Partnership, Agency and Trust

8/10/2019 Partnership, Agency and Trust

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150 2005CENTRALIZEDBAROPERATIONS

PARTNERSHIP

PARTNERSHIPBy the contract of partnership

two or more persons bind themselves tocontribute money, property or industryto a common fund, with the intention ofdividing the profits among themselves.

Two or more persons may alsoform a partnership for the exercise of aprofession. (Art. 177! A partnership has a "uridical

personality which is separate anddistinct from that of the partners.

A partnership may sue and be sued in

its name or by its duly authori#edrepresentatives. A managing partnerof the partnership may execute allacts of administration including theright to sue debtors of thepartnership in the case of theirfailure to pay their obligation whenit becomes demandable. (Tai TongChuache & Co. vs. InsuranceCommission 158 SCRA 336 [1988]

FORM OF PARTNERSHIP CONRTRACT

!"#"RA$ R%$" $o special form isre%uired for the validity or existence ofthe contract of partnership."'C"TI)#S1.&here immovable property or realrights are contributed, the partnershipcontract shall be void unless'

a. t is reduced to writingin a public instrument (Art. 1771!.b. An inventory of the propertycontributed is made, signed by theparties and attached to the publicinstrument. (Art.177)!.

A partnershipcontract which states that thepartnership is established to operatea fishpond is not rendered voidbecause no inventory of the fishpondwas made (where it did not clearlyappear in the articles of partnershipthat the real property had beencontributed by anyone of thepartners). (Agad vs. Mabolo andMabolo Agad and Co., 23 SCRA1223[1968])

*. &here the contract is by its terms notto be performed within a year from thema+ing thereof, such partnershipcontract is covered by the statute offrauds and thus re%uires a writtenagreement to be enforceable.). &here the contract of partnershiphas a capital of ), pesos or more, inmoney or property, it shall appear in apublic instrument and must be recordedin the -ffice of the ecurities and/xchange 0ommission. owever, apartnership has a "uridical personality

even in case of failure to comply withthis re%uirement.

Requisites:1. intention to create a partnership*. common fund obtained from the

contributions). "oint interest in the profits

Essential Features:1. there must be a valid contract2*. the parties must have legal capacity

to enter into the contract2

NOTE: &ith regard to number * (legalcapacity of contracting parties!,individuals not legally incapacitated tocontract and partnerships may enter intoa contract of partnership. &ith respectto corporations, the court held inAurbach vs. anitary &ares3anufacturing 0orporation 14 05A 1)6148 that although a corporationcannot enter into a partnership contract,it may however engage in a "oint venture

with others. A "oint venture has beengenerally understood to mean anorgani#ation formed for some temporarypurpose.

There is nothing against onecorporation being represented by anatural or "uridical person in a suit incourt, for the true rule is that 9althougha corporation has no power to enter apartnership, it may nevertheless enterinto a "oint venture with another wherethe nature of that venture is in line withthe business authori#ed by the charter.

2005 CENTRALIZEDBAROPERATIONSEXECUTIVECOMMITTEEANDSUBJECTCHAIRPERSONS

Maricel Aare!"#$ (Over-all Chairperson), R#!al% Jal&a!'ar (Over-all Vice Chair), (#la!%aT#le!"i!#(VC-Acads), Je!!i)er A!*(VC- Secretariat),J#+ I!%,c"i-#(VC-Finance), Elai!e Ma$,.a" (VC-EDP), A!!a Mar*ari"a Ere$(VC-Logistics) J#!a"/a!

Ma!*,!%a+a# (Political La), ra!ci$ Be!e%ic" Re#","ar (La!or La), R#&,al% Pa%illa (Civil La),C/ar&ai!e T#rre$ ("a#ation La), Mar. Da-i% Mar"i!e' (Cri$inal La), ar!+ L,i$a Ale*re (Co$$ercialLa),Ji!.+ A!! U+(%e$edial La),Jac.ie L#, Ba,"i$"a(Legal Ethics)


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(*+ Tua,on an- Co. Inc vs. /o0anos 95I$ 126 [195]). there must be mutual contribution of

money, property and industry to a

common fund

NOTE:A partnership of a civil nature wasformed because :atchalian ; 0o. put upmoney to buy a sweepsta+es tic+et forthe sole purpose of dividing e%ually thepri#e which they may win as they did infact in the amount of children so theycan build their residences, but the latterafter 1 year sold them and paid the

capital gains, they should not be treatedto have formed an unregisteredpartnership and taxed corporate incometax on the sale and on dividend incometax on their shares of the profits fromthe sale. ()i00os *r. vs. CIR [1985]>. the ob"ect must be lawful2 and=. the primary purpose must be to

obtain profits7" C*3 :;A


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Sa! Be%a C#lle*e #) La152

MEMOR(AIDINCIVILLA3

moment of execution ofthe contract of partnership

personality fromthe date of issuance of thecertificate ofincorporation by

the ecuritiesand /xchange0ommission

4. Powersora4e- vs.

!uingona *r ;3; SCRA 112 [199]the court defined a "oint venture asan association of persons orcompanies "ointly underta+ing somecommercial enterprise2 generally allcontribute assets and share ris+s. tsre%uisites are'

CIVILLA3COMMITTEEC&A'%PE%SO %o$*ald Padilla ASS"+C&A'%PE%SO Vida ocar, Joce Vidad EDP Alnai.a &assi$an, Doroth /aon

S0JEC" &EADS Christopher %e 1arasigan (Persons and Fa$il %elations), Ale2andro Casa!ar(Propert), 1a+

%hodoraFerrer(3ills and S*ccession), 'an Do$inic P*a(O!ligations and Contracts), Sha Eli2ah D*$a$a(Sales and Lease),John Stephen4*ia$!ao(PA"), Christopher Ca!igao(Credit "ransactions), Ligaa Alipao("orts and Da$ages), AnthonP*rganan(L"D),1a+ %icasion "*gadi (Con5icts o6 La)


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a. A community of interest inthe performance of thesub"ect matter2

b. A right to direct and govern

the policy in connectiontherewith2

c. @uty to share profits andlosses.

NOTE: Dnder the 0ivil 0ode, apartnership may be particular oruniversal, and a particular partnershipmay have for its ob"ect a specificunderta+ing. ence, a "oint venturemay be treated li+e any other contract,innominate in nature to be regulated andgoverned primarily by the stipulations ofthe parties thereto and suppletorily by

the general provisions of the 0ivil 0odeon obligations and contracts, by rulesgoverning the most analogous contracts(e.g. 0a@ on >ar4nershi>!, and by thecustoms of the place.

Other Si"ilar Contra#ts$% Colla&oration- the act of wor+ingtogether in a "oint pro"ect.'% Asso#iation- act of a number ofpersons uniting together for some specialpurpose or business.

R!(ES TO )ETERMINE E*ISTENCE OFPARTNERSHIP (A5T 17!

1. !"#"RA$ R%$" . 5eceipt of share in the profits is astrong presumptive evidence ofpartnership. owever, no suchinference will be drawn if suchprofits were received in payment'

(a! as a -e4 by installments orotherwise2 (b! as @ages of anemployee or rent to a

landlord2

(c! as an annui4? to a widow orrepresentative of a deceasedpartner2

(d! as in4erest on a loan, though theamount of payment vary with theprofits of the business2 and

(e! as the consi-era4ionfor the saleof a goodwill of a business orother property by installments orotherwise.

C(ASSIFICATION OF PARTNERSHIP1. as 4o oec4

a! universal partnershipi. universal partnership of all

present propertyii. universal partnership of

profits

b! particular partnership

;. as 4o 0iai0i4? oB >ar4nersa! general partnershipb! limited partnership

3. as 4o -ura4iona! partnership at will

b! partnership with a fixedperiod

. as 4o 0ega0i4? oB eis4encea! de "ure partnershipb! de facto partnership

5. as 4o re>resen4a4ion 4o o4hersa! ordinary or real partnershipb! ostensible or partnership by

estoppel

6. as 4o >u0ici4?

a! secret partnershipb! notorious or open partnership

. as 4o >ur>osea! commercial or tradingb! professional or non?trading

!NIERSA( PARTNERSHIP1. A uni+ersal partnership o, allpresent propert is one wherein thepartners contribute all the propertywhich actually belong to them to a





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MEMOR(AIDINCIVILLA3

common fund, with the intention ofdividing the same among themselves, aswell as all the profits which they mayac%uire therewith.

n a universal partnership of all

present property, the property whichbelongs to each of the partners at thetime of the constitution of thepartnership, becomes the commonproperty of all the partners, as well asthe profits which they may ac%uiretherewith.

A stipulation for the commonen"oyment of any other profits may alsobe made2 but the properties which thepartners may ac%uire subse%uently by

inheritance, legacy or donation cannotbe included in such stipulation, exceptthe fruits thereof.

&here the articles of partnership do

not specify the nature of the universalpartnership, whether it is one of9present propertyC or of 9profitsC only,it will be presumed that the partiesintended merely a partnership of profits.NOTE: Euture properties cannot becontributed. Thus, propertysubse%uently ac%uired by (1!

inheritance, (*! legacy or ()! donationcannot be included by stipulation exceptthe fruits thereof.

*. A uni+ersal partnership o, pro,its isone which comprises all that thepartners may ac%uire by their industry orwor+ during the existence of thepartnership and the usufruct of movableor immovable property which each of thepartners may posses at the time of thecelebration of the contract.

3ovable or immovable property

which each of the partners may posses atthe time of the celebration of thecontract shall continue to pertainexclusively to each, only the usufructpassing to the partnership.

NOTE:


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1. )e Jure Partnership- one which hascomplied will all the legalre%uirements for its establishment.

2. )e Fa#to Partnership-one which has

failed to comply with all the legalre%uirements for its establishment.

3. Or1inar or real partnership- onewhich actually exists among thepartners and also as to third persons.

4. Ostensi&le partnership orpartnership 1e ,a#to-one which inreality is not a partnership, but isconsidered a partnership only inrelation to those who, by theirconduct or admission, are precludedto deny or disprove its existence.

5. Se#ret partnership-one wherein theexistence of certain persons aspartners is not avowed or made+nown to the public by any of thepartners.

6. Open or notorious partnership-onewhose existence is avowed or made+nown to the public by the membersof the firm.

7. Co""er#ial or tra1in2 partnership-one formed for the transaction ofbusiness.

8. Pro,essional or non-tra1in2partnership- one formed for theexercise of a profession.

C(ASSIFICATION OF PARTNERS1. as 4o C)#TRI/%TI)#

a Capitalist partner one whocontributes money or property to thecommon fund. ndustrial partner one whocontributes only his industry orpersonal service.

;. as 4o $IA/I$ITa) eneral

partner one whose liability to thirdpersons extends to his separateproperty, he may either be acapitalist or industrial partner. 0i&ited partner one whoseliability to third persons is limited tohis capital contribution.

3. as 4o +A#A!"+"#T

a *ana"in" partner one whomanages the business or affairs ofthe partnership2 he may beappointed in the articles of

partnership or after constitution ofthe partnership. ilent partner one who does notta+e any active part in the businessalthough he may be +nown to be apartner.c 0iuidatin" partner one whota+es charge of the winding up ofthe partnership affairs upondissolution.

. +isce00aneousa stensi(le partner one who

ta+es active part and +nown to thepublic as a partner in the business,whether or not he has actual interestin the firm.

ecret partner? one who ta+esactive part in the business by is not+nown to be a partner by outsideparties nor held out as a partner bythe other partners. c Dor&ant

partner one who does not ta+eactive part in the business and is not+nown or held out as partner.

7" C;$Capitalist Partner In1ustrial

Partner1. as to contri(ution

contributes moneyor property

contributes hisindustry (mentalor physical!

2. as to prohi(ition to en"a"e inother (usiness

0annot generallyengage in the sameor similar enterpriseas that of his firm

cannot engage inany business forhimself

3. as to profits1. shares in the

profits accordingto agreementthereon2

*. if none, pro ratato hiscontribution

receives a "ustand e%uitableshare

4. as to losses1. first, the

stipulation as tolosses2

exempted as tolosses (asbetween





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MEMOR(AIDINCIVILLA3

*. if none, theagreement as toprofits2

). if none, pro ratato contribution

partners!2 but isliable to thirdpersons, withoutpre"udice toreimbursement

from thecapitalistpartners

O3(I.ATIONS OF PARTNERS AMON.THEMSE(ES:

I% O&li2ation with respe#t to#ontri&ution o, propert

a! To contribute what had beenpromised

b! To answer for eviction in case

the partnership is deprived ofdeterminate propertycontributed

c! To answer to the partnership forthe fruits of the property thecontribution of which is delayed,from the date they should havebeen contributed to the time ofactual delivery

d! To preserve the property withthe diligence of a good father ofa family pending delivery to thepartnership

e! To indemnify the partners forany damages caused to it by theretention of the same or bydelay in its contribution.

II% O&li2ations with respe#t to#ontri&ution o, "one an1 "one#on+erte1 to personal use

a! To contribute on the date duethe amount he has underta+en tocontribute to the partnership

b! To reimburse any amount he may

have ta+en from the partnershipcoffers and converted to his ownpersonal use

c! To pay the agreed or legalinterest, if he fails to pay hiscontribution on time or in casehe ta+es any amount from thecommon fund and converted tohis own personal use

d! To indemnify the partnership forthe damages caused to it by thedelay in the contribution or the

conversion of any sum for hispersonal benefit.

III% O&li2ation Not to En2a2e in Other

3usiness ,or Hi"sel,1. In1ustrial partner? cannot engage in

any business for himself unless thepartnership expressly permits him todo so. The other partners have theremedy of either excluding theerring partner from the firm or ofavailing themselves of the benefitswhich he may have obtained.Note: The prohibition is absolute andapplies whether the industrialpartner is to engage in the samebusiness in which the partnership is

engaged or in any +ind of business. tis clear that the reason for theprohibition exists in both cases,which is to prevent any conflict ofinterest between the industrialpartner and the partnership and toinsure faithful compliance by saidpartner with his prestation(/vangelista ; 0o. vs. Abad antos,=1 05A >1, 17)!

*. Capitalist partner? The prohibitionextends only to any operation which

is of the same +ind of business inwhich the partnership is engagedunless there is a stipulation to thecontrary.

I% O&li2ation to Contri&ute A11itionalCapital

As a general rule, a capitalistpartner is not bound to contribute to thepartnership more than what he agreed tocontribute but in case of an imminentloss of the business, and there is noagreement to the contrary, he is underobligation to contribute an additionalshare to save the venture. f he refusesto contribute, he shall be obliged to sellhis interest in the partnership to otherpartners.

% O&li2ation o, Mana2in2 Partner whoColle#ts )e&t

&here a person is separatelyindebted to the partnership and to themanaging partner at the same time, any





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sum received by the managing partnershall be applied to the two credits inproportion to their amounts, exceptwhere he received it entirely for the

account of the partnership, in whichcase the whole sum shall be applied tothe partnership credit only.

Requisites ,or the appli#ation o, therule:1! There exists two debts, one where

the collecting partner is creditor, theother, where the partnership iscreditor.

*! Both debts are demandable)! The partner who collects is

authori#ed to manage and actually

manages the partnership.

I% O&li2ation o, Partner /ho Re#ei+esShare in Partnership Cre1it

A partner who receives, in wholeor in part, his share in the partnership,when the others have not collectedtheirs, shall be obliged, if the debtorshould thereafter become insolvent, tobring to the partnership capital what hereceived even though he may have givenreceipt for his share only.

Requisites ,or appli#ation o, rule:1! A partner has received, in whole or

in part, his share in the partnershipcredit

*! The other partners have notcollected their shares.

)! The partnership debtor has becomeinsolvent.

II% O&li2ation o, Partner ,or )a"a2esto Partnership

/very partner is responsible to thepartnership for damages suffered by itthrough his fault. e cannot compensatethem with the profits and benefits whichhe may have earned for the partnershipby his industry.

III% )ut to Ren1er In,or"ation


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MEMOR(AIDINCIVILLA3

a! According to their agreement asto losses (but not ine%uitously todefeat Art.17!

b! f none, according to their

agreement as to profitsc! f none, in proportion to his

capital contribution, but thepurely industrial partner shallnot be liable for the losses

!"#"RA$ R%$"A stipulation excludinga partner from any share in the profits orlosses is -@ (Article 17!"'C"TI)# Article 177(*! excludesan industrial partner from losses. Thus, astipulation excluding an industrialpartner from losses is A@, but he is

$-T exempted from liability insofar asthird persons are concerned.NOTE: n general, ABTF refers toresponsibility towards third persons, and-/ refers to responsibility as amongpartners

CONTRACT OF S!3-PARTNERSHIP -ne formed between a member of a

partnership and a third person for adivision of profits owing to him fromthe partnership enterprise.

t is a partnership within apartnership distinct and separatefrom the main or principalpartnership.

NOTE: n the absence of unanimousconsent of all the partners, a sub?partner does not become a member ofthe partnership. ence, a sub?partnerdoes not ac%uire the rights of a partnernor is he liable for its debts

PROPERT5 RI.HTS OF A PARTNER1. ,i"ht to specific partnership

property contemplates tangible property

The specific partnership property

belongs to the partnership as aseparate "uridical personality. Thepartners have no actual interest in ituntil after dissolution.

e%ual right with other partners to

possess specific partnership propertyfor partnership purposes

not assignable, except in connection

with the assignment of rights of allpartners in the same property

not sub"ect to attachment or

execution, except on a claim againstthe partnership

not sub"ect to legal support

NOTE: Any immovable property or aninterest therein may be ac%uired in thepartnership name. The title so ac%uiredmay be conveyed only in the partnershipname sub"ect to the provisions ofAr4ic0e1819 oB 4he Civi0 Co-e.2. nterest in the partnership share in the profits and surplus

A partner actually owns his

respective share.

E,,e#ts o, #on+ean#e & a partner o,his interest in the partnership1. conveyance of his whole interest G

partnership may either remain or bedissolved

*. assignee does not necessarilybecome a partner

). assignee cannot interfere in themanagement or administration of thepartnership business or affairs

>. assignee cannot demandinformation, accounting andinspection of the partnership boo+s

Re"e1ies o, separate 6u12"ent#re1itor o, a partner Application for a charging order after

securing "udgment on his credit tosub"ect the interest of the debtorpartner with payment of unsatisfiedamount of the "udgment debt

Re1e"ption o, interest #har2e11. :eneral partnership

a! with separate property of apartner2 or

b! with partnership property, withthe consent of all the partnerswhose interests are not socharged or sold

*. imited partnership (interest oflimited partner!

a! with separate property of anygeneral partner but $-T withpartnership property





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3. ,i"ht to participate in the&ana"e&ent

MANA.EMENT OF PARTNERSHIP

I% /hen the "anner o, "ana2e"enthas &een pro+i1e1 ,or in thepartnership a2ree"ent

A. /hen a &ana"in" partnerhas&een appointe11 A>>oin4men4 in 4he ar4ic0es oB

>ar4nershi>a. >oin4men4 o4her 4han in 4hear4ic0es oB >ar4nershi>

a. >aren40? carr?ingon in 4he usua0 @a? 4heusiness oB 4he >ar4nershi>

!"#"RA$ R%$" Act bindsthe partnership.

"'C"TI)#


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MEMOR(AIDINCIVILLA3

ii. the third person +nowsthat the acting partnerhas no authority

b) Ac4s oB S4ric4 :ominion or

)@nershi> (acts which arenot apparently for carryingon in the usual way thebusiness of the partnership!!"#"RA$ R%$" Act doesnot bind the partnership."'C"TI)#


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1. when he is expressly or impliedlyauthori#ed

*. when he acts in behalf and in thename of the partnership

PARTNERSHIP 35 ESTOPPE( Arises when a person, by words

spo+en or written or by conduct,represents himself or consents toanother representing him to anyone,as partner in an existing partnership,or with one or more persons notactual partners2 he is liable to anysuch person to whom suchrepresentation has been made, whohas, on the faith of suchrepresentation given credit to the

actual or apparent partnership. (Ar418;5!

NOTE: Art. 14*= does not create apartnership as between the allegedpartners. A contract, express or impliedis essential to the creation ofpartnership. The law considers thempartners and the association as apartnership insofar as it is favorable tothird persons. owever, partnershipliability is created only in favor ofpersons who on the faith of such

representation given credit to the actualor apparent partnership

)ISSO(!TION 0hange in the relation of the

partners caused by any partnerceasing to be associated in carryingon the business. (Ar4ic0e 18;8!

t is the point in time when the

partners cease to carry on thebusiness together. t represents thedemise of a partnership.

NOTE: The dissolution of a partnershipmust not be understood in the absoluteand strict sense so that at thetermination of the ob"ect for which itwas created the partnership isextinguished. (Tes4a4e oB +o4a vs.Serra I$ 6 19;6. @issolutiondoes not automatically result in thetermination of the legal personality of

the partnership, nor the relations of thepartners among themselves who remainas co?partners until the partnership isterminated.

/IN)IN. !P


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MEMOR(AIDINCIVILLA3

c. By any event whichma+es it unlawful for thebusiness of the partnership to becarried on or for the members to

carry it on in partnership.d. &hen a specific thing, a

partner had promised tocontribute, perishes before itsdelivery. -r where the partneronly contributed the use oren"oyment of the thing and hasreserved ownership thereof, itsloss, before or after deliverydissolves the partnership.

e. By the death of anypartner2

f. By the insolvency of any

partner or the partnership2g. By the civil interdiction

of any partner2

*. Ju1i#ial 1issolution (A5T 14)1! ?when so decreed by the court, thepresiding "udge may place thepartnership under receivership anddirect an accounting to be madetowards winding up the partnershipaffairs.)n a>>0ica4ion ? or Bor an? >ar4ner4he cour4 sha00 -ecree a -isso0u4ion

@henevera. A partner has been

declared insane in any "udicialproceeding or is shown to be ofunsound mind2

b. A partner becomes in anyother way incapable of performing his part of thepartnership contract2

c. A partner has been guiltyof such conduct as tend to affectpre"udicially the carrying on ofthe business2

d. A partner willfully orpersistently commits a breach ofthe partnership agreement, orotherwise so conducts himself inmatters relating to thepartnership business that it isnot reasonably practicable tocarry on the business inpartnership with him.

e. The business of thepartnership can only be carriedon in a loss2

f. -ther circumstances

render a dissolution e%uitable.)n a>>0ica4ion oB 4he >urchaser oB a

>ar4nerFs in4eres4 un-er Ar4ic0e 1813or 181a. After the termination of the

specified term or particularunderta+ing2

b. At any time if thepartnership was a partnership atwill when the interest wasassigned or when the chargingorder was issued.

EFFECTS OF )ISSO(!TIONA% As to partner7s authorit to a#t ,or

the partnership!"#"RA$ R%$" @issolution terminatesall authority of any partner to act for thepartnership"'C"TI)#S1. Acts necessary to wind up

partnership affairs*. Acts necessary to complete

transactions begun but not thenfinished$ote' Thus, dissolution terminates

the A0TDA authority of a partner tounderta+e $/& business for thepartnership

;!A(IFICATIONS TO THE .ENERA(R!(E:1. ith respect to the partners(in so

far as partners themselves areconcerned!a! @issolution is not by act,

insolvency or death of a partner':eneral 5ule applies. ence,dissolution terminates theA0TDA authority of a partner tounderta+e $/& business for thepartnership

b! @issolution is by act, insolvencyor death of a partner'!"#"RA$ R%$" Authority ofpartners inter se to act for thepartnership is $-T deemedterminated. Thus, each partneris liable to his co?partners for hisshare of any liability created by





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any partner acting for thepartnership as if the partnershiphas not been dissolved

"'C"TI)#S

1! The cause of dissolution isthe A0T of a partner and theacting partner hadI$-&/@:/ of suchdissolution

2) The cause of dissolution isthe @/AT or $-/$0F ofa partner and the actingpartner had I$-&/@:/ or$-T0/ of such dissolution

*. ith respect to persons notpartners(third persons!

a! &hen partnership is oun- tothird persons after dissolution1! Act appropriate for winding

up partnership affairs*! Act appropriate for

completing unfinishedtransactions

)! 0ompletely $/& transactionwhich would bind thepartnership if dissolution hadnot ta+en place provided'the other party is in "ood

faith, meaning'i. ! To continue the business inthe same name during the





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MEMOR(AIDINCIVILLA3

agreed term of thepartnership, by themselvesor "ointly with others

=! To possess partnership

property should they decideto continue the business

b! 5ights of a partner who haswrongfully caused the dissolution1! f the business is not

continued by the otherpartnersi. To have partnership

property applied todischarge partnershipliabilities

ii. To receive in cash his shareof the surplus less damagescaused by his wrongful

dissolution*! f the business is continued

i. To have the value of hisinterest in the partnershipat the time of thedissolution, surplus lessdamages caused by hiswrongful dissolution to hisco?partners, ascertainedand paid in cash or securedby a bond approved by thecourt2 A$@

ii. To be released from allexisting and future

liabilitiesNOTE: The value of thegoodwill of the business isnot considered inascertaining the value of theinterest of the guiltypartners.

RI.HTS OF A PARTNER /HEREPARTNERSHIP CONTRACT IS RESCIN)E)ON THE .RO!N) OF FRA!) ORMISREPRESENTATION(NOTE:The following are the rights of

the partner entitled to rescind!1. 5ight of /$ on, or 5/T/$T-$ of,

the surplus of partnership propertyafter satisfying partnership liabilitiesfor any sum of money paid orcontributed by him

2. 5ight of DB5-:AT-$ in place ofthe partnership creditors afterpayment of partnership liabilities2and

). 5ight of $@/3$E0AT-$ by theguilty partner against all debts andliabilities of the partnership

MANNER OF /IN)IN. !P1. /xtra"udicial G by the partners

themselves without the interventionof the court

*. Hudicial G under the control anddirection of the court upon propercause shown by any partner, his legalrepresentative or his assignee

PERSONS A!THORI


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1. . The limited partners may as+ for thereturn of their capital contributionsunder the conditions prescribed bylaw

=. The partnership debts are paid outof the common fund and theindividual properties of the generalpartners

(i"ite1Partner=Partnership

.eneralPartner=

Partnership1. +-tent of lia(ility

imited partnerJsliability extends only tohis capital contribution

:eneral partneris personallyliable forpartnershipobligations

2. ,i"ht to participate in the&ana"e&ent of partnership

imited partner has noshare in themanagement of alimited partnership andrenders himself liable topartnership creditors asa general partner if heta+es part in the controlof the business

:eneralpartners havean e%ual rightin themanagement ofthe business(when themanner of managementhas not beenagreed upon!

3. Contri(utionimited partner mustcontribute cash orproperty to thepartnership but notservices

:eneral partnermay contributemoney,property orindustry to thepartnership

4. Proper party to proceedin"s (y ora"ainst the partnership

imited partner is not aproper party toproceedings by oragainst a partnershipnless1. he is also a general

partner, or*. where the ob"ect of

the proceeding is toenforce a limitedpartnerJs rightagainst or liability tothe partnership

:eneral partneris the properparty toproceedings byor against apartnership

5. Transfera(ility of interest





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MEMOR(AIDINCIVILLA3

imited partnerJsinterest is freelyassignable, withassignee ac%uiring all

the rights of the limitedpartner sub"ect tocertain %ualifications

:eneralpartnerJsinterest in thepartnership

may not beassigned as toma+e theassignee a newpartner withoutthe consent ofthe otherpartners,although hemay associate athird personwith him in hisshare

6. nclusion of partner8s na&e in the

fir& na&e

As a general rule, nameof a limited partnermust not appear in thefirm name

$ame of ageneral partnermay appear inthe firm name

7. Prohi(ition to en"a"e in other(usiness

$o such prohibition inthe case of a limitedpartner who isconsidered a mere

contributor to thepartnership

:eneral partneris prohibitedfrom engagingin a business

which is of theA3/ +ind ofbusiness inwhich thepartnership isengaged, if heis a capitalistpartner, or inA$F of businessfor himself if heis an industrialpartner

. +ffect of retire&ent9 death9 insanity

or insol/ency

5etirement, death,insanity or insolvency ofa limited partner doesnot dissolve thepartnership for hisexecutor oradministrator shall havethe rights of alimited partner for thepurpose of selling hisestate

5etirement,death, insanityor insolvency ofa generalpartnerdissolves thepartnership

#. Creationimited partnership iscreated by the membersafter substantialcompliance in goodfaith with there%uirements set forthby law

:eneralpartnership, asa general rule,may beconstituted inany form bycontract orconduct of thepartnership

1$. *e&(ers of the partnership

0omposed of one ormore general partnersand one or more limitedpartners

0omposed onlyof generalpartners

11. %ir& na&eEirm name must befollowed by the wordimited

$o suchre%uirement

12. ,ules "o/ernin" dissolution andwindin" up

:overned by Art. 14) :overned byArt. 14)

ESSENTIA( RE;!IREMENTS FORFORMATION OF (IMITE) PARTNERSHIP1. A certificate or articles of limited

partnership which states the mattersenumerated in Article 14>>, whichmust be signed and sworn2

*. uch certificate must be filed forrecord in the -ffice of the ecuritiesand /xchange 0ommission.

NOTE: A strict compliance with the legalre%uirements is not necessary. t issufficient that there is substantialcompliance in good faith. f there is nosubstantial compliance, the partnershipbecomes a general partnership as far asthird persons are concerned, in which allthe members are liable as generalpartners. (*o Chung Cang vs. aciBic

Commercia0 Co. 5 I$ 1; [19;3].owever, a firm which fails tosubstantially comply with the formalre%uirements of a limited partnership isa general partnership only as to itsrelations to third persons. The firm is alimited partnership, sub"ect to all rulesapplicable to such partnership2 and asbetween the partners they are bound bytheir agreement2 and that all the limitedpartnerJs relations to his co?partners and





18/33


their obligations to him growing out ofthe relation remain unimpaired.

As to third persons or creditorsguilty of estoppel, the firm shall not be

treated as a general partnership despitelac+ of substantial compliance to there%uirements of a limited partnership. fcreditors deal with the firm as a limitedpartnership, they will be estopped frominsisting that there is no suchpartnership, or that the terms of thepartnership were not sufficiently statedin the notice of its formation. (2 Am.

*ur. 6.

CONTENTS OF THE CERTIFICATE ORARTIC(ES OF (IMITE) PARTNERSHIP

1. $ame of the partnership, addingthereto the word 9limited2C

*. 0haracter of the business2). ocation of the principal place of

business2>. $ame and place of residence of each

member, general and limitedpartners being respectivelydesignated2

=. Term for which the partnership is toexist2

. Amount of cash and description ofand the agree value of the other

property contributed by each limitedpartner2

7. Additional contributions to be madeby each limited partner and thetimes at which or events on thehappening of which they shall bemade2

4. Time, if agreed upon, when tocontribution of each limited partneris to be returned2

. hare in the profits or othercompensation by way of incomewhich each limited partner shallreceive by reason of his contribution2

1. 5ight, if given, of a limited partnerto substitute an assignee ascontributor in his place, and theterms and conditions of thesubstitution2

11. 5ight, if given, of the partners toadmit additional partners2

1*. 5ight, if given, of one or more of thelimited partners to priority overother limited partners, as tocontributions or as to compensation

by way of income, and the nature ofsuch priority2

1). 5ight, if given, of the remaininggeneral partner or partners to

continue the business on the death,retirement, civil interdiction,insanity or insolvency of a generalpartner2 and

1>. 5ight, if given, of a limited partnerto demand and receive propertyother than cash in return of hiscontribution.

(IA3I(IT5 FOR FA(SE STATEMENT INCERTIFICATE

Any partner to the certificatecontaining a false statement is liable to

one who suffers loss by reliance on suchcertificate provided the followingre%uisites are present'1. e +new the statement to be false

at the time he signed thecertificate, or subse%uently havingsufficient time to cancel or amendit or file a petition for itscancellation or amendment, hefailed to do so2

*. The person see+ing to enforceliability has relied upon the falsestatement in transacting business

with the partnership2). The person suffered a loss as a

result of reliance upon such falsestatement.

MANA.EMENT OF (IMITE) PARTNERSHIP A general partner in a limited

partnership is vested with the entirecontrol of the firmJs business and hasall the rights and powers and issub"ect to all the liabilities andrestrictions of a partner in a generalpartnership.

A general partner in a limited

partnership however has noauthority, without written consent orratification of all limited partners,to'1. @o any act in

contravention of the certificate2*. @o any act which would

ma+e it impossible to carry onthe ordinary business of thepartnership2





19/33


MEMOR(AIDINCIVILLA3

). 0onfess "udgmentagainst the partnership2

>.


20/33


a partnership who extended credit orwhose claim arose after the filling andbefore the cancellation or amendment ofthe certificate, to enforce such

liabilities.

S!3STIT!TE) (IMITE) PARTNER A person admitted to all the rights of

a limited partner who has died of hasassigned his interest in thepartnership.

!"#"RA$ R%$"e has all, the rightsand powers, and is sub"ect to all therestrictions and liabilities of his assignor."'C"TI)# Those liabilities which he

was ignorant at the time he became alimited partner A$@ which could not beascertained from the certificate.

RE;!ISITES IN OR)ER THAT THEASSI.NEE MA5 3ECOME A S!3STIT!TE)(IMITE) PARTNER1. All the members must consent to the

assignee becoming a substitutedlimited partner, -5 the limitedpartner, being empowered by thecertificate must give the assigneethe right to become a limited

partner*. The certificate must be amended in

accordance with Art.14=). The certificate as amended must be

registered in the ecurities and/xchange 0ommission

A((O/A3(E TRANSACTIONS OF A(IMITE) PARTNER Being merely a contributor to the

partnership is not prohibited from'1. granting loans to the partnership*. transacting other business with the

partnership). receiving a pro rata share of the

partnership assets with the generalcreditors if he is $-T also a generalpartner

NOTE:n transacting a business with thepartnership as a non?member, thelimited partner is considered a non?partner creditor

PROHI3ITE) TRANSACTIONS OF A(IMITE) PARTNER

1. receiving or holding as collateralsecurity any partnership property2 or

*. receiving any payment, conveyance,or release from liability if it willpre"udice the partnership creditors

NOTES:

iolation of the prohibition will give

rise to the presumption that it hasbeen made to defraud partnershipcreditors

The prohibition is $-T AB-DT/,

there is no such prohibition if the

partnership assets are sufficient todischarge partnership liabilities topersons not claiming as general orlimited partners.

A.ENC5

CONTRACT OF A.ENC5 A contract whereby a person (a"ent!

binds himself to render some serviceor to do something in representationor on behalf of another (principal!,

with the consent or authority of thelatter. (Ar4ic0e 1868!

The parties to the contract are'

1.


21/33


MEMOR(AIDINCIVILLA3

>. . . Bound to actaccording to theinstructions of hisprincipal.

>. The buyer candeal with the thingas he please beingthe owner.

P!RPOSE OF A.ENC5 The purpose of agency is to extend

the personality of the principalthrough the facility of the agent. tenables the activity of man which isnaturally limited in its exercise bythe impositions of his physiologicalconditions to be legally extended bypermitting him to be constructivelypresent in many different places andto perform diverse "uridical acts andcarry on many different activities

through another when physicalpresence is impossible or inadvisableat the same time. (11 +anresa 3!

E(EMENTS OF A.ENC5A. Consen4 Any person or entity having "uridical

capacity and capacity to act and nototherwise dis%ualified, may enterinto an agency.

But as regards the party with whom

the agent acts or contracts, the legalcapacity of the principal rather than

the agent, is of the greater import.

/. )ec4 the services to be underta+en by the

agent may cover all acts pertaining to a

business of the principal ("enerala"ency! or one or more specifictransactions (special a"ency!

the extent of the agentJs authority

to act, whether it be a general or aspecial agency, depends on how theagency is couched.

C. Cause 3ay be onerous or gratuitous but

presumed for compensationNOTE: The agent may not be deprivedof his right to compensation by anun"ustified revocation of the agency

0IN)S OF A.ENC51. as 4o manner oB crea4ion

a! e9press? one where the agenthas been actually authori#edby the principal, either orally

or in writing2b! i"plie1? one which is implied

from thei. acts of the

principal? from his silence orlac+ of action, or his failureto repudiate the agency+nowing that another personis acting on his behalfwithout authority.

ii. Acts of the agent?when he carries out theagency, or from his silence orinaction according to the

circumstances.

;. as 4o i4s charac4era! 2ratuitous? one where the

agent receives nocompensation for his services.

b! #o"pensate1 or onerous?one where the agent receivescompensation for his services.

3. as 4o e4en4 oB usiness covere-a! 2eneral? one which comprises

all the business of the

principal2b! spe#ial? one which comprises

one or more specifictransactions.

. as 4o au4hori4? conBerre-a! #ou#he1 in 2eneral ter"s?

one which is created ingeneral terms and is deemedto comprise only acts ofadministration2





22/33


b! #ou#he1 in spe#i,i# ter"s-one authori#ing only theperformance of a specific actor acts.

5. as 4o i4s na4ure an- eBBec4sa! ostensi&le or

representati+e- one wherethe agent acts in the nameand in representation of theprincipal.

b! si"ple or #o""ission- onewhere the agent acts in hisown name but for theaccount of the principal.

ACTS /HICH MA5 3E )E(E.ATE) TO ANA.ENT!"#"RA$ R%$" Dha4 a man ma? -o in

>erson he ma? -o 4hru ano4her."'C"TI)#S1. ersona0 ac4s if personal

performance is re%uired the doing ofan act by a person on behalf ofanother does not constituteperformance by the latter.

a! oting during an election2b! 3a+ing a will2c! 3a+ing statements which arere%uired to be done under oath2d! A member of the board of

directors or trustees in acorporation cannot validly act assuch by proxye! An agent cannot delegate toa sub?agent the performance ofacts which he has beenappointed to perform in person.

*. Crimina0 Ac4s or Ac4s no4 a00o@e- ?0a@? There can be no agency in theperpetration of a crime or unlawful act./xamples'

a! An alien principal usingan agent to ac%uire lands2b!


23/33


MEMOR(AIDINCIVILLA3

!"#"RA$ R%$" Acceptancecannot be implied from silence ofthe agent"'C"TI)#

1. principal transmits his power ofattorney to the agent, whoreceives it without anyob"ection2

*. principal entrusts to him byletter or telegram a power ofattorney with respect to thebusiness in which he ishai4ua00? engage-as an agent,and he did not reply to the letteror telegram

R!(E ON A.ENC5 35 ESTOPPE( -ne who clothes another with

apparent authority as his agent, andholds him out to the public as such,cannot be permitted to deny theauthority of such person in good

faith, and in the honest belief thathe is what he appears to be. (Cuisonvs. CA!R.88531 )c4oer ;6 1993

C(ASSES AN) 0IN)S OF A.ENTS

1. Dniversal Agent? one employed to doall acts that the principal maypersonally do, and which he canlawfully delegate to another thepower of doing.

*. :eneral Agent? one employed totransact all the business of theprincipal, or all the business of a

particular +ind or in a particularplace, or in other words to do allacts, connected with a particulartrade, business or employment.

). pecial or


24/33


another as his agent and confersupon him the authority to performcertain specified acts or +inds of actson behalf of the principal.

NOTE: t need not be notari#ed2 exceptwhere it is executed in a foreign country,must be certified in accordance with the5ules of 0ourt.

INSTANCES /HERE SPA IS NECESSAR5(A5T 1474!>PEC/EM- ((3- 3OCARO81. To ma+e such payments as are not

usually considered as acts ofadministration2

*. To effect novation which put an endto obligations already in existence attime the agency was constituted2

). To compromise, to submit %uestionsto arbitration, to renounce the rightto appeal from a "udgment, to waiveob"ections to the venue of an actionor to abandon a prescription alreadyac%uired2

>. To waive any obligation gratuitously2=. To enter into any contract by which

the ownership of an immovable istransmitted or ac%uired eithergratuitously or foe a valuableconsideration2

. To ma+e gifts, except customaryones for charity or those made toemployees in the business managedby the agents2

7. To loan or borrow money, unless thelatterJs act be urgent andindispensable for the preservation ofthe things which are underadministration2

4. To lease any real property to anotherperson for more than one year2

. To bind the principal to render someservice without compensation2

1. To bind the principal in a contract ofpartnership2

11. To obligate the principal asguarantor or surety2

1*. To create or convey real rights overimmovable property2

1). To accept or repudiate aninheritance2

1>. To ratify or recogni#e obligationscontracted before the agency2

1=. Any other act of strict dominion.

NOTE: a third person with whom theagent wishes to contract on behalf of theprincipal may re%uire the presentation ofthe power of attorney or the instructions

as regards the agency2 ece>4 private orsecret orders.

NOTE: The scope of the agentJsauthority is what appears in the writtenterms of the power of attorney. &hilethird persons are bound to in%uire intothe extent or scope of the agentJsauthority, they are not re%uired to gobeyond the terms of the written powerof attorney. Third persons cannot beadversely affected by an understandingbetween the principal and his agent as

to the limits of the latterJs authority. nthe same way, third persons need notconcern themselves with instructionsgiven by the principal to his agentoutside the written power of attorney.(ire-? "n4er>rises Inc. vs. CA e4 a0.!R 1;9239 Se>4emer ; ;22;NOTES:


25/33


MEMOR(AIDINCIVILLA3

*. Agent must act in eha0B oB 4he>rinci>a0

NOTE: The limits of the agentJs authority

shall not be considered exceeded shouldit have been performed in a mannermore advantageous to the principal thanthat specified by him.

/hen a person NOT &oun1 & a#t o,another

1. atter acts @i4hou4 or e?on- 4hesco>eof his authority in the formerJsname2 and

*. atter acts @i4hin 4he sco>e oB hisau4hori4? u4 in his o@n name(%#:ISC$)S": RI#CIA$, except

when the transaction involves a thingbelonging to the principal. n suchcase, the contract is deemed asentered between the principal andthe third person.

EFFECTS OF A.ENT7S ACTS1. &ith Authority

a. in >rinci>a0Fs name = +ali12principal is bound2 agent notpersonally liable unless he boundhimself (Article 147!

b. in his o@n name = Apply Article144)2 generally not &in1in2 onthe prin#ipal2 agent andstranger are the only parties,except regarding thingsbelonging to the principal orwhen the principal ratifies thecontract or derives benefittherefrom.

*. &ithout Authoritya. in >rinci>a0Fs name =

unauthori4e1 an1

unen,or#ea&le but may beratified, in which case, may bevalidated retroactively from thebeginning (Article 1>7!

b. in his o@n name = +ali1, whetheror not the sub"ect matterbelongs to the principal,provided that at the time ofdelivery, the 9agentC cantransfer legally the ownership ofthe thing. -therwise, he will beheld liable for breach of

warranty against eviction2Article 144) does $-T apply

OCCASIONS /HEN PRINCIPA( IS 3O!N)

35 THE ACTS OF THE A.ENT 3E5ON)THE (ATTER7S PO/ERS

.eneral Rule: The principal is not boundby the acts of the agent beyond hislimited powers.+-ceptions1. &here the principalJs acts havecontributed to deceive the third personin good faith2*. &here the limitations upon thepower created by him could not havebeen +nown by the third person2). &here the principal has placed inthe hands of the agent instrumentssigned by him in blan+ (trong vs.:utierre# 5epide . &here the principal has ratified theacts of the agent.

)o#trine o, A2en# & Ne#essit By virtue of the existence of an

emergency, the authority of an agent iscorrespondingly enlarged in order to

cope with the exigencies or thenecessities of the moment Requisites:

1. 5eal existence of an emergency*. nability of the agent tocommunicate with the principal). /xercise of the additionalauthority for the principalJs ownprotection>. Adoption of fairly reasonablemeans, premises duly considered

NOTE:Agency can never be created by

necessity2 what is created is a--i4iona0au4hori4? in an agent appointed andauthori#ed before the emergency arose.

.ENERA( O3(I.ATIONS OF A.ENT TOPRINCIPA(:1. To act with utmost good faith and

loyalty for furtherance of principalJsinterests

*. To obey all lawful orders andinstructions of principal within thescope of the agancy





26/33


). To exercise reasonable care, s+ill anddiligence

SPECIFIC O3(I.ATIONS OF A.ENT TO

PRINCIPA(1. To carry out the agency which he has

accepted*. To answer for damages which

through his performance theprincipal may suffer

). To finish the business already begunon the death of the principal shoulddelay entail any danger

>. To observe diligence of a good fatherof a family in the custody andpreservation of the goods forwardedto him by the owner in case he

declines an agency, until an agent isappointed

=. To advance the necessary fundsshould there be a stipulation to do so

. To act in accordance with theinstructions of the principal, and indefault thereof, to do all that a goodfather of a family would do

7. $ot to carry out the agency if itsexecution would manifestly result inloss or damage to the principal

4. To answer for damages if there beinga conflict between his interest and

those of the principal, he shouldprefer his own

. $ot to loan to himself if he has beenauthori#ed to lend money at interest

1. To render an account of histransactions and to deliver to theprincipal whatever he may havereceived by virtue of the agency

11. To distinguish goods by countermar+sand designate the merchandiserespectively belonging to eachprincipal, in the case of acommission agent who handles goodsof the same +ind and mar+, whichbelong to different owners

1*. To be responsible in certain cases forthe acts of the substitute appointedby him

1). To pay interest on funds he hasapplied to his own use

1>. To inform the principal, where anauthori#ed sale of credit has beenmade, of such sale

1=. To bear the ris+ of collection, shouldhe receive also on sale, a guaranteecommission

1. To indemnify the principal for

damages for his failure to collect thecredits of his principal at the timethat they become due

17. To be responsible for fraud ornegligence

NOTE:A stipulation exempting the agentfrom the obligation to render an accountshall be -@.!"#"RA$ R%$"Inowledge of agent is+nowledge of principal."'C"TI)#S1. AgentJs interests are adverse to

those of the principal*. AgentJs duty is not to disclose the

information (confidentialinfor&ation!

). &here the person claiming thebenefit of the rule colludes with theagent to defraud the principal

S!3-A.ENT A person to whom the agent

delegates, as his agent, theperformance of an act for theprincipal which the agent has beenempowered to perform through hisrepresentative.

NOTE: The agent may appoint asubstitute (su&-a2ent! except when hehas been prohibited by the principal.(A5T 14*!

Instan#es when a2ent shall &eresponsi&le ,or the a#ts o, thesu&stitute:

1. when he was not given the power toappoint2 or*. when he was given such power but

without designating the person, andthe person appointed was notoriouslyincompetent or insolvent.

). in these two cases the principal mayfurther bring an action against thesubstitute with respect to theobligations which the latter hascontracted under the substitution.





27/33


MEMOR(AIDINCIVILLA3

NOTE: All acts of the substituteappointed against the prohibition of theprincipal shall be -@.

JOINT A.ENTS Agents appointed by one or more

principals under such circumstancesas to induce the inference that itwas the principalJs intent that allshould act in con"unction inconsummating the transaction forwhich they were appointed.

Their responsibility is H-$T2 except

if solidarity has been expresslystipulated.

f solidarity has been agreed upon,

each agent is responsible for the'

a. non?fulfillment of the agencyb. fault or negligence of his fellow

agents2 except when the fellowagents acted beyond the scopeof their authority.

NOTE: innocent agent has a right lateron to recover from the guilty ornegligent agent (A5T 1*17(*!!Instan#es when a2ent "a in#urpersonal lia&ilit:1. &hen the agent expressly binds

himselfNOTE:The individual liability of theagent can be considered a furthersecurity in favor of the creditor anddoes not affect or preclude theliability of the principal2 &oth arelia&le

*. &hen agent exceeds his authority). &hen agent by his acts prevents

performance on the part of theprincipal

>. &hen a person acts as an agentwithout authority or without a

principal=. A person who acts as an agent of an

incapacitated principal unless thethird party was aware of theincapacity at the time of the ma+ingof the contract

FACTOR=COMMISSION A.ENT? one engaged in the purchase and salefor a principal of personal property,which for this purpose, has to be placedin his possession and at his disposal.

f the commission agent received

goods consigned to him, he isresponsible for any damage ordeterioration suffered by the same

in the terms and conditions and asdescribed in the consignment.

The commission agent who handles

goods of the same +ind and mar+,which belong to different owners,shall distinguish them bycountermar+s, and designate themerchandise respectively belongingto each principal.

A commission agent can sell on

credit only with the express orimplied consent of the principal. fsuch sale is made without authority,

the principal is given twoalternatives'

i. e may re%uire payment in cash,in which case any interest orbenefit from the sale on creditshall belong to the agent since theprincipal cannot be allowed toenrich himself at the agentJsexpense2

ii. e may ratify the sale on credit inwhich case it will have all the ris+sand advantages to him.

f the commission agent is authori#ed

to sell on credit, he shall inform theprincipal with a statement of thenames of the buyers. &ith suchstatement, the sale shall be deemedto be for cash as far as the principalis concerned.

The commission agent who does not

collect the credits of his principal atthe time when they become due anddemandable shall be liable fordamages, unless he proves theexercise of due diligence for thatpurpose.

3RO0ER A middleman or intermediary who, in

behalf of others and for acommission or fee, negotiatescontractsKtransactions relating toreal or personal property.

Fa#tora2e 0ompensation of a factor or

commission agent.





28/33


Or1inar Co""ission 0ompensation for the sale of goods

which are placed in his possession orat his disposal.

.uarant Co""ission >)el #re1ere8 Eee that is given in return for the

ris+, which the agent has to bear inthe collection of credits.

An agent with a del credere

commission is liable to the principalif the buyer fails to pay or isincapable of paying.

.ENERA( O3(I.ATIONS OF PRINCIPA(TO A.ENT @uties and liabilities of the principal

are primarily based upon thecontract and the validity of thecontract between them

SPECIFIC O3(I.ATIONS OF PRINCIPA( TOA.ENT (0A5

which the agent may havecontracted within the scope of hisauthority and in the name of theprincipal

*. To advance to the agent, should thelatter so re%uest, the sums necessaryfor the execution of the agency

). To reimburse the agent for what thelatter has advanced (plus interest!,even if the business was notsuccessful, provided the agent wasfree from fault

>. To indemnify the agent for all thedamages, which the execution of theagency may have caused the latterwithout fault or negligence on hispartNOTE: The agent may retain in

pledge the things which are theob"ect of the agency until theprincipal effects this reimbursementand pays the indemnity.

=. To pay the agent the compensationagreed upon, or if no compensationwas specified, the reasonable valueof the agentJs services

(IA3I(IT5 OF PRINCIPA( FOR TORT OFA.ENT R!(E: The principal is civillyliable to third persons for torts of an

agent committed at the principalJsdirection or in the course and within thescope of the agentJs authority.Reason ,or lia&ilit: The rule is basedupon the principle that he who does anact through another does it himself.

CON)ITIONS FOR RATIFICATION1. principal must have capacity and

power to ratify*. principal must have had +nowledge

of material facts). principal must ratify the acts in its

entirety>. act must be capable of ratification=. act must be done in behalf of the

principal

ESTOPPE( 35 PRINCIPA(/ven when the agent has

exceeded his authority, the principal issolidarily liable with the agent if theformer allowed the latter to act asthough he had full powers.

JOINT PRINCIPA(S

Two or more persons who appoint anagent for a common transaction orunderta+ing.

(ia&ilit: solidarily liable to the

agent for all the conse%uences of theagency.

Requisites o, soli1ar lia&ilit:

1. There are two or more principals*. The principals have all concurred

in the appointment of the sameagent2 and

). The agent is appointed for a

common transaction orunderta+ing

NOTE: Any one of them may revo+e theagency

R!(ES ON )O!3(E SA(E 35 PRINCIPA(AN) A.ENT1 &hen two persons contract with

regard to the same thing, one ofthem with the agent and the otherwith the principal, and the twocontracts are incompatible with each





29/33


MEMOR(AIDINCIVILLA3

other, that of prior date shall bepreferred, without pre"udice toArticle 1=>>(-ou0e sa0e!.

* f the agent has acted in good faith,

the principal shall be liable indamages to the third person whosecontract must be re"ected. f theagent is in bad faith, he alone shallbe responsible.

Instan#es when prin#ipal is not lia&le,or the e9penses in#urre1 & thea2ent:1. if the agent acted in contravention

of the principalJs instructions, unlessthe latter should wish to availhimself of the benefits derived from

the contract2*. when the expenses were due to the

fault of the agent2). when the agent incurred them with

+nowledge that an unfavorable resultwould ensure, if the principal wasnot aware thereof2

>. when it was stipulated that theexpenses would be borne by theagent, or that the latter would beallowed only a certain sum.

MO)ES OF E*TIN.!ISHMENT OF

A.ENC5 (/@&A5@!1. Expiration of the period*. )eath, civil interdiction, insanity or

insolvency of the principal or of theagent

). /ithdrawal of the agent agent may withdraw by giving

notice to the principal, but mustindemnify the principal fordamages that he may suffer byreason of such withdrawal.

>. Accomplishment of the ob"ect or thepurpose of the agency

=. Revocation. )issolution of the firm or

corporation, which entrusted oraccepted the agency.

Instan#es when 1eath o, prin#ipal 1oesnot ter"inate a2en#1. f the agency has been constituted in

the common interest of the principaland the agent

2. f it has been constituted in theinterest of a third person who hasaccepted the stipulation in his favor

Re+o#ation o, A2en# & Prin#ipalL :/$/5A 5D/' Agency is revocable atwill of the principal, regardless of theterm of the agreement.L /M0/


30/33


TR!STS

TR!ST A legal relationship between one

person having an e%uitableownership in property and anotherowning the legal title to suchproperty.

C(ASSIFICATIONS1. +ffecti/ity ? from the viewpoint of

whether they become effective afterthe death of the trustor or during hislife, it may be either'a% testa"entar trusts

b. trusts inter +i+os (sometimescalled 9li/in" trustsC!

*. Creation? from the viewpoint of thecreative force bringing them intoexistence, it may be either'

a) E9press trust ? created by theintention of the trustor or of theparties

b) I"plie1 trust? one which comesinto being by operation of law.This may be either'

1) Resu04ing 4rus4 ? one in which

the intention to create a trustis presumed by law to existfrom the transaction and factsof the case

2) Cons4ruc4ive 4rus4 ? oneimposed by law irrespective ofand even contrary to theintention of the parties. t isdesigned to promote "ustice,frustrate fraud and preventun"ust enrichment.

Persons in+ol+e1 in the #reation o, atrust:

1. Trustor? the one who intentionallycreates a trust

2. Trustee? the person who holds thelegal title to the trust property forthe benefit of another and withcertain powers and sub"ect tocertain duties

3. :eneficiaryor the cestui ue trust? the one who has the e%uitableinterest in the property and en"oysthe benefit of administration by the

trustee. e may be a natural personor a legal entity. The trustor mayestablish a trust with himself as thebeneficiary (usual case!.

E(EMENTS OF E*PRESS TR!ST1. 0ompetent trustor and trustee2

2. Ascertainable trust res2 and). ufficiently certain beneficiaries.

TR!ST PROPERT5The concept of a trust arises from or isthe result of a fiduciary relationbetween the trustee and the cestui %uetrust as regards certain property? real,personal, funds or money, choses inaction held by the trustee. (acheco vs.

Arro 85 I$ 525

The trust property is owned by two

or more persons at the same time, therelation between the two owners beingsuch that one of them is under anobligation to use his ownership for thebenefit of the other.




TR!ST CONTRACTAlways involvesowner?ship,embracing a set ofrights and dutiesfiduciary incharacter which maybe created by adeclaration withoutconsideration.

A legal obligationbased on anunderta+ingsupported by aconsideration,which obligationmay or may not befiduciary incharacter.

TR!ST )ONATION1. An existing legalrelationship andinvolves the

separation of legaland e%uitable title

There is a transferof property as wellas the disposition of

both legal ande%uitable ownershipexcept in cases ofgifts in trust.

*. The beneficiary ofa trust may demandperformance of theobligation withouthaving formallyaccepted thebenefit of the trustin public document,upon mere

ac%uiescence in theformation of thetrust andacceptance underthe secondparagraph of article1)11(stipulationspour autrui!.

*. The donee mustcomply with thelegal re%uirementsin acceptingdonations.


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MEMOR(AIDINCIVILLA3

The trustee is not a mere agent

but an owner. But his ownership is amere matter of form rather thansubstance, and nominal rather than real.

PROOF OF TR!STL :/$/5A 5D/' trust whether expressor implied may be proved by parol ororal evidenceL /M0/


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IMP(IE) TR!ST

Are those, without being express,

are deducible from the nature of the

transaction as matters of intention, orwhich are superinduced on thetransaction by operation of law, asmatters of e%uity independently of theparticular intention of the parties.

E*PRESS TR!ST IMP(IE) TR!ST

1. !s to creation0reated by theintention of the parties

0ome into being byoperation of law.

2. !s to proof of trustAn express trust overan immovable propertyor any interest thereincannot be proved byparol evidence

An implied trustover an immovableor any interesttherein may beproved by oralevidence.

3. !s re"ards repudiation of trustAn express repudiationmade +nown to thebeneficiary isnecessary in order thatlaches or ac%uisitiveprescription may baran action to enforce an

n constructivetrusts, even ifthere is norepudiation, lachesmay bar an actionto enforce animplied trust.

express trust.

0IN)S OF IMP(IE) TR!STS1. >4! G There is a resultingtrust when property is sold, and thelegal estate is granted to one partybut the price is paid by anotherparty for the purpose of having thebeneficial interest of the property.

To give rise to a purchase money

resulting trust, it is essential thatthere be'a! an actual payment of money,property or services or ane%uivalent, constituting valuableconsideration2

b! and such consideration must befurnished by the alleged beneficiaryof a resulting trust.

"'C"TI)#S

a! &here A pays the purchasemoney and title is conveyed byabsolute deed to AJs child or to aperson to whom A stands in locoparentis and who ma+es no expresspromise, a trust does not result, thepresumption being that a gift was

intended2b! &here an actual contraryintention is proved2

c) &here the purchase is made inviolation of an existing statute and inevasion of its express provision, notrust can result in favor of the partywho is guilty of fraud. (Tigno vs.Cour4 oB A>>ea0s ;82 SCRA ;6;[199]

*. @onations made to a person but thebeneficial interest is vested inanother. The donee is the trusteewhile the designated third person isthe beneficiary. (A5T 1>>!.

). = !

>. egal title to land inherited by heirplaced in the name of another.(Ar4ic0e 151!




RES!(TIN.TR!ST

CONSTR!CTIETR!ST

1. ntention to create trustThe intent ofthe parties tocreate a trustis presumed or

implied by lawfrom thenature of theirtransaction

The trust is createdirrespective of or evencontrary to theintention of the parties

to promote "ustice,frustrate fraud and toprevent un"ustenrichment.

2. Prescripti/e periodThe 1 yearprescriptiveperiod shall becounted fromthe timerepudiation ismade +nownto beneficiary.

The 1 yearprescriptive periodshall be counted fromthe time that theconstructive trustarises.

3. +-a&plesllustrated inArticles 1>>4,1>>, 1>=1,1>=*, 1>=)

llustrated in Articles1>=, 1>=>, 1>==, 1>=


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MEMOR(AIDINCIVILLA3

=. egal title to property purchasedta+en in one co?owner. (A5T 1>=*!

. 0onveyance under a promise to holdfor, or transfer to another. (A5T

1>=)!7. Absolute conveyance to a person to

secure performance of grantorJsobligation.

4. (A5T 1>=>!. ==!1. Ac%uisition of property through

mista+e or fraud. (A5T 1>=!.

NOTE: An action for reconveyance ofa parcel of land based on an impliedor constructive trust prescribes in

ten years, the point of referencebeing the date of registration of thedeed or the date of the issuance ofthe certificate of title over theproperty. BDT, this rule applies onlywhen the plaintiff (or personenforcing the trust! is not inpossession of the property, since if aperson claiming to be the ownerthereof is in actual possession of theproperty, the right to see+reconveyance, which in effect see+sto %uiet title to property, does not

prescribe.

Requisites &e,ore perio1 orpres#ription "a start in re2ar1 toan a#tion &ase1 on an i"plie1trust:a! the trustee has performedune%uivocal acts of repudiationamounting to an ouster of the cestui%ue trust.

b! uch positive acts of repudiation have been made +now tothe cestui %ue trust2 and

c) /vidence thereon is clear

and positive. (G-a. :e Carera vs.Cour4 oB A>>ea0s ;6 SCRA 339[199].

NOTE:The enumeration is not exclusive.

Other e9a"ples o, i"plie1 trust:1. The registration of land under

torrens in the name of one person donot bar evidence to show it was onlyheld in trust for another.

*. 0ertificate of registration of vehicleplaced in the name of a person

although the price was not paid byhim but by another.

). -ne arising from the agentJs willfulviolation of the trust reposed in himby the principal by buying forhimself the property he wassupposed to buy for the principalwho designated and appointed himto negotiate with the owner.

>. n consonance with the trust funddoctrine in 0orporation aw, theassets of the corporation, asrepresented by the capital stoc+, areregarded as 9trust fundC to bemaintained unimpaired for thepayment of corporate creditors.



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Partnership, Agency and Trust

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