DIGESTED CASES ON AGENCY, TRUST AND

PARTNERSHIP

SUBMITTED BY:Ranel De Lara

SUBMITTED TO:Judge Ampuan

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs.

HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondentsG.R. No. 109248 July 3, 1995

FACTS:Ortega, then a senior partner in the law firm Bito, Misa, and Lozada

withdrew from the said firm. He filed with SEC a petition for dissolution and liquidation of the partnership. The SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership. Since it is partnership at will, the law firm could be dissolved by any partner at anytime, such as by withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his will.

ISSUE:1. Whether or not the partnership of Bito, Lozada and Misa is a

partnership at will.2. Whether or not withdrawal of Misa dissolved the partnership

regardless of good faith and bad faith.

RULING:1. Yes. The partnership agreement of the firm provides that ”[t]he

partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners.”

2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will (e.g. by way of withdrawal of a partner). He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages.

A partnership that does not fix its term is a partnership at will. It can be dissolved

anytime since no partner can be forced to continue in the partnership against his will. Doctrine of Delectus Personae allows them to have the power, although not necessary a right to dissolve the partnership.

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE, petitioners, vs.DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C. RAMIREZ, respondents.G.R. No. 144214 July 14, 2003

FACTS:In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership

with a capital of P750,000for the operation of a restaurant and catering business. Respondent Ramirez joined as a partner in the business with the capital contribution of P250,000. 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 to petitioners 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 a complaint in the RTC. RTC ruled that the parties had voluntarily entered into a partnership, which could be dissolved at any time, 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 CA took 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 petitioners are liable to respondents his share in the

partnership.

RULING:No, respondents have no right to demand from petitioners but

partnership is liable instead. The partnership has a juridical personality separate and distinct from that of each of the partners. Respondents have no right to demand from petitioner the return of their equity share. 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 in the partnership

cannot be determined until all the partnership assets will have been liquidated and all partnership creditors have been paid.

BENJAMIN YU, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.G.R. No. 97212 June 30, 1993

FACTS:Benjamin Yu used to be the Assistant General Manager of Jade

Mountain, a partnership engaged in marble quarrying and export business. The majority of the founding partners sold their interests in said partnership to Willy Co and Emmanuel Zapanta without Yu’s knowledge. Said new partnership continued operating under the same name and continued the business’s operations. However, it transferred its main office from Makati to Mandaluyong. Said new partnership did not anymore availed of the services of Yu. Thus, he filed a complaint for illegal dismissal, recovery of unpaid wages and damages.

ISSUE:Whether or not old partnership of YU and as Assistant General

Manager extinguished and replaced by new partnership.

RULING:No. The legal consequences of dissolution of a partnership do not,

however, automatically result in the determination of the legal personality of the old partnership. The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired Yu in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987. 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. Not only the retiring partners but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership.

LOURDES NAVARRO AND MENARDO NAVARRO, petitioners, vs.COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON, respondents.G.R. No. 101847 May 27, 1993

FACTS:Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro

were engaged in the business of Air Freight Service Agency. Pursuant to the Agreement which they entered, they agreed to operate the said Agency; It is the Private Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of the agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier; In compliance to her obligation as stated in their agreement, private respondent brought into their business certain chattels or movables or personal properties. However, those personal properties remain to be registered in her name; Among the provisions stipulated in their agreement is the equal sharing of whatever proceeds realized from their business; However, sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal properties which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal Properties With Damages and with an application for a writ of replevin. Private respondents' application for a writ of replevin was later approved/granted by the trial court. For her defense, petitioner Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged in the business of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership.

ISSUE:Whether or not a partnership exists between the parties.

RULING:No. Article 1767 of the New Civil Code defines the contract of

partnership: Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the proceeds among themselves. A cursory examination of the evidences presented no proof that a partnership, whether oral or written had been constituted. In fact, those

movables brought by the plaintiff for the use in the operation of the business remain registered in her name. While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any partnership between them. Art. 1769 par. 2 provides: Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property” Besides, the alleged profit was a difference found after evaluating the assets and not arising from the real operation of the business.

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs.THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, Regional Trial Court, Branch 11, Sindangan, Zamboanga Del Norte; THE REGIONAL TRIAL COURT SHERIFF, Branch 11, Sindangan, Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio Sheriff; and LAMBERTO T. CHUA, respondents.G.R. No. 164401 June 25, 2008

FACTS:On June 22, 1992, respondent Lamberto T. Chua filed a complaint

against petitioners, Lilibeth Sunga Sunga Chan and Cecilia Sunga, daughter and wife, respectively of the deceased Jacinto L. Sunga, for winding up of Partnership Affairs, accounting, appraisal and recovery of Shares and Damages with Writ of Preliminary Attachment with the Regional Trial Court, Branch 11, Zamboanga del Norte.

Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila with initial capital contribution of Php100,000.00 each, with the intention that the profits would be equally divided between them. For business convenience, respondent and Jacinto agreed to register the business name of their partnership SHELLITE GAS APPLIANCE CENTER under the name of Jacinto as sole proprietorship.

ISSUE:Whether or not respondent Lamberto Chua and Jacinto L. Sunga has

entered into a partnership.

RULING:Yes. The court ruled that a partnership may be constituted in any

form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. Also, Article 1772 of the Civil Code requires that partnership with a capital of Php3,000.00 or more must register with the Securities and Exchange Commission, however this registration requirement is not mandatory. Article 1768 of the Civil Code explicitly provides that the partnership retains its juridical personality even if it fails register. The failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the essential requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of the contents of their contract.

EMILIO EMNACE, petitioner, vs.COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents.G.R. No. 126334 November 23, 2001

FACTS:Emilio Emnace, Jacinto Divinagracia and Vicente Tabanao formed a

partnership engaged in the fishing industry. In 1986, Jacinto decided to leave the partnership hence they agreed to dissolve the partnership. At that time, the partnership has an estimated asset amounting to P30,000,000.00.

However, until the death of Vicente Tabanao in 1994, Emnace never rendered an accounting either to Vicente or his heirs. Emnace reneged on his promise to turn over Tabanao’s share which is 1/3 of the P30M. The heirs of Tabanao then sued Emnace. Emnace argued, among others, that the heirs are barred by prescription hence they can no longer demand an accounting. He contends that the partnership was dissolved in 1986 and that was the time when Tabanao’s (and his heirs’) right to inquire into the business affairs accrued; that said right has expired in 1990 or 4 years after. So beyond 1990, they can no longer inquire.

ISSUE:Whether or not the heirs of Tabano are barred by prescription.

RULING:No. Prescription has not run in this case, it has never begun. The

three final stages of partnership are: a) dissolution, b) winding up, and c) termination. In this case, Emnace and his partners dissolved their partnership but such did not perfect the dissolution because no accounting took place. The partnership, although dissolved, continues to exist and its legal personality is retained, at which time it completes the winding up of its affairs, including the partitioning and distribution of the net partnership assets to the partners. For as long as the partnership exists, any of the partners (or legal representative – in this case the heirs of Tabanao) may demand an accounting of the partnership’s business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done.

When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final accounting has been made, and that is precisely what the heirs are seeking in their action before the trial court,since Emnace has failed or refused to render an accounting of the partnership’s business and assets. Hence, the said action is not barred by prescription.

JOSEFINA P. REALUBIT, Petitioner, vs.PROSENCIO D. JASO and EDEN G. JASO, Respondents.G.R. No. 178782 September 21, 2011

FACTS:On 17 March 1994, petitioner Josefina Realubit (Josefina) entered

into a Joint Venture Agreement with Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be used for the payment of the ice making machine which was purchased for the business.5 For and in consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of Assignment dated 27 June 1997, transferring all his rights and interests in the business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso.6 With Biondo’s eventual departure from the country, the Spouses Jaso caused their lawyer to send Josefina a letter dated 19 February 1998, apprising her of their acquisition of said Frenchman’s share in the business and formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.

ISSUE: Whether or not the court may order Josefina Realubit as partner in the joint ventureto render an accounting to one who is not a partner in said joint venture.

RULING:No. Generally understood to mean an organization formed for some

temporary purpose, a joint venture is likened to a particular partnership or one which "has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation."27 The rule is settled that joint ventures are governed by the law on partnerships28 which are, in turn, based on mutual agency or delectus personae.29 Insofar as a partner’s conveyance of the entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any

information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

In the case of dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners, vs.JULIET VILLA LIM, Respondent.G.R. No. 172690 March 3, 2010

FACTS:In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a

partnership agreement with Jimmy Yu and Norberto Uy. The three contributed P50,000.00 each and used the funds to purchase a truck to start their trucking business. A year later however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his management, the trucking business prospered. Elfledo was able to but real properties in his name. From one truck, he increased it to 9 trucks, all trucks were in his name however. He also acquired other motor vehicles in his name.

In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledo’s wife, Juliet Lim, took over the properties but she intimated to Jimmy and the heirs of Norberto that she could not go on with the business. So the properties in the partnership were divided among them.

Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet to do an accounting of all income, profits, and properties from the estate of Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused hence they sued her.

The heirs of Jose Lim argued that Elfledo Lim acquired his properties from the partnership that Jose Lim formed with Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The heirs testified that Elfledo was merely the driver of Jose Lim.

ISSUE:Who is the partner between Jose lim and Elfledo Lim in a

partnership?

RULING:It is Elfledo Lim based on the evidence presented regardless of Jimmy

Yu’s testimony in court that Jose Lim was the partner. If Jose Lim was the partner, then the partnership would have been dissolved upon his death (in fact, though the SC did not say so, I believe it should have been dissolved upon Norberto’s death in 1993). A partnership is dissolved upon the death of the partner. Further, no evidence was presented as to the articles of partnership or contract of partnership between Jose, Norberto and Jimmy.

Unfortunately, there is none in this case, because the alleged partnership was never formally organized.Art. 1769. In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

Applying the legal provision to the facts of this case, the following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto.

Marsman Drysdale Land, INC., petitioner,

vs. PHILIPPINE GEOANALYTICS, INC. AND GOTESCO PROPERTIES, INC., respondents.G.R. No. 183374. June 29, 2010.

FACTS:Marsman Drysdale, Inc. (Marsman) and Gotesco Properties, Inc.

(Gotesco) entered into a joint venture agreement for the construction and development of an office building on a land owned by Marsman. They agreed on a 50-50 ratio on the proceeds of the project, but did not agree on how losses would be divided. The joint venture engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil exploration, seismic study and geotechnical engineering. PGI completed its seismic study but failed to complete its subsurface soil exploration because the area where drilling was to be made had not been cleared. The building project was subsequently shelved due to unfavorable economic conditions. PGI billed the joint venture for work done, but was not paid despite its repeated demands. PGI, thus, filed a collection case against Marsman and Gotesco. Marsman passed the obligation to Gotesco because under the joint venture agreement, Gotesco was solely liable for the monetary expenses of the project, and Marsman’s participation was limited to the land. Gotesco, on the other hand, asserted that PGI had no cause of action against it as PGI had yet to complete the services in its contract, and it was Marsman’s failure to clear the property of debris which prevented PGI from completing its work.

ISSUE:Whether or not a joint venture between Marsman and Gotesco is a

form of partnership.

RULING:Yes. A joint venture being a form of partnership, it is to be governed

by the laws on partnership. Under the laws on partnership, particularly Article 1797 of the Civil Code, the losses and profits shall be distributed in accordance with the agreement; if only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion. In the joint venture agreement, Marsman and Gotesco agreed on a 50-50 ratio on the proceeds of the project, but did not provide for the splitting of losses. Applying Article 1797, the same ratio applies in splitting the obligation-loss of the joint venture to PGI.When there are two or more debtors, the obligation is presumed to be joint unless the law or the obligation expressly states that the liability is solidary,

or unless the nature of the obligation requires solidary liability (Articles 1207 and 1208, Civil Code). In this case, since solidary liability was not required by law, or the contract, or by the nature of the obligation, the obligation to PGI was presumed to be joint between Marsman and Gotesco.

J. TIOSEJO INVESTMENT CORP., petitioner, Vs.SPOUSES BENJAMIN AND ELEANOR ANG, respondents.G.R. No. 174149

FACTS:On 28 December 1995 petitioner entered into a Joint Venture

Agreement (JVA) with Primetown Property Group, Inc. (PPGI) for the development of a residential condominium project to be known as The Meditel on the formers 9,502 square meter property along Samat St., Highway Hills, Mandaluyong City. With petitioner contributing the same property to the joint venture and PPGI undertaking to develop the condominium, the JVA provided, among other terms and conditions, that the developed units shall be shared by the former and the latter at a ratio of 17%-83%, respectively. While both parties were allowed, at their own individual responsibility, to pre-sell the units pertaining to them. PPGI further undertook to use all proceeds from the pre-selling of its saleable units for the completion of the Condominium Project. On 17 June 1996, the Housing and Land Use Regulatory Board (HLURB) issued License to Sell No. 96-06-2854 in favor of petitioner and PPGI as project owners. By virtue of said license, PPGI executed Contract to Sell No. 0212 with Spouses Benjamin and Eleanor Ang on 5 February 1997, over the 35.45-square meter condominium unit denominated as Unit A-1006, for the agreed contract price of P52,597.88 per square meter or a total P2,077,334.25.[8] On the same date PPGI and respondents also executed Contract to Sell No. 0214 over the 12.50 square meter parking space identified as Parking Slot No. 0405, for the stipulated consideration of P26,400.00 square meters or a total of P313,500.

ISSUE:Who are liable or the losses incurred by a joint venture to a third

person?

RULING:Under Article 1824 of the Civil Code of the Philippines, all partners

are solidarily liable with the partnership for everything chargeable to the partnership, including loss or injury caused to a third person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners. Whether innocent or guilty, all the partners are solidarily liable with the partnership itself.

FEDERICO JARANTILLA, JR., Petitioner,

vs.ANTONIETA JARANTILLA, BUENAVENTURA REMOTIGUE, substituted by CYNTHIA REMOTIGUE, DOROTEO JARANTILLA and TOMAS JARANTILLA, Respondents.G.R. No. 154486 December 1, 2010

FACTS:The present case stems from the complaintfiled by Antonieta

Jarantilla againstBuenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla andTomas Jarantilla, for the accounting of the assets and income of the co-ownership, for itspartition and the delivery of her share corresponding to eight percent (8%), and for damages. Antonieta claimed that in 1946, she had entered into an agreement with the defendants toengage in business through the execution of a document denominated as "Acknowledgement of Participating Capital. Antonieta also alleged that she had helped in the management of the business they co-owned without receiving any salary. Antonieta further claimed co-ownership of certain properties (the subject real properties) in the name of the defendants since the only way the defendants could have purchased these properties were through the partnership as they had no other source of income.

ISSUE:Whether or not a partnership exists between the parties subject to

the Acknowledgement of Participating Capital.

RULING:Yes, Under Article 1767 of the Civil Code, there are two essential

elements in a contract of partnership:(a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, all the parties in this case have agreed to, and did contribute money and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. They have admitted this fact agreed to its veracity, and even submitted one common documentary evidence to prove such partnership - the Acknowledgement of Participating Capital.

Philex Mining Corp. v. Commissioner of Internal Revenue

G.R. No. 148187 April 16, 2008 Ynares-Santiago, J.

FACTS:

Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the former to manage and operate the latter’s mining claim, known as the Sto. Nino Mine. The parties’ agreement wasdenominated as “Power of Attorney” which provides interalia: Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts asfrom time to time may be required by the MANAGERS within the said 3-year period, for use in theMANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s account in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is left with the Sto. Nino PROJECT,shall be added to such owner’s account.

Philex Mining made advances of cash and property in accordance with paragraph 5 of the agreement. However, the mine suffered continuing losses over the years which resulted to PhilexMining’s withdrawal as manager of the mine and in the eventual cessation of mine operations. The parties executed a “Compromise with Dation in Payment” wherein Baguio Gold admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay the same in three segments.

The parties executed an “Amendment to Compromise with Dation in Payment” where the partiesdetermined that Baguio Gold’s indebtedness to petitioner actually amounted to P259,137,245.00,which sum included liabilities of Baguio Gold to other creditors that petitioner had assumed asguarantor. These liabilities pertained to long-term loans amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This time, Baguio Goldundertook to pay petitioner in two segments by first assigning its tangible assets forP127,838,051.00 and then transferring its equitable title in its Philodrill assets for P16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstanding indebtedness topetitioner in the amount of P114,996,768.00.

In its 1982 annual income tax return, Philex Mining deducted from its gross income the amount of P112,136,000.00 as “loss on settlement of receivables from Baguio Gold against reserves andallowances.” However, the BIR disallowed the amount as deduction for bad debt and assessed petitioner a deficiency income tax of P62,811,161.39. Philex Mining

protested before the BIR arguing that the deduction must be allowed since all requisites for a bad debt deduction were satisfied.

ISSUE:

WON the parties entered into a contract of agency coupled with an interest which is not revocable at will.

HELD:

No. In this case, the non-revocation or non-withdrawal under paragraph 5(c) applies to the advances made by petitioner who is supposedly the agent and not the principal under the contract. Thus, it cannot be inferred from the stipulation that the parties’ relation under the agreement is one of agency coupled with an interest and not a partnership.

The main object of the “Power of Attorney” was not to confer a power in favor of petitioner to contract with third persons on behalf of Baguio Gold but to create a business relationship between petitioner and Baguio Gold, in which the former was to manage and operate the latter’s mine through the parties’ mutual contribution of material resources and industry. The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact that it would receive 50% of the net profits as compensation under paragraph 12 of the agreement. The entirety of the parties’ contractual stipulations simply leads to no other conclusion than that petitioner’s “compensation” is actually its share in the income of the joint venture. Article 1769 (4) of the Civil Code explicitly provides that the “receipt by a person of a share in the profits of a businessis prima facie evidence that he is a partner in the business.”

Spouses Fernando and Lourdes Viloria vs. Continental Airlines, Inc.

G.R. No. 188288 January 16, 2012

FACTS:

In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel, a travel agency working for Continental Airlines, to purchase tickets from Newark to San Diego. The travel agent, Margaret Mager, advised the couple that they cannot travel by train because it is fully booked; that they must purchase plane tickets for Continental Airlines; that if they won’t purchase plane tickets; they’ll never reach their destination in time. The couple believed Mager’s representations and so they purchased two plane tickets worth $800.00.

Later however, the spouses found out that the train trip isn’t fully booked and so they purchased train tickets and went to their destination by train instead. Then they called up Mager to request for a refund for the plane tickets. Mager referred the couple to Continental Airlines. As the couple are now in the Philippines, they filed their request with Continental Airline’s office in Ayala. The spouses Viloria alleged that Mager misled them into believing that the only way to travel was by plane and so they were fooled into buying expensive tickets.

Continental Airlines refused to refund the amount of the ticket and so the spouses sued the airline company. In its defense, Continental Airlines claimed that the ticket sold to them by Mager is non-refundable; that, if any, they are not bound by the misrepresentations of Mager because there’s no agency existing between Continental Airlines and Mager.

The trial court ruled in favor of spouses Viloria but the Court of Appeals reversed the ruling of the RTC.

ISSUE: Whether or not a contract of agency exists between Continental

Airlines and Mager.

HELD: Yes. All the elements of agency are present, to wit:

there is consent, express or implied of the parties to establish the relationship;the object is the execution of a juridical act in relation to a third person;

the agent acts as a representative and not for himself, andthe agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it concluded an agreement with Holiday Travel to which Mager is part of, whereby Holiday Travel would enter into contracts of carriage with third persons on the airlines’ behalf. The third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is Continental Airlines and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that Continental Airlines has not made any allegation that Holiday Travel exceeded the authority that was granted to it.

Continental Airlines also never questioned the validity of the transaction between Mager and the spouses. Continental Airlines is therefore in estoppels. Continental Airlines cannot be allowed to take an altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good faith on Continental Airlines’ acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.

Sally Yoshizaki vs. Joy Training Center of Aurora, Inc.GR 174978 Juky 31, 2013

FACTS:

On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a Wrangler jeep, and other personal properties in favor of the spouses Sally and Yoshio Yoshizaki. On the same date, a Deed of Absolute Sale and a Deed of Sale of Motor Vehicle were executed in favor of the spouses Yoshizaki. The spouses Johnson were members of Joy Training’s board of trustees at the time of sale. On December 7, 1998,TCT No. T-25334 was cancelled and TCT No. T-26052 was issued in the name of the spouses Yoshizaki.

On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio, filed an action for the Cancellation of Sales and Damages with prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki and the spouses Johnson before the Regional Trial Court of Baler, Aurora (RTC).

In the complaint, Joy Training alleged that the spouses Johnson sold its properties without the requisite authority from the board of directors. It assailed the validity of a board resolution dated September 1, 1998 which purportedly granted the spouses Johnson the authority to sell its real properties. It averred that only a minority of the board, composed of the spouses Johnson and Alexander Abadayan, authorized the sale through the resolution.

After the presentation of their testimonial evidence, the spouses Yoshizaki formally offered in evidence photocopies of the resolution and certification, among others. Joy Training objected to the formal offer of the photocopied resolution and certification on the ground that they were not the best evidence of their contents. In an Order dated May 18, 2004, the RTC denied the admission of the offered copies. The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the real properties. However, it held that the sale was valid because Joy Training authorized the spouses Johnson to sell the real properties.

The CA upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to the sale of real properties. It maintained that the present action is cognizable by the RTC because it involves recovery of ownership from third parties.

It also ruled that the resolution is void because it was not approved by a majority of the board of trustees. It stated that under Section 25 of the Corporation Code, the basis for determining the composition of the board of trustees is the list fixed in the articles of incorporation.

ISSUES:

Whether or not there was a contract of agency to sell the real properties between Joy Training and the spouses Johnson.

RULING:

There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel of land with its improvements

Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person “binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.” It may be express, or implied 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.

The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act. We unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals that a special power of attorney must express the powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. In the present case, Sally presents three pieces of evidence which allegedly prove that Joy Training specially authorized the spouses Johnson to sell the real properties.

The CA’s position that the basis for determining the board of trustees’ composition is the trustees as fixed in the articles of incorporation and not the actual members of the board. The second paragraph of Section 25 of the Corporation Code expressly provides that a majority of the number of trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business. CA decision affirmed, petition denied.

PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented by Mother and Attorney-in-Fact VIRGINIA CASTILLA), Petitioners,- versus -COURT OF APPEALS et. al. , Respondents.G.R. No. 160346

FACTS:For our resolution is a petition for review on certiorari assailing the

April 23, 2003 Decision and October 8, 2003 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 59426. The appellate court, in the said decision and resolution, reversed and set aside the January 14, 1998 Decision of the Regional Trial Court (RTC), which ruled in favor of petitioners.

The dispute stemmed from the following facts.

During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-square meter parcel of land situated in Barangay Anos, Los Baos, Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-15. Agatona Genil died on September 13, 1990 while Pedro San Agustin died on September 14, 1991. Both died intestate, survived by their eight (8) children: respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.

Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares conveying in favor of petitioners (the Pahuds, for brevity) their respective shares from the lot they inherited from their deceased parents for P525,000.00. Eufemia also signed the deed on behalf of her four (4) other co-heirs, namely: Isabelita on the basis of a special power of attorney executed on September 28, 1991, and also for Milagros, Minerva, and Zenaida but without their apparent written authority. The deed of sale was also not notarized. On July 21, 1992, the Pahuds paid P35,792.31 to the Los Baos Rural Bank where the subject property was mortgaged. The bank issued a release of mortgage and turned over the owners copy of the OCT to the Pahuds. Over the following months, the Pahuds made more payments to Eufemia and her siblings totaling to P350,000.00. They agreed to use the remaining P87,500.00 to defray the payment for taxes and the expenses in transferring the title of the property. When Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it.

On July 8, 1993, Virgilios co-heirs filed a complaint for judicial partition of the subject property before the RTC of Calamba, Laguna. On November 28,

1994, in the course of the proceedings for judicial partition, a Compromise Agreement was signed with seven (7) of the co-heirs agreeing to sell their undivided shares to Virgilio forP700,000.00. The compromise agreement was, however, not approved by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the agreement because he knew of the previous sale made to the Pahuds.

On December 1, 1994, Eufemia acknowledged having received P700,000.00 from Virgilio. Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia Ocampo (Belarminos) sometime in 1994. The Belarminos immediately constructed a building on the subject property.

Alarmed and bewildered by the ongoing construction on the lot they purchased, the Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the property to the Belarminos. Aggrieved, the Pahuds filed a complaint in intervention in the pending case for judicial partition. After trial, the RTC upheld the validity of the sale to petitioners. The dispositive portion of the decision reads:

Not satisfied, respondents appealed the decision to the CA arguing, in the main, that the sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds should have been declared void and inexistent for want of a written authority from her co-heirs. The CA yielded and set aside the findings of the trial court. In disposing the issue, the CA ruled: Judicial Partition is hereby REVERSED and SET ASIDE, and a new one entered.

ISSUE:

The focal issue to be resolved is the status of the sale of the subject property by Eufemia and her co-heirs to the Pahuds.

Ruling:

We find the transaction to be valid and enforceable. Also, under Article 1878, a special power of attorney is necessary for an agent to enter into a contract by which the ownership of an immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.

In several cases, we have repeatedly held that the absence of a written authority to sell a piece of land is, ipso jure, void, precisely to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another.

Based on the foregoing, it is not difficult to conclude, in principle, that the sale made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid only with respect to the 4/8 portion of the subject property. The sale with respect to the 3/8 portion, representing the shares of Zenaida, Milagros, and Minerva, is voidbecause Eufemia could not dispose of the interest of her co-heirs in the said lot absent any written authority from the latter, as explicitly required by law. This was, in fact, the ruling of the CA.

Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion of the land should have been deemed ratified when the three co-heirs, namely: Milagros, Minerva, and Zenaida, executed their respective special power of attorneys authorizing Eufemia to represent them in the sale of their shares in the subject property.

While the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification, we nevertheless uphold its validity on the basis of the common law principle of estoppel.

Article 1431 of the Civil Code provides: Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.

True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8 portion of the property. It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latters reliance upon a deceitful representation by an agent in the course of his employment (1) if the representation is authorized; (2) if it is within the implied authority of the agent to make for the principal; or (3) if it is apparently authorized, regardless of whether the agent was authorized by him or not to make the representation.

By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the sale from assailing the authority of Eufemia to enter into such transaction.

Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void because they no longer had any interest over the subject property which they could alienate at the time of the second transaction.

Yun Kwan Byung vs PAGCOR

December 11, 2009

Facts:

PAGCOR launched its Foreign Highroller Marketing Program (Program). The Program 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. The Korean-based ABS Corporation was one of the international groups that availed of the Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino Filipino). Petitioner, a Korean national, alleges that from November 1996 to March 1997, he came to the Philippines four times to play for high stakes at the Casino Filipino.

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. 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. Only ABS Corporation would make an accounting of these chips to PAGCOR’s casino treasury. PAGCOR argues that petitioner is not a PAGCOR player because under PAGCOR’s gaming rules, gambling chips cannot be brought outside the casino. TC: dismissed the complaint and counterclaim. CA affirmed.

Issues:

1. WON an implied agency was created

2. Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the agent, ABS Corporation.

Ruling:

1. NO. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCOR’s 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.

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.

The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it. Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another.

2. NO. The Junket Agreement is void. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification.64 Article 1409 of the Civil Code provides that contracts expressly prohibited or declared void by law, such as gambling contracts, "cannot be ratified."

(NFA) vs. INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION

G.R. No. 75640 April 5, 1990

Facts:

On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract for hire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to defendant National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a letter requesting defendant NGA that it be allowed to collect the amount stated in its statement of account.

On November 5, 1979, plaintiff wrote again defendant NGA, this time specifically requesting that the payment for freightage and other charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel "MV Sea Runner". In reply, defendant NGA on November 16, 1979 informed plaintiff that it could not grant its request because the contract to transport the rice was entered into by defendant NGA and defendant Medalla who did not disclose that he was acting as a mere agent of plaintiff . Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for freight services in connection with the shipment of 8,550 sacks of rice (Exhibit "A").

On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid to him by defendant NFA. Defendant Medalla, however, "ignored the demand."

Plaintiff was therefore constrained to file the instant complaint.

For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage. Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to this court on the sole issue as to whether it is jointly and severally liable with defendant Gil Medalla for freightage.

It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of the fact of agency between respondent Superior Shipping and Medalla at the time when the contract was entered into between them (NFA and Medalla).

Issue:

Whether or not the instant case falls within the exception of the general rule provided for in Art. 1883 of the Civil Code of the Philippines.

Ruling:

Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior Shipping Corporation which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in the case at bar provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.

Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract.

Valenzuela v CA

G.R. No. 83122 October 19, 1990

Facts:

Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized to solicit and sell all kinds of non-life insurance. He had a 32.5% commission rate. From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors, Inc. in the amount of P4.4 Million from which he was entitled to a commission of 32%. However, Valenzuela did not receive his full commission which amounted to P1.6 Million from the P4.4 Million. Premium payments amounting to P1,946,886.00 were paid directly to Philamgen. Valenzuela’s commission amounted to P632,737.00.

Philamgen wanted to cut Valenzuela’s commission to 50% of the amount. He declined.

When Philamgen offered again, Valenzuela firmly reiterated his objection.

Philamgen took drastic action against Valenzuela. They: reversed the commission due him, threatened the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a substantial debt with Philamgen. His agency contract was terminated.

The petitioners sought relief by filing the complaint against the private respondents. The trial court found that the principal cause of the termination as agent was his refusal to share his Delta commission.

The court considered these acts as harassment and ordered the company to pay for the resulting damage in the value of the commission. They also ordered the company to pay 350,000 in moral damages.

The company appealed. The CA ordered Valenzuela to pay the entire amount of the commission. Hence, this appeal by Valenzuela.

Issue:

1. WON the agency contract is coupled with interest on the part of agent Valenzuela.

2. Whether or not Philamgen can be held liable for damages due to the termination of the General Agency Agreement it entered into with the petitioners.

Ruling:

Ratio:

1. Yes, agency is one coupled with an interest. In any event the principal's power to revoke an agency at will is so pervasive. Records show that the agency is one "coupled with an interest," and, therefore, should not be freely revocable at the unilateral will of the company.

The records sustain the finding that the private respondent started to covet a share of the insurance business that Valenzuela had built up, developed and nurtured. The company appropriated the entire insurance business of Valenzuela. Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the insured for unpaid premiums.

Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency when it was unceremoniously terminated not only because of the commissions he procured, but also Philamgen’s stipulation liability against him for unpaid premiums. The respondents cannot state that the agency relationship between Valenzuela and Philamgen is not coupled with interest.

There is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but also for the mutual interest of the principal and the agent. The principal may not defeat the agent's right to indemnification by a termination of the contract of agency. Also, if a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring an appropriate action for the breach of that duty.

2. Yes, the principal can be held liable. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency, then he is liable in damages. The Civil Code says that "every person must in the exercise of his rights and in the performance of his duties act with justice, give everyone his due, and observe honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently causes damages to another, shall indemnify the latter for the same (Art. 20, Civil Code).

The circumstances of the case, however, require that the contractual relationship between the parties shall be terminated upon the satisfaction of the judgment. No more claims arising from or as a result of the agency shall be entertained by the courts after that date.

PHILIPPINE NATIONAL BANK, petitioner,

vs.

COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.

G.R. No. 97995 January 21, 1993

FACTS:

Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms. On February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay the amount of US$14,000 to Mata.

On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist. However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment. On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive trust under Article 1456 of the Civil Code.

ISSUE:

Whether or not there is implied trust between the parties.

RULING:

Yes, while it is true that there is implied trust in the case. We rule that petitioner's claim cannot prosper since it is already barred by laches. It is a well-settled rule now that an action to enforce an implied trust, whether resulting or constructive, may be barred not only by prescription but also by laches. While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay.

ABERTO HERBON, MARGARITO HERBON and GABINO HERBON, petitioners,

vs.

LEOPOLDO T. PALAD and HELENP. CAYETANO, respondents.

G.R. No. 149542 July 20, 2006

FACTS:

Gonzalo Palad in his lifetime was a co-owner of a parcel of agricultural land located in Poblacion, Bagac, Bataan known as Lot 421, with an area of 32,944 square meters and covered by Transfer Certificate of Title (TCT) No. 4408 of the Register of Deeds of Bataan. Gonzalo’s share was conjugal property, having been acquired during his marriage with Alejandra Nava. Alejandra died in1949, Gonzalo contracted a second marriage with Remedios Torres, a widow with three children from her previous marriage, herein petitioners. The union of Gonzalo and emedios bore no children. On November 16, 1983, Gonzalo died. Thereafter, petitioners took possession of a portion of the property and despite respondents’ demand to vacate and turnover possession of the property, petitioners refused to do so.

On July 22, 1997, the RTC rendered its Decision dismissing the complaint and ordering respondents to pay petitioners P 3,000.00 as attorney’s fees and cost of suit. The RTC held that the action for recovery of possession cannot prosper since petitioners proved that they are co-owners of the subject property based on the two deeds of absolute sale while CA set aside the decision of RTC. Hence, an appeal.

ISSUE:

Whether or not implied trust exist in this case.

RULING:

Yes, the Court finds that on matters of implied trust, Article 1448 of the Civil Code provides: “There is an implied trust when property is sold\, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.” The trust

created is sometimes referred to as a purchase money resulting trust, the elements of which are: a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; and b) such consideration must be furnished by the alleged beneficiary of a resulting trust.

Spouses ANTHONY and PERCITA OCO, Petitioners,

vs.

VICTOR LIMBARING, Respondent.

G.R. No. 161298 January 31, 2006

FACTS:

Sometime in 1996, Sabas Limbaring subdivided his Lot 2325-D, covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as Lot Nos. 2325-D-1 and 2325-D-2. He then executed in favor of Jennifer Limbaring a Deed of Sale for Lot 2325-D-2 for P60,000; and, in favor of Sarah Jane Limbaring, another Deed for Lot 2325-D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and T-21920 were issued in the names of Jennifer and Sarah Jane, respectively.

Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring, left Puerto Princesa City and went to Ozamis City. She then filed a case of perjury and falsification of documents against respondent, her uncle who was the father of Jennifer and Sarah Jane. During the pre-litigation conference called by City Prosecutor Luzminda Uy on July 1, 1996, the parties agreed that the two parcels of land should be reconveyed to Percita, who was to pay respondent all the expenses that had been and would be incurred to transfer the titles to her name.

ISSUE:

Was there a trust created between Limbaring when he purchased the properties in favor of his daughter.

RULING:

No, Under the last sentence of Article 1448, respondent’s alleged acts paying the price of the subject properties and, in the titles, naming his children as owners -- raise the presumption that a gift was effected in their favor. Respondent failed to rebut this presumption. Absent any clear proof that a trust was created, he cannot be deemed a real party in interest.49 That he should be deemed a trustor on the basis merely of having paid the purchase price is plainly contradicted by the presumption based on Article 1448 of the Civil Code "that there is a gift in favor of the child," not with parent.

MARLENE CRISOSTOMO & JOSE G. CRISOSTOMO, Petitioners,

vs.

FLORITO M. GARCIA, JR., Respondent.

G.R. No. 164787 January 31, 2006

FACTS:

On 24 September 1986, Victoria Garcia Vda. de Crisostomo, mother of petitioner Jose G. Crisostomo, sold to him, by way of a Deed of Absolute Sale, the property, described in the aforesaid TCT including the improvements and rights thereon, particularly described as TAG No. 84-205-1097 (Urban Bliss Level I located at 163 Libis Talisay, Caloocan City). In the Deed of Sale, petitioner Jose Crisostomo and his sister Cristina Crisostomo signed as witnesses in the execution of the instrument. Since they were distant relatives, respondent allowed Victoria and her children, petitioner Jose and Cristina, to stay in the subject property as lessees under a Contract of Lease. By virtue of the said deed of sale, respondent effected the transfer of the tax declaration covering the property, under his name from the City Assessor’s Office of Caloocan City.

However, before the transfer of title to respondent could be completed, petitioners-spouses Jose and Marlene Crisostomo were able to secure a loan from the National Home Mortgage Finance Corporation using the subject property as security through bad faith and machinations. Worse, petitioners were able to transfer the subject property under their names, obtaining TCT No. 273165, from the Registry of Deeds of Caloocan City, without the knowledge and consent of the respondent. Instead of an Answer, petitioners filed an "Urgent Motion to Dismiss Action," alleging that since respondent’s cause of action is based on an alleged deed of sale executed on 24 September 1986, the cause of action of the respondent to enforce and to implement the instrument arose on 24 September 1986 and pursuant to Article 11446 of the Civil Code, the action must be brought within 10 years from the time the right of action accrues. Thus, from 24 September 1986, respondent had only up to 24 September 1996 within which to file the action. Since the complaint was filed only on 20 June 2002, or after the lapse of more than 16 years, the cause of action is clearly barred by prescription.

ISSUE:

Whether or not the action filed by the respondent had already prescribed.

RULING:

No, It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art. 1144. This ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust, which repudiation takes place when the adverse party registers the land.

Clearly, the applicable prescriptive period is ten years under Art. 1144 and not four years under Arts. 1389 and 1391. Applying the law and jurisprudential declaration above-cited to the allegations of fact in the complaint, it can clearly be seen that respondent has a period of 10 years from the registration of the title within which to file the action. Since the title was registered in the name of the petitioners on 16 November 1993, respondent had a period of 10 years from the time of the registration within which to file the complaint. Since the complaint was filed on 20 June 2002, the action clearly has not prescribed and was timely-filed.

FELOMINA ABELLANA, petitioner,

vs.

SPOUSES ROMEO PONCE and LUCILA PONCE and the REGISTER OF DEEDS of BUTUAN CITY, respondents.

G.R. No. 160488 September 3, 2004

FACTS:

On July 15, 1981, Felomina, a spinster, pharmacist and aunt of private respondent Lucila Ponce, purchased from the late Estela Caldoza-Pacres a 44, 297 square meter agricultural lot with the intention of giving said lot to her niece, Lucila. Thus, in the deed of sale, the latter was designated as the buyer of Lot 3, Pcs-10-000198, covered by Original Certificate of Title No. P-27, Homestead Patent No. V-1551 and located at Los Angeles, Butuan City. The total consideration of the sale was P16,500.00, but only P4,500.00 was stated in the deed upon the request of the seller. Subsequently, Felomina applied for the issuance of title in the name of her niece. On April 28, 1992, Transfer Certificate of Title (TCT) No. 2874 over the subject lot was issued in the name of Lucila. Said title, however, remained in the possession of Felomina who developed the lot through Juanario Torreon and paid real property taxes thereon.

The relationship between Felomina and respondent spouses Romeo and Lucila Ponce, however, turned sour. The latter allegedly became disrespectful and ungrateful to the point of hurling her insults and even attempting to hurt her physically. Hence, Felomina filed the instant case for revocation of implied trust to recover legal title over the property. Private respondent spouses Lucila, also a pharmacist, and Romeo, a marine engineer, on the other hand, claimed that the purchase price of the lot was only P4,500.00 and that it was them who paid the same. The payment and signing of the deed of sale allegedly took place in the office of Atty. Teodoro Emboy in the presence of the seller and her siblings namely, Aquilino Caldoza and the late Lilia Caldoza. A year later, Juanario approached Lucila and volunteered to till the lot, to which she agreed. In 1987, the spouses consented to Felomina’s proposal to develop and lease the lot. They, however, shouldered the real property taxes on the lot, which was paid through Felomina. When Lucila learned that a certificate of title in her name had already been issued, she confronted Felomina who claimed that

she already gave her the title. Thinking that she might have misplaced the title, Lucila executed an affidavit of loss which led to the issuance of another certificate of title in her name.

ISSUE:

Is there an implied trust created between the parties?

RULING:

Yes, While Felomina sought to recover the litigated lot on the ground of implied trust and not on the invalidity of donation, the Court is clothed with ample authority to address the latter issue in order to arrive at a just decision that completely disposes of the controversy. Since rules of procedure are mere tools designed to facilitate the attainment of justice, they must be applied in a way that equitably and completely resolve the rights and obligations of the parties.

Finally, in deciding in favor of Felomina, the trial court ordered respondent spouses to execute a deed of sale over the subject lot in favor of Felomina in order to effect the transfer of title to the latter. The proper remedy, however, is provided under Section 10 (a), Rule 39 of the Revised Rules of Civil Procedure which provides that " if real or personal property is situated within the Philippines, the court in lieu of directing a conveyance thereof may by an order divest the title of any party and vest it in others, which shall have the force and effect of a conveyance executed in due form of law."