsetting the subject remittances to alleged
Appeals, alleging, inter alia, that the Office of the President erred when it relied accounts of NASUTRA with PNB and PHILEX is legal and valid.
solely on the documents submitted by PNB to determine the amount of the
subject remittances and in not ordering PNB to render an accounting of the said 81. |Ching vs. Bantolo |G.R. No. 177086| December 5, 2012| Justice
remittances; in declaring as valid and legal PNB's application of the subject Del Castillo|
remittances to alleged NASUTRA's accounts with PNB and PHILEXCHANGE
without NASUTRA's knowledge, consent and authority. Consequently, the FACTS:
appellate court dismissed the petition. Hence, this petition.
Respondents Felix M. Bantolo (Bantolo), Antonio O. Adriano and Eulogio
Sta. Cruz, Jr. are owners of several parcels of land situated in Tagaytay City. On
ISSUE: Whether or not the agency NASUTRA/SRA and PNB can be April 3, 2000, respondents executed in favor of petitioners Albert Ching (Ching)
cancelled and revoked at will by any parties? and Romeo J. Bautista a Special Power of Attorney (SPA] authorizing petitioners
to obtain a loan using respondents properties as collateral. Without notice to
HOLDING and RATIO: petitioners, respondents executed a Revocation of Power of Attorney effective at
NO, the agency being coupled with interest is an exception of revocability the end of business hours of July 17, 2000.
of a contract of agency. On July 18, 2000, the Philippine Veterans Bank (PVB) approved the loan
The relationship between NASUTRA/SRA and PNB when the former application of petitioner Ching in the amount of P25 million for a term of five
constituted the latter as its attorney-in-fact is not a simple agency. years subject to certain conditions. On July 31, 2000, petitioner Ching thru a letter
NASUTRA/SRA has assigned and practically surrendered its rights in favor of informed respondents of the approval of the loan.
PNB for a substantial consideration. Sometime in the first week of August 2000, petitioners learned about the
To reiterate, NASUTRA/SRA executed promissory notes in favor of PNB revocation of the SPA. Consequently, petitioners sent a letter to respondents
every time it availed of the credit line. The agency established between the parties demanding that the latter comply with the agreement by annulling the revocation
is one coupled with interest which cannot be revoked or cancelled at will by any of the SPA.
of the parties. On September 8, 2000, petitioners filed before the Regional Trial Court
(RTC) of Quezon City a Complaint for Annulment of Revocation of SPA,
Obligations arising from contract have the force of law between the Enforcement of SPA and/or interest in the properties covered by said SPA and
contracting parties and should be complied with in good faith. Damages against respondents. Petitioners later amended the Complaint to include
an alternative prayer to have them declared as the owners of one-half of the
Verily, parties may freely stipulate their duties and obligations which properties covered by the SPA.
perforce would be binding on them. Not being repugnant to any legal proscription,
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Petitioners alleged that the SPA is irrevocable because it is a contract of HOLDING and RATIO:
agency coupled with interest. According to them, they agreed to defray the costs
or expenses involved in processing the loan because respondents promised that NO.There is no question that the SPA executed by respondents in favor
they would have an equal share in the proceeds of the loan or the subject of petitioners is a contract of agency coupled with interest. This is because their
properties. bilateral contract depends upon the agency. Hence, it cannot be revoked at the
sole will of the principal.
In their Answer, respondents contended that petitioners have no cause of
action. Respondents alleged that they executed the SPA in favor of petitioners Article 2229 of the Civil Code provides that exemplary damages may be
because of their assurance that they would be able to get a loan in the amount of imposed by way of example or correction for the public good, in addition to the
P50 million and that P30 million would be given to respondents within a months moral, temperate, liquidated or compensatory damages. They are, however, not
time. When the one-month period expired, respondents complained to petitioner recoverable as a matter of right. They are awarded only if the guilty party acted in
Ching and asked him to advance the amount of P500, 000.00. Petitioner Ching a wanton, fraudulent, reckless, oppressive or malevolent manner.
acceded to their request on the condition that they hand over to him the original
In this case, we agree with the CA that although the revocation was done
titles for safekeeping. Respondents, in turn, asked petitioner Ching to give them
in bad faith, respondents did not act in a wanton, fraudulent, reckless, oppressive
P1 million in exchange for the titles. Petitioner Ching agreed and so they gave him
or malevolent manner. They revoked the SPA because they were not satisfied with
the titles. However, he never gave them the money. They asked him to return the
the amount of the loan approved. Thus, petitioners are not entitled to exemplary
titles, but he refused. Later, they were informed that the loan was approved in the
damages.
amount of P25 million and that their share would be P6 million. Since it was not
the amount agreed upon, respondents revoked the SPA and demanded the return 82. |Coleongco vs. Claparols|G.R. No. L-18616| March 31, 1964|
of the titles. Justice J.B.L. Reyes|
The RTC in its decision upheld the validity of the SPA and declared its
revocation illegal and unjust. But although the SPA was declared valid, the RTC FACTS:
held that it could no longer be enforced because the circumstances present at the
time of its execution have changed. The RTC also held petitioners owners of one- Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory
half of the subject properties. 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
On appeal, the appellate court declared the revocation of the SPA null and
foreign sources, especially from Belgium; and Claparols had a regular dollar
void. It further ruled that petitioners are not entitled to one-half of the subject
allocation therefor, granted by the Import Control Commission and the Central
properties and that they are not entitled to reimbursement for their failure to show
Bank. The marketing of the nails was handled by the "ABCD Commercial" of
that the receipts presented in evidence were incurred in relation to the loan
Bacolod, which was owned by a Chinaman named Kho To
application.Hence, this petition.
The Chinaman introduced his compadre, appellant Vicente Coleongco, to
ISSUE: Whether or not the revocation of the SPA by the principal is done
the appellee, recommending said appellant to be the financier in the stead of Kho
in bad faith, thus, petitioner is entitled to the award of exemplary damages?
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 77

To. Claparols agreed, a contract was perfected between them whereby Coleongco at the same time. Coleongco, as could be expected, protested these acts of
undertook to finance and put up the funds required for the importation of the nail Claparols, but the latter insisted, and dismissed Coelongco as assistant manager of
wire, which Claparols bound himself to convert into nails at his plant. the plant and asked C. Miller & Company, auditors, to go over the books and
records of the business with a view to adjusting the accounts of the associates.
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 These last steps were taken in view of the revelation made by his machinery
of sales all over the Philippines", except the Davao Agency; that Coleongco would superintendent, Romulo Agsam, that in the course of the preceding New Year
"share the control of all the cash" from sales or deposited in banks; that he would celebrations Coleongco had drawn Agsam aside and proposed that the latter
have a representative in the management; that all contracts and transactions should should pour acid on the machinery to paralyze the factory.
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". As the parties could not amicably settle their accounts, Coleongco filed a
The contract was renewed from one year to year until 1958, and Coleongco's share suit against Claparols charging breach of contract, asking for accounting, and
subsequently increased by 5% of the net profit of the factory. 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
Two days after the execution of the basic agreement, Claparols executed agreement with Coleongco for P561, 387.99 by way of damages.
in favor of Coleongco, at the latter's behest a special power of attorney to open
and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers The trial court dismissed the action for damages. On appeal, Coleongco
covering transactions; to represent appellee and the nail factory; and to accept contended that the power of attorney was made to protect his interest under the
payments and cash advances from dealers and distributors. Thereafter, Coleongco financing agreement and was one coupled with an interest that Claparols had no
also became the assistant manager of the factory, and took over its business legal power to revoke.
transactions, while Claparols devoted most of his time to the nail manufacture
processes. ISSUE: Whether or not the power of attorney coupled with an interest can
be revoked?
Claparols was disagreeably surprised by service of an alias writ of execution
to enforce a judgment obtained against him by the Philippine National Bank, HOLDING and RATIO:
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 YES.
Manila to confer with the bank authorities. Upon arrival, he learned to his dismay
It must not be forgotten that a power of attorney can be made irrevocable
that the execution had been procured because of derogatory information against
by contract only in the sense that the principal may not recall it at his pleasure; but
appellee that had reached the bank from his associate, appellant Coleongco.
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
Incensed at what he regarded as disloyalty of his attorney-in-fact, he
in this case. It is not open to serious doubt that the irrevocability of the power of
consulted lawyers. The upshot was that appellee revoked the power of attorney,
attorney may not be used to shield the perpetration of acts in bad faith, breach of
and informed Coleongco thereof, by registered mail, demanding a full accounting
confidence, or betrayal of trust, by the agent for that would amount to holding
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 78

that a power coupled with an interest authorizes the agent to commit frauds against conferred upon Florentino Collantes a public power of attorney notarized by
the principal. Mr.Perfecto Salas Rodriguez dated November 16, 1907 to perform in his name
and on his behalf all acts necessary for carrying out his plans.
Our new Civil Code, in Article 1172, expressly provides the contrary in
prescribing that responsibility arising from fraud is demandable in all obligations, Accepting this invitation, the plaintiffs proceeded to do a considerable
and that any waiver of action for future fraud is void. It is also on this principle that the business with the defendant through the said Collantes, as his factor, sending to
Civil Code, in its Article 1800, declares that the powers of a partner, appointed as him as agent for the defendant a good deal of produce to be sold on commission.
manager, in the articles of co-partnership are irrevocable without just or lawful cause; Later, and in the month of February, 1909, the plaintiffs sent to the said Collantes,
and an agent with power coupled with an interest cannot stand on better ground as agent for the defendant, 218 bundles of tobacco in the leaf to be sold on
than such a partner in so far as irrevocability of the power is concerned. commission, as had been other produce previously. The said Collantes received
said tobacco and sold it for the sum of P1,744. The charges for such sale were
That the appellee Coleongco acted in bad faith towards his principal P206.96. leaving in the hands of said Collantes the sum of P1,537.08 belonging to
Claparols is, on the record, unquestionable. His letters to the Philippine National the plaintiffs. This sum was apparently, converted to his own use by said agent.
Bank 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, It appears, however, that prior to the sending of said tobacco the
Kho To, instructing the latter to reduce to one-half the usual monthly advances to defendant had severed his relations with Collantes and that the latter was no longer
Claparols on account of nail sales in order to squeeze said appellee and compel acting as his factor. This fact was not known to the plaintiffs and it is conceded
him to extend the contract entitling Coleongco to share in the profits of the nail in the case that no notice of any kind was given by the defendant to the plaintiffs
factory on better terms, and ultimately "own his factory", a plan carried out by of the termination of the relations between the defendant and his agent. The
Kho's letter, reducing the advances to Claparols; Coleongco's attempt to, have defendant refused to pay the said sum upon demand of the plaintiffs, placing such
Romulo Agsam pour acid on the machinery; his illegal diversion of the profits of refusal upon the ground that at the time the said tobacco was received and sold by
the factory to his own benefit; and the surreptitious disposition of the Yates band Collantes he was acting personally and not as agent of the defendant. This action
resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while was brought to recover said sum.
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 ISSUE: Whether or not the revocation of power of attorney is valid against
by Claparols and his demand for an accounting from his agent Coleongco. clients whom the agent is specified to deal with?

83. |Rallos vs. Yangco|G.R. No. L-6906| September 27, 1911| Justice HOLDING and RATIO:
Moreland|
NO.
FACTS:
Having advertised the fact that Collantes was his agent and having given
Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907 them a special invitation to deal with such agent, it was the duty of the defendant
offering a consignment agreement. In such letter, Yangco made known that he on the termination of the relationship of principal and agent to give due and timely
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notice thereof to the plaintiffs. Failing to do so, he is responsible to them for petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan which was
whatever goods may have been in good faith and without negligence sent to the superseded by the Deed of Definite Sale dated May 4, 1979 which petitioner signed
agent without knowledge, actual or constructive, of the termination of such upon Parangan's representation that the same merely evidences the loans extended
relationship. by him unto the former.
For fear that her property might be prejudiced by the continued borrowing
Where principal had expressly revoked the agents power to handle
of Parangan, petitioner demanded the return of her certificate of title. Instead of
business, but such revocation was not conveyed to a long standing client to whom
complying with the request, Parangan asserted his rights over the property which
the agent had been specifically endorsed in the past by the principal, the revocation
allegedly had become his by virtue of the aforementioned Deed of Definite
was not deemed effective as to such client and the contracts entered into by the
Sale. Under said document, petitioner conveyed the subject property and all the
agent in the name of the principal after the revocation would still be valid and
improvements thereon unto Parangan absolutely for and in consideration of the
binding against his principal.
sum of Seventy Five Thousand (P75,000.00) Pesos.
84. |Lustan vs. CA et.al.|G.R. No. 111924| January 27, 1997| Justice Aggrieved, petitioner filed an action for cancellation of liens, quieting of
Francisco| title, recovery of possession and damages against Parangan and PNB in the
Regional Trial Court of Iloilo City.
FACTS:
The trial court rendered its judgment in favor of the petitioner. On appeal,
Petitioner Adoracion Lustan leased a parcel of land in Iloilo, which he the appellate court reversed the trial courts decision. Hence, this petition.
owns, to Nicolas Parangan for a term of ten (10) years and an annual rent of One
Thousand (P1,000.00) Pesos. ISSUE: Whether or not the revocation of agents general powers effective
During the period of lease, Parangan was regularly extending loans in small against the mortgagee bank?
amounts to petitioner to defray her daily expenses and to finance her daughter's
education. On July 29, 1970, petitioner executed a Special Power of Attorney in HOLDING and RATIO:
favor of Parangan to secure an agricultural loan from private respondent
Philippine National Bank (PNB) with the aforesaid lot as collateral. NO.

On February 18, 1972, a second Special Power of Attorney was executed Third persons who are not parties to a loan may secure the latter by
by petitioner, by virtue of which, Parangan was able to secure four (4) additional pledging or mortgaging their own property. So long as valid consent was given,
loans, to wit: the sums of P24,000.00, P38,000.00, P38,600.00 and P25,000.00 on the fact that the loans were solely for the benefit of Parangan would not invalidate
December 15, 1975, September 6, 1976, July 2, 1979 and June 2, 1980, the mortgage with respect to petitioner's property. In consenting thereto, even
respectively. granting that petitioner may not be assuming personal liability for the debt, her
property shall nevertheless secure and respond for the performance of the
The last three loans were without the knowledge of herein petitioner and principal obligation. It is admitted that petitioner is the owner of the parcel of land
all the proceeds therefrom were used by Parangan for his own benefit. These mortgaged to PNB on five (5) occasions by virtue of the Special Powers of
encumbrances were duly annotated on the certificate of title. On April 16, 1973, Attorney executed by petitioner in favor of Parangan. Petitioner argues that the
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last three mortgages were void for lack of authority. She totally failed to consider jointly liable for the fulfilment thereof; it is therefore subject to execution and sale
that said Special Powers of Attorney are a continuing one and absent a valid for the purpose of paying the amount of the debt for which it is liable.
revocation duly furnished to the mortgagee, the same continues to have force and
effect as against third persons who had no knowledge of such lack of However, petitioner has an unquestionable right to demand proportional
authority. Article 1921 of the Civil Code provides: indemnification from Parangan with respect to the sum paid to PNB from the
proceeds of the sale of her property in case the same is sold to satisfy the unpaid
"Art. 1921. If the agency has been entrusted for the purpose of contracting with debts.
specified persons, its revocation shall not prejudice the latter if they were not given
notice thereof." 85. AMPARO G. PEREZ ET AL. VS. THE PHILIPPINE NATIONAL
BANK G.R. No. L-21813, July 30, 1966
The Special Power of Attorney executed by petitioner in favor of Parangan
duly authorized the latter to represent and act on behalf of the former. Having FACTS:
done so, petitioner clothed Parangan with authority to deal with PNB on her Vicente Perez, mortgaged Lot No. 286-E of the Kabankalan Cadastre to
behalf and in the absence of any proof that the bank had knowledge that the last the appellant Philippine National Bank-Bacolod Branch. Said mortgaged was
three loans were without the express authority of petitioner, it cannot be made to secure payment of a loan plus interests, payable in yearly instalments.
prejudiced thereby. Subsequently, Vicente died intestate, survived by his widow and children and
leaving behind outstanding balance on the mortgaged indebtedness. The widow
As far as third persons are concerned, an act is deemed to have been of Perez instituted Special Proceedings with the CIF for the settlement of the
performed within the scope of the agent's authority if such is within the terms of estate where the widow was appointed as Administratix and notice to the creditors
the power of attorney as written even if the agent has in fact exceeded the limits was duly published, however, PNB did not file a claim.
of his authority according to the understanding between the principal and the In 1956, the bank pursuant to the authority granted it in the mortgaged
agent. deed, caused the mortgaged properties to be extra-judicially foreclosed, however,
the widow and the heirs were not notified. Hence, they instituted a case against
The Special Power of Attorney particularly provides that the same is good PNB seeking to annul the extrajudicial foreclosure sale and the transfer of the
not only for the principal loan but also for subsequent commercial, industrial, Certificate of Title as well as to recover damages, claiming that the bank had acted
agricultural loan or credit accommodation that the attorney-in-fact may obtain and illegally and in bad faith. Using the decision set in Pasno V. Ravina, the Trial Court
until the power of attorney is revoked in a public instrument and a copy of which (TC) declared null and void the extrajudicial foreclosure sale, the cancellation of
is furnished to PNB. Even when the agent has exceeded his authority, the the Certificate of Title of Perez and ordered payment of damages to the plaintiffs.
principal is solidarily liable with the agent if the former allowed the latter to act as
though he had full powers (Article 1911, Civil Code). The bank appealed directly to the Supreme Court.

The mortgage directly and immediately subjects the property upon which ISSUE: Whether or not the extra-judicial foreclosure by PNB under its
it is imposed. The property of third persons which has been expressly mortgaged power of sale is extinguished by the death of Perez?
to guarantee an obligation to which the said persons are foreign, is directly and
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RULING: a restraining order prohibiting the execution of the contract of lease awarded to
winning bidders by the municipality. Upon appeal, the CA set aside the order of
No. The SC overruled the decision in Pasno v. Ravina as it virtually wipes Judge Saroca thereby upholding the possession of Lydia Terrado and Martin
out the third alternative given to creditor-mortgagee, that is to rely on the mortgage Rosario.
exclusively, foreclosing the same at any time before it is barred by prescription,
without a claim for any deficiency. Such is not in accord with reason and law, as In the meantime, the Municipality of Bayambang, represented by the
said option presents undoubted advantages for the estate of the mortgagor. Mayor and the Sangguniang Bayan filed with the CIF of Pangasinan against
Geruncio Lacuesta for annulment of the contract entered into between the
The argument that foreclosure by the bank under its power of sale is barred Municipality and Lacuesta under Ordinance No.8. The TC ruled in favour of the
upon the death of the debtor, because agency is distinguished by the death of the plaintiffs. Lacuesta, went straight to the SC who denied his motion for
principal neglects to take into account that the power to foreclose is not an reconsideration. Lacuesta, then filed another case, this time with the CIF of
ordinary agency that contemplates exclusively the representation of the principal Pangasinan, Dagupan City, a Motion to Dissolve the Injunction and to order
by the agent is primarily an authority conferred upon the mortgagee for the latters plaintiffs to vacate and turn all the fisheries to defendants. Said motion was
own protection. It is an ancillary stipulation supported by the same causa or granted by Judge Carandang-Villalon on the ground that the plaintiffs have
consideration for the mortgage and forms an essential and inseparable part of that recognized and confirmed the validity of the resolution and the contract. During
bilateral agreement. the course of litigation, private respondent Geruncio Lacuesta died.
The SC also upheld the validity of PNBs foreclosure, however, as it did
not sufficient notice to the heirs of Vicente Perez, the court permitted them to Having reached the Supreme Court, the Highest Tribunal traced the origin
redeem the foreclosed property within the reasonable time. of the protracted legal controversy in the enactment and implementation of
Municipal Ordinance No. 8.
86. TERRADO ET AL. V. COURT OF APPEALS ET AL., G.R. No.
L-58794; August 24, 1984 ISSUES:
Whether or not Municipal Ordinance No.8 is valid?
FACTS: Whether or not the death of private respondent Lacuesta
extinguished the Management and Administration Contract entered
In connection with Resolution No. 35, enacting Ordinance No. 8, private into in relation to Municipal Ordinance No. 8?
respondent Geruncio Lacuesta was designated, appointed and constituted by the
Sangggunian Bayan of Bayambang, Pangasinan as Manager-Administrator of the RULING:
Bayambang Fishery and Hunting Park and Municipal Watershed for a period of No, the ordinance is invalid for it is clearly against the provisions of the
25 years. However, as the ordinance was disapproved by the Secretary of law for it granted exclusive fishery privileges to the private respondent for a period
Agriculture and Natural Resources, Lacuesta was directed to refrain and desist exceeding five (5) years without benefit of public bidding. Under the Fisheries
from acting as Administrator-Manager, which the latter refused. Meanwhile, Act, the Municipality may not delegate to a private individual as Manager-
spouses Lydia Terrado and Martin Del Rosario and Domingo Fernandez were Administrator. The said ordinance and the contract of management executed in
awarded the right for four years over the Mangabul Fisheries. Lacuesta obtained accordance therewith were null and void ab initio.
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FACTS:
From the foregoing, perforce the contract of management and
administration between the Municipality and Lacuesta is likewise null and void. It Celso Avelino, plaintiffs predecessor in interest, purchased the land in
also follows that the complaint filed by Lacuesta to enjoin the Municipal Council question consisting of two adjoining parcels while he was still a bachelor, through
of Bayambang from leasing the Mangabul Fisheries upon public bidding is without a escritura de venta. He then caused the transfer of the tax declarations of the two
basis and merit for Lacuesta has no right or interest under the void ordinance and parcels in his name, had the area surveyed and built therein a residential house. He
contract. subsequently took in his parents, Rosendo Avelino and Juana Ricaforte, and his
sister, Aurea, who took care of the couple, to live there until their deaths. He later
Ruling on the death of Lacuesta, the Supreme Court held that his death is became a Judge of the Court of First Instance in Cebu, resulting to his sister,
an irreversible fact that throws an entirely new bearing on the legal controversy at Aurea, taking care of the premises in question. In spite of the transfer, Celso paid
hand. For essentially, the contract of management and administration between the the corresponding realty taxes, keeping intact receipts which he comes to get or
Municipality and Lacuesta is one of agency whereby a person binds himself to Aurea would go to Cebu to give it to him. Without the knowledge and consent of
render some service or to do something in representation or on behalf of another, Celso, the defendant, constructed a small beauty shop in the questioned property.
with the consent or authority of the latter. In the case, Lacuesta bound himself as
Manager-Administrator of the Bayambang Fishing and Hunting Park and Meanwhile, the plaintiffs, who are the purchasers of the other properties
Municipal Watershed to render service or perform duties and responsibilities in of Celso Avelino, were also offered to buy the questioned property. After visiting
representation or on behalf of the Municipality of Bayambang, with the consent the premises and talked with the defendant of said intended sale by Celso, they
or authority of the latter pursuant to Ordinace No. 8. Under Article 1919 of the paid the purchased price and subsequently a deed of sale was executed between
New Civil Code, agency is extinguished by the death of the agent. His rights and the parties. However, despite due notice from Celso, defendants refused to vacate
obligations arising from the contract are not transmissible to his heirs. the premises. Plaintiffs demanded, orally and in writing to vacate the premises,
the defendant also refused. As they were to undertake urgent repairs on the
As correctly ruled by the CA, the resulting difference in the beginning dilapidated residential building, the defendant had already occupied the same,
inventory of the stocks of the hardware store (before management was transferred taking in paying boarders and claiming already ownership of the premises in
to respondent spouses Ramos) and the second inventory thereof (after question, hence, plaintiffs filed an action for recovery of land, praying therein that
management was returned to petitioner), by itself, is not conclusive proof that the they be declared owners of the questioned property, defendants be ordered to
said amount was used to pay the purchase price of the Bonifacio property, such as remove whatever improvements constructed thereon, vacate the premises and pay
would make it the property of petitioner held in trust by respondent spouses for damages and other fees.
Ramos.
Both the trial court and appellate courts ruled in favour of plaintiffs.
SECTION SIX Undaunted with said decision, defendants filed a petition alleging errors
committed by both courts. The High Court, nevertheless, granted the defendants
87. MORALES V. COURT OF APPEALS, G.R. No. 117228, June 19, motion for reconsideration.
1997
ISSUES:
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Whether or not an implied trust is created between Celso Avelino Petitioner Lina Pealber, for many years, owned and operated a hardware
and his parents in relation to the questioned property? store prior to 1984 in a building she owned along Bonifacio St., Tugueguerao,
Whether or not the disputed property is a trust property? Cagayan (Bonifacio Property). However, the lot on which the building is erected
is owned by Maria Mendoza (Mendoza), from whom petitioner rented the same.
RULING: On March 22, 1982, petitioner allowed Spouses Ramos, the wife being her
daughter, to take over the management of the business with the verbal agreement
NO. Article 1448 of the Civil Code states that, There is an implied trust that that the accumulated earnings of the store would be used to purchase the lot
when property is sold, and the legal estate is granted to one party but the price is which Mendoza was selling that time. Petitioner further alleged that based on the
paid by another for the purpose of having the beneficial interest of the property. same agreement, the Ramos spouses having the better credit standing, they would
The former is the trustee, while the latter is the beneficiary. However, if the person be made to appear as vendees so that the title to be issued in their names could
to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying be used to secure a loan with which to build a bigger building and expand the
the price of the sale, no trust is implied by law, it being disputably presumed that hardware business. Consequently respondent spouses Ramos allegedly entered in
there is a gift in favour of the child. to a contract of sale with Mendoza over the Bonifacio property as a result of which
a Transfer Certtificate Title over said lot was issued in their names.
In the case, it is petitioners contention that Rosendo Avelino owned the
money for the purchase of the property and that he requested Celso, his son, to In 1984, spouses Ramos returned the management of the business to
buy the property allegedly in trust for the former. The fact remains, however, that petitioner. She later found out that the Bonifacio Property was already fully paid.
title to the property was conveyed to Celso. Accordingly, the situation is governed Petitioner demanded from the spouses the reconveyance of the title of the
by or falls within the exception under the third sentence of Article 1448. The SC property, however the latter refused. Petitioner asserted that respondent spouses
held that on this basis alone, the case for petitioners must fall. The preponderance Ramos were mere trustees, thus, they were under moral and legal obligation to
of evidence, as found by the trial court and affirmed by the CA, established positive reconvey title over the said property. She then filed a petition with the RTC of
acts of Celso indicating, without doubt, that he considered the property purchased Cagayan with the prayer that she be declared the owner of the Bonifacio property.
from the Mendiolas as his exclusive property. He had its tax declaration Respondents countered that they acquired the questioned property after
transferred in his name, caused the property surveyed for him by the Bureau of redeeming it from DBP to avoid foreclosure of the mortgage debt of the
Lands, and faithfully pad the realty taxes. Finally, he sold the property to private petitioner. Allegedly, after said incident, petitioner executed a Deed of Donation
respondents. of the questioned property on their favor.

The trial court held that petitioner is the owner of the Bonifacio property
and ordered the respondents to reconvey the same to her. On appeal to the Court
88. PEALBER V. RAMOS ET AL., G. R. No. 178645, January 30, 2009 of Appeals, said decision was reversed and the lower courts decision was assailed
on the ground that the alleged express trust created between the parties involving
FACTS: the questioned property could not be proven by parol evidence. Thus, petitioner
elevated her case to the Supreme Court.
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ISSUE: Whether or not an express trust was created by the parties over the On September 8, 1950, Clemente Dalandan, deceased father of defendants
Bonifacio property? Emiliano and Maria duly subscribed and sworn an affidavit which terms indicated
that a four-piece of Riceland in Las Pinas, Rizal belonging to Victoriana Dalandan
RULING: was posted as security for an obligation which Clemente assumed but, however,
Victoriana failed to fulfill. As said land was foreclosed, the pertinent provisions
No. The Supreme Court held that petitioners allegations as to the of the affidavit stated that the riceland is owned by Victoriana and she used the
existence of an express trust agreement with respondent spouses Ramos, same to secure an obligation; that Victoriana held herself liable to Victoria Julio,
supported by her own testimonies and her son, do not hold water. her sole heir, for the foreclosure of said land; that herein defendants may not be
forced to give up the harvest of the said farm nor the return of said land be
Express trusts are those which are created by the direct and positive acts demanded immediately. Victoriana attested to the truth of all the statements in
of the parties, by some writing or deed, or will or by words either expressly or the document.
impliedly evincing an intention to create a trust. No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended. After the death of Clemente, plaintiff Victoria requested from defendants,
However, in accordance with Article 1443 of the Civil Code, when an express trust Clementes legitimate and surviving heirs to deliver the same to her. Defendants
concerns an immovable property or any interest therein, the same may not be argued that based on the agreement, neither delivery of the land nor the fruits
proved by parol or oral evidence. thereof could be immediately demanded. The trial court granted the motion to
dismiss filed by defendants on the ground of prescription of plaintiffs action
Though the SC held that Article 1443 takes the nature of a statue of frauds, pendency of another suit between the same parties for the same cause; and release
spouses Ramos did indeed fail to interpose their objections regarding the and/or abandonment of the claim set forth in the plaintiffs complaint.
admissibility of the testimonies when the same were offered to prove the alleged Hence, this appeal.
verbal trust agreement between and petitioner. Consequently, the testimonies
were admissible in evidence. Nevertheless, while admissibility of evidence is an ISSUE: Whether or not the statement (salaysay) entered into between
affair of logic and law, determined as it is by relevance and competence, the weight Clemente and Victoriana constitute a trust?
to be given to such evidence, once admitted, still depends on judicial intervention.
The court holds that the same carried little weight in proving the alleged verbal RULING:
trust agreement between petitioner and respondent spouses.
Yes. The contention of the defendants that recognition of trust may not
SECTION SEVEN be proved by evidence allunde is of no moment. They likewise argue that by the
express terms of Article 11443 of the Civil Code, no express trust concerning an
89. VICTORIA JULIO V. EMILIANO DALANDAN and MARIA immovable or any interest therein may be proved by parol evidence. Such
DALANDAN, G.R. No. L-19012, October 30, 1967 argument overlooks the fact the no oral evidence is necessary . The expressed
trust imposed upon defendants by their predecessor appears in the document
FACTS: itself. For while it is true that said deed did not in definitive words institute
defendants as trustees, a duty is therein imposed them when the proper time
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comes to turn over the fruits and possession of the property to Victoria Julio.
Not that this view is without statutory support. Article 1444 of the Civil Code No. Sections 2 and 3 of PD No. 1508, which was then still in effect when
states that: No particular words are required for the creation of an express trust, the case was instituted, state that the Lupon of each barangay shall have the
it being sufficient that a trust is clearly intended. In reality the development of authority to bring together the parties actually residing in the same barangay for
the trust as a method of disposition of property, so jurisprudence teaches, seems amicable settlement, or in different barangays within the same city or municipality.
to its freedom from formal requirements. This principle perhaps account for the Lupon shall have no authority over disputes involving parties who actually reside
provisions in Article 1444 just quoted. For technical or particular forms of words in barangays of different cities or municipalities, except where such barangays
or phrases are not essential to the manifestation of intention to create a trust or adjoin each other. Torbela siblings and the spouses Rosario do not reside in the
the establishment thereof. Nor would the use of the word trust or trustee same barangay, or in different barangays within the same city or municipality, or
essential to the constitution of a trust. Conversely, the mere fact that the word in different barangays of different cities or municipalities but are adjoining each
trust or trustee was employed would not necessarily prove an intention to create a other. The Lupon had no jurisdiction over the dispute and barangay conciliation
trust. What is important is whether the trustor manifested an intention to create was not a pre-condition for the filing of the said civil case.
the kind of relationship which in law is known as trust. It is unimportant that the
trustor should know that the relationship which he intends to create is called a
trust, or whether or not he knows the precise characteristics of the relationship 91. CAEZO v ROJAS, G.R. No. 148788 (November 23, 2007)
which is called a trust. Here the trust is effective as against defendants and in
favor of the beneficiary thereof, plaintiff Victoria Julio, who accepted it in the FACTS:
document itself.
Soledad Canezo filed a complaint for the recovery of real property plus
90. Torbela vs. Spouses Rosario [GR No. 140528, December 7, 2011] damages against Conception Rojas (2nd wife of her father). Canezo alleged that she bought the
said land from Crisogono Limpiado although the transaction was not in writing.
FACTS: Then she entrusted it to her father when she and her husband had to go Mindanao.
The father took possession of the said land and then one day Canezo found out that Rojas
Petitioner Torbela siblings filed before the RTC of Urdaneta, Pangasinan was in possession of the said land and the tax declarations were under his fathers
a Complaint for recovery of ownership and possession of a parcel of land in name.
Urdaneta City, Pangasinan, plus damages, against the spouses Rosario. RTC and
CA, on appeal, ordered Rosario to reconvey land to Torbela siblings and to pay Rojas contends that her husband (father of Canezo) bought the land from
damages. Rosario, on appeal to SC, avers that Torbela siblings failed to avail of the same seller. The father took possession and cultivated it. Canezo has knowledge
barangay conciliation, a pre-requisite to filing above civil case. of it because it was included in the estate of the father (father died) and Canezo did not protest
meaning she abandoned her right assuming Canezos contentions were true. Canezo
ISSUE: Whether or not the case is covered by barangay conciliation is barred by laches and estoppel.
requirement?
MTC was in favor of Canezo. Rojas appealed to RTC, decision was
RULING: reversed because action has not yet prescribed because it is a trust. Canezo filed a
motion for reconsideration; RTC reversed again the decision (in favor of Canezo).
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Rojas filed a motion to reconsider the decision but denied by RTC. Rojas then filed a petition intention of such. However, it cannot be inferred from Canezos testimony and the attendant
for review with CA - reversed the decision of RTC(ground is laches and prescription). facts and circumstances. What they agreed is to give Canezo a share of the copra in
land.
ISSUE Whether or not there was a trust exist?
92. PNB v. Aznar, et al. [G.R. 171805 May 30, 2011]
HELD / RATIO:
FACTS:
No. The court said, the grant or denial of a motion from extension of time is addressed
to the sound discretion of the court and there was a reasonable basis for the said Rural Insurance and Surety Company, Inc. (RISCO) ceased operation due
extension. Trust is a legal relationship between one person having an equitable to business reverses
ownership of property and another person owning the legal title to such property, the In plaintiffs (Anzar et al.) desire to rehabilitate RISCO, they contributed a total
equitable ownership of the former entitling him to the performance of certain duties amount of P212, 720.00. This was used to purchase 3 parcels of land in Cebu, two
and exercise of certain powers by the latter. Trusts are either express or implied. (2) in the Municipality of Talisay and one (1) in the District of Lahug, Cebu City.
Express trust is those which are created by the direct and positive acts of the parties by some After the purchase of the lots, titles were issued in the name of RISCO.
writing or deed, or will, or by words evidencing and intention to create a trust. Implied trusts
are those which, without being expressed, are deducible from the nature of the transaction The amount contributed by plaintiffs constituted as liens and
as matters of intent or, independently, of the particular intention of the parties, as encumbrances on the properties as annotated in the titles of said lots. Such
being super induced on the transaction by operation of law basically by reason of annotation was made pursuant to the Minutes of the Special Meeting of the
equity. It can be either resulting trust or constructive trust. Board of Directors of RISCO on March 14, 1961, and a part of it says:
Resulting trust is presumed always to have been contemplated. The And that the respective contributions above-mentioned (Aznar et al.) shall
intention as to which can be found in the nature of their transaction although not expressed in constitute as their lien or interest on the property described above, if and when
a deed or instrument based on the equitable doctrine that it is more valuable said property are titled in the name of RISCO, subject to registration as their
consideration than the legal title that determines the equitable interest in property. adverse claim in pursuance of the Provision of Land Registration Act, until such
Trustworthy evidence is required in here. Express trust and resulting trusttrustee time their respective contributions are refunded to them completely
cannot acquire by prescription a property entrusted to him unless he repudiates a
trust. This is because, in an express trust, the possession of a trustee is not adverse, Thereafter, various subsequent annotations were made on the same titles,
therefore, he does not acquire by prescription the property. The burden of proving including the Notice of Attachment and Writ of Execution both dated August
the existence of trust is on the party asserting it. In this case, Canezo failed to 3, 1962 in favour of Philippine National Bank (PNB). As a result, a Certificate
provide clear and satisfactorily proof of its existence. Elements: (1) trustor who of Sale was issued in favor of PNB, being the lone and highest bidder of the
executes the instrument creating the trust; (2) a trustee who is the person expressly 3 parcels of land. This prompted Aznar et al. to file the instant case seeking the
designated to carry out the trust; (3) the trust res consisting of duly identified and quieting of their supposed title to the subject properties.
definite real property; and (4) beneficiaries whose identity must be clear.
Canezos only evidence was her self-serving testimony of the petitioner. Express
trust may not be established by parol evidence. One exceptionwhen there was a clear
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Trial court ruled against PNB on the basis that there was an express trust created
over the subject properties whereby RISCO was the trustee and the FACTS:
stockholders, Aznar, et al., were the beneficiaries.
Court of Appeals opined that the monetary contributions made by Aznar, et al. The case involved a parcel of Friar Land with an area of 13,308 square
to RISCO can only be characterized as a load secured by a lien on the subjected meters known at Cebu City which was purchased from the Bureau of Lands way back on 1919
lots, rather than an expressed trust. by Emilio in his own behalf and on behalf of his brothers and sisters who were the heirs of
Jose. (Collectively known as Heirs of Jose)The money that was used to purchase
ISSUE: Whether or not there was a trust contract between RISCO and the land came from both Emilio and their Uncle Lino so after full payment of the
Aznar? purchase price but prior to the issuance of the deed of conveyance by the Bureau
of Lands, Emilio executed an Affidavit in Spanish dated on 1923 affirming that
RULING: he, as one of the heirs of Jose and his Uncle Lino then co-owned the lot. Thereafter
or on 1924 the Bureau of Lands executed the Deed of Conveyance in favor of
NO. At the outset, the Court agrees with the Court of Appeals that the Emilio and his siblings, or the heirs of Jose by virtue of which a TCT was issued
agreement contained in the Minutes of the Special Meeting of the RISCO Board by the Register of Deeds. On 1928, the lot was subdivided by Deputy Land
of Directors held on March 14, 1961 was a loan by the therein named stockholders Surveyor, Engineer Bunag into two (2) equal parts with an area of 6,664 square
to RISCO. Careful perusal of the Minutes relied upon by plaintiffs-appellees in meters for Lino and an area of 6,664 square meters for Emilio and the other heirs
their claim, showed that their contributions shall constitute as lien or interest on of Jose. This was approved by the Director of Lands on 1928.On 1939, the heirs
the property. The term lien as used in the Minutes is defined as "a discharge on of Lino purchased the share of the lot of the heirs of Jose as evidenced by the
property usually for the payment of some debt or obligation. Hence, from the Calig-onan sa Panagpalit executed by the parties in Visayan dialect. So the heirs of
use of the word "lien" in the Minutes, We find that the money contributed Lino immediately took possession of the entire13, 308 sq.m. lot.
by plaintiffs-appellees was in the nature of a loan, secured by their liens and
interests duly annotated on the titles. The annotation of their lien serves only as When World War II broke out however, Linos heirs fled the city. When they came
collateral and does not in any way vest ownership of property to plaintiffs. We are back after the war, they found their homes and possessions and therecords in the
not persuaded by the contention of Aznar, et al., that the language of the subject government offices burned and destroyed with squatters occupying their entire
Minutes created an express trust. property. Linos heirs subsequently learned that one of the heirs of Jose filed a petition for
reconstitution of title over the Lot on September 17, 1993. So in October 1993 they opposed
the said petition but later on withdrew the same on the basis of a compromise
agreement they entered with the heirs of Jose to expedite the reconstitution of title.
93. HEIRS OF TRANQUILINO LABISTE v HEIRS OF JOSE LABISTE So on December 14, 1994, the Register of Deed issued the reconstituted Title in
587 SCRA 417 (May 8, 2009) the names of the heirs of Jose. The heirs of Jose however did not honor the
compromise agreement. Soon January 13, 1995, the heirs of Lino filed a complaint
DOCTRINE for annulment of title, re-conveyance of property with damages. Joses heirs however said
If a trust relationship has been created between the parties whether expressly or impliedly, that the action of Linos heirs had long prescribed or barred by laches.
prescription does not run until the said trust is repudiated.
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ISSUE: Plaintiff Tan Sen Guan & Co. secured a judgment for a sum of P21,426
a) Whether or not Linos heirs had long prescribed or barred by laches. against the Mindoro Sugar Co. of which the Philippine Trust is the trustee. The
plaintiff entered into an agreement with the defendant Philippine Trust Co.
HELD / RATIO: wherein the former assigned, transferred, and sold to the latter the full amount of
said judgment against Mindoro Sugar Co. together with all its rights thereto and
No. The rules on prescription and the principle of laches cannot be applied here the latter offered satisfactory consideration thereto. The agreement further
because of the existence of a trust relationship. b) Trust is the right to the stipulated that upon signing of the agreement, Phil Trust shall pay Tan Sen the
beneficial enjoyment of property, the legal title to which is vested in another. It sum of P5000; should the Mindoro Sugar
may either be express or implied. An express trust is created by direct and positive acts of be sold or its ownership be transferred, an additional P10,000pesos will be paid to
the parties, by some writing or deed or will. No particular words are required for the TanSen upon perfection of the sale; in case any other creditor of Mindoro Sugar
creation of an express trust it being sufficient that a trust is clearly intended (Article obtains in the payment of his credit a greater proportion than the price paid to Tan
144, Civil Code). An implied trust comes into being by operation of law. The Sen, the Phil Trust shall pay to the latter whatever sum may be necessary to be
Affidavit of Emilio which is genuine and authentic beyond cavil is in the nature of an express trust. proportioned the claim of the creditor. However, if the Mindoro Sugar is sold to
In said affidavit, Emilio confirmed that Lot1054 bought in his name was co-owned by any person who does not pay anything to the creditors or pay them equal or less
him as one of the heirs of Jose, and his uncle Lino. And by agreement, each of them has than 70 percent of their claim, or should the creditors obtain from other sources
been in possession of half of the property as corroborated by the subdivision plan the payment of their claim equal to or less than 70 percent, the Phil Trust will only
prepared by Engineer Bunag and approved by the Bureau of Lands. As such pay to Tan Sen the additional sum of P10,000 upon the sale or transfer of the
prescription and laches will run only if it is shown that: (a) the trustee has performed Mindoro Sugar as above stated. The properties of Mindoro Sugar were later on
unequivocal acts of repudiation amounting to an ouster of the beneficiary; (b) such sold at public auction to the Roman Catholic Archbishop of Manila and base on the
positive acts of repudiation have been made known to the beneficiary, and (c) the agreement plaintiff Tan Sen brought suit against defendant Phil Trust for the sum of
evidence thereon is clear and conclusive. P10,000.
Joses heirs cannot rely on the fact that the Torrens title was issued in their names.
Trustees who obtain a Torrens title over a property held in trust by them for Issues: (1) Whether or Not the defendant is personally responsible for
another cannot repudiate the trust by relying on the registration. The only act that the claim of the plaintiff based on the deed of assignment because of having
can be construed as repudiation was when one of Joses heirs filed the petition for executed the same in its capacity as trustee of the properties of the Mindoro
reconstitution in October 1993. And since Linos heirs filed their complaint in January 1995 Sugar.
their cause of action has not yet prescribed.
.

94. TAN SENGUIAN & CO., INC VS. PHILIPPINE TRUST Held:
COMPANY, G.R. NO. L-38810, November 6, 1933
(1) YES, The Phil Trust Company in its individual capacity is responsible
FACTS: for the contract as there was no express stipulation that the trust estate and not
the trustee should be held liable on the contract in question. Not only is there no
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express stipulation that the trustee should not be held responsible but the the complaint only in 1997 means that she had already abandoned her right over
Wherefore clause of the contract states the judgment was expressly assigned in the property.
favor of Phil Trust Company and not Phil Trust Company, the trustee. It therefore
follows that appellant had a right to proceed directly against the Phil Trust on its The MTC rendered a Decision in favour of the petitioner.
contract and has no claim against either Mindoro Sugar or the trust estate. The respondent appealed to RTC of Naval. The RTC reversed the decision
Section Seven on the ground that the action had already prescribed and acquisitive prescription
had set in.
95. Caezo vs. Rojas / G.R. No. 148788538 SCRA 242 / November 23,
2007/ Justice Ynares-Santiago The petitioner filed a motion for reconsideration, the RTC amended its
original decision on the ground that the action not yet prescribed considering that
FACTS: the petitioner my entrusted the property to her father. The ten year prescription
for the recovery of property held in trust would commence to run only from the
The petitioner Soledad Caezo filed a complaint against her fathers second time the trustee repudiated the trust.
wife, respondent Concepcion Rojas for the recovery of real property. The subject The respondent filed a motion to reconsider but RTC denied. She filed a petition
property is an unregistered land with an area of 4,169 square meters situated at for review with the Court of Appeals.
Higatangan, Naval, Biliran. Caezo attached to the complaint o Joint Affidavit
executed by Isidro Catandijan and Maximina Caezo attesting to her acquisition of Issue:Whether or not there exist a trust relationship between the petitioner
the property. and Father, Express or implied?

The petitioner alleged that she bought the parcel of land in 1939 from Holding and Ratio Decidendi
Crisogono Limpiado,although the transaction was not reduced into writing.
Thereafter, she immediately took possession of the property. 1948, Soledad Caezo A trust is the legal relationship between one person having an equitable
and her husband left for Mindanao. She entrusted the said land to her father, ownership of property and another person owning the legal title to such property,
Crispulo Rojas, who took possession of, and cultivated the property. She found the equitable ownership of the former entitling him to the performance of certain
out in 1980, her stepmother, was in possession of the property and was cultivating duties and the exercise of certain powers by the latter. Trusts are either express or
the same. She also discovered that the tax declaration over the property was already implied. Express trusts are those which are created by the direct and positive acts
in the name of Crispulo Rojas. 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
The respondent asserted that her husband, Crispulo Rojas, who bought deducible from the nature of the transaction as matters of intent or, independently,
the property from Crisgono Limpiado in 194, which for the tax declaration named of the particular intention of the parties, as being super induced on the on the
in Crispulo Rojas. Her husband possessed and cultivated the property until he transaction by operation of law basically by reason of equity. An implied trust may
died in 1978. The petitioner, as heir, even received her share her share in the either be a resulting trust or a constructive trust.
produce of the estate. The respondent further contended that the petitioner filed
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As a rule, however, the burden of proving the existence of a trust is on the equal shares among their children, the Torbela siblings, by virtue of Deed of
party asserting its existence, and such proof must be clear and satisfactorily show Extrajudicial Partition dated December 3, 1962.
the existence of the trust and its elements. The presence of the following elements After the partition, the Torbela siblings executed a Deed of Absolute Quitclaim
must be proved: (1) a trustor or settlor who executes the instrument creating the on December 12, 1964 I which they transferred and conveyed the Lot to Dr.
trust; (2) a trustee, who is the person expressly designated to carry out the trust; Rosario for the consideration of P 9.00. However, the Torbela siblings explained
(3) the trust res, consisting of duly identified and definite real properties; and (4) that they only executed the Deed as an accommodation so that Dr. Rosario could
the cestio que trust, or beneficiaries whose identity must be clear. Accordingly, it have Lot registered in his name and used said property to secure a loan from DBP,
was incumbent upon petitioner to prove the existence of the trust relationship. the proceeds of which would be used for construction of improvements.
And petitioner sadly failed to discharge that burden.
On May 16, 1967, Cornelio T. Tosino executed an Affidavit of Adverse
In light of the disquisitions, we hold that there was no express trust or Claim, on behalf of the Torbela siblings. The very next day the Adverse claim was
resulting trust established between the petitioner and her father. Thus, in the annotated on TCT No. 52721 respectively.
absence of a trust relation, we can only conclude that Crispulos uninterrupted The construction of a four-storey building was eventually completed. The building
possession of the subject property for 49 years, coupled with the performance of was initially used as a hospital, but later on converted into a commercial building.
acts of ownership, such as payment of real estate taxes, ripened into ownership.
The statutory period of prescription commences when a person who has neither Dr. Rosario was able to fully pay his loan from DBP and was cancelled as
title nor good faith, secures a tax declaration in his name and may, therefore, be per Cancellation and Discharge of Mortgage executed by DBP in favor of Dr.
said to have adversely claimed ownership of the lot. While tax declarations and Rosario and ratified before the notary public.
receipts are not conclusive evidence of ownership and do not prove title to the Sometime in 1979-1981, Dr. Rosario acquired another loan from the Philippine
land, nevertheless, when coupled with actual possession, they constitute evidence National Bank (PNB) amounting to P450,000.00. the loan secured by three (3)
of great weight and can be the basis of a claim of ownership through prescription. properties including Lot No. 356-A.
Moreover, Section 41 of Act No. 190 allows adverse possession in any character Five days later, on March 11, 1981, another annotation was made, cancelling the
to ripen into ownership after the lapse of ten years. There could be prescription adverse claim on Lot No. 356-A on the basis of the Cancellation and Discharge of
under the said section even in the absence of good faith and just title. Mortgage executed by Dr. Rosario.

96. Torbela V. Spouses Rosario/ G. R. No. 140528, 661 SCRA 633/ December 8, 1981, Dr. Rosario and his wife, acquired a third loan in the
December 7, 2011/ Justice C. J. Corona amount of P1,200,000.00 from Banco Filipino Savings and Mortgage Bank. To
secure said loan, the spouses Roasario again constituted mortgages three (3) lots.
FACTS: Since the construction of a two-storey commercial building still incomplete, the
value reduce to P830,064.00 as maximum loan value.
The controversy began with a parcel of land, with an area of 374 square On February 13, 1986, the Torbela sibling filed a Complaint for recovery of
meters located in Urdaneta City, Pangasinan (Lot No. 356-A). It was part of larger ownership and possession of Lot No 356-A, plus damages before the Regional
parcel which given by Valeriano Semilla to his sister Marta Semilla wife of Eugenio Trial Court of Urdanete, Pangasinan against the Spouses Rosario.
Torbela. Upon death of of the Spouses Torbela, Lot No 356-A was adjudicated in
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The spouses Rosario afterwards failed to pay their loan from Banco partition of Lot No. 356-A. she also witnessed the execution of the two Deeds of
Filipino. Due to failure to pay, Banco Filipino extrajudicially foreclosed the Absolute Quitclaim by the Torbela siblings and Dr. Rosario.
mortgage Lots, through public auction Banco Filipino was the lone bidder for the
three foreclosed properties. The Certificate of Sale in favor of Banco Filipino was Upon presented the title by Dr. Rosario, the court made a clear distinction
annotated. between title and the certificate of title:
On December 9, 1987, The Torbela siblings filed before the RTC their Amended The certificate referred to is that document issued by the Register of Deeds known
Complaint, impleading Banco Filipino as additional defendant in Civil Case and as the Transfer Certificate of Title. By title, the law refers to ownership which is
praying that the spouses Rosario be ordered to redeem Lot No. 356-A from Banco represented by that document. Petitioner apparently confuses certificate with title.
Filipino. Placing a parcel of land under the mantle of the Torrens system does not mean
that ownership thereof can no longer be disputed.
The spouses Rosario instituted before the RTC a case for annulment of
extrajudicial foreclosure and damages, with prayer for writ of preliminary Ownership is different from a certificate of title. The TCT is only the best
injunction and temporary restraining order against Banco Filipino, the Provincial proof of ownership of a piece of land. Besides, the certificate cannot always be
Ex Officio Sheriff and his Deputy, and Register of Deeds of Pangasinan. considered as conclusive evidence of ownership. Mere issuance of the certificate
The Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but their of title in the name of any person does not foreclose the possibility that the real
effort were unsuccessful. Upon the expiration of one-year redemption period. The property may be under co-ownership with persons not named in the certificate or
Certificate of Final Sale and Affidavit of Consolidation covering all three that the registrant may only be a trustee or that other parties may have acquired
foreclosed properties were executed. New certificates of title were issued in name interest subsequent to the issuance of the certificate of title. To repeat, registration
of Banco Filipino. is not the equivalent of title, but is only the best evidence thereof. Title as a concept
The Torbela siblings filed before the RTC a complaint for the annulment of the of ownership should not be confused with the certificate of title as evidence of
Certificate of Final Sale, judicial cancelation of TCT No. 165813 and damages. The such ownership although both are interchangeably used.
Decision of RTC in favor of Banco Filipino. Registration does not vest title; it is merely the evidence of such title. Land laws
Court of Appeals affirmed the Decision of RTC with modification. They appeal do not give the holder any better title than what he actually has.
via Petition for Review.
Dr. Rosario testified that he obtained Lot No. 356-A after paying the
Issue: Whether or not is express trust susceptible to prescription? Torbela siblings, pursuant to a verbal agreement with the latter. The Court though
observes that Dr. Rosarios testimony on the execution and existence of the verbal
Holding and Ratio Decidendi: agreement with the torbela siblings lacks significant details and is not corroborated
by independent evidence.
Among the notable evidence presented by the Torbela siblings is the
testimony of Atty. Alcantara, who had no apparent personal interest in the present The Parol of Evidence Rule provides that when the terms of the agreement
case. When she still a boarder at the house of Eufrosina Torbela Rosario (Dr. have been reduced into writing, it is considered as containing all the terms agreed
Rosarios mother), was consulted by the Torbela siblings as regards the extrajudicial upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement. Dr.
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Rosario may not modify, explain, or add to the terms in the two Deeds of Absolute trustor manifested an intention to create the kind of relationship which to lawyers
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic ambiguity, is known as trust. It is immaterial whether or not he knows that the relationship
mistake, or imperfection in the Deeds; (2) failure of the Deeds of Express the true which he intends to create is called a trust, and whether or not he knows the precise
intent and the agreement of the parties thereto; (3) the validity of the Deeds; or (4) characteristics of the relationship which is called trust.
the exercise of other terms agreed to by the Torbela siblings and Dr. Rosario after
the execution of the Deeds. In Tamayo v. Callejo, the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered owners
It can also be said that Sr. Rosario is estopped from claiming or asserting subsequent express acknowledgement in a public documents of a previous sale of
ownership over Lot no. 356-A based on his Deed of Absolute Quitclaim. Dr. the property to another party, had the effect of imparting to the aforementioned
Rosarios Admission in the said Deed that he merely borrowed Lot No. 356-A is trust the nature of an express trust. The same situation exist in this case. When Dr.
deemed conclusive upon him. Under Article 1431 of the Civil Code, through Rosario was able to register Lot No. 356-a I his name under TCT No 52751, an
estoppel an admission or representation is rendered conclusive upon the person implied trust was initially established between himand the Torbela siblings under
making it, and cannot be denied or disproved as against the person relying thereon. Article 1451 of the civil Code.
That admission cannot now be denied by Sr. Rosario as against the Torbela Article 1451. When land passed by succession to any person and he causes the
siblings, the latter having relied upon his representation. legal title to be put in the name of another, a trust is established by implication of
law for the benefit of the true owner.
Considering the foregoing, the Court agrees with the RTC and the Cour
of Appeals that Dr. Rosario only holds Lot No. 356-A in Trust for the Torbela Dr. Rosario execution of the Deed of Absolute Quitclaim containing his
siblings. express admission that he only borrowed Lot no. 356-A from the Torbela siblings,
eventually transformed the nature of the trust to an express one. The express trus
Trust is the right to the beneficial enjoyment of property, the legal title to continued despite Dr. Rosario stating in his Deed of Absolute Quitcalim that he
which is vested in another. It is a fiduciary relationship that obliges the trustee to was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A
deal with the property for the benefit og the beneficiary. Trust relations between remained registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario
parties may either be express or implied. An express trust is created by the kept possession of said property, together with the improvements.
intention of the trust or of the parties, while an implied trust comes into being by
operation of law. On the issue of prescription, we had the opportunity to rule in case Bueno
v. Reyes that unrepudiated written express are imprescriptible. While there are
Express trusts are created by direct and positive acts of the parties, by some some decisions ehich hold that an action upon a trust is imprescriptible, without
writing or deed, or will, or by words either expressly or impliedly evincing an distinguishing between express ans implied trusts, the better rule, as laid down by
intention to create a trust. Under Article 1444 of the Civil Code, no particular this court in other decisions, is that prescription does supervene where the trust is
words are required for the creation of an express trust, it being sufficient that a merely an implied one.
trust is clearly intended. It is possible to create a trust without using the word trust
or trustee. Conversely , mere fact that these words are used does not necessarily The prescriptive period for the enforcement of an express trust of ten(10)
indicate an intention to create a trust. The question in each case is whether the years starts upon the repudiation of the trust by the trustee.
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To apply the 10 years prescription period, which would bar a beneficiarys action The Register of Deeds of Cebu City issued Original Certificate of Title No.
to recover in an express trust, the repudiation of the trust must be proven by clear 3878. The lot subdivided into lots: Lot 1054-A for Tranquilino and Lot 1054-B
and convincing evidence and made known to the beneficiary. The express trust for Epifanio, both with an area of 6,664 square meters. The subdivision plan
disables the trustee from acquiring for his own benefit the property committed to prepared by Engr. Buangan was approved by Jose Dan, Acting Director of Lands.
hid management or custody, at least while he does not openly repudiate the trust, Subsequently, the heirs of Tranquilino purchased the one-half interest of the heirs
and makes such repudiation known to the beneficiary or cestui que trust. For this of Jose over the Lot No, 1054, as evidenced by the Calig-onan sa Panagpalit
reason, the old Code of Civil Procedure (Act 190) declared that the rules on executed by the parties in the Visayan dialect. The heirs of Tranquilino immediately
adverse possession do not apply to continuing and subsisting trusts. In an express took possession of the entire lot.
trust, the delay of the beneficiary is directly attributable to the trustee who
undertakes to hold the property for the former, or who is linked to the beneficiary When World War II broke out, the heirs of Tranquilino fled Cebu City and
by confidential or fiduciary relations. The trustees possession is, therefore, not when they came back they found their homes and possessions destroyed. The
adverse to the beneficiary, until and unless the latter is made aware that the trust records in the Office of Register of Deeds, Office of the City Assessor and other
has been repudiated. government offices were also destroyed during the war. Squatters have practically
overrun the entire property, such that neither petitioners nor respondents possess
it.
Asuncion Labiste filed a petition for reconstitution of title over Lot No. 1054
against the petitioners. Petitioners opposed the petition and end up by a comprise
97. Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste / G.R. No. agreement. Under comprise agreement, petitioners were to be given time to file a
162033, 587 SCRA 417 / May 08, 2009 / Justice Quisumbing complaint so that the issues could be litigated in an ordinary action and the
reconstituted title was to be deposited with the clerk of court for a period of sixty
FACTS: (60) days to allow petitioners to file an action for reconveyance and to a notice of
lis pendens. Register of Deeds issued reconstituted title in the name of Epifanio
The late Epifanio Labiste, on his own and behalf of his brothers and sisters Labiste , his brothers and sisters, heirs of Jose Labiste.
who were the heirs of Jose Labiste, purchased from th Bureau of Lands Lot No.
1054 of the Banilad Friar Lands Estate, with an area of 13,308 square meters, However, respondents did not honor the compromise agreement.
located at Guadalupe, Cebu City. The Bureau of Land Director Jorge Vargas Petitioners filed a complaint for annulment of title seeking the reconveyance of
executed Deed of Conveyance in favor to Epifanio and his brothers and sisters property and damages. Respondents claimed that the Affidavit of Epifanio and the
who were the heirs of Jose Labiste. Calig-onan sa Panagpalit were forgeries and that petitioners action had long
After full payment of the purchase price but prior to the issuance of the deed of prescribed or barred by laches.
conveyance, Epifanio executed an Afidavit in Spanish affirming that he, as one of
the heris of Jose, and his uncle Tranquilino Labiste (petitioner), then co-owned the The RTC decision ruled in favor of petitioners evaluating the documents
said Lot because the money that was paid to the government came from the two presented was genuine and authentic as ancient documents and that they are valid
of them. and enforceable.
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On appeal, the Court of Appeals, while affirming petitioners right to the heirs of Jose. It has been held that a trustee who obtains a Torrens title over
property, nevertheless reversed the RTCs decision on the ground of prescription property held in trust by him for another cannot repudiation of the trust duly
and laches. Affirmed the RTCs findings that the Affidavit and the Calig-onan sa communicated to the beneficiary. The only act that can be construed as
Panagpalit are genuine and authentic, and that the same are valid and enforceable repudiation was when respondents filed the petition for reconstitution. And since
documents. petitioners filed their complaint, their cause of action has not yet prescribed, laches
cannot be attributed to them.
Issue: Whether or not the court can resolve the case applying the rules on
prescription and principle of laches involving express trust?
RAMOS VS. RAMOS
Holding and Ratio Decidendi:
FACTS:
Citing Article 1144 of the Civil Code, it held that petitioners cause of action
had prescribed for the action must be brought within ten(10) years from the time Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October
of right of actions accrues upon the written contract which in this case was when 26, 1880, respectively. They were survived by their 3 children. Moreover, Martin
petitioners predeccessors-in-interest lost possession over the property after World was survived by his 7 natural children. In December 1906, a special proceeding for
War II. Also, the lapse of time to file the action constitutes neglect on petitioners the settlement of the intestate estate of said spouses was conducted. Rafael Ramos,
part so the principle of laches is applicable. a brother of Martin, administered the estate for more than 6 years. Eventually, a
partition project was submitted which was signed by the 3 legitimate children and
Express trust are created by direct and positive acts of the parties, by some 2 of the 7 natural children. A certain Timoteo Zayco signed in representation of
writing or deed, or will, or by words either expressly or impliedly evincing an the other 5 natural children who were minors. The partition was sworn to before
intention to create a trust. The Affidavit of Epifanio is in the nature of trust a justice of peace.
agreement. Epifanio affirmed that the lot brought in his name was co-owned by
him, as one of the heirs of Jose, and his uncle Tranquilino. And by agreement, The conjugal hereditary estate was appraised at P74,984.93, consisting of 18
each of them has been in possession of half of the property. Their arrangement parcels of land, some head of cattle and the advances to the legitimate children.
was corroborated by the subdivision plan. thereof represented the estate of Martin. 1/3 thereof was the free portion or
P12,497.98. The shares of the 7 natural children were to be taken from that 1/3
As such, prescription and laches will run only from the time the express free portion. Indeed, the partition was made in accordance with the Old Civil code.
trust is repudiated. The court has held that for acquisitive prescription to bar the Thereafter, Judge Richard Campbell approved the partition project. The court
action of the beneficiary against trustee in an express trust for the recovery of the declared that the proceeding will be considered closed and the record should be
property held in trust it must be shown that: (a) the trustee has performed archived as soon as proof was submitted that each he3ir had received the portion
unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) adjudicated to him.
such positive acts of repudiation have been made known to the cestui que trust,
and (c) the evidence thereon is clear and conclusive. Respondents cannot rely on On February 3, 1914, Judge Nepumoceno asked the administrator to submit a
the fact that the Torrens title was issued in the name of Epifanio and the other report showing that the shares of the heirs had been delivered to them as required
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 95

by the previous decision. Nevertheless, the manifestation was not in strict


conformity with the terms of the judges order and with the partition project itself.
8 lots of the Himamaylan Cadastre were registered in equal shares in the names of 98. SOLEDAD CAEZO VS. CONCEPCION ROJAS
Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator
was supposed to pay the cash adjudications to each of them as enshrined in the Facts:
partition project. Plaintiffs were then constrained to bring the suit before the court
seeking for the reconveyance in their favor their corresponding participations in On January 29, 1997, petitioner Soledad Caezo filed a Complaint for the recovery
said parcels of land in accordance with Article 840 of the old Civil Code. Note that of real property plus damages with the Municipal Trial Court (MTC) of Naval,
1/6 of the subject lots represents the 1/3 free portion of martins shares which Biliran, against her fathers second wife, respondent Concepcion Rojas. The
will eventually redound to the shares of his 7 legally acknowledged natural children. subject property is an unregistered land with an area of 4,169 square meters,
The petitioners action was predicated on the theory that their shares were merely situated at Higatangan, Naval, Biliran. Caezo attached to the complaint a Joint
held in trust by defendants. Nonetheless, no Deed of Trust was alleged and Affidavit [executed on May 10, 1979 by Isidro Catandijan and Maximina Caezo
proven. Ultimately, the lower court dismissed the complaint on the grounds of res attesting to her acquisition of the property. Petitioner alleged that she bought the
judicata, prescription and laches. parcel of land in 1939 from Crisogono Limpiado, although the transaction was not
reduced into writing. Thereafter, she immediately took possession of the property.
ISSUE: Whether or not the plaintiffs action was barred by prescription, laches When she and her husband left for Mindanao in 1948, she entrusted the said land
and res judicata to the effect that they were denied of their right to share in their to her father, Crispulo. Rojas, who took possession of, and cultivated, the property.
fathers estate. In 1980, she found out that the respondent, her stepmother, was in possession of
the property and was cultivating the same. She also discovered that the tax
HELD: YES, there was inexcusable delay thereby making the plaintiffs action declaration over the property was already in the name of his father Crispulo Rojas.
unquestionably barred by prescription and laches and also by res judicata. They contented that contrary to the petitioners claim, it was her husband, Crispulo
Inextricably interwoven with the questions of prescription and res judicata is the Rojas, who bought the property from Crisogono Limpiado in 1948, which
question on the existence of a trust. It is noteworthy that the main thrust of accounts for the tax declaration being in Crispulos name. From then on, until his
plaintiffs action is the alleged holding of their shares in trust by defendants. death in 1978, Crispulo possessed and cultivated the property. Upon his death, the
Emanating from such, the Supreme Court elucidated on the nature of trusts and property was included in his estate. The petitioner, as heir, even received her share
the availability of prescription and laches to bar the action for reconveyance of in the produce of the estate. The respondent further contended that the petitioner
property allegedly held in trust. It is said that trust is the right, enforceable solely ought to have impleaded all of the heirs as defendants. She also argued that the
in equity to the beneficial enjoyment of property, the legal title to which is vested fact that petitioner filed the complaint only in 1997 means that she had already
in another. It may either be express or implied. The latter ids further subdivided abandoned her right over the property. MTC Ruled in Favor of Soledad. On appeal
into resulting and constructive trusts. Applying it now to the case at bar, the to the RTC, the Decision of MTC was reversed and ruled in favour of Conception,
plaintiffs did not prove any express trust. Neither did they specify the kind of but subsequently, amended its decision and ruled in favour of Soledad.
implied trust contemplated in their action. Therefore, its enforcement maybe
barred by laches and prescription whether they contemplate a resulting or a Issue: Whether or not there exist a trust relationship between the petitioner and
constructive trust. her Father, Express or implied?
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2 of the 7 natural children. A certain Timoteo Zayco signed in representation of


Held: No. A trust is the legal relationship between one person having an equitable the other 5 natural children who were minors. The partition was sworn to before
ownership of property and another person owning the legal title to such property, a justice of peace.
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 The conjugal hereditary estate was appraised at P74,984.93, consisting of 18
implied. Express trusts are those which are created by the direct and positive acts parcels of land, some head of cattle and the advances to the legitimate children.
of the parties, by some writing or deed, or will, or by words evincing an intention thereof represented the estate of Martin. 1/3 thereof was the free portion or
to create a trust. Implied trusts are those which, without being expressed, are P12,497.98. The shares of the 7 natural children were to be taken from that 1/3
deducible from the nature of the transaction as matters of intent or, independently, free portion. Indeed, the partition was made in accordance with the Old Civil code.
of the particular intention of the parties, as being superinduced on the transaction Thereafter, Judge Richard Campbell approved the partition project. The court
by operation of law basically by reason of equity. An implied trust may either be a declared that the proceeding will be considered closed and the record should be
resulting trust or a constructive trust. - As a rule, however, the burden of proving archived as soon as proof was submitted that each he3ir had received the portion
the existence of a trust is on the party asserting its existence, and such proof must adjudicated to him.
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 On February 3, 1914, Judge Nepumoceno asked the administrator to submit a
executes the instrument creating the trust; (2) a trustee, who is the person expressly report showing that the shares of the heirs had been delivered to them as required
designated to carry out the trust; (3) the trust res, consisting of duly identified and by the previous decision. Nevertheless, the manifestation was not in strict
definite real properties; and (4) the cestui que trust, or beneficiaries whose identity conformity with the terms of the judges order and with the partition project itself.
must be clear. Accordingly, it was incumbent upon petitioner to prove the 8 lots of the Himamaylan Cadastre were registered in equal shares in the names of
existence of the trust relationship. And petitioner sadly failed to discharge that Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator
burden. was supposed to pay the cash adjudications to each of them as enshrined in the
partition project. Plaintiffs were then constrained to bring the suit before the court
seeking for the reconveyance in their favor their corresponding participations in
said parcels of land in accordance with Article 840 of the old Civil Code. Note that
99. RAMOS VS. RAMOS 1/6 of the subject lots represents the 1/3 free portion of martins shares which
will eventually redound to the shares of his 7 legally acknowledged natural children.
FACTS: The petitioners action was predicated on the theory that their shares were merely
held in trust by defendants. Nonetheless, no Deed of Trust was alleged and
Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October proven. Ultimately, the lower court dismissed the complaint on the grounds of res
26, 1880, respectively. They were survived by their 3 children. Moreover, Martin judicata, prescription and laches.
was survived by his 7 natural children. In December 1906, a special proceeding for
the settlement of the intestate estate of said spouses was conducted. Rafael Ramos, ISSUE: Whether or not the plaintiffs action was barred by prescription, laches
a brother of Martin, administered the estate for more than 6 years. Eventually, a and res judicata to the effect that they were denied of their right to share in their
partition project was submitted which was signed by the 3 legitimate children and fathers estate.
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wrongfully conveyed to Gorricho the whole of the two lots, instead of only the
RULING: YES, there was inexcusable delay thereby making the plaintiffs action half-interest of Sevilla therein. In 1951, Sevilla died. A year later, Sevillas children,
unquestionably barred by prescription and laches and also by res judicata. plaintiffs Manuel, Constancia and Lolita filed an against defendants Gorricho and
Inextricably interwoven with the questions of prescription and res judicata is the her husband Francisco Aguado, compelling the latter to execute in their favor a
question on the existence of a trust. It is noteworthy that the main thrust of deed of reconveyance over an undivided one-half interest over the two lots the
plaintiffs action is the alleged holding of their shares in trust by defendants. share of their deceased father, Francisco Diaz, which was illegally conveyed by the
Emanating from such, the Supreme Court elucidated on the nature of trusts and provincial sheriff to Gorricho. The siblings Diaz contend that Gorricho acquired
the availability of prescription and laches to bar the action for reconveyance of their fathers half of the disputed property through an error of the provincial
property allegedly held in trust. It is said that trust is the right, enforceable solely sheriff, so it was subject to an implied trust, under Article 1456 of the New Civil
in equity to the beneficial enjoyment of property, the legal title to which is vested Code. Furthermore, they allege that since the trust is continuing and subsisting,
in another. It may either be express or implied. The latter ids further subdivided the siblings Diaz may compel reconveyance of the property despite the lapse of
into resulting and constructive trusts. Applying it now to the case at bar, the time, because prescription does not run against titles registered under Act 496.
plaintiffs did not prove any express trust. Neither did they specify the kind of Defendants denied and alleged that plaintiffs' action had prescribed. The trial court
implied trust contemplated in their action. Therefore, its enforcement maybe held that while a constructive trust in siblings Diaz favor arose when defendant
barred by laches and prescription whether they contemplate a resulting or a Gorricho took advantage of the error of the provincial sheriff in conveying to her
constructive trust. the whole of the lots and obtained title in herself, the action of plaintiffs was,
however, barred by laches and prescription. So, the plaintiffs appealed.

100. DIAZ V. GORRICHO & AGUADO G.R. No. L-11229 March ISSUES: 1. Whether or not a constructive trust was created in favor of the siblings
29, 1958 Diaz.
2. Whether or not the action for reconveyance of the two lots to siblings Diaz was
DOCTRINE: In constructive trusts, laches constitutes a bar to actions to enforce barred by laches. 3. Whether or not the action for reconveyance of the two lots to
the trust, and repudiation is not required, unless there is concealment of the facts siblings Diaz was barred by prescription.
giving rise to the trust although the concealment must be adequately pleaded by
the plaintiff in a suit to declare a trust, where the delay is apparent on the face of HELD: 1. YES. Art. 1456 of the NCC provides that if property is acquired
his pleading. through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property
FACTS: Spouses Francisco Diaz and Maria Sevilla originally owned Lot Nos. 1941 comes. Since Gorricho acquired the whole of the disputed lots through the error
and 3073. Francisco Diaz died in 1919, survived by his widow Maria Sevilla and of the sheriff, when in fact Gorricho was only entitled to the half of it, then a
their three children Manuel, Lolita and Constancia. In 1935, defendant Carmen constructive trust was created in favor of the siblings Diaz.
J. Gorricho filed an action against Sevilla, wherein a writ of attachment was issued
upon the shares of Sevilla in said lots, which were later on sold at a public auction 2. YES. The action for reconveyance of the two lots to siblings Diaz was barred
to Gorricho. Since Sevilla failed to redeem the lots in one year, the acting provincial by laches. Express trusts are created by intention of the parties, while implied or
sheriff executed a final deed of sale in favor of Gorricho; however, the sheriff constructive trusts are exclusively created by law and are not trusts in their
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technical sense. The express trusts disable the trustee from acquiring for his own time the cause of action arose before plaintiffs sought for remedy, then their action
benefit the property committed to his management or custody, at least while he for reconveyance was barred by prescription. The judgment appealed from is
does not openly repudiate the trust, and makes such repudiation known to the affirmed.
beneficiary. Thus, the oldCode of Civil Procedure (Act 190) declared that rules on
adverse possession do not apply to "continuing and subsisting" (i.e., unrepudiated) 101. SOLEDAD CAEZO VS. CONCEPCION ROJAS
trusts. In the case of an express trust, a beneficiary is entitled to rely upon the
fidelity of the trustee. No laches exists until a reasonable time after a beneficiary is Facts: -On January 29, 1997, petitioner Soledad Caezo filed a Complaint for the
notified of a breach or other cause of suit against the trustee. However, laches recovery of real property plus damages with the Municipal Trial Court (MTC) of
exists where suit is not commenced within such reasonable time. In constructive Naval, Biliran, against her fathers second wife, respondent Concepcion Rojas. The
trusts, laches constitutes a bar to actions to enforce the trust, and repudiation is subject property is an unregistered land with an area of 4,169 square meters,
not required, unless there is concealment of the facts giving rise to the trust. Time situated at Higatangan, Naval, Biliran. Caezo attached to the complaint a Joint
runs from the moment that the law creates the trust, which is the time when the Affidavit [executed on May 10, 1979 by Isidro Catandijan and Maximina Caezo
cause of action arises. But laches does not exist while the trustee, fraudulently and attesting to her acquisition of the property. Petitioner alleged that she bought the
successfully conceals the facts giving rise to the trust, although the concealment parcel of land in 1939 from Crisogono Limpiado, although the transaction was not
must be adequately pleaded by the plaintiff in a suit to declare a trust, where the reduced into writing. Thereafter, she immediately took possession of the property.
delay is apparent on the face of his pleading. The reason for the difference in When she and her husband left for Mindanao in 1948, she entrusted the said land
treatment is that on one hand, in express trusts, the delay of the beneficiary is to her father, Crispulo. Rojas, who took possession of, and cultivated, the property.
directly attributable to the trustee who holds the property for the former, thus In 1980, she found out that the respondent, her stepmother, was in possession of
creating a fiduciary relation between them. The trustee's possession is, therefore, the property and was cultivating the same. She also discovered that the tax
not adverse to the beneficiary, until and unless the latter is made aware that the declaration over the property was already in the name of his father Crispulo Rojas.
trust has been repudiated. On the other hand, in constructive trusts, there is neither They contented that contrary to the petitioners claim, it was her husband, Crispulo
promise nor fiduciary relation; the trustee does not recognize any trust and has no Rojas, who bought the property from Crisogono Limpiado in 1948, which
intent to hold for the beneficiary; therefore, the beneficiary is not justified in accounts for the tax declaration being in Crispulos name. From then on, until his
delaying action to recover his property. It is his fault if he delays; hence, he may death in 1978, Crispulo possessed and cultivated the property. Upon his death, the
be estopped by his own laches. Since the cause of action of siblings Diaz to attack property was included in his estate. The petitioner, as heir, even received her share
the sheriff's deed and cancel the transfer certificates of title issued to spouses in the produce of the estate. The respondent further contended that the petitioner
Gorricho and Aguado accrued since its issuance and recording in 1937, and ought to have impleaded all of the heirs as defendants. She also argued that the
plaintiffs had allowed fifteen (15) years to elapse before seeking remedy in 1952, fact that petitioner filed the complaint only in 1997 means that she had already
then the dismissal of the case must be upheld. Even considering that Constancia abandoned her right over the property. MTC Ruled in Favor of Soledad. On appeal
only became of age in 1939, more than sufficient time (thirteen years) had been to the RTC, the Decision of MTC was reversed and ruled in favour of Conception,
allowed to elapse to extinguish appellant's action. but subsequently, amended its decision and ruled in favour of Soledad.

3. YES. Under the old Code of Civil Procedure in force at the time, the longest Issue: Whether or not there exist a trust relationship between the petitioner and
period of extinctive prescription was only ten years. Since 15 years lapsed from the her Father, Express or implied?
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include a parcel of land in EDSA Greenhills, a residential land in Wack Wack, and
Held: No. A trust is the legal relationship between one person having an equitable the Meridien condo unit in Annapolis, Greenhills.
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 Alejandro Ty opposed the move and filed for recovery of the property with prayer
duties and the exercise of certain powers by the latter. Trusts are either express or for preliminary injunction and/or temporary restraining order. Plaintiff Alejandro
implied. Express trusts are those which are created by the direct and positive acts claims that he owns the EDSA, Wack Wack and Meridien condo unit because he
of the parties, by some writing or deed, or will, or by words evincing an intention paid for them. The property was supposedly registered in trust for Alexanders
to create a trust. Implied trusts are those which, without being expressed, are brothers and sisters in case plaintiff dies. Plaintiff also claimed that Alex had no
deducible from the nature of the transaction as matters of intent or, independently, financial capacity to purchase the disputed property, as the latter was only
of the particular intention of the parties, as being superinduced on the transaction dependent on the former.
by operation of law basically by reason of equity. An implied trust may either be a
resulting trust or a constructive trust. - As a rule, however, the burden of proving Sylvia countered that Alexander had purchased the property with his money.
the existence of a trust is on the party asserting its existence, and such proof must Alexander was financially capable of purchasing it because he had been managing
be clear and satisfactorily show the existence of the trust and its elements. The the family corporations since he was 18 years old and was also engage in other
presence of the following elements must be proved: (1) a trustor or settlor who profitable businesses.
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 The RTC granted the application for preliminary injunction and decides in favor
definite real properties; and (4) the cestui que trust, or beneficiaries whose identity of plaintiff regarding the recovery of the property. CA reversed the RTC stating
must be clear. Accordingly, it was incumbent upon petitioner to prove the that the implication created by law under Art. 1448 does not apply if the property
existence of the trust relationship. And petitioner sadly failed to discharge that was in the name of the purchasers child. They agreed that plaintiff partly paid for
burden. the EDSA property. Plaintiff appealed.

ISSUE:
102. G.R. No. 165696 April 30, 2008 ALEJANDRO B.
TY, petitioner, vs. SYLVIA S. TY, in her capacity as Administratrix Whether or not there was an implied trust under Art. 1448 of the Civil Code?
of the Intestate Estate of Alexander Ty, respondent.
RULING:
FACTS:
No. There was no implied trust created in relation to the EDSA property.
Alexander Ty, son of Alejandro Ty and husband of Sylvia Ty, dies of If the person to whom the title is conveyed is the child of the one paying the price
cancer at the age of 34. Sylvia files petition for the settlement of Alexanders of the sale, no trust is implied by law under Art. 1448, the so-called purchase
intestate estate. She also asks court to sell or mortgage properties in order to pay money resulting trust. The said article provides an exception: if the person to
the estate tax amounting to P4,714,560.02 assessed by the BIR. The properties whom the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, NO TRUST is IMPLIED by LAW, it being disputable
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presumed that there is a gift in favor of the child. The Court also noted that authority to sell or special power of attorney unless Sime Darby paid him the
plaintiff failed to prove that he did not intend a donation. amount of P300,000, claiming that this represented his unpaid separation benefits.
As a result, the sale did not push through and Sime Darby was compelled to return
Regarding the Meridien Condo and Wack Wack property, the court said that the payment to the prospective buyer.
plaintiff failed to prove that purchase money came from him. They also said that
Alexander was capable of purchasing the property as he had been working for nine On 13 September 2005, Sime Darby filed a complaint10 for damages with writ of
years, had a car care business, and was actively engaged in the business dealings of preliminary injunction against Mendoza with the Regional Trial Court (RTC) of
several family corporations from which he received emoluments and other Makati City.
benefits. Hence, no implied trust created because there was no proof that plaintiff
had paid for said properties. ISSUE:

103. G.R. No. 202247 June 19, 2013SIME DARBY PILIPINAS, Whether or not there is trust arises in favor of one who pays for the purchase
INC., Petitioner, vs. JESUS B. MENDOZA, Respondent. price?

FACTS: RULING:

Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Yes. While the share was bought by Sime Darby and placed under the
Mendoza (Mendoza) as sales manager to handle sales, marketing, and distribution name of Mendoza, his title is only limited to the usufruct, or the use and enjoyment
of the company's tires and rubber products. On 3 July 1987, Sime Darby bought of the clubs facilities and privileges while employed with the company.
a Class "A" club share4 in Alabang Country Club (ACC) from Margarita de
Araneta as evidenced by a Deed of Absolute Sale.5 The share, however, was placed In Thomson v. Court of Appeals,20 we held that a trust arises in favor of one
under the name of Mendoza in trust for Sime Darby since the By-Laws6 of ACC who pays the purchase price of a property in the name of another, because of the
state that only natural persons may own a club share.7 As part of the arrangement, presumption that he who pays for a thing intends a beneficial interest for himself.
Mendoza endorsed the Club Share Certificate8 in blank and executed a Deed of While Sime Darby paid for the purchase price of the club share, Mendoza was
Assignment,9 also in blank, and handed over the documents to Sime Darby. From given the legal title. Thus, a resulting trust is presumed as a matter of law. The
the time of purchase in 1987, Sime Darby paid for the monthly dues and other burden then shifts to the transferee to show otherwise.
assessments on the club share.

When Mendoza retired in April 1995, Sime Darby fully paid Mendoza his
separation pay amounting to more thanP3,000,000. Nine years later, or sometime 104. G.R. No. 181844 September 29, 2010 SPS. FELIPE
in July 2004, Sime Darby found an interested buyer of the club share and JOSEFA PARINGIT, Petitioner,
for P1,101,363.64. Before the sale could push through, the broker required Sime vs. MARCIANA PARINGIT BAJIT, ADOLIO PARINGIT and
Darby to secure an authorization to sell from Mendoza since the club share was ROSARIO PARINGIT ORDOO, Respondents.
still registered in Mendozas name. However, Mendoza refused to sign the required
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FACTS: Whether or not Felipe and his wife purchased the subject lot under an implied
trust for the benefit of all the children of Julian?
During their lifetime, spouses Paringit leased a lot in Sampaloc, Manilafrom
Terocel Realty. They built their home there and raised five children. For having RULING:
occupied the lot for years, Terocel Realty offered to sell it to Julian but he did not
have enough money at that time to meet the payment deadline. Julian sought the Yes, the Court ruled that the case at bar falls under the rubric of the implied
help of his children so he can buy the property but only his so nFelipe and wife trust provided in Article 1450 of the Civil Code. Implied trust under Article 1450
Josefa had the financial resources he needed at that time. To bring about the presupposes a situation where a person, using his own funds, buys property on
purchase, Julian executed a deed of assignment of lease hold right in favor of Felipe behalf of another, who in the meantime may not have the funds to purchase it.
and his wife that would enable them to acquire the lot. The latter then bought the Title to the property is for the time being placed in the name of the trustee, the
same from Terocel Realty and a TCT was subsequently issued in favor of spouses person who pays for it, until he is reimbursed by the beneficiary, the person for
Felipe and Josefa. whom the trustee bought the land. It is only after the beneficiary reimburses the
trustee of the purchase price that the former can compel conveyance of the
Later on, due to issues among Julians children regarding the ownership of the lot, property from the latter. The circumstances of this case are actually what implied
Julian executed an affidavit clarifying the nature of Felipe and his wifes purchase trust is about. Although no express agreement covered
of the lot. He claimed that it was bought for the benefit of all his children.
Felipe and his wifes purchase of the lot for the siblings and their father, it
Despite the title being under their name, the spouses moved to another house on came about by operation of law and is protected by it. The nature of the transaction
the same street in 1988. Marciana, et al, on the other hand, continued to occupy established the implied trust and this in turn gave rise to the rights and obligations
the lot with their families without paying rent. This was the situation when their provided by law. Implied trust is a rule of equity, independent of the particular
father died in 1994. A year later, Felipe and his wife sent a demand letter to his intention of the parties. Here, the evidence shows that Felipe and his wife bought
siblings who occupy the lot, asking them to pay rental arrearages for occupying the the lot for the benefit of Julian and his children, rather than for themselves. There
property. They refused to pay or reply to the letter, believing that they had the is no question that the house originally belonged to Julian and Aurelia who built
right to occupy the house and lot, it being their inheritance from their parents. it.
Because of this, Felipe and his wife filed an ejectment suita gainst them. The suit
prospered, resulting in the ejectment of Marciana, et a land their families from the First, if Julian really intended to sell the entire house and assign the right
property. to acquire the lot to Felipe and his wife, he would have arranged for Felipes other
siblings to give their conformity as co-owners to such sale.
To vindicate what they regarded as their right to the lot and the house, the other
children filed the present action against Felipe and his wife for annulment of title Second, Julian said in his affidavit that Felipe and his wife bought the lot
and reconveyance of property. from Terocel Realty on his behalf and on behalf of his other children. Felipe and
his wife advanced the payment because Julian and his other children did not then
ISSUE: have the money needed to meet the realty companys deadline for the purchase.
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Notably, Felipe, acting through his wife, countersigned Julians affidavit the ss trust, and not an impliedtrust, was created and that the action had already
way his siblings did. prescribed.

Third, if Felipe and his wife really believed that they were the absolute ISSUE:
owners of the lot, then their moving out of the house in 1988 and letting Marciana,
et al continue to occupy the house did not make sense. Fourth, Felipe and his wife What kind of trust was created? Express or implied trust? Implied trust.
demanded rent from Marciana, et al only a year following Julians death. This
shows that for over 10 years, Felipe and his wife respected the right of the siblings RULING:
to reside on the property. This is incompatible with their claim that they bought
the house and lot for themselves back in 1984. Until they filed the suit, they did Where the grantee takes the property under
nothing to assert their supposed ownership of the house and lot. an agreement to convey to another on certain conditions, a trust results for the
benefit of such other or his heirs. It is also the rule that there is an implied trust
when a person purchases land with his own money and
takes conveyance thereof in the name of another. In such a case, the property is
105. G.R. No. L-12149 September 30, 1960 HEIRS OF EMILIO held on a resulting trust in favor of the one furnishing the consideration for the
CANDELARIA, ETC., vs. LUISA ROMERO, ET AL., transfer. This kind of trust is from equity and arises by implication or operation
of law. In the present case, it is apparent that Emilio furnished the consideration
FACTS: intending to obtain a beneficial interest in the property in question. Having
supplied the money, it is presumed that he intended to purchase the
Parties to this case are the heirs of Emilio Candelaria as plaintiff lot for his own benefit. Moreover, by entering into an agreement with Emilio that
and Luisa Romero, and the heirs of Lucas as defendants. Emilio and Lucas the necessary documents of transfer will be made later,
Candelaria bought a lot on an installment basis. Lucas paid the first two
installments but because of sickness which caused him to be bedridden, he sold Lucas acknowledged the he merely held
his share to his brother Emilio who continued to pay the purchase price until the the property in trust for his brother with the understanding that it will eventually
obligation to pay had been fully satisfied. The TCT was however issued under the be conveyed tothe plaintiffs predecessor in interest. Lastly, by acknowledging the
name of presence of trust, the plaintiffs action cannot be said to have been barred by lapse
Lucas.Nevertheless, Lucas acknowledges that he merelyheld the title in trust for of time. The case is therefore remanded for further proceedings.
his brother with theunderstanding that the necessary documents of transfer will
be made later and this fact was known not only to him but also to the defendants.
However upon his death, his heirs refused to reconvey the lotto plaintiff despite
repeated demands. Plaintiff brought an action in the CFI for a 106. G.R. No. 47354 March 21, 1989 HORACIO G. ADAZA and
complaint for reconveyance of real FELICIDAD MARUNDAN, petitioners, vs.THE HONORABLE
property. Thelower court however dismissed the case on theground that an expre COURT OF APPEALS and VIOLETA G. ADAZA, assisted by her
husband LINO AMOR, respondents.
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FACTS: Reversed Trial court decision, declaring that though the deed was signed
voluntarily, such Deed was without consideration or cause because the land had
In 1953, Victor Adaza Sr. executed a Deed of Donation, covering the been unconditionally donated to Violeta alone.
disputed land in this case,located in Sinonok, Zamboanga del Norte in favor
of Respondent Violeta. The land being disposable publicland had been held and ISSUE:
cultivated by Victor, Sr. With the help of her brother, Horacio, Violeta filed a
homestead application over the land and a free patent was issued in 1956. An OCT Who owns the disputed parcel of land?
was issued in1960. In 1962, Violeta and husband, Lino obtained a loan from PNB
by executing a mortgage on the land, while Homero Adaza, brother of Violeta RULING:
remainedad ministrator of the same.
Petitioners owned the parcel of land.
In 1971, Horacio invited his brothers and sisters for a family gathering
where he asked Violeta to sign a Deed of Waiver with respect to the property Deed of donation had a crossed-out provision: That the donee shall share of the
inSinonok. The Deed stated that the land was owned in common by Violeta and entire property with one of her brothers and sisters after the death of the
Horacio even though the OCT was in her name only. The Deed also providedfor donor. The record is bereft of any indication of any evil intent or malice on the
the waiver, transfer and conveyance of Violeta to Horacio of of the property part of Homero, Victor, Jr. and Teresita (siblings of Violeta) that would suggest
and its improvements.Violeta and Horacio signed the Deed with Homero as a deliberate collusion against Violeta. Their father had executed the Deed of
witness. A few months later, Violeta and husband Lino filed a complaint for Donation with the understanding that the same would be divided between
annulment of the Deed of waiver and for damages against Horacio and wife Felisa. Horacio and Violeta and that Violeta had signed the Deed of Waiver freely and
The complaint alleged that (1) she was absolute owner of the land by virtue of an voluntarily. Victor Adaza, Sr. left 4 parcels of land divided among the 6 children
unconditional donation executed by her father in her favor; (2) she was registered through the practice of having the lands acquired by him titled to the name of one
owner; (3) she signed the Deed of waiver because of fraud, misrepresentation and of his children. The property involved in the instant case is owned in common by
undue influence; and (4) because of such malicious acts, she is entitled to damages Violeta and brother, Horacio even though the OCT was only in her name. She
from Horacio. held half of the land in trust for petitioner Horacioimplied trust based on Article
1449 of the Civil Code: There is also an implied trust when a donation is made to
Trial Court person but It appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest of only a part thereof. The
Declared Deed of Waiver as valid and binding upon Violeta, that Horacio doctrine of laces is not to be applied mechanically as between near relatives.
was co-owner of of the land, and ordering Violeta to pay Horacion the proceeds
of his share.

CA
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and the earlier decision was reversed, the case went up to the CA but the CA
affirmed the reversed decision of the RTC.
ISSUE: Should MCIAA reconvey the lands to petitioners?
HELD:
Yes. The notion that the government via expropriation proceedings acquires
unrestricted ownership over or a fee simple title to the covered land is no longer
tenable. Expropriated lands should be differentiated from a piece of land,
115. VDA. DE OUANO vs. REPUBLIC, G.R. NO. 168770, 9 FEBRUARY ownership of which was absolutely transferred by way of an unconditional
2011 purchase and sale contract freely entered by two parties, one without obligation to
FACTS: buy and the other without the duty to sell. In that case, the fee simple concept
really comes into play. There is really no occasion to apply the fee simple concept
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency if the transfer is conditional.
pursued a program to expand the Lahug Airport in Cebu City. As an assurance
from the government, there is a promise of reconveyance or repurchase of said The taking of a private land in expropriation proceedings is always conditioned on
property so long as Lahug ceases its operation or transfer its operation to Mactan its continued devotion to its public purpose. Once the purpose is terminated or
Cebu Airport. Some owners refused to sell, and that the Civil Aeronautics peremptorily abandoned, then the former owner, if he so desires, may seek its
Administration filed a complaint for the expropriation of said properties for the reversion subject of course to the return at the very least of the just compensation
expansion of the Lahug Airport. received.

The trial court then declared said properties to be used upon the expansion of said In expropriation, the private owner is deprived of property against his will. The
projects and order for just compensation to the land owners, at the same time mandatory requirement of due process ought to be strictly followed such that the
directed the latter to transfer certificate or ownership or title in the name of the state must show, at the minimum, a genuine need, an exacting public purpose to
plaintiff. take private property, the purpose to be specifically alleged or least reasonably
deducible from the complaint.
At the end of 1991, Lahug Airport completely ceased its operation while the
Mactan-Cebu airport opened to accommodate incoming and outgoing commercial Public use, as an eminent domain concept, has now acquired an expansive meaning
flights. This then prompted the land owners to demand for the reconveyance of to include any use that is of usefulness, utility, or advantage, or what is productive
said properties being expropriated by the trial court under the power of eminent of general benefit [of the public]. If the genuine public necessitythe very reason
domain. Hence these two consolidated cases arise. or condition as it wereallowing, at the first instance, the expropriation of a
private land ceases or disappears, then there is no more cogent point for the
In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said governments retention of the expropriated land. The same legal situation should
properties to the land owners plus attorneys fee and cost of suit, while in G.R. hold if the government devotes the property to another public use very much
No. 168770, the RTC ruled in favor of the petitioners Oaunos and against the different from the original or deviates from the declared purpose to benefit
MCIAA for the reconveyance of their properties but was appealed by the latter another private person. It has been said that the direct use by the state of its power
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to oblige landowners to renounce their productive possession to another citizen,


who will use it predominantly for that citizens own private gain, is offensive to
our laws.
The government cannot plausibly keep the property it expropriated in any manner
it pleases and in the process dishonor the judgment of expropriation. A
condemnor should commit to use the property pursuant to the purpose stated in
the petition for expropriation, failing which it should file another petition for the
new purpose. If not, then it behooves the condemnor to return the said property
to its private owner, if the latter so desires.
Hence, equity and justice demand the reconveyance by MCIAA of the litigated
lands in question to the Ouanos and Inocians. In the same token, justice and fair
play also dictate that the Ouanos and Inocian return to MCIAA what they received
as just compensation for the expropriation of their respective properties plus legal
interest to be computed from default, which in this case should run from the time
MCIAA complies with the reconveyance obligation.

116. LOPEZ v. CA G.R. No. 157784 December 16, 2008


FACTS:
On 23 March 1968, Juliana executed a notarial will, whereby she expressed that
she wished to constitute a trust fund for her paraphernal properties, denominated
as Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be administered by
her husband. If her husband were to die or renounce the obligation, her nephew,
Enrique Lopez, was to become administrator and executor of the Fideicomiso.
Two-thirds (2/3) of the income from rentals over these properties were to answer
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for the education of deserving but needy honor students, while one-third 1/3 was (1/2) of the Abra de Ilog lot on Mindoro, the 1/6 portion of the lot in Antorcha
to shoulder the expenses and fees of the administrator. St. in Balayan, Batangas and all other properties inherited ab intestato by Juliana
from her sister, Clemencia, in accordance with the order of the probate court in
As to her conjugal properties, Juliana bequeathed the portion that she could legally S.P. No. 706. The disputed lands were excluded from the trust. Jose died on 22
dispose to her husband, and after his death, said properties were to pass to her July 1980, leaving a holographic will disposing of the disputed properties to
biznietos or great grandchildren. Juliana initiated the probate of her will five (5) respondents. The will was allowed probate on 20 December 1983 in S.P. No. 2675
days after its execution, but she died on 12 August 1968, before the petition for before the RTC of Pasay City.
probate could be heard.
Pursuant to Joses will, the RTC ordered on 20 December 1983 the transfer of the
The petition was pursued instead in Special Proceedings (S.P.) No. 706 by her disputed properties to the respondents as the heirs of Jose. Consequently, the
husband, Jose, who was the designated executor in the will. On 7 October 1968, certificates of title of the disputed properties were cancelled and new ones issued
the Court of First Instance, Branch 3, Balayan,Batangas, acting as probate court, in the names of respondents.
admitted the will to probate and issued the letters testamentary to Jose. Jose then
submitted an inventory of Julianas real and personal properties with their Petitioners father, Enrique Lopez, also assumed the trusteeship of Julianas estate.
appraised values, which was approved by the probate court. Thereafter, Jose filed On 30 August 1984, the RTC of Batangas, Branch 9 appointed petitioner as trustee
a Report dated 16 August 1969, which included a proposed project of partition. of Julianas estate in S.P. No. 706.
Jose proceeded to offer a project of partition. Then, Jose listed those properties On 11 December 1984, petitioner instituted an action for reconveyance of parcels
which he alleged were registered in both his and Julianas names, totaling 13 parcels of land with sum of money before the RTC of Balayan, Batangas against
in all. The disputed properties consisting of six (6) parcels, all located in Balayan, respondents. The complaint essentially alleged that Jose was able to register in his
Batangas, were included in said list. On 25 August 1969, the probate court issued name the disputed properties, which were the paraphernal properties of Juliana,
an order approving the project of partition. either during their conjugal union or in the course of the performance of his duties
as executor of the testate estate of Juliana and that upon the death of Jose, the
As to the properties to be constituted into the Fideicomiso, the probate court disputed properties were included in the inventory as if they formed part of Joses
ordered that the certificates of title thereto be cancelled, and, in lieu thereof, new estate when in fact Jose was holding them only in trust for the trust estate of
certificates be issued in favor of Jose as trustee of the Fideicomiso covering one- Juliana.
half (1/2) of the properties listed under paragraph 14 of the project of partition;
and regarding the other half, to be registered in the name of Jose as heir of Juliana. The RTC dismissed the petition on the ground of prescription. The CA denied the
appeals filed by both parties.
The properties which Jose had alleged as registered in his and Julianas names,
including the disputed lots, were adjudicated to Jose as heir, subject to the ISSUE: Whether an implied trust was constituted over the disputed properties
condition that Jose would settle the obligations charged on these properties. when Jose, the trustee, registered them in his name?
The probate court, thus, directed that new certificates of title be issued in favor of HELD:
Jose as the registered owner thereof in its Order dated 15 September 1969. On
even date, the certificates of title of the disputed properties were issued in the name The disputed properties were excluded from the Fideicomiso at the outset. Jose
of Jose. The Fideicomiso was constituted in S.P No. 706 encompassing one-half registered the disputed properties in his name partly as his conjugal share and
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partly as his inheritance from his wife Juliana, which is the complete reverse of the 117. SALAO VS SALAO, G.R. NO. L-26699, March 16, 1976
claim of the petitioner, as the new trustee, that the properties are intended for the
beneficiaries of the Fideicomiso. Furthermore, the exclusion of the disputed Facts:
properties from the Fideicomiso was approved by the probate court and, The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon,
subsequently, by the trial court having jurisdiction over the Fideicomiso. The Rizal begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia.
registration of the disputed properties in the name of Jose was actually pursuant Manuel Salao died in 1885. His eldest son, Patricio, died in 1886 survived by his
to a court order. The apparent mistake in the adjudication of the disputed only child. Valentin Salao. After Valentinas death, her estate was administered by
properties to Jose created a mere implied trust of the constructive variety in favor her daughter Ambrosia. The documentary evidence proves that in 1911 or prior
of the beneficiaries of the Fideicomiso. to the death of Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia
Salao, secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga,
in their names.
The property in question is the forty-seven-hectare fishpond located at Sitio
Calunuran, Lubao, Pampanga, wherein Benita Salao-Marcelo daughter of Valentin
Salao claimed 1/3 interest on the said fishpond. The defendant Juan Y. Salao Jr.
inherited from his father Juan Y. Salao, Sr. of the fishpond and the other half
from the donation of his auntie Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia Salao had
engaged in the fishpond business. Where they obtained the capital and that
Valentin Salao and Alejandra Salao were included in that joint venture, that the
funds used were the earnings of the properties supposedly inherited from Manuel
Salao, and that those earnings were used in the acquisition of the Calunuran
fishpond. There is no documentary evidence to support that theory.
The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated
January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share
in the two fishponds and that when Juani took possession thereof in 1945, in which
he refused to give Benita and Victorinas children their one-third share of the net
fruits which allegedly amounted to P200,000. However, there was no mention on
the deeds as to the share of Valentin and Alejandra. Juan S. Salao, Jr. in his answer
dated February 6, 1951 categorically stated that Valentin Salao did not have any
interest in the two fishponds and that the sole owners thereof his father Banli and
his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917, and
that he Juani was the donee of Ambrosias one-half share.
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Benita Salao and her nephews and niece asked for the annulment of the donation convincing as if the act giving rise to the trust obligation were proven by an
to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran fishpond authentic document. Such a trust cannot be established upon testimony consisting
as Valentin Salaos supposed one-third share in the 145 hectares of fishpond in large part of insecure surmises based on ancient hearsay. (Syllabus, Santa Juana
registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao. vs. Del Rosario 50 Phil. 110).
Issue: Whether or not the Calunuran fishpond was held in trust for Valentin Salao The foregoing rulings are good under article 1457 of the Civil Code which, as
by Juan Y. Salao, Sr. and Ambrosia Salao. already noted, allows an implied trust to be proven by oral evidence. Trustworthy
oral evidence is required to prove an implied trust because, oral evidence can be
Held: easily fabricated.
There was no resulting trust in this case because there never was any intention on On the other hand, a Torrens title is generally a conclusive of the ownership of
the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any the land referred to therein (Sec. 47, Act 496). A strong presumption exists. that
trust. There was no constructive trust because the registration of the two fishponds Torrens titles were regularly issued and that they are valid. In order to maintain an
in the names of Juan and Ambrosia was not vitiated by fraud or mistake. This is action for reconveyance, proof as to the fiduciary relation of the parties must be
not a case where to satisfy the demands of justice it is necessary to consider the clear and convincing.
Calunuran fishpond being held in trust by the heirs of Juan Y. Salao, Sr. for the
heirs of Valentin Salao. The real purpose of the Torrens system is, to quiet title to land. Once a title is
registered, the owner may rest secure, without the necessity of waiting in the
A Torrens Title is generally a conclusive evidence of the ownership of the land portals of the court, or sitting in the mirador de su casa, to avoid the possibility of
referred to therein. (Sec. 47, Act 496). A strong presumption exists that Torrens losing his land.
titles were regularly issued and that they are valid. In order to maintain an action
for reconveyance, proof as to the fiduciary relation of the parties must be clear and
convincing.
The plaintiffs utterly failed to prove by clear, satisfactory and convincing evidence.
It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations.
Trust and trustee; establishment of trust by parol evidence; certainty of proof.
Where a trust is to be established by oral proof, the testimony supporting it must
be sufficiently strong to prove the right of the alleged beneficiary with as much
certainty as if a document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague and inconclusive
proof.
Trusts; evidence needed to establish trust on parol testimony. In order to
establish a trust in real property by parol evidence, the proof should be as fully
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The Court of Appeals however claimed that this evidence is not a sufficient Deed
of Sale. It therefore reversed the ruling of the CFI and ordered the petitioner to
deliver the possession of the land in question to respondents.
Issue: W/N the notary public of sale is sufficient to substantiate the
municipalitys claim that it acquired the disputed land by means of a Deed of Sale.
Held:
Yes.The fact that the notary public of sale showed the nature of the instrument,
the subject of the sale, the parties of the contract, the consideration and the date
118. MUNICIPALITY OF VICTORIAS VS. CA of sale, the Court held that it was a sufficient evidence of the Deed of Sale. Thus,
when Norma inherited the land from her grandmother, a portion of it has already
Facts: been sold by the latter to the Municipality of Victorias in1934. Her registration of
Norma Leuenberger, respondent, inherited aparcel of land from her grandmother, the parcel of land did not therefore transfer ownership but merely confirmed it.
Simeona Vda.de Ditching in 1941. As the civil code provides, where the land is decreed in the name of a person
through fraud or mistake, such person is by operation of law considered a trustee
In 1963, she discovered that a part of the parcel of land was being used by of an implied trust for the benefit of the persons from whom the property comes.
petitioner Municipality of Victorias as a cemetery. By reason of the discovery, Consequently, she only held the land in dispute in trust for the petitioner hence
respondent wrote a letter to the Mayor of Victorias demanding payment of past private respondent is inequity bound to reconvey the subject land to the cestui que
rentals over the land used a cemetery and requesting delivery of the illegally trust , the Municipality of Victorias.
occupied land by the petitioner.
The Mayor replied that the municipality bought the land but however refused to
show the papers concerning the sale. Apparently, the municipality failed to register
the Deed of Sale of the lot in dispute.
Respondent filed a complaint in the Court of First Instance of Negros Occidental
for recovery of possession of the parcel of land occupied by the municipal
cemetery. In its answer, petitioner Municipality alleged ownership of the lot having
bought it from Simeona Vda. de Ditching sometime in 1934.
The lower court decided in favor of the petitioner municipality. On appeal,
petitioner presented an entry in the notarial register form the Bureau of Records
Management in Manila of a notary public of a sale purporting to be that of the 130. ROSARIO GAYONDATO , vs. THE TREASURER OF THE
disputed parcel of land. Included within it are the parties to the sale, Vda. De PHILIPPINE ISLANDS, ET AL., G.R. No. L-24597 August 25, 1926
Ditching, as the vendor and the Municipal Mayor of Victorias in 1934, as vendee.
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FACTS: not trusts at all in the strict and proper signification of the word "trust"; but as courts are
agreed in administering the same remedy in a certain class of frauds as are
Three parcels of land (subject lots) were inherited by Domingo Gayondato from administered in fraudulent breaches of trusts, and as courts and the profession
his mother. Domingo then married Adela Gasataya (Adela) and they had one have concurred in calling such frauds constructive trusts, there can be no misapprehension
child, Rosario Gayondato. Domingo died in 1902 and six years later, Adela in continuing the same phraseology, while a change might lead to confusion and
married Domingo Cuachon. The subject lots were included in a cadastral case misunderstanding. If this is the kind of constructive trust referred to in Section
where Domingo appeared on behalf of Adela and Rosario, who was then fifteen years old. 106, it must be conceded that Rosario cannot recover damages from the assurance fund. But
that such is not the case, becomes quite apparent upon an examination of sections
Despite Domingos claims that the subject lots were owned by both Adela and Rosario, Court 101 and 102, of the same Act, in which the right of recovery from the assurance fund
of First Instance erroneously decreed the registration of the aforesaid lots in the in cases of registration through fraud or wrongful acts is expressly recognized, then it clearly
name of Adela Gasataya alone. Subsequently Adela, with the consent of her shows that the term trust as used in section106 must be taken in its technical and
husband, mortgaged the property to the National Bank and in the year 1920, sold more restricted sense. Indeed, if it were to be regarded in its broadest sense, the
it to the Francisco Rodriguez (Francisco), the latter assuming the liability for the assurance fund would, under the conditions here prevailing, be of little or no value
mortgage and for certain other debts. Rosario filed a complaint against Adela,
Domingo, Francisco, and Insular Treasurer to recover damages for the erroneous
registration of the subject lots in the name of Adela. Trial court ruled in favor of
Rosario ordering Adela and Domingo to solidarily indemnify Rosario, but
absolving Insular Treasurer and Francisco

ISSUE
131. EUSEBIA ESCOBAR VS RAMON LOCSIN, in his capacity as special
WON Insular Treasurer should be held secondarily liable? administrator of the intestate estate of Juana Ringor, G.R. No. L-48309
January 30, 1943
HELD
FACTS
The Attorney-General in his brief for the Insular Treasurer raises the point that The complaint alleges that the plaintiff is the owner of the subject lot; and that in
Domingo and Adela prior to the registration must be considered to have held the the course of the cadastral proceedings, plaintiff being illiterate, asked Sumangil to
property in trust and for the benefit of Rosario; thus, the relation of trustee and claim the same for her (plaintiff) but Sumangil committed a breach of trust by
cestui que trust was created making this case fall under Section106 of the claiming the lot for himself, so it was adjudicated in favor of Sumangil. The
Land Registration Act, which provides that "the assurance fund shall not be liable defendant is the special administrator of the estate of Juana Ringor, to whom the
to pay for any loss or damage or deprivation occasioned by breach of trust, whether parcel of land in question was assigned by partition in the intestate estate of
express, implied, or constructive, by any registered owner who is a trustee, or by the Sumangil and Duque. The CFI found that the plaintiff is the real owner of the lot
improper exercise of any sale in mortgage-foreclosure proceedings. The use of which she had acquired in 1914 by donation propter nuptias from Pablo Ringor;
the word "trust" in this sense is not technically accurate. As Perry says, such trusts "are that plaintiff had since that year been in possession of the land; and that the same
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had been decreed in the cadastral proceedings in favor of Domingo Sumangil. The manner of chicanery or detestable design cloaked by legal technicalities. The
trial court, while recognizing that the plaintiff had the equitable title and the Torrens system was never calculated to foment betrayal in the performance of a
defendant the legal title, nevertheless dismissed the complaint because the period trust. The judgment appealed from is hereby reverse, and the defendant is ordered
of one year provided for in section 38 of the Land Registration Act for the review to convey that lot in question to the plaintiff within fifteen days from the entry of
of a decree had elapsed and the plaintiff had not availed herself of this remedy. final judgment herein; and upon his failure or refusal to do so, this judgment shall
constitute sufficient authorization for the Register of Deeds of Nueva Ecija, in lieu
ISSUE Does the possession of legal title preclude the operation of a trust of a deed of conveyance, to transfer the certificate of title for said lot No. 692 to
agreement? the plaintiff Eusebia Escobar. The defendant shall pay the costs of both instances
HELD
No. The trial court plainly erred. The complaint did not seek the review of the
decree or the reopening of the cadastral case, but the enforcement of a trust.
Hence, section 38 of Act No. 496 does not apply. The estate of Juana Ringor as 132. CAVILE v LITANIA-HONG
the successor in interest of the trustee, Domingo Sumangil, is in equity bound to
execute a deed of conveyance of this lot to the plaintiff-appellant. The remedy FACTS
herein prayed for has been upheld by this Court in previous cases, one of which is A deed of partition was entered into by the heirs of spouses Bernardo Cavile and
Severino vs. Severino (44 Phil., 343, year 1923). There is no indication there of an Tranquilina Galon. Subject of the deed of partition were several parcels of lant all
intention to cut off, through the issuance of a decree of registration, equitable under the name of Bernardo. Some of the legal heirs sold their shares to Castor
rights or remedies such as those here in question. On the contrary, section 70 of (father of Perfecta petitioner) making him sole owner of the properties. Castor
the Act provides: Registered lands and ownership therein, shall in all respects be and Susana (legal heir, sister of castor) executed a confirmation of extrajudicial
subject to the same burdens and incidents attached by law to unregistered land. partition, it was recognized and confirmed in the document that Susana has a just
Nothing contained in this Act shall in any way be construed to relieve registered and lawful share on the said properties and she was in actual possession of the said
land or the owners thereof from any rights incident to the relation of husband and properties. 14 years after, heirs of susana filed a complaint for reconveyance and
wife, or from liability to attachment on mesne process or levy on execution, or recovery of the said property with damages before RTC against Perfecta (daughter
from liability to any lien of any description established by law on land and the of castor). Heirs of susana contends that Perfecta intruded upon and excluded
buildings thereon, or the interest of the owner in such land or buildings, or to them from the subject lots unlawful occupancy Perfecta planted and harvested
change the laws of descent, or the rights of partition between coparceners, joint crops on the land. In addition, the land was registered under the name of Perfecta.
tenants and other cotenants, or the right to take the same by eminent domain, or (Perfecta was in possession of the land) Perfecta then contends that the land sold
to relieve such land from liability to be appropriated in any lawful manner for the by castors heir to him and castor has possession and lots covered by tax
payment of debts, or to change or affect in any other way any other rights or declaration. Then castor sold it to perfecta who took possession and filed with the
liabilities created by law and applicable to unregistered land, except as otherwise Bureau of Lands an application for the issuance of title over her name and it was
expressly provided in this Act or in the amendments hereof. A trust such as granted. Furthermore, the Confirmation of Extrajudicial Partition was a nullity.
that which was created between the plaintiff and Domingo Sumangil is sacred The intention of such document was to accommodate susana who thenneeded
and inviolable. The Courts have therefore shielded fiduciary relations against every security for the loan she was trying to obtain from the Rural bank. RTC was in
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favor of Perfecta because her evidence was more worthy of credence. Heirs of In addition, the heirs of Susana alleged fraud and breach of trust in the part of
susana appealed before CA and it reversed the decision alleging that the perfecta. But the court said that mere allegation of fraud is not enough. Intentional
confirmation of extrajudicial partition was not a simulated document. It was susana acts to deceive and deprive another party of his right must be proved.
who paid the taxes before. Perfecta then filed a motion for reconsideration but
was denied. Perfecta then filed this petition.
ISSUE Whether or not Perfecta has a the better right to the subject lots? 133. Estrella Tiongco Yared vs Jose B. Tiongco, (G.R. No. 161360 October
19, 2011
HELD
FACTS:
Yes. In civil cases, the party having the burden of proof must establish his case by
a preponderance of evidence. It is the weight, credit, and value of the aggregate Matilde, Jose, Vicente, Felipe are the HEIRS OF MARIA LUIS DE TIONGCO.
evidence on either side and is usually considered to be synonymous with the term Although the HEIRS OF MARIA LUIS DE TIONGCO have all died, there were
greater weight of the evidence or greater weight of the credible evidence. It is survived by their children and descendants. Among them are the legitimate
the probability of truth. The heirs of Susana were only able to provide as evidence children of Jose, Estrella Tiongco Yared and Carmelo Tiongco, father of the
the document of the Confirmation of Extrajudicial Partition and the tax respondent Jose. In 1965, Estrella built a house on Lot 1404 and sustained herself
declaration. Tax declarations are not conclusive evidence of ownership but it can by collecting rentals from the tenants of Lots 3244 and 3246. In 1968, Estrella, as
be used to support such claim. In addition, Susana failed to shed light on why or one of the heirs of Jose, filed an adverse claim affecting all the rights, interest and
how the said properties wholly pertained to her when her parents Bernardo and participation of her deceased father on the disputed lots, but the adverse claim was
Tranquilina clearly had other heirs who also had shares in the inheritance. No only annotated on the OCTs covering Lots 3244 and 1404. In 1983, the
information was provided as to how said possession of the lots was actually NEPHEW prohibited Estrella from collecting rentals from the tenants of Lots
exercised or demonstrated by Susana. On the side of perfecta, the land was 3244 and 3246. The NEPHEW filed a suit for recovery of possession against
registered under her name; a patent was legally issued by the government in her several tenants of Lots 324 and 3246 wherein he obtained a judgment in his favour.
name. Possession of lots was established not just by the testimony of Perfecta but The NEPHEW also filed a case for unlawful detainer against Estrella as she was
was corroborated by the testimony of Luciana Navarra, whose husband was a staying on Lot 1404. The RTC ruled in favour of the NEPHEW.
tenant working on the subject lots. Moreover, they planted coconuts, rice, and The CA reversed and ruled in favour of Estrella. As such, the NEPHEW never
corn on which the heirs of Susana were unable to refute. Therefore, the court was took possession of the properties. In 1988, when Estrella inquired at the Office of
convinced that the evidence adduced by perfecta preponderated over that of the the RD, she discovered that, sometime in 1974, the NEPHEW had already
heirs of Susanna. It is important to note that the heirs of Susana brought the action executed an Affidavit of Adjudication declaring that he is the only surviving heir
for reconveyance of the subject lots before RTC only more than 12 years after the of the registered owners and adjudicating unto himself Lots 3244, 3246, and 1404.
Torrens titles were issued in favor of perfecta. The remedy then was already time- The OCTs were cancelled and new TCTs were issued in respondent Joses name.
barred (implied or constructive trust 10 years from the date of the issuance of Based on the records of the RD, the NEPHEW sold Lots 3244 and 1404 to
certificate of title over the property provided not transferred to innocent purchaser Catalino Torre. Lot 3246 was sold to Antonio Doronila. Torre sold the Lots 3244
for value). And even if it has not been barred, still perfecta will win because of the and 1404 to Doronila. Doronila sold back to Jose Lots 1404, 3244, and 3246. In
preponderance of evidence. 1990, Estrella filed a complaint against the NEPHEW and Doronila. RTC ruled
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in favour of Jose for prescription has set since the complaint was filed in 1990 or
some 16 years after the NEPHEW caused to be registered the affidavit of
adjudication. The CA AFFIRMED. FACTS:

ISSUE Who has a better right to the properties? On December 27, 1989, the RTC, Branch 19, of Digos City, Davao del Sur,
rendered a Decision5 in Civil Case No. 2514 (a case for Reconveyance and
RULING The CA decision is reversed and set aside. The RD is ordered to restore Damages), ordering the exclusion of 2.5002 hectares from Lot 13521. The trial
the OCTs under the name/s of the registered original owners. court found that said 2.5002 hectares which is part of Lot 13521, a 13,752- square
meter parcel of land covered by Original Certificate of Title (OCT) No. P- 49526
HELD registered in the name of Antonio Go Pace (Antonio) on July 19, 1971 actually
Generally, an action for reconveyance can barred by prescription. An action for pertains to Sesinando Jumamoy (Sesinando), Ciriacos predecessor-ininterest.
reconveyance based on implied or constructive trust must perforce prescribe in 10 The RTC found that said 2.5002-hectare lot was erroneously included in Antonios
years from the issuance of the Torrens title over the property. However, there is free patent application which became the basis for the issuance of his OCT. It then
an exception to this rule: when the plaintiff is in possession of the land to be ordered the heirs of Antonio (the Paces [represented by Rosalia Pace (Rosalia)]) to
reconveyed, prescription cannot be invoke in an action for reconveyance. The reconvey said portion to Ciriaco. In so ruling, the RTC acknowledged Ciriacos
action is imprescriptible so long as the land has not passed to an innocent buyer actual and exclusive possession, cultivation, and claim of ownership over the
for value. This is based on the theory that registration proceedings cannot be used subject lot which he acquired from his father Sesinando, who occupied and
as a shield for fraud or enriching a person at the expense of another. In this case, improved the lot way back in the early 1950s.7 The December 27, 1989 ruling then
Estrellas possession was disturbed in 1983 when the NEPHEW filed a case for became final but could not be annotated since the OCT was already cancelld.
recovery of possession. The RTC ruled in favour of Estrella. Estrella never lost Apparently, Antonio and his wife Rosalia mortgaged Lot 13521 to PNB as security
possession of the properties, as such, she is in a position to file the complaint to for a series of loans which Antonio defaulted and PNB foreclosed the mortgage
protect her rights and clear whatever doubts had been cast on her title by the on July 14, 198610 and the title was transferred to PNB.
issuance of the TCTs in the NEPHEWs name. The circuitous sale transaction of
the properties from the NEPHEW to Torre to Doronilla, and back again to the Thus, in February 1996, Ciriaco filed the instant complaint against PNB and the
NEPHEW were unusual. However, these successive transfers of title from one Paces for Declaration of Nullity of Mortgage, Foreclosure Sale, Reconveyance and
hand to another could not cleanse the illegality of the NEPHEWs act of Damages, docketed as Civil Case No. 3313 and raffled to Branch 18 of RTC, Digos
adjudicating to himself all the disputed properties so as to entitle him the City, Davao del Sur. In his complaint, Ciriaco averred that Antonio could not
protection of the law as a buyer in good faith. The NEPHEW cannot claim lack validly mortgage the entire Lot 13521 to PNB as a portion thereof consisting of
of knowledge of the defects surrounding the cancellation of the OCTs over the 2.5002 hectares belongs to him (Ciriaco), as already held in Civil Case No. 2514.
properties and benefit from his fraudulent actions. The subsequent sales will not He claimed that PNB is not an innocent mortgagee/purchaser for value because
cure the nullity of the certificates of title obtained by the NEPHEW on the basis prior to the execution and registration of PNBs deed of sale with the Register of
of the false and fraudulent Affidavit of Adjudication. Deeds, the bank had prior notice that the disputed lot is subject of litigation. It
would appear that during the pendency of Civil Case No. 2514, a notice of lis
pendens was annotated at the back of OCT No. P-4952 as Entry No. 16554712
134. PNB v JUMANOY on November 28, 1988.
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The RTC and CA ruled that Ciriaco is correct and that PNB must reconvey the Both the CA and the trial court correctly observed that PNB could not validly raise
land to Ciriaco. Thus PNB filed this case to question the ruling of the RTC and the defense that it relied on Antonios clean title. The land, when it was first
CA. mortgaged, was then unregistered under our Torrens system. The first mortgage
was on February 25, 197128 while OCT No. P-4952 was issued on July 19, 1971.
ISSUE Whether or not PNB can recover the land to Ciriaco? Since the Paces offered as collateral an unregistered land, with more reason PNB
HELD should have proven before the RTC that it had verified the status of the property
by conducting an ocular inspection before granting Antonio his first loan. Good
Yes. PNB is not an innocent purchaser/ mortgagee for value. PNB In this case is faith which is a question of fact could have been proven in the proceedings before
considered a trustee in a constructive trust holding the land in trust for Ciriaco. the RTC, but PNB dispensed with the trial proper and let its opportunity to dispute
Also, since Ciriaco is in possession of the land, the action based on constructive factual allegations pass. Had PNB really taken the necessary precautions, it would
trust is imprescriptible. Undoubtedly, our land registration statute extends its have discovered that a large portion of Lot 13521 is occupied by Ciriaco. Ciriacos
protection to an innocent purchaser for value, defined as "one who buys the action for reconveyance is imprescriptible. If a person claiming to be the owner
property of another, without notice that some other person has a right or interest thereof is in actual possession of the property, as the defendants are in the instant
in such property and pays the full price for the same, at the time of such purchase case, the right to seek reconveyance, which in effect seeks to quiet title to the
or before he has notice of the claims or interest of some other person in the property, does not prescribe. The reason for this is that one who is in actual
property."25 An "innocent purchaser for value" includes an innocent lessee, possession of a piece of land claiming to be the owner thereof may wait until his
mortgagee, or other encumbrancer for value .26 Here, we agree with the possession is disturbed or his title is attacked before taking steps to vindicate his
disposition of the RTC and the CA that PNB is not an innocent purchaser for right, the reason for the rule being, that his undisturbed possession gives him a
value. As we have already declared: A banking institution is expected to exercise continuing right to seek the aid of a court of equity to ascertain and determine the
due diligence before entering into a mortgage contract. The ascertainment of the nature of the adverse claim of a third party and its effect on his own title, which
status or condition of a property offered to it as security for a loan must be a right can be claimed only by one who is in possession.34 In Ciriacos case, as it has
standard and indispensable part of its operations. PNBs contention that Ciriaco been judicially established that he is in actual possession of the property he claims
failed to allege in his complaint that PNB failed to take the necessary precautions as his and that he has a better right to the disputed portion, his suit for
before accepting the mortgage is of no moment. It is undisputed that the 2.5002- reconveyance is in effect an action for quieting of title. Hence, petitioners defense
hectare portion of the mortgaged property has been adjudged in favor of Ciriacos of prescription against Ciriaco does.
predecessor-in-interest in Civil Case No. 2514.
Hence, PNB has the burden of evidence that it acted in good faith from the time
the land was offered as collateral. However, PNB miserably failed to overcome
this burden. There was no showing at all that it conducted an investigation; that it
observed due diligence and prudence by checking for flaws in the title; that it
verified the identity of the true owner and possessor of the land; and, that it visited
subject premises to determine its actual condition before accepting the same as
collateral.