AGENCY PARTNERSHIP AND TRUST
SY 2022-2023
ACTIVITY 3
Answer the following:
1. Define Dissolution of Partnership
Dissolution of Partnerhip is the change in the relation of
the partners caused by any partner ceasing to be associated in
the carrying on of the business. It is that point in time when the
partners cease to carry on the business together. It represents
the demise of a partnership. Thus, any time a partner leaves the
business, the partnership is dissolved.
1. What are the causes of the dissolution of a partnership?
The following are the
causes of the dissolution of a
partnership as provided by the law:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular
undertaking specified in the agreement;
(b) By the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is
specified;
(c) By the express will of all the partners who have not
assigned their interests or suffered them to be charged for
their separate debts, either before or after the termination
of any specified term or particular undertaking;
(d) By the expulsion of any partner from the business bona
fide in accordance with such a power conferred by the
agreement between the partners;
(2) In contravention of the agreement between the partners,
where the circumstances do not permit a dissolution under any
other provision of this article, by the express will of any partner
at any time;
(3) By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on in
partnership;
(4) When a specific thing, a partner had promised to contribute to
the partnership, perishes before the delivery; in any case by the
loss of the thing, when the partner who contributed it having
reserved the ownership thereof, has only transferred to the
partnership the use or enjoyment of the same; but the
partnership shall not be dissolved by the loss of the thing when it
occurs after the partnership has acquired the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article.
2. What is a Limited Partnership?
The term is sometimes used to designate joint ventures and
partnerships limited only in respect of the nature and scope of the
business to be carried on. It also confines it to the form of
business association composed of one or more general partners
and one or more special partners, the latter not being personally
liable for the partnership debts.
A limited partnership is thus composed of two classes of
partners. It is so called because the liability to third persons of
one or more of its members referred to as limited (or special)
partners is limited to a fixed amount, their capital contributions or
the amount they have invested in the partnership. This limited
liability is the key characteristic of the limited partnership.
3. Can a general partner be a limited partner at the same
time?
A person may be a general partner and a limited partner in
the same partnership at the same time, provided that this fact
shall be stated in a certificate.
ACTIVITY 4
Answer the following:
1. What is a Contract of Agency?
The definition of a Contract of Agency is provided in ARTICLE
1868 of the New Civil Code, which states that:
“By the contract of agency a person binds himself to
render some service or to do some thing in representation or
on behalf of another, with the consent or authority of the
latter.”
2. What are the kinds of Contracts of Agency?
Agency may be classified as follows:
(1) As to manner of its creation:
(a) express
(b) implied
(2) As to its character:
(a) gratuitous
(b) compensated or onerous
(3) As to extent of business covered:
(a) general
(b) special
(4) As to authority conferred:
(a) couched in general terms
(b) couched in specific terms
(5) As to its nature and effects:
(a) ostensible or representative
(b) simple or commission
3. Enumerate the instances where a Special Power of Attorney
is necessary.
As provided for in Article 1874 of the New Civil Code, a
Special Powers of Attorney (SPA) are necessary in the following
cases:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to obligations
already in existence at the time the agency was
constituted;
(3) To compromise, to submit questions to arbitration,
to renounce the right to appeal from a judgment, to
waive objections to the venue of an action or to
abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership
of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or
those made to employees in the business managed by
the agent;
(7) To loan or borrow money, unless the latter act be
urgent and indispensable for the preservation of the
things which are under administration;
(8) To lease any real property to another person for
more than one year;
(9) To bind the principal to render some service without
compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable
property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before
the agency;
(15) Any other act of strict dominion.
4. What are the elements of agency by estoppel?
According to jurisprudence, an agency by estoppel to exist,
the following must be established:
(a) The principal manifested a representation of the
agent’s authority or knowingly allowed the agent to
assume suc authority;
(b) The third person, in good faith, relied upon such
representation, such third person has changed his
position to his detriment.
An agency by estoppel, which is similar to the doctrine
of apparent authority requires proof of reliance upon the
representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.
5. What is a commission agent?
A factor or commission agent is one whose business is to receive
and sell goods for a commission (also called factorage) and who
is entrusted by the principal with the possession of goods to be
sold, and usually selling in his own name. He may act in his own
name or in that of the principal.
An ordinary agent need not have possession of the goods of
his principal, while the commission agent must be in possession.
6. TRUE OR FALSE. If the authority of an agent in a sale of a
piece of land is made orally, the sale is still valid.
FALSE. While agency may be oral, the Civil Code requires
that it be in written form in certain situations. For instance, the
authority of the agent to sell land or any interest therein must be
in writing. Otherwise, the sale shall be considered void.
7. What are the instances where a principal is not liable for the
expenses incurred by the agent?
As provided in Article 1918 of the New Civil Code. The
principal is not liable for the expens es incurred by the agent in
the following cases:
(1) If the agent acted in contravention of the principal’s
instructions, unless the latter should wish to avail
himself of the benefits derived from the contract;
(2) When the expenses were due to the fault of the
agent;
(2) When the agent incurred them with knowledge that
an unfavorable result would ensue, if the principal was
not aware thereof;
(4) When it was stipulated that the expenses would be
borne by the agent, or that the latter would be allowed
only a certain sum.
8. What are the grounds for the termination/extinguishment of
the contract of agency?
As provided in Article 1919 of the New Civil Code, Agency is
extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity
insolvency of the principal or of the agent;
or
(4) By the dissolution of the fifi rm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
6) By the expiration of the period for which the
agency was constituted.
Additionally, there are war, legal impossibility, termination
of agent’s authority, occurrence of specified event, lost or
destruction of subject matter, and change of conditions.
9. Provide at least three instances where an agency cannot be
revoked.
As provided in Article 1927 of the New Civil Code, a Contract
of Agency cannot be revoked:
1.
if a bilateral contract depends upon it;
if it is the means of fulfilling an obligation already
contracted; and
2.
if a partner is appointed manager of a partnership in
the contract of partnership and his removal from the
management is unjustifiable.
3.
10.
Can an agency remain in full force despite the death of
the principal?
As stated in Article 1930 of the New Civile Code, the agency shall
remain in full force and effect even after the death of the principal,
if it has been constituted in the common interest of the latter and
of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.
ACTIVITY 5
1. What is a Trust?
A trust is the fifi duciary relationship between one person
having an equitable ownership in property and another owning
the legal title to such property, the equitable ownership of the
former entitling him to the performance of certain duties and the
exercise of certain powers by the latter (see 54 Am. Jur. 21.) for
the benefit of the former.
It is a legal arrangement whereby a person transfers his
legal title to property to another to be administered by the latter
for the benef t of a third party. It is a right of property held by
one party for the benefifi t of another.
2. What are the characteristics of a Trust?
The following are the characteristics of a Trust:
1. It is a relationship;
2. The relationship is fiduciary in character;
3. Its subject matter is property, real or personal, tangible
or intangible, legal or equitable, and it does not involve
merely personal duties;
4. It imposes upon the person holding the property equitable
duties to deal with said property for the benefit of another;
and
5. It arises out of a manifestation to create it.
3. What are the kinds of Trusts?
The following are the kinds of Trust:
As to Creation
1. EXPRESS TRUST
2. IMPLIED TRUST
Implied Trust are either:
1. resulting trust
2. constructive trust
As to Effectivity
1. testamentary trust
2. trust inter vivos
As to Revocability
1. Revocable trust
2. Irreovocable trust
4. What is an Implied Trust?
Implied trusts are those which, without being express, are
deducible from the nature of the transaction as matters of intent,
or which are superinduced on the transaction by operation of law,
as matters of equity, independently of the particular intention of
the parties.
Implied trusts are not created voluntarily, but imposed by
law or inferred from the conduct or dealings of the parties. The
concept of implied trusts is that from the facts and circumstances
of a given case, the existence of a trust relationship is inferred in
order to effect the presumed intention of the parties. Thus, there
is no implied trust where a contrary intention is proved.
5. What is an Express Trust?
Express trusts are those trusts intentionally created by direct
and positive act of the trustor, by some writing, deed, will, or oral
declaration evincing an intention to create the trust.
6. Can an express trust be established through parol evidence?
As a general rule, an Express Trust concerning immovable
property or any interest therein cannot be
proven by parol evidence.Except when it is waived, either by:
1. Failure ti interpose timely objections against the
presentation of oral evidence not admissible under the
law
2. By cross-examining the adverse party and his
witnesses along the prohibited ones.
To affect third persons, a trust concerning an immovable or
any interest therein must be:
(1)
embodied in a public instrument; and
(2)
registered in the Registry of Property.
7. Define Resulting Trust
It is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention
as to which is to be found in the nature of their transaction, but
not expressed in the deed or instrument of conveyance. It is also
based on the equitable doctrine that valuable consideration and
not legal title determines the equitable title or interest.
Additionally, it arises out of or is created by, the conduct of
the parties. It is imposed in order to carry out the apparent
intention of the parties at the time they entered into the
transaction that gave rise to the
trust.
8. Define Constructive Trust
It is to create a trust but by the construction of equity in
order to satisfy the demands of justice and prevent unjust
enrichment. It does not arise by agreement or intention but by
operation of law against one who, by fraud, duress, or abuse of
confidence obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.
Additionally, it is usually imposed upon property by the
courts to correct or rectify fraud or to prevent one party from
being unjustly enriched at the expense of another. In reality, it is
a fiction or remedy to which a court of equity will resort to
prevent injustice. While in an express trust, a beneficiary and a
trustee are linked by a confidential or fiduciary relation, in a
constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary.
9. Mr. A purchased a parcel of land with his own money. Title
was placed in the name of Ms. B. To whom does the
property belong to? Is there a trust created? If yes, what
kind of trust was created?
If Ms. B in the given problem is the daughter of Mr. A, is
there a trust created? If yes, what kind of trust was created?
The beneficial ownership belongs to Mr. A. According to
Article 1448 of the New Civil Code, a resulting trust arises in
favor of a person from whom a consideration comes for a
conveyance of property, whether realty or personally, to another.
The presumption is that he who pays for a thing intends a
beneficial interest therein for himself.
If Ms. B is the daughter of Mr. A, then no trust is created.
Article 1448 states that no trust is implied if the person to whom
the legal estate is conveyed is a child, legitimate or illegitimate,
of the payor, because it is presumed that a gift or donation was
intended in favor of the child.
.
10.
TRUE OR FALSE. A resulting trust does not prescribe.
FALSE. Resulting trust prescribes. Only express trusts do not
prescribe as long as they have not been repudiated.
DIGEST THE FOLLOWING CASES:
PARTNERSHIP
1. Sy vs. CA (GR No. 94285 August 31, 1999)
FACTS:
Sy Yong Hu & Sons is a partnership of Sy Yung Hu and his
six (6) sons. The partnership has valuable assets such as tracts
of land planted with sugar cane and commercial lots in the
business district of Bacolod City.
Sometime in September 1977, a certain Keng Sian brought
an action before the then Court of First Instance of Negros
Occidental, docketed as Civil Case No. 13388, against the
partnership for accounting of all the partnership properties and
for the delivery or reconveyance of her one-half (1/2) share in
the properties and in the fruits thereof. Keng Sian averred that
she is the common-law wife of Sy Yung Hu and that the latter
and his children connived to deprive her of her share in the
properties by diverting it to the partnership. During the
pendency of said civil case, partner Marciano Sy filed a
petition for declaratory relief against his co-partners,
praying that he be appointed managing partner to replace
Jose Sy who just died.
Answering the petition, his brothers, Vicente, Jesus and
Jaime, who claimed to represent the majority interest in the
partnership, sought the dissolution of the partnership and the
appointment of Vicente Sy as managing partner. The
Hearing Officer, in a decision (Sison Decision) dismissed
the petition, and dissolved the partnership.
The Sison Decision was affirmed by the SEC En Banc.
In the meantime the Regional Trial Court appointed one
Alex Ferrer as Special Administrator. Thereafter, Alex Ferrer
moved to intervene in the proceedings in for the partition and
distribution of the of the partnership assets on behalf of the
respondent intestate estate but was denied. The Intestate
Estate appealed to the SEC en banc. In its decision, the SEC en
banc reiterated that the Abello decision, which upheld the order
of dissolution of the partnership, had long become final and
executory. No further appeal was taken from said decision.
During the continuation of SEC Case, the parties
brought to the attention of the Hearing Officer the fact of
existence of a Civil Case pending before the RTC. They also
agreed that during the pendency of said case, there would be
no disposition of partnership assets. Hearing Officer Tongco in
an order placed the partnership under a receivership
committee. Petitioners appealed to the SEC en banc. In an
order (Lopez Order), the SEC en banc affirmed the Tongco
order. Then they filed a special civil action for certiorari
with the Court of Appeals. The appellate court granted
the petition and remanded the case for further execution
of the Decisions, ordering partition and distribution of
partnership properties.
On motion for reconsideration by private respondents,
the Court of Appeals reversed its earlier decision and
remanded the case to the SEC for the formation of a
receivership committee as envisioned in the Tongco Order.
Hence the present petition.
ISSUE:
What is there is a difference between winding up and
dissolution?
HELD:
Petitioners fail to recognize the basic distinctions
underlying the principles of dissolution, winding up and
partition or distribution. The dissolution of a partnership is
the change in the relation of the parties caused by any
partner ceasing to be associated in the carrying on, as might be
distinguished from the winding up, of its business.
Upon its dissolution, the partnership continues and its legal
personality is retained until the complete winding up of its
business culminating in its termination. The dissolution of the
partnership did not mean that the juridical entity was
immediately terminated and that the distribution of the
assets to its partners should perfunctorily follow. On the
contrary, the dissolution simply effected a change in the
relationship among the partners.
The partnership, although dissolved, continues to exist
until its termination, at which time the winding up of its affairs
should have been completed and the net partnership assets
are partitioned and distributed to the partners. It ruled that
although the Abello Decision was, indeed, final and executory,
it did not pose any obstacle to the hearing officer to issue
orders not inconsistent therewith because from the time a
dissolution is ordered until the actual termination of the
partnership,
2. Yu vs. NLRC (GR No. 97212, June 30, 1993)
FACTS:
Petitioner Benjamin Yu was formerly the Assistant General
Manager of the marble quarrying and export business operated
by a registered partnership with the firm name of "Jade Mountain
Products Company Limited" ("Jade Mountain"). The partnership
was originally organized on 28 June 1984 with Lea Bendal and
Rhodora Bendal as general partners and Chiu Shian Jeng, Chen
Ho-Fu and Yu Chang, all citizens of the Republic of China
(Taiwan), as limited partners.
Sometime in 1988, without the knowledge of Benjamin Yu,
the general partners Lea Bendal and Rhodora Bendal sold and
transferred their interests in the partnership to private
respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu
Chang, a limited partner, also sold and transferred his interest in
the partnership to Willy Co. Between Mr. Emmanuel Zapanta and
himself, private respondent Willy Co acquired the great bulk of
the partnership interest. The partnership now constituted solely
by Willy Co and Emmanuel Zapanta continued to use the old firm
name of Jade Mountain, though they moved the firm's main office
from Makati to Mandaluyong, Metropolitan Manila
Petitioner was informed by Willy Co that the latter had bought the
business from the original partners and that it was for him to
decide whether or not he was responsible for the obligations of
the old partnership, including petitioner's unpaid salaries.
Petitioner was in fact not allowed to work anymore in the Jade
Mountain business enterprise. His unpaid salaries remained
unpaid.
On 21 December 1988, Benjamin Yu filed a complaint for
illegal dismissal and recovery of unpaid salaries accruing from
November 1984 to October 1988
ISSUE:
Whether the partnership which had hired petitioner Yu as
Assistant General Manager had been extinguished and replaced
by a new partnership composed of Willy Co and Emmanuel
Zapanta
HELD:
Yes, the partnership which hired Yu was extinguished and
replaced by a new partnership.
In the case at bar, just about all of the partners had sold
their partnership interests (amounting to 82% of the total
partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The
record does not show what happened to the remaining 18% of
the original partnership interest. The acquisition of 82% of the
partnership interest by new partners, coupled with the retirement
or withdrawal of the partners who had originally owned such 82%
interest, was enough to constitute a new partnership
In the ordinary course of events, the legal personality of the
expiring partnership persists for the limited purpose of winding up
and closing of the affairs of the partnership.
In other words, the new partnership simply took over the
business enterprise owned by the preceding partnership, and
continued using the old name of Jade Mountain Products
Company Limited, without winding up the business affairs of the
old partnership, paying off its debts, liquidating and distributing
its net assets, and then re-assembling the said assets or most of
them and opening a new business enterprise.
The new partnership itself which continued the business of
the old, dissolved, one, are liable for the debts of the preceding
partnership.
3. Primelink Properties vs. Lazatin-Magat GR No. 167379)
FACTS:
In
1994,
Primelink
Properties
and
the
Lazatin
siblings entered into a joint venture agreement whereby
theLazatins shall contribute a huge parcel of land and Primelink
shall develop the same into a subdivision. For 4 years however,
Primelink failed to develop the said land. So in 1998, the Lazatins
filed a complaint to rescind the joint venture agreement
withprayer for preliminary injunction. In said case, Primelink was
declared in default or failing to file an answer and for
askingmultiple motions for extension. The trial court eventually
ruled in favor of the Lazatins and it ordered Primelink to return
the possession of said land to the Lazatins as well as some
improvements which Primelink had so far over the property
without the Lazatins paying for said improvements. This decision
was affirmed by the Court of Appeals. Primelink is now assailing
the order;that turning over improvements to the Lazatins without
reimbursement is unjust; that the Lazatins did not ask the
properties to be placed under their possession but they merely
asked for rescission.
ISSUE:
Whether or not the improvements made by Primelink
should also be turned over under the possession of the Lazatins.
HELD:
Yes. In the first place, even though the Lazatins
did specifically pray for possession the same (placing of
improvements under their possession) is incidental in the relief
they prayed for. They are therefore entitled possession over the
parcel of land plus the improvements made thereon made by
Primelink. In this jurisdiction, joint ventures are governed by the
laws of partnership. Under the laws of partnership, when a
partnership is dissolved, as in this case when the trial court
rescinded the joint venture agreement, the innocent party has
the right to windup the partnership affairs.
With the rescission of the JVA on account of petitioners’
fraudulent acts, all authority of any partner to act for
the partnership is terminated except so far as may be necessary
to wind up the partnership affairs or to complete transactions
begun but not yet finished. On dissolution, the partnership is not
terminated but continues until the winding up of partnership
affairs is completed. Winding up means the administration of the
assets of the partnership for the purpose of terminating
the business and discharging the obligations of the partnership.It
must be stressed, too, that although the Lazatins acquired
possession of the lands and the improvements thereon, the said
lands and improvements remained partnership property, subject
to the rights and obligations of the parties, inter se, of the
creditors and of third parties and subject to the outcome of the
settlement of the accounts between the parties, absent any
agreement of the parties in their JVA to the contrary (here no
agreement in the JVA as to winding up). Until the partnership
accounts are determined, it cannot be ascertained how much any
of the parties is entitled to, if at all
4. Villareal vs. Ramirez (GR No. 144214 July 14, 2003)
FACTS:
In 1984, Villareal, Carmelito Jose and Jesus Jose formed a
partnership with a capital of P750,000 for the operation ofa
restaurant and catering business. Respondent Ramirez joined as
a partner in the business with the capital contribution ofP250,
000. In 1987, Jesus Jose withdrew from the partnership and
within the same time, Villareal and Carmelito Jose,petitioners
closed the business without prior knowledge of respondents In
March 1987, respondents wrote a letter topetitioners stating that
they were no longer interested in continuing the partnership and
that they were accepting the latter’s offer to return their capital
contribution. This was left unheeded by the petitioners, and by
reason of which respondents filed acomplaint in the RTC.
RTC ruled that the parties had voluntarily entered into a
partnership, which could be dissolved at anytime, and this
dissolution was showed by the fact that petitioners stopped
operating the restaurant. On appeal, CA upheld RTC’s decision
that the partnership was dissolved and it added that respondents
had no right to demand the return of their capital contribution.
However since petitioners did not give the proper accounting for
the liquidation of the partnership, the CAtook it upon itself to
compute their liabilities and the amount that is proper to the
respondent. The computation of which was:(capital of the
partnership – outstanding obligation) / remaining partners =
amount due to private respondent
ISSUE:
Whether or not the petitioners are liable to respondents for
the latter’s share in the partnership?
RULING:
No. Respondents have no right to demand from petitioner
the return of their equity share. As found by the court petitioners
did not personally hold its equity or assets. “The partnership has
a juridical personality separate and distinct from that of each of
the partners.” Since the capital was contributed to the
partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners. However, before the
partners can be paid their shares, the creditors of the partnership
must first be compensated. Therefore, the exact amount of
refund equivalent to respondents’ one-third share inthe
partnership cannot be determined until all the partnership assets
will have been liquidated and all partnership creditorshave been
paid. CA’s computation of the amount to be refunded to
respondents as their share was thus erroneous
AGENCY
1. Tuazon vs. RAMOS (GR No. 156262, July 14, 2005)
FACTS:
"[Respondents] alleged that between the period of May 2,
1988 and June 5, 1988, spouses Leonilo and Maria Tuazon
purchased a total of 8,326 cavans of rice from [the deceased
Bartolome] Ramos [predecessor-in-interest of respondents]. That
of this [quantity,] x x x only 4,437 cavans [have been paid for so
far], leaving unpaid 3,889 cavans valued at P1,211,919.00. In
payment therefor, the spouses Tuazon issued x x x [several]
Traders Royal Bank checks.
xxx
[B]ut when these [checks] were encashed, all of the checks
bounced due to insufficiency of funds. [Respondents] advanced
that before issuing said checks[,] spouses Tuazon already knew
that they had no available fund to support the checks, and they
failed to provide for the payment of these despite repeated
demands made on them.
"[Respondents] averred that because spouses Tuazon
anticipated that they would be sued, they conspired with the
other [defendants] to defraud them as creditors by executing x x
x fictitious sales of their properties. They executed x x x
simulated sale[s] [of three lots] in favor of the x x x spouses
Buenaventura x x x[,] as well as their residential lot and the
house thereon[,] all located at Nueva Ecija, and another
simulated deed of sale dated July 12, 1988 of a Stake Toyota
registered with the Land Transportation Office of Cabanatuan City
on September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of
spouses Tuazon, registered a fictitious Deed of Sale on July 19,
1988 x x x over a residential lot located at Nueva Ecija. Another
simulated sale of a Toyota Willys was executed on January 25,
1988 in favor of their other son, [co-petitioner] Alejandro Tuazon
x x x. As a result of the said sales, the titles of these properties
issued in the names of spouses Tuazon were cancelled and new
ones were issued in favor of the [co -]defendants spouses
Buenaventura, Alejandro Tuazon and Melecio Tuazon. Resultantly,
by the said ante-dated and simulated sales and the corresponding
transfers there was no more property left registered in the names
of spouses Tuazon answerable to creditors, to the damage and
prejudice of [respondents].
"For their part, defendants denied having purchased x x x
rice from [Bartolome] Ramos. They alleged that it was Magdalena
Ramos, wife of said deceased, who owned and traded the
merchandise and Maria Tuazon was merely her agent. They
argued that it was Evangeline Santos who was the buyer of the
rice and issued the checks to Maria Tuazon as payments therefor.
In good faith[,] the checks were received [by petitioner] from
Evangeline Santos and turned over to Ramos without knowing
that these were not funded. And it is for this reason that
[petitioners] have been insisting on the inclusion of Evangeline
Santos as an indispensable party, and her non-inclusion was a
fatal error. Refuting that the sale of several properties were
fictitious or simulated, spouses Tuazon contended that these were
sold because they were then meeting financial difficulties but the
disposals were made for value and in good faith and done before
the filing of the instant suit. To dispute the contention of plaintiffs
that they were the buyers of the rice, they argued that there was
no sales invoice, official receipts or like evidence to prove this.
They assert that they were merely agents and should not be held
answerable."
The corresponding civil and criminal cases were filed by
respondents against Spouses Tuazon. Those cases were later
consolidated and amended to include Spouses Anastacio and
Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazon
as additional defendants. Having passed away before the pretrial,
Bartolome Ramos was substituted by his heirs, herein
respondents.
Contending that Evangeline Santos was an indispensable
party in the case, petitioners moved to file a third-party
complaint against her. Allegedly, she was primarily liable to
respondents, because she was the one who had purchased the
merchandise from their predecessor, as evidenced by the fact
that the checks had been drawn in her name. The RTC, however,
denied petitioners' Motion.
Since the trial court acquitted petitioners in all three of the
consolidated criminal cases, they appealed only its decision
finding them civilly liable to respondents.
ISSUE:
Whether or not the Honorable Court of Appeals erred in
ruling that petitioners are not agents of the respondents.
RULING:
The Petition is unmeritorious.
Well-entrenched is the rule that the Supreme Court's role in
a petition under Rule 45 is limited to reviewing errors of law
allegedly committed by the Court of Appeals. Factual findings of
the trial court, especially when affirmed by the CA, are conclusive
on the parties and this Court.8 Petitioners have not given us
sufficient reasons to deviate from this rule.
In a contract of agency, one binds oneself to render some
service or to do something in representation or on behalf of
another, with the latter's consent or authority. The following are
the elements of agency: (1) the parties' consent, express or
implied, to establish the relationship; (2) the object, which is the
execution of a juridical act in relation to a third person; (3)
the representation, by which the one who acts as an agent does
so, not for oneself, but as a representative; (4) the limitation that
the agent acts within the scope of his or her authority. As the
basis of agency is representation, there must be, on the part of
the principal, an actual intention to appoint, an intention naturally
inferable from the principal's words or actions. In the same
manner, there must be an intention on the part of the agent to
accept the appointment and act upon it. Absent such mutual
intent, there is generally no agency.
This Court finds no reversible error in the findings of the
courts a quo that petitioners were the rice buyers themselves;
they were not mere agents of respondents in their rice dealership.
The question of whether a contract is one of sale or of agency
depends on the intention of the parties.
The declarations of agents alone are generally insufficient to
establish the fact or extent of their authority. The law makes no
presumption of agency; proving its existence, nature and extent
is incumbent upon the person alleging it. In the present case,
petitioners raise the fact of agency as an affirmative defense, yet
fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued
Evangeline Santos for collection of the amounts represented by
the bounced checks, in a separate civil case that they sought to
be consolidated with the current one. If, as they claim, they were
mere agents of respondents, petitioners should have brought the
suit against Santos for and on behalf of their alleged principal, in
accordance with Section 2 of Rule 3 of the Rules on Civil
Procedure. Their filing a suit against her in their own
names negates their claim that they acted as mere agents in
selling the rice obtained from Bartolome Ramos.
2. I-BANK vs. Spouses Briones (GR No. 205657, March 29,
2017)
FACTS:
Spouses Briones took out a loan of P3.7M from iBank (now
Union Bank) to purchase a BMW Z4 Roadster. They executed a
promissory note that required them to take out an insurance
policy on the car and to give iBank, as attomey-infact, irrevocable
authority to file an insurance claim in case of loss or damage to
the vehicle. The BMW was carnapped so the spouses declared the
loss to iBank, which instructed them to continue paying the next
three monthly installments "as a sign of good faith,” a directive
they complied with. After they finished paying the 3 installments,
iBank demanded full payment of the lost vehicle. The spouses
submitted a notice of claim with their insurance company which
was denied due to a delay in the reporting of the lost vehicle.
iBank filed a complaint for replevin or sum of money against
the spouses alleging default in paying the monthly
amortizations of the mortgaged vehicle
ISSUE:
Whether or not the Spouses Briones are liable to iBank for
the monthly amortizations of the BMW.
RULING:
NO. Under the promissory note, Spouses Briones appointed
iBank as their attorney-in-fact (agent), authorizing it to file a
claim with the insurance company if the mortgaged vehicle was
lost or damaged. iBank was also authorized to collect the
insurance proceeds as the beneficiary of the
insurance policy.
As the agent, petitioner was mandated to look after the
interests of the Spouses Briones by collecting the insurance
proceeds. However, instead of going after the insurance proceeds,
as expected of it as the agent, petitioner opted to claim the full
amount from the Spouses Briones, disregarding the established
principal-agency relationship, and putting its own interests before
those of its principal.
The insurance policy was valid when the vehicle was lost,
and that the insurance claim was only denied because of the
belated filing. Having been negligent in its duties as the duly
constituted agent, petitioner must be held liable for the denial of
the insurance claim suffered by the Spouses Briones because of
non-performance of its obligation as the agent, and because it
prioritized its interests over that of its principal. Petitioner's bad
faith was evident when it advised the Spouses Briones to continue
paying three (3) monthly installments after the loss, purportedly
to show their good faith.
If petitioner was indeed acting in good faith, it could have
timely informed the Spouses Briones that
it was terminating the agency and its right to file an insurance
claim, and could have advised them to facilitate the insurance
proceeds themselves. This would have allowed the spouses to
collect from their insurer and pay the amortizations on the BMW.
Petitioner's failure to do so only compounds its negligence and
underscores its bad faith. Thus, it will be inequitable now to
compel the Spouses Briones to pay the full amount of the lost
property.
3. Rallos vs. Felix Go Chan & Son Realty Corporation (GR NO.
L-24332)
FACTS:
An SPA was executed by sisters Concepcion and Gerundia in
favo of their brother Simeon for thesale of a parcel of land coowned by the two. Months after Conception died, Simeon sold the
undividedshares of his sisters to herein respondent Felix Go Chan
& Realty Corp. Petitioner Ramon Rallos,administrator of he late
Concepcion's estate, prayed that the sale of the undivided share
of the deceasedbe invalidated and a new certificate be issued in
the name of respondent corporation and Concepion'sintestate
estate, plus damages. CFI ruled in favor of petitioner and granted
the payers but CA reversed thedecision. Respondent's MR was
further denied.
ISSUE:
Whether or not the sale entered into by an agent is valid
alhough executed after death of the principal.
HELD:
No, the sale is void because Simeon's authority as an agent
of Concepcion was extinguished uponher death. Article 1317
provides that no one may contract inthe name of another without
being authorizedor unless he has, by law, a righ to represent him.
Article 1919 urthers hat the death of the princpalterminates the
agency. The case at bar is also not among the exceptions
whereby an agent's acts bind theprincipal even after the latter's
death because of Simeon's knowledge of Concepion's death is
material.CA's decision is reversed, CFI decision affimed. The
sale was null and void.
4. Spouses Fernando and Villoria vs. Continental Airlines ( GR
No. 188288 January 16, 2012)
FACTS:
Fernando agreed to buy airline tickets on board CAI
after Margaret Mager of Holiday Travel (HT) agency informed
him that there were no available seats at Amtrak.
Subsequently, Fernando requested Mager to reschedule their
flight. Mager informed him that flights to Newark, New Jersey,
USA via CAI were fully booked and offered the alternative
flight via Frontier Air.
Since alternative flight would be more costly and would
mean traveling by night, Fernando opted to request for a
refund. Mager denied his request as said tickets were nonrefundable. When Fernando saw an Amtrak station nearby, he
made inquiries and was told that there were seats available
anytime. Fernando confronted Mager with the Amtrak
tickets, telling her that she had misled them into buying
CAI tickets by misrepresenting that Amtrak was already
fully booked. Fernando reiterated his demand for a refund but
Mager denied it.
Fernando sent a letter to CAI demanding a refund.
Continental Micronesia denied his request and advised him
that he may take said tickets to any CAI ticketing location for
re-issuance of new tickets. When Fernando went to CAI’s
ticketing office to have the tickets replaced by a single round
trip ticket to Los Angeles under his name, he was informed
that Lourdes’ ticket was non- transferable, thus, cannot be
used for the purchase of a ticket in his favor.
Sps. Viloria filed a complaint against CAI. CAI interposed,
among other things, that it should not be liable for Mager’s
acts because she was not a CAI employee. Citing Articles
1868 and 1869 of the Civil Code, RTC-Antipolo City ruled that
Mager was CAI’s agent, hence, bound by her bad faith and
misrepresentation. On appeal, the Court of Appeals (CA)
reversed RTC-Antipolo City’s decision and ruled that CAI cannot
be held liable for Mager’s act in the absence of any proof that a
principal-agent relationship existed between CAI and HT, as
the contract was not an agency but that of a sale. Hence, this
petition.
ISSUE:
Whether or not a principal-agent relationship existed
between CAI and Holiday Travel; and assuming that an
agency relationship existed between the two, would CAI be
bound by the acts of HT’s agents and employees such as Mager.
HELD:
Yes. SC ruled that there was principal-agent relationship
because all the elements of an agency 1 existed between CAI
and HT. The first and second elements were present as CAI
did not deny that it concluded an agreement with HT, whereby
the latter would enter into contracts of carriage with third
persons on CAI’s behalf. The third element was present as it
was undisputed that HT merely acted in a representative
capacity and it was CAI and not HT who was bound by the
contracts of carriage entered into by the latter on its behalf.
The fourth element was also present considering that CAI
had not made any allegation that HT exceeded the
authority that was granted to it.
In fact, CAI consistently maintained validity of the
contracts of carriage that HT executed with Sps. Viloria and
that Mager was not guilty of fraudulent misrepresentation. SC,
as early as 1970, had already formulated the guidelines that
would aid in differentiating the two contracts. In Commissioner
of Internal Revenue v. Constantino, SC extrapolated that the
primordial differentiating consideration between the two
contracts is the transfer of ownership or title over the
property subject of the contract.
In an agency, the principal retains ownership and
control over the property and the agent merely acts on
the principal’s behalf and under his instructions in furtherance
of the objectives for which the agency was established. On the
other hand, the contract is clearly a sale if the parties intended
that the delivery of the property will effect a relinquishment
of title, control and ownership in such a way that the recipient
may do with the property as he pleases. That the principal is
bound by all the obligations contracted by the agent within
the scope of the authority granted to him is clearly provided
under Article 1910 of the Civil Code and this constitutes the
very notion of agency.
As to the subsequent issue on whether or not CAI would
be bound by the acts of HT’s agents, SC mentioned that an
examination of its pronouncements in China Air Lines, Ltd. v.
Court of Appeals, et al. [264 Phil 15 (1990)] will reveal
that an airline company is not completely exonerated from
any liability for the tort committed by its agent’s employees.
A prior determination of the nature of the passenger’s
cause of action is necessary. If the passenger’s cause of action
against the airline company is premised on culpa aquiliana or
quasi-delict for a tort committed by the employee of the
airline company’s agent, there must be an independent showing
that the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct committed
by the employee of its agent.
The mere fact that the employee of the airline company’s
agent has committed a tort is not sufficient to hold the airline
company liable. There is no vinculum juris between the airline
company and its agent’s employees and the contractual
relationship between the airline company and its agent does
not operate to create a juridical tie between the airline
company and its agent’s employees.
Article 2180 of the Civil Code does not make the
principal vicariously liable for the tort committed by its agent’s
employees and the principal-agency relationship per se does
not make the principal a party to such tort; hence, the need to
prove the principal’s own fault or negligence. On the other hand,
if the passenger’s cause of action for damages against the
airline company is based on contractual breach or culpa
contractual, it is not necessary that there be evidence of the
airline company’s fault or negligence.
As SC stated in China Air Lines, "in an action based on a
breach of contract of carriage, the aggrieved party does
not have to prove that the common carrier was at fault or
was negligent. All that he has to prove is the existence of
the contract and the fact of its non- performance by the
carrier." SC denied the petition.
5. Loadmasters Custom Services Inc. vs. Glodel Brokerage
Corporation (GR No. 179446, January 10, 2011)
FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No.
MN-00105/2001 in favor of Columbiatoinsure theshipment of132
bundles ofelectric copper cathodesagainst All Risks.
On August 28, 2001, the cargoes were shipped on board the
vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor,
Manila. They arrived on the same date. Columbia engaged the
services of Glodel for the release and withdrawal of the Cargoes
from the pier and the subsequent delivery to its warehouses/
plants. Glodel, in turn, engaged the services of Loadmasters for
the use of its delivery trucks to transport the cargoes to
Columbia’s warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned
by Loadmasters, driven by its employed drivers and accompanied
by its employed truck helpers. Six (6) truck loads of Copper
cathodes were to be delivered to Balagtas, Bulacan, while the
other six (6)truck loads were destined for Lawang Bato,
Valenzuela City. The cargoes in six truckloads for Lawang Bato
were duly delivered in Columbia’s warehouses there. Of the six (6)
trucks enroute to Balagtas, Bulacan, however, only five (5)
reached the destination. One (1) truck loaded with 11 bundles or
232 pieces of copper cathodes, failed to deliver its cargo. Later on,
the said truck, an Isuzu with Plate No. NSD-117, was recovered
but without the copper cathodes. Because of this incident,
Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of P1,903,335.39 which was paid in the
amount of P1,896,789.62 after investigation and adjustment.
R&B Insurance, thereafter, filed a complaint for damages
against both Loadmasters and Glodel before the Regional Trial
Court, Branch 14, Manila (RTC), docketed as Civil CaseNo. 02103040. It sought reimbursement of the amount it had paid to
Columbia for the loss of the subject cargo. It claimed that it had
been subrogated "to the right of the consignee to recover from
the party/parties who may be held legally liable for the loss."
ISSUE:
Whether there is a Principal-Agent relationship between
Loadmasters and Glodel.
HELD:
At this juncture, the Court clarifies that there exists no
principal-agent relationship between Glodel and Loadmasters, as
erroneously found by the CA. Article 1868 of the Civil Code
provides: “By the contract of agency a person binds himself to
render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.”
The elements of a contract of agency are: (1) consent,
express or implied, of the parties to establish the relationship; (2)
the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority.
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it
ever authorized to make such representation. It is a settled rule
that the basis for agency is representation, that is, the agent acts
for and on behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect as if they
were personally executed by the principal.
On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his
words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it.
Such mutual intent is not obtaining in this case. There is no
contribution between joint tortfeasors whose liability is solidary
since both of them are liable for the total damage. Where the
concurrent or successive negligent acts or omissions of two or
more persons, although acting independently, are in combination
the direct and proximate cause of a single injury to a third person,
it is impossible to determine in what proportion each contributed
to the injury and either of them is responsible for the whole injury.
Where their concurring negligence resulted in injury or damage to
a third party, they become joint tortfeasors and are solidarily
liable for the resulting damage under Article 2194 of the Civil
Code.
6. Nario vs. Philamlife (GR No. L-22796, June 26, 1997)
FACTS:
Mrs. Alejandra Santos-Mario was, upon application, issued,
on June 12, 1959, by the Philippine American Life Insurance Co.,
a life insurance policy under a 20-year endowment plan, with a
face value of P5,000.00. She designated thereon her husband,
Delfin Nario, and their unemancipated minor son, Ernesto Nario,
as her irrevocable beneficiaries. About the middle of June, 1963,
She then applied for a loan on the above policy with PHILAMLIFE
w/c she is entitled to as policy holder, after the policy has been in
force for 3 years.
The purpose of such loan was for the school expenses
of Ernesto.The application bore the written signature and consent
of Delfin Nario in two capacities first, as one of the irrevocable
beneficiaries of the policy; and the other, as the father-guardian
of said minor son and irrevocable beneficiary, Ernesto Nario, and
as the legal administrator of the minor’s properties, pursuant to
Article 320 of the Civil Code of the Philippines. PHILAMLIFE
denied the loan application contending that written consent of the
minor son must not only be given by his father as legal guardian
but it must also be authorized by the court in a competent
guardianship proceeding.
Mrs. Nario then signified her decision to surrender her policy
and demand its cash value which then amounted to P 520. The
Insurance Company also denied the surrender of the policy on the
same ground as that given in disapproving the loan application.
Mrs. Nario sued PHILAMLIFE praying that the latter grant their
loan application and/or accept the surrender of said policy in
exchange for its cash value.
On September 10, 1963, Mrs. Nario and her husband, Delfin,
sued PHILAMLIFE praying that the latter grant their loan
application and/or accept the surrender of said policy in exchange
for its cash value. Defendant PHILAMLIFE contends that the loan
application and the surrender of the policy involved acts of
disposition and alienation of the property rights of the minor, said
acts are not within the power of administrator granted under Art.
320 in relation to art. 326 CC, hence, mere written consent given
by the father-guardian, for and in behalf of the minor son,
without any court authority therefor, was not a sufficient
compliance of the law.
The lower court ruled agreeing with defendant’s contention,
sustained defendant’s affirmative defense, and rendered, on
January 28, 1964, its decision dismissing plaintiffs’ complaint.
Unable to secure reconsideration of the trial Court’s ruling,
petitioner appealed directly to this Court, contending that the
minor’s interest amounted to only one-half of the policy’s cash
surrender value of P520.00; that under Rule 96, Section 2 of the
Revised Rules of Court, payment of the ward’s debts is within the
powers of the guardian, where no realty is involved; hence, there
is no reason why the father may not validly agree to the proposed
transaction on behalf of the minor without need of court authority.
ISSUE:
Whether or not payment of the ward's debts is within the
powers of the guardian, where no realty is involved; hence, there
is no reason why the father may not validly agree to the proposed
transaction on behalf of the minor without need of court authority.
RULING:
We likewise agree with the conclusion of the lower court that
the proposed transactions in question (policy loan and surrender
of policy) constitute acts of disposition or alienation of property
rights and not merely of management or administration because
they involve the incurring or termination of contractual
obligations.
Article 320 of the Civil Code of the Philippines provides —
The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under
parental authority. If the property is worth more than two
thousand pesos, the father or mother shall give a bond
subject to the approval of the Court of First Instance.
and article 326 of the same Code reads —
When the property of the child is worth more than two
thousand pesos, the father or mother shall be considered a
guardian of the child's property, subject to the duties and
obligations of guardians under the Rules of Court.
The above quoted provisions of the Civil Code have already
been implemented and clarified in our Revised Rules of Court
which provides —
SEC. 7. Parents as guardians. — When the property of
the child under parental authority is worth two thousand
pesos or less, the father or the mother, without the
necessity of court appointment, shall be his legal guardian.
When the property of the child is worth more than two
thousand pesos, the father or the mother shall be
considered guardian of the child's property, with the duties
and obligations of guardians under these rules, and shall file
the petition required by Section 2 hereof. For good reasons
the court may, however, appoint another suitable person.
(Rule 93).
It appearing that the minor beneficiary's vested interest or
right on the policy exceeds two thousand pesos (P2,000.00); that
plaintiffs did not file any guardianship bond to be approved by the
court; and as later implemented in the abovequoted Section 7,
Rule 93 of the Revised Rules of Court, plaintiffs should have, but,
had not, filed a formal application or petition for guardianship,
plaintiffs-parents cannot possibly exercise the powers vested on
them, as legal administrators of their child's property, under
articles 320 and 326 of the Civil Code. As there was no such
petition and bond, the consent given by the father-guardian, for
and in behalf of the minor son, without prior court authorization,
to the policy loan application and the surrender of said policy,
was insufficient and ineffective, and defendant-appellee was
justified in disapproving the proposed transactions in question.
The result would be the same even if we regarded the
interest of the ward to be worth less than P2,000.00. While the
father or mother would in such event be exempt from the duty of
filing a bond, and securing judicial appointment, still the parent's
authority over the estate of the ward as a legal-guardian would
not extend to acts of encumbrance or disposition, as
distinguished from acts of management or administration. The
distinction between one and the other kind of power is too basic
in our law to be ignored. Thus, under Article 1877 of the Civil
Code of the Philippines, an agency in general terms does not
include power to encumber or dispose of the property of the
principal; and the Code explicitly requires a special power or
authority for the agent "to loan or borrow money, unless the
latter act be urgent or indispensable for the preservation of the
thing under administration" (Art. 1878 no. 7). Similarly, special
powers are required to required to effect novations, to waive any
obligation gratuitously or obligate the principal as a guarantor or
surety (Do., nos. 2, 4 and 11). By analogy, since the law merely
constitutes the parent as legal administrator of the child's
property (which is a general power), the parent requires special
authority for the acts above specified, and this authority can be
given only by a court. This restricted interpretation of the parent's
authority becomes all the more necessary where as in the case
before us, there is no bond to guarantee the ward against
eventual losses.
7. Alcantara vs. Nido (GR No. 165133, April 19, 2010)
FACTS:
Revelen N. Srivastava is the owner of an unregistered land
In Cardona, Rizal. Sometime in March 1984, respondent accepted
the offer of petitioners to purchase a 200 m² portion of the
Revelen’s lot. Petitioners paid 3000 pesos as down payment and
the balance was payable on installment.
Petitioners constructed their houses in 1985. In 1986, with
respondent’s consent, petitioners occupied an additional 150 m²
of the lot. By 1987, petitioners had already paid 17,500 pesos
before petitioners defaulted on their installment payments. On 11
May 1994, Brigida L. Nido, acting as administrator and attorneyin-fact of Revelen, filed a complaint for recovery of possession
with damages and prayer for preliminary injunction against
petitioners.
ISSUE:
Whether or not the contract entered into its valid.
RULING:
No, the contract entered into is not null and void.
The Supreme Court ruled that according to article 1318 of
the Civil Code, the requisites for a valid contract are:
1. Consent of contracting parties;
2. Object certain which is the subject matter of the contract;
and
3. Cause of obligation which is established.
In the case of the bar, the respondent did not have the
written authority to enter into a contract to sell the lot. As the
consent of Revelen, the real owner of the lot, was not obtained in
writing as by law, no contract was perfected. Hence, petitioners
failed to validly acquire the lot.
8. Ormoc Sugar Planters Associatio, Inc. vs. CA (GR No.
156660 August 24, 2009)
FACTS:
Petitioner Ormoc Sugar Planter’s Association (OSPA) and
other associations whose members are sugar planters while
respondent Hideco Sugar Milling Co. Inc and Ormoc Sugar Milling
Co Inc are sugar centrals engaged in the grinding and milling
sugar cane delivered to them by numerous individual sugar
planters who may or may not be members of an association. The
relationship of indicidual sugar planters are governed by milling
contracts.
The milling contract provides that 34% of the sugar and
molasses produced by the planters shall belong to the sugar
centrals, 65% thereof to the individual planters and the
remaining 1% shall be given to the association to which the
planter is a member. If the planter is not a member of any, it
shall revert back to the centrals. Petitioner OSPA et al filed a case
before the RTC
for arbitration under RA 876 to Recover Additional Benefits, and
others against respondents.
Petitioners claim breach of the milling contract because
respondent gave the 1% to the individual planters who are not
there members the 1% instead of reverting it back to the centrals.
The RTC directed the parties to proceed with the arbitration.
Respondents elevated the case to the CA by way of certiori.
The CA set aside the challenged decision hence the petition.
ISSUE:
Whether or not petitioner associations have legal personality
to file a suit against or demand arbitration from respondents in
their own name without impleading the individual planters.
HELD:
Petitioners have no legal personality to do so. Section 2 of
RA 876.
Section 2: Persons and matters subject to arbitration.
Two or more persons or parties may submit to the
arbitration of one or more arbitrators any controversy
existing between them at the time of the submission and
which may be subject of an action, or the parties to any
contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable, and
irrevocable, save upon such grounds as exist at law for the
revocation of any contract.
Petitioner in this case is not the proper party but the
individual members of the association. Without a special power of
attorney to make them a representative of the members, the
associations are a stranger to the contract. The parties to a
contract are the real parties in interest in an action upon it, as
consistently held by the Court.
Only the contracting parties are bound by the stipulations in
the contract;they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract and for
whose benefit it was expressly made, cannot maintain an action
on it. One cannot do so, even if the contract performed by the
contracting parties would incidentally inure to ones benefit.
9. Lintojua vs. Eternit Corporation GR No. 144805, June 8,
2006)
FACTS:
The Eternit Corporation (EC) is a corporation duly organized
and registered under Philippine laws. It hadbeen engaged in the
manufacture of roofing materials and pipe products. Its
manufacturing operations were conductedon eight parcels of land.
The properties, located in Mandaluyong City, were covered by
Transfer Certificates of Titleunder the name of Far East Bank &
Trust Company, as trustee. Ninety (90%) percent of the shares of
stocks of EC were owned by Eteroutremer S.A. Corporation
(ESAC), a corporation organized and registered under the laws of
Belgium. Jack Glanville, an Australian citizen, was the General
Manager and President of EC, while Claude Frederick Delsaux was
the Regional Director for Asia of ESAC.
In 1986, the management of ESAC grew concerned about
the political situation in the Philippines and wanted to stop its
operations in the country. The Committee for Asia of ESAC
instructed Michael Adams, a member of EC’s Boardof Directors, to
dispose of the eight parcels of land. Adams engaged the services
of realtor/broker Lauro G. Marquezso that the properties could be
offered for sale to prospective buyers. Glanville later showed the
properties to Marquez.
Marquez thereafter offered the parcels of land and the
improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua
& Company, Inc. In a Letter dated September 12, 1986, Marquez
declared that he was authorized to sell the properties for
P27,000,000.00 and that the terms of the sale were subject to
negotiation.
The Litonjua siblings offered to buy the property for
P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua
siblings’ offer and relayed the same to Delsaux in Belgium, but
the latter did not respond. It was only on February 12, 1987 that
Delsaux sent a telex to Glanville stating that, based on the
“Belgian/Swiss decision,” the final offer was “US$1,000,000.00
and P2,500,000.00 to cover all existing obligations prior to final
liquidation.”
Litonjua, Jr. Accepted the counterproposal of Delsaux. The
Litonjua brothers deposited the amount of US$1,000,000.00 with
the Security Bank & Trust Company, Ermita Branch, and drafted
an Escrow Agreement to expedite the sale.
Meanwhile, with the assumption of Corazon C. Aquino as
President of the Republic of the Philippines, the political situation
in the Philippines had improved. Marquez received a telephone
call from Glanville, advising that the sale would no longer proceed.
When apprised of this development, the Litonjuas, through
counsel, wrote EC, demanding payment for damages they had
suffered on account of the aborted sale. EC, however, rejected
their demand. The Litonjuas then filed a complaint for specific
performance and damages against EC (now the Eterton Multi
Resources Corporation) and the Far East Bank & Trust Company,
and ESAC in the RTC of Pasig City.
The trial court declared that since the authority of the
agents/realtors was not in writing, the sale is void and not merely
unenforceable, and as such, could not have been ratified by the
principal. In any event, such ratification cannot be given any
retroactive effect. Plaintiffs could not assume that defendants had
agreed to sell the property without aclear authorization from the
corporation concerned, that is, through resolutions of the Board
of Directors and stockholders.
The trial court also pointed out that the supposed sale
involves substantially all the assets of defendant EC which would
result in the eventual total cessation of its operation CA rendered
judgment affirming the decision of the RTC. The CA ruled that
Marquez, who was a real estate broker, was a special agent
within the purview of Article 1874 of the New Civil Code. Under
Section 23 of the Corporation Code, he needed a special authority
from EC’s board of directors to bind such corporation to the sale
of its properties. Delsaux, who was merely the representative of
ESAC (the majority stockholder of EC) had no authority to bind
the latter.
The CA pointed out that Delsaux was not even a member of
the board of directors of EC.
ISSUE:
Whether CA erred in holding that Marquez needed a written
Authority from respondent Eternit before thesale can be perfected.
HELD:
No. Section 23 of Batas Pambansa Bilang 68, otherwise
known as the Corporation Code of the Philippines,provides:
SEC. 23. The Board of Directors or Trustees.—Unless
otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations
controlled and held by the board of directors or trustees to
be elected from among the holders of stocks, or where there
is no stock, from among the members of the corporation,
who shall hold office for one (1) year and until their
successors are elected and qualified.
A corporation is a juridical person separate and distinct from
its members or stockholders and is not affected by the personal
rights, obligations and transactions of the latter. It may act only
through its board of directors or, when authorized either by its
by-laws or by its board resolution, through its officers or agents
in the normal course of business. The general principles of agency
govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law.
The property of a corporation, however, is not the property
of the stockholders or members, and as such, may not be sold
without express authority from the board of directors. Physical
acts, like the offering of the properties of the corporation for 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 by the corporation only by officers or
agents duly authorized for the purpose by corporate bylaws or by
specific acts of the board of directors.
Absent such valid delegation/authorization, the rule is that
the declarations of an individual director relating to the affairs of
the corporation, but not in the course of, or connected with, the
performance of authorized duties of such director, are not binding
on the corporation.
While a corporation may appoint agents to negotiate for the
sale of its real properties, the final say will have to be with the
board of directors through its officers and agents as authorized by
a board resolution or by its by-laws. An unauthorized act of an
officer of the corporation is not binding on it unless the latter
ratifies the same expressly or impliedly by its board of directors.
Any sale of real property of a corporation by a person purporting
to be an agent
thereof but without written authority from the corporation is null
and void.
10.
Byung vs. PAGCOR (GR No. 163553, December 11,
2009)
FACTS:
PAGCOR launched its Foreign Highroller Marketing Program
that aims to invite patrons from foreign countries to play at the
dollar pit of designated PAGCOR-operated casinos under specified
terms and conditions and in accordance with industry practice.
Petitioner, a Korean national, alleges that he came to the
Philippines four times to play for high stakes at the Casino Filipino;
that in the course of the games, he was able to accumulate
gambling chips worth US$2.1 million.
He contends that when he presented the gambling chips for
encashment with PAGCORs employees or agents, PAGCOR
refused to redeem them. PAGCOR claims that petitioner, who was
brought into the Philippines by ABS Corporation, is a junket
player who played in the dollar pit exclusively leased by ABS
Corporation for its junket players. PAGCOR alleges that it
provided ABS Corporation with distinct junket chips and ABS
Corporation distributed these chips to its junket players. At the
end of each playing period, the junket players would surrender
the chips to ABS Corporation and only ABS Corporation would
make an accounting of these chips to PAGCORs casino treasury.
ISSUE:
Is PAGCOR liable to petitioner, applying the doctrine of implied
agency, or agency by estoppels?
RULING:
No. Acts and conduct of PAGCOR negates the existence of an
implied agency or an agency by estoppel.
Article 1869 of the Civil Code states that implied agency is
derived from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority. Implied
agency, being an actual agency, is a fact to be proved by
deductions or inferences from other facts. On the other hand,
apparent authority is based on estoppel and can arise from two
instances.
First, the principal may knowingly permit the agent to hold
himself out as having such authority, and the principal becomes
estopped to claim that the agent does not have such authority.
Second, the principal may clothe the agent with the indicia
of authority as to lead a reasonably prudent person to believe
that the agent actually has such authority. In an agency by
estoppel, there is no agency at all, but the one assuming to act
as agent has apparent or ostensible, although not real, authority
to represent another.
In the case at bar, there is no implied agency in this case
because PAGCOR did not hold out to the public as the principal of
ABS Corporation. PAGCORs actions did not mislead the public into
believing that an agency can be implied from the arrangement
with the junket operators, nor did it hold out ABS Corporation
with any apparent authority to represent it in any capacity. The
Junket Agreement was merely a contract of lease of facilities and
services.
11.
Spouses Yulo vs. BPI (GR 217044, January 26, 2019)
FACTS:
On October 9, 2006, the Bank of the Philippine Islands
issued Rainier a pre-approved credit card. His wife, Juliet, was
also given a credit card as an extension of his account. Rainier
and Juliet (the Yulo Spouses) used their respective credit cards by
regularly charging goods and services on them.
The Yulo Spouses regularly settled their accounts with the
Bank of the Philippine Islands at first, but started to be delinquent
with their payments by July 2008.
On November 11, 2008, the Bank of the Philippine Islands
sent Spouses Yulo a Demand Letter for the immediate payment of
their outstanding balance. On February 12, 2009, the Bank of the
Philippine Islands sent another Demand Letter for the immediate
settlement of their outstanding balance.
On February 23, 2009, the Bank of the Philippine Islands
filed a Complaint before the Metropolitan Trial Court of Makati
City for sum of money against the Yulo Spouses. This was initially
raffled to the Metropolitan Trial Court Branch 67, Makati City, and
was docketed as Civil Case No. 97470.
The Regional Trial Court noted that the Bank of the
Philippine Islands presented as evidence the Delivery Receipt for
the credit card packet, which was signed by Rainier's authorized
representative, Jessica Baitan (Baitan). It held that the Bank of
the Philippine Islands successfully discharged its burden, as the
signed Delivery Receipt and Rainier's use of credit card were
proofs that Rainier agreed to be bound by its Terms and
Conditions.
ISSUE:
Whether or not Baitan is an agent of the petitioner’s, thus
making authorizing her in receiving the credit card packet for the
petitioner.
RULING:
While the Delivery Receipt showed that Baitan received the
credit card packet for petitioner Rainier, it failed to indicate
Baitan's relationship with him. Respondent also failed to
substantiate its claim that petitioner Rainier authorized Baitan to
act on his behalf and receive his pre-approved credit card. The
only evidence presented was the check mark in the box beside
"Authorized Representative" in the Delivery Receipt. This selfserving evidence is obviously insufficient to sustain respondent's
claim.
A contract of agency is created when a person acts for or on
behalf of a principal, with the latter's consent or authority. Unless
required by law, an agency does not require a particular form,
and may be express or implied from the acts or silence of the
principal. Rallos v. Felix Go Chan & Sons Realty Corporation lays
down the elements of agency:
Out of the above given principles, sprung the creation
an acceptance of the relationship of agency whereby
one party, called the principal (mandante), authorizes
another, called the agent (mandatario), to act for find
(sic) in his behalf in transactions with third persons.
The essential elements of agency are: (1) there is
consent, express or implied, of the patties to establish
the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agents
(sic) acts as a representative and not for himself; and
(4) the agent acts within the scope of his authority.
Respondent fell short in establishing an agency relationship
between petitioner Rainier and Baitan, as the evidence presented
did not support its claim that petitioner Rainier authorized Baitan
to act on his behalf. Without proof that petitioner Rainier read
and agreed to the Terms and Conditions of his pre-approved
credit card, petitioners cannot be bound by it.
12.
Virata vs. Wee GR No. 220926 July 5, 2017
FACTS:
Ng Wee, a client of Westmont Bank, was enticed by the
bank manager to make money placements withWestmont
Investment Corporation (Wincorp), a domestic corporation
organized
and
licensed
to
operate
as an investment house, and one of the bank’s affiliates. Offered
to him were “sans recourse” transactions with the following
mechanics:
A corporate borrower who needs financial assistance to
run its business is screened by Wincorp. Once it qualifies,
Wincorp enters into a Credit Line Agreement for a specific
amount with the corporation which the latter can draw upon
in a series of availments over aperiod of time. Wincorp then
scouts for investors willing to provide the funds needed by
the accredited borrower. The investor is matched with the
accredited borrower.
Lured by representations that the “sans recourse”
transactions are safe, stable, high-yielding, and involve little to
no risk, Ng Wee placed investments. Ng Wee’s initial investments
were matched with Hottick Holdings Corporation (Hottick). Hottick
was extended a credit facility with a maximum draw down
of P1.5billion. Hottick fully availed of the loan facility but it
defaulted in paying its outstanding obligations when the Asian
financial crisis struck.
As a result, Wincorp led a collection suit. To induce the
parties to settle, petitioner Virata offered to guarantee the full
payment of the loan embodied in the Memorandum of Agreement
between him and Wincorp. Thereafter, Wincorp executed a
Waiver and Quitclaim in favor of Virata, releasing the latter from
any obligation, except for his obligation to transfer 40% equity of
UEM Development Philippines, Inc. (UDPI)and forty percent (40%)
of UDPI’s interest in the tollway project to Wincorp.
Alarmed by the news of Hottick’s default and financial
distress, Ng Wee confronted Wincorp and inquired about the
status of his investments. Wincorp assured him that the losses
from the Hottick account will be absorbed by the company and
that his investments would be transferred instead to a new
borrower account. Thus, Ng Wee continued making money
placements, rolling over his previous investments in Hottick and
even increased his stakes in the new borrower account Power
Merge Corporation (PowerMerge). Virata is the majority
stockholder of said corporation. In a special meeting of Wincorp’s
board of directors, the investment house resolved to tackle the
collection case against Halim Saad (majority shareholder of
Hottick) and Hottick, and approved Power Merge’sapplication for
a credit line, extending a credit facility to the latter in the
maximum amount of P1.3 billion.
Barely a month later, Wincorp, through another board meeti
ng allegedly attended by the samepersonalities, increased Power
Merge’s maximum credit limit to P2.5 billion.
After receiving the promissory notes from Power Merge,
Wincorp, in turn, issued Confirmation Advices to Ng Wee. A
summary of the said Confirmation Advices reveals that out of
the P2,183,755,253.11 drawn by Power Merge, the aggregate
amount of P213,290,410.36 was sourced from Ng Wee’s money
placements.
Unknown to Ng Wee, however, was that on the very same
dates the Credit Line Agreement and its subsequent Amendment
were entered into by Wincorp and Power Merge, additional
contracts (Side Agreements) were likewise executed by the two
corporations absolving Power Merge of liability as regards the
Promissory Notes it issued.By virtue of these contracts, Wincorp
was able to assign its rights to the uncollected Hottick obligations
and hold Power Merge papers instead.
However, this also meant that if Power Merge subsequently
defaults in the payment of its obligations, it would refuse, as it
did in fact refuse, payment to its investors. Despite repeated
demands, Ng Wee was not able to collect Power Merge’s
outstanding obligation. This prompted Ng Wee to institute a
Complaint for Sum of Money with Damages. In his Complaint, Ng
Wee claimed that he fell prey to the intricate scheme of fraud and
deceit that was hatched by Wincorp and Power Merge. As he later
discovered, Power Merge’s default was inevitable from the very
start since it only had subscribed capital in the amount of P37.5
million, of which only P9.375million is actually paid up.
He then attributed gross negligence, if not fraud and bad
faith, on the part ofWincorp and its directors for approving Power
Merge’s credit line application and its subsequent increase to the
amount of P2.5 billion despite its glaring inability to pay.For their
part, the Wincorp directors argued that they can only be held
liable under Section 31 of the Corporation Code, if they assented
to a patently unlawful act, or are guilty of either gross negligence
orbad faith in directing the affairs of the corporation. They
explained that the provision is inapplicable since the approval of
Power Merge’s credit line application was done in good faith and
that they merely relied on the vetting done by the various
departments of the company.
ISSUE:
Whether or not directors of Wincorop are liable in their
personal capacity
RULING::
The board of directors is expected to be more than mere
rubber stamps of the corporation and its subordinate departments.
It wields all corporate powers bestowed by the Corporation Code,
including the control over its properties and the conduct of its
business. Being stewards of the company, the board is primarily
charged with protecting the assets of the corporation in behalf of
its stakeholders. Cua and the Cualopings failed to observe this
fiduciary duty when they assented to extending a credit line
facility to Power Merge.
In a separate case, the SEC discovered that Power Merge is
actually Wincorp’s largest borrower at about 30% of the total
borrowings. It was then incumbent upon the board of directors to
have been more circumspect in approving its credit line facility,
and should have made an independent evaluation of Power
Merge’s application before agreeing to expose it to a P2.5 billion
risk.Had it fulfilled its fiduciary duty, the obvious warning signs
would have cautioned it from approving the loan in haste.
To recapitulate: (1) Power Merge has only been in existence
for two years when it was granted a credit facility; (2) Power
Merge was thinly capitalized with only P37,500,000.00 subscribed
capital; (3) Power Merge was not an ongoing concern since it
never secured the necessary permits and licenses to conduct
business, it never engaged in any lucrative business, and it did
not tackle the necessary reports with the SEC; and (4) no
security other than its Promissory Notes was demanded by
Wincorp or was furnished by Power Merge in relation to
the latter’s drawdowns.
It cannot also be ignored that prior to Power Merge’s
application for a credit facility, its controller Virata had already
transacted with Wincorp. A perusal of his records with the
company would have revealed tha the was a surety for the
Hottick obligations that were still unpaid at that time.
This means that at the time the Credit Line Agreement was
executed, Virata still had direct obligations to Wincorp under the
Hottick account. But instead of impleading him in the collection
suit against Hottick, Wincorp’s board of directors effectively
released Virata from liability, and, ironically, granted him a credit
facility in the amount of P1.3billion on the very same day.
This only goes to show that even if Cua and the
Cualopings are not guilty of fraud, they would nevertheless still
be liable for gross negligence in managing the affairs of the
company, to the prejudice of its clients and stakeholders. Under
such circumstances, it becomes immaterial whether or not they
approved of the Side Agreements or authorized Reyes to sign the
same since this could have all been avoided if they were vigilant
enough to disapprove the Power Merge credit application. Neither
can the business judgment rule apply herein for it is elementary
in corporation law that the doctrine admits of exceptions: bad
faith being one of them, gross negligence, another.
13.
Pacific Rehouse Corporation vs. EIB Securities Inc. GR
No. 184036
FACTS:
During the period of June 2003 to March 2004, plaintiffs
Pacific Rehouse Corp (PRC), through their Broker EIB Securities
(EIB)purchased 60,790,000 shares of Kuok Properties Inc (KPP),
valued at P0.22 per share.
Subsequently, PRC also bought 32,180,000 DMIC shares. Of
these shares, 16,180,000 were acquired through EIB, while the
remaining 16,000,000 were transferred from Westlink Global
Equities Inc. The DMIC shares were purchased at P.038 per share
PRc and EIB agreed to sell the KPP shares for P0.14 per
share with the option to buy back or reacquire the KPP shares
within a period of 30 days from transaction date at P0.18 per
share.
Since PRC was undecided on whether it was to exercise their
option to buy back the shares, PRC and EIB agreed to extend the
buyback option.
However, without their knowledge or consent, EIB sold the
32,180,000 DMIC shares atP0.24 per share despite knowing that
such sale would result in a substantial loss to PRC.
As such, PRC filed an action against EIB for damages. The
trial court held in favor of PRC. It held that that EIB went beyond
its authority in selling petitioner’s DMIC shares in order to buy
back the KKP shares Petitioners asserted the inapplicability of
Sec 7 of the SDAA to their liability to reacquire the KKP shares,
as the DMIC shares were not sold to pay their P70 million
obligation to EIB but to settle their obligation to the buyers of
their KKP shares
ISSUE:
Whether or not EiB acted within the scope of its authority in
the sale of the DMIC shares.
HELD:
No. Sec 7 of the SDAA does not apply to petitioner’s
obligation to third party purchasers of their KKP shares under the
“full cross to seller” obligation, and certainly EIB could not use
said provision for the repurchase of the KKP shares. Indubitably,
the sale of the DMIC shares made by EIB is null and void for lack
of authority to do so since PRC never gave their consent or
permission to the sale.
Moreover, ART 1991 NCC provides that the agent must act
within the scope of his authority. Pursuant to the authority given
by the principal, the agent is granted the right to “affect the
legal relations of his principal by the performance of acts
effectuated in accordance with the principal’s manifestation of
consent.
CAB: The scope of EIB as agent of petitioner is “to retain
apply, sell, or dispose of all or any of the
petitioners’ property,” “of all or any indebtedness or other
obligations of petitioners to EIB are not discharged in full by PRC
“when due or on demand in or towards the payment and
discharge of such obligation or liability.”
The right tosell or dispose of the properties of petitioners by
EIB is unequivocally confined to the payment of obligations and
liabilities of petitioners to EIB and none other. Thus, when EIB
sold the DMIC shares to buy back the KPP shares, it paid the
proceeds to the vendees of said shares, the act of which is clearly
an obligation to a third party and hence, beyond the scope of its
authority as agent. Such an act is surely illegal and does not
bind petitioners as principals of EIB
14.
Cagungun vs. Planters Development Bank
FACTS:
Sps. Cagungun filed a suit with RTC Olongapo against
Country Development Bank (Country; eventually merged with
Planters Development Bank). Sps. Cagungun were substituted by
their children when Vicente Cagungun (father) died.
Sps. Cagungun opened two (2) savings account with
Country. Because of the exigencies of their businesses that
requireddaily deposits of the proceeds and of the trust that they
have reposed with County and its personnel, they entrusted and
left with them their said savings passbooks.
At least once a day the Branch manager Ruperto Reyes or a
certain Bong and Ding would come to get their funds andwith the
agreement that these would be rounded off and deposited to their
account while the odd remainderwould be applied to their loan.
Sps. Cagungun received a letter from Country telling them
that their loan is past due and payment was demanded.
Investigation ensued but because of lack of cooperation and even
resistance from Country, Sps. Cagungun had to be helped by its
friend in high places when they learned that a total of P220,000
was withdrawn from one of its passbooks. These withdrawals
were invalid for no such withdrawal was authorized, made or
received by the depositors, and the signatures of Vicente
Cagungun on the slips were forgeries, as confirmed by NBI.
RTC ruled that the 7 withdrawal slips amounting to P220,000
were not made by petitioners as the signatures were falsified. The
loan balance of P58,297.16 was also considered already paid.
Moral damages was awarded because the threated foreclosure of
the real estate mortgage over Sps. Cagungun’s house was caused
by the failure of Country to applythe savings of the Sps.
Cagungun as payment of their loan. Country’s attempt to cover
up the misdeeds of its employees constitutes malice and bad faith,
hence respondents was also ordered to pay exemplary damages.
CA held that the loan balance remains unpaid, removed the
awards of moral and exemplary damages, and reduced the
attorney’s fees and litigation expenses. Hence the current petition.
ISSUE:
Whether or not the Country exercised the required degree of
diligence it ought to have exercised in dealing with clients.
RULING:
NO. If only the respondent exercised the diligence higher
than that of a good father of a family, no anomaly or
irregularity would have happened.
The bank was grossly negligent when it allowed the sum of
P220,000.00 to be withdrawn through falsified withdrawal slips
without petitioners’ authority and knowledge and its failure to
comply with petitioners’ instruction to apply their deposits on
their loan. In so doing, respondent bank breached the trust that
petitioners reposed on it.
Sps. Cagungun trusted and depended on respondent to take
care of their accounts with it. If respondent bank was really strict
in enforcing the banking rule that the passbook must be kept by
the depositor, why did it not do so? For its failure, any anomaly
or damage that might result therefrom should be borne by it.
It should have been Country’s duty to present OIC Reyes,
who had custody of the passbooks, to explain why unauthorized
withdrawals were made and why the instruction to apply Sps.
Cagungun’s deposit to their loan was not complied with.
The unauthorized transactions were committed by one or
some of the employees of Country for which it should be liable.
The evidence showed that Country did not exercise the degree of
diligence it ought to have exercised in dealing with its clients—
diligence higher than that of a good father of a family.
PNB v Pike:
“With banks, the degree of diligence required, is more
than that of a good father of a family considering that the
business of banking is imbued with public interest due to the
nature of their functions. The stability of banks largely
depends on the confidence of the people in the honesty and
efficiency of banks.
Thus, the law imposes on banks a high degree of obligation
to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of banking. Section 2
of Republic Act No. 8791, which took effect on 13 June 2000,
makes a categorical declaration that the State recognizes the
“fiduciary nature of banking that requires high standards of
integrity and performance.”
Though passed long after the unauthorized withdrawals in
this case, Sec. 2 is a statutory affirmation of SC decisions (e.g.
Simex International v CA) already in effect at the time of such
withdrawals.
CBTC v CA: SC clarified that said fiduciary relationship
means that the bank’s obligation to observe “highest standards of
integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. Article 1172 of the
New Civil Code states that the degree of diligence required of an
obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a family.
15.
Eurotech Industrial Technologies, Inc. vs. Cuizon
FACTS:
Edwin Cuizon, general manager of Impact Systems Sales
owned by Erwin Cuizon, bought one equipmentfrom Petitioner
Eurotech valued at Php 250,000.00, paying Php 50,000.00 as
down payment. When the equipment arrived, petitioner refused
to deliver it to the respondent without paying the balance.Edwin
and a general manager of Eurotech signed a deed of assignment,
whereby Impact Systems assignsits outstanding receivable
amounting to Php 365,000.00 to Eurotech, which delivered the
equipmentthereafter.But Erwin, the proprietor, still collected the
receivables despite the assignment. After partial paymentsmade,
Eurotech made a final demand of Php 295,000.00, excluding
interest and attorney's fees.For failure to meet the demand,
Eurotech filed a complaint for sum of money, damages, with
application forpreliminary attachment.Edwin alleged that he is not
a real party in interest in the case for he merely acted as an
agent of hisprincipal, Impact Systems.RTC dropped respondent as
a party defendant of the case. The CA affirmed the order, hence
the appealwas made.
ISSUE:
Whether or not respondent, as sales manager, is acting
merely as an agent for the sole proprietorship
HELD:
Respondent Edwin merely acted as an agent.
In a contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of
another with the latter’s consent.
The underlying principle of the contract of agency is to
accomplish results by using the services of others – to do a great
variety of things like selling, buying, manufacturing, and
transporting.Its purpose is to extend the personality of the
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 agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal
effect as if they were personally executed by the principal.By this
legal fiction, the actual or real absence of the principal is
converted into his legal or juridical presence – qui facit per alium
facit per se.
The elements of the contract of agency are:(1) consent,
express or implied, of the parties to establish the relationship;(2)
the object is the execution of a juridical act in relation to a third
person;(3) the agent acts as a representative and not for
himself;(4) the agent acts within the scope of his authority
In this case, the parties do not dispute the existence of the
agency relationship between respondents ERWIN as principal and
EDWIN as agent. The only cause of the present dispute is
whether respondent EDWIN exceeded his authority when he
signed the Deed of Assignment thereby binding himself personally
to pay the obligations to petitioner. Article 1897 reinforces the
familiar doctrine that an agent, who acts as such, is
not personally liable to the party with whom he contracts.The
same provision, however, presents two instances when an agent
becomes personally liable to a third person:(1) When
he expressly binds himself to the obligation; and,(2) When
he exceeds his authority.In the last instance, the agent can be
held liable if he does not give the third party sufficient notice of
his powers.
We hold that respondent EDWIN does not fall within any of
the exceptions contained in this provision.
"...the position of manager is unique in that it
presupposes the grant of broad powers with which to
conductthe business of the principal."The powers of an agent
are particularly broad in the case of one acting as a general
agent or manager;such a position presupposes a degree of
confidence reposed and investiture with liberal powers for
theexercise of judgment and discretion in transactions and
concerns which are incidental or appurtenant to thebusiness
entrusted to his care and management. In the absence of an
agreement to the contrary, amanaging agent may enter into
any contracts that he deems reasonably necessary or
requisite for theprotection of the interests of his principal
entrusted to his management. A real party in interest is one
who "stands to be benefited or injured by the judgment in
the suit, or the partyentitled to the avails of the suit."
16.
FACTS:
Mendoza vs. Paule GR No. 175885 Febfruary 13, 2009
Engineer Paule is the proprietor of E.M. Paule Construction
and Trading (EMPCT). PAULE executed an SPA authorizing
Mendoza to participate in the prequalification and bidding of a
National Irrigation Administration (NIA) project, the Casicnan
Multi-Purpose Irrigation and Power Plant (CMIPPL).
Mendoza was given the power to bid and secure bonds with
the NIA as well as receive and collect payments. EMPCT, through
Mendoza, was awarded the project. When Cruz learned the
Mendoza was in need of heavy equipment for use in the NIA
project, he met up with him to discuss an agreement for such
project. The product of their agreement was two job orders for
dump trucks on December of 1999.
On April 2000, Paule revoked the SPA of Mendoza prompting
NIA to refuse payment on her billings. CRUZ, therefore, could not
be paid for the rent of the equipment. Upon advice of MENDOZA,
CRUZ addressed his demands for payment of lease rentals
directly to NIA but the latter refused to acknowledge the same
and informed CRUZ that it would be remitting payment only to
EMPCT as the winning contractor for the project.
Cruz then sued Paule (EMPTC) and NIA. Paule proceeds
against Mendoza. MENDOZA alleged in her crossclaim that
because of PAULEs whimsical revocation of the SPA, she was
barred from collecting payments from NIA, thus resulting in her
inability to fund her checks which she had issued to suppliers of
materials, equipment and labor for the project. She claimed that
estafa and B.P. Blg. 22 cases were filed against her.
ISSUES:
1. Whether or not Mendoza, as agent, could claim from
Paule/EMPTC for debts she incurred from Cruz?
2. Whether or not Paule/EMPTC is liable as Mendoza was an
agent that acted within the scope of her authority?
HELD:
“Records show that PAULE (or, more appropriately, EMPCT) and
MENDOZA had entered into a PARTNERSHIP in regard to the
NIA project.
PAULEs contribution thereto is his contractors license and
expertise, while MENDOZA would provide and secure the needed
funds for labor, materials and services; deal with the suppliers
and subcontractors; and in general and together with PAULE,
oversee the effective implementation of the project. For this,
PAULE would receive as his share three per cent (3%) of the
project cost while the rest of the profits shall go to MENDOZA.
PAULE admits to this arrangement in all his pleadings.”
Although the SPA limited Mendoza only to bid on behalf of
EMPTC with regard the project, MENDOZAs actions were in accord
with what she and PAULE originally agreed upon, as to division of
labor and delineation of functions within their partnership.
Under the Civil Code, every partner is an agent of the
partnership for the purpose of its business; each one may
separately execute all acts of administration, unless a
specification of their respective duties has been agreed upon, or
else it is stipulated that any one of them shall not act without the
consent of all the others. At any rate, PAULE does not have any
valid cause for opposition because his only role in the partnership
is to provide his contractors license and expertise, while the
sourcing of funds, materials, labor and equipment has been
relegated to MENDOZA.
Given the present factual milieu, CRUZ has a cause of action
against PAULE and MENDOZA. Thus, the Court of Appeals erred
in dismissing CRUZs complaint on a finding of exceeded agency.
There was no valid reason for PAULE to revoke MENDOZAs SPAs.
Since MENDOZA took care of the funding and sourcing of labor,
materials and equipment for the project, it is only logical that she
controls the finances, which means that the SPAs issued to her
were necessary for the proper performance of her role in the
partnership, and to discharge the obligations she had already
contracted prior to revocation.
Without the SPAs, she could not collect from NIA, because
as far as it is concerned, EMPCT and not the PAULEMENDOZA
partnership is the entity it had contracted with. Without these
payments from NIA, there would be no source of funds to
complete the project and to pay off obligations incurred. As
MENDOZA correctly argues, an agency cannot be revoked if a
bilateral contract depends upon it, or if it is the means of fulfilling
an obligation already contracted, or if a partner is appointed
manager of a partnership in the contract of partnership and his
removal from the management is
unjustifiable.
Moreover, PAULE should be made civilly liable for
abandoning the partnership, leaving MENDOZA to fend for her
own, and for unduly revoking her authority to collect payments
from NIA, payments which were necessary for the settlement of
obligations contracted for and already owing to laborers and
suppliers of materials and equipment like CRUZ, not to mention
the agreed profits to be derived from the venture that are owing
to MENDOZA by reason of their partnership agreement.
TRUST
17.
Canezo vs. Rojas GR No. 148788 November 23, 2007
FACTS:
Soledad Cañezo filed a Complaint for the recovery of real
property with the Municipal Trial Court (MTC) of Naval, Biliran,
against her father’s second wife, respondent Concepcion Rojas.
The subject property is an unregistered land situated at
Higatangan, Naval, Biliran.
In her complaint, Soledad alleged that she bought the parcel
of land in 1939 from Crisogono Limpiado, However, the
transaction was not reduced into writing. Thereafter, she
immediately took possession of the property. When she and her
husband left for Mindanao in 1948, she entrusted the said land to
her father, Crispulo Rojas, who took possession of, and cultivated,
the property.
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 declaration over the property
was already in the name of Crispulo Rojas.
On the contrary, Conception Rojas asserted that it was her
husband, Crispulo Rojas, who bought the property from
Crisogono Limpiado, which accounts for the tax declaration being
in Crispulo’s name.
From then on, until his death in 1978, Crispulo possessed
and cultivated the property. Upon his death, the property was
included in his estate, which was administered by a special
administrator, Bienvenido Ricafort. The petitioner, as heir, even
received her share in the produce of the estate.
MTC decided in favor of the petitioner which was reversed by
the RTC that makes the said property remains as the legitime of
the defendant Concepcion Rojas and her children on he the
respondent asserts that the complaint is barred by prescription,
laches and estoppel.
However, upon reaching the Court of Appeals, the decision
was reversed. CA favored the contention of the Conception that
the complaint is barred by prescription, laches and estoppel. With
this, CA reasoned that the petitioner’s inaction for several years
casts a serious doubt on her claim of ownership over the parcel of
land. It noted that 17 years lapsed since she discovered that
respondent was in adverse possession of the property before she
instituted an action to recover the same.
Aggrieved, petitioner insists that her right of action to
recover the property cannot be barred by prescription or laches
even with the respondent’s uninterrupted possession of the
property for 49 years because there existed between her and her
father an express trust or a resulting trust.
ISSUE:
Whether or not a trust, express or implied, was constituted
between the petitioner Cañezo and her father Crispulo.
RULING:
No. Supreme Court ruled that there was no trust, express or
implied, between Cañezo and Crispulo.
In the decision held by the SC, A definition of trust was
stated.
SC mentioned that “A trust is a legal relationship between
one person having an equitable ownership of property and
another person owning the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers
by the latter. Trusts are either express or implied.Express trusts
are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words evincing an
intention to create a trust.Implied trusts are those which, without
being expressed, are deducible from the nature of the transaction
as matters of intent or, independently, of the particular intention
of the parties, as being super-induced on the transaction by
operation of law basically by reason of equity.An implied trust
may either be a resulting trust or a constructive trust.
Thus, on the present case, assuming that such a relation
existed, an express or implied trust, it is already terminated upon
Crispulo’s death in 1978.A trust terminates upon the death of the
trustee where the trust is personal to the trustee in the sense
that the trustor intended no other person to administer it.
If Crispulo was indeed appointed as trustee of the property,
it cannot be said that such appointment was intended to be
conveyed to the respondent or any of Crispulo’s other heirs.
Hence, after Crispulo’s death, the respondent had no right to
retain possession of the property. At such point, a constructive
trust would be created over the property by operation of law.
Where one mistakenly retains property which rightfully
belongs to another, a constructive trust is the proper remedial
device to correct the situation. As a rule, however, the burden of
proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show
the existence of the trust and its elements. The presence of the
following elements must be proved:
(1) a trustor or settlor who executes the instrument
creating the trust;
(2) a trustee, who is the person expressly designated
to carry out the trust;
(3) the trust res, consisting of duly identified and
definite real properties; and
(4) the cestui que trust, or beneficiaries whose identity
must be clear.
Accordingly, it was incumbent upon Cañezo to prove the
existence of the trust relationship, but she failed to discharge that
burden.The existence of express trusts concerning real property
may not be established by parol evidence. It must be proven by
some writing or deed. In this case, the only evidence to support
the claim that an express trust existed between the petitioner and
her father was the self-serving testimony of the petitioner. Bare
allegations do not constitute evidence adequate to support a
conclusion. They are not equivalent to proof under the Rules of
Court.
Thus, in the end, Supreme Court held that although no
particular words are required for the creation of an express trust,
a clear intention to create a trust must be shown; and the proof
of fiduciary relationship must be clear and convincing. The
creation of an express trust must be manifested with reasonable
certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of
other interpretations.
In the case at bench, an intention to create a trust cannot
be inferred from Cañezo’s testimony and the attendant facts and
circumstances.
Neither can it be deduced from the circumstances of the
case that a resulting trust was created. A resulting trust is a
species of implied trust that is presumed always to have been
contemplated by the parties, the intention as to which can be
found in the nature of their transaction although not expressed in
a deed or instrument of conveyance. A resulting trust is based on
the equitable doctrine that it is the more valuable consideration
than the legal title that determines the equitable interest in
property.
18.
Ty vs. Ty GR NO. 165696 April 30, 2008
FACTS:
Alexander Ty died and was succeeded by his wife Sylvia and
his daughter Krizia. A few months after his death, a petition for
the settlement of his intestate estate was filed. Sylvia, as
administratrix, was ordered by the California court to distribute
his property in the United States.
In the Philippines, Sylvia submitted to the intestate Court in
Quezon City an inventory of the assets of Alexander’s estate,
consisting of shares of stocks and various properties (EDSA
Property, Meridien, and Wack-Wack). She asked the court to
permit her to sell/mortgage the properties of the estate in order
to pay additional estate tax as assessed by the BIR.
Apparently, this action did not sit well with her father-in-law,
Alejandro, who later filed a complaint for recovery of properties
with prayer for preliminary injunction and/or temporary
restraining order. In her opposition, Sylvia claimed that plaintiff
Alejandro had no actual or existing right, which entitles him to
the writ of preliminary injunction, for the reason that no express
trust concerning an immovable maybe proved by parole evidence
under the Law.
In addition, Sylvia Ty argued that the claim is barred by
laches, and more than that, that irreparable injury will be
suffered by the estate of Alexander Ty should the injunction be
issued. As to the complaint for recovery of properties, it is
asserted by Alejandro that he owns the three properties
mentioned above. He said he bought all three properties at
different times, and registered them under his son’s name with
the understanding that they will be held in trust for his brothers
and sisters in the event of his sudden demise. Plaintiff further
alleged that at the time the properties were purchased, his son
was financially incapable of purchasing said properties. He
presented Alexander’s and Sylvia’s income tax returns to bolster
his claim. Alejandro added that defendant acted in
bad faith in including the subject properties in the inventory of
Alexander Ty’s estate, for she was well aware that Alexander was
simply holding the said properties in trust for his siblings.
ISSUE:
Whether or not a trust, express or implied, was established
by Alejandro in favor of his late son and name-sake Alexander.
RULING:
No, there was neither express nor implied trust created
concerning the subject properties. An express trust over real
property cannot be constituted when nothing in writing was
presented to prove it. As for implied trust, since Alejandro has
erected his case upon Art. 1448 of the Civil Code, a prime
example of an implied trust, viz.: that it was he who allegedly
paid for the purchase price of some of the realties subject of this
case, legal title or estate over which he allegedly granted or
conveyed unto his son, Alexander, for the latter to hold these
realties in trust for his siblings in case of his demise, Alejandro is
charged with the burden of establishing the existence of an
implied trust by evidence described or categorized as "sufficiently
strong," "clear and satisfactory," or "trustworthy." He has
miserably failed to discharge that burden. If only to emphasize
and reiterate what the Supreme Court has in the past declared
about implied trusts, these case law rulings are worth mentioning.
As a rule, the burden of proving the existence of a trust is
on the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its elements.
While implied trusts may be proved by oral evidence, the
evidence mustbe trustworthy and received by the courts with
extreme caution and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated.
The EDSA Property
Article 1448 of the Civil Code is clear. If the person to whom
the title is conveyed is the child of the one paying the price of the
sale, and in this case this is undisputed, NO TRUST IS IMPLIED
BY LAW.
The law, instead, disputably presumes a donation in favor of
the child. On the question of whether or not petitioner intended a
donation, the CA found that petitioner failed to prove the contrary.
This is a factual finding which this Court sees no reason the
record to reverse. The net effect of all the foregoing is that Sylvia
is obliged to collate into the mass of the estate of Alejandro, in
the event of his death, the EDSA property as an advance of
Alexander’s share in the estate of his father, to the extent that
petitioner provided a part of its purchase price.
19.
Pigao vs. Rabanillo GR No. 150712 May 2, 2006
FACTS:
Sometime in 1947, the late Eusebio Pigao, petitioners’ father,
together with his family, settled on a 240 square meter lot
located at 92 (now 102) K-5th Street, Kamuning, Quezon City.
The parcel of land used to be government property owned by the
People’s Homesite and Housing Corporation (PHHC),3 under
Transfer Certificate of Title (TCT) No. 27287.4 Eusebio applied for
the purchase of the subject lot and a contract to sell for a
consideration of P1,022.19 was thereafter entered into by
Eusebio and PHHC.
In 1959, Eusebio executed a deed of assignment of rights
over one-half of the property in favor of respondent, for a
consideration of P1,000. Respondent proceeded to occupy the
front half portion, established a residential building thereon, and
paid the amortizations for the said portion.
In 1970, Eusebio executed a deed of mortgage over the
same half-portion of the property in favor of respondent. After
the amortizations on the subject lot were fully paid in 1973, the
PHHC issued a deed of sale over the entire lot in favor of Eusebio.
Consequently, TCT No. 197941 was issued in Eusebio’s name. In
1978, respondent executed an affidavit of adverse claim over the
front half portion of the lot registered in Eusebio’s name. This
affidavit was duly annotated on TCT No. 197941. On June 17,
1979, Eusebio died and was survived by his children, herein
petitioners.
In 1988, after the Office of the Register of Deeds of Quezon
City was gutted by fire, petitioner Estrella Pigao applied for the
reconstitution of the original of TCT No. 197941 that was burned.
This was approved in 1990 and TCT No. RT-11374 was issued,
still in the name of Eusebio. This reconstituted title no longer
carried the annotation of the adverse claim of respondent.
In 1992, petitioners executed an extrajudicial settlement of
Eusebio’s estate among themselves, including the entire subject
lot. As a consequence, TCT No. 56210 was issued for the entire
lot in the name of petitioners. Respondent continued to occupy
the front half portion through his tenant, Gil Ymata. On January
29, 1996, petitioners instituted civil case no. Q-96-26270 in the
Regional Trial Court (RTC) of Quezon City, Branch 95, against
respondent and Ymata wherein they sought to quiet their title
over the entire lot and to recover possession of the front half
portion. They averred that Eusebio’s deed of assignment and
deed of mortgage were clouds on their title which should be
nullified.5 The RTC ruled in favor of petitioners.
ISSUE:
Whether or not the CA erred in declaring that a relationship of
implied trust over the [one-half] (1/2) portion of the subject lot
was created between eusebio pigao and [respondent].
RULING:
A resulting trust is exemplified by Article 1448 of the Civil
Code xxx
The trust created under the first sentence of Article 1448 is
sometimes referred to as a purchase money resulting trust. The
trust is created in order to effectuate what the law presumes to
have been the intention of the parties in the circumstances that
the person to whom the land was conveyed holds it as trustee for
the person who supplied the purchase money.
To give rise to a purchase money resulting trust, it is
essential that there be:
1. an actual payment of money, property or services,
or an equivalent, constituting valuable consideration;
2. and such consideration must be furnished by the
alleged beneficiary of a resulting trust.
There are recognized exceptions to the establishment of an
implied resulting trust. The first is stated in the last part of Article
1448 itself. Thus, where A pays the purchase money and title is
conveyed by absolute deed to A's child or to a person to whom A
stands in loco parentis and who makes no express promise, a
trust does not result, the presumption being that a gift was
intended. Another exception is, of course, that in which an actual
contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of
the fraud.
Another exception to the establishment of an implied
resulting trust under Article 1448 is when its enforcement
contravenes public policy. We have already ruled that the transfer
of rights by Eusebio to respondent was null and void ab initio for
being contrary to public policy. As we held in Ramos v. Court of
Appeals:
Otherwise stated, as an exception to the law on trusts,
"[a] trust or a provision in the terms of a trust is invalid if
the enforcement of the trust or provision would be against
public policy, even though its performance does not involve
the commission of a criminal or tortious act by the trustee."
The parties must necessarily be subject to the same
limitations
on
allowable
stipulations
in
ordinary
contracts, i.e., their stipulations must not be contrary to law,
morals, good customs, public order, or public policy. What
the parties then cannot expressly provide in their contracts
for being contrary to law and public policy, they cannot
impliedly or implicitly do so in the guise of a resulting trust.
Admittedly, respondent shouldered half of the amortizations
which were received by Eusebio’s wife31 and paid to the PHHC for
the purchase of the lot. He also paid for the realty taxes for the
said portion.32 However, this was not an implied trust wherein
petitioners held the title over the front half portion in trust for
respondent. Otherwise, it would again run against public policy.