B. Obligations of the Agent Articles 1884 to 1909 2. CONSOLACION L. RAMOS vs. BENIGNO A.
CAOIBES
1. PNB vs. MANILA SURETY & FIDELITY CO., INC., and THE COURT OF APPEALS
Facts: The Philippine National Bank had opened a letter of credit and advanced thereon
$120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons
worth P279,000.00 were released and delivered to Adams & Taguba Corporation (known as
ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co. up to the amount of
P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee and attorney-in-fact
to receive and collect from the Bureau of Public Works the amount aforesaid out of funds payable
to the assignor under Purchase Order No. 71947.
ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total value
of P431,466.52. Of this amount the Bank regularly collected, from April 21, 1948 to November
18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to collect, until in
1952 its investigators found that more moneys were payable to ATACO from the Public Works
office, because the latter had allowed another creditor to collect funds due to ATACO under the
same purchase order, to a total of P311,230.41. The Court of Appeals found the Bank to have been
negligent in having stopped collecting from the Bureau of Public Works the moneys falling due in
favor of the principal debtor, ATACO, from and after November 18, 1948, before the debt was
fully collected, thereby allowing such funds to be taken and exhausted by other creditors, to the
prejudice of the surety, and held that the Bank's negligence resulted in the exoneration of re-
spondent Manila Surety & Fidelity Company. This holding is now assailed by the Bank. It contends
that the power of attorney obtained from ATACO was merely an additional security in its favor,
and that it was the duty of the surety, and not that of the creditor, to see to it that the obligor
fulfills his obligation, and that the creditor owed the surety no duty of active diligence to collect
any sum from the principal debtor, citing Judge Advocate General vs. Court of Appeals, G. R. No.
L-10671, October 23, 1958.
Issue: whether the Bank has exercised due diligence in collecting from the Bureau of Public
Works
Held: This argument of appellant Bank misses the point. The Court of Appeals did not hold the
Bank answerable for negligence in failing to collect from the principal debtor but for its neglect
in collecting the sums due to the debtor from the Bureau of Public Works, contrary to its duty as
holder of an exclusive and irrevocable power of attorney to make such collections, since an agent
is required to act with the care of a good father of a family (Civ. Code, Art. 1887) and becomes
liable for the damages which the principal may suffer through his non-performance (Civ. Code,
Art. 1884). Certainly, the Bank could not expect either ATACO or the surety to collect from the
Bureau of Public Works the moneys it had failed to demand. Not only because these parties had
the right to expect that the Bank would diligently perform its duty under its power of attorney,
but because they could not have collected from the Bureau even if they had attempted to do so. It
must not be forgotten that the Bank's power to collect was expressly made irrevocable, so that
the Bureau of Public Works could very well refuse to make payments to the principal debtor itself,
and a fortiori reject any demands by the surety. The fact remains that because of the Bank's
inactivity the other creditors were enabled to collect P173,870.31, when the balance due
to appellant Bank was only P158,563.18. The finding of negligence made by the Court of
Appeals is thus not only conclusive on us but fully supported by the evidence.
AGENCY; DUTY OF AGENT TO ACT WITH THE CASE OF A GOOD FATHER OF A FAMILY. An
agent is required to act with the care of a good father of a family and becomes liable for the dam-
ages which the principal may suffer through his non-performance.||| (Philippine National Bank
vs. Manila Surety
Facts: "That I, Concepcion Ramos Dipusoy, of legal age, single, Filipino citizen and resident of
Balayan, Batangas, have made, constituted and appointed, and by these presents do make, con-
stitute and appoint Mr. Benigno A. Caoibes, also of legal age, married, Filipino citizen and at pre-
sent residing at 1047 Antipolo Street, Sampaloc, Manila, my true and lawful attorney-in-fact, for
me and in my name, place and stead, to collect any amount due me from the Philippine War Dam-
age Commission, regarding my claim filed for my properties that were lost during the last war in
Balayan, Batangas, to cash checks, warrants and to sign receipts, vouchers, documents which shall
be necessary to the said purpose
"That I am giving and granting unto my said attorney-in-fact Benigno A. Caoibes, full and absolute
power and authority to do and perform all any every act or thing whatsoever to be done neces-
sary in and about the premises, as fully to all intents and purposes as I might or could myself do
if I were personally present, and hereby confirming and ratifying all that my said attorney-in-fact
shall lawfully do or cause to be done and by virtue of these presents
Concepcion Ramos died on August 19,1948, leaving a will dated January 7, 1927 admitted to pro-
bate on October 4, 1948, in which she ordered that the credits due to her be distributed among
the children of the deceased Antonino Ramos, namely, Consolacion, Ramon, Socorro, and Cirila.
One year before she died, Concepcion Ramos filed with the War Damage Commission a claim
which the Commission issued check No. 348444, in the amount of P501.62, payable to the de-
ceased Concepcion Ramos. This check was returned to the Commission and substituted by the
latter with check No. 564614, on November 10, 1948, for the same amount, but payable to Be-
nigno A. Caoibes, who had presented to said entity Annexes "A" and "B", above mentioned, in
order to exchange the first check No. 564614, which he cashed for himself.
The administratrix, Consolacion L. Ramos, the appellant herein, discovered the collection made
by Caoibes when she saw the note "previous payment" which appeared in the account sent to her
by the Commission on October 13, 1950. She filed a motion with the court asking that Caoibes be
ordered to deposit the sum of P501.62 with the clerk of court. Caoibes answered the motion ad-
mitting that after the death of Concepcion, he presented Annexes "A" and "B" to the Commission
and received in cash the sum of P501.62, amount of the second check, above mentioned, but stat-
ing that he was willing to deliver to the clerk the sum of P250.81. He contended that, by virtue of
Annex "A", and Annex "B", he had the right to retain, for himself, half of the sum of P501.62.
Issue:
Held: Annex A is only a power of attorney. Caoibes, as agent, had the obligation to deliver the
amount collected by virtue of said power to his principal, Concepcion, or, after her death, to the
administratrix of her estate, Consolacin. There is absolutely no cession of rights made in favor
of Caoibes in Annex "A", and under Article 1711 of the old Civil Code (which was in force at the
time of the transaction), the contract of agency is presumed to be gratuitous, unless the agent is
a professional agent. There is no proof that Caoibes was such. Furthermore, according to Article
1732 of said Code, an agency is terminated, among other causes, by the death of the principal or
of the agent. When Caoibes made use of the power of attorney, his principal, Concepcion, was
already dead. The alleged donation was made in writing but it has not been accepted in the same
form, and, consequently, has no validity. It cannot be considered a donation upon valuable con-
sideration, for no services nor any valuable consideration had passed from the donees to the do-
nor. The mere fact that Caoibes collected the claim from the War Damage Commission is not such
a service as to require compensation. Caoibes did not even prepare the claim.
3. GUTIERREZ HERMANOS vs. ORIA HERMANOS & CO. (digested na to from somewhere su-
per haba quasi ito un pinkakelangan lang)
Facts: Gutierrez Hermanos and Oria Hermanos entered into a contract wherein GH bound itself
to acquire for and forward to OH certain goods such as rice, cash, petroleum, etc. Because of this,
GH and OH decided to open a mutual current account under Oria Hermanos on the books of
Gutierrez Hermanos with 8% interest. Gutierrez Hermanos informed Oria Hermanos. that said
current account would be closed within 30 days, after which, Oria Hermanos would have to settle
the balance due to Gutierrez Hermanos, if any. However, despite repeated demands from
Gutierrez Hermanos to Oria Hermanos, the latter never paid which led to the filing of this suit.
Up until the closing of the account, GH had sent OH various quantities of salt, petroleum, tobacco,
groceries, and beverages and had collected a commission on the sale. The semiannual accounts
rendered by GH were never questioned. However, OH claims that GH had set higher prices than
the price actually paid, thereby defrauding OH. OH prayed that GH render an account as well as
the vouchers used to determine the purchase price of the said goods. OH also claimed that GH had
kept the discount in addition to collecting commission on the sale of goods.
Issue: whether or not OH is liable to GH for its unsettled account?
Held: Yes, but only upon proper accounting of the expenses for the shipment of rice and petro-
leum which were claimed to be overpriced.
When an agent in executing the orders and commissions of his principal carries out the instruc-
tions he has received from his principal, and does not appear to have exceeded his authority or
to have acted with negligence, deceit, or fraud, he cannot be held responsible for the failure of his
principal to accomplish the object of the agency.
Since it was not proven that the price of the goods were overstated, thereby defrauding OH, OH
cannot escape the liability of paying GH for performing the task given to him by OH as his princi-
pal.
4. VICENTE M. DOMINGO, represented by his heirs, ANTONIA RAYMUNDO VDA. DE DO-
MINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all sur-
named DOMINGO vs. GREGORIO M. DOMINGO
Facts: Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency
to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of
P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the
property is sold by Vicente or by anyone else during the 30-day duration of the agency or if the
property is sold by Vicente within three months from the termination of the agency to a purchaser
to whom it was submitted by Gregorio during the continuance of the agency with notice to Vi-
cente. The said agency contract was in triplicate, one copy was given to Vicente, while the original
and another copy were retained by Gregorio. Gregorio authorized the intervenor Teofilo P. Puri-
sima to look for a buyer, promising him one-half of the 5% commission. Thereafter, Teofilo Puri-
sima introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar de Leon submitted a
written offer which was very much lower than the price of P2.00 per square meter (Exhibit "B").
Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences be-
tween Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 as
evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit C". Pursuant to his promise
to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand Pesos (P1,000.00) for
succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure
of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos
(P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the addi-
tional amount of One Thousand Pesos (P1,000.00) by way of earnest money. When the deed of
sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 16, 1956 as
extended by Vicente, Oscar told Gregorio that he did not receive his money from his brother in
the United States, for which reason he was giving up the negotiation including the amount of One
Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos
(P1,000.00) given to Gregorio as propina or gift. When Oscar did not see him after several weeks,
Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A" marked
Exhibit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale
is consummated within three months after the expiration of the 30-day period of the exclusive
agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser
brought by Gregorio to Vicente during the said 30-day period.
Issue: whether the failure on the part of Gregorio to disclose to Vicente the payment to him by
Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having
persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so consti-
tutes fraud as to cause a forfeiture of his 5% commission on the sale price;
Held: The duties and liabilities of a broker to his employer are essentially those which an agent
owes to his principal. Consequently, the decisive legal provisions are found in Articles 1891 and
1909 of the New Civil Code. The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon the agent the absolute obligation to make a full dis-
closure or complete account to his principal of all his transactions and other material facts rele-
vant to the agency, so much so that the law as amended does not countenance any stipulation
exempting the agent from such an obligation and considers such an exemption as void. The duly
of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded
on the highest and truest principle of morality as well as of the strictest justice.
An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the
vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty
to the principal and forfeits his right to collect the commission from his principal, even if the prin-
cipal does not suffer any injury by reason of such breach of fidelity, or that he obtained better
results or that the agency is a gratuitous one, or that usage or custom allows it, because the rule
is to prevent the possibility of any wrong, not to remedy or repair an actual damage. By taking
such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for his principal, who has a right to treat him,
insofar as his commission is concerned, as if no agency had existed. The fact that the principal
may have been benefited by the valuable services of the said agent does not exculpate the agent
who has only himself to blame for such a result by reason of his treachery or perfidy.
Where a principal has paid an agent or broker a commission while ignorant of the fact that the
latter has been unfaithful, the principal may recover back the commission paid, since an agent or
broker who has been unfaithful is not entitled to any compensation. If the agent does not conduct
himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commis-
sion in regard the matter in which he is employed, he loses his right to compensation on the
ground that he has taken a position wholly inconsistent with that of agent for his employer, and
which gives his employer, upon discovering it, the right to treat him so far as compensation, at
least, is concerned as if no agency had existed. This may operate to give to the principal the benefit
of valuable services rendered by the agent, but the agent has only himself to blame for that result.
The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker
acted only as a middleman with the task of merely bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms and conditions of the transaction. Neither
would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit
he received from the purchaser and his principal did not object thereto. Herein defendant-appel-
lee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo
and the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And
herein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received
by Gregorio Domingo form the prospective buyer; much less did he consent to his agent's accept-
ing such a gift.
5. THE UNITED STATES, plaintiff-appellee, vs. DOMINGO REYES, defendant-appellant.
Facts: R. B. Blackman is a surveyor in the Province of Pangasinan. Domingo Reyes, the accused,
also lives in that province. Blackman employed Reyes to collect certain amounts due from twelve
individuals for Blackman's work in connection with the survey of their lands. The total amount
to be collected by Reyes was P860. He only succeeded in collecting P540. he delivered to Black-
man P368. He retained the balance, or P172. So far so good. The difficult point concerns the exact
terms of the contracrt. It was merely an oral agreement between Blackman and Reyes. Blackman
claims that he agreed to pay Reyes a commission of 10 per cent. Reyes claims that he was to re-
ceive a commission of 20 per cent. The trial court, in its decision, states that "R. B. Blackman,the
surveyor, ordered the said accused to collect certain debts due for surveying and offered a 10 per
cent commission on all accounts collected.)To return to the figures again, it will be noticed that if
we accept the statements of Blackman, Reyes was entitled to 10 per cent of P540 (or P530), or
P54, making P172 misappropriated, or, if we deduct his commission, P118. On the other hand, if
we accept the statements of Reyes, then 20 per cent of the total amount to be collected, P860, is
exactly P172, the amount claimed to have been misappropriated.
Held: In the first place, in view of the discrepancy in the evidence we are not disposed to set up
our judgment as superior to that of the trial court. In the second place, conceding that Reyes was
to receive 20 per cent, this, unless some contrary and express stipulation was included, would
not entitle him in advance to 20 per cent of the total to be collected but only to 20 per cent of the
amount actually collected. In the third place, the right to receive a commission of either 10 or 20
per cent did not make Reyes a joint owner with Blackman so as to entitle him to hold out anu sum
he chose. (Campbell vs. The State [1878], 35 Ohio St., 70.) In the fourth place, under the oral con-
tract Reyes was an agent who was bound to pay to the principal all that he had received by virtue
of the agency. (Civil Code, article 1720; U. S. vs. Kiene [1907], 7 Phil. Rep., 736.) And, lastly, since
for all practical purposes, the agency was terminated, the agent was under the onligation to turn
over to the principal the amount collected, minus his commission on that amount.
The right to a commission does not make one a joint owner with a right to money collected, but
establishes the relation of principal and agent. The agent is under obligation to turn over to the
principal the amount collected minus his commission. But the agent, having unlawfully retained
more than his commission, is guilty of estafa.
6. ROSA VILLA Y MONNA, plaintiff-appellee, vs. GUILLERMO GARCIA BOSQUE, ET AL., defend-
ants. GUILLERMO GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE,|||
Facts: This action was instituted in the (Court of First Instance of Manila by Rosa Villa y Monna,
widow of Enrique Bota, for the purpose of recovering from the defendants, Guillermo Garcia
Bosque and Jose Pomar Ruiz, as principals, and from the defendants R. G. France and F. H. Gou-
lette, as solidary sureties for said principals, the sum of P20,509.71, with interest, as a balance
alleged to be due to the plaintiff upon the purchase price of a printing establishment and
bookstore located at 89 Escolta, Manila, which had been sold to Bosque and Ruiz by the plaintiff,
acting through her attorney in fact, one Manuel Pirretas y Monros. The plaintiff, Rosa Villa y
Monna, viuda de E. Bota, was the owner of a printing establishment and bookstore located at 89
Escolta, Manila, and known as La Flor de Catalua, Viuda de E. Bota, with the machinery, motors,
bindery, type material, furniture, and stock appurtenant thereto. Upon the date stated, the plain-
tiff, then and now a resident of Barcelona, Spain, acting through Manuel Pirretas, as attorney in
fact, sold the establishment above-mentioned to the defendants Guillermo Garcia Bosque and
Jose Pomar Ruiz residents of the City of Manila, for the stipulated sum of P56,000, payable as
follows: Fifteen thousand pesos (P15,000) on November 1, next ensuing upon the execution of
the contract, being the date when the purchasers went to take possession. By the contract of sale
the deferred installments bear interest at the rate of 7 per centum per annum. In the same docu-
ment the defendants France and Goulette obligated themselves as solidary sureties with the prin-
cipals Bosque and Ruiz, to answer for any balance, including interest, which should remain due
and unpaid after the dates stipulated for payment of said installments, expressly renouncing the
benefit of exhaustion of the property of the principals. The first installment of P15,000 was paid
conformably to agreement.
When the time came for the payment of the second installment and accrued interest due at that
time, the purchasers were unable to comply with their obligation, and after certain negotiations
between said purchasers and one Alfredo Rocha, representative of Figueras Hermanos, acting as
attorney in fact for the plaintiff, an agreement reached, whereby Figueras Hermanos accepted the
payment of P5,800 on November 10, 1920, and received for the balance five promissory notes
payable.
Held: The partial substitution of agency (Exhibit B to amended complaint) purports to confer on
Figueras Hermanos or the person or persons exercising legal representation of the same all of the
powers that had been conferred on Pirretas by the plaintiff in the original power of attorney. This
original power of attorney is not before us, but assuming, as is stated in Exhibit B, that this docu-
ment contained a general power to Pirretas to sell the business known as La Flor de Catalua
upon conditions to be fixed by him and power to collect money due to the plaintiff upon any ac-
count, with a further power of substitution, yet it is obvious upon the face of the act of substitution
(Exhibit B) that the sole purpose was to authorize Figueras Hermanos to collect the balance due
to the plaintiff upon the price of La Flor de Catalua, the sale of which had already been effected
by Pirretas. The words of Exhibit B on this point are quite explicit ("to the end that the said lady
may be able to collect the balance of the selling price of the Printing Establishment and Bookstore
above-mentioned, which has been sold to Messrs. Bosque and Pomar"). There is nothing here that
can be construed to authorize Figueras Hermanos to discharge any of the debtors without pay-
ment or to novate the contract by which their obligation was created.
In the actual execution of Exhibit 1, M. T. Figueras intervenes as purported attorney in fact with-
out anything whatever to show that he is in fact the legal representative of Figueras Hermanos or
that he is there acting in such capacity. The act of substitution conferred no authority whatever
on M. T. Figueras as an individual. In view of these defects in the granting and exercise of the
substituted power, we agree with the trial judge that the Exhibit 1 is not binding on the plaintiff.
Figueras had no authority to execute the contract of release and novation in the manner at-
tempted; and apart from this it is shown that in releasing the sureties Figueras acted contrary to
instructions.
7. DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and the
ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORT-
GAGE REDEMPTION INSURANCE POOL,
Facts: Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a
loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage re-
demption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and re-
leased on August 11, 1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00
as payment for the MRI premium. On August 15, 1987, Dans accomplished and submitted the
"MRI Application for Insurance" and the "Health Statement for DBP MRI Pool.
Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool.
On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI cover-
age, being over the acceptance age limit of 60 years at the time of application. On February 10,
1989, respondent Estate, through Candida Dans as administratrix, filed a complaint against DBP
and the insurance pool for "Collection of Sum of Money with Damages." Respondent Estate al-
leged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age
at the time of application, required him to apply for MRI, and later collected the insurance pre-
mium thereon. It was DBP, as a matter of policy and practice, that required Dans, the borrower,
to secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier or some
other form of insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI cov-
erage. When Dan's loan was released, DBP already deducted from the proceeds thereof the MRI
premium. Four days latter, DBP made Dans fill up and sign his application for MRI, as well as his
health statement. The DBP later submitted both the application form and health statement to the
DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP deducted 10
percent of the premium collected by it from Dans.
Held: As an insurance agent, DBP made Dans go through the motion of applying for said insur-
ance, thereby leading him and his family to believe that they had already fulfilled all the require-
ments for the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full
knowledge that Dan's application was never going to be approved. The maximum age for MRI
acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. 1-
Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not person-
ally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his powers.
The DBP is not authorized to accept applications for MRI when its clients are more than 60 years
of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced
age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by col-
lecting the insurance premium, and deducting its agent's commission and service fee. The liability
of an agent who exceeds the scope of his authority depends upon whether the third person is
aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation
on DBP's authority to solicit applications for MRI.
8. PHILIPPINE PRODUCTS COMPANY vs. PRIMATERIA SOCIETE ANONYME POUR LE COM-
MERCE EXTERIEUR: PRIMATERIA (PH) INC., ALEXANDER G. BAYLIN and JOSE M. CRAME
Facts: Primateria Zurich, through defendant Alexander G. Baylin, entered into an agreement with
plaintiff Philippine Products Company, whereby the latter undertook to buy copra in the Philip-
pines for the account of Primateria Zurich, during "a tentative, experimental period of one month
from date". The contract was renewed by mutual agreement of the parties to cover an extended
period up to February 24, 1952, later extended to 1953. During such period, plaintiff caused the
shipment of copra to foreign countries, pursuant to instructions from defendant Primateria Zur-
ich, thru Primateria (Phil.) Inc., referred to hereafter as Primateria Philippines acting by
defendant Alexander G. Baylin and Jose M. Crame, officers of said corporation. As a result, the
total amount due to the plaintiff as of May 30, 1955, was P33,009.71.
At the trial, before the Manila court of first instance, it was proven that the amount due from
defendant Primateria Zurich, on account of the various shipments of copra, was P31,009.71, be-
cause it had paid P2,000.00 of the original claim of plaintiff. There is no dispute about accounting.
And there is no question that Alexander G. Baylin and Primateria Philippines acted as the duly
authorized agents of Primateria Zurich in the Philippines. As far as the record discloses, Baylin
acted indiscriminately in these transactions in the dual capacities of agent of the Zurich firm and
executive vice-president of Primateria Philippines, which also acted as agent of Primateria Zurich.
It is likewise undisputed that Primateria Zurich had no license to transact business in the Philip-
pines.
Issue: Assuming said entity to be a foreign corporation, whether it may be considered as having
transacted business in the Philippines within the meaning of said sections; and
3. If so, whether its agents may be held personally liable on contracts made in the name of the
entity with third persons in the Philippines.
Held: "ART. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his power. But there is no proof that, as agents, they exceeded the
limits of their authority. In fact, the principal Primateria Zurich who should be the one to
raise the point, never raised it, never denied its liability on the ground of excess of authority. At
any rate, the article does not hold that in case of excess of authority, both the agent and the prin-
cipal are liable to the other contracting party.
This view of the cause dispenses with the necessity of deciding the other two issues, namely:
whether the agent of a foreign corporation doing business, but not licensed here is personally
liable for contracts made by him in the name of such corporation. Although, the solution should
not be difficult, since we already held that such foreign corporation may be sued here . And obvi-
ously, liability of the agent is necessarily premised on the inability to sue the principal or non-
liability of such principal. In the absence of express legislation, of course.
9. NATIONAL POWER CORPORATION vs. NATIONAL MERCHANDISING CORPORATION and
DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES
Facts: Plaintiff National Power Corporation appealed on questions of law from the decision of the
Court of First Instance of Manila dated October 10, 1966, ordering defendants National Merchan-
dising Corporation and Domestic Insurance Company of the Philippines to pay solidarily to the
National Power Corporation reduced liquidated damages in the sum of P72,114.66 plus legal, rate
of interest from the filing of the complaint and the costs (Civil Case No. 33114). The two defend-
ants appealed from the same decision allegedly because it is contrary to law and the evidence. As
the amount originally involved is P360,572.80 and defendants' appeal is tied up with plaintiff's
appeal on questions of law, defendants' appeal can be entertained under Republic Act No. 2613
which amended section 17 of the Judiciary Law.
The National Power Corporation and National Merchandising Corporation (Namerco) of 3111
Nagtahan Street, Manila, as the representative of the International Commodities Corporation of
11 Mercer Street, New York City, executed in Manila a contract for the purchase by the NPC from
the New York firm of four thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant
in Iligan City at a total price of (450,716 (Exh. E).On that same date, a performance bond in the
sum of P90,143.20 was executed by the Domestic Insurance Company in favor of the NPC to guar-
antee the seller's obligations.
The New York supplier was not able to deliver the sulfur due to its inability to secure shipping
space. During the period from January 20 to 26, 1957 there was a shutdown of the NPC's fertilizer
plant because there was no sulfur. No fertilizer was produced. The Government Corporate Coun-
sel in his letter to Sycip dated May 8, 1957 rescinded the contract of sale due to the New York
supplier's non-performance of its obligations.
Held: We agree with the trial court that Namerco is liable for damages because under article 1897
of the Civil Code the agent who exceeds the limits of his authority without giving the party with
whom he contracts sufficient notice of his powers is personally liable to such party. The truth is
that even before the contract of sale was signed Namerco was already aware that its principal
was having difficulties in booking shipping space. In a cable dated October 16, 1956, or one day
before the contract of sale was signed, the New York supplier advised Namerco that the latter
should not sign the contract unless it (Namerco) wished to assume sole responsibility for the
shipment.
In support of that contention, the defendants cite article 1403 of the Civil Code which provides
that a contract entered into in the name of another person by one who has acted beyond his pow-
ers is unenforceable. We hold that defendants' contention is untenable because article 1403 re-
fers to the unenforceability of the contract against the principal. In the instant case, the contract
containing the stipulation for liquidated damages is not being enforced against it principal but
against the agent and its surety. It is being enforced against the agent because article 1807 implies
that the agent who acts in excess of his authority is personally liable to the party with whom he
contracted.
And that rule is complemented by article 1898 of the Civil Code which provides that "if the agent
contracts in the name of the principal, exceeding the scope of his authority, and the principal does
not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal. It is being enforced against the agent because arti-
cle 1897 implies that the agent who acts in excess of his authority is personally liable to the party
with whom he contracted.
And the rule is complemented by article 1898 of the Civil Code which provides that "if the agent
contracts in the name of the principal, exceeding the scope of his authority, and the principal does
not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal. As priorly discussed, Namerco, as agent, exceeded
the limits of its authority in contracting with the NPC in the name of its principal. The NPC was
unaware of the limitations on the powers granted by the New York firm to Namerco.
10. MARIANO A. ALBERT vs. UNIVERSITY PUBLISHING CO., INC.
Facts: Fifteen years ago, on September 24, 1949, Mariano A. Albert sued University Publishing
Co., Inc. Plaintiff alleged inter alia that defendant was a corporation duly organized and existing
under the laws of the Philippines; that on July 19, 1948, defendant, through Jose M. Aruego, its
President, entered into a contract with plaintiff; that defendant had thereby agreed to pay plain-
tiff P30,000.00 for the exclusive right to publish his revised Commentaries on the Revised Penal
Code and for his share in previous sales of the book's first edition; that defendant had undertaken
to pay in eight quarterly installments of P3,750.00 starting July 15, 1948; that per contract failure
to pay one installment would render the rest due; and that defendant had failed to pay the second
installment. Defendant admitted plaintiff's allegation of defendant's corporate existence; admit-
ted the execution and terms of the contract dated July 19, 1948; but alleged that it was plaintiff
who breached their contract by failing to deliver his manuscript. Furthermore, defendant coun-
terclaimed for damages.Plaintiff died before trial and Justo R. Albert, his estate's administrator,
was substituted for him.
Defendant admitted plaintiff's allegation of defendant's corporate existence; admitted the execu-
tion and terms of the contract dated July 19, 1948; but alleged that it was plaintiff who breached
their contract by failing to deliver his manuscript. Furthermore, defendant counterclaimed for
damages.
The fact of non-registration of University Publishing Co., Inc., in the Securities and Exchange Com-
mission has not been disputed. Defendant would only raise the point that "University Publishing
Co., Inc.," and not Jose M. Aruego, is the party defendant; thereby assuming that "University Pub-
lishing Co., Inc." is an existing corporation with an independent juridical personality. Precisely,
however, on account of the non-registration it cannot be considered a corporation, not even a
corporation de facto (Hall vs. Piccio, 86 Phil. 603. It has therefore no personality separate from
Jose M. Aruego; it cannot be sued independently.
Held: 2. ID.; PERSON ACTING FOR CORPORATION WITH NO VALID EXISTENCE IS PERSONALLY
LIABLE FOR CONTRACTS ENTERED INTO AS SUCH AGENT. A person acting or purporting to
act on behalf of a corporation which has no valid existence assumes each privileges and obliga-
tions and becomes personally liable for contracts entered into or for other acts performed as such
agent.
In a suit against a corporation with no valid existence the person who had and exercised the rights
to control the proceedings, to make defense, to adduce and cross-examine witnesses, and to ap-
peal from a decision, is the real defendant, and the enforcement of a judgment against the corpo-
ration upon him is substantial observance of due process of law.
The evidence is patently clear that Jose M. Aruego, acting as representative of a non-existent prin-
cipal, was the real party to the contract sued upon; that he was the one who reaped the benefits
resulting from it, so much so that partial payments of the consideration were made by him; that
he violated its terms, thereby precipitating the suit in question; and that in the litigation he was
the real defendant. Perforce, in line with the ends of justice, responsibility under the judgment
falls on him.
We need hardly state that should there be persons who under the law are liable to Aruego for
reimbursement or contribution with respect to the payment he makes under the judgment in
question, he may, of course, proceed against them through proper remedial measures.
11. Eugenio vs Court of Appeals
Facts: Private respondent Pepsi-Cola Bottling Company of the Philippines, Inc. is engaged in the
business of manufacturing, making bottling and selling soft drinks and beverages to the general
public. Petitioner Nora S. Eugenio was a dealer of the soft drink products of private Respondent
Corporation. Although she had only one store Eugenio had a regular charge account in both the
Quezon City plant (under the name "Abigail Minimart" *) as well as in the Muntinlupa plant (un-
der the name "Nora Store") of respondent corporation. Her husband and co-petitioner, Alfredo Y.
Eugenio, used to be a route manager of private respondent in its Quezon City plant. On March 17,
1982, private respondent filed a complaint for a sum of money against petitioners Nora S. Eugenio
and Alfredo Y. Eugenio, docketed as Civil Case No. Q-34718 of the then Court of First Instance of
Quezon City, Branch 9 (now Regional Trial Court, Quezon City, Branch 97). In its complaint, re-
spondent corporation alleged that on several occasions in 1979 and 1980, petitioners purchased
and received on credit various products from its Quezon City plant. As of December 31, 1980,
petitioners allegedly had an outstanding balance of P20,437.40 therein. Likewise, on various oc-
casions in 1980, petitioners also purchased and received on credit various products from re-
spondent's Muntinlupa plant and, as of December 31, 1989, petitioners supposedly had an out-
standing balance of P38,357.20 there. In addition, it was claimed that petitioners had an unpaid
obligation for the loaned "empties" from the same plant in the amount of P35,856.40 as of July
11, 1980. Altogether, petitioners had an outstanding account of P94,651.00 which, so the com-
plaint alleged, they failed to pay despite oral and written demands. In their defense, petitioners
presented four trade provisional receipts (TPRs) allegedly issued to and received by them from
private respondent's Route Manager Jovencio Estrada of its Malate Warehouse (Division 57),
showing payments in the total sum of P80,500.00 made by Abigail's Store. Petitioners contended
that had the amounts in the TPRs been credited in their favor, they would not be indebted to
Pepsi-Cola.
Further, petitioners maintain that the signature purporting to be that of petitioner Nora S. Eu-
genio in Sales Invoice No. 85366 dated May 15, 1980 in the amount of P5,631.00, 3 which was
included in the computation of their alleged debt, is a falsification. In sum, petitioners argue that
if the aforementioned amounts were credited in their favor, it would be respondent corporation
which would be indebted to them in the sum of P3,546.02 representing overpayment.After trial
on the merits, the court a quo rendered a decision on February 17, 1986, ordering petitioners, as
defendants therein to jointly and severally pay private respondent.
Issue: whether or not the amounts in the aforementioned trade provisional receipts should be
credited in favor of herein petitioner spouses.
Held: These trade provisional receipts are bound and given in booklets to the company sales
representatives, under proper acknowledgment by them and with a record of the distribution
thereof. After every transaction, when a collection is made the customer is given by the sales rep-
resentative a copy of the trade provisional receipt, that is, the triplicate copy or customer's copy,
properly filled up to reflect the completed transaction. All unused TPRs, as well as the collections
made, are turned over by the sales representative to the appropriate company officer. According
to respondent court, "the questioned TPR's are merely 'provisional' and were, as printed at the
bottom of said receipts, to be officially confirmed by plaintiff within fifteen (15) days by deliver-
ing the original copy thereof stamped paid and signed by its cashier to the customer. . . . Defend-
ants-appellants (herein petitioners) failed to present the original copies of the TPRs in question,
showing that they were never confirmed by the plaintiff, nor did they demand from plaintiff the
confirmed original copies thereof." 36
We do not agree with the strained implication intended to be adverse to petitioners. The TPRs
presented in evidence by petitioners are disputably presumed as evidentiary of payments made
on account of petitioners. Besides, even assuming arguendo that herein private respondent's
cashier never received the amounts reflected in the TPRs, still private respondent failed to prove
that Estrada, who is its duly authorized agent with respect to petitioners, did not receive those
amounts from the latter. As correctly explained by petitioners, "in so far as the private respond-
ent's customers are concerned, for as long as they pay their obligations to the sales representative
of the private respondent using the latter's official receipt, said payment extinguishes their obli-
gations." 38 Otherwise, it would unreasonably cast the burden of supervision over its employees
from respondent corporation to its customers.
The substantive law is that payment shall be made to the person in whose favor the obligation
has been constituted, or his successor-in-interest or any person authorized to receive it. 39 As far
as third persons are concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such is within the terms of the power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority according to an understanding between the prin-
cipal and his agent. 40 In fact, Atty. Rosario, private respondent's own witness, admitted that "it
is the responsibility of the collector to turn over the collection." Private respondent Pepsi-Cola
Bottling Company of the Philippines, Inc. is hereby ORDERED to pay petitioners Nora and Alfredo
Eugenio the amount of P5,710.60 representing overpayment made to the former.
12. Green Valley Poultry & Allied Products, Inc. vs. Intermediate Appellate Court
Facts: On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of
which reads as follows:
"E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied
Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products, as recommended by
Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor.
"As a distributor; Green Valley Poultry & Allied Products, Inc. will be entitled to a discount as
follows:
For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as
aforesaid gave judgment in favor of Squibb which was affirmed by the Court of Appeals.In both
the trial court and the Court of Appeals, the parties advanced their respective theories. prLL
Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never pur-
chased goods from Squibb; that the goods received were on consignment only with the obligation
to turn over the proceeds, less its commission, or to return the goods if not sold, and since it had
sold the goods but had not been able to collect from the purchasers thereof, the action was prem-
ature.Upon the other hand. Squibb claimed that the contract was one of sale so that Green Valley
was obligated to pay for the goods received upon the expiration of the 60-day credit period.Both
courts below upheld the claim of Squibb that the agreement between the parties was a sales con-
tract.
Ruling: We do not have to categorize the contract. Whether viewed as an agency to sell or as a
contract of sale, the liability of Green Valley is indubitable. Adopting Green Valley's theory that
the contract is an agency to sell, it is liable because it sold on credit without authority from its
principal. The Civil Code has a provision exactly in point. It reads: "Art. 1905. The commission
agent cannot, without the express or implied consent of the principal, sell on credit. Should he do
so, the principal may demand from him payment in cash, but the commission.
13. Metropolitan Bank Trust Co. vs. Court of Appeals
Facts: The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the
Philippines and even abroad. Golden Savings and Loan Association was, at the time these events
happened, operating in Calapan, Mindoro, with the other private respondents as its principal of-
ficers. In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and
deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37.
They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its
General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez
while the others appeared to have been indorsed by their respective payees, followed by Gomez
as second indorser. On various dates between June 25 and July 16, 1979, all these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings
Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing
by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing.
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times
to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was
meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Glo-
ria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it
finally decided to allow Golden Savings to withdraw from the proceeds of thewarrants. 3The first
withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979,
in the amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The
total withdrawal was P968.000.00.
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account,
eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently
cleared warrants. The last withdrawal was made on July 16, 1979.On July 21, 1979, Metrobank
informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury
on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously
withdrawn, to make up the deficit in its account.The demand was rejected. Metrobank then sued
Golden Savings in the Regional Trial Court of Mindoro. 5 After trial, judgment was rendered in
favor of Golden Savings, which, however, filed a motion for reconsideration even as Metrobank
filed its notice of appeal. On November 4, 1986, the lower court modified its decision. On appeal
to the respondent court, 6 the decision was affirmed, prompting Metrobank to file this petition
for review on the following grounds:
Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual
terms and conditions on the deposit slips allowing Metrobank to charge back any amount erro-
neously credited. (b) Until such time as Metrobank is actually paid, its obligation is that of a
mere collecting agent which cannot be held liable for its failure to collect on the warrants
Issue: WON Metrobanks obligation was that only of a mere collecting agent.
Held: No. Metrobank exhibited extraordinary carelessness. The amount involved was not trifling
more than one and a half million pesos (and this was 1979). There was no reason why it should
not have waited until the treasury warrants had been cleared; it would not have lost a single
centavo by waiting. Yet, despite the lack of such clearance and notwithstanding that it had not
received a single centavo from the proceeds of the treasury warrants, as it now repeatedly
stresses it allowed Golden Savings to withdraw not once, not twice, but thrice from the
uncleared treasury warrants in the total amount of P968,000.00 Its reason? It was "exasperated"
over the persistent inquiries of Gloria Castillo about the clearance and it also wanted to "accom-
modate" a valued client. It "presumed" that the warrants had been cleared simply because of "the
lapse of one week." 8 For a bank with its long experience, this explanation is unbelievably naive.
In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to
be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On
the contrary, Article 1909 of the Civil Code clearly provides that Art. 1909. The agent is re-
sponsible not only for fraud, but also for negligence, which shall be judged 'with more or less rigor
by the courts, according to whether the agency was or was not for a compensation.
The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the
clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw
the proceeds of the treasury warrants he had deposited Metrobank misled Golden Savings. There
may have been no express clearance, as Metrobank insists (although this is refuted by Golden
Savings) but in any case that clearance could be implied from its allowing Golden Savings to with-
draw from its account not only once or even twice but three times. The total withdrawal was in
excess of its original balance before the treasury warrants were deposited, which only added to
its belief that the treasury warrants had indeed been cleared.
C. Obligations of the Principal
1. Prudential Bank vs. Court of Appeals 223 SCRA 350
Facts: The complaint in this case arose when private respondent Aurora F. Cruz, * with her sister
as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential Bank at its branch
in Quezon Avenue, Quezon City, on June 23, 1986. The placement was for 63 days at 13.75% an-
nual interest. For this purpose, the amount of P196,122.88 was withdrawn from the depositors'
Savings Account No. 2546 and applied to the investment. The transaction was evidence by a Con-
firmation of Sale 1 delivered to Cruz two days later, together with a Debit Memo 2 in the amount
withdrawn and applied to the confirmed sale. These documents were issued by Susan Quimbo,
the employee of the bank to whom Cruz was referred and who was apparently in charge of such
transactions. Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to
"roll-over" or renew her investment, Quimbo, who again attended to her, prepared a Credit Memo
4 crediting the amount of P200,000.00 in Cruz's savings account passbook. She also prepared a
Debit Memo for the amount of P196,122.88 to cover the re-investment of P200,000.00 minus the
prepaid interest of P3,877.02. 5
This time, Cruz was asked to sign a Withdrawal Slip 6 for P196,122.98, representing the amount
to be re-invested after deduction of the prepaid interest. Quimbo explained this was a new re-
quirement of the bank. Several days later, Cruz received another Confirmation of Sal 7 and a copy
of the Debit Memo. 8
On October 27, 1986, Cruz returned to the bank and sought to withdraw her P200,000.00. After
verification of her records, however, she was informed that the investment appeared to have
been already withdrawn by her on August 25, 1986. There was no copy on file of the Confirmation
of Sale and the Debit Memo allegedly issued to her by Quimbo by Quimbo. Quimbo herself was
not available for questioning as she had not been reporting for the past week. Shocked by this
information, Cruz became hysterical and burst into tears. The branch manager, Roman Santos,
assured her that he would look into the matter. Every day thereafter, Cruz went to the bank to
inquire about her request to withdraw her investment. She received no definite answer, not even
to the latter she wrote the bank which was received by Santos himself. 10 Finally, Cruz sent the
bank a demand letter dated November 12, 1986 for the amount of P200,000.00 plus interest. 11
In a reply dated November 20, 1986, the bank's Vice President Lauro J. Jocson said that there
appeared to be an anomaly and requested Cruz to defer court action as they hoped to settle the
matter amicably. 12 Increasingly worried, Cruz sent another letter reiterating her demand. 13
This time the reply of the bank was unequivocal and negative. She was told that her request had
to be denied because she had already withdrawn the amount she was claiming. 14 Cruz's reaction
was to file a complaint for breach of contract against Prudential Bank in the Regional Trial Court
of Quezon City. She demanded the return of her money with interest, plus damages and attorney's
fees. In its answer, the bank denied liability, insisting that Cruz had withdrawn her investment.
The bank also instituted a third-party complaint against Quimbo, who did not file an answer and
was declared in default. ACCORDINGLY, judgment is hereby rendered ordering the defend-
ant/third-party plaintiff to pay to the plaintiffs the following amounts, which was affirmed by the
CA.
Issue: WON the bank is liable.
Held: Yes. There is no question that the petitioner was made liable for its failure or refusal to
deliver to Cruz the amount she had deposited with it and which she had a right to withdraw upon
its maturity. That investment was acknowledged by its own employees, who had the apparent
authority to do so and so could legally bind it by its acts vis-a-vis Cruz. Whatever might have
happened to the investment whether it was lost or stolen by whoever was not the concern
of the depositor. It was the concern of the bank.As far as Cruz was concerned, she had the right
to withdraw her P200,000.00 placement when it matured pursuant to the terms of her invest-
ment as acknowledged and reflected in the Confirmation of Sale. The failure of the bank to deliver
the amount to her pursuant to the Confirmation of Sale constitute its breach of their contract, for
which it should be held liable.The liability of the principal for the acts of the agent is not even
debatable. Law and jurisprudence are clearly and absolutely against the petitioner.Such liability
dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He who
does a thing by an agent is considered as doing it himself." This rule is affirmed by the Civil Code
thus:"Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with
the agent if the former allowed the latter to act as though he had full powers.
Conformably, we have declared in countless decisions that the principal is liable for obligations
contracted by the agent. The agent's apparent representation yields to the principal's true repre-
sentation and the contract is considered as entered into between the principal and the third per-
son. Application of these principles is especially necessary because banks have a fiduciary rela-
tionship with the public and their stability depends on the confidence of the people in their hon-
esty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selec-
tion and supervision of its employees, resulting in prejudice to their depositors.
2. Cuison vs. Court of Appeals
Facts: Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of news-
print, bond paper and scrap, with places of business at Baesa, Quezon City, and Sto. Cristo, Bi-
nondo, Manila. Private respondent Valiant Investment Associates, on the other hand, is a partner-
ship duly organized and existing under the laws of the Philippines with business address at Ka-
lookan City. From December 4, 1979 to February 15, 1980, private respondent delivered various
kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The de-
liveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was
then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions
that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchan-
dise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac
issued nine (9) postdated checks to private respondent as payment for the paper products. Un-
fortunately, sad checks were later dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay for the merchan-
dise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the manager of
his Binondo office, to enter into the questioned transactions with private respondent and Lilian
Tan. Petitioner denied any involvement in the transaction entered into by Tiu Huy Tiac and re-
fused to pay private respondent the amount corresponding to the selling price of the subject mer-
chandise.Left with no recourse, private respondent filed an action against petitioner for the col-
lection of P297,487.30 representing the price of the merchandise. After due hearing, the trial
court dismissed the complaint against petitioner for lack of merit. On appeal, however, the deci-
sion of the trial court was modified, but was in effect reversed by the Court of Appeals.
Issue: whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to
hold the latter liable for the disputed transaction.
Held: It is a well-established rule that one who clothes another with apparent authority as his
agent and holds him out to the public as such cannot be permitted to deny the authority of such
person to act as his agent, to the prejudice of innocent third parties dealing with such person in
good faith and in the honest belief that he is what he appears to be. It is evident from the records
that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the manager
of his store in Sto. Cristo, Binondo, Manila. More particularly, petitioner explicitly introduced Tiu
Huy Tiac to Bernardino Villanueva, respondent's manager, as his (petitioner's) branch manager
as testified to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager of peti-
tioner's Sto. Cristo, Binondo branch. This general perception of Tiu Huy Tiac as the manager of
petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in the
community to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted
his close relationship with Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54).
There was thus no reason for anybody especially those transacting business with petitioner to
even doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo branch. By his
representations, petitioner is now estopped from disclaiming liability for the transaction entered
by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional or
merely negligent so long as innocent, third persons relied upon such representations in good faith
and for value.
"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent
if the former allowed the latter to act as though he had full powers." (Emphasis supplied).
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such
a situation, both the principal and the agent may be considered as joint tortfeasors whose liability
is joint and solidary.
D. Modes of Extinguishment of Agency
1. Rallos vs Felix GoChan (Medyo mahaba na case)
Facts: Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of
a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu. On April 21, 1954, the
sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing
him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. September
12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot
5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. On May 18, 1956
Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint dock-
eted as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the
undivided share of the deceased Concepcion Rallos in lot 5983 be declared unenforceable, and
said share be reconveyed to her estate; (2) that the Certificate of Title issued in the name of Felix
Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided shares. The trial
court declared the sale null and void. The appellate tribunal, as adverted to earlier, resolved the
appeal on November 20, 1964 in favor of the appellant corporation sustaining the sale in ques-
tion. Before proceeding to the issues, We shall briefly restate certain principles of law relevant to
the matter under consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in
the name of another without being authorized by the latter, or unless he has by law a
right to represent him. 3 A contract entered into in the name of another by one who
has no authority or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on whose be-
half it has been executed, before it is revoked by the other contracting party. 4 Article
1403 (1) of the same also provides. Out of the above given principles, sprung the cre-
ation an acceptance of the relationship of agency whereby one party, called the princi-
pal (mandante), authorizes another, called the agent (mandatario), to act for find in his
behalf in transactions with third persons. The essential elements of agency are: (1)
there is consent, express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agents acts
as a representative and not for himself; and (4) the agent acts within the scope of his
authority. 5
Agency is basically personal, representative, and derivative in nature. The authority of
the agent to act emanates from the powers granted to him by his principal; his act is
the act of the principal if done within the scope of the authority. Qui facit per alium
facit per se. "He who acts through another acts himself." 6
2. There are various ways of extinguishing agency, 7 but here We are concerned only with
one cause death of the principal: Paragraph 3 of Art. 1919 of the Civil Code which
was taken from Art. 1709 of the Spanish Civil Code provides:
"ART. 1919. Agency is extinguished: "3. By the death, civil interdiction, insanity or in-
solvency of the principal or of the agent;
3. Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule
aforementioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the
agent, or in the interest of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge the death of the principal
or of any other cause which extinguishes the agency, is valid and shall be fully effective
with respect to third persons who may have contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of attorney executed
in favor of Simeon Rallos was not coupled with an interest.
Ruling: Article 1931 is the applicable law. Under this provision, an act done by the agent after the
death of his principal is valid and effective only under two conditions, viz: (1) that the agent acted
without knowledge of the death of the principal, and (2) that the third person who contracted
with the agent himself acted in good faith. Good faith here means that the third son was not aware
of the death of the principal at the time he contracted with said agent. These two requisites must
concur: the absence of one will render the act of the agent invalid unenforceable.In the instant
case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at
the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of
the death is clearly to be inferred from the pleadings filed by Simeon Rallos before the trial court.
12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the
court a quo 13 and of respondent appellate court when the latter stated that Simeon Rallos "must
have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of
both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corpo-
ration) of the death of the former." 14
On the basis of the established knowledge of Simeon Rallos concerning the death of his principal,
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for
its application lack of knowledge on the part of the agent of the death of his principal; it is not
enough that the third person acted in good faith. That being the general rule it follows a fortiori
that any act o an agent after the death of his principal is void ab initio unless the same falls under
the exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931, being
an exception to the general rule, is to be strictly construed; it is not to be given an interpretation
or application beyond the clear import of its terms for otherwise the courts will be involved in a
process of legislation outside of their judicial function. We stressed that by reason of the very
nature of the relationship between principal and agent, agency is extinguished ipso jure upon the
death of either principal or agent. Although a revocation of a power of attorney to be effective
must be communicated to the parties concerned, 18 yet a revocation by operation of law, such as
by death of the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the
agent's exercise of authority is regarded as an execution of the principal's continuing will." 19
With death, the principal's will ceases or is terminated; the source of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal.
What the Code provides in Article 1932 is that, if the agent dies, his heirs must notify the principal
thereof, and in the meantime adopt such measures as the circumstances may demand in the in-
terest of the latter. Hence, the fact that no notice of the death of the principal was registered on
the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause
of the estate of the principal.
2. Diolosa vs CA
Facts: This case originated in the then Court of First Instance of Iloilo where private respondents
instituted a case of recovery of unpaid commission against petitioners over some of the lots sub-
ject of an agency agreement that were not sold. That the plaintiff was and still is a licensed real
estate broker, and as such licensed real estate broker on June 20, 1968, an agreement was entered
into between him as party of the second part and the defendants spouses as party of the first part,
whereby the former was constituted as exclusive sales agent of the defendants, its successors,
heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE
SUBDIVISION owned by the defendants. the plaintiff acted for and in behalf of the defendants as
their agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION; "2. That on Sep-
tember 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales agent
per letter marked as Exhibit "B", for the reason stated in the latter.
Issue: whether the petitioners could terminate the agency agreement without paying damages to
the private respondent.
Ruling: Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dis-
pose of, sell, cede, transfer and convey . . . until all the subject property as subdivided is fully
disposed of." The authority to sell is not extinguished until all the lots have been disposed of.
When, therefore, the petitioners revoked the contract with private respondent in a letter they
become liable to the private respondent for damages for breach of contract. grounds specified in
Articles 1381 and 1382 of the Civil Code. In the case at bar, not one of the grounds mentioned
above is present which may be the subject of an action of rescission, much less can petitioners
say that the private respondent violated the terms of their agreement such as failure to deliver
to them (Subdivision owners) the proceeds of the purchase price of the lots.
3. Philippine National Bank vs. Intermediate Appellate Court
Facts: On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB,
San Carlos Branch, over a lot registered in her name under TCT No. T-31913 to secure the pay-
ment of a sugar crop loan of P3,400. Later, Leticia Sepe, acting as attorney-in-fact for her brother-
in-law, private respondent Romeo Alcedo, executed an amended real estate mortgage to include
his (Alcedo's) Lot No. 1626 as additional collateral for Sepe's increased loan of P16,500. eticia
Sepe and private respondent Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the
loan. but failing to receive his one-half share from her, Alcedo wrote a letter on May 12, 1970 to
the PNB, San Carlos Branch, revoking the Special Power of Attorney which he had given to Leticia
Sepe to mortgage his Lot No. 1626. Replying on May 22, 1970, the PNB Branch Manager, Jose T.
Gellegani advised Alcedo that his land had already been included as collateral for Sepe's 1970-71
sugar crop loan, which the latter had already availed of, nevertheless, he assured Alcedo that the
bank would exclude his lot as collateral for Sepe's forthcoming (1971-72) sugar crop loan. On the
same day, May 22, 1970, PNB advised Sepe in writing to replace Lot No. 1402 with another col-
lateral of equal or higher value. Despite the above advice from PNB, Sepe was still able to obtain
an additional loan from PNB increasing her debt of P 16,500 to P56,638.69 on the security of
Alcedo's property as collateral. On January 15, 1974, Alcedo received two (2) letters from PNB:
(1) informing him of Sepe's failure to pay her loan in the total amount of P 56,638.69; and (2)
giving him six (6) days to settle Sepe's outstanding obligation, as otherwise, foreclosure proceed-
ings would be commenced against his property. Alcedo requested Sepe to pay her accounts to
forestall foreclosure proceedings against his property, but to no avail. On April 17, 1974, Alcedo
sued Sepe and PNB in the Court of First Instance of Negros Occidental for collection and injunc-
tion with damages. During the pendency of the case, PNB filed in the Office of the Sheriff at Pasig,
Metro Manila, a petition for extrajudicial foreclosure of its real estate mortgage on Alcedo's land.
On November 19, 1974, the property was sold to PNB as the highest bidder in the sale. The cor-
responding Sheriffs Certificate of Sale was issued to the Bank. On October 18, 1975, Alcedo filed
an amended complaint against Leticia and her husband Elias Sepe, and the Provincial Sheriff of
Negros Occidental praying additionally for annulment of the extrajudicial foreclosure sale and
reconveyance of the land to him free from liens and encumbrances, with damages. In its answer,
PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to split the
crop loan proceeds between them. It required Sepe to put up other collaterals when it granted
her an additional loan because Alcedo informed the Bank that he was revoking the Special Power
of Attorney he gave Sepe; that the revocation was not formalized in accordance with law; and that
in any event, the revocation of the Special Power of Attorney on May 12, 1970 by Alcedo did not
impair the real estate mortgage earlier executed on April 28, 1969 by Sepe in favor of the Bank.
Issue: whether or not PNB validly foreclosed the real estate mortgage on Alcedo's property de-
spite notice of Alcedo's revocation of the Special Power of Attorney authorizing Leticia Sepe to
mortgage his property as security for her sugar crop loans and despite the Bank's written assur-
ance to Alcedo that it would exclude his property as collateral for Sepe's future loan obligations.
Held: We agree with the opinion of the appellate court that under the doctrine of promissory
estoppel the act and assurance given by the PNB to Alcedo "that we shall exclude the aforemen-
tioned lot [Lot No. 1402] as a collateral of Leticia de la Vina-Sepe in our recommendation for her
1971-72 sugar crop loan" (p. 37, Rollo) is binding on the bank. Having given that assurance, the
bank may not turn around and do the exact opposite of what it said it would not do. One may not
take inconsistent positions.
While Article 1358 of the New Civil Code requires that the revocation of Alcedo's Special Power
of Attorney to mortgage his property should appear in a public instrument:Art. 1358. The follow-
ing must appear in a public document:
(1) Acts or contracts which have for their object the creation, transmission, modification or ex-
tinguishment of real rights over immovable property; sales of real property or of an interest
therein are governed by Articles 1403, No. 2 and 1405.
nevertheless, a revocation embodied in a private writing is valid and binding between the parties
The legalization by a public writing and the recording of the same in the registry are not essential
requisites of a contract entered into, as between the parties, but mere conditions of form or so-
lemnities which the law imposes in order that such contract may be valid as against third persons,
and to insure that a publicly executed and recorded agreement shall be respected by the latter.
The PNB acted with bad faith in proceeding against Alcedo's property to satisfy Sepe's unpaid
1971-72 sugar crop loan. The extrajudicial foreclosure being null and void ab initio, the certificate
of sale which the Sheriff delivered to PNB as the highest bidder at the sale is also null and void.
4. Dy Buncio & Co vs Ong Guan Can (This the full text; really short case)
Facts: This is a suit over a rice-mill and camarin situated at Dao, Province of Capiz. Plaintiff claims
that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan Tong and
Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by
Ong Guan Can, Jr.After trial the Court of First Instance of Capiz held that the deed was invalid and
that the property was subject to the execution which had been levied on said properties by the
judgment creditor of the owner. Defendants Juan Tong and Pua Giok Eng bring this appeal and
insist that the deed of the 31st of July, 1931, is valid.
The First recital of the deed is that Ong Guan Can, jr., as agent of Ong Guan Can, the proprietor of
the commercial firm of Ong Guan Can & Sons, sells the rice-mill and camarin for P13,000 and gives
as his authority the power of attorney dated the 23d of May, 1928, a copy of this public instrument
being attached to the deed and recorded with the deed in the office of the register of deeds of
Capiz. The receipt of the money acknowledged in the deed was to the agent, and the deed was
signed by the agent in his own name and without any words indicating that he was signing it for
the principal.
Ruling: Leaving aside the irregularities of the deed and coming to the power of attorney referred
to in the deed and registered therewith, it is at once seen that it is not a general power of attorney
but a limited one and does not give the express power to alienate the properties in question. (Ar-
ticle 1713 of the Civil Code.)
Appellants claim that this defect is cured by Exhibit 1, which purports to be a general power of
attorney given to the same agent in 1920. Article 1732 of the Civil Code is silent over the partial
termination of an agency. The making and accepting of a new power of attorney, whether it en-
larges or decreases the power of the agent under a prior power of attorney, must be held to sup-
plant and revoke the latter when the two are inconsistent. If the new appointment with limited
powers does not revoke the general power of attorney, the execution of the second power of at-
torney would be a mere futile gesture.
The title of Ong Guan Can not having been divested by the so- called deed on July 31, 1931, his
properties are subject to attachment and execution. The judgment appealed from is therefore
affirmed. Costs against appellants. So ordered.
5. Infante vs Cunanan (Almost the full text)
Facts: Consejo Infante, defendant herein, was the owner of two parcels of land, together with a
house built thereon, situated in the City of Manila and covered by Transfer Certificate of Title No.
61786. On or before November 30, 1948, she contracted the services of Jose Cunanan and Juan
Mijares, plaintiffs herein, to sell the above-mentioned property for a price of P30,000 subject to
the condition that the purchaser would assume the mortgage existing thereon in favor of the Re-
habilitation Finance Corporation. She agreed to pay them a commission of 5 per cent on the pur-
chase price plus whatever overprice they may obtain for the property. Plaintiffs found one Pio S.
Noche who was willing to buy the property under the terms agreed upon with defendant, but
when they introduced him to defendant, the latter informed them that she was no longer inter-
ested in selling the property and succeeded in making them sign a document stating therein that
the written authority she had given them was already cancelled. However, on December 20, 1948,
defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon learning
this transaction, plaintiffs demanded from defendant the payment of their commission, but she
refused and so they brought the present action. Defendant admitted having contracted the ser-
vices of the plaintiffs to sell her property as set forth in the complaint, but stated that she agreed
to pay them a commission of P1,200 only on condition that they buy her a property somewhere
in Taft Avenue to where she might transfer after selling her property. Defendant avers that while
plaintiffs took steps to sell her property as agreed upon, they sold the property at Taft Avenue to
another party and because of this failure it was agreed that the authority she had given them be
cancelled. There is no dispute that respondents were authorized by petitioner to sell her property
for the sum of P30,000 with the understanding that they will be given a commission of 5 percent
plus whatever overprice they may obtain for the property. Petitioner, however, contends that
that authority has already been withdrawn on November 30, 1948 when, by the voluntary act of
respondents, they executed a document stating that said authority shall be considered cancelled
and without any effect, so that when petitioner sold the property to Pio S. Noche on December
20, 1948, she was already free from her commitment with respondents and, therefore, was not
in duty bound to pay them any commission for the transaction.
If the facts were as claimed by petitioner, there is indeed no doubt that she would have no obli-
gation to pay respondents the commission which was promised them under the original author-
ity because, under the old Civil Code, her right to withdraw such authority is recognized. A prin-
cipal may withdraw the authority given to an agent at will. (Article 1733.) But this fact is disputed.
Thus, respondents claim that while they agreed to cancel the written authority given to them,
they did so merely upon the verbal assurance given by petitioner that, should the property be
sold to their own buyer, Pio S. Noche, they would be given the commission agreed upon. True,
this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the other
hand, it is disputed by petitioner, but respondents were allowed to present oral evidence to prove
it, and this is now assigned as error in this petition for review.
Ruling: Oral evidence is presented to the effect that while the agents agreed to cancel the written
authority given them by their principal, they did so merely upon the principal's verbal assurance
that, should the property subject of their contract of agency be sold to their own buyer, they
would be given the commission agreed upon. The cancellation of the written authority being in
writing, parole evidence is not admissible under section 22 of Rule 123. If there is other evidence
which would justify the agents' claim for commission, even if such parol evidence is disregarded,
they are entitled to such commission. The principal took advantage of the agents' services con-
sisting in locating a buyer for the principal's land. The principal, perhaps by stratagem, advised
the agents that she was no longer interested in the deal and was able to prevail upon them to sign
a document agreeing to the cancellation of the written authority she had originally given the
agents, believing that she could evade payment of their commission. Then she sold the property
to the buyer found by the agents. The principals act is unfair as would amount to bad faith, and
cannot be sanctioned without according to the agents the reward which is due them.
6. VICENTE M. COLEONGCO vs. EDUARDO L. CLAPAROLS
Facts: Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the manufac-
ture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The
raw material, nail wire, was imported from foreign sources, specially from Belgium; and Claparols
had a regular dollar allocation therefor, granted by the Import Control Commission and the Cen-
tral Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which
was owned by a chinaman named Kho To. Losses compelled Claparols in 1953 to look for some-
one to finance his imports of nail wire. At first, Kho To agreed to do the financing, but on April 25,
1953, the Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee, rec-
ommending said appellant to be the financier in the stead of Kho To. Claparols agreed, and on
April 25 of that year a contract (Exhibit B) was perfected between them whereby Coleongco un-
dertook to finance and put up the funds required for the importation of the nail wire, which Clapa-
rols bound himself to convert into nails at his plant. It was agreed that Coleongco would have the
exclusive distribution of the product, and the "absolute care in the marketing of these nails and
the promotion of sales all over the Philippines", except the Davao Agency; that Coleongco would
"share the control of all the cash" from sales or deposited in banks; that he would have a repre-
sentative in the management; that all contracts and transactions should be jointly approved by
both parties; that proper books would be kept and annual accounts rendered; and that profits
and losses would be shared "on a 50-50 basis". The contract was renewed from year to year until
1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory.
Two days after the execution of the basic agreement, Claparols executed in favor of Coleongco, at
the latter's behest, a special power of attorney (Exhibit C) to open and negotiate letters of credit,
to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee
and the nail factory; and to accept payments and cash advances from dealers and distributors.
Thereafter, Coleongco also became the assistant manager of the factory, and took over its busi-
ness transactions, while Claparols devoted most of his time to the nail manufacture processes.
Around mid-November of 1956, appellee Claparols was disagreeably surprised by service of an
alias writ of execution to enforce a judgment obtained against him by the Philippine National
Bank, despite the fact that on the preceding September he had submitted an amortization plan to
settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the
bank authorities. Upon arrival, he learned to his dismay that the execution had been procured
because of derogatory information against appellee that had reached the bank from his associate,
appellant Coleongco.
Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy
lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he consulted lawyers.
The upshot was that appellee revoked the power of attorney (Exhibit "C"), and informed Cole-
ongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same time.
Coleongco, as would be expected, protested these acts of Claparols, but the latter insisted, and on
the first of January, 1957 wrote a letter to Coleongco dismissing him as assistant manager of the
plant and asked C. Miller & Company, auditors, to go over the books and records of the business
with a view to adjusting the accounts of the associates.
As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols
charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and
attorney's fees, to which Claparols answered, denying the charge, and counterclaiming for the
rescission of the agreement with Coleongco for P561,387.39 by way of damages.
Issue: won appellee Claparols had no legal power to revoke the special power of attorney
Held: it must not be forgotten that a power of attorney can be made irrevocable by contract only
in the sense that the principal may not recall it at his pleasure; but coupled with interest or not,
the authority certainly can be revoked for a just cause, such as when the attorney- in-fact betrays
the interest of the principal, as happened in this case. It is not open to serious doubt that the
irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad
faith, breach of confidence, or betrayal of trust, by the agent, for that would amount to holding
that a power, coupled with an interest authorizes the agent to commit frauds against the princi-
pal. Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that re-
sponsibility arising from fraud is demandable in all obligations, and that any waiver of action for
future fraud is void. It is also on this principle that the Civil Code, in its Article 1800, declares that
the powers of a partner, appointed as manager, in the articles of copartnership are irrevocable
without just or lawful cause; and an agent with power coupled with an interest can not stand on
better ground than such a partner in so far as irrevocability of the power is concerned.
That the appellant Coleongco acted in bad faith towards his principal Claparols is, on the record,
unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36) attempting to
undermine the credit of the principal and to acquire the factory of the latter, without the princi-
pal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to
reduce to one-half the usual monthly advances to Claparols on account of nail sales in order to
squeeze said appellee and compel him to extend the contract entitling Coleongco to share in the
profits of the nail factory in better terms, and ultimately "own his factory", a plan carried out by
Kho's letter, Exhibit "33", reducing the advances to Claparols; Coleongco's attempt to have
Romulo Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to his
own benefit; and the surreptitious disposition of the Yates band resaw machine in favor of his
cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956,
are plain acts of deliberate sabotage by the agent that fully justified the revocation of the power
of attorney (Exhibit "C") by Claparols and his demand for an accounting from his agent Coleongco.
Appellant attempts to justify his letters to the Philippine National Bank (Exhibits 35 and 36),
claiming that Claparols mal-administration of the business endangered the security for the ad-
vances that he had made under the financing contract (Exhibit "B"). But if that were the case, it is
to be expected that Coleongco would have first protested to Claparols himself, which he never
did. Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as well as the at-
tempt to induce Agsam to damage the machinery of the factory. Between the testimony of Agsam
and Claparols and that of Coleongco, the court below chose to believe the former, and we see no
reason to alter the lower court's conclusion on the value of the evidence before it, considering
that Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan out-
lined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of Coleongco
is affected adversely by his own admission of his having been previously convicted of estafa (t.s.n.,
p. 139, 276), a crime that implies moral turpitude. Even disregarding Coleongco's letter to his
son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of business scruples, the clear pre-
ponderance of evidence is against appellant.
7. NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR vs. LUY KIM GUAN
and LINO BANGAYAN
Facts: The plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased
and who died in China sometime after he went to that country in the last part of 1931 or early
part of 1932. The said Luis Herrera in his lifetime was the owner of three (3) parcels of land and
their improvements. Record 477 and the area, nature, improvements and Boundaries of each and
every of these three (3) lots are sufficiently described in the complaint filed by the plaintiffs. Be-
fore leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General
Power of Attorney, which authorized and empowered the defendant Luy Kim Guan, among others
to administer and sell the properties of said Luis Herrera. Lot 1740 was originally covered by
Original Certificate of Title 8601 registered in the name of Luis Herrera, married to Go Bang. This
lot was sold by the defendant Luy Kim Guan in his capacity as attorney-in-fact of the deceased
Luis Herrera to Luy Chay on September 11, 1939, as shown in Exhibit '2', the corresponding deed
of sale. Transfer Certificate of Title No. 3162, Exhibit '3', was issued to Luy Chay by virtue of said
deed of sale. On August 28, 1941, to secure a loan of P2,000.00, a deed of mortgage to the Zambo-
anga Mutual Building and Loan Association was executed by Luy Chay, Exhibit '4'. On January 31,
1947, the said Luy Chay executed a deed of sale, Exhibit 'E', in favor of Lino Bangayan. By virtue
of this sale, Transfer Certificate of Title T-2567 was issued to Lino Bangayan on June 24, 1949,
Exhibit '1'. Lots 4465 and 4467 were originally registered in the name of Luis Herrera, married
to Go Bang, under Original Certificate of Title No. 0-14360, Exhibit '5'. On December 1, 1931, Luis
Herrera sold one- half (1/2) undivided share and to Luis Herrera and Go Bang, the other half
(1/2), as shown Exhibit '12' and Exhibit '12-A', the latter an annotation made by the Register of
Deeds of the City of Zamboanga.
On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the defendants, sold
to Nicomedes Salazar his one-half 1/2 participation in these two (2) lots, as shown in Exhibit 'C',
the corresponding deed of sale for P3,000.00. Transfer Certificate of Title No. T-494-(T-13045)
was issued to Nicomedes Salazar and to the defendant Luy Kim Guan, Exhibit '7'. On August 4,
1936, the defendant Luy Kim Guan and Nicomedes Salazar executed a deed of mortgage in favor
of the Bank of the Philippine Island to secure a loan of P3,500.00, Exhibit '6'. On August 17, 1937,
the defendant Luy Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for the
sum of P100.00 as shown in Exhibits '9', corresponding deed of sale, and Transfer Certificate of
Title No. T-2653 was issued on September 7, 1939 to Carlos Eijasantos Exhibit '10'. Nicomedes
Salazar sold his half 1/2 interest on Lot 4467 to the defendant Lino Bangayan for P3,000.00 on
February 22, 1949, Exhibit 'B', and the corresponding Transfer Certificate of Title T-2654 was
issued to Lino Bangayan and to Luy Kim Guan, both are co-owners in equal shares, Exhibits '8'.
opinion of the City Attorney, Exhibit 'p', and an affidavit of Atty. Jose T. Atilano, Exhibit 'O', state
that Lino Bangayan is a Filipino citizen. As admitted by both parties (plaintiffs and defendants)
Luis Herrera is now deceased, but as to the specific and precise date of his death the evidence of
both parties failed to show.
It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding
quoted portion of the decision were fraudulent and were executed after the death of Luis Herrera
and, consequently, when the power of attorney was no longer operative. It is also claimed that
the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos.
1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire real proper-
ties. Plaintiff-appellant, in addition, questions the supposed deed of sale allegedly executed by
Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying one-half inter-
est on the two lots, Nos. 4465 and 4467, asserting that what was actually executed on that date,
jointly with the general power of attorney, was a lease contract over the same properties for a
period of 20 years for which Luy Kim Guan paid the sum of P2,000.00.
Issue: WON The transactions were null and void because they are executed after the death of the
principal
Held: We find all the contentions of plaintiff-appellant untenable. Starting with her claim that the
second deed executed on December 1, 1931 by Luis Herrera was a lease contract instead of a
deed of sale as asserted by defendant Luy Kim Guan, we find that the only evidence in support of
her contention is her own testimony and that of her husband to the effect that the deceased Luis
Herrera showed the said document to them, and they remembered the same to be a lease contract
on the three properties for a period of 20 years in consideration of P2,000.00. Their testimony
was sought to be corroborated by the declaration of the clerk of Atty. Enrique A. Fernandez, who
allegedly notarized the document. Outside of this oral testimony, given more than 23 years after
the supposed instrument was read by them, no other evidence was adduced.
In the face of these documentary evidence presented by the defendants, the trial court correctly
upheld the contention of the defendants as against that of plaintiff-appellant who claims that the
second deed executed by Luis Herrera in 1931 was a lease contract. It is pertinent to note what
the lower court stated in this regard, that is, if the second deed executed by Luis Herrera was a
lease contract covering the 3 lots in question for a period of twenty (20) years, there would have
been no purpose for him to constitute Luy Kim Guan as his attorney-in-fact to administer and
take charge of the same properties already covered by the lease contract. Coming now to the con-
tention that these transactions are null and void and of no effect because they were executed by
the attorney-in- fact after the death of his principal, suffice it to say that as found by the lower
court, the date of death of Luis Herrera has not been satisfactorily proven. The only evidence
presented by the plaintiff- appellant in this respect is a supposed letter received from a certain
"Candi", dated at Amoy in November, 1936, purporting to give information that Luis Herrera
(without mentioning his name) had died in August of that year. This piece of evidence was
properly rejected by the lower court for lack of identification. On the other hand, we have the
testimony of the witness Lu Chung Lian to the effect that when he was in Amoy in the year 1940,
Luis Herrera visited him and had a conversation with him, showing that the latter was still alive
at the time. Since the documents had been executed by the attorney-in- fact one in 1937 and other
in 1939, it is evident, if we are to believe this testimony, that the documents were executed during
the lifetime of the principal. Be that as it may, even granting arguendo that Luis Herrera did die
in 1936, plaintiffs presented no proof and there is no indication in the record, that the agent Luy
Kim Guan was aware of the death of his principal at the time he sold the property. The death of
the principal does not render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency.
8. MANUEL BUASON and LOLITA M. REYES vs. MARIANO PANUYAS
Facts: In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by home-
stead patent a parcel of land situated at barrio Gabaldon, municipality of Munoz, province of
Nueva Ecija, containing an area of 14.8413 hectares covered by original certificate of title
No.1187 (Exhibit C). On 29 October 1930 they executed a power of attorney authorizing Eu-
staquio Bayuga to engage the sevices of an attorney to prosecute their case against Leonardo
Gambito for annulment of a contract of sale of the parcel of land (civil No. 5787 of the same court)
and after the termination of the case in their favor to sell it, and from the proceeds of the sale to
deduct whatever expenses he had incurred in the litigation (Exhibit B). On 14 March 1934 Bue-
naventura Dayao died leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata and
Juliana, all surnamed Dayao. On 21 March 1939 his four children executed a deed of sale convey-
ing 12.8413 hectares of the parcel of land to the appellants, the spouses Manuel Buason and Lolita
M. Reyes (Exhibit A). Their mother Eugenia Vega affixed her thumbmark to the deed of sale as
witness (Exhibit A). The appellants took possession of the parcel of land through their tenants in
1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of land to the spouses
Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio Bayuga died on 25
March 1946 and Eugenia Vega in 1954.
The appellant and the appellee calim ownership to the same parcil of land. In their complaint the
appellants prayed that the appellee be ordered to deliver possession of the part of the parcel of
land held by him; that the deed of sale of that part of the parcel of land held by the appellee exe-
cuted by Eustaquio Bayuga in his favor and of his wife (Exhibit D) be declared null and void and
that transfer certificate of title No. 8419 issued in their name be cancelled; that the deed of sale
of the parcel of land executed by the children and heirs of Buenaventura Dayao in their fabor
(Exhibit A) be declared valid; that the appellee be ordered to pay them damages and attorney's
fees in the sum of P9,600; and that he be ordered to pay the costs of the suit. The appellee's af-
firmative defenses are that he and his wife were buyer in good faith and for valuable considera-
tion; that appellants' causes of action are barred by the statute of limitations; that the complaint
states no cause of action; that the claim on which their action is based is unenforceable under the
statute of frauds; and that the appellants are guilty of laches. By way of counter-claim, he prayed
that for bringing a clearly unfounded suit against him which depreciated the value of the land and
injured his good reputation, the appellants be ordered to pay him the sums of P5,000 as actual
damages and P10,000 as moral damages.
Issue: won the death of Buenaventura Dayao extinguished Eustaquio Bayugas authority?
Held: It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of
land in question executed in their favor by the Dayao children on 21 March 1939 after death of
their father Buenaventura Dayao. On the other hand, the power of attorney executed by Buena-
ventura Dayao on 29 October 1930 authorizing Eustaquio Bayuga to sell the parcel of land (Ex-
hibit B) was annotated or inscribed on the back of original certificate of title No. 1187 (Exhibit C)
as Entry No. 16836/H-1187, and the sale executed by Eustaquio Bayuga in favor of the appellee
Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of attorney was anno-
tated or incribed on the back of the same original certificate of title (Exhibit C) as Entry No.
778/H-1187. It does not appear that the appellee and his wife had actual knowledge of the pre-
vious sale. In the absence of such knowledge, thay had a right to rely on the face of the cetificate
of title of the registered owners and of the authority conferred by them upon the agent also rec-
orded on the back of the certificate of title. As this is a case of double sale of land registered under
the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better right
than he who did not.
As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the
authority of the agent, 2 the sale of 8 hectares of the parcel of land by the agent to the appellee
Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state that it has not
been shown that the agent knew of his principal's demise, and for that reason article 1738, old
Civil Code or 1931, new Civil Code, which provides:
Anything done by the agent, without knowledge of the death of the principal or of any other cause
which extinguishes the agence, is valid and shall be fully effective with respect to third persons who
may have contracted with him in good faith.
is the law applicable to the point raised by the appellants.
Trust
1. BENITA SALAO vs. JUAN S. SALAO
Facts: The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot
four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885.
His eldest son, Patricio, died in 1886 survived by his only child, Valentin Salao. There is no docu-
mentary evidence as to what properties formed part of Manuel Salao's estate, if any. His widow
died on May 28, 1914. After her death, her estate was administered by her daughter Ambrosia.mIt
was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on May 22, 1919
(Exh. 21). The deed was signed by her four legal heirs, namely, her three children, Alejandra, Juan
and Ambrosia, and her grandson, Valentin Salao, in representation of his deceased father, Patri-
cio. The lands left by Valentina Ignacio, all located at Barrio Dampalit
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share valued at
P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was then already forty-
eight years old) was given the biggest fishpond with an area of 50,469 square meters, a smaller
fishpond with an area of 6,989 square meters and the riceland with a net area of 9,905 square
meters. Those parcels of land had an aggregate appraised value of P13,501 which exceeded Val-
entin's distributive share. So in the deed of partition he was directed to pay to his co-heirs the
sum of P5,365.75. That arrangement, which was obviously intended to avoid the fragmentation
of the lands, was beneficial to Valentin.
By virtue of the partition the heirs became "dueos absolutos de sus respectivas propiedadas, y
podran inmediatamente tomar posesion de sus bienes, en la forma como se han distribuido y
llevado a cabo las adjudicaciones (Absolute owners of their respective property, and may imme-
diately take possession of their property, in the manner in which the adjudications have been
distributed and carried out) The Calunuran fishpond is the bone of contention in this case.
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the fishpond
business. Where they obtained the capital is not shown in any documentary evidence. Plaintiffs'
version is that Valentin Salao and Alejandra Salao were included in that joint venture, that the
funds used were the earnings of the properties supposedly inherited from Manuel Salao, and that
those earnings were used in the acquisition of the Calunuran fishpond. There is no documentary
evidence to support that theory. On the other hand, the defendants contend that the Calunuran
fishpond consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906,
1907 and 1908 as shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the plain-
tiffs.
However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and Ambrosia
Salao secured a Torrens title for the Calunuran fishpond in 1911 they exercised dominical rights
over it to the exclusion of their nephew, Valentin Salao. Thus, on December 1, 1911 Ambrosia
Salao sold under pacto de retro for P800 the Calunuran fishpond to Vicente Villongco. The period
of redemption was one year. In the deed of sale (Exh. 19) Ambrosia confirmed that she and her
brother Juan were the dueos proindivisos of the said pesqueria. On December 7, 1911 Villongco,
the vendee a retro, conveyed the same fishpond to Ambrosia by way of lease for an annual canon
of P128 (Exh. 19-a). After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia
and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360. The period of redemp-
tion was also one year (Exh. 20). The fishpond was later redeemed and Naval reconveyed it to the
vendors a retro in a document dated October 5, 1916 (Exh. 20-a).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His nephew, Val-
entin Salao, died on February 9, 1933 at the age of sixty years according to the death certificate
(Exh. A. However, if according to Exhibit 21, he was forty-eight years old in 1918, he would be
sixty-three years old in 1933). The intestate estate of Valentin Salao was partitioned extrajudi-
cially on December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina
Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds which he had inherited in 1918
from his grandmother, Valentina Ignacio. If it were true that he had a one-third interest in the
Calunuran and Lewa fishponds with a total area of 145 hectares registered in 1911 and 1917 in
the names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange
that no mention of such interest was made in the extrajudicial partition of his estate in 1934.
The trial court found that there was no community of property among Juan Y. Salao, Sr., Ambrosia
Salao and Valentin Salao when the Calunuran and Pinaganacan (Lewa) lands were acquired; that
a co-ownership over the real properties of Valentina Ignacio existed among her heirs after her
death in 1914; that the co-ownership was administered by Ambrosia Salao and that it subsisted
up to 1918 when her estate was partitioned among her three children and her grandson, Valentin
Salao.
Issue: Whether or not the Calunuran fishpond as held in trust for Valentin Salao, Juan Salao, Sr.
and Ambrosia Salao
Held: In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is vested in another, but the word 'trust'
is frequently employed to indicate duties, relations, and responsibilities which are not strictly
technical trusts" (89 C.J.S. 712)."A person who establishes a trust is called the trustor; one in
whom confidence is reposed as regards property for the benefit of another person is known as
the trustee; and the person for whose benefit the trust has been created is referred to as the ben-
eficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and the cestui
que trust as regards certain property, real, personal, money or choses in action (Pacheco vs. Arro,
85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention of the trustor or
of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No
express trusts concerning an immovable or any interest therein may be proven by parol evidence.
An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Da-
landan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are cre-
ated by the direct and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 722).
"Implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of
law as matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724).
They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by the act or construction
of law, but in its more restricted sense it is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention as to which is to be found in the
nature of their transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S.
725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code.
On the other hand, a constructive trust is a trust "raised by construction of law, or arising by
operation of law". In a more restricted sense and as contradistinguished from a resulting trust, a
constructive trust is "a trust not created by any words, either expressly or impliedly evincing a
direct intention to create a trust, but by the construction of equity in order to satisfy the demands
of justice". It does not arise "by agreement or intention, but by operation of law."
Thus, "if property is acquired through mistake or fraud, the person obtaining it is by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property
comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of equity will im-
press upon the title a so-called constructive trust in favor of the defrauded party". Such a con-
structive trust is not a trust in the technical sense.
Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there
was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol
evidence was offered by them to prove the alleged trust. Their claim that in the oral parti-
tion in 1919 of the two fishponds the Calunuran fishpond was assigned to Valentin Salao
is legally untenable.
The foregoing rulings are good under article 1457 of the Civil Code which, as already noted, al-
lows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required to
prove an implied trust because oral evidence can be easily fabricated. On the other hand, a Tor-
rens title is generally a conclusive evidence of the ownership of the land referred to therein (Sec.
47, Act 496). A strong presumption exists that Torrens titles were regularly issued and that they
are valid. In order to maintain an action for reconveyance, proof as to the fiduciary relation of the
parties must be clear and convincing. The real purpose of the Torrens system is to quiet title to
land. "Once a title is registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting in the mirador de su casa, to avoid the possibility of losing his land".
There was no resulting trust in this case because there never was any intention on the part of
Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no construc-
tive trust because the registration of the two fishponds in the names of Juan and Ambrosia was
not vitiated by fraud or mistake. This is not a case where to satisfy the demands of justice it is
necessary to consider the Calunuran fishpond as being held in trust by the heirs of Juan Y. Salao,
Sr. for the heirs of Valentin Salao. And even assuming that there was an implied trust, plaintiffs'
action is clearly barred by prescription or laches
2. RESURRECCION DE LEON, ET AL. vs. EMILIANA MOLO-PECKSON ET AL.
Facts: On January 24, 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed
his entire estate to his wife, Juana Juan. This will was probated in the Court of First Instance of
Pasay City, Rizal, which was affirmed by the Supreme Court on November 26, 1956 (G.R. No. L-
8774). On May 11, 1948, Juana Juan in turn executed a will naming therein many devisees and
legatees, one of whom is Guillerma San Rafael, mother of the plaintiffs and defendant Pilar Perez
Nable. On June 7, 1948, however, Juana Juan executed a donation inter vivos in favor of Emiliana
Molo-Peckson and Pilar Perez Nable of almost all of her entire property leaving only about
P16,000.00 worth of property for the devisees mentioned in the will. Among the properties con-
veyed to the donees are the ten parcels of land subject of the present action. Juana Juan died on
May 28, 1950.
On December 5, 1950, Emiliana Molo-Peckson and Pilar Perez Nable executed a document which
they called "MUTUAL AGREEMENT" the pertinent provisions of which are:
"That the above named parties hereby mutually agree by these presents . . . that the following lots
should be sold at ONE (1) PESO each to the following persons and organization:.
On August 9, 1956, however, the same defendants, assisted by their husbands, executed another
document in which they revoked the so-called mutual agreement mentioned above, and another
relating to the same subject matter, stating therein that the parties, "after matured and thorough
study, realized that the above-mentioned public instruments . . . do not represent their true and
correct interpretations of the verbal wishes of the late spouses Don Mariano Molo y Legaspi and
Doa Juana Francisco Juan y Molo." But after the execution of this document, that is, on August
11, 1956, the beneficiaries Resurreccion de Leon and Justa de Leon, thru their counsel, demanded
the conveyance to them of the ten parcels of land for the consideration of P1.00 per parcel as
stated in the document of December 5, 1950. And having the defendants refused to do so, said
beneficiaries consigned on July 8, 1957 the amount of P10.00 as the consideration of the ten par-
cels of land.
Issue: 1. won the dec 5, 1950 document created an expess trust in favor of the appellees. YES!
2. Won the mutually created agreement of trust can be revoked without the consent of the trustee.
NO!
Held: 1. it is to be supposed that appellants understood and comprehended the legal import of
said document when they executed it more so when both of them had studied in reputable centers
of learning, one being a pharmacist and the other a member of the bar. Moreover, they have more
than ample time the six months intervening between the death of the donor and the execution
of the document to ponder not only on the importance of the wish of their predecessors- in-
interest but also on the propriety of putting in writing the mandate they have received. It is, there-
fore, reasonable to presume that that document represents the real wish of appellants' predeces-
sors-in-interest and that the only thing to be determined is its real import and legal implications.
That the document represents a recognition of pre-existing trust or a declaration of an express
trust impressed on the ten parcels of land in question is evident. A declaration of trust has been
defined as an act by which a person acknowledges that the property, title to which he holds, is
held by him for the use of another (Griffith vs. Maxfield, 51 S.W. 832, 66 Ark. 513, 521). This is
precisely the nature of the will of the donor: to convey the titles of the land to appellants with the
duty to hold them in trust for the appellees. Appellants obligingly complied with this duty by ex-
ecuting the document under consideration.
True it is that to establish a trust the proof must be clear, satisfactory and convincing. It cannot
rest on vague, uncertain evidence, or on a loose, equivocal or indefinite declaration (In re Tuttle's
Estate, 200 A. 921, 132 Pa. Super 356); but here the document in question clearly and unequivo-
cally declares the existence of the trust even if the same was executed subsequent to the death of
the trustor, Juana Juan, for it has been held that the right creating or declaring a trust need not be
contemporaneous or inter-parties.
The fact that the beneficiaries were not notified of the existence of the trust or that the latter have
not been given an opportunity to accept it, is of no importance, for it is not essential to the exist-
ence of a valid trust and to the right of the beneficiaries to enforce the same that they had
knowledge thereof at the time of its creation. Neither is it necessary that the beneficiary should
consent to the creation of the trust. In fact, it has been held that in case of a voluntary trust the
assent of the beneficiary is not necessary to render it valid because as a general rule acceptance
by the beneficiary is presumed.
2. It is true, as appellants contend, that the alleged declaration of trust was revoked, and having
been revoked it cannot be accepted, but the attempted revocation did not have any legal effect.
The rule is that in the absence of any reservation of the power to revoke a voluntary trust is ir-
revocable without the consent of the beneficiary. Here there is no such reservation.
To recapitulate, we hold: (1) that the document executed on December 5, 1950 creates an
express trust in favor of appellees; (2) that appellants had no right to revoke it without the
consent of the cestui que trust; (3) that appellants must render an accounting of the fruits
of the lands from the date the judgment rendered in G.R. No. L-8774 became final and ex-
ecutory; and (4) that appellants should free said lands from all liens and encumbrances.
3. THE GOVERNMENT OF THE PHILIPPINE ISLANDS vs. ANASTASIA ABADILLA ET AL.
Facts: t appears from the evidence that the lands in question were originally owned by one Luis
Palad, a school teacher, who obtained titled to the land by composicion gratuita in 1894. On Jan-
uary 25, 1892, Palad executed a holographic will party in Spanish and partly in Tagalog. Palad
died on December 3, 1896, without descendants, but leaving a widow, the appellant Dorotea
Lopez, to whom he had been married since October 4, 1885. On July 27, 1987, the Court of First
Instance of Tayabas ordered the protocolization of the will over the opposition of Leopoldo and
Policarpio Palad, collateral heirs of the deceased and of whom the appellants Palad are descend-
ants.
The will contained a clause in Tagalog which, translated into English, reads:
That the cocoanut land in Colongcolong, which I have put under cultivation, be used by my wife after
my death during her life or until she marries, which property is referred to in the inventory under
No. 5, but from this cocoanut land shall be taken what is to be lent to the persons who are to plant
cocoanut trees and that which is to be paid to them as their share of the crop if any should remain;
and that she try to earn with the product of the cocoanut trees of which those bearing fruit are
annually increasing; and if the times aforementioned should arrive, I prepare and donate it to sec-
ondary college to be erected in the capital of Tayabas; so this will be delivered by my wife and the
executors to the Ayuntamiento of this town, should there be any, and if not, to the civil governor of
this province in order to cause the manager thereof to comply with my wishes for the good of many
and the welfare of the town.
After the death of Luis Palad the widow Dorotea Lopez remained in possession of the land and in
the year 1900 married one Calixto Dolendo. On April 20, 1903, the aforesaid collateral heirs of
Luis Palad brought an action against the widow for the partition of the lands here in question on
the ground that she, by reason of her second marriage, had lost the right to their exclusive use
and possession. In the same action the municipality of Tayabas intervened claiming the land un-
der the clause of the Palad will above quoted. During the pendency of the action an agreement
was arrived at by the parties under which the land which now constitutes lots Nos. 3464 and
3469 were turned over to the municipality as its share of the inheritance under the will, and the
remaining portion of the land in controversy and which now forms lot No. 3470 was left in the
possession of Dorotea Lopez.
Held: It is a well-known rule that testamentary dispositions must be liberally construed so as to
give effect to the intention of the testator as revealed by the will itself. Applying this rule of con-
struction it seems evident that by the clause in question the testator proposed to create a trust
for the benefit of a secondary school to be established in the town of Tayabas, naming as trustee
the ayuntamiento of the town or if there be no ayuntamiento, then the civil governor of the Prov-
ince of Tayabas.
In order that a trust may become effective there must, of course, be a trustee and a cestui que
trust, and counsel for the appellants Palad argues that we here have neither; that there is no
ayuntamiento, no Gobernador Civil of the province, and no secondary school in the town of Tay-
abas.
An ayuntamiento corresponds to what in English is termed a municipal corporation and it may
be conceded that the ordinary municipal government in these Island falls short of being such a
corporation. But we have provincial governors who like their predecessors, the civil governors,
are the chief executives of their respective provinces. It is true that in a few details the function
and power of the two offices may vary somewhat, but it cannot be successfully disputed that one
office is the legal successor of the other. It might as well be contended that when under the pre-
sent regime the title of the chief executive of the Philippine was changed from Civil Governor to
that of Governor-General, the latter was not the legal successor of the former. There can therefore
be but very little doubt that the governor of the Province of Tayabas, as the successor of the civil
governor of the province under the Spanish regime, may acts as trustee in the present case. In
regard to private trust it is not always necessary that the cestui que trust should be named, or
even be in esse at the time the trust is created in his favor.
4. PAULINA CRISTOBAL ET AL. vs. MARCELINO GOMEZ
Facts: On December 13, 1891, Epifanio Gomez sold this property under contract of sale with pacto
de retro to Luis R. Yangco, redeemable in five years, for the sum of P2,500, the vendor remaining
in possession in the character of lessee. The period expressed in this agreement passed without
redemption, with the result that the property consolidated in Yangco, who, nevertheless, many
years later conceded to the vendor the privilege of repurchasing. Gomez was without means to
effect the repurchase of the property himself, and he therefore found it necessary to apply to a
kinsman, Bibiano Baas, for assistance. Baas hesitated to lend Gomez the money upon his own
sole credit; but told him that he would let him have the money if his brother Marcelino Gomez
and his sister Telesfora Gomez would make themselves responsible for the loan. Epifanio there-
fore consulted with his brother and sister and they agreed to assist him in getting back his prop-
erty. Accordingly, in the latter part of July, 1907, Bibiano Baas was called in consultation, at the
home of Telesfora Gomez in Manila, with Epifanio Gomez and Marcelino Gomez. These four being
present upon that occasion, an agreement was reached, which was, in substance, that Bibiano
Baas should advance the sum of P7,000, upon the personal credit of Marcelino and Telesfora
Gomez, and that this money should be used to repurchase the property in the names of Marcelino
Gomez and Telesfora Gomez, who should hold and administer the property until the capital ad-
vanced by Baas should be paid off, after which the property would be returned to Epifanio
Gomez. This agreement was carried into effect by the execution of the Exhibits A and D of the
plaintiffs, and though executed two days apart, these documents, as the trial court found, really
constitute parts of one transaction. By the Exhibit A, executed on August 12, 1907, Marcelino
Gomez and Telesfora Gomez created a "private partnership in participation" for the purpose of
redeeming the property which their brother Epifanio had sold to Yangco. It was therein agreed
that the capital of this partnership should consist of P7,000, of which Marcelino Gomez was to
supply the amount of P1,500, and Telesfora Gomez the sum of P5,500. It was further agreed that
all the property to be redeemed should be placed in the name of the two, namely, Marcelino
Gomez and Telesfora Gomez, and that Marcelino Gomez should be its manager.
A little more than a year after the transaction above-mentioned had been consummated, Epifanio
Gomez died, leaving a widow, Paulina Cristobal, and the four children who are coplaintiffs with
their mother in this action. Marcelino Gomez meanwhile entered into possession of the property,
a possession which he subsequently maintained until his death, which occurred after this ac-
tion had been tried in the court below. During this period of about twenty years Marcelino Gomez
improved the larger parcel by extending the salt beds constructed upon it and by converting them
from the Filipino form to the Chinese style. During the same period the three parcels of property
quintupled in value, being now worth about P50,000, according to the estimate made by Mar-
celino Gomez him-self.
Less than a year after the death of Epifanio Gomez, his sister Telesfora became desirous of freeing
herself from the responsibility which she had assumed to Bibiano Baas. Accordingly, on Septem-
ber 10, 1909, with the consent of Baas, the document Exhibit E was prepared and executed by
Telesfora and Marcelino Gomez. By this instrument Telesfora conveyed to Marcelino her interest
and share in the three properties previously redeemed from Yangco. The conveyance recites a
consideration of the sum of P6,096, paid in the act. Nevertheless, no money passed, and the real
consideration of the conveyance, as admitted by Marcelino Gomez himself, was that Marcelino
should assume the obligation which Telesfora had contracted with Baas by reason of the loan of
P7,000 made by the latter upon the occasion of the redemption of the property from Yangco.
Issue: won Marcelino acted as a mere trustee
Held: The facts sketched above exhibit the dominant features of the case, and reflection upon
their import conducts us to the conclusion that the trial court committed no error in holding that
the defendant Marcelino Gomez must surrender the property involved in this lawsuit; and he
being now dead, the same obligation devolves on his heirs. The so-called partnership agreement
(Exhibit A) between Marcelino Gomez and his sister created a trust for the express purpose of
rescuing the property of Epifanio Gomez; and now that that purpose has been accomplished, the
property should be returned to his legitimate children, as provided in paragraph (i) of the agree-
ment. This bilateral contract was fully binding on both the contracting parties; and the trial court
did not err in declaring that, under the second paragraph of article 1257 of the Civil Code, the
successors of Epifanio Gomez are entitled to demand fulfillment of the trust. In Martinez vs. Grao
(42 Phil., 35), we held that a person who, before consolidation of property in the purchaser under
a contract of sale with pacto de retro, agrees with the vendors to buy the property and administer
it till all debts constituting an incumbrance thereon shall be paid, after which the property shall
be turned back to the original owner, is bound by such agreement; and upon buying in the prop-
erty under these circumstances such person becomes in effect a trustee and is bound to adminis-
ter the property in this character. The same rule is applicable in the case before us.
Separate Opinion:
There is no evidence that the defendant acted as trustee or that he ever recognized a trust, or that
during the whole period of twenty years he ever rendered any accounting or that any one ever
requested him to make an accounting. The evidence is conclusive that at all times he acted, dealt
with and treated the property as his own, upon which he spent his own time, his own money, and
improved the property, so as to give it a commercial value. Because he did that and the property
now has increased in value, it is taken away from him without any compensation for his services,
and he is denied the fruits of twenty years of his labor in giving t a commercial value. This is one
of many cases which come before this court growing out of the increase in the value of property,
and which would never appear in court, if there was not an increase in value. The very fact that
during the whole period of twenty years, the defendant was never called upon or required to
make an accounting, and that at all times he considered, dealt with, and treated the property as
his own, is conclusive evidence that he never held the title in trust for any one.
5. J. ANTONIO ARANETA vs. ANTONIO PEREZ
Facts: On June 16, 1961, Antonio M. Perez executed a promissory note wherein he agreed to pay
J. Antonio Araneta, or order, the sum of P3,700.00 119 days from said date, or on October 13,
1961, and if it is not paid on the date of maturity, to pay interest at 9% per annum on the amount
of the loan, and P370.00 as attorney's fees in addition to costs and other disbursements taxable
under the Rules of Court. The note having become due and Antonio M. Perez having failed to pay
it despite demand made upon him to do so, Araneta filed on October 31, 1961 a complaint in the
Municipal Court of Manila to collect its import under the terms therein stipulated (Civil Case No.
92265).
In his answer, defendant Perez admitted the execution of the promissory note as well as his fail-
ure to pay it despite its maturity and demand, but he averred certain allegations that were irrel-
evant to the complaint. Thus, Perez alleged that the proceeds of the note was applied by him to
the payment of the medical treatment of his minor daughter Angela Perez y Tuason, who is the
beneficiary of the trust then administered by Araneta as trustee in Special Proceeding No. Q-73
of the Court of First Instance of Quezon City, and that the trust estate is bound to pay the expenses
of said treatment because they were for the benefit of said minor and so the personal fund he
borrowed from Araneta and for which he executed the aforesaid promissory note should be paid
by Araneta in the manner above stated. In the same answer, Perez set up a counterclaim demand-
ing several amounts by way of moral damages, exemplary damages, and attorney's fees. In the
meantime, or on February 8, 1962, Perez filed a complaint in the Municipal Court of Manila
against Araneta in his capacity as trustee of the minor child Angela Perez y Tuason in Special
Proceeding No. Q-73 of the Court of First Instance of Quezon City wherein, making reference to
Civil Case No. 92265 filed against him by Araneta, repeated the same allegations contained in the
answer he interposed to the complaint of Araneta and prayed that Araneta as trustee be required
to pay Perez the amount of P3,700.00 advanced by the latter in order to meet the obligation of
the trust estate. And on the basis of a motion to dismiss filed by Araneta as trustee, and over the
opposition of Perez, the municipal court dismissed the latter's complaint. His motion for recon-
sideration having been denied, Perez appealed to the court a quo where his case was docketed as
Civil Case No. 50706 and where he filed on amended complaint against Araneta.
Appellant contends that (1) the court a quo erred in finding Antonio Perez indebted to Antonio
Araneta in the sum of P3,700.00 requiring him to pay said amount to Araneta with interest at the
rate of 9% per annum from October 13, 1961 until its full payment, plus P370.00 as attorney's
fees, and in failing to find that the true debtor was the trust estate of the children of Angela I.
Tuason; and (2) assuming that the court a quo correctly ruled in requiring Antonio Perez to pay
the above amount to Antonio Araneta, nevertheless, the court a quo erred in failing to require
Araneta in his capacity as trustee of the aforesaid children to reimburse Antonio Perez that
amount upon proof by the latter of the payment made by him of said amount.
Held: It is clear that insofar as the personal liability of appellant Perez on the promissory note is
concerned, which he admittedly executed for value in favor of appellee Araneta, all the above
recited allegations are irrelevant and immaterial and cannot tender any issue that will affect his
personal liability under the note. And this is so because the allegation regarding the existence of
the trust and its mismanagement on the part of appellee Araneta as trustee, certainly, has nothing
to do with the money lent by him to appellant. Neither has the allegation that the proceeds of the
note was spent by appellant for the medical treatment of minor Angela anything to do with his
personal obligation because the destination of the proceeds of said note is certainly not the con-
cern of Araneta. We are, therefore, of the opinion that the court a quo did not err in rendering
judgment on the pleadings in the light of what is averred in appellee's complaint.
But even assuming for the sake of argument that what is claimed by appellant as to how he spent
the proceeds of the note is true, that will not exempt him from his liability to Araneta but would
merely give him some basis to claim for recoupment against the share of the trust fund belonging
to the benefited minor if it is properly shown that there is fund coming to said minor. Here no
such showing was made. Moreover, the trust herein created merely provides for delivery to the
beneficiaries of the share that may correspond to them in the net income of the trust fund, but
does not impose upon the trustee the duty to pay any obligation or expenses that may be needed
by said beneficiaries.
6. MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN PHILIPPINES DEVELOP-
MENT ADMINISTRATION vs. THE COURT OF APPEALS and FRANCISCO ANG BANSING
Facts: respondent Francisco Ang Bansing was the owner of a big tract of land with an area of
about 300,000 sq.m., situated in Barrio Panacan, Davao City. On February 25, 1939, Ang Bansing
sold a portion thereof, with an area of about 5 hectares to Juan Cruz Yap Chuy. After the sale, the
land of Ang Bansing was surveyed and designated as Lot 664-B Psd-1638 was further subdivided
into five (5) lots and the portion sold to Juan Cruz Yap Chuy, shortened to Juan Cruz, was desig-
nated as Lot 664-B-3, with an area of 61.107 square meters, more or less. 2 On June 15-17 and
December 15, 1939, a cadastral survey was made and Lot 664-B-3 was designated as Lot 1846-C
of the Davao Cadastre. On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth
of the Philippines for the amount of P6,347.50. 3 On that same day, Juan Cruz, as vendor, and C.B.
Cam and Miguel N. Lansona, as sureties, executed a surety bond in favor of the vendee to guaran-
tee the vendor's absolute title over the land sold. The cadastral survey plan was approved by the
Director of Lands on July 10, 1940, 5 and on March 7, 1941, Original Certificate of Title No. 26 was
issued in the names of Victoriana Ang Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing,
as claimants of the land, pursuant to Decree No. 745358 issued on July 29, 1940. On March 31,
1941, OCT No. 26 was cancelled pursuant to a Deed of Adjudication and Transfer Certificate of
Title No. 1783 was issued in the name of Francisco Ang Bansing.
On February 25, 1965, the President of the Philippines issued Proclamation No. 459, transferring
ownership of certain parcels of land situated in Sasa, Davao City, to the Mindanao Development
Authority, now the Southern Philippines Development Administration, subject to private rights,
if any. Lot 1846-C, the disputed parcel of land, was among the parcels of land transferred to the
Mindanao Development Authority in said proclamation. On March 31, 1969, Atty. Hector L.
Bisnar, counsel for the Mindanao Development Authority, wrote Ang Bansing requesting the lat-
ter to surrender the Owner's duplicate copy of TCT No. 2601 so that Lot 1846-C could be formally
transferred to his client, but Ang Bansing refused. 9 Consequently, on April 11, 1969, the Minda-
nao Development Authority filed a complaint against Francisco Ang Bansing before the Court of
First Instance of Davao City, docketed therein as Civil Case No. 6480, for the reconveyance of the
title over Lot 1846-C, alleging, among others
After trial, the Court of First Instance of Davao City found that an express trust had been estab-
lished and ordered the reconveyance of the title to Lot 1846-C of the Davao Cadastre to the plain-
tiff Mindanao Development Authority. Ang Bansing appealed to the Court of Appeals and the said
appellate court ruled that no express trust has been created and, accordingly, reversed the judg-
ment and dismissed the complaint.
Issue: Whether or not there was an express trust between Ang Bansing and Juan Cruz over Lot
1846-C
Held: As found by the respondent Court of Appeals, no express trust had been created between
Ang Bansing and Juan Cruz over Lot 1846-C of the Davao Cadastre. "Trusts are either express or
implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts
come into being by operation of law." 14 It is fundamental in the law of trusts that certain re-
quirements must exist before an express trust will be recognized. Basically, these elements in-
clude a competent trustor and trustee, an ascertainable trust res, and sufficiently certain benefi-
ciaries. Stilted formalities are unnecessary, but nevertheless each of the above elements is re-
quired to be established, and, if any one of them is missing, it is fatal to the trusts. Furthermore,
there must be a present and complete disposition of the trust property, notwithstanding that the
enjoyment in the beneficiary will take place in the future. It is essential, too, that the purpose be
an active one to prevent trust from being executed into a legal estate or interest, and one that is
not in contravention of some prohibition of statute or rule of public policy. There must also be
some power of administration other than a mere duty to perform a contract although the contract
is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and that the court, if called upon
so to do, may enforce, the trust.
"In case of a declaration of trust, the declaration must be clear and unequivocal that the owner
holds property in trust for the purposes named." While Ang Bansing had agreed in the deed of
sale that he will work for the titling of "the entire area of my land under my own expenses," it is
not clear therefrom whether said statement refers to the 30-hectare parcel of land or to that por-
tion left to him after the sale. A failure on the part of the settlor definitely to describe the subject-
matter of the supposed trust or the beneficiaries or object thereof is strong evidence that he in-
tended no trust. The intent to create a trust must be definite and particular. It must show a desire
to pass benefits through the medium of a trust, and not through some related or similar device.
Clear and unequivocal language is necessary to create a trust and mere precatory language and
statements of ambiguous nature, are not sufficient to establish a trust. As the Court stated in the
case of De Leon vs. Packson, 20 a trust must be proven by clear, satisfactory and convincing evi-
dence; it cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite decla-
rations. Considering that the trust intent has not been expressed with such clarity and definite-
ness, no express trust can be deduced from the stipulation aforequoted.
7. ALFREDO ROA, JR. vs. HON. COURT OF APPEALS
Facts: On September 1, 1955, an action for recovery of possession of a parcel of land was filed
before the Court of First Instance of Misamis Oriental by Alfredo Roa, Sr. (now deceased and sub-
sequently substituted by his heirs, the herein petitioners) against respondent spouses, Joaquin
Casio and Custodia Valdehuesa (real name appears to be Teodosia Valdehuesa), successors-in-
interest of one Pablo Valdehuesa, now deceased. In his complaint, Alfredo Roa, Sr. alleged that the
said land is agricultural; that it is situated in Bugo, formerly within the municipality of Tagoloan,
Misamis Oriental, now comprised within the limits of the City of Cagayan de Oro; that it is regis-
tered in his name under Original Certificate of Title No. T-21D; that he found the private respond-
ents occupying said land. He prayed that possession of the same be returned to him and that he
be awarded actual and moral damages in the sum of P10,000.00.
In answer to the complaint, respondent spouses alleged that the land in question formerly be-
longed to one Pablo Valdehuesa, father of respondent Custodia (Teodosia) Valdehuesa and now
deceased; that it was however titled in the name of Alfredo Roa, Sr., Trinidad Reyes Roa, Es-
peranza Roa de Ongpin, Concepcion Roa and her husband Zosimo Roa in Land Registration Case
No. 12, G.R.L.O. Record No. 10003 of the Court of First Instance of Misamis Oriental by virtue of
an agreement entered into between the Roas and said Pablo Valdehuesa; that the conditions of
the said compromise agreement were never complied with by the Roas, notwithstanding the
death of Pablo Valdehuesa in 1928 and despite repeated demands for compliance thereof; that
the heirs of said Pablo Valdehuesa sold the land in question to them on April 30, 1930, after re-
scinding the aforementioned compromise agreement; and that they now enjoy the privileges of
absolute ownership over said land by reason of their continuous and adverse possession thereof
since time immemorial. By way of counterclaim, the respondents prayed for the reconveyance of
the said parcel of land contending that the compromise agreement created an implied trust be-
tween the parties to it, and for damages in the amount of P10,000.00. In answer to private re-
spondent's counterclaim, Alfredo Roa, Sr. maintained that the heirs of Pablo Valdehuesa cannot
rescind the compromise agreement by their own act alone or without going to court; and that the
alleged sale of the said heirs to private respondents was null and void, in view of the fact that
respondent spouses knew that the land was then titled in the name of the Roas under Act 496.
Issue: won the said agreement created trust
Held: While it is Our ruling that the compromise agreement between the parties did not create
an express trust nor an implied trust under Art. 1456 of the New Civil Code, We may, however,
make recourse to the principles of the general law of trusts, insofar as they are not in conflict with
the New Civil Code, Code of Commerce, the Rules of Court and special laws which under Art, 1442
of the New Civil Code are adopted. While Articles 1448 to 1456 of the New Civil Code enumerates
cases of implied trust, Art. 1447 specifically stipulates that the enumeration of the cases of im-
plied trust does not exclude others established by the general law of trusts, but the limitations
laid down in Art 1442 shall be applicable.
In American law and jurisprudence, We find the following general principles:
"A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son
tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary
to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse
of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, con-
cealment, or questionable means, or who in any way against equity and good conscience, either
has obtained or holds the legal right to property which he ought not, in equity and good con-
science, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a con-
structive trust does not arise on every moral wrong in acquiring or holding property or on every
abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared
only on wrongful acquisitions or retentions of property of which equity, in accordance with its
fundamental principles and the traditional exercise of its jurisdiction or in accordance with stat-
utory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although
in business or social relations, rendering an acquisition or retention of property by one person
unconscionable against another, raises a constructive trust.
And specifically applicable to the case at bar is the doctrine that "A constructive trust is substan-
tially an appropriate remedy against unjust enrichment. It is raised by equity in respect of prop-
erty, which has been acquired by fraud, or where, although acquired originally without fraud, it
is against equity that it should be retained by the person holding it." (76 Am. Jur. 2d, Sec. 222, p.
447)
The above principle is not in conflict with the New Civil Code, Code of Commerce, Rules of Court
and special laws. And since We are a court of law and of equity, the case at bar must be resolved
on the general principles of law on constructive trust which basically rest on equitable consider-
ations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus
protect the innocent against fraud. As the respondent court said, "It behooves upon the courts to
shield fiduciary relations against every manner of chickanery or detestable design cloaked by allegation shall be supported by strong evidence which will prove that there is such trust rela-
legal technicalities. tionship created.

B. Express Trust Articles 1443 to 1446 SINAON V SORONGON

CUAYCONG V CUAYCONG
Facts: Eduardo Cuaycong, married to Clotilde de Leon, died on June 21, 1936 without issue but
with three brothers and a sister surviving him: Lino, Justo, Meliton and Basilisa. Upon his death,
his properties were distributed to his heirs as he willed except two haciendas in Victorias, Ne-
gros Occidental, devoted to sugar and other crops the Haciendas Sta. Cruz and Pusod both
known as Hacienda Bacayan. Hacienda Bacayan is comprised of eight (8) lots Nos. 28, cov-
ered by T.C.T. No. T-22130; Nos. 8, 17, 18 & 135, covered by T.C.T. No. T-22131; Nos. 21, 22, 23,
covered by T.C.T. No. 22132 all of which are titled in the name of Luis D. Cuaycong, son of
Justo Cuaycong. Lino Cuaycong died on May 4, 1937 and was survived by his children Paz, Caro-
lina, Gertrudes, Carmen, Virgilio, Benjamin, Praxedes and Anastacio. Praxedes Cuaycong, mar-
ried to Jose Betia, is already deceased and is survived by her children Jose Jr., Jesus, Mildred,
Nenita and Nilo, all surnamed Betia. Anastacio Cuaycong, also deceased, is survived by his chil-
dren Ester, Armando, Lourdes, Luis T., Eva and Aida, all surnamed Cuaycong. Meliton and Basi-
lisa died without any issue. On October 3, 1961, the surviving children of Lino Cuaycong: Ger-
trudes, Carmen, Paz, Carolina, Virgilio; the surviving children of Anastacio: Ester, Armando,
Lourdes, Luis T., Eva and Aida; as well as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all surnamed Be-
tia, children of deceased Praxedes Cuaycong Betia, filed as pauper litigants, a suit against Justo,
Luis and Benjamin Cuaycong for conveyance of inheritance and accounting, before the Court of
First Instance of Negros Occidental (Civil Case No. 6314). They alleged that Eduardo Cuaycong
intended to partition the Haciendas Sta. Cruz and Pusod among his wife and siblings on the con-
dition that his sibling will pay his wife P75,000 and then divide equally the remaining share of
Eduardo. It is also alleged that Eduardos siblings did not pay his wife and that, attended with
fraud, Luis Cuaycong registered to his name the two haciendas. It is also alleged that Eduardo
instructed Justo and Luis to hold in trust the properties that will belong to his siblings and then
deliver such to them upon the arrival of the proper time. Luis D. Cuaycong on October 20, 1961
moved to dismiss the complaint on the grounds of unenforceability of the claim under the stat-
ute of frauds, no cause of action (Rule 8, Sec. I [f] of the Rules of Court), and bar of causes of ac-
tion by the statute of limitations (Rule 8, Sec. I [e] ). the Court of First Instance ruled that the
trust alleged, particularly in paragraph 8 of the complaint, refers to an immovable which under
Article 1443 of the Civil Code may not be proved by parole evidence. Plaintiffs were given 10
days to file an amended complaint mentioning or alleging therein the written evidence of the
alleged trust, otherwise the case would be dismissed. Later, on December 23, 1961, the court
decreed that since there was no amended complaint filed, thus, no enforceable claim, it was use-
less to declare Benjamin Cuaycong in default. Plaintiff thereafter manifested that the claim is
based on an implied trust as shown by paragraph 8 of the complaint. They added that there be-
ing no written instrument of trust, they could not amend the complaint to include such instru-
ment. On January 13, 1962, the court dismissed the case for failure to amend the complaint; it
further refused to reconsider its order denying the motion to declare Benjamin Cuaycong in de-
fault, stating that such a default declaration would be of no purpose.
Facts: According to the documentary evidence consisting of public documents and tax records,
Judge (later Justice) Carlos A. Imperial in a decree dated March 4, 1916 adjudicated to Canuta
Soblingo (Somblingo), a widow, Lot No. 4781 of the Sta. Barbara, Iloilo cadastre with an area of
5.5 hectares. OCT No. 6178-A was issued in 1917 to Canuta (Exh. 6 and 7 or B). In 1923 Canuta
sold the lot to the spouses Patricio Sinaon and Julia Sualibio for P2,000 (Exh. 8). TCT No. 2542
was issued to the Sinaon spouses (Exh. 9 or C). It is still existing and uncancelled up to this time.
Julia was the granddaughter of Canuta. The lot was declared for tax purposes in Sinaon's name
(Exh. 3). The Sinaon spouses and their three children paid the realty taxes due thereon (Exh. 1 to
5-C). They have possessed the land as owners from 1923 up to this time or for more than half a
century. The theory of respondents Sorogon, et al., which they adopted in their 1968 second
amended complaint (they filed the action in 1964) is that Canuta and the Sinaons were trustees
of the lot and that the heirs of Domingo's four children are entitled to a 4/5 share thereof. That
theory was sustained by the trial court and the Appellate Court. The trial court ordered the
Sinaons to convey 4/5 of Lot No. 4781 to respondents Sorogon, et al. It decreed partition of the
lot in five equal parts.
Issue: Whether or not the title of the Sinaons can still be disturbed.
Held: It cannot be disturbed anymore. The Sinaons acquired exclusive possession and was regis-
tered as owners over the property for more than 40 years. Said title cannot be disturbed anymore
by an allegation of an implied trust as the said trust has already prescribed. There was no express
trust in this case. Express trusts concerning real property cannot be proven by parole evidence.
The trustors, who created the alleged trust, died a long time ago. An attempt to prove the trust
was made by unreliable oral evidence. The title and possession of the Sinaons cannot be defeated
by oral evidence which can be easily fabricated and contradicted. The contradictory oral evidence
leaves the court sometimes bothered and bewildered.

Issue: Whether or not plaintiffs alleges that there is an expressed trust between them and the
defendants

Held: The plaintiff alleged an express trust. They alleged that Eduardo Cuaycong told the defend-
ants to hold in trust the hacienda for the plaintiffs. Express trusts are those created by the direct
and positive acts of the parties, by some writing or deed or will or by words evidencing an inten-
tion to create a trust. On the other hand, implied trusts are those which, without being expressed,
are deducible from the nature of the transaction by operation of law as matters of equity, inde-
pendently of the particular intention of the parties. 3 Thus, if the intention to establish a trust is
clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or
other matters indicative of such intent, then the trust is implied. Thus being an express trust, said