NATURE, FORM AND KINDS OF AGENCY

BICOL SAVINGS AND LOAN vs CA

FACTS:
Juan de Jesus was the owner of a parcel of land situated in Naga City. He executed a
Special Power of Attorney in favor of his son, Jose de Jesus, to negotiate, mortgage
his real property in any bank either private or public entity preferably in the Bicol
Savings Bank, Naga City, in any amount that may be agreed upon between the
bank and the attorney-in-fact. By virtue thereof, Jose de Jesus obtained a loan of
P20,000 from petitioner bank and executed a deed of mortgage on the real
property. Juan de Jesus died at an unknown date. By reason of his failure to pay the
loan obligation even during his lifetime, petitioner bank caused the mortgage to be
extrajudicially foreclosed. In the subsequent public auction, the mortgaged property
was sold to the bank as the highest bidder. Private respondents herein, including
Jose de Jesus, who are all the heirs of the late Juan de Jesus, failed to redeem the
property within one year from the date of the registration of the Provisional
Certificate of Sale. Nonetheless, the private respondents still negotiated for the
repurchase of the property but were unsuccessful despite offers and counter-offers.
Private respondents filed a complaint with the trial court, praying for the annulment
of the deed of sale but the complaint was dismissed by the trial court ruling that the
deed became absolute. Upon appeal, the CA reversed the ruling o the trial court,
ruling that Article 1879 of the Civil Code and stated that since the special power to
mortgage granted to Jose de Jesus did not include the power to sell, it was error for
the lower Court not to have declared the foreclosure proceedings, and the auction
sale held in null and void because the Special Power of Attorney given by Juan de
Jesus to Jose de Jesus was merely to mortgage his property, and not to
extrajudicially foreclose the mortgage and sell the mortgaged property in the said
extrajudicial foreclosure.
ISSUE:
Whether or not the agent-son exceeded the scope of his authority in agreeing to a
stipulation in the mortgage deed that petitioner bank could extrajudicially foreclose
the mortgaged property.
HELD:

The sale proscribed by a special power to mortgage under Article 1879 is a

voluntary and independent contract, and not an auction sale resulting from
extrajudicial foreclosure, which is precipitated by the default of a mortgagor. The
stipulation granting an authority to extrajudicially foreclose a mortgage is an
ancillary stipulation supported by the same cause or consideration for the mortgage
and forms an essential or inseparable part of that bilateral agreement.
It matters not that the authority to extrajudicially foreclose was granted by an
attorney-in-fact and not by the mortgagor personally. The stipulation in that regard,
although ancillary, forms an essential part of the mortgage contract and is
inseparable therefrom. No creditor will agree to enter into a mortgage contract
without that stipulation intended for its protection.
Far East Bank v Sps. Cayetano
Respondent Leonor C. Cayetano (Cayetano) executed a special power of attorney in
favor of her daughter Teresita C. Tabing (Tabing) authorizing her to contract a loan
from petitioner and to mortgage her two lots. Petitioner loaned Tabing P100, 000.00,
secured by two promissory notes and a real estate mortgage over Cayetanos two
properties. The mortgage document was signed by Tabing and her husband as
mortgagors in their individual capacities, without stating that Tabing was executing
the mortgage contract for and in behalf of Cayetano. Petitioner foreclosed the
mortgage for failure of spouses Tabing to pay the loan. The mortgaged properties
were sold to petitioner through public auction. Subsequently, petitioner
consolidated its title and obtained new titles in its name after the lapse of
redemption period. Five years later, Tabing, on behalf of Cayetano expressed the
intention to repurchase the properties for petitioner gave respondent the chance to
buy back the properties by joining a bidding. Respondent however, filed a complaint
for annulment of mortgage and extrajudicial foreclosure sale as well as the
cancellation of petitioners title over the properties. The Regional Trial Court ruled in
favor of respondents, holding that Cayetano cannot be bound by the real estate
mortgage executed by Tabing unless it is shown that the same was made and
signed in the name of principal. The Court of Appeals affirmed the RTCs ruling.
ISSUE: Whether or not the principal is bound by the real estate mortgage executed
by the authorized agent in her own name without indicating the principal.
HELD: NO. It is a general rule in the law of agency 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 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 in his own hand and seal to the mortgage. Notwithstanding the nullity of the real
estate mortgage executed by Tabing and her husband, we find that the equity
principle of laches is applicable. Records show that respondent could have filed an
action to annul the mortgage on their properties, but for unexplained reasons, they
failed to do so. They only questioned the loan and mortgage transactions after the
lapse of more than five years from date of foreclosure sale.
PABLITO MURAO and NELIO HUERTAZUELA, petitioners, vs. PEOPLE OF THE
PHILIPPINES, respondent
Pablito Murao is the sole owner of Lorna Murao Industrial Commercial Enterprises
(LMICE), a company engaged in the business of selling and refilling fire
extinguishers. In 1994, Murao and Chito Federico entered into a Dealership
Agreement for the marketing, distribution, and refilling of fire extinguishers within
Puerto Princesa City.[4] According to the Dealership Agreement, private complainant
Federico, as a dealer for LMICE, could obtain fire extinguishers from LMICE at a 50%
discount, provided that he sets up his own sales force, acquires and issues his own
sales invoice, and posts a bond with LMICE as security for the credit line extended
to him by LMICE. Failing to comply with the conditions under the said Dealership
Agreement, private complainant Federico, nonetheless, was still allowed to act as a
part-time sales agent for LMICE entitled to a percentage commission from the sales
of fire extinguishers.[5]
On 17 June 1994, private complainant Federico went to see petitioner Huertazuela
at the LMICE branch office in Puerto Princesa City to demand for the amount of
P154,500.00 as his commission from the payment of Purchase Order No. GSO-856
by the City Government of Puerto Princesa. Petitioner Huertazuela, however,
refused to pay private complainant Federico his commission since the two of them
could not agree on the proper amount thereof.[16]
Federico sued huerteleza and murao for estafa.
RTC found petitioners guilty of estafa. CA affirmed the RTC.
ISSUE:
May Murao and Huerteleza be guilty of estafa by failing to pay Federico his agents
commission?
RULING:

It is unequivocal that an agency existed between LMICE and private complainant

Federico. Article 1868 of the Civil Code defines agency as a special contract
whereby a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.
Although private complainant Federico never had the opportunity to operate as a
dealer for LMICE under the terms of the Dealership Agreement, he was allowed to
act as a sales agent for LMICE. He can negotiate for and on behalf of LMICE for the
refill and delivery of fire extinguishers, which he, in fact, did on two occasions with
Landbank and with the City Government of Puerto Princesa. Unlike the Dealership
Agreement, however, the agreement that private complainant Federico may act as
sales agent of LMICE was based on an oral agreement.
As a sales agent, private complainant Federico entered into negotiations with
prospective clients for and on behalf of his principal, LMICE. When negotiations for
the sale or refill of fire extinguishers were successful, private complainant Federico
prepared the necessary documentation. Purchase orders, invoices, and receipts
were all in the name of LMICE. It was LMICE who had the primary duty of picking up
the empty fire extinguishers, filling them up, and delivering the refilled tanks to the
clients, even though private complainant Federico personally helped in hauling and
carrying the fire extinguishers during pick-up from and delivery to clients.
All profits made and any advantage gained by an agent in the execution of his
agency should belong to the principal. In the instant case, whether the transactions
negotiated by the sales agent were for the sale of brand new fire extinguishers or
for the refill of empty tanks, evidently, the business belonged to LMICE.
Consequently, payments made by clients for the fire extinguishers pertained to
LMICE. When petitioner Huertazuela, as the Branch Manager of LMICE in Puerto
Princesa City, with the permission of petitioner Murao, the sole proprietor of LMICE,
personally picked up Check No. 611437 from the City Government of Puerto
Princesa, and deposited the same under the Current Account of LMICE with PCIBank,
he was merely collecting what rightfully belonged to LMICE. Indeed, Check No.
611437 named LMICE as the lone payee. Private complainant Federico may claim
commission, allegedly equivalent to 50% of the payment received by LMICE from
the City Government of Puerto Princesa, based on his right to just compensation
under his agency contract with LMICE, but not as the automatic owner of the 50%
portion of the said payment.
Since LMICE is the lawful owner of the entire proceeds of the check payment from
the City Government of Puerto Princesa, then the petitioners who collected the
payment on behalf of LMICE did not receive the same or any part thereof in trust, or
on commission, or for administration, or under any other obligation involving the
duty to make delivery of, or to return, the same to private complainant Federico,
thus, the RTC correctly found that no fiduciary relationship existed between
petitioners and private complainant Federico. A fiduciary relationship between the

complainant and the accused is an essential element of estafa by misappropriation

or conversion, without which the accused could not have committed estafa.
The current Petition concerns an agency contract whereby the principal already
received payment from the client but refused to give the sales agent, who
negotiated the sale, his commission. As has been established by this Court in the
foregoing paragraphs, LMICE had a right to the full amount paid by the City
Government of Puerto Princesa. Since LMICE, through petitioners, directly collected
the payment, then it was already in possession of the amount, and no transfer of
juridical possession thereof was involved herein. Given that private complainant
Federico could not claim ownership over the said payment or any portion thereof,
LMICE had nothing at all to deliver and return to him. The obligation of LMICE to pay
private complainant Federico his commission does not arise from any duty to deliver
or return the money to its supposed owner, but rather from the duty of a principal to
give just compensation to its agent for the services rendered by the latter.
Although petitioners refusal to pay private complainant Federico his commission
caused prejudice or damage to the latter, said act does not constitute a crime,
particularly estafa by conversion or misappropriation punishable under Article
315(1)(b) of the Revised Penal Code. Without the essential elements for the
commission thereof, petitioners cannot be deemed to have committed the crime.

DIZON vs CA
ISSUE:
Can dizon validly bind the petitioners without a written power of attorney?
RULING:
After reviewing the records, we find that, despite all of private respondents
protestations, there is absolutely no written proof of Alice Dizons authority to bind
petitioners. First of all, she was not even a co-owner of the property. Neither was
she empowered by the co-owners to act on their behalf.

The acceptance of the amount of P300,000.00, purportedly as partial payment of

the purchase price of the land, was an act integral to the sale of the land. As a
matter of fact, private respondent invokes such receipt of payment as giving rise to
a perfected contract of sale. In this connection, Article 1874 of the Civil Code is
explicit 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.
When the sale of a piece of land or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the
authority of an agent to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney
is necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the
powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.
It necessarily follows, therefore, that petitioners cannot be deemed to have received
partial payment of the supposed purchase price for the land through Alice Dizon. It
cannot even be said that Alice Dizons acceptance of the money bound at least the
share of Fidela Dizon, in the absence of a written power of attorney from the latter.
It should be borne in mind that the Receipt dated June 20, 1975, while made out in
the name of Fidela Dizon, was signed by Alice Dizon alone.
Moreover, there could not have been a perfected contract of sale. As we held in our
Decision dated January 28, 1999, the implied renewal of the contract of lease
between the parties affected only those terms and conditions which are germane to
the lessees right of continued enjoyment of the property. The option to purchase
afforded private respondent expired after the one-year period granted in the
contract. Otherwise stated, the implied renewal of the lease did not include the
option to purchase. We see no reason to disturb our ruling on this point.

Jammang v. Takashi Trading Co.

G.R. No. 149429 October 9, 2006
FACTS:

Petitioner Jammang has been engaged in the trading business for over fifteen years,
and is a pioneer in the establishment of trade relations between Zamboanga City
and nearby Asian countries such as Taiwan, Malaysia and Indonesia. As stated
earlier, Jammang is also the general manager of Alma Shipping Lines, being the
owner and operator of the MV Queen Alma.
Sometime in October of 1993, Hiroaki Takahashi, the president of respondent
Takahashi, introduced Jammang to Sinotrans because the latter was scouting for a
supplier of Chinese goods for his buyers in Labuan, Malaysia. Sinotrans agreed to
supply said respondent with Chinese goods on the condition that the latter will act
as a sales agent of petitioner Sinotrans. It was agreed that Jammang shall turn over
the proceeds of the sale, less mark-up, and return unsold goods, if any, to Sinotrans.
On the other hand, Jammang and Takahashi agreed to split equally whatever profit
may be derived from the sale of Sinotrans goods.
Upon Jammangs assurances that he had ready buyers in the area, two shipments of
goods consisting of bleached or printed cotton, garlic and lungkow vermicelli
(sotanghon) were made by Sinotrans from Qingdao, China to Labuan, Malaysia. The
goods, valued at US$696,337, were consigned to Takahashi. Contrary to the
representation and assurances of Jammang, however, there were no ready buyers in
Labuan, Malaysia. For two months, Takahashi was forced to store the goods in a
warehouse for a fee.
Nevertheless, Jammang was able to convince Sinotrans and Takahashi to allow him
to bring the goods to Zamboanga City, Philippines, where he again claimed to have
ready buyers. He promised to turn over the proceeds of the sale, as well as the
unsold items, to Sinotrans. Likewise, he reassured Takahashi of their equal sharing
of the profits earned from the sale.
The goods were subsequently transshipped to Zamboanga City with Jammang as
consignee. Initially, he made a partial turnover of the proceeds of the sale in the
amount of US$230,000. After that, however, no further remittance was made.
To address the situation, the parties executed a Supplemental Agreement (Exhibit
"G") on July 27, 1994, stipulating the following:
This Agreement is entered into between ALMA SHIPPING LINES, INC. and
SHANDONG CO., CHINA, on July 27, 1994 at Alba Mall, Tetuan, Zamboanga City.
Whereas, the amount of goods received by Alma Shipping Lines, Inc. from
SINOTRANS SHANDONG CO. CHINA is 696,337 USD.
Whereas, Alma Shipping Lines, Inc. has remitted already the amount of 230,000
USD as partial payment to the Sinotrans Shandong, Co.
Whereas, Alma Shipping Lines , Inc. will remit by July 29, 1994 to SINOTRANS
SHANDONG CO. through T/T in the amount of 15,000 USD.

Whereas, 266,000 USD is still collectible and the due date for collection will be on
September 15, 1994, and the moment the Alma Shipping Lines, Inc. will receive the
payments from the buyers, immediately the same amount must be remitted to
Sinotrans Shandong, Co.
Whereas, the remaining stocks in the amount of 185,000 USD [will] be sold
continuously and if possible, [Alma Shipping Lines, Inc. will] try to dispose them up
to October 31, 1994.
Notwithstanding the agreement, Jammang was able to remit only the amount of
US$15,000.
It was discovered later, upon Sinotrans investigation, that Jammang had already
sold all the goods subject of the agreement. Despite repeated oral and written
demands, Jammang failed to account for and turn over the remaining balance of
US$451,337 to Sinotrans. He likewise declined to talk to respondents. Moreover, he
refused to give to Takahashi its share in the perceived profits.
Consequently, respondents filed with the RTC of Pasig City a complaint for a sum of
money and damages with an application for a writ of preliminary attachment
against Jammang.
Finding merit in the application for a writ of preliminary attachment, the RTC
granted the same in an order dated January 26, 1996.
Respondents offered in evidence several documents to support the testimony of
their lone witness, Lui Xiao Bo, a resident of China and the Import Export Manager
of Sinotrans.
He declared that since only the amount of US$230,000 was remitted by Jammang as
partial payment, he inspected the remaining inventory which the former showed to
him. To his estimate, the value of the same was only US$180,000. Petitioner
Jammang insisted, however, that he had collectibles amounting to US$246,000, and
a US$100,000 worth of stocks left at BCC Warehouse.
Despite the supplemental agreement that was subsequently executed by the
parties, petitioner Jammang was able to remit only US$15,000, leaving an
unliquidated balance of US$451,337. A demand in writing made by respondents to
said petitioner in April 1995 proved futile.
On his part, petitioner Jammang insisted that as a barter trader, he neither bought
nor sold the goods but merely facilitated the sale. Neither was he an agent of
respondents. His signing of the supplemental agreement was only for record
purposes, and the business development report was likewise signed by him in order
to convince Sinotrans that it is profitable to send goods to the Philippines. 3
As to the claim of Takahashi about his purported share in the profits, petitioner
Jammang stated that no such profit was realized on account of the poor quality of
the goods which cannot be sold at higher prices.

On the other hand, petitioner Alma Shipping Lines, Inc. denied liability arising out of
the transaction because it enjoys a separate and distinct personality from its
general manager. Petitioner Jammang acted on his own capacity and the former was
never a party or privy to any document signed by the latter. 4
On April 22, 1999, declaring that petitioner Jammang is bound by the provisions of
the supplemental agreement, the RTC rendered its decision in favor of respondents,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Sinotrans
Shandong Company and against the defendant Hadji Mahmud I. Jammang, ordering
the latter to pay the former, as follows:
The amount of US$266,000.00, as the principal obligation, plus legal interest
thereon per annum until full payment, to be paid in Philippine Currency at the
exchange rate fixed by the Bangko Sentral at the time of payment (Pan American
World Airways v. Intermediate Appellate Court, G.R. No. 44445, 31 August 1987);
To pay 10% of the principal obligation, as and for reasonable attorneys fees;
To account for the remaining stocks valued at US$185,000.00 and, if sold, to remit
the proceeds of the sale; and,
To pay the costs.
For lack of sufficient factual and legal basis, the counterclaim interposed by the
defendants is DISMISSED.
Petitioners appealed the RTC decision to the CA. On May 16, 2001, the CA affirmed
the assailed decision, thus:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED and the
appealed Decision in Civil Case No. 65340 is hereby AFFIRMED in its entirety.
Double costs against the defendants-appellants.
SO ORDERED.
Petitioners moved for a reconsideration of the CA decision but the same was denied
in a resolution dated August 9, 2001.
ISSUE:
Whether or not Jammang is a selling agent of Sinotrans Corp.?
RULING:

Yes. Jammang is a selling agent of Sinotrans Corporation. The court ruled that The
plain and clear language of the Agreement dated July 27, 1994 (Exhibit "G")
undoubtedly shows that appellants Jammang committed himself to act as a selling
agent of plaintiff-appellee Sinotrans by his acknowledgment of the actual receipt of
goods worth US$696,337 shipped by the latter, his first remittance of the amount of
US$230,000 as partial payment thereof, his undertaking to remit the sum of
US$266,000 still due and collectible and to remit US$15,000 on July 29, 1994, and
his acknowledgment of the remaining unsold goods worth US$185,000 which he will
try to dispose of by October 31, 1994. Aside from said Agreement, appellant
Jammang had earlier submitted a Business Development Report confirming receipt
of the goods sent to him by plaintiff-appellee Sinotrans, in which we do not find any
indication that he was accepting said goods merely as facilitator or warehouseman.
Even if appellants presented documentary evidence showing that Palis actually
withdrew some of the goods at the warehouse, the same does not sufficiently prove
the existence of agent-principal relationship between him and plaintiffs-appellees,
as in fact it only goes to show that he did so to assist appellant Jammang in
disposing of the goods. This conclusion is buttressed by the fact that the buyers had
issued promissory notes for the payment of the goods bought by them in the name
of appellant Jammang and not of Palis.
Lintonjua v. Eternit Corp.
G.R. No. 144805 June 8, 2006
FACTS:
The Eternit Corporation (EC) is a corporation duly organized and registered under
Philippine laws. Since 1950, it had been engaged in the manufacture of roofing
materials and pipe products. Its manufacturing operations were conducted on eight
parcels of land with a total area of 47,233 square meters. The properties, located in
Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos.
451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125 under the
name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the
shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation organized and registered under the laws of Belgium. Jack Glanville, an
Australian citizen, was the General Manager and President of EC, while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices
in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in
the Philippines and wanted to stop its operations in the country. The Committee for
Asia of ESAC instructed Michael Adams, a member of ECs Board of Directors, to
dispose of the eight parcels of land. Adams engaged the services of realtor/broker

Lauro G. Marquez so that the properties could be offered for sale to prospective
buyers. Glanville later showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September
12, 1986, Marquez declared that he was authorized to sell the properties
for P27,000,000.00 and that the terms of the sale were subject to negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to
Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings
offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville of
the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the
latter did not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium,
inquiring on his position/ counterproposal to the offer of the Litonjua siblings. It was
only on February 12, 1987 that Delsaux sent a telex to Glanville stating that, based
on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00
and P2,500,000.00 to cover all existing obligations prior to final liquidation."
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with
Glanville, and in a Letter dated February 26, 1987, confirmed that the Litonjua
siblings had accepted the counter-proposal of Delsaux. He also stated that the
Litonjua siblings would confirm full payment within 90 days after execution and
preparation of all documents of sale, together with the necessary governmental
clearances.
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security
Bank & Trust Company, Ermita Branch, and drafted an Escrow Agreement to
expedite the sale.
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the
sale would be implemented. In a telex dated April 22, 1987, Glanville informed
Delsaux that he had met with the buyer, which had given him the impression that
"he is prepared to press for a satisfactory conclusion to the sale." He also
emphasized to Delsaux that the buyers were concerned because they would incur
expenses in bank commitment fees as a consequence of prolonged period of
inaction.
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic
of the Philippines, the political situation in the Philippines had improved. Marquez
received a telephone call from Glanville, advising that the sale would no longer
proceed. Glanville followed it up with a Letter dated May 7, 1987, confirming that he
had been instructed by his principal to inform Marquez that "the decision has been
taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated."

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC
Regional Office had decided not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the
sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and
examined the position as far as the Philippines are (sic) concerned. Considering
[the] new political situation since the departure of MR. MARCOS and a certain
stabilization in the Philippines, the Committee has decided not to stop our
operations in Manila. In fact, production has started again last week, and (sic) to
recognize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy
would change at a later state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)
When apprised of this development, the Litonjuas, through counsel, wrote EC,
demanding payment for damages they had suffered on account of the aborted sale.
EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against
EC (now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust
Company, and ESAC in the RTC of Pasig City. An amended complaint was filed, in
which defendant EC was substituted by Eterton Multi-Resources Corporation; Benito
C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded
as additional defendants on account of their purchase of ESAC shares of stocks and
were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was
not doing business in the Philippines, it cannot be subject to the jurisdiction of

Philippine courts; the Board and stockholders of EC never approved any resolution
to sell subject properties nor authorized Marquez to sell the same; and the telex
dated October 28, 1986 of Jack Glanville was his own personal making which did not
bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and
dismissed the amended complaint.
The fallo of the decision reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources
Corporation and Eteroutremer, S.A. is dismissed on the ground that there is no valid
and binding sale between the plaintiffs and said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for
lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation
and Eteroutremer, S.A. is also dismissed for lack of merit.
The trial court declared that since the authority of the agents/realtors was not in
writing, the sale is void and not merely unenforceable, and as such, could not have
been ratified by the principal. In any event, such ratification cannot be given any
retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the
property without a clear authorization from the corporation concerned, that is,
through resolutions of the Board of Directors and stockholders. The trial court also
pointed out that the supposed sale involves substantially all the assets of defendant
EC which would result in the eventual total cessation of its operation.
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court
erred in concluding that the real estate broker in the instant case needed a written
authority from appellee corporation and/or that said broker had no such written
authority; and (2) the lower court committed grave error of law in holding that
appellee corporation is not legally bound for specific performance and/or damages
in the absence of an enabling resolution of the board of directors." 15 They averred
that Marquez acted merely as a broker or go-between and not as agent of the
corporation; hence, it was not necessary for him to be empowered as such by any
written authority. They further claimed that an agency by estoppel was created
when the corporation clothed Marquez with apparent authority to negotiate for the
sale of the properties. However, since it was a bilateral contract to buy and sell, it
was equivalent to a perfected contract of sale, which the corporation was obliged to
consummate.
In reply, EC alleged that Marquez had no written authority from the Board of
Directors to bind it; neither were Glanville and Delsaux authorized by its board of
directors to offer the property for sale. Since the sale involved substantially all of
the corporations assets, it would necessarily need the authority from the
stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the
RTC. 16 The Litonjuas filed a motion for reconsideration, which was also denied by
the appellate court.
The CA ruled that Marquez, who was a real estate broker, was a special
agent within the purview of Article 1874 of the New Civil Code. Under Section
23 of the Corporation Code, he needed a special authority from ECs board of
directors to bind such corporation to the sale of its properties. Delsaux, who
was merely the representative of ESAC (the majority stockholder of EC) had
no authority to bind the latter. The CA pointed out that Delsaux was not even
a member of the board of directors of EC. Moreover, the Litonjuas failed to
prove that an agency by estoppel had been created between the parties.

ISSUE: Whether or not Glanville and Delasaux is an agent of Eternit Corporation?

RULING:
No. Glanville and Delasaux is not an agent of Eternit Corporation. The court ruled
that a corporation is a juridical person separate and distinct from its members or
stockholders and is not affected by the personal rights, obligations and transactions
of the latter. It may act only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the
normal course of business. The general principles of agency govern the relation
between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law.
The property of a corporation, is not the property of the stockholders or members,
and as such, may not be sold without express authority from the board of directors.
Physical acts, like the offering of the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of such properties and the
execution of the deed of sale covering such property, can be performed by the
corporation only by officers or agents duly authorized for the purpose by corporate
by-laws or by specific acts of the board of directors. Absent such valid
delegation/authorization, the rule is that the declarations of an individual director
relating to the affairs of the corporation, but not in the course of, or connected with,
the performance of authorized duties of such director, is not binding on the
corporation. Any sale of real property of a corporation by a person purporting to be
an agent thereof but without written authority from the corporation is null and void.
The declarations of the agent alone are generally insufficient to establish the fact or
extent of his/her authority.
By the contract of agency, a person binds himself to render some service or to do
something in representation on behalf of another, with the consent or authority of
the latter. Consent of both principal and agent is necessary to create an agency. The
principal must intend that the agent shall act for him; the agent must intend to

accept the authority and act on it, and the intention of the parties must find
expression either in words or conduct between them. To create or convey real rights
over immovable property, a special power of attorney is necessary. Thus, when a
sale of a piece of land or any portion thereof is through an agent, the authority of
the latter shall be in writing, otherwise, the sale shall be void. In this case, the
petitioners as plaintiffs below, failed to adduce in evidence any resolution of the
Board of Directors of respondent EC empowering Marquez, Glanville or Delsaux as
its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of
land owned by respondent EC including the improvements thereon.

Maxicare v. Estrada
G.R. No. 171052 January 28, 2008
FACTS:
[Maxicare] is a domestic corporation engaged in selling health insurance plans
whose Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle,
and Sales/Marketing Manager Josephine Cabrera were impleaded as defendantsappellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela
Estrada who was doing business under the name of CARA HEALTH [SERVICES] to
promote and sell the prepaid group practice health care delivery program called
MAXICARE Plan with the position of Independent Account Executive. [Maxicare]
formally appointed [Estrada] as its "General Agent," evidenced by a letteragreement dated February 16, 1991. The letter agreement provided for plaintiffappellees [Estradas] compensation in the form of commission, viz.:
Commission
In consideration of the performance of your functions and duties as specified in this
letter-agreement, [Maxicare] shall pay you a commission equivalent to 15 to 18%
from individual, family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on
standard plans of commissionable amount on corporate accounts from all
membership dues collected and remitted by you to [Maxicare].
[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a
prospective company as client. [Estrada] alleged that it did apply with [Maxicare] for
the MERALCO account and other accounts, and in fact, its franchise to solicit
corporate accounts, MERALCO account included, was renewed on February 11,
1991.

Plaintiff-appellee [Estrada] submitted proposals and made representations to the

officers of MERALCO regarding the MAXICARE Plan but when MERALCO decided to
subscribe to the MAXICARE Plan, [Maxicare] directly negotiated with MERALCO
regarding the terms and conditions of the agreement and left plaintiff-appellee
[Estrada] out of the discussions on the terms and conditions.
On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and
signed a Service Agreement directly with [Maxicare] for medical coverage of its
qualified members, i.e.: 1) the enrolled dependent/s of regular MERALCO executives;
2) retired executives and their dependents who have opted to enroll and/or continue
their MAXICARE membership up to age 65; and 3) regular MERALCO female
executives (exclusively for maternity benefits). Its duration was for one (1) year
from December 1, 1991 to November 30, 1992. The contract was renewed twice for
a term of three (3) years each, the first started on December 1, 1992 while the
second took effect on December 1, 1995.
The premium amounts paid by MERALCO to [Maxicare] were alleged to be the
following: a) P215,788.00 in December 1991; b) P3,450,564.00 in 1992;
c) P4,223,710.00 in 1993; d) P4,782,873.00 in 1994; e)P5,102,108.00 in 1995;
and P2,394,292.00 in May 1996. As of May 1996, the total amount of premium paid
by MERALCO to [Maxicare] was P20,169,335.00.
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from
[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other
accounts. In reply, [Maxicare], through counsel, denied [Estradas] claims for
commission for the MERALCO and other accounts because [Maxicare] directly
negotiated with MERALCO and the other accounts(,) and that no agent was given
the go signal to intervene in the negotiations for the terms and conditions and the
signing of the service agreement with MERALCO and the other accounts so that if
ever [Maxicare] was indebted to [Estrada], it was only for P1,555.00 andP43.l2 as
commissions on the accounts of Overseas Freighters Co. and Mr. Enrique Acosta,
respectively.
[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers
with the Regional Trial Court (RTC) of Makati City, docketed as Civil Case No. 93-935,
raffled to Branch 135.
Defendants-appellants [Maxicare] and its officers filed their Answer with
Counterclaim on September 13, 1993 and their Amended Answer with Counterclaim
on September 28, 1993, alleging that: plaintiff-appellee [Estrada] had no cause of
action; the cause of action, if any, should be is against [Maxicare] only and not
against its officers; CARA HEALTHs appointment as agent under the February 16,
1991 letter-agreement to promote the MAXICARE Plan was for a period of one (1)
year only; said agency was not renewed after the expiration of the one (1) year
period; [Estrada] did not intervene in the negotiations of the contract with MERALCO

which was directly negotiated by MERALCO with [Maxicare]; and [Estradas] alleged
other clients/accounts were not accredited with [Maxicare] as required, since the
agency contract on the MAXICARE health plans were not renewed. By way of
counterclaim,
defendants-appellants
[Maxicare]
and
its
officers
claimed P100,000.00 in moral damages for each of the officers of [Maxicare]
impleaded as defendant, P100,000.00 in exemplary damages, P100,000.00 in
attorneys fees, and P10,000.00 in litigation expenses.
After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay
Estrada actual damages in the amount equivalent to 10% of P20,169,335.00,
representing her commission for the total premiums paid by Meralco to Maxicare
from the year 1991 to 1996, plus legal interest computed from the filing of the
complaint on March 18, 1993, and attorneys fees in the amount of P100,000.00.
On appeal, the CA affirmed in toto the RTCs decision. In ruling for Estrada, both the
trial and appellate courts held that Estrada was the "efficient procuring cause" in
the execution of the service agreement between Meralco and Maxicare consistent
with our ruling in Manotok Brothers, Inc. v. Court of Appeals.

ISSUE:
Whether or not Estrada is the efficient procuring cause of the Meralco account
entitling her to commissions?

RULING:
Yes. Estrada is the efficient procuring cause of the Meralco account entitling her to
commissions. The court ruled that Maxicares contention that Estrada may only
claim commissions from membership dues which she has collected and remitted to
Maxicare as expressly provided for in the letter-agreement does not convince us. It
is readily apparent that Maxicare is attempting to evade payment of the commission
which rightfully belongs to Estrada as the broker who brought the parties together.
In fact, Maxicares former Chairman Roberto K. Macasaet testified that Maxicare had
been trying to land the Meralco account for two (2) years prior to Estradas entry in
1990. Even without that admission, we note that Meralcos Assistant Vice-President,
Donatila San Juan, in a letter13 dated January 21, 1992 to then Maxicare President
Pedro R. Sen, categorically acknowledged Estradas efforts relative to the sale of
Maxicare health plans to Meralco.
At the very least, Estrada penetrated the Meralco market, initially closed to
Maxicare, and laid the groundwork for a business relationship. The only reason
Estrada was not able to participate in the collection and remittance of premium

dues to Maxicare was because she was prevented from doing so by the acts of
Maxicare, its officers, and employees.
To be regarded as the "procuring cause" of a sale as to be entitled to a commission,
a brokers efforts must have been the foundation on which the negotiations
resulting in a sale began. Verily, Estrada was instrumental in the sale of the
Maxicare health plans to Meralco. Without her intervention, no sale could have been
consummated.

Medrano vs. CA
G.R. No. 150678 February 18, 2005
FACTS:
Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned
by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law,
to look for a buyer of a foreclosed asset of the bank, 3a 17-hectare mango plantation
priced at P2,200,000.00, located in Ibaan, Batangas. 4
Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs.
Pacita G. Borbon, a licensed real estate broker. The two met through a previous
transaction where Lee responded to an ad in a newspaper put up by Borbon for an
8-hectare property in Lubo, Batangas, planted with atis trees. Lee expressed that he
preferred a land with mango trees instead. Borbon promised to get back to him as
soon as she would be able to find a property according to his specifications.
Borbon relayed to her business associates and friends that she had a ready buyer
for a mango orchard. Flor then advised her that her cousin-in-law owned a mango
plantation which was up for sale. She told Flor to confer with Medrano and to give
them a written authority to negotiate the sale of the property. 5 Thus, on September
3, 1986, Medrano issued the Letter of Authority, as follows:
Mrs. Pacita G. Borbon & Miss Josefina E. Antonio Campos Rueda Building Tindalo,
Makati, M.M.
Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig 23 Mabini Street
Quezon City, M.M.
Dear Mesdames:
This letter will serve as your authority* to negotiate with any prospective buyer for
the sale of a certain real estate property more specifically a mango plantation which
is described more particularly therein below:
Location : Barrio Tulay-na-Patpat, Ibaan, Batangas
Lot Area : 17 hectares (more or less) per
attached Appendix "A"

Improvements : 720 all fruit-bearing mango trees

(carabao variety) and other trees
Price : P 2,200,000.00
For your labor and effort in finding a purchaser thereof, I hereby bind myself to pay
you a commission of 5% of the total purchase price to be agreed upon by the buyer
and seller.
Very truly yours,
(Sgd.)
B.R. Medrano
Owner
* Subject to price sale.6
The respondents arranged for an ocular inspection of the property together with Lee
which never materialized the first time was due to inclement weather; the next
time, no car was available for the tripping to Batangas. 7 Lee then called up Borbon
and told her that he was on his way to Lipa City to inspect another property, and
might as well also take a look at the property Borbon was offering. Since Lee was in
a hurry, the respondents could no longer accompany him at the time. Thus, he
asked for the exact address of the property and the directions on how to reach the
lot in Ibaan from Lipa City.
Thereupon, Lee was instructed to get in touch with Medranos daughter and also an
officer of the bank, Mrs. Teresa Ganzon, regarding the property.
Two days after the visit, respondent Josefina Antonio called Lee to inquire about the
result of his ocular inspection. Lee told her that the mango trees "looked sick" so he
was bringing an agriculturist to the property. Three weeks thereafter, Antonio called
Lee again to make a follow-up of the latters visit to Ibaan. Lee informed her that he
already purchased the property and had made a down payment of P1,000,000.00.
The remaining balance of P1,200,000.00 was to be paid upon the approval of the
incorporation papers of the corporation he was organizing by the Securities and
Exchange Commission. According to Antonio, Lee asked her if they had already
received their commission. She answered "no," and Lee expressed surprise over
this.9
A Deed of Sale was eventually executed on November 6, 1986 between the bank,
represented by its President/General Manager Teresa M. Ganzon (as Vendor) and
KGB Farms, Inc., represented by Dominador Lee (as Vendee), for the purchase price
of P1,200,000.00.10 Since the sale of the property was consummated, the
respondents asked from the petitioners their commission, or 5% of the purchase
price. The petitioners refused to pay and offered a measly sum of P5,000.00
each.11 Hence, the respondents were constrained to file an action against herein
petitioners.

The petitioners alleged that Medrano issued the letter of authority in favor of all the
respondents, upon the representation of Flor that she had a prospective buyer. Flor
was the only person known to Medrano, and he had never met Borbon and Antonio.
Medrano had asked that the name of their prospective buyer be immediately
registered so as to avoid confusion later on, but Flor failed to do so. Furthermore,
the other officers of the bank had never met nor dealt with the respondents in
connection with the sale of the property. Ganzon also asked Lee if he had an agent
and the latter replied that he had none. The petitioners also denied that the
purchase price of the property was P2,200,000.00 and alleged that the property
only cost P1,200,000.00. The petitioners further contended that the letter of
authority signed by Medrano was not binding or enforceable against the bank
because the latter had a personality separate and distinct from that of Medrano.
Medrano, on the other hand, denied liability, considering that he was not the
registered owner of the property, but the bank. The petitioners, likewise, filed a
counterclaim as they were constrained to hire the services of counsel and suffered
damages.12
After the case was submitted for decision, Medrano died, but no substitution of
party was made at this time.13 The trial court resolved the case based on the
following common issues:
1. Whether or not the letter of authority is binding and enforceable against
the defendant Bank only or both defendants; and
2. Whether or not the plaintiffs are entitled to any commission for the sale of
the subject property.14
On September 21, 1994, the trial court rendered a Decision in favor of the
respondents. The petitioners were ordered to pay, jointly and severally, the 5%
brokers commission to herein respondents. The trial court found that the letter of
authority was valid and binding as against Medrano and the Ibaan Rural bank.
Medrano signed the said letter for and in behalf of the bank, and as owner of the
property, promising to pay the respondents a 5% commission for their efforts in
looking for a purchaser of the property. He is, therefore, estopped from denying
liability on the basis of the letter of authority he issued in favor of the respondents.
The trial court further stated that the sale of the property could not have been
possible without the representation and intervention of the respondents. As such,
they are entitled to the brokers commission of 5% of the selling price
of P1,200,000.00 as evidenced by the deed of sale. 15 The fallo of the decision reads
as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants, for the latter, jointly and severally:
1. To pay plaintiffs the sum of P60,000.00 representing their five percent (5%)
commission of the purchase price of the property sold based on Exh. "D" or
"9" plus legal interest from date of filing of the herein complaint until fully
paid;

2. To pay plaintiffs the sum of P20,000.00 as and for attorneys fees;

3. To pay the plaintiffs the sum of P10,000.00 as litigation expenses;
4. To pay the costs of the proceedings.16
Unable to agree with the RTC decision, petitioner Ibaan Rural Bank filed its notice of
appeal.17
On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for
Reconsideration18 praying that the late Bienvenido Medrano be substituted by his
heirs. They further prayed that the trial courts decision as far as Medrano was
concerned be set aside and dismissed considering his demise. The trial court denied
the motion for reconsideration.19 Hence, the heirs of Medrano also filed their notice
of appeal.20
On appeal, the petitioners reiterated their stance that the letter of authority was not
binding and enforceable, as the same was signed by Medrano, who was not actually
the owner of the property. They refused to give the respondents any commission,
since the latter did not perform any act to consummate the sale. The petitioners
pointed out that the respondents (1) did not verify the real owner of the property;
(2) never saw the property in question; (3) never got in touch with the registered
owner of the property; and (4) neither did they perform any act of assisting their
buyer in having the property inspected and verified. 21 The petitioners further raised
the trial courts error in not dismissing the case against Bienvenido Medrano
considering his death.
On May 3, 2001, the CA promulgated the assailed decision affirming the finding of
the trial court that the letter of authority was valid and binding. Applying the
principle of agency, the appellate court ruled that Bienvenido Medrano constituted
the respondents as his agents, granting them authority to represent and act on
behalf of the former in the sale of the 17-hectare mango plantation. The CA also
ruled that the trial court did not err in finding that the respondents were the
procuring cause of the sale. Suffice it to state that were it not for the respondents,
Lee would not have known that there was a mango orchard offered for sale.
The CA further ruled that an action for a sum of money continues even
after the death of the defendant, and shall remain as a money claim against
the estate of the deceased.

ISSUE:
WON Respondents are the agents of Medrano who are entitled to commissions even
though they did not directly negotiate for the perfection of the sale?

RULING:

Yes. Respondents are the agents of Medrano who are entitled to commissions even
though they did not directly negotiate for the perfection of the sale. The court ruled
that Indeed, the evidence on record shows that the respondents were instrumental
in the sale of the property to Lee. Without their intervention, no sale could have
been consummated. They were the ones who set the sale of the subject land in
motion. Upon being informed by Flor that Medrano was selling his mango orchard,
Borbon lost no time in informing Lee that they had found a property according to his
specifications. An ocular inspection of the property together with Lee was
immediately planned; unfortunately, it never pushed through for reasons beyond
the respondents control. It was actually Lee who personally called Borbon and
asked for directions prove that it was only through the respondents that Lee learned
about the property for sale. It can thus be readily inferred that the respondents were
the only ones who knew about the property for sale and were responsible in leading
a buyer to its consummation. All these circumstances lead us to the inescapable
conclusion that the respondents were the procuring cause of the sale. When there is
a close, proximate and causal connection between the brokers efforts and the
principals sale of his property, the broker is entitled to a commission.
Before negotiating a sale, a broker must first and foremost bring in a prospective
buyer. It has been held that a broker earns his pay merely by bringing the buyer
and the seller together, even if no sale is eventually made.

Sanchez vs. Medicard Phil. Inc.

FACTS:
Medicard Inc. appointed petitioner Sanchez as its special corporate agent and they
gave him a commission based on the "cash brought in." Through Sanchez efforts,
Medicard and Unilab executed a Health Care Program Contract. Unilab paid
Medicard the premium for one (1) year. Medicard then handed Sanchez 18% of said
amount representing his commission. Again, through Sanchezs initiative, the
agency contract between Medicard and Unilab was renewed for another year. Prior
to the expiration of the renewed contract, Medicard proposed an increase of the
premium which Unilab rejected for the reason that it was too high. Medicard then
requested petitioner to reduce his commission should the contract be renewed on
its third year, but he was obstinate. Unilab confirmed its decision not to renew the
health program. Meanwhile, in order not to prejudice its personnel by the
termination of their health insurance, Unilab negotiated with Dr. Montoya and other
officers of Medicard, to discuss new ways in order to continue the insurance
coverage. Medicard did not give Sanchez any commission under the new scheme.
Aggrieved, Petitioner demanded from Medicard payment of his commission plus
damages, but the latter refused to heed his demand.
ISSUE:

WON the contract of agency has been revoked by Medicard hence not entitling him
to a commission
HELD:
Yes. The Contract of Agency has been revoked, thus the petitioner is not entitled to
any commission. It is dictum that in order for an agent to be entitled to a
commission, he must be the procuring cause of the sale, which simply means that
the measures employed by him and the efforts he exerted must result in a sale.
Based on the facts, it may be recalled that through petitioner's efforts, Medicard
was able to enter into a Contract with Unilab, two times, however before the
expiration of the renewed contract, Unilab rejected the proposal. It is clear that
since petitioner refused to reduce his commission, Medicard directly negotiated with
Unilab, thus revoking its agency contract with petitioner. Such revocation is
authorized by Article 1924 of the Civil Code which provides: "The agency is revoked
if the principal directly manages the business entrusted to the agent, dealing
directly with third persons."
Sps. Alcantara v. Nido, G.R. No. 165133, Apr. 19, 2010
Facts:
Revelen Srivastava, Nidos daughter, is owner of unregistered land with an area of
1,939 sq. m. Sps. Alcantara and Sps. Rubi offered to buy a 200-sq. m. portion of the
land at P200 per sq. m. paying downpaymentand the balance in installment. They
constructed their houses and occupied an additional 150 sq. m. with respondents
consent. Petitioners had already paid P17,500 before defaulting payment. Nido, as
administrator and attorney-in-fact of Revelen, filed a complaint of recovery of
possession with damages and preliminary injunction. RTC declared the sale of land
void as it was not in writing under Art. 1874, CC, and ruled that rescission was
proper remedy.
Issue:
Whether or not the contract entered into between the parties was not void, but
merely voidable.
Held:
No. Art. 1874, CC, provides that when a sale of a piece of land or any interest
therein is through an agent, the authority shall be in writing; otherwise, the sale
shall be void. In Art. 1878, special powers of attorney are necessary to enter into
any contract where an immovable is transmitted or acquired either gratuitously or
for a valuable consideration. There is no proof of respondents written authority to
sell the lot to petitioner. Petitioners only knew that Revelen was the owner of the lot
during the hearing. Being void, it cannot be ratified. Although Revelen executed a
General Power of Attorney constituting respondent as attorney-in-fact to enter into

any and all contracts and agreements on her behalf, notarized in California, USA, it
cannot be the basis of respondents written authority to sell the lot.
Spouses Fernando Viloria and Lourdes Viloria vs Continental Airlines, Inc.
Facts:
In 1997, while the spouses Viloria were in the US, they approached Holiday Travel, a
travel agency working for Continental Airlines, to purchase tickets from Newark to
San Diego. The travel agent, Margaret Mager, advised the couple that they cannot
travel by train because it was already fully booked; that they must purchase plane
tickets for Continental Airlines; that if they wont purchase plane tickets; theyll
never reach their destination in time. The couple believed Magers representations
and so they purchased two plane tickets worth $800.00.
Later however, the spouses found out that the train trip wasnt really fully booked
and so they purchased train tickets and went to their destination by train instead.
Then they called up Mager to request for a refund for the plane tickets. Mager
referred the couple to Continental Airlines. As the couple were now in the
Philippines, they filed their request with Continental Airlines office in Ayala. The
spouses Viloria alleged that Mager misled them into believing that the only way to
travel was by plane and so they were fooled into buying expensive plane tickets.
Continental Airlines claimed that the tickets sold to them by Mager were nonrefundable; that, if any, they were not bound by the misrepresentations of Mager
because theres no contract of agency existing between Continental Airlines and
Mager.
ISSUE:
WON a contract of agency exists between Continental Airlines and Mager.
HELD:
Yes. All the elements of agency are present, to wit:
there is consent, express or implied of the parties to establish the relationship;
the object is the execution of a juridical act in relation to a third person;
the agent acts as a representative and not for himself, and
the agent acts within the scope of his authority.
The first and second elements are present as Continental Airlines does not deny
that it concluded an agreement with Holiday Travel to which Mager is part of,

whereby Holiday Travel would enter into contracts of carriage with third persons on
the airlines behalf. The third element is also present as it is undisputed that Holiday
Travel merely acted in a representative capacity and it is Continental Airlines and
not Holiday Travel who is bound by the contracts of carriage entered into by Holiday
Travel on its behalf. The fourth element is also present considering that Continental
Airlines has not made any allegation that Holiday Travel exceeded the authority that
was granted to it.
Continental Airlines also never questioned the validity of the transaction between
Mager and the spouses. Continental Airlines is therefore in estoppel. Estoppel is
primarily based on the doctrine of good faith and the avoidance of harm that will
befall an innocent party due to its injurious reliance, the failure to apply it in this
case would result in gross travesty of justice.
Tuazon v. Hrs. of Ramos GR 156262 July 14, 2005
Facts:
Sps. Tuazon purchased a total of 8,326 cavans of rice from Ramos, predecessor-ininterest of respondents. Only 4,437 cavans have been paid for so far leaving unpaid
3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon
issued Traders Royal Bank checks. But when these checks were encashed, all of the
checks bounced due to insufficiency of funds. Respondents advanced that before
issuing said checks, spouses Tuazon already knew that they had no available fund to
support the checks, and they failed to provide for the payment of these despite
repeated demands made on them.
Sps Tuazon denied having purchased rice from Ramos. They alleged that it was
Magdalena Ramos, wife of said deceased, who owned and traded the merchandise
and Maria Tuazon was merely her agent. They argued that it was Evangeline Santos
who was the buyer of the rice and issued the checks to Maria Tuazon as payments
therefor. In good faith the checks were received by Tuazon from Evangeline Santos
and turned over to Ramos without knowing that these were not funded. They assert
that they were merely agents and should not be held answerable.
Issue:
Whether or not the petitioners are agents of the respondents
Ruling:
In a contract of agency, one binds oneself to render some service or to do
something in representation or on behalf of another, with the latters consent or
authority. The following are the elements of agency: (1) the parties consent, express
or implied, to establish the relationship; (2) the object, which is the execution of a
juridical act in relation to a third person; (3) the representation, by which the one

who acts as an agent does so, not for oneself, but as a representative; (4)
thelimitation that the agent acts within the scope of his or her authority. As the
basis of agency is representation, there must be, on the part of the principal, an
actual intention to appoint, an intention naturally inferable from the principals
words or actions. In the same manner, there must be an intention on the part of the
agent to accept the appointment and act upon it. Absent such mutual intent, there
is generally no agency.
Petitioners were the rice buyers themselves; they were not mere agents of
respondents in their rice dealership. The question of whether a contract is one of
sale or of agency depends on the intention of the parties.
The declarations of agents alone are generally insufficient to establish the fact or
extent of their authority. The law makes no presumption of agency; proving its
existence, nature and extent is incumbent upon the person alleging it. In the
present case, petitioners raise the fact of agency as an affirmative defense, yet fail
to prove its existence.
G.R. No. 145817 October 19, 2011 URBAN BANK, INC, vs. MAGDALENO M. PEA
FACTS: Pea, a lawyer, was formerly a stockholder, director and corporate secretary
of Isabel Sugar Company, Inc. (ISCI). ISCI owned a parcel of land. ISCI leased
theland. Without its consent and in violation of the lease contract, the lessee
subleasedthe land to several tenants, who in turn put up nightclubs inside the
compound.Before the expiration of the lease contract, ISCI informed the lessee and
histenants that the lease would no longer be renewed because the land will be
sold.ISCI and Urban Bank executed a Contract to Sell, and they agreed that the
finalinstallment released by the bank upon ISCIs delivery of full and actual
possessionof the land, free from any tenants.ISCI then instructed Pea, to act as its
agent and handle the eviction of the tenants. The lessee left, but the unauthorized
sub-tenants refused to leave. Pea had thegates of the property closed and he also
posted security guardsservices for whichhe advanced payments. Despite the
closure of the gates and the posting of theguards, the sub-tenants would force open
the gates, and proceed to carry on withtheir businesses.Pea then filed a complaint
with the RTC, which issued a TRO. At the time thecomplaint was filed, a new title to
the had already been issued in the name of UrbanBank.When information reached
the judge that the had already been transferred by ISCIto Urban Bank, the trial court
recalled the TRO and issued a break-open order forthe property. Pea immediately
contacted ISCIs presidentand told him thatbecause of the break-open order of the
RTC, he (Pea) would be recalling thesecurity guards he had posted to secure the
property. The President asked him tosuspend the withdrawal of the posted guards,
so that ISCI could get in touch firstwith Urban Bank.Pea also called Urban Banks
President. The President allegedly assured him thatthe bank was going to retain his
services, and that the he should not give uppossession of the subject land.
Thereafter, Pea, in representation of Urban Bank, filed a separate complaint withthe
RTC-Makati City, to enjoin the tenants from entering the Pasay property. Actingon

Urban Banks preliminary prayer, the RTC-Makati City issued a TRO.While the 2nd
complaint was pending, Pea made efforts to settle the issue of possession with the
sub-tenants. During the negotiations, he was exposed toseveral civil and crimal
cases and received several threats against his life. The sub-tenants eventually
agreed to stay off the property for a total consideration of PhP1.5M. Pea advanced
the payment for the full and final settlement of theirclaims against Urban Bank. Pea
formally informed Urban Bank that it could alreadytake possession of the Pasay
property. There was however no mention of thecompensation due and owed to him
for the services he had rendered. The banksubsequently took actual possession of
the property and installed its own guards atthe premises. Pea thereafter made
several attempts to contact Urban Bank, but the bank officerswould not take any of
his calls. Pea formally demanded from Urban Bank thepayment of the 10%
compensation and attorneys fees allegedly promised to himduring his telephone
conversation with Urban Banks President for securing andmaintaining peaceful
possession of the property.Urban Bank and individual bank officers and directors
argued that it was ISCI, theoriginal owners of the Pasay property, that had engaged
the services of Pea insecuring the premises; and, consequently, they could not be
held liable for theexpenses Pea had incurred. ISSUE: Whether or not Pea is entitled
to payment for the services he rendered as agent of Urban Bank. HELD: Yes, Pea
should be paid for services rendered under the agency relationship thatexisted
between him and Urban Bank based on the civil law principle against
unjustenrichment, and not on the basis of the purported oral contract. Whether or
not anagency has been created is determined by the fact that one is representing
andacting for another. The law makes no presumption of agency; proving its
existence, nature and extent is incumbent upon the person alleging it. Agency is
presumed to be for compensation. Unless the contrary intent is shown, aperson who
acts as an agent does so with the expectation of payment according tothe
agreement and to the services rendered or results effected. In this case theres no
evidence that Urban Bank agreed to pay Pea a specific amount or percentage of
amount for his services, so the court applies the principleagainst unjust enrichment
and on the basis of quantum meruit. The agency of Pea comprised of services
ordinarily performed by a lawyer who is tasked with the job of ensuring clean
possession by the owner of a property. The court measured theamount Pea is
entitled to for the services he rendered.
G.R. No. 145817 October 19, 2011 URBAN BANK, INC, vs. MAGDALENO M.
PEA
FACTS:
Pea, a lawyer, was formerly a stockholder, director and corporate secretary of Isabel
Sugar Company, Inc. (ISCI). ISCI owned a parcel of land. ISCI leased the land.
Without its consent and in violation of the lease contract, the lessee subleased the
land to several tenants, who in turn put up nightclubs inside the compound. Before
the expiration of the lease contract, ISCI informed the lessee and his tenants that

the lease would no longer be renewed because the land will be sold. ISCI and Urban
Bank executed a Contract to Sell, and they agreed that the final installment
released by the bank upon ISCIs delivery of full and actual possession of the land,
free from any tenants. ISCI then instructed Pea, to act as its agent and handle the
eviction of the tenants. The lessee left, but the unauthorized sub-tenants refused to
leave. Pea had the gates of the property closed and he also posted security guards
services for which he advanced payments. Despite the closure of the gates and
the posting of the guards, the sub-tenants would force open the gates, and proceed
to carry on with their businesses. Pea then filed a complaint with the RTC, which
issued a TRO.
At the time the complaint was filed, a new title had already been issued in the name
of Urban Bank. When information reached the judge that they had already been
transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a
break-open order for the property. Pea immediately contacted ISCIs president and
told him that because of the break-open order of the RTC, he (Pea) would be
recalling the security guards he had posted to secure the property. The President
asked him to suspend the withdrawal of the posted guards, so that ISCI could get in
touch first with Urban Bank. Pea also called Urban Banks President. The President
allegedly assured him that the bank was going to retain his services, and that the
he should not give up possession of the subject land. Thereafter, Pea, in
representation of Urban Bank, filed a separate complaint with the RTC-Makati City,
to enjoin the tenants from entering the Pasay property.
Acting on Urban Banks preliminary prayer, the RTC-Makati City issued a TRO. While
the 2nd complaint was pending, Pea made efforts to settle the issue of possession
with the sub-tenants. During the negotiations, he was exposed to several civil and
criminal cases and received several threats against his life. The sub-tenants
eventually agreed to stay off the property for a total consideration of PhP1.5M. Pea
advanced the payment for the full and final settlement of their claims against Urban
Bank. Pea formally informed Urban Bank that it could already take possession of the
Pasay property. There was however no mention of the compensation due and owed
to him for the services he had rendered. The bank subsequently took actual
possession of the property and installed its own guards at the premises. Pea
thereafter made several attempts to contact Urban Bank, but the bank officers
would not take any of his calls. Pea formally demanded from Urban Bank the
payment of the 10% compensation and attorneys fees allegedly promised to him
during his telephone conversation with Urban Banks President for securing and
maintaining peaceful possession of the property.
Urban Bank and individual bank officers and directors argued that it was ISCI, the
original owners of the Pasay property, that had engaged the services of Pea in
securing the premises; and, consequently, they could not be held liable for the
expenses Pea had incurred.

ISSUE: Whether or not Pea is entitled to payment for the services he rendered as
agent of Urban Bank.
HELD: Yes, Pea should be paid for services rendered under the agency relationship
that existed between him and Urban Bank based on the civil law principle against
unjust enrichment, and not on the basis of the purported oral contract. Whether or
not an agency has been created is determined by the fact that one is representing
and acting for another. The law makes no presumption of agency; proving its
existence, nature and extent is incumbent upon the person alleging it.
Agency is presumed to be for compensation. Unless the contrary intent is shown, a
person who acts as an agent does so with the expectation of payment according to
the agreement and to the services rendered or results effected. In this case theres
no evidence that Urban Bank agreed to pay Pea a specific amount or percentage of
amount for his services, so the court applies the principle against unjust enrichment
and on the basis of quantum meruit.
The agency of Pea comprised of services ordinarily performed by a lawyer who is
tasked with the job of ensuring clean possession by the owner of a property. The
court measured the amount Pea is entitled to for the services he rendered.
OBLIGATIONS OF THE AGENT
Eurotech Industrial Technologies, Inc. v. Edwin Cuizon and Erwin Cuizon
G.R. No. 167552 April 23, 2007Chico-Nazario, J.
FACTS:
Eurotech is engaged in the business of importation and distribution of various
European industrialequipment. It has as one of its customers Impact Systems Sales
which is a sole proprietorship ownedby Erwin Cuizon. Eurotech sold to Impact
Systems various products allegedly amounting to P91,338.00. Cuizonssought to buy
from Eurotech 1 unit of sludge pump valued at P250,000.00 with Cuizons making
adown payment of P50,000.00. When the sludge pump arrived from the United
Kingdom, Eurotechrefused to deliver the same to Cuizons without their having fully
settled their indebtedness toEurotech. Thus, Edwin Cuizon and Alberto de Jesus,
general manager of Eurotech, executed a Deedof Assignment of receivables in favor
of Eurotech. Cuizons, despite the existence of the Deed of Assignment, proceeded
to collect from Toledo PowerCompany the amount of P365,135.29. Eurotech made
several demands upon Cuizons to pay theirobligations. As a result, Cuizons were
able to make partial payments to Eurotech. Cuizons totalobligations stood at
P295,000.00 excluding interests and attorneys fees. Edwin Cuizon alleged that he is
not a real party in interest in this case. According to him, he wasacting as mere
agent of his principal, which was the Impact Systems, in his transaction with
Eurotechand the latter was very much aware of this fact.

ISSUE:
WON Edwin exceeded his authority when he signed the Deed of Assignment thereby
bindinghimself personally to pay the obligations to Eurotech
HELD:
No. Edwin insists that he was a mere agent of Impact Systems which is owned by
Erwin and that hisstatus as such is known even to Eurotech as it is alleged in the
Complaint that he is being sued in hiscapacity as the sales manager of the said
business venture. Likewise, Edwin points to the Deed of Assignment which clearly
states that he was acting as a representative of Impact Systems in saidtransaction.
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 partysufficient notice of his powers. In a contract of
agency, a person binds himself to render some service or to do something
inrepresentation or on behalf of another with the latters consent. Its purpose is to
extend thepersonality of the principal or the party for whom another acts and from
whom he or she derives theauthority to act. The basis of agency is representation,
that is, the agent acts for and on behalf of theprincipal on matters within the scope
of his authority and said acts have the same legal effect as if they were personally
executed by the principal. The elements of the contract of agency are: (1) consent,
express or implied, of the parties to establish therelationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) theagent acts as a
representative and not for himself; (4) the agent acts within the scope of his
authority. An agent, who acts as such, is not personally liable to the party with
whom he contracts. There are 2instances when an agent becomes personally liable
to a third person. The first is when he expresslybinds himself to the obligation and
the second is when he exceeds his authority. In the last instance,the agent can be
held liable if he does not give the third party sufficient notice of his powers.
Edwindoes not fall within any of the exceptions contained in Art. 1897. In the
absence of an agreement to the contrary, a managing agent may enter into any
contracts thathe deems reasonably necessary or requisite for the protection of the
interests of his principalentrusted to his management. Edwin Cuizon acted wellwithin his authority when he signed the Deed of Assignment. Eurotechrefused to
deliver the 1 unit of sludge pump unless it received, in full, the payment for
ImpactSystems indebtedness. Impact Systems desperately needed the sludge
pump for its business sinceafter it paid the amount of P50,000.00 as downpayment
it still persisted in negotiating with Eurotechwhich culminated in the execution of
the Deed of Assignment of its receivables from Toledo PowerCompany. The
significant amount of time spent on the negotiation for the sale of the sludge
pumpunderscores Impact Systems perseverance to get hold of the said equipment.
Edwins participation in the Deed of Assignment was reasonably necessary or was
required in order for him to protect the business of his principal.

Sazon vs. Vasquez-Menancio February 22, 2012.G.R. No. 192085

FACTS:
Vasquez-Menancio is a resident of United States of America. She claimed to be the
owner of several properties located in Albay. Sometime in 1979, she entrusted the
management, administration, care and preservation of her properties to Sazon.
Vasquez-Menancio revoked in writing all the powers and authority of administration
granted to Sazon. She made repeated verbal and served written demands upon
Sazon asking the latter to render an accounting and to remit theowner's share of
the fruits. Sazon however continued to fail and to refuse to perform her obligation.
In fact, she continues to hold on to the properties and the management and
administration thereof. Further, she continues to collect, receive, and keep all the
income generated by the properties. Vasquez-Menancio filed a Complaint for
Recovery of Possession of Real Properties, Accounting and Injunction before the RTC
against Sazon. By way of compulsory counterclaim, petitioner is asking this Court to
order respondent to return the one-third portion of Lot IV allegedly owned by
petitioner's mother and the fruits collected therefrom. The RTC ruled in favor of
Vasquez-Menancio. Among other things, the July 31, 2007 Decision ordered Sazon
to do the following: a. turn over the possession, management and administration of
all the properties except parcels 4, 7, 8 and 9 which were already under plaintiff's
possession since August 1977to the plaintiff thru attorney-in-fact Edgar S.
Segarra; and b. to remit to Vasquez-Menancio the total sum of P1, 265, 493.75
representing unremitted fruits and income of the subject properties, less the
amount of P150, 000 by way of administration expenses incurred by defendant.
Sazon filed her motion for reconsideration. The RTC ruled in favor of VasquezMenancio and partly reversed its previous decision. Instead of remitting P1, 265,
493.75 to Vasquez-Menancio, Sazon was ordered to render full, accurate and
complete accounting of all the fruits and proceeds of the subject properties during
the period of her administration. Still aggrieved, petitioner raised the matter to the
CA but it dismissed her appeal.The CA affirmed the trial court's July 31, 2007
Decision except for the amount ordered to be remitted to respondent, which was
reduced to P908, 112.62. The MR filed by petitioner was also denied.
Issue: Whether or not the agent failed to perform his duty as an agent.
Ruling:
YES. Article 1891 of the Civil Code contains a few of the obligations owed by an
agent to his principal Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have received by
virtue of the agency, even though it may not be owing to the principal. Every
stipulation exempting the agent from the obligation to render an account shall be
void. It is evident that the reason behind the failure of petitioner to render an
accounting to respondent is immaterial. What is important is that the former fulfill

her duty to render an account of the relevant transactions she entered into as
respondents agent.

Serona vs Court of Appeals

GR. No. 130423; November 18, 2002
FACTS:
Leonida Quilatan delivered pieces of jewelry to petitioner !irgie Serona to be sold on
commission basis. By oral agreement of the parties, petitioner shall remit payment
or return the pieces of jewelry if not sold to Quilatan, both within 30 days from
receipt of the items. Quilatan required her to execute an acknowledgment receipt
indication their agreement and the total account due. The receipt was signed by
petitioner and a witness, Rufina G. Navarette. Unknown to Quilatan, petitioner had
earlier entrusted the jewelry to Marichu Labrador for the latter to sell on
commission basis. Petitioner was not able to collect payment from Labrador, which
caused her to likewise fail to pay her obligation to Quilatan. Quilatan filed a
complaint affidavit against petitioner and subsequently an information for estafa
was filed against petitioner. Petitioner pleaded not guilty upon arraignment. Marichu
Labrador confirmed that she received pieces of jewelry from petitioner. The TC
rendered decision finding petitioner guilty of estafa. CA affirmed the decision but
modified the penalty.
ISSUE:
Whether or not Serona is guilty of estafa due to the failure of her sub-agent to
deliver again the said jewelry or proceeds.
RULING:
NO. Petitioner did not ipso facto commit the crime of estafa through conversion or
misappropriation by delivering the jewelry to a sub-agent for sale on commission
basis. Supreme Court is unable to agree with the lower courts' conclusion that this
fact alone is sufficient ground for holding that petitioner disposed of the jewelry "as
if it were hers, thereby committing conversion and a clear breach of trust."
The elements of estafa through misappropriation or conversion as defined in Article
315 paragraph 1(b) of the Revised Penal Code are: (1) that the money, good or
other personal property is received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery
thereof, or to return the same; (b) that there be misappropriation or conversion of
such money or property by the offender or denial on his part of such receipt; (c) that
such misappropriation or conversion or denial is to the prejudice of another and (d)
that there is a demand made by the offended party on the offender.

While the first, third and fourth elements are concededly present, we find the
second element of misappropriation or conversion to be lacking in the case at bar. It
must be pointed out that the law on agency in our jurisdiction allows the
appointment by an agent of a substitute or sub-agent in the absence of an express
agreement to the contrary between the agent and the principal. In the case at bar,
the appointment of Labrador as petitioner's sub-agent was not expressly prohibited
by Quilatan, as the acknowledgment receipt, Exhibit B does not contain any such
limitation either does it appear that petitioner was verbally forbidden by Quilatan
from passing on the jewelry to another person before the acknowledgment receipt
was executed or at any other time.
Thus, it cannot be said that petitioner's act of entrusting the jewelry to Labrador is
characterized by abuse of confidence because such an act was not proscribed and is
in fact legally sanctioned. In the case at bar, it was established that the inability of
petitioner as agent to comply with her duty to return either the pieces of jewelry or
the proceeds of its sale to her principal Quilatan was due, in turn, to the failure of
Labrador to abide by her agreement with petitioner. Notably, Labrador testified that
she obligated herself to sell the jewelry in behalf of petitioner also on commission
basis or to return the same if not sold.
In other words, the pieces of jewelry were given by petitioner to Labrador to achieve
the very same end for which they were delivered to her in the first place.
Consequently, there is no conversion since the pieces of jewelry were not devoted
to a purpose or use different from that agreed upon. Similarly, it cannot be said that
petitioner misappropriated the jewelry or delivered them to Labrador "without
right." Aside from the fact that no condition or limitation was imposed on the mode
or manner by which petitioner was to effect the sale, it is also consistent with usual
practice for the seller to necessarily part with the valuables in order to find a buyer
and allow inspection of the items for sale. Labrador admitted that she received the
jewelry from petitioner and sold the same to a third person. She further
acknowledged that she owed petitioner P441, 035.00, thereby negating any
criminal intent on the part of petitioner. There is no showing that petitioner derived
personal benefit from or conspired with Labrador to deprive Quilatan of the jewelry
or its value. Consequently, there is no estafa within contemplation of the law.
Notwithstanding the above, however, petitioner is not entirely free from any liability
towards Quilatan. The rule is that an accused acquitted of estafa may nevertheless
be held civilly liable where the facts established by the evidence so warrant. Then
too, an agent who is not prohibited from appointing a sub-agent but does so without
express authority is responsible for the acts of the sub-agent. Considering that the
civil action for the recovery of civil liability arising from the offense is deemed
instituted with the criminal action, petitioner is liable to pay complainant Quilatan
the value of the unpaid pieces of jewelry.
G.R. No. 165411 June 18, 2009 WILMA TABANIAG vs. PEOPLE OF THE
PHILIPPINES

Facts:
Complainants, both doctors by profession, are engaged in part-time jewelry
business. Petitioner, on the other hand, is an agent who sells the pieces of jewelry
of complainants on commission basis. On February 7, 1992, petitioner received from
Victoria several pieces of jewelry amounting to Php106,000.00 as evidenced by a
trust receipt signed by petitioner. Later on February 16, 1992, petitioner again
received several pieces of jewelry amounting to Php64,515.00 as evidenced by
another trust receipt signed by petitioner.
After weeks passed, Victoria alleged that she made several verbal demands t
petitioner to return the pieces of jewelry. Likewise, complainants filed a complaint18
at Barangay Kapitolyo, Pasig City, against Tabaniag, Jane Bisquera (Bisquera) and
Olandia for estafa and violations of Batas Pambansa Bilang 22 (BP 22). Petitioner, in
her defense, alleged that she entrusted the pieces of jewelry to Bisquera who issued
Security Bank Check as payment. Petitioner claimed that Victoria knew that she was
planning to sell the pieces of jewelry to Bisquera. Moreover, petitioner contends that
she and Olandia delivered the said Security Bank checks to Victoria, who then
deposited the same to her account. The checks issued by Bisquera bounced as the
accounts were closed and thus Victoria asked petitioner to do something about it.
Petitioner claimed that she filed cases for estafa and violation of BP 22 against
Bisquera. Likewise, petitioner asked the court for the issuance of an alias warrant of
arrest and a hold departure order against Bisquera. On cross-examination, however,
petitioner admitted that the cases she filed against Bisquera did not involve the
same checks which are the subject matter of the case at bar. On February 27, 2004,
the CA found accused-appellant Wilma Tabaniag guilty beyond reasonable doubt of
the crime of estafa. The pertinent portions of the CA decision are hereunder
reproduced, to wit:
Tabaniag entered into an agreement with Victoria Espiritu for the sale of jewelry. She
obligated herself, among others, to deliver and account for the proceeds of all
jewelry sold and to return all other items she could not sell. The jewelry could not be
sold on installment. She abused the confidence reposed upon her by
misrepresenting herself to have sold the jewelry to a certain Bisquera and failing to
remit the profit after demand to do so by Espiritu. Due to her failure to forward the
returns from the sale of the jewelry, Espiritu suffered loss of income and profit. The
receipts issued to and signed by Tabaniag corroborate the prosecution's testimonial
proof that she personally received the jewelry. Tabaniag's uncorroborated claim that
Victoria Espiritu directly transferred the jewelry to a certain Jane Bisquera cannot
stand along against this factual finding. The checks issued by Bisquera do not
conclusively prove a direct transaction between her and Espiritu.
On March 26, 2004, petitioner filed a Motion for Reconsideration assailing the CA
decision. On August 2, 2004, Dennis filed a Motion to Dismiss, attaching thereto an

Affidavit of Desistance, to the effect that he was withdrawing the criminal complaint
because he and petitioner had already reached an amicable settlement, the latter
obligating herself to pay the civil aspect of the case. On September 22, 2004, the
CA issued a Resolution denying petitioner's Motion for Reconsideration, as well as
the Motion to Dismiss filed by Dennis.
Issues:
Whether or not there was abuse of confidence on the part of the petitioner agent
Tabaniag in entrusting the subject jewelries to Biequera for sale on commission to
prospective buyers.
Ruling: NO. Petitioner cannot be criminally held liable for estafa. Although it cannot
be denied that she received the pieces of jewelry from complainants, evidence is
wanting in proving that she misappropriated or converted the amount of the pieces
of jewelry for her own personal use. Likewise, the prosecution failed to present
evidence to show that petitioner had conspired or connived with Bisquera. The mere
fact that petitioner failed to return the pieces of jewelry upon demand is not proof of
conspiracy, nor is it proof of misappropriation or conversion. In addition, this Court
takes notice of the findings of fact by the RTC in the separate civil action instituted
by complainants, the same docketed as Civil Case No. 63131, dealing with the civil
aspect of the case at bar: x x x x Jane Bisquera cannot interpose the defense that
she is not privy to the transaction. Her admission that she has indeed received the
pieces of jewelry which is the subject matter of the controversy and her offer to
extinguish the obligation by payment or dacion en pago is contradictory to her
defense. Therefore, she is estopped from interposing such a defense. Furthermore,
earlier in her transaction with Wilma Tabaniag, the principals,
Sps. Espiritu, were not alien to her but were in fact disclosed to her, hence, she has
knowledge that the spouses are the principals of Tabaniag. Bisquera, being a subagent to Tabaniag, is in fact privy to the agreement. x x x Based on the foregoing, it
is clear that petitioner had in fact transferred the pieces of jewelry to Bisquera.
Thus, contrary to the finding of the CA, petitioner could not have converted the
same for her own benefit, especially since the pieces of jewelry were not with her,
and there was no evidence of conspiracy or connivance between petitioner and
Bisquera. Moreover, even Victoria cannot deny knowing that petitioner had given
the pieces of jewelry to Bisquera, as Victoria herself was the one who deposited the
checks issued by Bisquera to her account.
Lastly, although petitioner may have admitted that the cases she filed against
Bisquera do not involve the same checks, which are the subject matter of the case
at bar, the same does not necessarily manifest a criminal intent on her part. On the
contrary, what it shows is that petitioner too may be an unwilling victim of this dayto-day malady of bouncing checks, common in our business field. Certainly,

petitioner may have been negligent in entrusting the pieces of jewelry to Bisquera,
but in no way can such constitute estafa as defined in the RPC.
As a final note, a reading of the records and transcript of the case seemingly shows
an unintentional reference by the parties in describing the transaction as one of
sale. The foregoing notwithstanding, if this Court were to consider the transaction as
one of sale and not one of sub-agency, the same conclusion would nevertheless be
reached, as the critical elements of misappropriation or conversion, as previously
discussed, are absent in the case at bar.
It is the primordial duty of the prosecution to present its side with clarity and
persuasion so that conviction becomes the only logical and inevitable conclusion.
What is required of it is to justify the conviction of the accused with moral certainty.
In the case at bar, the prosecution has failed to discharge its burden. Based on the
foregoing, it would then be unnecessary to discuss the other assigned errors.
Notwithstanding the above, however, petitioner is not entirely free from any liability
towards complainants.
The rule is that an accused acquitted of estafa may nevertheless be held civilly
liable where the facts established by the evidence so warrant. However, since there
is a separate civil action instituted by complainants, this Court deems it proper for
the civil aspect of the case at bar to be resolved therein.

OBLIGATIONS OF THE PRINCIPAL

OLAGUER vs. PURUGGANAN, JR. and LOCSIN
G.R. No. 158907
February 12, 2007
FACTS:
Petitioner Eduardo B. Olaguer who is an activist against the Marcos
administration was the owner of 60,000 shares of stock of Business day Corporation
with a total par value of P600,000.00. Anticipating the possibility that petitioner
would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector
Holifea had an unwritten agreement that, in the event that petitioner was arrested,
they would support the petitioners family by the continued payment of his salary.
Oleguer executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as
his attorneys-in-fact Locsin, Joaquin and Hofilea for the purpose of selling or
transferring petitioners shares of stock with Business day. The parties
acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the
Corporate Secretary of Business day, and at the same time, a notary public for
Quezon City. On 24 December 1979, petitioner was arrested by the Marcos military
by virtue of an Arrest, Search and Seizure Order and detained for allegedly
committing arson. In view of petitioners previous instructions, for such price and
under such terms and conditions that the agents may deem proper, when petitioner

was detained, respondent Locsin tried to sell petitioners shares, but nobody wanted
to buy them. Petitioners reputation as an oppositionist resulted in the poor financial
condition of Business day and discouraged any buyers for the shares of stock.
Respondent Locsin decided to buy the shares himself.
Although the capital deficiency suffered by Business day caused the book
value of the shares to plummet below par value, respondent Locsin, nevertheless,
bought the shares at par value. The RTC found that petitioner consented to have
respondent Locsin buy the shares himself, through his wife received from
respondent Locsin the amount of P600,000.00 as payment for the shares of stock.
Petitioner contends that there was no valid sale since respondent Locsin exceeded
his authority under the SPA issued in his, Joaquin and Holifenas favor. He alleged
that the authority of the afore-named agents to sell the shares of stock was limited
to the following conditions: (1) in the event of the petitioners absence and
incapacity; and (2) for the limited purpose of applying the proceeds of the sale to
the satisfaction of petitioners subsisting obligations with the companies adverted to
in the SPA.
ISSUE:
Whether respondent Locsin exceeded his authority under the SPA.
DECISION:
It is a general rule that a power of attorney must be strictly construed; the
instrument will be held to grant only those powers that are specified, and the agent
may neither go beyond nor deviate from the power of attorney. However, the rule is
not absolute and should not be applied to the extent of destroying the very purpose
of the power. If the language will permit, the construction that should be adopted is
that which will carry out instead of defeat the purpose of the appointment. Clauses
in a power of attorney that are repugnant to each other should be reconciled so as
to give effect to the instrument in accordance with its general intent or predominant
purpose. Furthermore, the instrument should always be deemed to give such
powers as essential or usual in effectuating the express powers. In the present case,
limiting the definitions of "absence" to that provided under Article 381 of the Civil
Code and of "incapacity" under Article 38 of the same Code negates the effect of
the power of attorney by creating absurd, if not impossible, legal situations. Article
381 provides the necessarily stringent standards that would justify the appointment
of a representative by a judge. Among the standards the said article enumerates is
that no agent has been appointed to administer the property. In the present case,
petitioner himself had already authorized agents to do specific acts of
administration and thus, no longer necessitated the appointment of one by the
court. Likewise, limiting the construction of "incapacity" to "minority, insanity,
imbecility, the state of being a deaf-mute, prodigality and civil interdiction," as
provided under Article 38, would render the SPA ineffective.
Petitioner received from respondent Locsin, through his wife and in-laws, the
installment payments for a total of P600,000.00 from 1980 to 1982, without any
protest or complaint. It was only four years after 1982 when petitioner demanded
the return of the shares. The petitioners claim that he did not instruct respondent

Locsin to deposit the money to the bank accounts of his in-laws fails to prove that
petitioner did not give his consent to the sale since respondent Locsin was
authorized, under the SPA, to negotiate the terms and conditions of the sale
including the manner of payment. Moreover, had respondent Locsin given the
proceeds directly to the petitioner, as the latter suggested in this petition, the
proceeds were likely to have been included among petitioners properties which
were confiscated by the military. Instead, respondent Locsin deposited the money in
the bank accounts of petitioners in-laws, and consequently, assured that the
petitioners wife received these amounts. Article 1882 of the Civil Code provides
that the limits of an agents authority shall not be considered exceeded should it
have been performed in a manner more advantageous to the principal than that
specified by him.
Republic of the Philippines v. Hon. Victorino Evangelista
G.R. No. 156015
August 11, 2005
FACTS:
Plaintiff Dante Legaspi, through his Attorney-in-fact Paul Gutierrez, filed a
complaint for damages, with prayer for the issuance of a writ of preliminary
injunction against Defendants then Lt. Gen. Jose M. Calimlim et al.
Previous thereto, Legaspi as principal executed a Special Power of Attorney
(SPA) in favor of his nephew Gutierrez. Based on records, Gutierrez was given by
Legaspi, inter alia, the power to manage the treasure hunting activities in the
subject land; to file any case against anyone who enters the land without authority
from Legaspi; to engage the services of lawyers to carry out the agency; and, to dig
for any treasure within the land and enter into agreements relative thereto. It was
likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure
may be found in the land. Pursuant to this authority and to protect Legaspis land
from the alleged illegal entry of petitioners, agent Gutierrez hired the services of
Atty. Adaza to prosecute the case for damages and injunction against [defendants
who were allegedly treasure hunting on Legaspis land, with 80 military personnel
detailed to guard and intimidate Legaspis group from going near the area of
operations]. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza
30% of Legaspis share in whatever treasure may be recovered in the subject land.
(Emphasis omitted.)
On a motion to dismiss, defendants cited the nullity of the complaint which
was filed by agent Gutierrez after his principal Legaspi subsequently executed a
Deed of Revocation, among others. The trial court denied the motion.
ISSUE:
Can a contract of agency be effectively revoked unilaterally by the principal,
as in this case?
RULING:

The contract of agency between principal Legaspi and agent Gutierrez is not
revocable at will. A contract of agency is generally revocable as it is a personal
contract of representation based on trust and confidence reposed by the principal
on his agent. As the power of the agent to act depends on the will and license of the
principal he represents, the power of the agent ceases when the will or permission
is withdrawn by the principal. Thus, generally, the agency may be revoked by the
principal at will.
However, an exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency. The
reason for its irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal but also that of
the agent and third persons which are affected
Here, the agency is coupled with interest as a bilateral contract depends on it. It is
clear that the treasure that may be found in the land is the subject matter of the
agency; that under the SPA, Gutierrez can enter into contract for the legal services
of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject
matter of the agency, i.e., in the treasures that may be found in the land. This
bilateral contract depends on the agency and thus renders it as one coupled with
interest, irrevocable at the sole will of the principal Legaspi. When an agency is
constituted as a clause in a bilateral contract , that is, when the agency is inserted
in another agreement, the agency ceases to be revocable at the pleasure of the
principal as the agency shal now follow the condition of the bilateral agreement.
Consequently, the Deed of Revocation executed by Legaspi has no effect. The
authority of Gutierrez to file and continue with the prosecution of the case at bar is
unaffected.
SMITH, BELL & CO., INC. vs.COURT OF APPEALS and JOSEPH BENGZON
CHUA
G.R. No. 110668
February 6, 1997
FACTS:
In July 1982, the plaintiffs, doing business under the style of Tic Hin Chiong,
Importer, bought and imported to the Philippines from the firm Chin Gact Co., Ltd. of
Taipei; Taiwan, 50 metric tons of Dicalcium Phosphate, Feed Grade F-15% valued at
US$13,000.00 CIF Manila. These were contained in 1,250 bags and shipped from the
Port of Kaohsiung, Taiwan on Board S.S. "GOLDEN WEALTH" for the Port on (sic)
Manila. On July 27, 1982, this shipment was insured by the defendant First
Insurance Co. for US$19,500.00 "against all risks" at port of departure under Marine
Policy No. 1000M82070033219, with the note "Claim, if any, payable in U.S.
currency at Manila (Exh. "1", 'D" for the plaintiff) and with defendant Smith, Bell,
and Co. stamped at the lower left side of the policy as "Claim Agent." The cargo
arrived at the Port of Manila on September 1, 1982 aboard the above-mentioned
carrying vessel and landed at port on September 2, 1982. thereafter, the entire
cargo was discharged to the local arrastre contractor, Metroport Services Inc. with a
number of the cargo in apparent bad order condition. On September 27, 1982, the

plaintiff secured the services of a cargo surveyor to conduct a survey of the

damaged cargo which were (sic) delivered by plaintiff's broker on said date to the
plaintiffs premises at 12th Avenue, Grace Park, Caloocan City. The surveyor's report
(Exh. "E") showed that of the 1,250 bags of the imported material, 600 were
damaged by tearing at the sides of the container bags and the contents partly
empty. Upon weighing, the contents of the damaged bags were found to be
18,546.0 kg short. Accordingly, on October 16 following, the plaintiff filed with
Smith, Bell, and Co., Inc. a formal statement of claim (Exh. "G") with proof of loss
and a demand for settlement of the corresponding value of the losses, in the sum of
US$7,357.78.00. (sic) After purportedly conveying the claim to its principal, Smith,
Bell, and Co., Inc. informed the plaintiff by letter dated February 15, 1983 (Exh."G2") that its principal offered only 50% of the claim or US$3,616.17 as redress, on the
alleged ground of discrepancy between the amounts contained in the shipping
agent's reply to the claimant of only US$90.48 with that of Metroport's. The offer
not being acceptable to the plaintiff, the latter wrote Smith, Bell, & Co. expressing
his refusal to the "redress" offer, contending that the discrepancy was a result of
loss from vessel to arrastre to consignees' warehouse\which losses were still within
the "all risk" insurance cover. No settlement of the claim having been made, the
plaintiff then caused the instant case to be filed. (p. 2, RTC Decision; p. 142,
Record).
Denying any liability, defendant-appellant averred in its answer that it is
merely a settling or claim agent of defendant insurance company and as SUCH
agent, it is not personally liable under the policy in which it has not even taken part
of. It then alleged that plaintiff-appellee has no cause of action against it. Defendant
The First Insurance Co. Ltd. did not file an Answer, hence it was declared in default.
After due trial and proceeding, the lower court rendered a decision favorable to
plaintiff-appellee. It ruled that plaintiff-appellee has fully established the liability of
the insurance firm on the subject insurance contract as the former presented
concrete evidence of the amount of losses resulting from the risks insured against
which were supported, by reliable report and assessment of professional cargo
surveyor. As regards defendant-appellant, the lower court held that since it is
admittedly a claim agent of the foreign insurance firm doing business in the
Philippines justice is better served if said agent is made liable without prejudice to
its right of action against its principal, the insurance firm.
Petitioner rejects liability under the said insurance contract, claiming that: (1)
it is merely an agent and thus not personally liable to the party with whom it
contracts on behalf of its principal; (2) it had no participation at all in the contract of
insurance; and (3) the suit is not brought against the 9 real party-in-interest. On the
other hand, respondent Court in ruling against petitioner disposed of the main issue
by citing a case it decided in 1987, where petitioner 10 was also a party-litigant. In
that case, respondent Court held that petitioner as resident agent of First Insurance
Co. Ltd. was "authorized to settle claims against its principal. Its defense that its
authority excluded personal liability must be proven satisfactorily. There is a
complete dearth of evidence supportive of appellant's non-responsibility as resident
agent." The ruling continued with the statement that "the interest of justice is 11
better served by holding the settling or claim agent jointly and severally liable with
its principal."

Likewise, private respondent disputed the applicability of the cases of E

Macias & Co. vs. Warner, Barnes & Co. and Salonga vs. Warner, Barnes & 13 Co.,
Ltd. invoked by petitioner in its appeal. According to private respondent, these two
cases impleaded only the "insurance agent" and did not include the principal. While
both the foreign principal which was declared in default by the trial court and
petitioner, as claim agent, were found to be solidarily liable in this case, petitioner
still had "recourse" against its foreign principal. Also, being a contract of adhesion,
an insurance 14 agreement must be strictly construed against the insurer.
ISSUE:
Whether or not a local settling or claim agent of a disclosed principal a
foreign insurance company can be held jointly and severally liable with said
principal under the latter's marine cargo insurance policy, given that the agent is
not a party to the insurance contract.
RULING:
There are three reasons why we find for petitioner.
First Reason: Existing Jurisprudence
Petitioner, undisputedly a settling agent acting within the scope of its
authority, cannot be held personally and/or solidarily liable for the obligations of its
disclosed principal merely because there is allegedly a need for a speedy
settlement of the claim of private respondent. In the 15 leading case of Salonga vs.
Warner, Barnes & Co., Ltd. this Court ruled in this wise: We agree with counsel for
the appellee that the defendant is a settlement and adjustment agent of the foreign
insurance company and that as such agent it has the authority to settle all the
losses and claims that may arise under the policies that may be issued by or in
behalf of said company in accordance with the instructions it may receive from time
to time from its principal, but we disagree with counsel in his contention that as
such adjustment and settlement agent, the defendant has assumed personal
liability under said policies, and, therefore, it can be sued in its own right. An
adjustment and settlement agent is no different from any other agent from the
point of view of his responsibility (sic), for he also acts in a representative capacity.
Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his
action is binding not upon himself but upon his principal. And here again, the
ordinary rule of agency applies. The following authorities bear this out: "An
insurance adjuster is ordinarily a special agent for the person or company for whom
he acts, and his authority is prima facie coextensive with the business intrusted to
him. . . ." "An adjuster does not discharge functions of a quasi-judicial nature, but
represents his employer, to whom he owes faithful service, and for his acts, in the
employer's interest, the employer is responsible so long as the acts are done while
the agent is acting within the scope of his employment." (45 C.J.S., 1338- 1340.) It,
therefore, clearly appears that the scope and extent of the functions of an
adjustment and settlement agent do not include personal liability. His functions are
merely to settle and adjusts claims in behalf of his principal if those claims are
proven and undisputed, and if the claim is disputed or is 12 2 disapproved by the
principal, like in the instant case, the agent does not assume any personal liability.
The recourse of the insured is to press his claim against the principal. (Emphasis

supplied). The foregoing doctrine may have been enunciated by this Court in 1951,
but the passage of time has not eroded its value or merit. It still applies with equal
force and vigor. Private respondent's contention that Salonga does not apply simply
because only the agent was sued therein while here both agent and principal were
impleaded and found solidarily liable is without merit. Such distinction is immaterial.
The agent can not be sued nor held liable whether singly or solidarily with its
principal. Every cause of action ex contractu must be founded upon a contract, oral
or written, either express or implied. The only "involvement" of petitioner in the
subject contract of insurance was having its name stamped at the bottom left
portion of the policy as "Claim Agent." Without anything else to back it up, such
stamp cannot even be deemed by the remotest interpretation to mean that
petitioner participated in the preparation of said contract. Hence, there is no privity
of contract, and correspondingly there can be no obligation or liability, and thus no
Cause of 17 action against petitioner attaches. Under Article 1311 of the Civil Code,
contracts are binding only upon the parties (and their assigns and heirs) who
execute them. The subject cargo insurance was between the First Insurance
Company, Ltd. and the Chin Gact Co., Ltd., both of Taiwan, and 18 was signed in
Taipei, Taiwan by the president of the First Insurance Company, Ltd. and the
president of the Chin Gact Co., Ltd. There is absolutely nothing in the contract which
mentions the personal liability of petitioner.
Second Reason: Absence of Solidarity Liability
May then petitioner, in its capacity as resident agent (as found in the case
cited by the respondent Court ) be held solidarily liable with the foreign insurer?
Article 1207 of the Civil Code clearly provides that "(t)here is a solidary liability only
when the obligation expressly so states, or when the law or the nature of the
obligation requires solidarity." The well-entrenched rule is that solidary obligation
cannot lightly be inferred. It must be positively and clearly expressed. The
contention that, in the end, it would really be First Insurance Company, Ltd. which
would be held liable is specious and cannot be accepted. Such a stance would inflict
injustice upon petitioner which would be made to advance the funds to settle the
claim without any assurance that it can collect from the principal which disapproved
such claim, in the first place. More importantly, such ,position would have absolutely
no legal basis. The Insurance Code is quite clear as to the Purpose and role of a
resident agent. Such agent, as a representative of the foreign insurance company,
is tasked only to receive legal processes on behalf of its principal and not to answer
personally for any insurance claims. We quote: Sec. 190. The Commissioner must
require as a condition precedent to the transaction of insurance business in the
Philippines by any foreign insurance company, that such company file in his office a
written power of attorney designating some person who shall be a resident of the
Philippines as its general agent, on whom any notice provided by law or by any
insurance policy, proof summons and other legal processes may be served in all
actions or other legal proceedings against such company, and consenting that
service upon such general agent shall be admitted and held as valid as if served
upon the foreign company at its home office. Any such foreign company shall, as
further condition precedent to the transaction of insurance business in the
Philippines, make and file with the Commissioner an agreement or stipulation,
executed by the proper authorities of said company in form and substance as
follows: The (name of company) does hereby stipulate and agree in consideration of

the permission granted by the Insurance Commissioner to transact business in the

Philippines, that if at any time such company shall leave the Philippines, or cease to
transact business therein, or shall be without any agent in the Philippines on whom
any notice, proof of loss, summons, or legal process may be served, then in any
action or proceeding arising out of any business or transaction which occurred in the
Philippines, service of any notice provided by law, or insurance policy, proof of loss,
summons, or other legal process may be made upon the Insurance Commissioner
shall have the same force and effect as if made upon the company. Whenever such
service of notice, proof of loss, summons or other legal process shall be made upon
the Commissioner he must, within ten days thereafter, transmit by mail, postage
paid, a copy of such notice, proof of loss, summons, or other legal process to the
company at its home or principal office. The sending of such copy of the
Commissioner shall be necessary part of the service of the notice, proof of loss, or
other legal process. (Emphasis supplied). Further, we note that in the case cited by
respondent Court, petitioner was found to be a resident agent of First Insurance Co.
Ltd. In the instant case however, the trial court had to order the service of summons
upon First Insurance Co., Ltd. which would not have been necessary if petitioner was
its resident agent. Indeed, from our reading of the records of this case, we find no
factual and legal bases for the finding of respondent Court that petitioner is the
resident agent of First Insurance Co., Ltd.
Third Reason: Not Real Party-In-Interest
Lastly, being a mere agent and representative, petitioner is also not the real
party-in-interest in this case. An action is brought for a practical purpose, that is, to
obtain actual and positive relief. If the party sued is not the proper party, any
decision that may be rendered against him would be futile, for the decision cannot
be enforced or executed. Section 2, Rule 3 of the Rules of Court identifies who the
real parties-in-interest are, thus: Sec. 2. Parties in interest. Every action must be
prosecuted and defended in the name of the real party in interest. All persons
having an interest in the subject of the action and in obtaining the relief demanded
shall be joined as plaintiffs. All persons who claim an interest in the controversy or
the subject thereof adverse to the, plaintiff, or who are necessary to a complete
determination or settlement of the questions involved therein shall be joined as
defendants. The cause of action of private respondent is based on a contract of
insurance which as already shown was not participated in by petitioner. It is not a
"person who claim(s) an interest adverse to the plaintiff" nor is said respondent
"necessary to a complete determination or settlement of the questions involved" in
the controversy. Petitioner is improperly impleaded for not being a real-partyinterest. It will not benefit or suffer in case the 20 action prospers.
Resort to Equity Misplaced
Finally, respondent Court also contends that "the interest of justice is better
served by holding the settling agent jointly and severally liable with its principal." As
no law backs up such pronouncement, the appellate Court is thus resorting to
equity. However, equity which has been aptly 21 described as "justice outside
legality," is availed of only in the absence of, and never against, statutory law or
judicial pronouncements. Upon the other hand the liability of agents is clearly
provided for by our laws and existing jurisprudence.

WHEREFORE, in view of the foregoing considerations, the Petition is GRANTED

and the Decision appealed from is REVERSED and SET ASIDE. No costs. SO
ORDERED.
TRUSTS
Principle of Constructive Trust Applies
Pasino v Monteroyyo
Under the principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner being another
person, impresses upon the title so acquired the character of a constructive trust for
the real owner, which would justify an action for reconveyance. In the action for
reconveyance, the decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property wrongfully or erroneously registered in
anothers name to its rightful owner or to one with a better right. If the registration
of the land is fraudulent, the person in whose name the land is registered holds it as
a mere trustee, and the real owner is entitled to file an action for reconveyance of
the property.
In the case before us, respondents were able to establish that they have a
better right to Lot No. 2139 since they had long been in possession of the property
in the concept of owners, by themselves and through their predecessors-in-interest.
Hence, despite the irrevocability of the Torrens titles issued in their names and even
if they are already the registered owners under the Torrens system, petitioners may
still be compelled under the law to reconvey the property to respondents.
Implied Trust and Prescription
Sps. Pascual v. CA and Gino
Facts:
Petitioner Consolacion Sioson-Pascual and respondent Remedios S. Eugenio-Gino
are the niece and granddaughter, respectively, of the late Canuto. Canuto and 11
other individuals, including his sister Catalina Sioson and his brother Victoriano
Sioson, were co-owners of a parcel of land. The property, known as Lot 2 of Plan Psu
13245, had an area of 9,347 square meters and was covered by Original Certificate

of Title No. 4207 issued by the Register of Deeds of Rizal. Catalina, Canuto, and
Victoriano each owned an aliquot 10/70 share or 1,335 square meters of Lot 2.
On November 1951, Canuto had Lot 2 surveyed and subdivided into eight lots (Lot
Nos. 2-A to 2-H) through Subdivision Plan Psd 34713 which the Director of Lands
approved on May 1952. Lot No. 2-A, with an area of 670 square meters, and Lot No.
2-E, with an area of 2,000 square meters, were placed under Canutos name. Three
other individuals took the remaining lots.
On 26 September 1956, Canuto and Consolacion executed a Kasulatan ng
Bilihang Tuluyan. Under the KASULATAN, CANUTO sold his 10/70 share in Lot 2 in
favor of CONSOLACION for P2,250.00.
CONSOLACION immediately took possession of Lot Nos. 2-A and 2-E. She later
declared the land for taxation purposes and paid the corresponding real estate
taxes.
On October 1968, the surviving children of CANUTO, namely, Felicidad and
Beatriz, executed a joint affidavit affirming the KASULATAN in favor of
CONSOLACION. They also attested that the lots their father had sold to
CONSOLACION were Lot Nos. 2-A and 2-E of Subdivision Plan Psd 34713.
CONSOLACION registered the KASULATAN and the JOINT AFFIDAVIT with the
Register of Deeds of Rizal; Based on these documents, the Register of Deeds issued
to CONSOLACION Transfer Certificate of Title No. (232252) 1321 covering Lot Nos. 2A and 2-E of Subdivision Plan Psd 34713 with a total area of 2,670 square meters.
On February 1988, REMEDIOS filed a complaint against CONSOLACION and her
spouse Ricardo Pascual for Annulment or Cancellation of Transfer Certificate and
Damages. REMEDIOS claimed that she is the owner of Lot Nos. 2-A and 2-E because
CATALINA devised these lots to her in CATALINAs last will and testament. REMEDIOS
added that CONSOLACION obtained title to these lots through fraudulent means
since the area covered by TCT (232252) 1321 is twice the size of CANUTOs share in
Lot 2. REMEDIOS prayed for the cancellation of CONSOLACIONs title, the issuance of
another title in her name, and the payment to her of damages.
Petitioners sought to dismiss the complaint on the ground of
prescription. Petitioners claimed that the basis of the action is fraud, and REMEDIOS
should have filed the action within four years from the registration of
CONSOLACIONs title on October 1968 and not some 19 years later on February
1988. REMEDIOS opposed the motion, claiming that she became aware of
CONSOLACIONs adverse title only in February 1987. CONSOLACION maintained that
she had timely filed her complaint within the four-year prescriptive on February
1988.

Issue:
Whether prescription bars the action filed by REMEDIOS
Ruling:
Yes. What REMEDIOS filed was an action to enforce an implied trust but the same is
already barred by prescription.
REMEDIOS action is based on an implied trust under Article 1456 since she claims
that the inclusion of the additional 1,335 square meters in TCT No. (232252) 1321
was without basis. In effect, REMEDIOS asserts that CONSOLACION acquired the
additional 1,335 square meters through mistake or fraud and thus CONSOLACION
should be considered a trustee of an implied trust for the benefit of the rightful
owner of the property. Clearly, the applicable prescriptive period is ten years under
Article 1144 and not four years under Articles 1389 and 1391.
It is now well-settled that the prescriptive period to recover property obtained by
fraud or mistake, giving rise to an implied trust under Article 1456 of the Civil Code,
is ten years pursuant to Article 1144. This ten-year prescriptive period begins to run
from the date the adverse party repudiates the implied trust, which repudiation
takes place when the adverse party registers the land.
REMEDIOS filed her complaint on February 1988 or more than 19 years after
CONSOLACION registered her title over Lot Nos. 2-A and 2-E on October
1968. Unquestionably, REMEDIOS filed the complaint late thus warranting its
dismissal.
REMEDIOS thus had actual notice of petitioners adverse title on 8 November 1977.
Even if, for the sake of argument, the ten-year prescriptive period begins to run
upon actual notice of the adverse title, still REMEDIOS right to file this suit has
prescribed. REMEDIOS had until 11 November 1987 within which to file her
complaint. When she did so on 4 February 1988, the prescriptive period had already
lapsed.
SPS. FELIPE and JOSEFA PARINGIT v. MARCIANA PARINGIT BAJIT, et al.
G.R. No. 181844, 29 September 2010,
The nature of a transaction results to an implied trust by operation of law
notwithstanding the lack of agreement between the parties.
FACTS:

During their lifetime, spouses Julian and Aurelia Paringit leased a lot in Sampaloc,
Manila (the lot) from Terocel Realty, Inc. (Terocel Realty). They built their home there
and raised five children. Aurelia died on November 6, 1972. For having occupied the
lot for years, Terocel Realty offered to sell it to Julian. Julian sought the help of his
children so he can buy the property but only his son Felipe and wife Josefa had the
financial resources he needed at that time. To bring about the purchase, on January
16, 1984 Julian executed a deed of assignment of leasehold right in favor of Felipe
and his wife that would enable them to acquire the lot. On April 12, 1984 Felipe and
his wife paid the last installment and the realty company executed a Deed of
Absolute Sale in their favor and turned over the title to them. In 1985, due to issues
among Julians children regarding the ownership of the lot, Julian executed an
affidavit clarifying the nature of Felipe and his wifes purchase of the lot.
He claimed that it was bought for the benefit of all his children. Expressing their
concurrence with what their father said in his affidavit, Felipes siblings (Marciana,
et. al.), except Florencio, signed the same.
Marciana, et al continued to occupy the lot with their families without paying rent.
This was the situation when their father Julian died on December 21, 1994. In 1995.
Felipe and his wife sent a demand letter to Marciana, et al asking them to pay rental
arrearages for occupying the property from March 1990 to December 1995 at the
rate of P2,400.00 a month, totaling P168,000.00. Marciana, et al refused to pay
believing that they had the right to occupy the house and lot, it being their
inheritance from their parents. On March 11, 1996 Felipe and his wife filed an
ejectment suit against them. The suit prospered, resulting in the ejectment of
Marciana, et al and their families from the property. Shortly after, Felipe and his wife
moved into the same. Marciana, et al filed the present action against Felipe and his
wife for annulment of title and reconveyance of property. In his answer, Felipe
denied knowledge of the agreement among the siblings that the property would
devolve to them all. Josefa, his wife, claimed that she signed the affidavit only
because Marciana, et al were going to get mad at her had she refused.
She also claimed that she signed the document only to prove having received it.
RTC rendered a decision, finding the evidence of Marciana, et al insufficient to prove
by preponderance of evidence that Felipe and his wife bought the subject lot for all
of the siblings. CA rendered judgment reversing the decision of the RTC and
ordering Felipe and his wife to reconvey to Marciana, et al their proportionate share
in the lot upon reimbursement of what the spouses paid to acquire it plus legal
interest.
ISSUE:
Whether or not CA erred in finding that Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of Julian

CIVIL LAW: Implied Trust on sale of land

HELD:
The CA found that Felipe and his wifes purchase of the lot falls under the rubric of
the implied trust provided in Article 1450 of the Civil Code.
Implied trust under Article 1450 presupposes a situation where a person, using his
own funds, buys property on behalf of another, who in the meantime may not have
the funds to purchase it. Title to the property is for the time being placed in the
name of the trustee, the person who pays for it, until he is reimbursed by the
beneficiary, the person for whom the trustee bought the land. It is only after the
beneficiary reimburses the trustee of the purchase price that the former can compel
conveyance of the property from the latter.
CIVIL LAW:
Prescription on implied trust In an implied trust, the beneficiarys cause of action
arises when the trustee repudiates the trust, not when the trust was created as
Felipe and his wife would have it. The spouses of course registered the lot in their
names in January 1987 but they could not be said to have repudiated the implied
trust by that registration. Their purchase of the land and registration of its title in
their names are not incompatible with implied trust. It was understood that they did
this for the benefit of Julian and all the children.
At any rate, even assuming that Felipe and his wifes registration of the lot in their
names in January 1987 constituted a hostile act or a violation of the implied trust,
Marciana, et al had 10 years or until January of 1997 within which to bring their
action. Here, they filed such action in July 1996 well within the period allowed them.
Finally, the CA ordered Marciana, et al to reimburse Felipe and his wife the individual
siblings proportionate share in theP55,500.00 that the spouses paid the realty
company.
G.R. No. 165849, 170185, 170186, 171066, 176650
GILBERT G. GUY, Petitioner
Vs.
THE COURT OF APPEALS, December 10, 2007
NATURE: The petition composed five (5) consolidated cases which stemmed from
Civil Case No. 04-109444 filed with the Regional Trial Court. But the focus of the
case with respect to trust is GR 176650. The petition filed by Gilbert Guy (Gilbert)
and Lincoln Continental Development Corporation, Inc. (Lincoln Continental)
questioning the decision of the Court of Appeals (CA) in affirming the Regional Trial
Court (RTC) in dismissing their complaint against the respondents.
FACTS:

Gilbert, petitioner, is the son of Francisco and Simny Guy. Respondents, Geraldine,
Gladys and Grace are his sisters. The family feud involves the ownership and control
of 20,160 shares of stock of Northern Islands Co., Inc. (Northern Islands).
Northern Islands is a family-owned corporation. In November 1986, they
incorporated Lincoln Continental as a holding company of the 50% shares of stock
of Northern Islands in trust for their daughters, respondents. In December 1986,
upon instruction of spouses Guy, Atty. Andres Gatmaitan, president of Lincoln
Continental, indorsed in blank Stock Certificate No. 132 (covering 8,400 shares) and
Stock Certificate No. 133 (covering 11,760 shares) and delivered them to Simny.
In 1984, spouses Guy found that their son Gilbert has been disposing of the assets
of their corporations without authority. In order to protect the assets of Northern
Islands, the 20,160 shares covered by the two Stock Certificates were then
registered in the names of respondent sisters, thus enabling them to assume an
active role in the management of Northern Islands.
Thereafter, Simny was elected President; Grace as Vice-President for Finance;
Geraldine as Corporate Treasurer; and Gladys as Corporate Secretary. Gilbert
retained his position as Executive Vice President. This development started the
warfare between Gilbert and his sisters.
Lincoln Continental filed a Complaint for Annulment of the Transfer of Shares of
Stock against respondents. The complaint basically alleges that Lincoln Continental
owns 20,160 shares of stock of Northern Islands; and that respondents, in order to
oust Gilbert from the management of Northern Islands, falsely transferred the said
shares of stock in respondent sisters names.
The trial court held that the complaint was baseless and an unwarranted suit among
family members. That based on the evidence, Gilbert was only entrusted to hold the
disputed shares of stock in his name for the benefit of the other family members;
and that it was only when Gilbert started to dispose of the assets of the familys
corporations without their knowledge that respondent sisters caused the
registration of the shares in their respective names.
On appeal, the Court of Appeals affirmed the Trial Court. Hence this petition.
ISSUES: Whether or not Gilbert was merely trust for the Guy sisters.
RULING: There was no doubt that Lincoln Continental held the disputed shares of
stock of Northern Islands merely in trust for the Guy sisters as found by the trial
court and affirmed by the CA. In fact, the evidence proffered by Lincoln Continental
itself supports this conclusion.
Article 1440 of the Civil Code provides that:
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 beneficiary.
In the early case of Gayondato v. Treasurer of the Philippine Island, this Court
defines trust, in its technical sense, as a right of property, real or personal, held by
one party for the benefit of another. Differently stated, a trust is a fiduciary
relationship with respect to property, subjecting the person holding the same to the
obligation of dealing with the property for the benefit of another person.
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the
shares in question. However, there was no evidence to support their claim. Rather,
the evidence on record clearly indicates that the stock certificates representing the
contested shares are in respondents possession. Significantly, there is no proof to
support his allegation that the transfer of the shares of stock to respondent sisters
is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed but
must be established by clear and convincing evidence. Gilbert failed to discharge
this burden. We, agree with the Court of Appeals that respondent sisters own the
shares of stocks, Gilbert being their mere trustee.

G.R. No. 175073 August 15, 2011

ESTATE OF MARGARITA D. CABACUNGAN, represented by LUZ LAIGO-ALI,
Petitioner,
vs.
MARILOU LAIGO, PEDRO ROY LAIGO, STELLA BALAGOT and SPOUSES
MARIO B. CAMPOS AND JULIA S. CAMPOS, Respondents.
FACTS:
It appears that sometime in 1969, Roberto applied for a tourist visa for the United
States. However, in order to qualify, Roberto had to prove that he owned real
properties. Roberto asked his mother, Margarita, to help him by transferring her tax
declarations over the above-mentioned properties in his name. Margarita obliged,
executing a Transferors Affidavit in favor of Roberto. The transfer was made without
the knowledge of Margaritas other children. Armed of such ownership, Roberto
succeeded in acquiring a visa. Roberto then left for the United States but returned in
due time.
On February 1979, Roberto married Estela Balagot in Aringay La Union. On July 26,
1990, Roberto sold the 4,502 square meters land in Baccuit,Bauang, La Union to
spouses Mario and Julia Campos for P23,000.00 without the knowledge or consent of
Margarita and her other children. On August 26, 1992, Roberto likewise sold the
1,986 and 3,454 square meters land to his adopted children, Marilou and Pedro
Laigo, for in consideration of P100,000.00 and P40,000.00, respectively, again
without the knowledge or consent of Margarita and her other children.
On August 15, 1995, Roberto died. During his wake, Margarita learned of
the surreptitious sale of the properties by Roberto, prompting Margarita to file

a complaint for annulment of sale of real property, recovery of ownership

and possession and cancellation of Tax Declarations with damages against
the spouses Campos, Marilou and Pedro.
Margarita claimed that the transfer of the properties to Roberto was not Intended to
divest her of ownership the properties; that the sale is null and void as Roberto had
no right to sell the properties. Margarita also alleged that the sale is merely
fictitious or simulated, the consideration for the alleged sale being
grossly inadequate and done in evident bad faith. Marilou and Pedro on the other
hand, countered that when they acquired the subject properties from Roberto, there
was no legal infirmity in the ownership of Roberto and that they were innocent
purchasers for value. Since Margarita was already barred by laches and prescription.
On February 03, 1999, Margarita and spouses Campos entered into compromise
agreement . Thus, the case against the spouses Campos was dismissed while the
case against Marilou and Pedro remained. On February 04,1999, Margarita died and
was substituted by siblings of Roberto.
DECISION OF RTC
On February 8, 1999, the trial court rendered a Partial Decision approving
the compromise agreement and dismissing the complaint against the
Spouses Campos. Forthwith, trial on the merits ensued with respect to Pedro and
Marilou.
On July 02, 2001, the court rendered judgment dismissing the complaint in favor of
respondents Marilou and Pedro.The trial court ruled that the 1968 Affidavit of
Transfer operated as a simple transfer of the subject properties from Margarita to
Roberto. It found no express trust created between Roberto and Margarita by virtue
merely of the said document as there was no evidence of another document
showing Robertos undertaking to return the subject properties. Interestingly, it
concluded that, instead, an "implied or constructive trust" was created between the
parties, as if affirming that there was indeed an agreement albeit unwritten to
have the properties returned to Margarita in due time.
Moreover, the trial court surmised how Margarita could have failed to recover
the subject properties from Roberto at any time between 1968, following
the execution of the Affidavit of Transfer, and Robertos return from the United
States shortly thereafter.
Finding Margarita guilty of laches by such inaction, the trial court barred recovery
from respondents who were found to have acquired the properties supposedly in
good faith and for value. It also pointed out that recovery could no longer be
pursued in this case because Margarita had likewise exhausted the ten-year
prescriptive period for reconveyance based on an implied trust which had
commenced to run in 1968 upon the execution of the Affidavit of Transfer.
Finally, it emphasized that mere inadequacy of the price as alleged would not be a
sufficient ground to annul the sales in favor of Pedro and Marilou absent any defect
in consent.

DECISION OF COURT OF APPEALS

Aggrieved, petitioner appealed to the Court of Appeals which, on October 13, 2006,
affirmed the trial courts disposition. The appellate court dismissed petitioners
claim that Roberto was merely a trustee of the subject properties as there was no
evidence on record supportive of the allegation that Roberto merely borrowed the
properties from Margarita upon his promise to return the same on his arrival from
the United States. Further, it hypothesized that granting the existence of an implied
trust, still Margaritas action thereunder had already been circumscribed by laches.
Curiously, while the appellate court had found no implied trust relation in
the transaction between Margarita and Roberto, nevertheless, it held that the tenyear prescriptive period under Article 1144 of the Civil Code, in relation to
an implied trust created under Article 1456, had already been exhausted by
Margarita because her cause of action had accrued way back in 1968; and
that while laches and prescription as defenses could have availed against
Roberto, the same would be unavailing against Pedro and Marilou because the latter
were supposedly buyers in good faith and for value.
DECISION OF SUPREME COURT
On October 13, 2006 decision of Court of Appeals affirms the July 02,
2001 judgment of the Regional Trial Court. Where Civil Case No. 1031-BG, is
reversed and set aside, and a new one is entered directing the cancellation of the
tax declarations covering the subject properties in the name of Roberto d. Laigo
and his transferees, nullifying the deeds of sale executed by Roberto D. Laigo in
favor of respondents Pedro Roy Laigo and Marilou Laigo, and directing
said respondents to execute reconveyance in favor of petitioner.
ISSUES:
1. Whether or not the trial court erred in ruling that Margarita was guilty of laches
for her failure to recover the property during her lifetime after her son, Robertos
lips were sealed.
2. Whether or not the trial court erred in ruling that Margaritas action to recover the
said properties prescribed after the lapse of the (10) years from the time of transfer
by Margarita to Roberto in 1968.
3. Whether or not the trial court erred in holding that the petitioner failed to rebut
the presumption of good faith.
HELD:
The petitioner contends that since laches signify the absence of any effort to assert
a right for a prolonged period of time, it cannot apply to Margarita since she
continued to par real estate taxes on the properties until Robertos demise; that she
retained physical, actual, open, and continuous possession and ownership over the
properties until her demise on February 04, 1999. Thus, she continued to exercise
acts of ownership over the properties. Laches as a rule of equity, cannot find
application in the instant case where Margarita never showed signs of total

abandonment of the property, but on the contrary exerted complete and

uncontrovertible acts of ownership. Laches, being rooted in equity, is not always to
be applied strictly in a way that would obliterate an otherwise valid claim especially
between blood relatives. The existence of a confidential relationship based upon
consanguinity is an important circumstance for consideration; hence, the doctrine is
not to be applied mechanically as between near relatives.
Adaza v. Court of Appeals held that the relationship between the parties therein,
who were siblings, was sufficient to explain and excuse what would otherwise have
been a long delay in enforcing the claim and the delay in such situation should not
be as strictly construed as where the parties are complete strangers vis-a-vis each
other; thus, reliance by one party upon his blood relationship with the other and the
trust and confidence normally connoted in our culture by that relationship should
not be taken against him.
Too, Sotto v. Teves ruled that the doctrine of laches is not strictly applied between
near relatives, and the fact that the parties are connected by ties of blood or
marriage tends to excuse an otherwise unreasonable delay. The petitioner claims
that the court a quo erred in applying the ten (10) year prescriptive period for
actions to recover property based on implied trust. The court a quo overlooked the
rule that an action for reconveyance of title based on breach of fiduciary relations
and/ or fraud should be filed within four (4) years from the time of discovery of the
fraud, citing Miguel vs CA, 29 SCRA 760.
The petitioner faults the court for upholding respondents good faith, insisting that
as members of the family, respondents were presumed to have known Margaritas
ownership, this claim must fail as no evidence has been adduced to show that
Margarita or any of her children had informed respondents as to Margaritas
ownership or the truth behind the Transferors affidavit executed by margarita in
favor of Roberto. It is worth noting that the transfer was executed in 1967, long
before respondents formal adoption by Roberto in 1979. Thus, they are deemed
ignorant of the said transaction, unless it is proven otherwise.
Petitioner also harps on the gross inadequacy of the price, allegedly confirming that
the sale was fictitious or simulated. However, it concurs with the court a quo in
holding that consideration, though grossly inadequate, cannot invalidate a sale
absent a showing of a defect in consent. Settled is the rule that hardness of the
bargain or the inadequacy of the price is not sufficient ground for the cancellation of
the contract otherwise free from invalidating defects.

HEIRS OF LABANON VS. LABANON

Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter.

Trusts are classified under the Civil Code as either express or implied. Such
classification determines the prescriptive period for enforcing such trust.
No particular form or conduct is necessary for the manifestation of intention to
create a trust. It is possible to create a trust without using the word trust or
trustee. Conversely, the mere fact that that these words are used does not
necessarily indicate an intention to create trust. It is immaterial whether or not he
knows that the relationship which he intends to create is called a trust, and whether
or not he knows the precise characteristics of the relationship which is called a
trust.
An express trust is created by direct or positive acts of the parties, by some writing
or deed or by words evidencing an intention to create a trust; the use of the word
trust is not required or essential to its constitution, it being sufficient that a trust is
clearly intended.
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real
property prescribe in 10 years, excepting only actions based on continuing or
subsisting trusts that were considered by Section 38 as imprescriptible. As held in
Diaz vs. Gorricho, however, the continuing or subsisting trusts contemplated in
Section 38 of the Code of Civil Procedure referred only to express unrepudiated
trusts, and did not include constructive trusts (that are imposed by law) where no
fiduciary relation exists and the trustee does not recognize the trust at all.
The prescriptive period for the enforcement of an express trust of ten (10) years
starts upon the repudiation of the trust by the trustee.
DELFIN VS. BILLONES
When ones property is registered in anothers name without the formers consent,
an implied trust is created by law in favor of the true owner.
Implied trusts are those which without being expressed, are deducible from the
nature of the transaction by operation of law as matters of equity, independently of
the particular intention of the parties.
Meanwhile constructive trusts are created in order to satisfy the demands of justice
and prevent unjust enrichment. They arise 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.
An action for reconveyance based upon an implied or constructive trust is 10 years
from the registration of the deed or from the issuance of the title, registration being
constructive notice to all persons.
However, an action for reconveyance based on fraud is imprescriptible where the
plaintiff is in possession of the property subject of the acts.
A contract or conduct apparently honest and lawful must be treated as such and it
is shown to be otherwise by either positive or circumstantial evidence. A duly

executed contract carries with it the presumption of validity. The party who impugns
its regularity has the burden of proving its simulation. A notarized document is
executed to lend truth to the statements contained therein and to the authenticity
of the signatures. Notarized documents enjoy the presumption of regularity which
can be overturned only by clear and convincing evidence.
Fraud may be, and often is, proved by or inferred from circumstances, and the
circumstances proved may in some cases raise a presumption of its existence.
However, while fraud may be proved by circumstances or presumed from them, it
cannot be demonstrated by mere construction, but must be proven in all cases.
Respondents indeed failed to prove that fraud attended the execution of ExtraJudicial Partition and Deed of Absolute Sale. Their bare and unsupported allegations
are not enough to overthrow the presumption of the validity of said agreement or to
raise the presumption of fraud.
Documents consisting of entries in public records made in the performance of a
duty by a public officer are prima facie evidence of the facts therein stated. Public
documents are (a) the written official acts or records of the official acts of the
sovereign authority, official bodies and tribunals, and public officers, whether of the
Philippines, or of a foreign country; (b) documents acknowledged before a notary
public except last wills and testaments; and (c) public records, kept in the
Philippines, of private documents required by law to be entered therein. Public
documents may be proved by the original copy, an official publication thereof, or a
certified true copy thereof and when a copy of a document or record is attested for
the purpose of evidence, the attestation by the officer having legal custody of the
record must state that the copy is a correct copy of the original, or a specific part
thereof, as the case may be.
A duly registered death certificate is considered a public document and the entries
found therein are resumed correct, unless the party who contests its accuracy can
produce evidence establishing otherwise. Nevertheless, this presumption is
disputable and satisfactory only if uncontradicted, and may be overcome by the
other evidence to the contrary.
G.R. No. 117228 June 19, 1997 RODOLFO MORALES, represented by his
heirs, and PRISCILA MORALES, petitioners, vs. COURT OF APPEALS (Former
Seventeenth Division), RANULFO ORTIZ, JR., and ERLINDA ORTIZ,
respondents.
FACTS:
The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the absolute
and exclusive owners of the premises in question having purchased the same from
Celso Avelino. They later caused the transfer of its tax declaration in the name of
the female plaintiff and paid the realty taxes thereon. Celso Avelino (Plaintiffs'
predecessor in interest) purchased the land in question consisting of two adjoining
parcels while he was still a bachelor and the City Fiscal of Calbayog City from
Alejandra Mendiola and Celita Bartolome, through a "Escritura de Venta". After the
purchase, he caused the transfer of the tax declarations of the two parcels in his
name as well as consolidated into one the two tax declarations in his name. With

the knowledge of the Intervenor and the defendant, Celso Avelino caused the
survey of the premises in question, in his name, by the Bureau of Lands. He also
built his residential house therein with Marcial Aragon (now dead) as his master
carpenter who was even scolded by him for constructing the ceiling too low. When
the two-storey residential house was finished, he took his parents, Rosendo Avelino
and Juana Ricaforte, and his sister, Aurea, who took care of the couple, to live there
until their deaths. He also declared this residential house in his tax declaration to
the premises in question and paid the corresponding realty taxes, keeping intact the
receipts which he comes to get or Aurea would go to Cebu to give it to him. After
being the City Fiscal of Calbayog, Celso Avelino became an Immigration Officer and
later as Judge of the Court of First Instance in Cebu with his sister, Aurea, taking
care of the premises in question. While he was already in Cebu, the defendant,
without the knowledge and consent of the former, constructed a small beauty shop
in the premises in question. Inasmuch as the Plaintiffs are the purchasers of the
other real properties of Celso Avelino, one of which is at Acedillo (now Sen. J.D.
Avelino) street, after they were offered by Celso Avelino to buy the premises in
question, they examined the premises in question and talked with the defendant
about that fact, the latter encouraged them to purchase the premises in question
rather than the property going to somebody else they do not know and that he will
vacate the premises as soon as his uncle will notify him to do so. Thus, they paid
the purchase price and Exh. "C" was executed in their favor. However, despite due
notice from his uncle to vacate the premises in question, the defendant refused to
vacate or demolish the beauty shop unless he is reimbursed P35,000.00 for it
although it was valued at less than P5,000.00. So, the Plaintiffs demanded, orally
and in writing to vacate the premises. The defendant refused. As the plaintiffs were
about to undertake urgent repairs on the dilapidated residential building, the
defendant had already occupied the same, taking in paying boarders and claiming
already ownership of the premises in question, thus they filed this case. Plaintiffs,
being the neighbors of Celso Avelino, of their own knowledge are certain that the
premises in question is indeed owned by their predecessor-in-interest because the
male plaintiff used to play in the premises when he was still in his teens while the
female plaintiff resided with the late Judge Avelino. Besides, their inquiries and
documentary evidence shown to them by Celso Avelino confirm this fact. Likewise,
the defendant and Intervenor did not reside in the premises in question because
they reside respectively in Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of
Calbayog City with their own residential houses there. Due to the damages they
sustained as a result of the filing of this case, the plaintiffs are claiming P50,000.00
for mental anguish; monthly rental of the premises in question of P1,500.00 starting
from March 1987; litigation expenses of P5,000.00 and P10,000.00 for Attorney's
fees.
ISSUE: Whether or not the property acquired is a trust property?
RULING:
NO. A trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such property,
the equitable ownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter. The characteristics of a trust
are: It is a relationship; it is a relationship of fiduciary character; it is a relationship

with respect to property, not one involving merely personal duties; it involves the
existence of equitable duties imposed upon the holder of the title to the property to
deal with it for the benefit of another; and it arises as a result of a manifestation of
intention to create the relationship. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the parties, while implied
trusts come into being by operation of law, either through implication of an
intention to create a trust as a matter of law or through the imposition of the trust
irrespective of, and even contrary to, any such intention. In turn, implied trusts are
either resulting or constructive trusts. Resulting trusts are based on the equitable
doctrine that valuable consideration and not legal title determines the equitable
title or interest and are presumed always to have been contemplated by the parties.
They arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other
hand, constructive trusts are created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment. They arise contrary to
intention 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.
Reconveyance based on implied trust; how 10-year prescriptive period
counted; when prescription is inapplicable. (Heirs of Saludares vs CA)
RODOLFO V. FRANCISCO vs. EMILIANA M. ROJAS, and the legitimate heirs
of JOSE A. ROJAS, namely: JOSE FERDINAND M. ROJAS II, ROLANDO M.
ROJAS, JOSE M. ROJAS, JR., CARMELITA ROJAS-JOSE, VICTOR M. ROJAS, and
LOURDES M. ROJAS, all represented by JOSE FERDINAND M. ROJAS II, G.R.
No. 167120, April 23, 2014
Truly, one of the appropriate legal remedies that should have been availed of by the
Franciscos is an action for reconveyance. Contrary to petitioners declaration, proof
of actual fraud is not required as it may be filed even when no fraud intervened
such as when there is mistake in including the land for registration. In the action for
reconveyance, the decree of registration is highly respected as incontrovertible;
what is sought instead is the transfer of the property wrongfully or erroneously
registered in anothers name to its rightful owner or to the one with a better right.31
An action for reconveyance resulting from fraud prescribes four years from the
discovery of the fraud and if it is based on an implied or a constructive trust it
prescribes ten (10) years from the alleged fraudulent registration or date of
issuance of the certificate of title over the property.32
However, an action for reconveyance based on implied or constructive trust is
imprescriptible if the plaintiff or the person enforcing the trust is in possession of
the property.33 In effect, the action for reconveyance is an action to quiet the
property title, which does not prescribe.34 This Court held in Yared v. Tiongco:35
The Court agrees with the CAs disquisition that an action for reconveyance can
indeed be barred by prescription. In a long line of cases decided by this Court, we
ruled that an action for reconveyance based on implied or constructive trust must

perforce prescribe in ten (10) years from the issuance of the Torrens title over the
property.
However, there is an exception to this rule. In the case of Heirs of Pomposa
Saludares v. Court of Appeals, the Court reiterating the ruling in Millena v. Court of
Appeals, held that there is but one instance when prescription cannot be invoked in
an action for reconveyance, that is, when the plaintiff is in possession of the land to
be reconveyed. In Heirs of Pomposa Saludares, this Court explained that the Court
in a series of cases, has permitted the filing of an action for reconveyance despite
the lapse of more than ten (10) years from the issuance of title to the land and
declared that said action, when based on fraud, is imprescriptible as long as the
land has not passed to an innocent buyer for value. But in all those cases, the
common factual backdrop was that the registered owners were never in possession
of the disputed property. The exception was based on the theory that registration
proceedings could not be used as a shield for fraud or for enriching a person at the
expense of another.
In Alfredo v. Borras, the Court ruled that prescription does not run against the
plaintiff in actual possession of the disputed land because such plaintiff has a right
to wait until his possession is disturbed or his title is questioned before initiating an
action to vindicate his right. His undisturbed possession gives him the continuing
right to seek the aid of a court of equity to determine the nature of the adverse
claim of a third party and its effect on his title. The Court held that where the
plaintiff in an action for reconveyance remains in possession of the subject land, the
action for reconveyance becomes in effect an action to quiet title to property, which
is not subject to prescription.
The Court reiterated such rule in the case of Vda. de Cabrera v. Court of Appeals,
wherein we ruled that the imprescriptibility of an action for reconveyance based on
implied or constructive trust applies only when the plaintiff or the person enforcing
the trust is not in possession of the property. In effect, the action for reconveyance
is an action to quiet the property title, which does not prescribe.
Similarly, in the case of David v. Malay the Court held that there was no doubt about
the fact that an action for reconveyance based on an implied trust ordinarily
prescribes in ten (10) years. This rule assumes, however, that there is an actual
need to initiate that action, for when the right of the true and real owner is
recognized, expressly or implicitly such as when he remains undisturbed in his
possession, the statute of limitation would yet be irrelevant. An action for
reconveyance, if nonetheless brought, would be in the nature of a suit for quieting
of title, or its equivalent, an action that is imprescriptible. In that case, the Court
reiterated the ruling in Faja v. Court of Appeals which we quote:
x x x There is settled jurisprudence that one who is in actual possession of a piece
of land claiming to be owner thereof may wait until his possession is disturbed or
his title is attacked before taking steps to vindicate his right, the reason for the rule
being, that his undisturbed possession gives him a continuing right to seek the aid
of a court of equity to ascertain and determine the nature of the adverse claim of a
third party and its effect on his own title, which right can be claimed only by one
who is in possession. No better situation can be conceived at the moment for Us to

apply this rule on equity than that of herein petitioners whose mother, Felipa Faja,
was in possession of the litigated property for no less than 30 years and was
suddenly confronted with a claim that the land she had been occupying and
cultivating all these years, was titled in the name of a third person. We hold that in
such a situation the right to quiet title to the property, to seek its reconveyance and
annul any certificate of title covering it, accrued only from the time the one in
possession was made aware of a claim adverse to his own, and it is only then that
the statutory period of prescription commences to run against such possessor.
In this case, the Franciscos claim to be in open, continuous, exclusive, and notorious
possession and occupation of the subject lots. It appears that they never lost
possession of said properties, and as such, they are in a position to file the
complaint with the trial court to protect their alleged rights and clear whatever
doubts has been cast thereon.
G.R. No. 140528
December 7, 2011
MARIA TORBELA, et. al vs.SPOUSES ANDRES T. ROSARIO, et. al
G.R. No. 140553
LENA DUQUE-ROSARIO, vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent.
FACTS:
The issue is over a parcel of land inherited by the Torbela siblings from their
parents. They executed a deed of absolute quitclaim over the property in favor of
Dr. Rosario. Four days after, a TCT was issued in Dr. Rosarios name covering the
property.
Another deed of absolute quitclaim was subsequently executed twelve days after by
Dr. Rosario acknowledging that he only borrowed the lot from the Torbela siblings
and was already returning the same. This deed was notarized but not immediately
annotated. Dr. Rosario used the land as mortgage for a loan he obtain through DBP
for P70,000.00. He used the proceeds of the loan to build a 4 storey building which
was initially used as a hospital but later converted into a commercial space. Part
was leased to PT&T and the rest to Rosario s sister who operated the Rose Inn Hotel
and Restaurant. Dr. Rosario fully paid the loan from DBP and the mortgage was
cancelled and ratified by a notary public. However, Dr. Rosario took another loan
from PNB. He later acquired a third loan from Banco Filipino and bought out the loan
from PNB cancelling the mortgage with PNB. Rosario failed to pay their loan in
Banco Filipino and the property was extrajudicially foreclosed. Meanwhile, back in
1965, the Torbela siblings sought to register their ownership over the lot and to
perfect their title but couldnt because the title was still with DBP. They showed as
proof the deed of absolute quitclaim presented executed by Rosario himself. In
1986, they filed a civil case for recovery of ownership and possession and damages.
They tried to redeem the lot from Banco Filipino but failed. TCT was issued to Banco
FIilipino. The Torbelas claim they have right over the rents of the building through
accession because they are the land owners.

ISSUE:
1. Who has right over the improvements made on the lot and the rents thereof.
2. Has the right of Torbela siblings to recover Lot No. 356-A prescribed?
RULING:
1. According to Art. 440, the accessory follows the principal. Ownership of
property gives the right by accession to everything which is produced
thereby, or which is incorporated or attached thereto, either naturally or
artificially. However, in the case at bar, both Torbela siblings and Rosario are
deemed in bad faith. The Torbelas knew Rosario built on the land and even
allowed him to use the land to obtain a loan from DBP. Rosario on the other
hand consciously built on land he knew was not his. They both had
knowledge and did not oppose. Art. 453 states that when both parties are in
bad faith, the case shall be treated as though both were in good faith thus
the application of Art. 448. 448 allows the Land Owner 2 options in the case
at bar. Either indemnify Rosario and appropriate the lot to himself or ask
Rosario to buy the lot or the rent rate. This case was remanded to the RTC for
the Torbelas to make such decision. Still following the rules of accession, civil
fruits such as rent belong to the owner of the building. Rosario has rights
over the rent and improvements and shall continue until the Torbela siblings
have chosen an option from 448.
2. No. To apply the 10-year prescriptive period, which would bar a beneficiarys
action to recover in an express trust, the repudiation of the trust must be
proven by clear and convincing evidence and made known to the beneficiary.
The express trust disables the trustee from acquiring for his own benefit the
property committed to his management or custody, at least while he does not
openly repudiate the trust, and makes such repudiation known to the
beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse possession do not apply to
continuing and subsisting (i.e., unrepudiated) trusts. In an express trust,
the delay of the beneficiary is directly attributable to the trustee who
undertakes to hold the property for the former, or who is linked to the
beneficiary by confidential or fiduciary relations. The trustee's possession is,
therefore, not adverse to the beneficiary, until and unless the latter is made
aware that the trust has been repudiated.
Dr. Rosario argues that he is deemed to have repudiated the trust on
December 16, 1964, when he registered Lot No. 356-A in his name under TCT
No. 52751, so when on February 13, 1986, the Torbela siblings instituted
before the RTC Civil Case No. U-4359, for the recovery of ownership and
possession of Lot No. 356-A from the spouses Rosario, over 21 years had
passed. Civil Case No. U-4359 was already barred by prescription, as well as
laches.

It is clear however that the registration of Lot No. 356-A by Dr. Rosario in his
name under TCT No. 52751 on December 16, 1964 is not the repudiation that
would have caused the 10-year prescriptive period for the enforcement of an
express trust to run. The Court of Appeals held that Dr. Rosario repudiated
the express trust when he acquired another loan from PNB and constituted a
second mortgage on Lot No. 356-A sometime in 1979, which, unlike the first
mortgage to DBP in 1965, was without the knowledge and/or consent of the
Torbela siblings.
For repudiation of an express trust to be effective, the unequivocal act of
repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence.
The Torbela siblings can only be charged with knowledge of the mortgage of
Lot No. 356-A to PNB onMarch 6, 1981 when the amended loan and mortgage
agreement was registered on TCT No. 52751 as Entry No. 520099. Entry No.
520099 is constructive notice to the whole world [74] that Lot No. 356-A was
mortgaged by Dr. Rosario to PNB as security for a loan, the amount of which
was increased to P450,000.00. Hence, Dr. Rosario is deemed to have
effectively repudiated the express trust between him and the Torbela siblings
on March 6, 1981, on which day, the prescriptive period for the enforcement
of the express trust by the Torbela siblings began to run.
From March 6, 1981, when the amended loan and mortgage agreement was
registered on TCT No. 52751, to February 13, 1986, when the Torbela
siblings instituted before the RTC Civil Case No. U-4359 against the spouses
Rosario, only about five years had passed. The Torbela siblings were able to
institute Civil Case No. U-4359 well before the lapse of the 10-year
prescriptive period for the enforcement of their express trust with Dr. Rosario.

G.R. No. 76590 February 26, 1990

HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,
vs.
COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y GUEVARRA,
respondents.
FACTS:
Herein petitioners are the heirs (children) of the late Maria de la Cruz y Gutierrez,
married to Mateo del Rosario Lansang, while herein private respondents are the
heirs of Maria de la Cruz y Guevarra, married to Calixto Dimalanta, and Fermin de la

Cruz. The controversy involves a 1,980 square meters portion of Lot 1488.
From 1921 until her death in 1951, Maria de la Cruz y Gutierrez resided in the
questioned lot in the concept of an owner. She declared the lot for tax purposes in
her name. Later, she entrusted the administration of the said lot to her niece Maria
de la Cruz y Guevarra. Accordingly, the trial court rendered a decision adjudicating
Lot No. 1488 in favor of Maria de la Cruz, 26 years old, married to Calixto Dimalanta
and Fermin de la Cruz, Single. Finally, Original Certificate of Title No. 16684 of the
Register of Deeds of Pampanga was issued in their names.
Petitioners, claiming to have learned of the same only on July 1, 1974, on October 1,
1974 (allegedly barely three months after discovery of the registration, and two
years after the death of Maria de la Cruz y Guevarra who, before she died in 1974,
revealed to petitioners Daniel Lansang and Isidro Lansang that the lot of their
mother Maria de la Cruz y Gutierrez had been included in her title), filed with the
then Court of First Instance of Pampanga, Branch IV, presided over by Hon. Cesar V.
Alejandria, a complaint for reconveyance, docketed therein as Civil Case No. 2148.
The same was amended on June 16, 1975.
The main thrust of the complaint is that the claimant of Lot 1488 in Cadastral Case
No. 18 was Maria de la Cruz y Gutierrez and not Maria de la Cruz y Guevarra who by
not using her maternal surname "Guevarra" succeeded in registering Lot 1488 in
her name and that of her brother Fermin de la Cruz. Under the circumstances, it is
claimed that Maria de la Cruz married to Calixto Dimalanta and Fermin de la Cruz
hold the property in trust for the petitioners.
In their answer, private respondents claimed that the land in question is their
exclusive property, having inherited the same from their parents and the OCT No.
16684 was issued in their names. Moreover, they asserted that petitioners have lost
their cause of action by prescription.
ISSUE:
Whether the petitioners' action for reconveyance has already prescribed.
RULING:
No. As aptly argued by petitioners, the Court of Appeals erred when it ruled that
their action has already prescribed; obviously on the wrong premise that the action
is one based on implied or constructive trust. As maintained by petitioners, their
action is one based on express trust and not on implied or constructive trust.
Petitioners' predecessor-in-interest, Maria de la Cruz y Gutierrez, was an unlettered
woman, a fact borne out by her affixing her thumbmark in her answer in Cadastral
Case No. 18. Because of her mental weakness, in a prepared document for her,
Exhibit she consented and authorized her niece Maria de la Cruz y Guevarra to
administer the lot in question. Such fact is corroborated by the testimony of Daniel

Lansay, the son of Maria de la Cruz y Gutierrez that Maria de la Cruz y Guevarra was
the one entrusted with the paying of land taxes.
Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration
(Exhibit "B") which was prepared by the Office of the Municipal Assessor/Treasurer
where the lot in question is located, and clearly not the written instrument
constituting an express trust required under Article 1443 of the Civil Code. This
argument of private respondents, is untenable. It has been held that under the law
on Trusts, it is not necessary that the document expressly state and provide for the
express trust, for it may even be created orally, no particular words are required for
its creation (Article 1444, Civil Code). An express trust is created by the direct and
positive acts of the parties, by some writing or deed or will or by words evidencing
an intention to create a trust (Sotto v. Teves, 86 SCRA 154 [1978]). No particular
words are required for the creation of an express trust, it being sufficient that a trust
is clearly intended (Vda. de Mapa v. Court of Appeals, 154 SCRA 294 [1987]). Hence,
petitioner's action, being one based on express trust, has not yet prescribed. Be it
noted that Article 1443 of the Civil Code which states "No express trusts concerning
an immovable or any interest therein may be proved by parol evidence," refers
merely to enforceability, not validity of a contract between the parties. Otherwise
stated, for purposes of validity between the parties, an express trust concerning an
immovable does not have to be in writing. Thus, Article 1443 may be said to be an
extension of the Statute of Frauds. The action to compel the trustee to convey the
property registered in his name for the benefit of the cestui for trust does not
prescribe. If at all, it is only when the trustee repudiates the trust that the period of
prescription may run (Enriquez v. Court of Appeals, 104 SCRA 656 [1981]).
G.R. No. 182908

August 6, 2014

HEIRS OF FRANCISCO I. NARVASA, SR., and HEIRS OF PETRA IMBORNAL

and PEDRO FERRER, represented by their Attorney-in-Fact, MRS.
REMEDIOS B. NARVASA-REGACHO, Petitioners,
vs.
EMILIANA, VICTORIANO, FELIPE, MA TEO, RAYMUNDO,
EDUARDO, all surnamed IMBORNAL, Respondents.

MARIA,

and

FACTS:
Basilia owned a parcel of land situated at Sabangan, Pangasinan which she
conveyed to her three (3) daughters Balbina, Alejandra, and Catalina (Imbornal
sisters) sometime in 1920. Meanwhile, Catalinas husband, Ciriaco Abrio (Ciriaco),
applied for and was granted a homestead patent over a 31,367-sq. m. riparian land
(Motherland) adjacent to the Cayanga River in San Fabian, Pangasinan.14 He was
eventually awarded Homestead Patent No. 2499115 therefor, and, on December 5,
1933, OCT No. 1462 was issued in his name. Later, or on May 10, 1973, OCT No.

1462 was cancelled, and Transfer Certificate of Title (TCT) No. 101495 16 was issued
in the name of Ciriacos heirs, namely: Margarita Mejia; Rodrigo Abrio, marriedto
Rosita Corpuz; Antonio Abrio, married to Crisenta Corpuz; Remedios Abrio, married
to Leopoldo Corpuz; Pepito Abrio; Dominador Abrio; Francisca Abrio; Violeta Abrio;
and Perla Abrio (Heirs of Ciriaco). Ciriaco and his heirs had since occupied the
northern portion of the Motherland, while respondents occupied the southern
portion.17 Sometime in 1949, the First Accretion, approximately 59,772 sq. m. in
area, adjoined the southern portion of the Motherland. On August 15, 1952, OCT No.
P-318 was issued in the name of respondent Victoriano, married to Esperanza
Narvarte, covering the First Accretion. 18 Decades later, or in 1971, the Second
Accretion, which had an area of 32,307 sq. m., more or less, abutted the First
Accretion on its southern portion.19 On November 10, 1978, OCT No. 21481 was
issued in the names of all the respondents covering the Second Accretion. Claiming
rights over the entire Motherland, Francisco, et al., as the children of Alejandra and
Balbina, filed on February 27,1984 an Amended Complaint20 for reconveyance,
partition, and/or damages against respondents, docketed as Civil Case No. D-6978.
They anchored their claim on the allegation that Ciriaco, with the help of his wife
Catalina, urged Balbina and Alejandra to sell the Sabangan property.
Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and
misrepresentation, respondent Victoriano, with respect to the First Accretion, and
the respondents collectively, with regard to the Second Accretion, had illegally
registered the said accretions in their names, notwithstanding the fact that they
were not the riparian owners (as they did not own the Motherland to which the
accretions merely formed adjacent to). In this relation, Francisco, et al. explained
that they did not assert their inheritance claims over the Motherland and the two (2)
accretions because they respected respondents rights, until they discovered in
1983 that respondents have repudiated their (Francisco, et al.s) shares thereon. 22
Thus, bewailing that respondents have refused them their rights not only with
respect to the Motherland, but also to the subsequent accretions, Francisco, et al.
prayed for the reconveyance of said properties, or, in the alternative, the payment
of their value, as well as the award of moral damages in the amount of
P100,000.00, actual damages in the amount of P150,000.00, including attorneys
fees and other costs.23 On August 20, 1996, the RTC rendered a Decision 26 in
favor of Francisco, et al. and thereby directed respondents to: (a) reconvey to
Francisco, et al. their respective portions in the Motherland and in the accretions
thereon, or their pecuniary equivalent; and (b) pay actual damages in the amount of
P100,000.00, moral damages in the amount of P100,000.00, and attorneys fees in
the sum of P10,000.00, as well as costs of suit.
On November 28, 2006, the CA rendered a Decision 29 reversing and setting aside
the RTC Decision and entering a new one declaring: (a) the descendants of Ciriaco
as the exclusive owners of the Motherland; (b) the descendants of respondent
Victoriano asthe exclusive owners of the First Accretion; and (c) the descendants of

Pablo (i.e., respondents collectively) as the exclusive owners of the Second

Accretion. At odds with the CAs disposition, Francisco et al. filed a motion for
reconsideration which was, however denied by the CA in a Resolution35 dated May
7, 2008, hence, this petition taken by the latters heirs as their successors-ininterest.
ISSUES:
(a) WON the descendants of Ciriaco are the exclusive owners of the Motherland;
(b) WON the descendants of respondent Victoriano are the exclusive owners of the
First Accretion; and
(c) WON the descendants of Pablo (respondents collectively) are the exclusive
owners of the Second Accretion on the basis of the following grounds:
(1) prescription of the reconveyance action, which was duly raised as an
affirmative defense in the Amended Answer, and
(2) the existence of an implied trust between the Imbornal sisters and Ciriaco.
RULING:
The petition is bereft of merit.
A. Procedural Matter: Issue of Prescription.
At the outset, the Court finds that the causes of action pertaining to the Motherland
and the First Accretion are barred by prescription. To recount, Francisco, et al.
asserted co-ownership over the
Motherland, alleging that Ciriaco agreed to hold the same in trust for their
predecessors-in-interest Alejandra and Balbina upon issuance of the title in his
name. Likewise, they alleged that respondents acquired the First and Second
Accretions by means of fraud and deceit. When property is registered in anothers
name, an implied or constructive trust is created by law in favor of the true owner.
An action for reconveyance based on an implied trust prescribes in 10 years. The
reference point of the 10-yearprescriptive period is the date of registration of the
deed or the issuance of the title. The prescriptive period applies only if there is an
actual need to reconvey the property as when the plaintiff is not in possession of
the property. However, if the plaintiff, as the real owner of the property also remains
in possession of the property, the prescriptive period to recover title and possession
of the property does not run against him. Based on the foregoing, Francisco, et al.
had then a period of ten (10) years from the registration of the respective titles
covering the disputed properties within which to file their action for reconveyance,
taking into account the fact that they were never in possession of the said
properties. Hence, with respect tot he Motherland covered by OCT No. 1462 issued

on December 5, 1933 in the name of Ciriaco, an action for reconveyance therefor

should have been filed until December 5, 1943; with respect to the First Accretion
covered by OCT No. P-318 issued on August 15, 1952 in the name of respondent
Victoriano, an action of the same nature should have been filed until August 15,
1962; and, finally, with respect to the Second Accretion covered by OCT No. 21481
issued on November 10, 1978in the name of the respondents, a suit for
reconveyance therefor should have been filed
until November 10, 1988. A judicious perusal of the records, however, will show that
the Amended Complaint42 covering all three (3) disputed properties was filed only
on February 27, 1984. As such, it was filed way beyond the 10-year reglementary
period within which to seek the reconveyance of two (2) of these properties,
namely, the Motherland and the First Accretion, with only the reconveyance action
with respect to the Second Accretion having been seasonably filed.
B. Substantive Matter: Existence of an Implied Trust.
The main thrust of Francisco, et al.s Amended Complaint is that an implied trust
had arisen between the Imbornal sisters, on the one hand, and Ciriaco, on the other,
with respect to the Motherland. A homestead patent award requires proof that the
applicant meets the stringent conditions 48 set forth under Commonwealth Act No.
141, as amended, which includes actual possession, cultivation, and improvement
of the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid
process and duly satisfied the strict conditions necessary for the grant of his
homestead patent application. As such, it is highly implausible that the Motherland
had been acquired and registered by mistake or through fraud as would create an
implied trust between the Imbornal sisters and Ciriaco. Hence, when OCT No. 1462
covering the Motherland was issued in his name pursuant to Homestead Patent No.
24991 on December 15, 1933, Ciriacos title to the Motherland had become
indefeasible. It bears to stress that the proceedings for land registration that led to
the issuance of Homestead Patent No. 24991 and eventually, OCT No.
1462 in Ciriacos name are presumptively regular and proper, 49 which presumption
has not been overcome by the evidence presented by Francisco, et al.
Consequently, as Francisco, et al. failed to prove their ownership rights over the
Motherland, their cause of action with respect to the First Accretion and,
necessarily, the Second Accretion, must likewise fail. A further exposition is apropos.
C. Exclusive Ownership
As regards the third issue, being the owner of the land adjoining the foreshore area,
respondent is the riparian or littoral owner who has preferential right to lease the
foreshore area. Accordingly, therefore, alluvial deposits along the banks of a creek
or a river do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added.
The only restriction provided for by law is that the owner of the adjoining property

must register the same under the Torrens system; otherwise, the alluvial property
may be subject to acquisition through prescription by third persons.53 In this case,
Francisco, et al. and, now, their heirs, i.e., herein petitioners are not the riparian
owners of the Motherland to which the First Accretion had attached, hence, they
cannot assert ownership over the First Accretion. Consequently, as the Second
Accretion had merely attached to the First Accretion, they also have no right over
the Second Accretion. Neither were they able to show that they acquired these
properties through prescription as it was not established that they were in
possession of any of them. Therefore, whether through accretion or, independently,
through prescription, the discernible conclusion is that Francisco et al. and/or
petitioners' claim of title over the First and Second Accretions had not been
substantiated, and, as a result, said properties cannot be reconveyed in their favor.
This is especially so since on the other end of the fray lie respondents armed with a
certificate of title in their names covering the First and Second Accretions coupled
with their possession thereof, both of which give rise to the superior credibility of
their own claim. Hence, petitioners' action for reconveyance with respect to both
accretions must altogether fail.

G.R. No. 159494

July 31, 2008

ROGELIO, GEORGE, LOLITA, ROSALINDA, and JOSEPHINE, all surnamed

PASIO, represented by their father and attorney-in-fact JOSE PASIO
Petitioners,
vs.
DR. TEOFILO EDUARDO F. MONTERROYO, ROMUALDO MONTERROYO, MARIA
TERESA MONTERROYO, and STEPHEN MONTERROYO, Respondents.
FACTS:
Lureano Pasio filed a homestead application over the entire 24-hectare land under
homestead Application No. 205845.
The Director of Lands issued an order
approving Laureanos homestead application and stating that Homestead Entry No.
154651 was recorded in his name for the land applied by him. Laureano died on
March 24, 1950. On April 15, 1952, the Director of Land issued an order for the
issuance of a homestead patent in favor of Lureano, married to Graciana Herbito.
Laureanos heirs did not receive the order and consequently, the land was not
registered under Laureanos name or under that of his heirs.
Between 1949 and 1954, a cadastral survey was conducted in Iligan City. The
surveyor found that a small creek divided the 24-hectare parcel of land into two
portions, identified as Lot No. 2138 and 2139. Petitioners claimed that Laureanos
heirs, headed by his son Jose, continuously possessed and cultivated both lots. On

October 16, 1962, Joses co-heirs executed a Deed of Quitclaim renouncing their
rights over the land in favor of Jose. Jose secured a title in his name for Lot No.
2138. Later, Jose alienated Lot No. 2139 in favor of his children. Petitioners alleged
that their possession of Lot No. 2139 was interrupted on January 3, 1993 when
respondents forcibly took possession of the property.
Respondents alleged that they had been in open, continuous, exclusive and
notorious possession of Lot No. 2139, by themselves and through their possessorsin-interest since July 10, 1949. They alleged that on July 10, 1949, Rufo Larumbe
sold Lot No. 2139 to Petra Teves. On February 27, 1984, Petra executed a deed of
sale over Lot No. 2139 in favor of Vicente Teves. On February 20, 1985, Vicente
executed a pacto de retro sale over the land in favor of Arturi Teves. In 1992, Arturo
sold Lot No. 2139 in favor of respondents father Dr. Montemayor, by virtue of an
oral contract. On January 5, 1995, Arturo executed a Deed of Confirmation of
Absolute Sale of Unregistered Land in favor of Dr. Montemayors heirs.
Respondents alleged that Jose was not the owner of Lot No. 2139 and as such, he
could not sell the land to his children. They alleged that petitioners OCT were null
and vpid for having been procured in violation of the Public Land Act. They further
alleged that the Land Management Bureau had no authority to issue the free patent
titles because Lot No. 2139 was a private land.
The trial court ruled in favor of the respondent, Lot No. 2139 had already acquired
the character of a private land by operation of law. Since Lot No. 2139 had already
ceased to be a public land, the Land Management Bureau had no power or authority
to dispose of it by issuing free patent titles.
ISSUE:
1. Whether the respondents are the rightful owners and possessors of Lot No.
2139.
2. Whether a counterclaim is a collateral attack on a land title.
3. Whether the principle of constructive trust applies.
RULING:
1. Yes. The Land Management Bureau had no jurisdiction to issue free patent
titles. Alienable public land held by a possessor, continuously or through his
predecessors-in-interest, openly, continuously and exclusively for the
prescribed statutory period (30 years under The Public Land Act, as
amended) is converted to private property by the mere lapse or completion
of the period, ipso jure. Respondents were able to present the original Deed
of Absolute Sale, dated 10 July 1949, executed by Larumbe in favor of Petra.
Respondents also presented the succeeding Deeds of Sale showing the
transfer of Lot No. 2139 from Petra to Vicente and from Vicente to Arturo and
the Deed of Confirmation of Absolute Sale of Unregistered Real Property
executed by Arturo in favor of respondents. Respondents also presented a
certification executed by P/Sr. Superintendent Julmunier Akbar Jubail, City

Director of Iligan City Police Command and verified from the Log Book records
by Senior Police Officer Betty Dalongenes Mab-Abo confirming that Andres
Quinaquin made a report that Jose, Rogelio and Luciana Pasio, Lucino
Pelarion and Nando Avilo forcibly took his copra. This belied petitioners
allegation that they were in possession of Lot No. 2139 and respondents
forcibly took possession of the property only in January 1993.
Considering that petitioners application for free patent titles was filed only
on 8 January 1994, when Lot No. 2139 had already become private land ipso
jure, the Land Management Bureau had no jurisdiction to entertain
petitioners application.
2. No. It is already settled that a counterclaim is considered an original
complaint and as such, the attack on the title in a case originally for recovery
of possession cannot be considered as a collateral attack on the title. A
counterclaim is considered a complaint, only this time, it is the original
defendant who becomes the plaintiff. It stands on the same footing and is to
be tested by the same rules as if it were an independent action.
3. Yes. Under the principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner being
another person, impresses upon the title so acquired the character of a
constructive trust for the real owner, which would justify an action for
reconveyance. In the action for reconveyance, the decree of registration is
respected as incontrovertible but what is sought instead is the transfer of the
property wrongfully or erroneously registered in anothers name to its rightful
owner or to one with a better right. If the registration of the land is
fraudulent, the person in whose name the land is registered holds it as a
mere trustee, and the real owner is entitled to file an action for reconveyance
of the property. In the present case, respondents were able to establish that
they have a better right to Lot No. 2139 since they had long been in
possession of the property in the concept of owners, by themselves and
through their predecessors-in-interest. Hence, despite the irrevocability of the
Torrens titles issued in their names and even if they are already the
registered owners under the Torrens system, petitioners may still be
compelled under the law to reconvey the property to respondents.