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Partnership, Agency & Trusts (Bar Q&A) - San Beda LSG 2017-2018

The document discusses several agency law questions from past Philippine Bar exams between 1990-2017. It provides sample questions and suggested answers on topics like: 1) Whether a contract was one of agency or sale based on indicators like ownership and risk of loss. 2) The validity of revoking an agent's power of attorney if it was coupled with an interest in fulfilling a contractual obligation. 3) An agent's liability to the principal for a customer's unpaid bill if the agent received a guarantee commission. 4) A principal's liability for a loan contracted by his agent using his property as collateral, even if the agent acted in his own name.

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0% found this document useful (0 votes)
3K views10 pages

Partnership, Agency & Trusts (Bar Q&A) - San Beda LSG 2017-2018

The document discusses several agency law questions from past Philippine Bar exams between 1990-2017. It provides sample questions and suggested answers on topics like: 1) Whether a contract was one of agency or sale based on indicators like ownership and risk of loss. 2) The validity of revoking an agent's power of attorney if it was coupled with an interest in fulfilling a contractual obligation. 3) An agent's liability to the principal for a customer's unpaid bill if the agent received a guarantee commission. 4) A principal's liability for a loan contracted by his agent using his property as collateral, even if the agent acted in his own name.

Uploaded by

shinhye
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SAN BEDA COLLEGE OF LAW – MANILA back by the manufacturer at the same price they were ordered.

the manufacturer at the same price they were ordered. The manufacturer
LAW STUDENT GOVERNMENT (AY 2017-2018) shall hold the distributor free and harmless from any claim for defects in the units. Is
the agreement one for sale or agency?
ATP - BAR Q&As 1990-2017 (5%)

Law Student Government (LSG) President SUGGESTED ANSWER:


Simbulan, Ferozza Delia C. The contract is one of agency, not sale. The notion of sale is negated by the
following indicia: (1) the price is fixed by the manufacturer with the 10% mark-up
Academics Committee: Vice President for Academics: constituting the commission; (2) the manufacturer reacquires the unsold units at
Angara, Patrick Alexis Alfaro, Rennette Joy G. exactly the same price; and (3) warranty for the units was borne by the manufacturer.
2nd Year Batch Representative The foregoing indicianegate sale because they indicate that ownership over theunits
was never intended to transfer to the distributor.
Members:
Mirabel, Lydia Marie I. (2S) – Agency, Trust and Partnership (ATP) Subject Head Agency; coupled with an interest (2001)
Tolentino, Inah Beatriz R. (2E)
Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual
Bartolome, John Paul P. (2C) Cabañas, Cristopher Dave D., CPA (2G) installments over a period of ten years, but title will remain with Richard until the
Paglinawan, Domine David A. (2E) Reyes, Earl James G. (2G) purchase price is fully paid. To enable Leo to pay the price, Richard gave him a
Santos, Ma. Lourdes M. (2S) Vista, Erica Mae C., CPA (2S) power-of-attorney authorizing him to subdivide the land, sell the individual lots, and
deliver the proceeds to Richard, to be applied to the purchase price. Five years later,
PART I SUGGESTED ANSWERS TO BAR EXAM QUESTIONS Richard revoked the power of attorney and took over the sale of the subdivision lots
YEARS 1990-2006 himself. Is the revocation valid or not? Why? (5%)

Agency (2003) SUGGESTED ANSWER:


The revocation is not valid. The power of attorney given to the buyer is irrevocable
Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the because it is coupled with an interest: the agency is the means of fulfilling the
supermarket. Was there a nominate contract entered into between Jo-Ann and Aissa? obligation of the buyer to pay the price of the land (Article 1927, CC). In other
In the affirmative, what was it? Explain. 5% words, a bilateral contract (contract to buy and sell the land) is dependent on the
agency.
SUGGESTED ANSWER:
Yes, there was a nominate contract. On the assumption that Aissa accepted the Agency; Guarantee Commission (2004)
request of her close friend Jo-Ann to but some groceries for her in the supermarket,
what they entered into was a nominate contract of Agency. Article 1868 of the New As an agent, AL was given a guarantee commission, in addition to his regular
Civil Code provides that by the contract of agency a person binds himself to commission, after he sold 20 units of refrigerators to a customer, HT Hotel. The
render some service or to do something in representation or on behalf of another, customer, however, failed to pay for the units sold. AL’s principal, DRBI, demanded
with the consent or authority of the latter. from AL payment for the customer’s accountability. AL objected, on the ground that
his job was only to sell and not to collect payment for units bought by the customer.
ALTERNATIVE ANSWER: Is AL’s objection valid? Can DRBI collect from him or not? Reason. (5%)
Yes, they entered into a nominate contract of lease to service in the absence of a
relation of principal and agent between them (Article 1644, New Civil Code). SUGGESTED ANSWER:
No, AL's objection is not valid and DRBI can collect from AL. Since AL accepted a
Agency vs. Sale (2000) guarantee commission, in addition to his regular commission, he agreed to bear the
risk of collection and to pay the principal the proceeds of the sale on the same terms
A foreign manufacturer of computers and a Philippine distributor entered into agreed upon with the purchaser (Article 1907,
a contract whereby the distributor agreed to order 1,000 units of the manufacturer's Civil Code)
computers every month and to resell them in the Philippines at the manufacturer's
suggested prices plus 10%. All unsold units at the end of the year shall be bought
Page 1 of 10 ATP Bar Q&As 1990-2017
LSG AY 2017-2018
Agency; Real Estate Mortgage (2004) SUGGESTED ANSWER:
Yes, the agent may appoint a substitute or sub-agent if the principal has not
CX executed a special power of attorney authorizing DY to secure a loan from any prohibited him from doing so, but he shall be responsible for the acts of the
bank and to mortgage his property covered by the owner’s certificate of title. In substitute:
securing a loan from MBank, DY did not specify that he was acting for CX in the (1) when he was not given the power to appoint one;
transaction with said bank. Is CX liable for the bank (2) when he was given such power, but without designating the person, and the
loan? Why or why not? Justify your answer. (5%) person appointed was notoriously incompetent or insolvent.

SUGGESTED ANSWER: General Agency vs. Special Agency (1992)


CX is liable for the bank loan because he authorized the mortgage on his property to
secure the loan contracted by DY. If DY later defaults and fails to pay the loan, CX A as principal appointed B as his agent granting him general and unlimited
is liable to pay. However, his liability is limited to the extent of the value of the said management over A's properties, stating that A withholds no power from B and that
property. ALTERNATIVE ANSWER: CX is not personally liable to the bank loan the agent may execute such acts as he may consider appropriate.
because it was contracted by DY in his personal capacity. Only the property of CX is Accordingly, B leased A's parcel of land in Manila to C for four (4) years at
liable. Hence, while CX has authorized the mortgage on his property to secure the P60,000.00 per year, payable annually in advance.
loan of DY, the bank cannot sue CX to collect the loan in case DY defaults thereon. B leased another parcel of land of A in Caloocan City to D without a fixed term at
The bank can only foreclose the property of CX. P3,000.00 per month payable monthly.
And if the proceeds of the foreclosure are not sufficient to pay the loan in full, the B sold to E a third parcel of land belonging to A located in Quezon City for three (3)
bank cannot run after CX for the deficiency. times the price that was listed in the inventory by A to B All those contracts were
executed by B while A was confined due to illness in the Makati Medical Center.
ALTERNATIVE ANSWER: Rule on the validity and binding effect of each of the above contracts upon A the
While as a general rule the principal is not liable for the contract entered into by his principal. Explain your answers,
agent in case the agent acted in his own name without disclosing his principal, such
rule does not apply if the contract involves a thing belonging to the principal. In such SUGGESTED ANSWER:
case, the principal is liable under Article 1883 of the Civil Code. The contract is The agency couched in general terms comprised only acts of administration (Art.
deemed made on his behalf (Sy-juco v. Sy-juco 40 Phil. 634 [1920]). 1877, Civil Code). The lease contract on the Manila parcel is not valid, not
enforceable and not binding upon A. For B to lease the property to C, for more than
ALTERNATIVE ANSWER: one (1) year, A must provide B with a special power of
CX would not be liable for the bank loan. CX's property would also not be liable on attorney (Art. 1878. Civil Code).
the mortgage. Since DY did not specify that he was acting for CX in the transaction The lease of the Caloocan City property to D is valid and binding upon A. Since the
with the bank, DY in effect acted in his own name. In the case of Rural Bank of lease is without a fixed term, it is understood to be from month to month, since the
Bombon v. CA, 212 SCRA, (1992), the Supreme Court, under the same facts, ruled rental is payable monthly (Art. 1687, Civil Code).
that "in order to bind the principal by a mortgage on real property executed by an The sale of the Quezon City parcel to E is not valid and not binding upon A. B
agent, it must upon its face purport to be made, signed and sealed in the name of the needed a special power of attorney to validly sell the land (Arts. 1877 and 1878,
principal, otherwise, it will bind the agent only. It is not enough merely that the agent Civil Code). The sale of the land at a very good price does not cure the defect of the
was in fact authorized to make the mortgage, if he, has not acted in the name of the contract arising from lack of authority
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 Powers of the Agent (1994)
own name and has set his own hand and seal to the mortgage. There is no principle
of law by which a person can become liable on a real estate mortgage which she Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots of
never executed in person or by attorney in fact". its newly developed subdivision. Prime Realty told Nestor that he could not collect
or receive payments from the buyers. Nestor was able to sell ten lots to Jesus and to
Appointment of Sub-Agent (1999) collect the down payments for said lots. He did
not turn over the collections to Prime Realty. Who shall bear the loss for Nestor's
X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a sub- defalcation, Prime Realty or Jesus?
agent and if he does, what are the effects of such appointment? (5%)
SUGGESTED ANSWER:
Page 2 of 10 ATP Bar Q&As 1990-2017
LSG AY 2017-2018
a) The general rule is that a person dealing with an agent must inquire into the SUGGESTED ANSWER:
authority of that agent. In the present case, if Jesus did not inquire into that authority,
he is liable for the loss due to Nestor's defalcation unless Article 1900, Civil Code B-2 has a better title. This is not a case of double sale. Since the first sale was void.
governs, in which case the developer corporation The law provides that when a sale of a piece of land or any interest therein is through
bears the loss. Art. 1900 Civil Code provides: "So far as third persons are an agent, the authority of the latter shall be in writing; otherwise, the sale shall be
concerned, an act is deemed to have been performed within the scope of the agent's void (Art 1874, NCC). The property was sold by Y to B1 wihtout any written
authority, if such act is within the terms of the power of attorney, as written, even if authority from the owner X. Hence, the sale to B1 was void.
the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent. However, if Jesus made due ALTERNATIVE ANSWER:
inquiry and he was not informed by the principal Prime Realty of the limits of
Nestor's authority. Prime Realty shall bear the loss. b) Considering that Prime Realty Under the facts, B-1 has a better right to the land. Given the fact that the Deed of
Corporation only "told" Nestor that he could not receive or collect payments, it Sale in favor of B-1 and B-2 are not inscribed in the Registry of Deeds, the case is
appears that the limitation does not appear in his written authority or power of governed by Art 1544 of the New Civil Code which provides that in case of double
attorney. In this case, insofar as Jesus, who is a third person is concerned, Nestor's sales of an immovable property, the ownership shall pertain to the person who is in
acts of collecting payments is deemed to have been performed within the scope of good faith was first in possession and in the absence thereof to the person who
his authority {Article 1900. Civil Code). Hence, the principal is liable. presents the oldest title, provide there is good faith.
However, if Jesus was aware of the limitation of Nestor's power as an agent, and
Prime Realty Corporation does not ratify the sale contract, then Jesus shall be liable In a case, the Supreme Court has held that in a sale of real estate the execution of a
(Article 1898. Civil Code). notarial document of sale is tantamount to delivery of the possession of the property
sold. The ownership of the land therefore pertains to the first buyer. It may also be
Termination; Effect of Death of Agent (1997) mentioned that under Art 3344 no instruments or deed establishing, transmitting,
acknowledging, modifying, or extinguishing right to real property not registered
Stating briefly the thesis to support your answer to each of the following cases, will under Act 496 shall be valid except as between the parties. Thus, the Deed of Sale of
the death - (c) of an agent end an agency? B-2 has no binding effect on B-1.

SUGGESTED ANSWER: 2014


Yes. The death of an agent extinguishes the agency, by express provision of par. 3, Joe Miguel, a well-known treasure hunter in Mindanao, executed a Special Power of
Art 1919 of the Civil Code Attorney (SPA) appointing his nephew, John Paul, as his attorney-in-fact. John Paul
was given the power to deal with treasure-hunting activities on Joe Miguel’s land
2007-2013 and to file charges against those who may enter it without the latter’s authority. Joe
Miguel agreed to give John Paul forty percent (40%) of the treasure that may be
Agency; Sale of a Real Property through an Agent (2010) found on the land.

X was the owner of an unregistered parcel of land in Cabanatuan City. As she was Thereafter, John Paul filed a case for damages and injunction against Lilo for
abroad, she advised her sister Y via overseas call to sell the land and sign a contract illegally entering Joe Miguel’s land. Subsequently, he hired the legal services of
of sale on her behalf. Atty. Audrey aggreing to give the latter thirty percent (30%) of Joe Miguel’s share in
whatever treasure that may be found in the land.
B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but Dissatisfied however with the strategies implemented by John Paul, Joe Miguel
asked Y for her authority from X. Without informing X that she had sold the land to unilaterally revoked the SPA granted to John Paul.
B1, Y sought X for a written authority to sell.
Is the revocation proper?
X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001
to B2 on monthly installment basis for two years, the first installment to be paid at SUGGESTED ANDSWER:
the end of May 2001. Yes, the revocation is proper. Art. 1920 provides that the principal may expressly or
impliedly revoke the agency at will, and compel the agent to return the document
Who between B1 and B2 has a better right over the land? Explain. (5%) evidencing the agency. Joe Miguel may however be held liable for damages if he
abused his right in revoking the agency.
Page 3 of 10 ATP Bar Q&As 1990-2017
LSG AY 2017-2018
TRUST
ALTERNATIVE ANSWER:
No, the revocation is not proper. Under Art. 1927, an agency cannot be revoked if a Express Trust; Prescription (1997)
bilateral contract depends upon it, or if it is the means of fulfilling an obligation
already contracted, or if a partner is appointed manager of a partnership in the On 01 January 1980, Redentor and Remedies entered into an agreement by virtue of
contract of partnership and his removal from the management is unjustifiable. which the former was to register a parcel of land in the name of Remedies under the
In the case of Republic v. Evangelista, (G.R. No. 156015, August 11, 2005), which explicit covenant to reconvey the land to Remigio, son of Redentor, upon the son's
has similar facts as the present case, it was held that “an exception to the revocability graduation from college. In 1981, the land was registered in the name of Remedies.
of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract Redentor died a year later or in 1982. In March 1983, Remigio graduated from
depends upon the agency. The reason for its irrevocability is because the agency college. In February 1992, Remigio accidentally found a copy of the document so
becomes part of another obligation or agreement. It is not solely the rights of the constituting Remedies as the trustee of the land. In May 1994, Remigio filed a case
principal but also that of the agent and third persons which are affected. Hence, the against Remedies for the reconveyance of the land to him. Remedies, in her answer,
law provided that in such cases, the agency cannot be revoked at the sole will of the averred that the action already prescribed. How should the matter be decided?
principal.”
In this case, the interest of John Paul and Atty. Audrey in the agency is the treasure SUGGESTED ANSWER:
that may be found in the land. The contract with the lawyer depends on the agency The matter should be decided in favor of Remigio (trustee) because the action has
which renders such agency as one coupled with an interest. Therefore, Joe Miguel not prescribed. The case at bar involves an express trust which does not prescribe as
cannot unilaterally revoke the agency. long as they have not been repudiated by the trustee (Diaz vs. Gorricho. 103 Phil,
261).

AGENCY COUPLED WITH INTEREST; 2015 Implied Trust (1998)

A lawyer was given an authority by means of a Special Power of Attorney by his Juan and his sister Juana inherited from their mother two parcels of farmland with
client to sell a parcel of land for the amount of P3M. Since the client owed the exactly the same areas. For convenience, the Torrens certificates of title covering
lawyer P1M in attorney’s fees in a prior case he handled, the client agreed that if the both lots were placed in Juan's name alone. In 1996, Juan sold to an innocent
property is sold, the lawyer was entitled to get 5% agent’s fee plus P1M as payment purchaser one parcel in its entirety without the knowledge and consent of Juana, and
for his unpaid attorney’s fees. The client, however, subsequently found a buyer of his wrongfully kept for
own who was willing to buy the property for a higher amount. Can the client himself the entire price paid.
unilaterally rescind the authority he gave in favor of his lawyer? Why or why not? 1. What rights of action, if any, does Juana have against and/or the buyer? |3%]
2. Since the two lots have the same area, suppose Juana flies a complaint to have
SUGGESTED ANSWER: herself declared sole owner of the entire remaining second lot, contending that her
No, the client cannot unilaterally rescind the authority he gave in favor of his lawyer brother had forfeited his share thereof by wrongfully disposing of her undivided
because the agency is coupled with interest, the interest being the attorney’s fees share in the first lot. Will the suit prosper? [2%]
which the client owed the lawyer. Under Art. 1927 of the Civil Code, an agency
cannot be revoked if a bilateral contract depends upon it, or if it is the means of SUGGESTED ANSWER:
fulfilling the obligation already contracted, or if a partner is appointed manager of a 1. When, for convenience, the Torrens title to the two parcels of land were placed in
partnership in the contract of partnership and his removal from the management is Joan's name alone, there was created an implied trust (a resulting trust) for the
unjustifiable. In this case, if the lawyer could sell his client’s property, the lawyer benefit of Juana with Juan as trustee of one-half undivided or ideal portion of each of
will be entitled not only to his commission, but also to his attorney’s fees. These the two lots. Therefore, Juana can file an action for
attorney’s fees were already owed by the client to his lawyer before the SPA was damages against Joan for having fraudulently sold one of the two parcels which he
executed. The agency is a means of fulfilling an obligation already contracted. partly held in trust for Juana's benefit. Juana may claim actual or compensatory
damage for the loss of her share in the land; moral damages for the mental anguish,
anxiety, moral shock and wounded feelings she had
suffered; exemplary damage by way of example for the common good, and attorney's
fees. Juana has no cause of action against the buyer who acquired
the land for value and in good faith, relying on the transfer certificate of title
showing that Juan is the registered owner of the land.
Page 4 of 10 ATP Bar Q&As 1990-2017
LSG AY 2017-2018
ANOTHER ANSWER: ANOTHER ANSWER:
1. Under Article 476 of the Civil Code, Juana can file an action for quieting of title 2. The suit will prosper, applying the ruling in Imperial vs. CA cited above. Both
as there is a cloud in the title to the subject real property. Second, Juana can also file law and equity authorize such a result, said the Supreme Court.
an action for damages against Juan, because the settled rule is that the proper Strictly speaking, Juana's contention that her brother had forfeited his share in the
recourse of the true owner of the property who was second lot is incorrect. Even if the two lots have the same area, it does not follow
prejudiced and fraudulently dispossessed of the same is to bring an action for that they have the same value. Since the sale of the first lot on the Torrens title in the
damages against those who caused or employed the same. Third, since Juana had the name of Juan was valid, all that Juana may recover is the value of her undivided
right to her share in the property by way of inheritance, she can demand the partition interest therein, plus damages. In addition, she can ask for partition or reconveyance
of the thing owned in common, under Article 494 of the Civil Code, and ask that of her undivided interest in the second lot, without prejudice to any agreement
the title to the remaining property be declared as exclusively hers. between them that in lieu of the payment of the value of Juana's share in the first lot
However, since the farmland was sold to an innocent purchaser for value, then Juana and damages, the second lot be reconveyed to her.
has no cause of action against the buyer consistent with the established rule that the
rights of an innocent purchaser for value must be respected and protected ALTERNATIVE ANSWER:
notwithstanding the fraud employed by the seller in securing his title. (Eduarte vs. 2. The suit will not prosper, since Juan's wrongful act of pocketing the entire
CA, 253 SCRA 391) proceeds of the sale of the first lot is not a ground for divesting him of his rights as a
co-owner of the second lot. Indeed, such wrongdoing by Juan does not constitute, for
ADDITIONAL ANSWER: the benefit of Juana, any of the modes of
1. Juana has the right of action to recover (a) her one half share in the proceeds of the acquiring ownership under Art. 712, Civil Code.
sale with legal interest thereof, and (b) such damages as she may be able to prove as
having been suffered by her, which may include actual or compensatory damages as Trust; Implied Resulting Trust (1995)
well as moral and exemplary In 1960, Maureen purchased two lots in
damages due to the breach of trust and bad faith (Imperial vs. CA, 259 SCRA 65). a plush subdivision registering Lot 1 in her name and Lot 2 in the name of her
Of course, if the buyer knew of the co-ownership over the lot he was buying, Juana brother Walter with the latter's consent. The idea was to circumvent a subdivision
can seek (c) reconvenyance of her one-half share instead but she must implead the policy against the acquisition of more than one lot by one buyer. Maureen
buyer as co-defendant and allege his bad faith in constructed a house
purchasing the entire lot. Finally, consistent with the ruling in Imperial us. CA. on Lot 1 with an extension on Lot 2 to serve as a guest house.
Juana may seek instead (d) a declaration that she is now the sole owner of the entire In 1987, Walter who had suffered serious business losses demanded that Maureen
remaining lot on the theory that Juan has forfeited his one-half share therein. remove the extension house since the lot on which the extension was built was his
property. In 1992, Maureen sued for the reconveyance to her of Lot 2 asserting that a
ADDITIONAL ANSWER: resulting trust was created when she had the
1. Juana can file an action for damages against Juan for having fraudulently sold one lot registered in Walter's name even if she paid the purchase price. Walter opposed
of the two parcels which he partly held in trust for Juana's benefit. Juana may claim the suit arguing that assuming the existence of a resulting trust the action of Maureen
actual or compensatory damage for the loss of her share in the land; moral damages has already prescribed since ten years have already elapsed from the registration of
for the mental anguish, anxiety, moral shock and wounded feelings she had suffered; the title in his name. Decide. Discuss fully.
exemplary damage by way of example for the common good, and attorney's fees.
Juana has no cause of action against the buyer who acquired the land for value and in SUGGESTED ANSWER:
good faith, relying on the transfer certificate showing that Juan is the registered This is a case of an implied resulting trust. If Walter claims to have acquired
owner of the land. ownership of the land by prescription or if he anchors his defense on extinctive
prescription, the ten year period must be reckoned from 1987 when he demanded
SUGGESTED ANSWER: that Maureen remove the extension house on Lot No. 2 because such demand
2. Juana's suit to have herself declared as sole owner of the entire remaining area will amounts to an express repudiation of the trust and it was made known to Maureen.
not prosper because while Juan's act in selling the other lot was wrongful. It did not The action for reconveyance filed in 1992 is not yet barred by prescription.
have the legal effect of forfeiting his share in the remaining lot. (Spouses Huang v. Court of Appeals, Sept. 13, 1994).
However, Juana can file an action against Juan for partition or termination of the co-
ownership with a prayer that the lot sold be adjudicated to Juan, and the remaining
lot be adjudicated and reconveyed to her.
Page 5 of 10 ATP Bar Q&As 1990-2017
LSG AY 2017-2018
2007-2013 siblings because more than 5 years have passed since the titles were registered in his
name. Do you agree? Explain.
Trust De Son Tort (2007)

Explain the following concepts and doctrines and give an example of each:
SUGGESTED ANSWER:
(A).concept of trust de son tort (constructive trust) (5%)
No, I don’t agree with X. This is clear case of an implied trust provided in Art. 1453
SUGGESTED ANSWER: of the Civil Code which states that “when property is conveyed to a person in
reliance upon his declared intention to hold it for, or transfer it to another or the
A constructive trust is a trust NOT created by any word or phrase, either expressly
grantor, there is an implied trust in favor of the person for whose benefit it is
or impliedly, evincing a direct intention to create a trust, but is one that arises in
contemplated.” In this case, A is the trustor, S is the trustee, and the three other
order to satisfy the demands of justice. It does not come about by agreement or
children of A are the beneficiaries. A and/or his three children may file an action to
intention but mainly operation of law and construed as a trust against one who, by
compel X to transfer title in favor his three siblings within ten (10) years from the
fraud, duress or abuse of confidence, obtains or holds the legal right to property
time the cause of action accrues upon an obligation created by law- when the
which he ought not, in equity and good conscience, to hold (Heirs of Lorenzo Yap
children attains the age of majority. (Art. 1144, Civil Code)
v. CA, 371 Phil 523, 1991). The following are examples of constructive trust: 1.
Art. 1456 NCC which provides: "If property is acquired through mistake or fraud,
the person obtaining it is, by force of law considered a trustee of an implied trust for
the benefit of the person for whom the property comes." 2. Art 1451 NCC which
provides: "When land passes by succession through any person and he causes the
legal title to be put in the name of another, a trust is established by implication of law
for the benefit of the true owner." 3. Art 1454 NCC which provides: "If an absolute
conveyance of property is made in order to secure the performance of an obligation
of the grantor toward the grantee, a trust by virtue of law is established. If the
fulfillment of the obligation is offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him." 4. Art 1455 NCC which provides:
"When any trustee, guardian or any person holding a fiduciary relationship uses trust
funds for the purchase of property and causes conveyance to be made to him or to
third person, a trust is established by operation of law in favor of the person to whom
the funds belong."

IMPLIED TRUST; 2015

Mr. A, a business man, put several real estate properties under the name of his eldest
son X because at that time, X was the only one of legal age among his four children.
He told his son he was to hold those assets for his siblings until they become adults
themselves. X then got married. After 5 years, Mr. A asked X to transfer the titles
over three properties to his three siblings, leaving two properties to himself. To A’s
surprise, X said that he can no longer be made to transfer the properties to his

Page 6 of 10 ATP Bar Q&As 1990-2017


LSG AY 2017-2018
PARTNERSHIP whatever net profit is realized per fiscal period. After two years of operation,
however, Una conveys her whole interest in the partnership to
Composition of Partnerships; Spouses; Corporations (1994) Justine, without the knowledge and consent of Dielle and Karlo.
1. Is the partnership dissolved?
1) Can a husband and wife form a limited partnership to engage in real estate 2. What are the rights of Justine, if any, should she desire to participate in the
business, with the wife being a limited partner? management of the partnership and in the distribution of a net profit of P360.000.00
2) Can two corporations organize a general partnership under the Civil Code of the which was realized after her purchase of Una's interest? [3%]
Philippines? 3) Can a corporation and an individual form a general partnership?
SUGGESTED ANSWER:
SUGGESTED ANSWER: 1. No, a conveyance by a partner of his whole interest in a partnership does not of
1) a) Yes. The Civil Code prohibits a husband and wife from constituting a universal itself dissolve the partnership in the absence of an agreement. (Art. 1813. Civil
partnership. Since a limited partnership is not a universal partnership, a husband and Code)
wife may validly form one.
b) Yes. While spouses cannot enter into a universal partnership, they can enter into a SUGGESTED ANSWER:
limited partnership or be members thereof (CIR u. Suter, etal. 27 SCRA 152). 2. Justine cannot interfere or participate in the management or administration of the
partnership business or affairs. She may, however, receive the net profits to which
SUGGESTED ANSWER: Una would have otherwise been entitled. In this case, P120.000 (Art. 1813, Civil
2) a) No, A corporation is managed by its board of directors. If the corporation were Code)
to become a partner, co-partners would have the power to make the corporation party
to transactions in an irregular manner since the partners are not agents subject to the Dissolution of Partnership (1995)
control of the Board of Directors. But a corporation may enter into a joint venture
with another corporation as long as the nature of the venture is in line with the Pauline, Patricia and Priscilla formed a business partnership for the purpose of
business authorized by its charter. (Tuason & Co., Inc. v. Bolano, 95 Phil. 106). engaging in neon advertising for a term of five (5) years. Pauline subsequently
b) As a general rule a corporation may not form a general partnership with another assigned to Philip her interest in the partnership. When Patricia and Priscilla learned
corporation or an individual because a corporation may not be bound by persons who of the assignment, they decided to dissolve the partnership before the expiration of
are neither directors nor officers of the corporation. its term as they had an unproductive
However, a corporation may form a general partnership with another corporation or business relationship with Philip in the past. On the other hand, unaware of the move
an individual provided the following conditions are met: of Patricia and Priscilla but sensing their negative reaction to his acquisition of
1) The Articles of Incorporation of the corporation expressly allows the corporation Pauline's interest, Philip simultaneously petitioned for the dissolution of the
to enter into partnerships; partnership.
2) The Articles of Partnership must provide that all partners will manage the 1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or
partnership, and they shall be jointly and severally liable; and Philip valid? Explain.
3) In case of a foreign corporation, it must be licensed to do business in the 2. Does Philip have any right to petition for the dissolution of the partnership before
Philippines. the expiration of its specified term? Explain.
c) No. A corporation may not be a general partner because
the principle of mutual agency in general partnership allowing the other general SUGGESTED ANSWER:
partner to bind the corporation will violate the corporation law principle that only the 1, Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is
board of directors may bind the corporation. valid and did not violate the contract of partnership even though Pauline and Philip
did not consent thereto. The consent of Pauline is not necessary because she had
SUGGESTED ANSWER: already assigned her interest to Philip. The consent of Philip is not also necessary
3) No, for the same reasons given in the Answer to Number 2 above. because the assignment to him of Pauline's interest did not make him a partner, under
Art, 1813 of the NCC.
Conveyance of a Partner’s Share Dissolution (1998)
ALTERNATIVE ANSWER:
Dielle, Karlo and Una are general partners in a merchandising firm. Having Interpreting Art. 1830 (1) (c) to mean that if one of the partners had assigned his
contributed equal amounts to the capital, they also agree on equal distribution of interest on the partnership to another the remaining partners may not dissolve the

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partnership, the dissolution by Patricia and Priscilla without the consent of Pauline or Who of the applicants should be hired by the partnership? Explain and give your
Philip is not valid. reasons.

SUGGESTED ANSWER: SUGGESTED ANSWER:


2. No, Philip has no right to petition for dissolution because he does not have the A should be hired as Secretary. The decision for the hiring of A prevails because it is
standing of a partner (Art. 1813 NCC). an act of administration which can be performed by the duly appointed managing
partners, W and X.
Dissolution of Partnership; Termination (1993) B cannot be hired, because in case of a tie in the decision of the managing partners,
the deadlock must be decided by the partners owning the controlling interest. In this
A, B and C formed a partnership for the purpose of contracting with the Government case, the opposition of X and Y prevails because Y owns the controlling Interest
in the construction of one of its bridges. On June 30, 1992, after completion of the (Art. 1801, Civil Code).
project, the bridge was turned over by the partners to the Government. On August
30, 1992, D, a supplier of materials used in the project sued A for collection of the Obligations of a Partner; Industrial Partner (2001)
indebtedness to him. A moved to dismiss the complaint against him on the ground
that it was the ABC partnership that is liable for the debt. D replied that ABC Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe
partnership was dissolved upon completion of the project for which purpose the provided the capital while Rudy contributed his labor and industry. On one side of
partnership was formed. Will you dismiss the complaint against A If you were the their shop, Joe opened and operated a coffee shop, while on the other side, Rudy put
Judge? up a car accessories store. May they engage in
such separate businesses? Why? [5%]
SUGGESTED ANSWER:
As Judge, I would not dismiss the complaint against A. because A is still liable as a SUGGESTED ANSWER:
general partner for his pro rata share of 1/3 (Art. 1816, C. C.J. Dissolution of a Joe, the capitalist partner, may engage in the restaurant business because it is not the
partnership caused by the termination of the particular undertaking same kind of business the partnership is engaged in. On the other hand, Rudy may
specified in the agreement does not extinguish obligations, which must be liquidated not engage in any other business unless their partnership
during the "winding up" of the partnership affairs (Articles 1829 and 1830. par. 1-a, expressly permits him to do so because as an industrial partner he has to devote his
Civil Code). full time to the business of the partnership [Art. 1789, CC)

Effect of Death of Partner (1997)


2007-2013
Stating briefly the thesis to support your answer to each of the following cases, will
the death - of a partner terminate the partnership? Liability; Liability of a Partner (2010)

SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by express provision of No.XV. A, B, and C entered into a partnership to operate a restaurant business.
par. 5, Art. 1830 of the Civil Code. When the restaurant had gone past break-even stage and started to garner
considerable profits, C died. A and B continued the business without dissolving the
Obligations of a Partner (1992) partnership. They in fact opened a branch of the restaurant, incurring obligations in
the process. Creditors started demanding for the payment of their obligations.
W, X, Y and Z organized a general partnership with W and X as industrial partners
and Y and Z as capitalist partners. Y contributed P50,000.00 and Z contributed (A). Who are liable for the settlement of the partnership’s obligations? Explain?
P20,000.00 to the common fund. By a unanimous vote of the partners, W and X were (3%)
appointed managing partners, without any specification of their respective powers
and duties. A applied for the position of Secretary and B applied for the position of SUGGESTED ANSWER:
Accountant of the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z. The two remaining partners, A and B, are liable. When any partner dies and the
The hiring of B was decided upon by W and Z, but was opposed by X and Y. business is continued without any settlement of accounts as between him or his

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estate, the surviving partners are held liable for continuing the business despite the into a public document in order to comply with the required form (Article 1357,
death of C (Art 1841, 1785, par 2, and Art 1833 of NCC). NCC). The purpose of the law in requiring a public document is simply to notify the
public about the contribution.
(B).What are the creditors’ recourse/s? Explain. (3%)
Share; Demand during the Existence of Partnership (2012)
SUGGESTED ANSWER:
No.X.b) A partner cannot demand the return of his share (contribution) during the
Creditors can file the appropriate actions, for instance, an action for collection of existence of a partnership. Do you agree? Explain your answer. (5%)
sum of money against the “partnership at will” and if there are no sufficient funds,
the creditors may go after the private properties of A and B (Art 816, NCC). SUGGESTED ANSWER:
Creditors may also sue the estate of C. The estate is not excused from the liabilities
of the partnership even if C is dead already but only up to the time that he remained a Yes, he is not entitled to the return of his contribution to the capital of the
partner (Art 1829, 1835, par 2, NCC; Testate Estate of Mota v. Serra, 47 Phil 464 partnership, but only to the net profits from the partnership business during the life of
[1925]). However, the liability of C’S individual properties shall be subject first to the partnership period. If he is a limited partner, however, he may ask for the return
the payment of his separate debts (Art 1835. NCC). of his contributions as provided in Art 1856 and 1857, Civil Code.

CONTRACTUAL RELATIONSHIP; 2014


Oral Partnership (2009)
Timothy executed a Memorandum of Agreement (MOA) with Kristopher setting up
a business venture covering three (3) fastfood stores known as “Hungry Toppings”
No.I. TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the that will be established at Mall Uno, Mall Dos, and Mall Tres.
statement is false. Explain your answer in not more than two (2) sentences.
(C). An oral partnership is valid. (1%) The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty percent (30%) share in all
of the stores to be set up by Kristopher;
SUGGESTED ANSWER: 2. The proceeds of the business, after deducting expenses, shall be used to pay
TRUE. Partnership is a consensual contract, hence, it is valid even though not in the principal amount of P500, 000.00 and the interest therein which is to be
writing. computed based on the bank rate, representing the bank loan secured by
Timothy;
ALTERNATIVE ANSWER: 3. The net profits, if any, after deducting the expenses and payments of the
principal and interest shall be divided as follows: seventy percent (70%) for
TRUE. An oral is a consensual of the partnership is valid even though not in writing. Kristopher and thirty percent (30%) for Timothy;
However, If it involves contribution of an immovable property or a real right, an oral 4. Kristopher shall have a free hand in running the business without any
contract of partnership is void. In such a case, the contract of partnership to be valid, interference from Timothy, his agents, representatives, or assigns, and
must be in a public instrument ( Art. 1771 ,NCC ), and the inventory of said should such interference happen, Kristopher has the right to buy back the
property signed by the parties must be attached to said public instrument (Art. 1773, share of Timothy less the amounts already paid on the principal and to
NCC). dissolve the MOA; and
5. Kristopher shall submit his monthly sales report in connection with the
ALTERNATIVE ANSWER: business to Timothy.
TRUE. Partnership is a consensual contract, hence, it is valid even though not in What is the contractual relationship between Timothy and Kristopher?
writing. The oral contract of partnership is also valid even if an immovable property
or real right is contributed thereto. While the law, in such a case, requires the SUGGESTED ANSWER:
partnership to be in a public document, the law does not expressly declare the The contractual relationship between Timothy and Kristopher is that of partnership.
contract void if not executed in the required form (Article 1409 (7 ,NCC ). And Art. 1767 of the Civil Code provides that under a contract of partnership, two or
there being nothing in the law from which it can be inferred that the said requirement more persons bind themselves to contribute money, property, or industry to a
is prohibitory or mandatory (Article 5, NCC), the said oral contract of partnership common fund, with the intention of dividing the profits among themselves.
must also be valid. The interested party may simply require the contract to be made Moreover, Art. 1769 of the Civil Code states in part that receipt by a person of a
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share of the profits of a business is prima facie evidence that he is a partner in the ALTERNATIVE ANSWER:
business, provided that the said profits were receives in payment for debt, as wages, B. No, a joint venture is not considered a partnership. Although the Supreme Court
annuity, interest on a loan, or as consideration for a sale. In this case, the MOA has recognized that for certain purposes, a joint venture is a form of partnership and
between Timothy and Kristopher stipulated that they shall share in the profits of the should be governed by the law of partnerships, it has also recognized a distinction
business 30-70. The contributions of the partners include a bank loan obtained by between the two business forms, and has held that although a corporation cannot
Timothy and industry in the form of managing the properties by Kristopher. Thus, enter into a partnership contract, it may however engage in a joint venture with
the requisites for establishing a contract of partnership are complied with. others. (Aurbach v. Sanitary Wares Manufacturing Corp., 1989)

JOINT VENTURE; 2015

X and Y are partners in a shop offering portrait painting. Y provided the capital and
the marketing while X was the portrait artist. They accepted the P50, 000.00
payment of Kyla to do her portrait but X passed away without being able to do it.
Can Kyla demand that Y deliver the portrait she had paid for because she was
dealing with the business establishment and not with the artist personally? Why or
why not?

B. In this jurisdiction, is a joint venture (i.e., a group of corporations contributing


resources for a specific project and sharing the profits therefrom) considered a
partnership?

SUGGESTED ANSWER:
A. No, Kyla cannot validly demand that Y deliver the portrait. Although she may be
correct that it is the partnership that she contracted with, Kyla cannot demand that Y
deliver the portrait if the intention of the parties was that the portrait should be done
by X and this is precisely why the obligation was constituted. With the death of X,
the obligation was extinguished because it is a purely personal obligation which is
extinguished upon the death of the obligor. Finally, the obligation is an obligation to
do. To oblige the surviving partner, Y, to deliver the painting (do the painting) would
be tantamount to an involuntary servitude, which is against the law.

ALTERNATIVE ANSWER:
A. Yes. Art. 1768 states that a partnership has a juridical personality separate and
distinct from that of each of the partners. The facts do not allege that Kyla contracted
for a purely personal service, hence the partnership is the entity which she contracted
with, so even upon the death of X, she can demand that Y as the remaining partner
deliver the portrait in fulfillment of the obligation of the partnership to her.

SUGGESTED ANSWER:
B. Yes. The Supreme Court has ruled that a joint venture may be considered a
species of partnership (Aurbach v Sanitary Wares Manufacturing Corp., 1989;
Philex Minig v CIR, 2008). It has also ruled that “a joint venture is hardly
distinguishable from, and may be likened to a partnership since their elements are
similar, i.e., community of interests in the business and sharing profits and losses.
Being a form of partnership, a joint venture is generally governed by the law on
partnership.” (Litonjua v Litonjua, 2005)

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