BAR EXAM QUESTIONS FOR TRUST AND AGENCY
TRUST
Q: ​On 01 January 1980, Redentor and
Remedies entered into an agreement by
virtue of which the former was to register a
parcel of land in the name of Remedies
under the explicit covenant to reconvey the
land to Remigio, son of Redentor, upon the
son’s graduation from college. In 1981, the
land was registered in the name of
Remedies.
Redentor died a year later or in 1982. In
March 1983, Remigio graduated from
college. In February 1992, Remigio
accidentally found a copy of the document
so constituting Remedies as the trustee of
the land. In May 1994, Remigio filed a case
against Remedies for the reconveyance of
the land to him. Remedies, in her
answer, averred that the action already
prescribed. How should the matter be
decided?
A: ​The matter should be decided in favor of
Remigio (trustee) because the action has not
prescribed. The case at bar involves an
express trust which does not prescribe as long
as they have not been repudiated by the
trustee (Diaz vs. Gorricho, 103 Phil, 261).
Q: Joaquin Reyes bought from Julio Cruz a
residential lot of 300 square meters in
Quezon City for which Joaquin paid Julio
the amount of P300, 000.00. When the deed
was about to be prepared Joaquin told Julio
that it be drawn in the name of Joaquina
Roxas, his acknowledged natural child.
Thus, the deed was so prepared and
executed by Julio. Joaquina then built a
house on the lot where she, her husband
and children resided. Upon Joaquin’s
death, his legitimate children sought to
recover possession and ownership of the
lot, claiming that Joaquina Roxas was but a
trustee of their father. Will the action
against Joaquina Roxas prosper? (1993
BAR)
A: Yes, because there is a presumed donation
in favor of Joaquina under Art. 1448 of the Civil
Code ( Civil Code (De Los Santos v. Reyes, 27
January 1992, 206 SCRA 437 ). However, the
donation should be collated to the hereditary
estate and the legitime of the other heirs
should be preserved.
Q: In 1980, Maureen purchased two lots in a
plush subdivision registering Lot 1 in her
name and Lot 2 in the name of her brother
Walter with the latter’s consent. The idea
was to circumvent a subdivision policy
against the acquisition of more than one lot
by one buyer. Maureen constructed a house
on Lot 1 with an extension on Lot 2 to serve
as a guest house. In 1987, Walter who had
suffered serious business losses
demanded that Maureen remove the
extension house since the lot on which the
extension was built was his property. In
1992, Maureen sued for the reconveyance
to her of Lot 2 asserting that a resulting
trust was created when she had the lot
registered in Walter’s name even if she paid
the purchase price. Walter opposed the suit
arguing that assuming the existence of a
resulting trust the action of Maureen has
already prescribed since ten years have
already elapsed from the registration of the
title in his name. Decide. Discuss fully.
(1995 BAR)

A: This is a case of an implied resulting trust. If
Walter claims to have acquired ownership of
the land by prescription or if he anchors his
defense on extinctive prescription, the ten year
period must be reckoned from 1987 when he
demanded that Maureen remove the extension
house on Lot No. 2 because such demand
amounts to an express repudiation of the trust
and it was made known to Maureen. The
action for reconveyance filed in 1992 is not yet
barred by prescription.
Q: Explain the concept of trust de son tort
(Constructive Trust) (2007 BAR)
A: A constructive trust is a trust not created by
any word or phrase, either expressly or
impliedly, evincing a direct intention to create a
trust, but is one that arises in order to satisfy
the demands of justice. It does not come about
by agreement or intention but mainly operation
of law and construed as a trust against one
who, by fraud, duress or abuse of confidence,
obtains or holds the legal right to property
which he ought not, in equity and good
conscience, to hold (Heirs of Lorenzo Yap v.
Court of Appeals, 371 Phil. 523 [1999]). The
following are examples of constructive trust:
1. Article 1456 NCC which provides: “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.”
2. Article 1451 NCC which provides:
“When land passes by succession to
any person and he causes the legal title
to be put in the name of another, a trust
is established by implication of law for
the benefit of the true-owner.”
3. Article 1454 NCC which provides: “If
an absolute conveyance of property is
made in order to secure the
performance of an obligation of the
grantor toward the grantee, a trust by
virtue of law is established. If the
fulfillment of the obligation is offered by
the grantor when it becomes due, he
may demand the reconveyance of the
property to him.”
4. Article 1455 NCC which provides:
“When any trustee, guardian or other
person holding a fiduciary relationship
uses trust funds for the purchase of
property, and causes the conveyance to
be made to him or to a third person, a
trust is established to whom the findings
belong.
AGENCY
Q: A foreign manufacturer of computers
and a Philippine distributor entered into a
contract whereby the distributor agreed to
order 1, 000 units of the manufacturer’s
computers every month and to resell them
in the Philippines at the manufacturer’s
suggested prices plus 10%. All unsold units
at the end of the year shall be bought back
by the manufacturer at the same price they
were ordered. The manufacturer shall hold
the distributor free and harmless from any
claim for defects in the units. Is the
agreement one for sale or agency? (2000
BAR)
A: The contract is one of agency not sale. The
notion of sale is negated by the following
indicia: (1) the price is fixed by the
manufacturer with the 10% mark up
constituting the commission; (2) the
manufacturer reacquires the unsold units at
exactly the same price; and (3) warranty for the
units was borne by the manufacturer. The
foregoing indicia negate sale because they
indicate that ownership over the units was
never intended to transfer to the distributor.
Q: Jo-Ann asked her close friend, Aissa, to
buy some groceries for her in the
supermarket. Was there a nominate
contract entered into between Jo-Ann and
Aissa? In the affirmative, what was it?
Explain. (2003 BAR)
A: Yes, there was a nominate contract. On the
assumption that Aissa accepted the request of
her close friend Jo-Ann to buy some groceries
for her in the supermarket, what they entered
into was the nominate contract of Agency. Art.
1898 of the New Civil Code provides that by
the contract of agency a person binds himself
to render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
Q: X appoints Y as his agent to sell his
products in Cebu City. Can Y appoint a sub-
agent and if he does, what are the effects of
such appointment? (1999 Bar)
A: ​Yes, the agent may appoint a substitute or
subagent if the principal has not prohibited him
from doing so, but he shall be responsible for
the acts of the substitute:
a. when he was not given the power to
appoint one;
b. when he was given such power, but
without designating the person, and the
person appointed was notoriously
incompetent or insolvent.
Q: An agent, authorized by a special power
of attorney to sell a land belonging to the
principal succeeded in selling the same to a
buyer according to the instructions given
the agent. The agent executed the deed of
absolute sale on behalf of his principal two
days after the principal died, an event that
neither the agent nor the buyer knew at the
time of the sale. What is the standing of the
sale? (2011 BAR)
(A) Voidable.
(B) Valid.
(C) Void.
(D) Unenforceable.
A: ​(B) Valid.
Q: A as principal appointed B as his agent
granting him general and unlimited
management over A's properties, stating
that A withholds no power from B and that
the agent may execute such acts as he may
consider appropriate. Accordingly, B leased
A's parcel of land in Manila to C for four (4)
years at P60, 000.00 per year, payable
annually in advance. B leased another
parcel of land of A in Caloocan City to D
without a fixed term at P3, 000.00 per month
payable monthly. B sold to E a third parcel
of land belonging to A located in Quezon
City for three (3) times the price that was
listed in the inventory by A to B. All those
contracts were executed by B while A was
confined due to illness in the Makati
Medical Center. Rule on the validity and
binding effect of each of the above
contracts upon A the principal. Explain
your answers. (1992 BAR)
A: ​The agency couched in general terms
comprised only acts of administration ( Art.
1877 ). The lease contract on the Manila parcel
is not valid, not enforceable and not binding
upon A. For B to lease the property to C, for
more than one (1) year, A must provide B with
a special power of attorney (Art. 1878). The
lease of the Caloocan City property to D is
valid and binding upon A. Since the lease is
without a fixed term, it is understood to be from
month to month, since the rental is payable
monthly ( Art. 1687 ). The sale of the Quezon
City parcel to E is not valid and not binding
upon A. B needed a special power of attorney
to validly sell the land ( Arts. 1877 and 1878).
The sale of the land at a very good price does
not cure the defect of the contract arising from
lack of authority.
Q: CX executed a special power of attorney
authorizing DY to secure a loan from any
bank and to mortgage his property covered
by the owner’s certificate of title. In
securing a loan from MBank, DY did not
specify that he was acting for CX in the
transaction with said bank. Is CX liable for
the bank loan? Why or why not? Justify
your answer. (2004 BAR)
A: ​CX is liable for the bank loan because he
authorized the mortgage on his property to
secure the loan contracted by DY. If DY later
defaults and fails to pay the loan, CX is liable
to pay. However, his liability is limited to the
extent of the value of the said property.
Alternative Answer:
CX is not personally liable to the bank loan
because it was contracted by DY in his
personal capacity. Only the property of CX is
liable. Hence, while CX has authorized the
mortgage on his property to secure the loan of
DY, the bank cannot sue CX to collect the loan
in case DY defaults thereon. The bank can
only foreclose the property of CX. And if the
proceeds of the foreclosure are not sufficient to
pay the loan in full, the bank cannot run after
CX for the deficiency.
Alternative Answer:
While as a general rule the principal is not
liable for the contract entered into by his agent
in case the agent acted in his own name
without disclosing his principal, such rule does
not apply if the contract involves a thing
belonging to the principal. In such case, the
principal is liable under Article 1SS3 of the Civil
Code. The contract is deemed made on his
behalf (Syjuco v. Syjuco 40 Phil. 634 [1920]).
Alternative Answer:
CX would not be liable for the bank loan. CX’s
property would also not be liable on the
mortgage. Since DY did not specify that he
was acting for CX in the transaction with the
bank, DY in effect acted in his own name. In
the case of Rural Bank of Bombon v. CA, 212
SCRA, (1992), the Supreme Court, under the
same facts, ruled that “in order to bind the
principal by a mortgage on real property
executed by an agent, it must upon its face
purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the
agent only. It is not enough merely that the
agent was in fact authorized to make the
mortgage, if he has not acted in the name of
the principal. Neither is it ordinarily sufficient
that in the mortgage the agent describes
himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his
own name and has set his own hand and seal
to the mortgage. There is no principle of law by
which a person can become liable on a real
estate mortgage which she never executed in
person or by attorney in fact".
Q: Fe, Esperanza, and Caridad inherited
from their parents a 500 sq. m. lot which
they leased to Maria for three (3) years. One
year after, Fe, claiming to have the authority
to represent her siblings Esperanza and
Caridad, offered to sell the leased property
to Maria which the latter accepted. The sale
was not reduced into writing, but Maria
started to make partial payments to Fe,
which the latter received and
acknowledged. After giving the full
payment, Maria demanded for the execution
of a deed of absolute sale which Esperanza
and Caridad refused to do. Worst, Maria
learned that the siblings sold the same
property to Manuel. This compelled Maria to
file a complaint for the annulment of the
sale with specific performance and
damages.
If you are the judge, how will you decide the
case? (2014 BAR)
A: I will dismiss the case for annulment of the
sale and specific performance filed by Maria
with respect to the shares pertaining to
Esperanza and Caridad. Since the object of the
sale is a co-owned property, a co-owner may
sell his undivided share or interest in the
property owned in common but the sale will be
subject to the result of the partition among the
co-owners. In a co-ownership there is no
mutual agency except as provided under Art.
487. Thus, Fe cannot sell the shares of
Esperanza and Caridad without a special
power of attorney from them and the sale with
respect to the shares of the latter without their
written authority is void under Art.1874. Hence,
the sale of the property to Manuel is not valid
with respect to the shares of Esperanza and
Caridad. Maria can only assail the portion
pertaining to Fe as the same has been validly
sold to her by Fe.
Q: X, who was abroad, phoned his brother,
Y, authorizing him to sell X’s parcel of land
in Pasay. X sent the title to Y by courier
service. Acting for his brother, Y executed a
notarized deed of absolute sale of the land
to Z after receiving payment. What is the
status of the sale? (2011 BAR)
(A) Valid, since a notarized deed of
absolute sale covered the transaction
and full payment was made.
(B) Void, since X should have
authorized agent Y in writing to sell
the land.
(C) Valid, since Y was truly his
brother X’s agent and entrusted with
the title needed to effect the sale.
(D) Valid, since the buyer could file
an action to compel X to execute a
deed of sale.
A: (B) Void, since X should have authorized
agent Y in writing to sell the land.
Q: X was the owner of an unregistered
parcel of land in Cabanatuan City. As she
was abroad, she advised her sister Y via
overseas call to sell the land and sign a
contract of sale on her behalf. Y thus sold
the land to B1 on March 31, 2001 and
executed a deed of absolute sale on behalf
of X. B1 fully paid the purchase price. B2,
unaware of the sale of the land to B1,
signified to Y his interest to buy it but
asked Y for her authority from X. Without
informing X that she had sold the land to
B1, Y sought X for a written authority to
sell. X e-mailed Y an authority to sell the
land. Y thereafter sold the land on May 1,
2001 to B2 on monthly installment basis for
two years, the first installment to be paid at
the end of May 2001. Who between B1 and
B2 has a better right over the land? Explain.
(2010 Bar Question)
A: ​B-2 has a better title. This is not a case of
double sale since the first sale was void. The
law provides that when a sale of a piece of
land or any interest therein is through an agent,
the authority of the latter shall be in writing;
otherwise, the sale shall be void (Article
1874,New Civil Code). The property was sold
by Y to B1 without any written authority from
the owner X. Hence, the sale to B1 was void.

Alternative Answer:
Under the facts, B-1 has a better right to the
land. Given the fact that the Deed of Sale in
favor of B-1 and B- 2 are not inscribed in the
Registry of Deeds, the case is governed by
Article 1544 of the New Civil Code which
provides that in case of double sales of an
immovable property, the ownership shall
pertain to the person who in good faith was first
in possession and in the absence thereof to the
person who presents the oldest title, provided
there is good faith. In a case, the Supreme
Court has held that in a sale of real estate the
execution of a notarial document of sale is
tantamount to delivery of the possession of the
property sold. Ownership of the land therefore
pertains to the lmt buyer. It may also be
mentioned that under Act 3344 no instruments
or deed establishing, transmitting,
acknowledging, modifying, or extinguishing
right to real property not registered under Act
496 shall be valid between the parties. Thus,
the Deed of Sale of B-2 has no binding effect
on B-1.
Q: In 1950, A executed a power of attorney
authorizing B to sell a parcel of land
consisting of more than 14 hectares. A died
in 1954. In 1956, his four children sold more
than 12 hectares of the land to C. In 1957, B
sold. 8 hectares of the same land to D. It
appears that C did not register the sale
executed by the children. D, who was not
aware of the previous sale, registered the
sale executed by B, whose authority to sell
was annotated at the back of the Original
Certificate of Title.
1. What was the effect of the death of
A upon B’s authority to sell the land?
2. Assuming that B still had the
authority to sell the land—who has a
better right over the said land, C or
D? (1988 Bar Question)
A:
1. While the death of the principal in 1954
ended the authority of the agent to sell the
land, it has not been shown that he was aware
of his principal s demise. Hence, the act of
such agent is valid and shall be fully effective
with respect to third persons which may have
contracted with him in good faith in conformity
with Art. 1931 of the Civil Code. (Buason vs.
Panuyas, 105 Phil. 795, Herrera vs. Luy, 110
Phil. 1020.)
2. As the case at bar is a case of double sale
of registered land he who recorded the sale in
good faith has a better right in conformity with
Art. 1544 of the Civil Code. Since D was not
aware of the previous sale, he had to rely on
the face of the certificate of title of the
registered owner. Hence, he now has a better
right to the land. (Buason vs. Panuyas)
Alternative Answer:
1. The agency is terminated upon the death of
either the principal or agent. Exceptionally, a
transaction entered into by the agent with a
third person where both had acted in good faith
is valid. Article 1930 of the Civil Code provides
that:
“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.”
and Article 1931 provides that:
“Anything done by the agent, without
knowledge of 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.”
Q: As an agent, AL was given a guarantee
commission, in addition to his regular
commission, after he sold 20 units of
refrigerators to a customer, HT Hotel. The
customer, however, failed to pay for the
units sold. AL’s principal, DRB1, demanded
from AL payment for the customer’s
accountability. AL objected, on the ground
that his job was only to sell and not to
collect payment for units bought by the
customer. Is AL’s objection valid? Can
DRBI collect from him or not? Reason. (5%)
(2004 Bar Question)
A: No, AL’s objection is not valid and DRBI can
collect from AL. Since AL accepted a
guarantee commission, in addition to his
regular commission, he agreed to bear the risk
of collection and to pay the principal the
proceeds of the sale on the same terms agreed
upon with the purchaser (Article 1907, Civil
Code).
Q: Prime Realty Corporation appointed
Nestor the exclusive agent in the sale of
lots of its newly developed subdivision.
Prime Realty told Nestor that he could not
collect or receive payments from the
buyers. Nestor was able to sell ten lots to
Jesus and to collect the down payments for
said lots. He did not turn over the
collections to Prime Realty. Who shall bear
the loss for Nestor's defalcation, Prime
Realty or Jesus? (1994 Bar Question)
A:
a) The general rule is that a person dealing
with an agent must inquire into the authority of
that agent. In the present case, if Jesus did not
inquire into that authority, he is liable for the
loss due to Nestor’s defalcation unless Article
1900, Civil Code governs, in which case the
developer corporation bears the loss. Art. 1900
Civil Code provides: “So far as third persons
are concerned, an act is deemed to have been
performed within the scope of the agent’s
authority, if such act 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
principal and the agent. However, if Jesus
made due inquiry and he was not Informed by
the principal Prime Realty of the limits of
Nestor’s authority. Prime Realty shall bear the
loss.
b) Considering that Prime Realty Corporation
only “told" Nestor that he could not receive or
collect payments, it appears that the limitation
does not appear in his written authority or
power of attorney. In this case, insofar as
Jesus, who is a third person, is concerned,
Nestor’s acts of collecting payments is deemed
to have been performed within the scope of his
authority (Article 1900, Civil Code). Hence, the
principal is liable. However, if Jesus was aware
of the limitation of Nestor's power as an agent,
and Prime Realty Corporation does not ratify
the sale contract, then Jesus shall be liable
(Article 1898, Civil Code).
Q: A lawyer was given an authority by
means of a Special Power of Attorney by
his client to sell a parcel of land for the
amount of P3 Million. Since the client owed
the lawyer Pl Million in attorney's fees in a
prior case he handled, the client agreed that
if the property is sold, the lawyer was
entitled to get 5% agent's fee plus Pl Million
as payment for his unpaid attorney's fees.
The client, however, subsequently found a
buyer of his own who was willing to buy the
property for a higher amount. Can the client
unilaterally rescind the authority he gave in
favor of his lawyer? Why or why not? (2015
BAR)
A: NO, the agency in the case presented is
one which is coupled with an interest. As a
rule, agency is revocable at will except if it was
established for the common benefit of the
agent and the principal. In this case, the
interest of the lawyer is not merely limited to
his commission for the sale of the property but
extends to his right to collect his unpaid
professional fees. Hence, it is not revocable at
will (Art.1927).
Q: Joe Miguel, a well-known treasure hunter
in Mindanao, executed a Special Power of
Attorney (SPA) appointing his nephew,
John Paul, as his attorney-in-fact. John
Paul was given the power to deal with
treasure-hunting activities on Joe Miguel’s
land and to file charges against those who
may enter it without the latter’s authority.
Joe Miguel agreed to give John Paul forty
percent (40%) of the treasure that may be
found on the land. Thereafter, John Paul
filed a case for damages and injunction
against Lilo for illegally entering Joe
Miguel’s land. Subsequently, he hired the
legal services of Atty. Audrey agreeing to
give the latter thirty percent (30%) of Joe
Miguel’s share in whatever treasure that
may be found in the land. Dissatisfied
however with the strategies implemented
by John Paul, Joe Miguel unilaterally
revoked the SPA granted to John Paul. Is
the revocation proper? (2014 BAR)
A: NO, the revocation was not proper. As a
rule, a contract of agency may be revoked by
the principal at will. However, an agency
ceases to be revocable at will if it is coupled
with an interest or if it is a means of fulfilling an
obligation already contracted (Art. 1927). In the
case at bar, the agency may be deemed an
agency coupled with an interest not only
because of the fact that John Paul expects to
receive 40% of whatever treasure may be
found but also because he also contracted the
services of a lawyer pursuant to his mandate
under the contract of agency and he therefore
stands to be liable to the lawyer whose
services he has contracted. (Sevilla v. Tourist
World Service, G.R. No. L-41182-3 April 16,
1988).
Q: Richard sold a large parcel of land in
Cebu to Leo for P100 million payable in
annual installments over a period of ten
years, but title will remain with Richard until
the purchase price is fully paid. To enable
Leo to pay the price, Richard gave him a
power-of-attorney authorizing him to
subdivide the land, sell the individual lots,
and deliver the proceeds to Richard, to be
applied to the purchase price. Five years
later, Richard revoked the power of attorney
and took over the sale of the subdivision
lots himself. Is the revocation valid or not?
Why? (2001 Bar Question)
A: The revocation is not valid. The power of
attorney given to the buyer is irrevocable
because it is coupled with an interest: the
agency is the means of fulfilling the obligation
of the buyer to pay the price of the land (Article
1927, CC). In other words, a bilateral contract
(contract to buy and sell the land) is dependent
on the agency.
Q: Will death of an agent end an agency?
A: Yes. The death of an agent extinguishes the
agency, by express provision of par. 3, Art
1919 of the Civil Code