Partnerships, Agency & Trusts

Republic Act No. 386 (New Civil Code)

Agency – Title X (Articles 1868 to 1932)
Trusts – Title V (Articles 1440 to 1457)
Partnership – Title IX (Articles 1767 to 1867)

Agency & Trusts, Partnerships & Joint Ventures (Villanueva Tansay 2018)
Book IV Titles V, IX, and X of Civil Code of the Phils. [Volume V],(Paras 2008 or later)

TRUSTS
Cases –

Trusts are vested with equitable considerations

Government v. Abadilla, 46 Phil. 642 (1924)

As the law of trusts has been much more frequently applied in England and in the United Stated than it has in
Spain, we may draw freely upon American precedents in determining the effect of the testamentary trust here
under consideration, especially so as the trusts known to American and English equity jurisprudence are derived
from the fidei commissa of the Roman law and are based entirely upon Civil Law principles.

In order that a trust may become effective there must, of course, be a trustee and a cestui que trust, and counsel
for the appellants Palad argues that we here have neither; that there is no ayuntamiento, no Gobernador Civil of
the province, and no secondary school in the town of Tayabas.

In regard to private trust it is not always necessary that the cestui que trust should be named, or even be in esse at
the time the trust is created in his favor. (Flint on Trusts and Trustees, section 25; citing Frazier vs. Frazier, 2 Hill
Ch., 305; Ashurt vs. Given, 5 Watts & S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to a father in
trust for accumulation for his children lawfully begotten at the time of his death has been held to be good although
the father had no children at the time of the vesting of the funds in him as trustees. In charitable trust such as the
one here under discussion, the rule is still further relaxed.

Deluao v. Casteel, 22 SCRA 231 (1962)

IV. The appellees submit as their fourth proposition that there being no prohibition against joint applicants for a
fishpond permit, the fact that Casteel and Deluao agreed to acquire the fishpond in question in the name of Casteel
alone resulted in a trust by operation of law (citing art. 1452, Civil Code) in favor of the appellees as regards their
one-half interest.

A trust is the right, enforceable in equity, to the beneficial enjoyment of property the legal title to which is in another
(Ulmer v. Fulton, 97 ALR 1170, 120 Ohio St. 323, 195 NE 557). However, since we held as illegal the second part
of the contract of partnership between the parties to divide the fishpond between them after the award, a fortiori, no
rights or obligations could have arisen therefrom. Inescapably, no trust could have resulted because trust is
founded on equity and can never result from an act violative of the law. Art. 1452 of the Civil Code does not
support the appellees' stand because it contemplates an agreement between two or more persons to purchase
property — capable of private ownership — the legal title of which is to be taken in the name of one of them for the
benefit of all. In the case at bar, the parties did not agree to purchase the fishpond, and even if they did, such is
prohibited by law, a fishpond of the public domain not being susceptible of private ownership.

Miguel v. CA, 29 SCRA 760 (1969)

The respondent Court opined that the cases cited by the petitioners in their motion for reconsideration (i.e.,
Republic of the Philippines v. Carle Heirs, L-12485, July 21, 1959, and Roco, et al. v. Gimeda L-11651, Dec. 27,
1958) are not applicable because they involved properties which admittedly belonged to the parties entitled to
reconveyance, unlike the herein petitioners who are mere public land applicants and have not acquired title under
the Public Land Act. Assuming the respondent Court to be correct, a legion of cases there are which can be cited
in favor of the petitioners' position. Since the law of trust has been more frequently applied in England and in the
United States than it has been in Spain, we may draw freely upon American precedents in determining the effects
of trusts, especially so because the trusts known to American and English equity jurisprudence are derived from
the fidei commissa of the Roman Law and are based entirely upon civil law principles.7 Furthermore, because
the case presents problems not directly covered by statutory provisions or by Spanish or local
precedents, resort for their solution must be had to the underlying principles of the law on the subject.
Besides, our Civil Code itself directs the adoption of the principles of the general law of trusts, insofar as
they are not in conflict with said Code, the Code of Commerce, the Rules of Court and special laws.8

In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic of the Philippines
v. Carle Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the respondent Court advances the
theory that an action for reconveyance based on constructive trust will prosper only if the properties involved
belong to the parties suing for and entitled to reconveyance. This is not entirely accurate. In Fox v. Simons9 the
plaintiff employed the defendant to assist him in obtaining oil leases in a certain locality in Illinois, the former paying
the latter a salary and his expenses. The defendant acquired some leases for the plaintiff and others for himself.
Whereupon, the plaintiff brought suit to compel the defendant to assign the leases which he had acquired for
himself. The court found for the plaintiff, holding that it was a breach of the defendant's fiduciary duty to purchase
for himself the kind of property which he was employed to purchase for the plaintiff. 10

It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil leases. He merely
employed the defendant to obtain them for him, but the latter obtained some for the plaintiff and some for himself.
Yet, despite the absence of this former-ownership circumstance, the court there did not hesitate to order the
defendant to assign or convey the leases he obtained for himself to the plaintiff because of the breach of fiduciary
duty committed by said defendant. Indeed, there need only be a fiduciary relation and a breach of fiduciary duty
before reconveyance may be adjudged. In fact, a fiduciary may even be chargeable as a constructive trustee of
property which he purchases for himself, even though he has not undertaken to purchase it for the beneficiary if in
purchasing it he was improperly competing with the beneficiary.

Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and the other
reposes confidence in him, although there is no written contract or no contract at all. If the agent violates his duty
as fiduciary, a constructive trust arises. It is immaterial that there was no antecedent fiduciary relation and that it
arose contemporaneously with the particular transaction.

In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file a homestead
application over the land and offered his services in assisting the latter to secure a homestead patent. Eloy Miguel
accepted Leonor Reyes' offer of services, thereby relying, on his word and reposing confidence in him. And in
payment for the services rendered by Leonor Reyes in preparing and filing the homestead application and those
still to be rendered by him in securing the homestead patent, Eloy Miguel delivered to Reyes 1/5 of his yearly
harvest from the said land. When Leonor Reyes died, the petitioners continued to deliver the same percentage of
their annual harvest to the private respondent who undertook to continue assisting the former to secure a
homestead patent over said land. However, in breach of their fiduciary duty and through fraud, Leonor Reyes and
the private respondent filed a sales application and obtained a sales patent and ultimately an original certificate of
title over the same parcel of land. Therefore, following the ruling in Fox v. Simons, supra, the private respondent
can be compelled to reconvey or assign to the petitioners the parcel of land in the proportion of nine hectares in
favor of Eloy Miguel and 14 hectares in favor of Demetrio Miguel, respectively.

The private respondent argues that there is no violation of trust relationship because the petitioners could have
participated in the public bidding. She avers that the alleged fraud supposedly committed upon the petitioners, and
on which the claim for reconveyance is founded, is clearly of no moment because the sales patent in question was
not the necessary consequence thereof, but rather, it was granted in consideration of her being the highest bidder
and the purchaser of the land. In refutation of the foregoing argument, it must be observed, firstly, that the
petitioners — because of the fraud practised on them by the Reyes spouses — never came to know about the
public bidding in which the land was offered for sale and therefore could not have participated therein. Had not the
Reyes spouses misrepresented in their sales application that the land was uncultivated and unoccupied, the
Director of Lands would in all probability have found out about the occupancy and cultivation of the said land by the
petitioners and about Eloy Miguel's homestead application over the same, and consequently would have denied
the sales application of the Reyes spouses. Secondly, it may justifiably be postulated that equity will convert one
who, for any reason recognized by courts of equity as a ground for interference, has received legal title from the
Government to lands, which in equity and by the laws of Congress ought to have gone to another, into a trustee for
such other and compel him to convey the legal title accordingly.13 Thirdly, Eloy Miguel could have very easily
obtained title to the said parcel of land in either of two ways, had he not been inveigled by Leonor Reyes to file a
homestead application. Thus, since he is a natural-born Filipino citizen, who is not an owner of more than twenty-
four hectares of land, and who since prior to July 4, 1926 (under R.A. 782, approved June 21, 1952, occupation
and cultivation since July 4, 1945, or prior thereto, is deemed sufficient) has continuously occupied and cultivated a
parcel of land not more than twenty-four hectares in area, he was entitled to apply for a free patent for, or
gratuitous grant, of said land. This is known as confirmation of imperfect or incomplete titles by administrative
legalization.14 Or, since Eloy Miguel has possessed the land prior to July 26, 1894 and said possession has been
continuous, uninterrupted, open, adverse and in the concept of an owner, there is a presumption juris et de jure
that all necessary conditions for a grant by the State have been complied with, and he would have been by force of
law entitled — pursuant to the provisions of sec. 48(b) of the Public Land Act — to the registration of his title to the
land.

Salao v. Salao, 70 SCRA 65 (1976)

The other nine assignments of error of the plaintiffs may be reduced to the decisive issue of whether the Calunuran
fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with
the question of whether plaintiffs' action for reconveyance had already prescribed.

The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S. Salao, Jr. allegedly violated.
The existence of a trust was not definitely alleged in plaintiffs' complaint. They mentioned trust for the first time on
page 2 of their appelants' brief.

To determine if the plaintiffs have a cause of action for the enforcement of a trust, it is necessary to make some
exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-American jurisprudence were derived from the
fideicommissa of the Roman law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646).

"In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial enjoyment
of property, the legal title to which is vested in another, but the word 'trust' is frequently employed to indicate duties,
relations, and responsibilities which are not strictly technical trusts" (89 C.J.S. 712).

A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for
the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created
is referred to as the beneficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and the
cestui que trust as regards certain property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil.
505).

"Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties.
Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express trusts concerning an
immovable or any interest therein may be proven by parol evidence. An implied trust may be proven by oral
evidence" (Ibid, Arts. 1443 and 1457).

"No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly
intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30,
1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust" (89 C.J.S. 72).

"Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as
matters of intent, or which are superinduced on the transaction by operation of law as matter of equity,
independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722).

"A resulting trust. is broadly defined as a trust which is raised or created by the act or construction of law, but in
its more restricted sense it is a trust raised by implication of law and presumed to have been contemplated by the
parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or
instrument of conveyance (89 C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of the
Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs.
Graño 42 Phil. 35).

On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by operation of law".
In a more restricted sense and as contra-distinguished from a resulting trust, a constructive trust is "a trust not
created by any words, either expressly or impliedly evincing a direct intension to create a trust, but by the
construction of equity in order to satisfy the demands of justice." It does not arise "by agreement or intention, but by
operation of law." (89 C.J.S. 726-727).

Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a
so-called constructive trust in favor of the defrauded party". Such a constructive trust is not a trust in the technical
sense. (Gayondato vs. Treasurer of the P. I., 49 Phil. 244).

Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there was an express trust
over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidence was offered by them to prove the
alleged trust. Their claim that in the oral partition in 1919 of the two fishponds the Calunuran fishpond was
assigned to Valentin Salao is legally untenable.

It is legally indefensible because the terms of article 1443 of the Civil Code (already in force when the action herein
was instituted) are peremptory and unmistakable: parol evidence cannot be used to prove an express trust
concerning realty.

Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or constructive, regarding the two
fishponds?

Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The trial court's firm conclusion
that there was no community of property during the lifetime of Valentina; Ignacio or before 1914 is substantiated by
defendants' documentary evidence. The existence of the alleged co-ownership over the lands supposedly inherited
from Manuel Salao in 1885 is the basis of plaintiffs' contention that the Calunuran fishpond was held in trust for
Valentin Salao.

But that co-ownership was not proven by any competent evidence. It is quite improbable because the alleged
estate of Manuel Salao was likewise not satisfactorily proven.

The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by clear, satisfactory and
convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).

Trust and trustee; establishment of trust by parol evidence; certainty of proof. — Where a trust is to be established
by oral proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged beneficiary with
as much certainty as if a document proving the trust were shown. A trust cannot be established, contrary to the
recitals of a Torrens title, upon vague and inconclusive proof. (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).

Trusts; evidence needed to establish trust on parol testimony. — In order to establish a trust in real property by
parol evidence, the proof should be as fully convincing as if the act giving rise to the trust obligation were proven by
an authentic document. Such a trust cannot be established upon testimony consisting in large part of insecure
surmises based on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).

The foregoing rulings are good under article 1457 of the Civil Code which, as already noted, allows an implied trust
to be proven by oral evidence. Trustworthy oral evidence is required to prove an implied trust because, oral
evidence can be easily fabricated.

On the other hand, a Torrens title is generally a conclusive of the ownership of the land referred to therein (Sec.
47, Act 496). A strong presumption exists. that Torrens titles were regularly issued and that they are valid. In order
to maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be clear and
convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18).

The real purpose of the Torrens system is, to quiet title to land. "Once a title is registered, the owner may rest
secure, without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid the
possibility of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).

There was no resulting trust in this case because there never was any intention on the part of Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao to create any trust. There was no constructive trust because the registration of
the two fishponds in the names of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case
where to satisfy the demands of justice it is necessary to consider the Calunuran fishpond " being held in trust by
the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.

And even assuming that there was an implied trust, plaintiffs' action is clearly barred by prescription or laches
(Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Quiniano vs. Court of Appeals, L-23024, May 31,
1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and
Reyes, 114 Phil. 377).
Under Act No. 190, whose statute of limitation would apply if there were an implied trust in this case, the longest
period of extinctive prescription was only ten year (Sec. 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).

The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its reconveyance was made
by the plaintiffs in 1951. Their action was filed in 1952 or after the lapse of more than forty years from the date of
registration. The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if they had any
rights at all. Vigilanti prospiciunt jura or the law protects him who is watchful of his rights (92 C.J.S. 1011, citing
Esguerra vs. Tecson, 21 Phil. 518, 521).

"Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is human
nature for a person to assert his rights most strongly when they are threatened or invaded". "Laches or
unreasonable delay on the part of a plaintiff in seeking to enforce a right is not only persuasive of a want of merit
but may, according to the circumstances, be destructive of the right itself." (Buenaventura vs. David, 37 Phil. 435,
440-441).

Ramos v. CA, 232 SCRA 348 (1994)

The inevitable conclusion then is that Lydia Celestino, knowing of her disqualification to acquire a lot from the
PHHC at the subdivision reserved for qualified Central Bank employees, tried to get one through the backdoor.
Otherwise stated, she wanted to get indirectly that which she could not do so directly. Having acted with evident
bad faith, she did not come to court with clean hands when she asked for the reconveyance of the property on the
basis of a resulting trust under Article 1448 of the Civil Code.

A resulting trust is an "intent-enforcing" trust, based on a finding by the court that in view of the relationship of
the parties their acts express an intent to have a trust, even though they did not use language to that effect . The
trust is said to result in law from the acts of the parties. However, if the purpose of the payor of the consideration in
having title placed in the name of another was to evade some rule of the common or statute law, the courts will not
assist the payor in achieving his improper purpose by enforcing a resulting trust for him in accordance with the
"clean hands" doctrine. The court generally refuses to give aid to claims from rights arising out of an illegal
transaction, such as where the payor could not lawfully take title to land in his own name and he used the grantee
as a mere dummy to hold for him and enable him to evade the land laws, 28 e.g., an alien who is ineligible to hold
title to land, who pays for it and has the title put in the name of a citizen.

Otherwise stated, as an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is invalid if the
enforcement of the trust or provision would be against public policy, even though its performance does not involve
the commission of a criminal or tortious act by the trustee." 29 The parties must necessarily be subject to the same
limitations on allowable stipulations in ordinary contracts, i.e., their stipulations must not be contrary to law, morals,
good customs, public order, or public policy. 30 What the parties then cannot expressly provide in their contracts
for being contrary to law and public policy, they cannot impliedly or implicitly do so in the guise of a resulting trust.

No trust is implied by law if property is given as gift to a minor; Rebuttable presumption.

Bernardo delos Santos vs. Faustino Reyes, et al.
L-45027, Jan. 27, 1992

CIVIL LAW; TRUST; NO TRUST IS IMPLIED BY LAW WHERE TITLE IS CONVEYED TO A CHILD, LEGITIMATE
OR ILLEGITIMATE OF ONE PAYING THE PRICE. — There is no express trust over an immovable, when it was
made to appear that the land in question was sold to and registered in the name of Faustino Reyes’ daughter,
Virginia — wife of petitioner — to conform with the limitation imposed by the vendor that no vendee could purchase
from the former more than two lots. The applicable provision of the Civil Code, as correctly pointed out by
respondent Court, is Article 1448 which provides as follows: "There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there us a gift in favor of the child."

The third assigned error raises a question of law. Unfortunately, however, petitioner miserably failed to
demonstrate that respondent court committed any error which warrants reversal. In the first place, estoppel was
not raised by him in the Brief he submitted to the respondent Court. He cannot raise it for the first time in this
petition. In the second place, petitioner assumes that an express trust over an immovable was created when it was
made to appear that the land in question was sold to and registered in the name of Faustino Reyes’ daughter,
Virginia — wife of petitioner — to conform with the limitation imposed by the vendor that no vendee could purchase
from the former more than two lots. Consequently, pursuant to Article 1444 of the Civil Code, such a trust cannot
be proved by parol evidence. If his assumption is correct, Article 1444 is applicable and both the trial court and the
respondent Court then erred in admitting the oral testimony of Faustino Reyes concerning the facts surrounding
the "sale" of the lot in favor of Virginia. Unfortunately, the assumption is wrong. There is neither an express nor
implied trust in this case. The applicable provision of the Civil Code, as correctly pointed out by respondent Court,
is Article 1448 which provides as follows:

"There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is
the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably presumed that there us a gift in favor of
the child." (Emphasis supplied for emphasis).

Action for partition in implied trust prescribes after 10 years.

Juanito Gonzales, et al., vs. IAC et al.,
G.R. NO. 66479, Nov. 21, 1991

The crucial issue to be resolved in the instant case is whether Lot 6870-B was held in trust by Fausto Soy for his
sisters Emilia, Cornelia and Anastacia.

According to the Appellate Court:

From the time the subject property (Lot 6870) was brought under the operation of the Land Registration Act in the
name alone of Fausto Soy, who had recognized the proprietary rights of plaintiffs-appellants as co-owners, the
land was impressed with a trust relationship in favor of Fausto's sisters or their children. When Fausto sold a
portion of 140 square meters to intervenors, the relationship of trust included said intervenors. Upon the death of
Fausto Soy, the trust relationship subsisted between Fausto's heirs and his living sisters or the latters' children, as
well as the Intervenors-appellees. . . .

In other words, the sales in favor of intervenors-appellees did not terminate the trust relationship between plaintiffs-
appellants and intervenors-appellees.

We hold that after Fausto Soy, the predecessor-in-interest of herein petitioners, had appeared to be the registered
owner of the lot for more than thirty years, his title had become indefeasible and his dominical rights over it could
no longer be challenged. Any insinuation as to the existence of an implied constructive trust should not be allowed.

Private respondent have invoked Article 1456 of the Civil Code which states that "if property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes."

The trust alluded to in this case is a constructive trust arising by operation of law. It is not a trust in the technical
sense.

Even assuming that there was an implied trust, private respondents' attempt at reconveyance (functionally, an
action for partition is both an action for declaration of co-ownership, and for segregation and conveyance of a
determinate portion of the subject property. See Roque vs. IAC, G.R. No. 75886, August 30, 1988, 165 SCRA 118)
was clearly barred by prescription.

Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and stale claims from
springing up at great distances of time and surprising the parties or their representatives when the facts have
become obscure from the lapse of time or the defective memory or death or removal of witnesses. 14

It is well-settled that an action for reconveyance of real property to enforce an implied trust prescribes in ten years,
the period reckoned from the issuance of the adverse title to the property which operates as a constructive notice.
15

In the case at bar, that assertion of adverse title, which was an explicit indication of repudiation of the trust for the
purpose of the statute of limitations, took place when OCT No. 49661 was issued in the name of Fausto Soy in
1932, to the exclusion of his three sisters. 16

But even if there were no repudiation — as private respondent Rosita Lopez would have us believe when she
testified in court that while Fausto Soy might have succeeded in securing title his sole name, he nonetheless
recognized the co-ownership between him and his sisters — the rule in this jurisdiction is that an action to enforce
an implied trust may be circumscribed not only by prescription but also by laches, in which case repudiation is not
even required.

From 1932 to 1965, or a period of thirty-three years, private respondents had literally slept on their rights,
presuming they had any. They can no longer dispute the conclusive and incontrovertible character of Fausto Soy's
title as they are deemed, by their unreasonably long inaction, to have acquiesced therein. Moreover, the law
protects those who are vigilant of their rights. Undue delay in the enforcement of a right is strongly indicative of a
lack of merit in the claim, since it is human nature for persons to assert their rights most vigorously when
threatened or invaded. 17

Implied trust; Imprescriptibility of action.

Ancog, et al., vs. CA, et al.,
G.R. No. 112260, June 30, 1997

We hold, however, that the Court of Appeals erred in ruling that the claim of petitioner Gregorio Yap, Jr. was barred
by laches. In accordance with Rule 74, §1 9 of the Rules of Court, as he did not take part in the partition, he is not
bound by the settlement. 10 It is uncontroverted that, at the time the extrajudicial settlement was executed,
Gregorio Yap, Jr. was a minor. For this reason, he was not included or even informed of the partition.

Instead, the registration of the land in Rosario Diez's name created an implied trust in his favor by analogy to Art.
1451 of the Civil Code, which provides:

When land passes by succession to any person and he causes the legal title to be put in the name of another, a
trust is established by implication of law for the benefit of the true owner.

In the case of O'Laco v. Co Cho Chit, 11 Art. 1451 was held as creating a resulting trust, which is founded on the
presumed intention of the parties. As a general rule, it arises where such may be reasonably presumed to be the
intention of the parties, as determined from the facts and circumstances existing at the time of the transaction out
of which it is sought to be established. 12 In this case, the records disclose that the intention of the parties to the
extrajudicial settlement was to establish a trust in favor of petitioner Yap, Jr. to the extent of his share. Rosario
Diez testified that she did not claim the entire property, 13 while Atty. de la Serna added that the partition only
involved the shares of the three participants. 14

A cestui que trust may make a claim under a resulting trust within 10 years from the time the trust is repudiated.
Although the registration of the land in private respondent Diez's name operated as a constructive notice of her
claim of ownership, it cannot be taken as an act of repudiation adverse to petitioner Gregorio Yap, Jr.'s claim,
whose share in the property was precisely not included by the parties in the partition. Indeed, it has not been
shown whether he had been informed of her exclusive claim over the entire property before 1985 when he was
notified by petitioner Jovita Yap Ancog of their mother's plan to sell the property.

This Court has ruled that for prescription to run in favor of the trustee, the trust must be repudiated by unequivocal
acts made known to the cestui que trust and proved by clear and conclusive evidence . Furthermore, the rule that
the prescriptive period should be counted from the date of issuance of the Torrens certificate of title applies only to
the remedy of reconveyance under the Property Registration Decree. 17 Since the action brought by petitioner Yap
to claim his share was brought shortly after he was informed by Jovita Ancog of their mother's effort to sell the
property, Gregorio Yap, Jr.'s claim cannot be considered barred either by prescription or by laches.

Trust; Resulting trust

Morales vs. CA, G.R. NO. 117228, June 19, 1997

The grant of the motion for reconsideration necessarily limits the issues to the three grounds postulated in the
motion for reconsideration, which we restate as follows:

1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948 as a mere trustee for his
parents and siblings or, simply put, is the property the former acquired a trust property?

2. Was Rodolfo Morales a builder in good faith?

3. Was there basis for the award of damages, attorney's fees and litigation expenses to the private respondents?

We shall discuss these issues in seriatim.

I

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. 12 The characteristics of a trust are:

1. It is a relationship;

2. it is a relationship of fiduciary character;

3. it is a relationship with respect to property, not one involving merely personal duties;

4. 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

5. 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,14 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. 16

A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:

Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price
is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while
the latter is the beneficiary. However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there is a gift in favor of the child.

The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money
resulting trust. The trust is created in order to effectuate what the law presumes to have been the intention of
the parties in the circumstances that the person to whom the land was conveyed holds it as trustee for the person
who supplied the purchase money.

To give rise to a purchase money resulting trust, it is essential that there be:

1. an actual payment of money, property or services, or an equivalent, constituting valuable consideration;

2. and such consideration must be furnished by the alleged beneficiary of a resulting trust.

There are recognized exceptions to the establishment of an implied resulting trust. The first is stated in the last
part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed by absolute deed to A's
child or to a person to whom A stands in loco parentis and who makes no express promise, a trust does not result,
the presumption being that a gift was intended. Another exception is, of course, that in which an actual contrary
intention is proved. Also where the purchase is made in violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of the fraud.

As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must
be clear and satisfactorily show the existence of the trust and its elements. 21 While implied trusts may be proved
by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should
not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral
evidence can easily be fabricated.
In the instant case, petitioners' theory is that Rosendo Avelino owned the money for the purchase of the property
and he requested Celso, his son, to buy the property allegedly in trust for the former. The fact remains, however,
that title to the property was conveyed to Celso. Accordingly, the situation is governed by or falls within the
exception under the third sentence of Article 1448, which for convenience we quote:

. . . However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the
price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.
(Emphasis supplied).

On this basis alone, the case for petitioners must fall. The preponderance of evidence, as found by the trial court
and affirmed by the Court of Appeals, established positive acts of Celso Avelino indicating, without doubt, that he
considered the property he purchased from the Mendiolas as his exclusive property. He had its tax declaration
transferred in his name, caused the property surveyed for him by the Bureau of Lands, and faithfully paid the realty
taxes. Finally, he sold the property to private respondents.

Implied trust; 10-year period to question title.

Purita Salvatierra v. CA, G.R. No. 107797, Aug. 26, 1996

3. ID.; TRUST; IMPLIED TRUST; ESTABLISHED WHEN A PERSON ACQUIRES A PROPERTY THROUGH
MISTAKE OR FRAUD. — This case at hand involves fraud committed by petitioner Anselmo Salvatierra in
registering the whole of Lot No. 26 in his name, with evident bad faith. In effect, an implied trust was created by
virtue of Art. 1456 of the New Civil Code which states: "Art. 1456. If property is acquired through mistake or fraud,
the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes."

4. ID.; ID.; ID.; DISCOVERY OF FRAUD IS DEEMED TO HAVE TAKEN PLACE AT THE TIME OF
REGISTRATION IN THE OFFICE OF THE REGISTER OF DEEDS. — In Duque v. Domingo, (80 SCRA 654)
especially, we went further by stating: "The registration of an instrument in the Office of the Register of Deeds
constitutes constructive notice to the whole world, and, therefore, discovery of the fraud is deemed to have taken
place at the time of registration. Such registration is deemed to be a constructive notice that the alleged fiduciary or
trust relationship has been repudiated. It is now settled that an action on an implied or constructive trust prescribes
in ten (10) years from the date the right of action accrued."

5. ID.; ID.; ID.; RESULTING AND CONSTRUCTIVE TRUST, DISTINGUISHED. — Implied trust is defined as
the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which is vested in
another and is further subdivided into resulting and constructive trust. While resulting trust is one raised by
implication of law and presumed to have been contemplated by the parties; constructive trust, on the other
hand, is one raised by construction of law or arising by operation of law. This case more specifically involves
constructive trust. In a more restricted sense, it is a trust not created by any words, either expressly or impliedly,
evincing a direct intention to create a trust, but by the construction of equity in order to satisfy the demands of
justice. It does not arise by agreement or intention but by operation of law.

6. ID.; ID.; ID.; ACTION FOR RECONVEYANCE OF REGISTERED LAND BASED THEREOF PRESCRIBES IN
TEN YEARS FROM THE DATE THE RIGHT OF ACTION ACCRUED. — In this connection, we hold that an action
for reconveyance of registered land based on an implied trust may be barred by laches. The prescriptive period of
such actions is ten (10) years from the date the right of action accrued. We have held in the case of Armamento v.
Central Bank (96 SCRA 178) that an action for reconveyance of registered land based on implied trust, prescribes
in ten (10) years even if the decree of registration is no longer open to review.

‘In contract under the present Civil Code, we find that just as an implied or constructive trust in an offspring of the
law (Art. 1465, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor
of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.

‘Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:chanrob1es virtual 1aw library

1) Upon a written contract;

2) Upon an obligation created by law;

3) Upon a judgment;
x x x

‘An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years
and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule.
Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over the property.

"An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which
provides:

‘In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against
the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of
registration on the original petition or application, . . .’

"This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:

‘Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom the property comes.’

"The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the
true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code
with Article 1144 (2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered
real property is ten (10) years reckoned from the date of the issuance of the certificate of title. In the present case,
therefore, inasmuch as Civil Case No. 10235 was filed on June 4, 1975, it was well-within the prescriptive period of
ten (10) years from the date of the issuance of "Original Certificate of Title No. 0-6836 on September 17, 1970."

A person who acquires a property thru fraud, holds it in trust.

Veran vs. CA, L-41154, Jan. 29, 1988

Contrary to petitioners' contention, the expiration of the one-year period from the issuance of an Original Certificate
of Title covering the disputed lot in favor of the heirs of Aleja Glodoveza will not bar private respondent's action for
reconveyance. Private respondent's counterclaim for reconveyance was made in her amended answer filed on
March 4, 1961, some seven and a half years after the issuance of the title in the name of the heirs of Aleja
Glodoveza on December 3, 1953, but well within the ten-year prescriptive period for bringing an action for
reconveyance based on an implied or constructive trust resulting from fraud in securing title (Diaz v. Gorricho, 103
Phil. 261 [1958]; J.M. Tuazon & Co., Inc. v. Magdangal, G.R. No. L-15539, January 30, l962, 4 SCRA 84; Alzona v.
Capunitan, G.R. No. L-10228, February 28, 1962, 4 SCRA 450). Thus, in Gonzales v. Jimenez, G.R. No. L-19073,
January 30, l965, 13 SCRA 80, the Court said:

Since it appears that the land in question was obtained by defendants thru fraudulent representations by means of
which a patent and a title were issued in their name, they are deemed to hold it in trust for the benefit of the person
prejudiced by it. Here this person is the plaintiff. There being an implied trust in this transaction, the action to
recover the property prescribes after the lapse of ten years. Here this period has not yet elapsed.

Further, no error was committed by the Court of Appeals in appreciating the significance of the subdivision survey
plan of the disputed lot (Exhibit 4). The fact that it was prepared a year after the title was issued in the name of the
heirs of Aleja Glodoveza does not per se render misplaced respondent court's reliance upon it. The division in the
subdivision survey plan of the disputed lot into three portions assigned to Leocadia, Aleja and Ladislawa
respectively, merely served to corroborate testimony as to the lot's apportionment among the three sisters.

AGENCY

What a person may do personally, he may do through another

Philpotts v. Philippine Manufacturing Co., 40 Phil. 471 (1919)

The real controversy which has brought these litigants into court is upon the question argued in
connection with the second ground of demurrer, namely, whether the right which the law
concedes to a stockholder to inspect the records can be exercised by a proper agent or
attorney of the stockholder as well as by the stockholder in person. There is no pretense that
the respondent corporation or any of its officials has refused to allow the petitioner himself to
examine anything relating to the affairs of the company, and the petition prays for a peremptory
order commanding the respondents to place the records of all business transactions of the
company, during a specified period, at the disposal of the plaintiff or his duly authorized agent
or attorney, it being evident that the Petitioner desires to exercise said right through an agent or
attorney. In the argument in support of the demurrer it is conceded by counsel for the
respondents that there is a right of examination in the stockholder granted under section 51 of
the Corporation Law, but it is insisted that this right must be exercised in person.

The pertinent provision of our law is found in the second paragraph of section 51 of Act No.
1459, which reads as follows: "The record of all business transactions of the corporation and
the minutes of any meeting shall be open to the inspection of and director, member, or
stockholder of the corporation at reasonable hours."cralaw virtua1aw library

This provision is to be read of course in connection with the related provisions oœ sections 51
and 52, defining the duty of the corporation in respect to the keeping of its records.

Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder
in the provision above quoted can be exercised either by himself or by any proper
representative or attorney in fact, and either with or without the attendance of the stockholder.
This is in conformity with the general rule that what a man may do in person
he may do through another; and we find nothing in the statute that would justify us in
qualifying the right in the manner suggested by the respondents. This conclusion is supported
by the undoubted weight of authority in the United States, where it is generally held that the
provisions of law conceding the right of inspection to stockholders of corporations are to be
liberally construed and that said right may be exercised through any other properly authorized
person. As was said in Foster v. White (86 Ala., 467), "The right may be regarded as personal,
in the sense that only a stockholder may enjoy it; but the inspection and examination may be
made by another. Otherwise it would be unavailing in many instances."

Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978)

Before proceedings to the issues, We shall briefly restate certain principles of law relevant to
the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the
name of another without being authorized by the latter, or unless he has by law a right to
represent him. 3 A contract entered into in the name of another by one who has no authority or
the legal representation or who has acted beyond his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party.4 Article 1403 (1) of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who hi - been given no authority or
legal representation or who has acted beyond his powers; ...

Out of the above given principles, sprung the creation and acceptance of the relationship
of agency whereby one party, caged the principal (mandante), authorizes another, called
the agent (mandatario), to act for and in his behalf in transactions with third persons.
The essential elements of agency are:

(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority. 5

Agency is basically personal representative, and derivative in nature. The

authority of the agent to act emanates from the powers granted to him by
his principal; his act is the act of the principal if done within the scope of
the authority. Qui facit per alium facit se. "He who acts through another acts
himself".

2. There are various ways of extinguishing agency, 7 but her We are concerned only with one
cause — death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from
Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.8

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the
law is found in the juridical basis of agency which is representation Them being an in.
integration of the personality of the principal integration that of the agent it is not possible for the
representation to continue to exist once the death of either is establish. Pothier agrees with
Manresa that by reason of the nature of agency, death is a necessary cause for its extinction.
Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon
the death of either without necessity for the heirs of the fact to notify the agent of the fact of
death of the former. 9

The same rule prevails at common law — the death of the principal effects instantaneous and
absolute revocation of the authority of the agent unless the Power be coupled with an interest.
10 This is the prevalent rule in American Jurisprudence where it is well-settled that a power
without an interest confer. red upon an agent is dissolved by the principal's death, and any
attempted execution of the power afterward is not binding on the heirs or representatives of the
deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that
exception? That is the determinative point in issue in this litigation. It is the contention of
respondent corporation which was sustained by respondent court that notwithstanding the
death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling
the former's sham in the property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-
mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal,
if it has been constituted in the common interest of the latter and of the agent, or in the interest
of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agency, is valid and shall be fully effective with respect
to third persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in favor
of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death
of his principal is valid and effective only under two conditions, viz: (1) that the agent acted
without knowledge of the death of the principal and (2) that the third person who contracted with
the agent himself acted in good faith. Good faith here means that the third person was not
aware of the death of the principal at the time he contracted with said agent. These two
requisites must concur the absence of one will render the act of the agent invalid and
unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of
his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before
the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a
finding of fact of the court a quo 13 and of respondent appellate court when the latter stated that
Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the sale of
the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing
appellant (the realty corporation) of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for
its application lack of knowledge on the part of the agent of the death of his principal; it is not
enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the
Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained
the validity , of a sale made after the death of the principal because it was not shown that the
agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy
Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof
and there is no indication in the record, that the agent Luy Kim Guan was aware of the death of
his principal at the time he sold the property. The death 6f the principal does not render the act
of an agent unenforceable, where the latter had no knowledge of such extinguishment of the
agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of Appeals
reasoned out that there is no provision in the Code which provides that whatever is done by an
agent having knowledge of the death of his principal is void even with respect to third persons
who may have contracted with him in good faith and without knowledge of the death of the
principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the general
rule enunciated in Article 1919 that the death of the principal extinguishes the agency. That
being the general rule it follows a fortiori that any act of an agent after the death of his principal
is void ab initio unless the same fags under the exception provided for in the aforementioned
Articles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly
construed, it is not to be given an interpretation or application beyond the clear import of its
terms for otherwise the courts will be involved in a process of legislation outside of their judicial
function.

5. Another argument advanced by respondent court is that the vendee acting in good faith
relied on the power of attorney which was duly registered on the original certificate of title
recorded in the Register of Deeds of the province of Cebu, that no notice of the death was aver
annotated on said certificate of title by the heirs of the principal and accordingly they must suffer
the consequences of such omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries which

We quote:

If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the principal
exercise due diligence to make the revocation of the agency publicity known.

In case of a general power which does not specify the persons to whom represents' on should
be made, it is the general opinion that all acts, executed with third persons who contracted in
good faith, Without knowledge of the revocation, are valid. In such case, the principal may
exercise his right against the agent, who, knowing of the revocation, continued to assume a
personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode of
terminating an agency which is to be distinguished from revocation by operation of law such as
death of the principal which obtains in this case. On page six of this Opinion We stressed that
by reason of the very nature of the relationship between principal and agent, agency is
extinguished ipso jure upon the death of either principal or agent. Although a revocation of a
power of attorney to be effective must be communicated to the parties concerned, 18 yet a
revocation by operation of law, such as by death of the principal is, as a rule, instantaneously
effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an
execution of the principal's continuing will. 19 With death, the principal's will ceases or is the of
authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the
principal What the Code provides in Article 1932 is that, if the agent die his heirs must notify the
principal thereof, and in the meantime adopt such measures as the circumstances may demand
in the interest of the latter. Hence, the fact that no notice of the death of the principal was
registered on the certificate of title of the property in the Office of the Register of Deeds, is not
fatal to the cause of the estate of the principal

6. Holding that the good faith of a third person in said with an agent affords the former sufficient
protection, respondent court drew a "parallel" between the instant case and that of an innocent
purchaser for value of a land, stating that if a person purchases a registered land from one who
acquired it in bad faith — even to the extent of foregoing or falsifying the deed of sale in his
favor — the registered owner has no recourse against such innocent purchaser for value but
only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case of
Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-
owner of lands with Agustin Nano. The latter had a power of attorney supposedly executed by
Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power was registered in
the Office of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that
Office, he found all in order including the power of attorney. But Vallejo denied having executed
the power The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the
decision of the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of the defendant- appellee must be
overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without those title
papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of the Philippine Bar and the husband
of Angela Blondeau, the principal plaintiff, searched the registration record, he found them in
due form including the power of attorney of Vallajo in favor of Nano. If this had not been so and
if thereafter the proper notation of the encumbrance could not have been made, Angela
Blondeau would not have sent P12,000.00 to the defendant Vallejo.' An executed transfer of
registered lands placed by the registered owner thereof in the hands of another operates as a
representation to a third party that the holder of the transfer is authorized to deal with the land.

As between two innocent persons, one of whom must suffer the consequence of a breach of
trust, the one who made it possible by his act of coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here We
are confronted with one who admittedly was an agent of his sister and who sold the property of
the latter after her death with full knowledge of such death. The situation is expressly covered
by a provision of law on agency the terms of which are clear and unmistakable leaving no room
for an interpretation contrary to its tenor, in the same manner that the ruling in Blondeau and
the cases cited therein found a basis in Section 55 of the Land Registration Law which in part
provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the register
of deeds to enter a new certificate or to make a memorandum of registration in accordance with
such instruments, and the new certificate or memorandum Shall be binding upon the registered
owner and upon all persons claiming under him in favor of every purchaser for value and in
good faith: Provided however, That in all cases of registration provided by fraud, the owner may
pursue all his legal and equitable remedies against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a certificate of title. ... (Act No. 496 as
amended)

7. One last point raised by respondent corporation in support of the appealed decision is an
1842 ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments
made to an agent after the death of the principal were held to be "good", "the parties being
ignorant of the death". Let us take note that the Opinion of Justice Rogers was premised on the
statement that the parties were ignorant of the death of the principal. We quote from that
decision the following:

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the
death is a good payment. in addition to the case in Campbell before cited, the same judge Lord
Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment after the death of
principal is not good. Thus, a payment of sailor's wages to a person having a power of attorney
to receive them, has been held void when the principal was dead at the time of the payment. If,
by this case, it is meant merely to decide the general proposition that by operation of law the
death of the principal is a revocation of the powers of the attorney, no objection can be taken to
it. But if it intended to say that his principle applies where there was 110 notice of death, or
opportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from the accident circumstance of the
death of the principal, which he did not know, and which by no possibility could he know? It
would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent,
done bona fide in ignorance of the death of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common
law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke,
mention may be made that the above represents the minority view in American jurisprudence.
Thus in Clayton v. Merrett, the Court said.—

There are several cases which seem to hold that although, as a general principle, death
revokes an agency and renders null every act of the agent thereafter performed, yet that where
a payment has been made in ignorance of the death, such payment will be good. The leading
case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in
an elaborate opinion, this view ii broadly announced. It is referred to, and seems to have been
followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it
appeared that the estate of the deceased principal had received the benefit of the money paid,
and therefore the representative of the estate might well have been held to be estopped from
suing for it again. . . . These cases, in so far, at least, as they announce the doctrine under
discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts &
S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in announcing the principle
in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the
opinion, except so far as it related to the particular facts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon the
point in question. But accordingly all power weight to this opinion, as the judgment of a of great
respectability, it stands alone among common law authorities and is opposed by an array too
formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American

jurisprudence, no such conflict exists in our own for the simple reason that our statute, the Civil
Code, expressly provides for two

exceptions to the general rule that death of the principal revokes ipso jure the agency, to
wit:

(1) that the agency is coupled with an interest (Art 1930), and
(2) that the act of the agent was executed without knowledge of the death of the principal
and the third person who contracted with the agent acted also in good faith (Art. 1931).

Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable
requirement that the agent acted without knowledge or notice of the death of the principal In the
case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death
of his principal Accordingly, the agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court,
and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of
First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent
realty corporation at all instances.

Orient Air Service & Hotel Representatives v. CA,

197 SCRA 645 (1991)
Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006)
Doles v. Angeles, 492 SCRA 607 (2006)
Eurotech Industrial Technologies, Inc. v. Cuizon,
521 SCRA 584 (2007)
Philex Mining Corp. v. Commissioner of Internal Revenue, 551 SCRA 428 (2008)

Liability of agent.
China Air Lines, Ltd. V. CA, et al., G.R. No. L-45985
PAL, et al., v. CA, et al., L-46036, May 18, 1990

If an agent acts in his own behalf only, the principal is not bound.
Rural Bank of Borbon (Camarines Sur), Inc. v. CA, et al., G.R. No. 95703, Aug. 3, 1992

A person must be authorized to bind another.

Uniland Resources vs. DBP
G.R. No. 95909, Aug. 16, 1991
De la Cruz vs. Northern Enterprises, 95 Phil. 739

The essence of agency is that the agent renders service to the prinicipal.
Sevilla vs. CA, L-41182-3, April 15, 1988
De la Peña v. Hidalgo, 16 Phil. 450

Act of agent is act of the principal.

Sy-Juco vs. Sy-Juco, 40 Phil. 634

Authority to sell does not carry with it authority to sell on credit.

Green Valley Poultry & Allied Products, Inc. vs. IAC,
L-49395, Dec. 26, 1981

Breach of loyalty in agency.

Domingo vs. Domingo, L-30573, October 29, 1971
Agency is for compensation.
Aguna v. Larena, 53 Phil. 630

Stipulation granting authority to sell in a mortgage is merely ancillary.

Bicol Savings and Loan Association v. CA,
G.R. No. 85302, March 31, 1989

Existence of General Power of Attorney; No need for special power of attorney

Francisco Veloso vs. CA, et al.,
G.R. No. 102737, Aug. 21, 1996

Revocation of agency, when principal is liable.

Dioloso vs. CA, 130 SCRA 350

Revocation of agency.
Rallos v. Yangco, 20 Phil. 269

Revocation of agency at will; Express or implied

CMS Logging, Inc. vs. CA, et al.,
L-41420, July 10, 1992

When principal may sue the person with whom agent dealt with.
Gold Star Mining Co., Inc. vs. Lim-Jimena,
25 SCRA 597

Responsibility of two agents.

Martinez vs. Ong Pong Co., 14 Phil. 726

Authority of agent to novate must be express.

Villa vs. Bosque, 49 Phil. 126

An agent’s responsibility extends to fraud and negligence

Travel Wide Associated Sales (Phils.), Inc., et al., vs. CA, et al., G.R. No. 77356, July 15,
1991

Death of principal does not render unenforceable an act of agent who was unaware of
such death.
Herera, etc. vs. Luy Kim Guan, et al.,
L-17043, January 31, 1961

When principal is solidarily liable with agent.

The Manila Remnant Co., Inc., vs. CA, et al.,
G.R. No. 82978, Nov. 22, 1990

An undisclosed principal can sue the third person with whom agent dealt with.
NFA vs. IAC, et al., G.R. No. 75640, April 5, 1990

Operation of the doctrine of promissory estoppel.

PNB vs. CA, et al., G.R. No. 66715, Sept. 18, 1990

Partnership
Cases –

When partnership exists

Leung vs. IAC, G.R. 709826, Jan. 31, 1989

Historical Background of Partnership

Prautch, etc. v. Hernandez, 1 Phil. 705, (1903)
Evangelista V. Commissioner of Internal Revenue, 102 Phil. 140 (1957)
Dietrrich v. Freedman, 18 Phil. 341 (1911)
Kwong-Wo-Sing v. Kieng-Chiong-Seng,
6 Phil. 498 (1906)
De los Reyes v. Lukban, 35 Phil. 757 (1916)
Compania Agricola de Ultramar v. Reyes,
4 Phil. 2 (1904)

Levels of Existence of a Partnership

Yu v. NLRC, 224 SCRA 75 (1993)
US v. Clarin, 17 Phil. 84 (1910)
Rojas v. Maglana, 192 SCRA 110 (1990)

A contractual relationship
Lyons v. Rosentock, 56 Phil. 632 (1932)

A contract to pursue a business enterprise

Lim v. Lim, 614 SCRA 141 (2010)
Villareal v. Ramirez, 406 SCRA 145 (2003)

Right to form a partnership is subject to legal requirements

Ang Pue and Co., et al., v. Secretary of Commerce and Industry, 5 SCRA 645

Doctrine of Separate Juridical Personality of Partnership

Vargas & Co. vs. Chan, 29 Phil. 446 (1915)
Campos Rueda & Co. v. Pacific Commercial Co.
44 Phil. 916 (1923)
Commissioner of Internal Revenue v. Suter
27 SCRA 152 (1969)
Aguila Jr., v. Court of Appeals, 319 SCRA 246 (1999)

Mere sharing of profits does not of itself establish a partnership

Jose Obillos et al., vs. Commissioner of Internal Revenue and CTA, 139 SCRA 436 (1985)
Pascual v. Commissioner of Internal Revenue
(166 SCRA 560)
Navarro v. CA, 222 SCRA 19930
Reyes v. CIR, 24 SCRA 198 (1968)
Evangelista v. CIR, 102 Phil. 140 (1957)
Pastor v. Gaspar 2 Phil. 592 (1903)
Fortis v. Gutierrez Hermanos, 6 Phil. 100 (1906)
Bastida v. Menzi & Co., 58 Phil. 188 (1933)
Tan Eng Kee v. CA, 341 SCRA 740 (2000)
Tocao v. CA, 342 SCRA 20 (2001)

De Facto partnership
Mac Donald v. National City Bank of New York,
99 Phil. 156 (1956)
Pioneer Insurance & Surety Corp. v. CA,
175 SCRA 668 (1989)
Lim Tong Lim v. Phil. Fishing Gear Industries, Inc.,
317 SCRA 728 (1999)

Doctrine of delectus personae

Ortega v. CA, 245 SCRA 529 (1995)
Tocao v. CA, 342 SCRA 20 (2000)
Essence of a partnership contract
Yulo v. Yang Chiao Seng, 106 Phil. 111 (1959)
Estanisla Jr. v. CA, 160 SCRA 830 (1988)
Evangelista v. CIR
Ona v. CIR, 45 SCRA 74 (1972)
Gatchalian v. CIR, 67 Phil. 666 (1939)
Gallemet v. Tabilaran, 20 Phil. 241 (1911)
Tan Eng Kee v. CA, 341 SCRA 740 (2000)

Badges that normally accompany a partnership relationship

Sy v. CA, 398 SCRA 301 (2003)
Heirs of Tan Eng Kee v. CA, 341 SCRA 740 (2000)
Heirs of Jose Lim v. Lim 614 SCRA 141 (2010)

Unlawful Partnerhsip
Arbes v. Polistico, 53 Phil. 489 (1929)
Deluao v. Casteel, 26 SCRA 474 (1968)

Registration of the contract of partnership

Angeles v. Secretary of Justice, 465 SCRA 106 (2005)
Rojas v. Maglana, 192 SCRA 110 (1990)

When immovable property contributed

Borja v. Addison, 44 Phil. 895 (1922)
Agad v. Mabato, 23 SCRA 1223 (1968)
Torres v. CA, 320 SCRA 428 (1999)
Litonjua Jr. v. Litonjua Sr., 477 SCRA 576 (2005)
Secuya v. Vda. De Selma, 326 SCRA 244 (2000)

Partnership name
Jo Chung Cang v. Pacific Commercial Co.,
45 Phil. 142 (1923)
Compania Agricola de Ultramar v. Reyes
Litton v. Hill & Ceron, 67 Phil. 509 (1939)
Goquiolay v. Sycip, 108 Phil. 947 (1960)

Spouses as partners between themselves or with third persons

Commission of Internal Revenue (CIR) v. Suter,
27 SCRA 152 (1969)
Guiang v. CA, 291 SCRA 372 (1998)
Cirelos v. Hernandez, 490 SCRA 625 (2006)
Bautista v. Silva, 502 SCRA 334 (2006)

Every partner has a right to manage

Muñasque v. CA, 139 SCRA 533 (1985)
Council of Red Men v. Veterans Army,
7 Phil. 685 (1907)
Litton v. Hill & Ceron, 67 Phil. 509 (1935)
Smith, Bell & Co. v. Aznar, 40 O.G. 1881 (1941)
Goquiolay v. Sycip, 108 Phil. 947 (1960)
Partners’ right to partnership property
Catlan v. Gatchalian, 105 SCRA 1270 (1959)
Clemente v. Galvan, 67 Phil. 565
Lozana v. Depakakibo, 107 Phil. 728 (196))

Right to participate in profits and losses

Moran Jr. v. CA, 133 SCRA 88 (1984)
Sison v. McQuaid, 94 Phil. 201 (1953)

Fiduciary duties of partners

Pang Lim and Galvez v. Lo Seng, 42 Phil. 282 (1921)
Hanlon v. Hausserman, 40 Phil. 796 (1920)
Evangelista & Co. v. Abad Santos,
51 SCRA 416 (1973)

Liability of withdrawing partner from a partnership

Rojas v. Maglana, L-30616, Dec. 10, 1990

If a partnership does not pay his share, the partnership can proceed against him.
Pabalan v. Velez, 22 Phil. 29

Personal liability of partners for obligations of partnership

De los Reyes v. Lukban and Borja,
35 Phil. 769, Dec. 16, 1916
Munasque v. CA, 159 SCRA 533

Dissolution and Winding-up a partnership

Idos v. CA, 296 SCRA 194, 206 (1998)
Tocao v. CA, 342 SCRA 20 (2000)
Fernandez v. De la Rosa, 1 Phil. 671 (1902)
Rojas v. Maglana, 192 SCRA 110 (1990)
Singzon v. Isabela Sawmill, 88 SCRA 623 (1979)
Soncuya v. De Luna, 67 Phil. 646 (1939)
Villareal v. Ramirez, 406 SCRA 145 (2003)
Magdusa v. Albaran, 5 SCRA 511 (1962)
Martinez v. Ong Pong Co., 14 Phil. 726 (1910)
Uy v. Puzon, 79 SCRA 598 (1977)

Limited partnership
Jo Chung Cang v. Pacific Commercial Co.,
45 Phil. 142 (1923)
Goquiolay v. Sycip, 9 SCRA 663 (1963)