UP COLLEGE OF LAW

AGENCY AND PARTNERSHIP

LAW 173
2nd Semester AY 2016-2017

by Jesusa Loreto A. Arellano-Aguda

I. Agency1

A. Nature, Form, and Kinds of Agency

1. Concept, Governing Law, Nature, Basis, Purpose, and Characteristics

See New Civil Code (NCC), Arts. 1868, 1870, 1875-76, 1896, 1919-20

Cases: Apex Mining Co., Inc. v. Southeast Mindanao Gold Mining Corp., 492
SCRA 355 (2006)
Orient Air Services & Hotel Representatives v. CA, 197 SCTA 645 (1991)

2. Parties to Agency

3. Elements of Agency (NCC, Art. 1868)

Cases: Rallos v. Felix Go Chan & Sons Realty Corp., L-24332, January 31, 1978
Bordador v. Luz, G.R. No. 130148, December 15, 1997
Victorias Milling v. CA, G.R. No. 117356, June 19, 2000
Sps. Viloria v. Continental Airlines, G.R. No. 188288, January 16, 2012

4. Distinguished from other forms of relations / contracts

a. Negotiorum Gestio (NCC, Art. 2144)

Case: Dela Peña v. Hidalgo, G.R. No. L-5486, August 17, 1910

b. Sale

Cases: Albaladejo y Cia v. Philippines Refining Co., G.R. No. L-20726 (1923)
Quiroga v. Parsons Hardware G.R. No. 11491, August 23, 1918

c. Partnership (NCC, Arts. 1767, 1818)

Case: Sevilla v. CA, G.R. No. L-41182-3, April 15, 1988

d. Lease of Service

1References: New Civil Code, Articles 1868-1932; De Leon and De Leon, Jr., Comments and Cases on
Partnership, Agency, and Trusts; Casis, Analysis of Philippine Agency Law & Jurisprudence; Nolledo,
Handbook on Sales, Agency and Bailments; Villanueva, Non-Corporate Media of Doing Business
(Agency, Trusts, Partnership and Joint Venture).
 See NCC, Art. 1644

Case: Nielson v. Lepanto, G.R. No. L-21601, Dec. 28, 1968

e. Independent Contractor (NCC, Art. 1713)

Cases: Fressel v. Mariano Uy Chaco Sons & Co., G.R. No. 10918, March 4, 1916
Shell v. Firemen’s Insurance, G.R. No. L-8169, January 29, 1957

f. Brokerage – Hahn v. CA, G.R. no. 114074, January 22, 1997

g. Loan – Jai-Alai Corp. of the Phils. v. BPI, 66 SCRA 29 (1975)

h. Bailment

i. Guardianship

j. Trust

k. Judicial Administration – San Diego, Sr. v. Nombre, 11 SCRA 165 (1964)

5. Form of Contract of Agency (NCC, Arts. 1869, 1874)

a. Oral
b. Written

Cases: Air France v. CA, G.R. No. L-57339, Dec. 29, 1983
Angeles v. Philippine National Railways, G.R. No. 150128, Aug. 31, 2006
Jimenez v. Rabat, G.R. No. L-12579, July 27, 1918
Cosmic Lumber v. CA, G.R. No. 114311, Nov. 29, 1996
AF Realty v. Dieselman, G.R. No. 111448, Jan. 16, 2002

6. Kinds of Agency

a. Manner of Creation

i. Express and Implied (NCC, Arts. 1869, 1870)

Case: Dela Peña v. Hidalgo, supra

ii. By Operation of Law [NCC, Arts. 1869, 1884 (2), 1930, 1931]

iii. By Estoppel (NCC, Arts. 1431, 1900, 1911, 1922)

Case: Yun Kwan Byung v. Phil. Amusement Gaming Corp., G.R. No. 163553,
Dec. 11, 2009

iv. By Ratification (NCC, Arts. 1910, 1317, 1403, 1393)

Case: Woodchild Holdings, Inc. v. Roxas Electric & Construction Co., 436
 SCRA 235 (2004)

b. Scope: General and Specific (NCC. Art. 1876)

Case: Dominion Insurance v. CA, G.R. No. 129919, Feb. 6, 2002

c. Authority Conferred

i. Couched in general terms (NCC, Art. 1876)

ii. Couched in specific terms (NCC, Arts. 1878-1880)

Cases: Veloso v. CA, 260 SCRA 593 (1996)

Pin v. Tan, G.R. No. 47740, July 20, 1982
Gozun v. Mercado, 511 SCRA 305 (2006)
Olaguer v. Purungganan, Jr., 575 SCRA 460 (2007)
Duñgo v. Lopena, 6 SCRA 1007 (1962)
Cosmic Lumber v. CA, supra
Hodges v. Salas, 63 Phil. 567 (1936)
Pahud v. CA, 597 SCRA 13 (2009)
Chua v. IAC, 229 SCRA 99 (1994)

B. Obligations and Liabilities of the Agent

1. To the Principal

a. Act within the scope of authority / in accordance with instructions (NCC,

Arts. 1881, 1882, 1887)

Case: Linan v. Puno, 31 Phil. 529 (1915)

b. Carry out the agency (NCC, Arts. 1884, 1929)

Case: British Airways v. CA, 285 SCRA 450 (1998)

c. Advance funds (NCC, Art. 1886)

d. Not to carry out the agency (NCC, Art. 1888, 1885)

e. Loyalty [NCC, Arts. 1889, 1890, 1491(2)]

Case: Severino v. Severino, 44 Phil. 343 (1923)

f. Account/deliver (NCC, Art. 1891)

Cases: Murao v. People, 462 SCRA 366 (2005)

Domingo v. Domingo, 42 SCRA 131 (1971)

g. Pay interest (NCC, Art. 1897)

 h. Responsibility for fraud & negligence (NCC, Art. 1909, 1875)

Case: Metrobank v. CA, 194 SCRA 169 (1991)

i. Solidary liability (NCC, Arts. 1894-1895)

j. Specific obligations of Commission Agents (NCC, Arts. 1903-1908)

k. Responsibility for acts of Substitutes (NCC, Arts. 1892-1893)

Case: International Films v. Lyric Film, 63 Phil. 778 (1936)

2. To Third Persons

a. Agent acting within the scope of authority (NCC, Arts. 1897, 1899-1900)

b. Agent acting outside the scope of authority (NCC, Arts. 1897-1898, 1911,
1901-1902)

Cases: NPC v. National Merchandising, 117 SCRA 789 (1982)

Phil. Products Co. v. Primateria, 15 SCRA 301 (1965)
DBP v. CA, 231 SCRA 370 (1994)
Cervantes v. CA, 304 SCRA 25 (1999)
Bacaltos Coal Mines v. CA, 245 SCRA 460 (1995)

c. Agent acting in his own name (NCC, Art. 1883)

Cases: Gold Star Mining Co. v. Lim-Jimena, 25 SCRA 597 (1968)

PNB v. Agudelo, 58 Phil. 635 (1933)
Beaumont v. Prieto, 41 Phil. 670 (1916)
E. Awad v. Filma Mercantile Co., 49 Phil. 816 (1926)

C. Obligations and Liabilities of the Principal

1. Comply with the obligations

a. Agent has contracted within the scope of his authority (NCC, Arts. 1910,
1881, 1883, 1897)

Cases: Dy Peh v. CIR, 28 SCRA 216 (1969)

Commercial Bank & Trust v. Republic Armored Car, 8 SCRA 425 (1963)

b. Ratified Acts (NCC, Art. 1901)

Case: Prieto v. CA, G.R. No. 158597, 18 June 2012

Manila Park Cemetery v. Linsangan, 443 SCRA 377 (2004)

c. Estopped to Deny (NCC, Arts. 1911)

Cases: Domingo v. Robles, 453 SCRA 812 (2005)

 Rural Bank of Milaor v. Ocfemia, 325 SCRA 99 (2000)
Cuison v. CA, 227 SCRA 391 (1993)

2. Advance / Reimburse (NCC, Arts. 1912, 1914, 1918)

3. Indemnify (NCC, Art. 1913)

4. Compensate (NCC, Art. 1875)

Cases: Macondray v. Sellner, 33 Phil. 370 (1916)

Philippine Health Care Providers v. Estrada, 542 SCRA 616 (2008)
Infante v. Cunanan, 93 Phil. 691 (1953)
Prats v. CA, 81 SCRA 360 (1978)
Manotok Brothers, Inc. v. CA, 221 SCRA 224 (1993)
Uniland Resources v. DBP, 200 SCRA 757 (1991)

5. Solidary Liability (NCC, Arts. 1911, 1915)

Case: De Castro v. CA, 384 SCRA 607 (2002)

6. To Third Parties (NCC, Art. 1883, 1910, 1911, 1916, 1917)

Cases: Gold Star Mining v. Lim-Jimena, supra

PNB v. Agudelo, supra

D. Extinguishment of Agency (NCC, Art. 1919)

1. Revocation; agency coupled with an interest (NCC, Arts. 1919-1927, 1873)

Cases: Dañon v. Brimo & Co., 44 Phil. 133 (1922)

Diolosa v. CA, 130 SCRA 350 (1984)
Lustan v. CA, G.R. No. 111924, January 27, 1997
Dy Buncio v. Ong Guan Gan, 60 Phil. 696 (1934)
Garcia v. De Manzano, 39 Phil. 577 (1919)
CMS Logging v. CA, G.R. No. 41420, July 10, 1992
Republic v. Evangelista, 466 SCRA 544 (2005)
Bacaling v. Muya, 380 SCRA 714 (2002)
Coleongo v. Claparols, G.R. No. L-18616, March 31, 1964

2. Withdrawal (NCC, Arts. 1919, 1928-1929)

Case: Valera v. Velasco, 51 Phil. 695 (1928)

3. Death (NCC, Arts. 1919, 1930-1932)

Cases: Herrara v. Luy Kim Guan, 1 SCRA 406 (1961)

Del Rosario v. Abad, G.R. No. L-10881, September 30, 1958

 Rallos v. Felix Go Chan, supra

4. Other modes (NCC, Art. 1919)

a. Civil interdiction, insanity, or insolvency

b. Dissolution of the firm or corporation

c. Accomplishment of the purpose or object

d. Expiration of the period

II. Partnership2

A. General Principles - Concept, Nature, Definition, Features, Formation, Kinds

(NCC, Arts. 1767-1783)

1. Contract (NCC, Art. 1767)

Cases: Woodhouse v. Halili, 83 Phil 526 (1953)

Tocao v. CA, 342 SCRA 20 (2000)
JM Tuason v. Bolanos, 95 Phil. 106 (1954)

2. Common Fund (NCC, Art. 1767)

Cases: Lim Tong Lim v. Philippine Fishing Gear, 317 SCRA 738 (1999)
Philex Mining Corp. v. CIR, 551 SCRA 428 (2008)

3. Intention to Divide Profits (NCC, Art. 1767)

Cases: Gatchalian v. CIR, 67 Phil 666 (1939)

4. Separate Juridical Personality (NCC, Art. 1768, 1775)

Cases: Evangelista v. CIR, 102 Phil. 140 (1957)

Aguila v. CA, 319 SCRA 246 (1999)
Campos Rueda & Co. v. Pacific Commercial & Co., 44 Phil. 916 (1923)
Mendiola v. CA, 497 SCRA 346

5. Determination of Existence of Partnership and Difference from Other

associations/contracts (NCC, Arts. 1769, 1825, 484)

a. Co-ownership or co-possession (NCC, 484-501);

2 References: New Civil Code, Articles 1767-1867; De Leon and De Leon, Jr., Comments and Cases on
Partnership, Agency, and Trusts; Casis, Analysis of Philippine Partnership Law & Jurisprudence;
Villanueva, Non-Corporate Media of Doing Business (Agency, Trusts, Partnership and Joint Venture).
 b. Labor Union;
c. Business Trust;
d. Conjugal Partnership of Gains (FC, Art. 106);
e. Corporations (B.P. Blg. 68, Sec. 2, 19; NIRC, Sec. 22 (b), 26)
f. Voluntary Associations (NCC, Art. 1775);
g. Joint Ventures;
h. Joint Tenancy.

Cases: Gatchalian v. CIR, supra

Evangelista v. CIR, supra
Philex Mining Corp. v. CIR, supra
Pascual v. CIR, 166 SCRA 560 (1988)
Obillos v. CIR, 139 SCRA 436 (1985)
Heirs of Jose Lim v. Juliet Villa Lim, G.R. No. 172690, 3 March 2010
AFISCO v. CA, 302 SCRA 1 (1999)
Litonjua v. Litonjua, 477 SCRA 576 (2005)
Aurbach v. Sanitary Wares, 180 SCRA 130 (1989)
Heirs of Tan Eng Kee v. CA, 341 SCRA 740 (2000)

6. Creation

a. Commencement and Term (NCC, Arts. 1784-1785)

Case: Ortega v. CA, 245 SCRA 529 (1995)

b. Lawful Purpose and Common Objective (NCC, Arts. 1770, 1830)

Cases: Deluao v. Casteel, 26 SCRA 475 (1968)
Arbes v. Polistico, 53 Phil. 489 (1929)

c. Form and Contribution [NCC, Arts. 1771-1774, 1403(2)]

Cases: Torres v. CA, 320 SCRA 428 (1999)
Kiel v. Estate of Sabert, 46 Phil. 198 (1924)
Agan v. Mabato and Agad Co., 23 SCRA 1223 (1968)

7. Kind of Partnership

a. As to Object – Universal or Particular (NCC, Arts. 1776-1783)

Case: CIR v. Suter, 27 SCRA 152 (1969);

b. As to Liability of the Partners – General or Limited (NCC, Arts. 1776,

1816, 1822-1824, 1843)

c. As to Duration – At will or with a Fixed Term or Undertaking (NCC,

Art. 1785)
Case: Ortega v. CA, supra

d. As to Legality of Existence – De Jure or De Facto (NCC, Art. 1772);

e. As to Representation – Real or by Estoppel (NCC, Art. 1825)

 Case: MacDonald v. National City Bank ofNew York, 99 Phil. 156 (1956);

f. As to Publicity – Secret or Open;

g. As to Purpose – Commercial or Professional (NCC. Art. 1767)

8. Kinds of Partners

a. Industrial (NCC, Arts. 1789, 1797)

Cases: Evangelista & Co. v. Abad Santos, 51 SCRA 416 (1973)
Ramnani v. CA, 196 SCRA 731 (1991);

b. Capitalist (NCC, Arts. 1789, 1790, 1797, 1808);

c. Managing (NCC, Arts. 1792, 1800-1802)

Case: Litton v. Hill & Ceron, 67 Phil. 509 (1939)

B. Obligations of the Partners

1. Obligations of the Partners Among Themselves

a. To contribute (NCC, Arts. 1786-1788, 1790-1791, 1795);

Case: Lozana v. Depakakibo, 107 Phil. 728 (1960)
Liwanag v. CA, G.R. No. 114398, 24 Oct. 1997
US v. Clarin, 17 Phil. 84 (1910)

b. To apply sums collected pro rata (NCC, Art. 1792);

c. To bring to partnership capital credit received (NCC, Art. 1793);

d. To pay for damages (NCC, Art. 1794);

e. To share in the losses (NCC, Art. 1797-1799)

Case: Moran v. CA, 133 SCRA 88 (1984)
Pioneer Insurance v. CA, 175 SCRA 668 (1989)

f. To act as managers and agents of partnership [NCC, Arts.1803(1), 1818]

Case: Bachrach v. La Protectora, 37 Phil. 441 (1918)

g. To render true and full information (NCC, Art. 1806)

h. To account for benefits (NCC, Art. 1807)

Case: Pang Lim & Galvez v. Lo Seng, 42 Phil. 283 (1921)
Lim Tanhu v. Remolete, 66 SCRA 425 (1975)
Catalan v. Gatchalian, 105 Phil. 1270 (1959)
 i. To not engage in another business (NCC, Arts. 1789, 1808)
Case: Evangelista & Co. v. Abad Santos, supra

2. Obligation of the Partnership to the Partners (NCC, Art. 1796)

Case: Martinez v. Ong Pong Co., 14 Phil. 726 (1909)
Agustin v. Inocencio, 9 Phil. 134 (1907)

3. Rights of the Partners

a. To share in profits (NCC, Art. 1797-1799)

b. To associate another (NCC, Art. 1804)

Case: Machuca v. Chuidian, 2 Phil. 210 (1913)

c. To access, inspect, copy partnership books (NCC, Art. 1805)

Case: Pardo v. Lumber Co. and Ferrer, 47 Phil. 964 (1925)

d. To have a formal account (NCC, Arts. 1809, 1842)

Case: Fue Leung v. IAC, 169 SCRA 746 (1989)
Emnace v. CA, 370 SCRA 431 (2001)

e. Property rights (NCC, Art. 1810-1814)

Case: Clemente v. Galvan, 67 Phil. 565 (1939)

4. Obligations of the Partners with regard to Third Persons

a. Liable for inclusion of name a firm name (NCC, Art. 1815; Code of
Professional Responsibility, Rule 3.02)
Case: Jo Chung Cang v. Pacific Commercial Co., 45 Phil. 142 (1923)

b. Jointly liable for partnership obligations (NCC, Arts. 1816-1817, 1835)

Cases: Compania Maritima v. Munoz, 9 Phil. 326 (1907)
Island Sales, Inc. v. United Partners, 65 SCRA 554 (1975)
Co-Pitco v. Yulo, 8 Phil. 544 (1907)
Pacific Commercial Co. v. Aboitiz, 48 Phil. 841 (1926)

c. Agents of the co-partners and the partnership (NCC, Arts. 1803, 1818-
1821)
Cases: Litton v. Hill, supra
Goquiolay v. SyCip, 105 Phil. 984 (1960) and 9 SCRA 663 (1963)
Santiago Syjuco v. Castro, 175 SCRA 171 (1989)
Congco v. Trilliana, 13 Phil. 194 (1909)

d. Solidarily liable for wrongful acts and omissions and breach of trust
(NCC, Art. 1822-1824)
Case: Muñasque v. CA, 139 SCRA 533 (1985)

e. Liability due to estoppel (NCC, Art. 1825; BP Blg. 68, Sec. 21)
Cases: MacDonald v. National City Bank of New York, supra
 Pioneer Insurance v. CA, supra

f. Liability of new partners (NCC, Art. 1826)

g. Partnership interest charged for personal debt (NCC, Arts. 1814, 1827)
Case: Viuda de Chan v. Peng, 503 Phil. 906 (1929)

C. Dissolution and Winding Up

1. Meaning of Dissolution (NCC, Arts. 1828, 1829)

Case: Rojas v. Maglana, 192 SCRA 110 (1990)
Idos v. CA, 296 SCRA 194 (1998)

2. Causes of Dissolution (NCC, Art. 1830-1831)

a. Without violating the agreement [NCC, Arts. 1830 (1), 1813]

Case: Ortega v. CA, supra

b. In contravention of the agreement [NCC, Art. 1830 (2)]

Case: Dojas v. Maglana, 192 SCRA 110

c. By operation of law [NCC, Art. 1830 (3-7)]

Case: Berneaza v. Dequilla, 43 Phil. 237 (1922)

d. By decree of court [NCC, Art. 1830 (8), 1831, 1814]

Case: Lichauco v. Lichauco, 33 Phil. 350 (1916)

3. Consequences of Dissolution

a. Continues until winding up (NCC, Art. 1829)

Case: Testate Estate of Mota v. Serra, 47 Phi. 464 (1926)

b. Termination of authority to act for the partnership (NCC, Arts.1832-

1834)
Case: Singson v. Isabella Sawmill, 88 SCRA 623 (1979)

c. Discharge of Liabilities (NCC, Arts. 1835, 1837)

d. Election to continue the business (NCC, Arts. 1840-1841)

Case: Yu v. NLRC, 224 SCRA 75 (1993)
Laguna Transportation v. SSS, 107 Phil. 833 (1960)

e. Effects of Rescission (NCC, Art. 1838)

Case: Primelink Properties v. Lazatin-Magat, 493 SCRA 444 (2006)

4. Right to Wind-up (NCC, Art. 1836)

5. Settling of Accounts and Liquidation (NCC, Arts. 1797-1799, 1827, 1837,

 1839, 1842)

Case: Villareal v. Ramirez, G.R. No. 144214, 14 July 2003

Magdusa v. Albaran, 5 SCRA 511 (1962)
Bonnevie v. Hernandez, 95 Phil. 175 (1954)
Fue Leung v. IAC, supra

D. Limited Partnership

1. Definition and Characteristics (NCC, Arts. 1843-1845, 1848, 1850, & 1857)

2. Formation (NCC, Arts. 1844, 1867)

3. Parties

a. Limited Partners

i. Contribution (NCC, Art. 1845)

ii. Partnership Name (NCC, Art. 1846)

iii. Liability (NCC, Arts. 1848, 1858)

iv. Additional Limited Partner (NCC, Art. 1849)

v. Rights

1. Same as general partners (NCC, Art. 1851)

2. Loan and transact business with partnership (NCC, Art. 1854)

3. Return of contribution (NCC, Arts. 1855, 1857)

4. Share Profits (NCC, Art. 1856)

5. Assign Interest (NCC, Art. 1859)

6. Not proper party to proceeding against partnership (NCC, Art. 1866)

vi. Effect of Death (NCC, Art. 1861)

vii. Rights of creditor of limited partner (NCC, Art. 1862)

b. General Partners (NCC, Art. 1850)

c. Person with erroneous belief that he is a limited partner (NCC, Art. 1852)

d. General and Limited Partner (NCC, Art. 1853)

 e. Substitute Limited Partner and Assignee (NCC, Art. 1859)

4. Certificate of Partnership

a. False statement (NCC, Art. 1847)

b. Amendment and Cancellation (NCC, Arts.1849, 1864-1865)

5. Dissolution and Settling of Accounts (NCC, Arts. 1860, 1863)

Additional readings and cases may be assigned during the term.

GRADING SYSTEM:

Final Exam – 40%

Midterms – 30%

Recitation – 25%

Attendance – 5%

University rules on class attendance and delinquency will be strictly enforced. More
than three (3) unexcused absences during the semester shall merit a grade of “Dropped”
if the student has a passing class standing. If the student has a failing class standing
(below 3.0), he/she shall automatically merit a grade of “5.0.”