2.
Agent he who acts or stands for another
AGENCY
CHAPTER 1
Nature, Form and Kinds of Agency
Article 1868. By the contract of agency a
person binds himself to render some
service or to do something in
representation or on behalf of another,
with the consent or authority of the
latter. (Defective definition)
Agency a contract, either express or implied, upon a
consideration or a gratuitous undertaking, by which
one of the parties confides to the other, the
management of some business to be transacted in his
name or his account, and by which that other
assumes to do business and renders an account of it
Purpose of Agency: It enables a man to increase the
range of his individual and corporate activity by
enabling him to be constructively present in many
places and carry on diverse activities at the same
time. It extends the personality of the principal
through the facility of the agent.
GENERAL RULE: Notice to the agent is, to all
legal intents and purposes, notice to the principal.
(Air France v. CA, 126 SCRA 448), even though
the agent never communicated such notice to the
principal. (Theory of Imputed Knowledge)
EXCEPTIONS:
o Where the agents interests are adverse
to those of the principal;
o Where the agents duty is not to disclose
the information, as where he is informed
by way of confidential information; and
o Where the person claiming the benefit of
the rule colludes with the agent to
defraud the principal.
Characteristics of a Contract of Agency:
1. Consensual based on the agreement of
the parties which is perfected by mere
consent
2. Principal it can stand by itself without need
of another contract
3. Nominate it has its own name
4. Unilateral or Bilateral
5. Preparatory it is entered into as a means to
an end
6. Commutative
7. Generally, onerous
8. A representative relation (not inherent or
permanent)
9. A fiduciary relation (based on trust and
confidence)
GENERAL RULE: What a man may do in person,
he may do thru another. (The exception is when
the law or agreement provides that the right to
act is purely personal.)
Parties to the contract:
1. Principal he whom the agent represents
and from whom the agent derives authority
Essential Elements of Agency:
1. Consent, express or implied;
2. Object of the contract is the execution of a
juridical act in relation to thirds persons;
3. The agent acts as a representative and not
for himself;
4. The agent acts within the scope of his
authority.
Rules for capacity of Principal and Agent:
1. The principal must be capacitated to act for
himself. If he is, he may act thru an agent.
2. In so far as third persons are concerned, it is
sufficient that the only one having capacity is
the principal because the agent merely acts
in behalf of the principal and generally,
assumes no personal liability. Thus, if a
contract is made between a third person and
the incapacitated agent, the contract cannot
be avoided by the principal on the ground of
incapacity of the agent.
3. An agent who assumes to contract in the
name of a principal without contractual
capacity renders himself liable to third
persons.
4. The agent is not liable where he was
ignorant of the principals incapacity.
5. As to liabilities between the principal and the
agent, if the agent is incapacitated, the latter
can setup incapacity against the former.
GENERAL RULE: The agent has neither rights
nor liabilities as against a third party with whom
the principal contracted. He cannot sue or be
sued on the contract.
EXCEPTION: If the agent is constituted as an
assignee, he may, in his own behalf, sue on a
contract made for his principal, as an assignee of
such contract. (Angeles v. Phil. National
Railways, 500 SCRA 444)
EXCEPTION: An agent who assumes to contract
in the name of a principal who is without
contractual capacity renders himself liable to third
persons.
The law on agency governing civil cases has no
application in criminal cases. When a person
participates in the commission of a crime, he
cannot escape punishment on the ground that he
simply acted as an agent of another party. (Ong
v. Ca, 401 SCRA 684)
GENERAL RULE: An agent who assumes to
contract in the name of a principal without
contractual capacity renders himself liable to third
persons. (Pero pwede ma ratify sa incapacitated
principal after acquiring capacity.)
EXCEPTION: The agent is not liable where he is
ignorant of the principals incapacity.
An agent cannot acquire by purchase, even at
public or judicial auction, either in person or
through the mediation of another, the property
whose administration or sale has been entrusted
 to him, unless the consent of the principal has to the trustee who acts in
been given. (Art. 1491[2]) his own name
The agent is subject to Based on the idea of
An agent can but for himself the property placed the control of the discretion in the trustee
in his hands for sale or administration after the principal
termination of the agency, or other properties
different from those he has been commissioned
to sell.
AGENCY TO SELL SALE
An agent cannot act as such for two principals
with conflicting interests, unless he acts with the
Agent receives the goods Buyer receives the goods
knowledge and consent of both, and on failure so
as the goods of the as owner;
to operate, either party may repudiate the
principal;
transaction involved. Thus, one cannot act as
agent for both buyer and seller in the same
The agent delivers the The buyer pays the price;
transaction since it is to the interest of the vendor
proceeds of the sale;
to secure the highest price and of the purchaser
to pay the least, and the agent thereby assumes
The agent can return the Generally, the buyer
a conflicting interest. (3 C.J.S. 15-17)
object in case he is cannot return the object
The knowledge of the principal cannot be unable to sell it to 3 rd sold;
imputed to his agent. (Sunace International persons;
Management Services v. NLRC, 480 SCRA 146)
The agent, in dealing with Buyer can deal with the
Distinction between an agent and a borrower: An the thing received, is thing as he pleases,
agent is given money by the principal to advance the bound to account being the owner.
latters business, while the borrower is given money according to the
for purposes of his own and he must generally return instructions of his
it, whether or not his own business is successful. principal;

AGENCY INDEPENDENT
AGENCY GUARDIANSHIP CONTRACTOR

The agent represents a A guardian represents an

capacitated person;
The agent is appointed by
the principal and can be
removed by the latter;
The agent is subject to the
directions of the principal;
The agent can make the
principal personally liable;
The agent acts under the The independent contractor is
incapacitated person;
control of the principal; authorized to do the work
according to his own method;
The guardian is appointed by
the court and stands in locoThe agent of the agent may The employees of the
parentis; be controlled by the contractor are not the
principal; employees of the employer of
The guardian is not subject to the contractor;
the directions of the ward, but
must of course act for the
Agent can bind the principal; Ordinarily, the independent
benefit of the latter;
contractor cannot bind the
employer by tort;
The guardian has no power to
impose personal liability on the
ward.
AGENCY LOAN

The one given money is The one given money is

AGENCY LEASE OF SERVICES
the agent called a borrower

Agents represents the The worker or the lessor of An agent is given funds A borrower is given
principal; services does not representby the principal to money for the purpose of
his employer; advance the latters his own and he must
business generally return it
Relationship can be Generally, the relationship whether or not his own
terminated at the will of either can be terminated only at the business is successful
the principal or agent; will of both;

Agent exercises discretionary The employee has ministerial AGENCY PARTNERSHIP

powers;
Usually involves 3 persons:
the principal, the agent, and a
stranger;
functions;
An agent acts only for his A partner acts not only
Usually involves only twoprincipal for his co-partners and
persons. the partnership but also
as principal of himself

AGENCY
The agent represents
and acts for his principal
TRUST
The agents acts are A partners power to bind
The title and control of
subject to the control of his co-partner is not
the property under the
the principal subject to the co-
trust instrument passes
partners right to control,
 (2) When the principal entrusts to
unless there is an him by letter or telegram a power
agreement to that effect of attorney with respect to the
business in which he is habitually
The agent does not A partners does not only
assume personal liability bind the partnership and engaged as an agent, and he did
where he acts within the his co-partners but also not reply to the letter or telegram.
scope of his authority binds himself as well
When there is implied acceptance of agency:
The agent receives A partner receives a
compensation share in the profits 1. When a person carries out the agency
without expressly accepting the agency;
Article 1869. Kinds of Agency; Agency 2. When a person receives the power of
may be: attorney personally delivered to him by
another without any objection, as between
persons who are present;
1. Express; or 3. When the principal transmits his power of
2. Implied; attorney to the agent, who receives it without
a. from the acts of the principal, any objection;
b. from his silence or lack of 4. When the principal entrusts to him by letter
or telegram a power of attorney with respect
action, or his failure to
to the business in which he is habitually
repudiate the agency, knowing engaged as an agent, and he did not reply to
that another person is acting the letter or telegram.
on his behalf without
authority. Article 1873. If a person specially
informs another that he has given a
GENERAL RULE: Agency may be oral, power of attorney to a third person, the
unless the law requires a specific form. latter thereby becomes a duly authorized
agent with respect to the person who
GENERAL RULE: Agency is not presumed. The received the special information.
relationship between principal and agent must
exist as a fact.
If a person states by public
EXCEPTIONS: (1) Agency arising by operation of advertisement that he has given a power
law; and (2) Agency arising to prevent unjust of attorney to a third person, the latter
enrichment.
thereby becomes a duly authorized
agent with regard to any person.
Article 1870. Acceptance by the agent
may also be express, or implied from his The power shall continue to be in full
acts which carry out the agency, or from force until the notice is rescinded in the
his silence or inaction according to the same manner in which it was given.
circumstances.
One who clothes another with apparent authority
Article 1871. Between persons who are as his agent, and holds him out to the public as
present, the acceptance of the agency such, cannot be permitted to deny the authority of
may also be implied if the principal such person to act as his agent to the prejudice
of innocent third parties dealing with such person
delivers his power of attorney to the
in good faith and in the honest belief that he is
agent and the latter receives it without what he appears to be. (Macke v. Camps, 7 Phil
any objection. 553) Doctrine of Apparent Authority

Power of attorney an instrument in writing by which
one person, as principal, appoints another as his
agent and confers upon him the authority to perform
certain specified acts or kinds of acts on behalf of the
principal
Article 1872. Between persons who are
absent, the acceptance of the agency
cannot be implied from the silence of the
agent, except:
(1) When the principal transmits
his power of attorney to the agent,
who receives it without any
objection;
Article 1874. When a sale of a piece of
land or any interest therein is through an
agent, the authority of the latter shall be
in writing; otherwise, the sale shall be
void. (This is one of the exceptions of the
general rule in Art. 1869)
Article 1875. Agency is presumed to be
for a compensation, unless there is proof
to the contrary.
In the absence of stipulation, the agent is entitled
to compensation only after he has completely or
substantially completed his obligation as agent.
 The compensation may be contingent or Article 1878. Special powers of attorney
dependent upon the realization of profit for the are necessary in the following cases:
principal. This is so in case there is a stipulation
to this effect.
(1) To make such payments as are
not usually considered as acts of
Article 1876. An agency is either:
administration;
1. General comprises all the business
(2) To effect novations which put
of the principal
2. Special comprises one or more an end to obligations already in
specific transactions existence at the time the agency
was constituted;
Kinds of agents:
(3) To compromise, to submit
1. Universal questions to arbitration, to
2. General
3. Special or particular
renounce the right to appeal from
a judgment, to waive objections to
the venue of an action or to
GENERAL AGENT SPECIAL AGENT abandon a prescription already
acquired;
Usually authorized to do Authorized to do only one
all acts connected with or more specific acts in Note that there are five different powers
the business or pursuance of particular mentioned here. A right given regarding one is
employment in which the instructions or with not enough to grant the others.
principal is engaged restrictions necessarily
implied from the act to be A compromise agreement entered into by the
done agent without a special power of attorney is not
void. It is merely unenforceable.
Authorized to conduct a Authorized to conduct a
series of transactions single transaction or a
(4) To waive any obligation
over time involving a series of transaction not
continuity of service involving continuity of gratuitously;
service and covering a
relatively limited period of (5) To enter into any contract by
time which the ownership of an
immovable is transmitted or
May bind his principal by Cannot bind his principal
an act within the scope of in a manner beyond or
acquired either gratuitously or for
his authority although it outside the specific acts a valuable consideration;
may be contrary to his which he is authorized to
special instructions perform on behalf of the (6) To make gifts, except
principal
customary ones for charity or
Statements of the Statements of the
those made to employees in the
principal with regard the principal with regard the business managed by the agent;
authority are generally authority are regarded as
advisory in nature words limiting the (7) To loan or borrow money,
authority of the agent
unless the latter act be urgent and
indispensable for the preservation
Article 1877. An agency couched in
of the things which are under
general terms comprises only acts of
administration;
administration,
(8) To lease any real property to
1. even if the principal should state
another person for more than one
that he withholds no power, or
year;
2. even if the principal should state
that the agent may execute such
An agreement for the leasing of real property for
acts as he may consider a longer period than one year is unenforceable
appropriate, or unless made in writing. It follows that even if the
3. even though the agency should agent is especially authorized, the lease is not
authorize a general and unlimited enforceable against the principal if it is not in
management. writing.

In order to sell, an agent must have a special (9) To bind the principal to render
power of attorney, unless the act of selling itself is
some service without
part of administration, as in the case of the sale
of goods in a retail store.
compensation;
 (10) To bind the principal in a In the absence of express authorization, authority
contract of partnership; to sell contemplates the sale for cash and not for
credit. (Teller)

(11) To obligate the principal as a

guarantor or surety;
Exclusive agent to Exclusive power of
SELL SALE
(12) To create or convey real
rights over immovable property; The principal may The principal may not so
endeavour to sell through compete with the agent
his own efforts
(13) To accept or repudiate an
inheritance;
The principal always has the power to revoke but
not having the right to do so in those cases
(14) To ratify or recognize wherein he has agreed not to exercise his power
obligations contracted before the during a certain period. If in the latter case, he
agency; does exercise his power, he must respond in
damages.

(15) Any other act of strict

Article 1880. A special power to
dominion.
compromise does not authorize
Special power of attorney refers to a clear mandate submission to arbitration.
specifically authorizing the performance of the act,
and must therefore be distinguished from an agency Article 1881. The agent must act within
couched in general terms the scope of his authority. He may do
such acts as may be conducive to the
Powers of attorney are generally construed
accomplishment of the purpose of the
strictly and courts will not infer or presume broad
powers from deeds which the agent is to deal. agency.
The act done must be legally identical with that
authorized to be done. However, the rule is not Authority the power of the agent to affect the legal
absolute and should not be applied to the extent relations of the principal by acts done in accordance
of destroying the very purpose of the power. with the principals manifestation of consent to him
Furthermore, the instrument should always be
deemed to give such powers as are essential or
usual in effectuating the express powers. AUTHORITY POWER
(Olaguer v. Purugganan, 575 SCRA 460)
The source or cause The effect
The cases enumerated in this article should be
couched in clear and unmistakable language.
An act is within the It is within the agents
This article refers to the nature of the authority of the agent if it power if he has the legal
authorization, not its form. (Lim Pin v. Liao tan, is not a violation of his ability to bind the
115 SCRA 290) duty to the principal principal to a third person
although the acts
A power of attorney is valid although no notary constitutes a violation of
public intervened in its execution. (Barretto v. his duty to the principal
Tuason, 59 Phil. 845)
Kinds of authority:
The special power of attorney can be included in
a general power of attorney when it specifies 1. Actual when it is actually granted, and it
therein the act or transaction for which the may be express or implied
special power is required. 2. Express when it is directly conferred by
words
Article 1879. A special power to sell 3. Implied when it is incidental to the
transaction or necessary to accomplish the
excludes the power to mortgage; and a
main purpose of the agency
special power to mortgage does not 4. Apparent or ostensible when it is conferred
include the power to sell. (n) by words, conduct or even by silence of the
principal which causes a third person
A mere authority to a real estate agent to sell reasonably to believe that a particular
person, who may or may be not be the
property at certain price and for a certain
principals agent, has actual authority to act
commission does not carry with it the implied
for the principal
power to make a contract of sale at such price in
5. General when it refers to all the business
behalf of the principal but as merely authorizing
of the principal
the agent to find a purchaser and submit his offer 6. Special when it is limited only to one or
to the principal for acceptance. more specific transactions
7. Authority by necessity or by operation of law
when it is demanded by necessity or by
virtue of the existence of an emergency
Two requisites in order that the principal may be
bound by the act of the agent as to third persons and
as to the agent himself:

1. The agent must act within the scope of his

authority;
2. The agent must act in behalf of his principal.

Article 1882. The limits of the agent's

authority shall not be considered
exceeded should it have been performed
in a manner more advantageous to the
principal than that specified by him.

GENERAL RULE: The principal is not bound by

the acts of an agent beyond his limited powers.

EXCEPTIONS: The principal may, however, be

held liable in the following cases even if the
agents acts were beyond the scope of authority:

o Where the principals acts have CHAPTER 2

contributed to deceive a third person in
good faith; (see doctrine of apparent
authority)
o Where the limitations upon the power
created by him could not have been
known by the third person;
o Where the principal has placed in the
hands of the agent instruments signed
by him in blank; and
o Where the principal has ratified the acts
of the agent.
Article 1883. If an agent acts in his own
name, the principal has no right of action
against the persons with whom the agent
has contracted; neither have such
persons against the principal.
In such case the agent is the one directly
bound in favor of the person with whom
he has contracted, as if the transaction
were his own, except when the contract
involves things belonging to the
principal.
The provisions of this article shall be
understood to be without prejudice to
the actions between the principal and
agent.
Kinds of principal:
1. Disclosed if at the time of the transaction
contracted by the agent, the other party
thereto has known that the agent is acting for
a principal and of the principals identity
2. Partially disclosed if the other party knows
or has reason to know that the agent is or
may be acting for a principal but is unaware
of the principals identity
3. Undisclosed if the party has no notice of
the fact that the agent is acting as such for a
principal
Obligations of the Agent
Article 1884. Specific obligations of the
agent (among others):
1. The agent is bound by his
acceptance to carry out the agency;
2. The agent is liable for the damages
which, through his non-performance,
the principal may suffer.
3. He must also finish the business
already begun on the death of the
principal, should delay entail any
danger.
Where an agent makes use of the power of
attorney after the death of his principal, the agent
has the obligation to deliver the amount collected
by him by virtue of said power to the
administrator of the estate of the principal.
(Ramos v. Cavives, 94 Phil. 440)
Article 1885. In case a person declines
an agency, he is bound to observe the
diligence of a good father of a family in
the custody and preservation of the
goods forwarded to him by the owner
until the latter should (1) appoint an
agent or (2) take charge of the goods.
Article 1886. Should there be a
stipulation that the agent shall advance
the necessary funds, he shall be bound
to do so except when the principal is
insolvent.
Article 1887. In the execution of the
agency, the agent shall act in
accordance with the instructions of the
principal.
In default thereof, he shall do all that a
good father of a family would do, as
required by the nature of the business.
Instructions private directions which the principal
may give the agent in regard to the manner of
performing his duties as such agent but of which a
third party is ignorant
This rule does not apply when the interest of the
agent is superior to that of the principal.
Article 1890. If the agent has been
empowered to borrow money, he may
himself be the lender at the current rate
of interest.

If he has been authorized to lend money

at interest, he cannot borrow it without
AUTHORITY INSTRUCTIONS
the consent of the principal.
The sum total of the Direct the manner of
powers committed or transacting the Article 1891. Every agent is bound
permitted to the agent by authorized business and
the principal which may contemplates only a
1. to render an account of his
be limited in scope and private rule of guidance
such limitations are to the agent and are transactions; and
themselves a part of the independent and distinct 2. to deliver to the principal whatever he
authority in character may have received by virtue of the
agency, even though it may not be
Relates to the subject Refer to the manner or owing to the principal.
with which the agent is mode of his action with
empowered to deal or the respect to matters which It is immaterial whether such money or property
kind of business or in their substance are is the result of the performance or violation of the
transactions upon which within the scope of agents duty, if it be the fruit of the agency. If his
he is empowered to act permitted action duty be strictly performed, the resulting profit
accrues to the principal as the legitimate
Limitations of authority Instructions limiting the consequence of the relation; if profit accrues from
are operative as against agents authority are his violation of duty while executing the agency,
those who have or are without significance as that likewise belongs to the principal, not only
charged with knowledge against those dealing because the principal has to assume the
of them with the agent with responsibility of the transaction, but also because
neither knowledge nor the agent cannot be permitted to derive
notice of them advantage from his own default. (Dumaguin v.
Reynolds, 92 Phil. 66)
Contemplated to be Not expected to be made
made known to the third known to those with When the obligation here does not apply:
person dealing with the whom the agent deals
agent 1. When the agent acted only as a middleman
with the task of merely bringing together the
An agent is not, in the absence of an agreement, vendor and the vendee, who themselves
an insurer of the success of his undertaking, and thereafter will negotiate on the terms and
does not guarantee the principal against conditions of the transaction;
incidental losses. (3 C.J.S. 36) 2. If the agent has informed the principal of the
gift or bonus or profit he received from the
The agent may disobey the principals purchaser and his principal did not object
instructions where it calls for the performance of thereto;
illegal acts, or where he is privileged to do so to 3. Where a right of lien exists in favor of the
protect his security interest in the subject matter agent.
of the agency.
An agent has both the physical and juridical
When departure from principals instructions justified: possession of the goods received in agency, or
the proceeds thereof, which take the place of the
goods after their sale by the agent.
1. Sudden emergency;
2. Ambiguous instructions;
3. Insubstantial departure. Every stipulation exempting the agent
from the obligation to render an account
Article 1888. An agent shall not carry out shall be void. (1720a)
an agency if its execution would
manifestly result in loss or damage to Articles 1892 and 1893.
the principal.
1. No power to appoint substitute given;
Article 1889. The agent shall be liable for but no prohibition to appoint one:
damages if, there being a conflict a. The agent may appoint a
between his interests and those of the substitute;
principal, he should prefer his own. (n)
 b. The agent is responsible
for the acts of the
substitute;
c. The principal may
furthermore bring an
action against the
substitute with respect to
the obligations which the
latter has contracted under
the substitution.
2. Power to appoint substitute given;
and the principal did not designate
the substitute:
a. The agent may appoint
substitute;
b. The agent is responsible
for the acts of the
substitute if the latter was
notoriously incompetent or
insolvent;
c. The principal may
furthermore bring an
action against the
substitute with respect to
the obligations which the
latter has contracted under
the substitution.
3. Prohibition to appoint substitute
imposed:
a. The agent cannot appoint
substitute;
b. All acts of the substitute
appointed against the
prohibition of the principal
shall be void.
Sub-agent a person employed or appointed by an
agent as his agent, to assist him in the performance
of an act for the principal which the agent has been
empowered to perform
Article 1894. The responsibility of two or
more agents, even though they have
been appointed simultaneously, is NOT
SOLIDARY, if solidarity has not been
expressly stipulated. (1723)
Article 1895. If solidarity has been
agreed upon, each of the agents is
responsible for the non-fulfillment of
agency, and for the fault or negligence of
his fellows agents, except in the latter
case when the fellow agents acted
beyond the scope of their authority.
Article 1896. The agent owes interest:
1. on the sums he has applied to his
own use from the day on which he
did so, and
2. on those which he still owes after the
extinguishment of the agency.
Article 1897. GENERAL RULE: The agent
who acts as such is not personally liable
to the party with whom he contracts.
EXCEPTIONS:
1. If he expressly binds himself; or
2. If he exceeds the limits of his
authority without giving such party
sufficient notice of his powers.
Article 1898. The contract is void if the
following concur:
1. The agent contracts in the name of
the principal,
2. The agent exceeds the scope of his
authority,
3. The principal does not ratify the
contract, and
4. The party with whom the agent
contracted is aware of the limits of
the powers granted by the principal.
In this case, however, the agent is liable
IF he undertook to secure the principal's
ratification.
Article 1899. If a duly authorized agent
acts in accordance with the orders of the
principal, the latter cannot set up the
ignorance of the agent as to
circumstances whereof he himself was,
or ought to have been, aware.
Article 1900. So far as third persons are
concerned, an act is deemed to have
been performed within the scope of the
agent's authority, if such act is within the
terms of the power of attorney, as
written, even if the agent has in fact
exceeded the limits of his authority
according to an understanding between
the principal and the agent.
Every person dealing with an assumed agent is
put upon inquiry and must discover upon his
peril, if he would hold the principal liable, not only
the fact of the agency but the nature and extent
of authority of the agent. If he does not make
such an inquiry, he is chargeable with knowledge
of the agents authority, and his ignorance of that
authority will not be an excuse. (Bacaltos Coal
Mines v. CA, 245 SCRA 460) It would be
different, however, if the authority of the agent is
in writing.
Article 1901. A third person cannot set
up the fact that the agent has exceeded
his powers, if the principal (1) has for cash insofar as the principal is
ratified, or (2) has signified his concerned. (Art. 1905)
willingness to ratify the agent's acts.
The purpose of the provision is to prevent the
Article 1902. A third person with whom agent from stating that the sale was on credit
when in fact it was made for cash.
the agent wishes to contract on behalf of
the principal may require the
Article 1907. Should the commission
presentation of the power of attorney, or
agent receive on a sale, in addition to the
the instructions as regards the agency.
ordinary commission, another called a
guarantee commission (del credere), he
Private or secret orders and instructions
shall bear the risk of collection and shall
of the principal do not prejudice third
pay the principal the proceeds of the
persons who have relied upon the power
sale on the same terms agreed upon with
of attorney or instructions shown them.
the purchaser.
Article 1903. The commission agent shall
Article 1908. The commission agent who
be responsible for the goods received by
does not collect the credits of his
him in the terms and conditions and as
principal at the time when they become
described in the consignment, unless
due and demandable shall be liable for
upon receiving them he should make a
damages, unless he proves that he
written statement of the damage and
exercised due diligence for that purpose.
deterioration suffered by the same.

Commission agent or factor one whose business is

to receive and sell goods for a commission
(factorage) and who is entrusted by the principal with Article 1909. The agent is responsible
the possession of goods to be sold, and usually not only for fraud, but also for
selling in his own name
negligence, which shall be judged with
more or less rigor by the courts,
according to whether the agency was or
ORDINARY AGENT COMMISSION AGENT
was not for a compensation. (1726)
Need not have Must be in possession of
possession of the goods the goods

Article 1904. The commission agent who

handles goods of the same kind and
mark, which belong to different owners,
shall distinguish them by countermarks,
and designate the merchandise
respectively belonging to each principal.

Article 1905. The commission agent

cannot, without the express or implied
consent of the principal, sell on credit.
Should he do so, the principal may
demand from him payment in cash, but
the commission agent shall be entitled to
any interest or benefit, which may result
from such sale.

If the principal does not demand payment in cash

but instead ratifies the sale on credit, the principal
will have all the risks and advantages. (Green
Valley v. IAC, 133 SCRA 697)

Article 1906. Should the commission

agent, with authority of the principal, sell
on credit, he shall so inform the
principal, with a statement of the names
of the buyers. Should he fail to do so, the
sale shall be deemed to have been made
 Whoever seeks to rely on a ratification is bound
to show that it was made under such
circumstances as in law to be binding on the
principal, especially to see that all material facts
were made known to him.

Actual knowledge will be assumed where the

principals reckless disregard of the natural
consequences of known fact induces an
inference that he was willing to assume a risk in
respect of the facts.

Actual knowledge will be assumed where the

principal has actual knowledge of a fact or facts
that a person of ordinary intelligence would
thereby infer the existence of the fact or facts
about which the dispute exists.

Void acts cannot be ratified.

Voidable acts may be ratified.

GENERAL RULE: Ratification is retroactive.

EXCEPTIONS:

o Where to do so would be to defeat rights

of third parties which have accrued
between the time of the making of the
unauthorized contract and the time of
CHAPTER 3 ratification.
o Where to do so would be to render
Obligations of the Principal wrongful an otherwise rightful act or
omission which has taken place
Article 1910. The principal must comply between the making of the unauthorized
with all the obligations which the agent contract and the time of its ratification;
o Where to do so would be to allow the
may have contracted within the scope of
circumvention of a rule of law formulated
his authority. in the interest of public policy;
o If the third party has withdrawn from the
GENERAL RULE: As for any obligation contract, the act or transaction is no
longer capable of ratification.
wherein the agent has exceeded his
power, the principal is not bound.
Article 1911. EXCEPTION: Even when the
agent has exceeded his authority, the
EXCEPTION: When the principal ratifies
principal is solidarily liable with the
it expressly or tacitly.
agent if the former allowed the latter to
Ratification the adoption or affirmance by a person act as though he had full powers.
of a prior act which did not bind him, but which was (Doctrine of apparent authority)
done or professed to be done on his account thus
giving effect to the acts as if originally authorized
RATIFICATION ESTOPPEL
Conditions for ratification:
Rests on intention Rests on prejudice rather
1. The principals intention to ratify; than intention
2. The principal must have the capacity and
power to ratify; Affects the entire Affects only the relevant
3. He must have had knowledge or had reason
transaction and from the parts of the transaction
to know of material or essential facts about
beginning and from that time only
the transaction;
when estoppel may be
4. He must ratify the acts in its entirety;
5. He must be capable of ratification; and said to be spelled out
6. The act must be done in behalf of the
principal. The substance is The substance is the
confirmation of the principals inducement to
The third party has a right to withdraw from the unauthorized act or another to act to his
transaction prior to ratification. The principal will contract after it has been prejudice
not be permitted to ratify after the third party has done or made
already indicated a desire to withdraw from the
transaction. Obviously, there can be no Article 1912. The principal must advance
ratification of an illegal transaction.
to the agent, should the latter so request,
the sums necessary for the execution of
the agency.
Should the agent have advanced them,
the principal must reimburse him
therefor, even if the business or
undertaking was not successful,
provided the agent is free from all fault.
The reimbursement shall include interest
on the sums advanced, from the day on
which the advance was made. (1728)
Article 1913. The principal must also
indemnify the agent for all the damages
which the execution of the agency may
have caused the latter, without fault or
negligence on his part.
No promise to indemnify will be implied for losses
or damages cause by the independent and
unexpected wrongful acts of third persons for
which the principal is in no way responsible.
(Mechem)
There is no obligation to indemnify where no
agency relation exists as where it appears that
the supposed agent acted upon its own account
and not as an agent, in the legal sense.
(Albaladejo y Cia v. Phil. Refining Co., 48 Phil.
556)
Article 1914. The agent may retain in
pledge the things which are the object of
the agency until the principal effects the
reimbursement (Art. 1912) and pays the
indemnity (Art. 1913) set forth in the two
preceding articles.
Article 1915. If two or more persons have
appointed an agent for a common
transaction or undertaking, they shall be
solidarily liable to the agent for all the
consequences of the agency. (1731)
(There are two or more principals)
Requisites:
1. There are two or more principals;
2. The principals have all concurred in the
appointment of the same agent; and
3. The agent is appointed for a common
transaction or undertaking.
Article 1916. When two persons contract
with regard to the same thing, one of
them with the agent and the other with
the principal, and the two contracts are
incompatible with each other, that of
prior date shall be preferred, without
prejudice to the provisions of article
1544.
Article 1544. If the same thing should have been sold
to different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is
good faith.
Article 1917. In the case referred to in the
preceding article, if the agent has acted
in good faith, the principal shall be liable
in damages to the third person whose
contract must be rejected. If the agent
acted in bad faith, he alone shall be
responsible.
Article 1918. The principal is not liable
for the expenses incurred by the agent in
the following cases:
(1) If the agent acted in
contravention of the principal's
instructions, unless the latter
should wish to avail himself of the
benefits derived from the
contract;
(2) When the expenses were due
to the fault of the agent;
(3) When the agent incurred them
with knowledge that an
unfavorable result would ensue, if
the principal was not aware
thereof;
(4) When it was stipulated that the
expenses would be borne by the
agent, or that the latter would be
allowed only a certain sum.

CHAPTER 4
Modes of Extinguishment of
Agency
Article 1919. Agency is extinguished:
(1) By its revocation (Art. 1920);
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction,
insanity or insolvency of the
principal or of the agent;
GENERAL RULE: Agency is extinguished ipso
jure upon the death of either principal or agent.
EXCEPTIONS: Agency is not extinguished even
upon death of either the principal or agent when:
o The act of the agent was executed
without the knowledge of the death of
the principal and the third person who
contracted with the agent acted in good
faith.
o 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.
(Agency coupled with an interest)
(4) By the dissolution of the firm
or corporation which entrusted or
accepted the agency;
The firm or corporation which entrusts is the
principal. The one which accepts is the agent.
(5) By the accomplishment of the
object or purpose of the agency;
(6) By the expiration of the period
for which the agency was
constituted.
The list is not exclusive.
Other cause of extinguishment of agency:
1. Modes of extinguishment of obligations in
general;
2. War;
3. Legal impossibility;
4. Terminations of the agents authority;
5. Occurrence of a specified event;
6. Loss or destruction of the subject matter of
the agency;
7. Change of conditions not contemplated by
the parties.
GENERAL RULE: The loss or destruction of the
subject matter of the agency or the termination of
the principals interest therein terminates the
agents authority to deal with reference to it.
EXCEPTIONS:
o If it is possible to substitute other
material for that which was destroyed
without substantial detriment to either
party or if the destroyed subject matter
was not in fact essential to the contract,
the agency may continue.
o In partial loss or destruction of the
subject matter, the agency may continue
in existence as to the remaining
property which is not lost or destroyed.
GENERAL RULE: Where there is basic change in
the circumstances surrounding the transaction,
which was not contemplated by the parties and
which would reasonably lead the agent to believe
that the principal would not desire him to act, the
authority of the agent is terminated.
EXCEPTIONS:
o If the original circumstances are
restored within a reasonable period of
time, the agents authority may be
revived;
o Where the agent has reasonable doubts
as to whether the principal would desire
him to act, his authority will not be
terminated if he acts reasonably.
o Where the principal and agent are in
close daily contact, the agents authority
to act will not terminate upon a change
of circumstances if the agent knows the
principal is aware of the change and
does not give him new instructions.
Article 1920. The principal may revoke
the agency at will, and compel the agent
to return the document evidencing the
agency. (Exception: Art. 1927)
Such revocation may be express or
implied. (1733a)
While the principal may have absolute power (not
right) to revoke the agency at any time, he must
respond in damages for breach of contract where
the termination is wrongful, although Art. 1920
does not expressly so provide, in those cases
wherein not having the legal right to do so, he
should discharge the agent.
Where the agency was constituted for a fixed
period, the revocation by the principal before the
expiration of the period fixed will make him liable
for damages. (Manresa) But if the principal is
given the absolute RIGHT to revoke the agency,
even if the period fixed in the contract of the
agency has not yet expired, the agent cannot
claim damages for such revocation, unless it is
shown that such was done in order to evade the
payment of the agents commission. (CMS
Logging v. CA, 211 SCRA 374)
Where no time for the continuance of the agency
is fixed by its terms, the principal is at liberty to
terminate it at will subject only to the
requirements of good faith. (Daon v. Brimo &
Co., 44 Phil 133) Diha ra liable ang principal for
damages if he acted in bad faith.
Article 1921. If the agency has been
entrusted for the purpose of contracting
with specified persons, its revocation
shall not prejudice the latter if they were
not given notice thereof.
Article 1922. If the agent had general
powers, revocation of the agency does
not prejudice third persons who acted in
good faith and without knowledge of the
revocation. Notice of the revocation in a
newspaper of general circulation is a
sufficient warning to third persons. (n)
Article 1923. The appointment of a new
agent for the same business or
transaction revokes the previous agency
from the day on which notice thereof
was given to the former agent, without
prejudice to the provisions of the two
preceding articles. (Implied revocation)
There is no implied revocation (1) where the
appointment of another agent is not incompatible
with the continuation of a like authority in the first
agent, or (2) the first agent is not given notice of
the appointment of the new agent. (Garcia v. De
Manzano, 39 Phil. 577)
Article 1924. The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly
with third persons. (Implied revocation)
Article 1925. When two or more
principals have granted a power of
attorney for a common transaction, any
one of them may revoke the same
without the consent of the others.
Article 1926. A general power of attorney
is revoked by a special one granted to
another agent, as regards the special
matter involved in the latter.
As to matters not covered by the special power,
the general power remains valid.
Article 1927. AGENCY COUPLED WITH
AN INTEREST; An agency cannot be
revoked:
1. If a bilateral contract depends upon
it, or
2. If it is the means of fulfilling an
obligation already contracted, or
3. If a partner is appointed manager of a
partnership in the contract of
partnership and his removal from the
management is unjustifiable.
In order that an agency may be irrevocable
because coupled with an interest, it is essential
that the interest of the agent shall be in the
subject matter of the power conferred and not
merely an interest in the exercise of the power
because it entitles him to compensation thereof.
Article 1928. The agent may withdraw
from the agency by giving due notice to
the principal. If the latter should suffer
any damage by reason of the withdrawal,
the agent must indemnify him therefor,
unless the agent should base his
withdrawal upon the impossibility of
continuing the performance of the
agency without grave detriment to
himself. (1736a)
Article 1929. The agent, even if he should
withdraw from the agency for a valid
reason, must continue to act until the
principal has had reasonable opportunity
to take the necessary steps to meet the
situation. (1737a)
Article 1930. AGENCY COUPLED WITH
AN INTEREST; The agency shall remain
in full force and effect even after the
death of the principal:
1. if it has been constituted in the
common interest of the latter and of
the agent, or
2. if it has been constituted in the A trustor may at the same time be also the
interest of a third person who has beneficiary.
accepted the stipulation in his favor.

AGENCY TRUST
Article 1931. Anything done by the agent,
without knowledge of the death of the Essentially revocable; Essentially obligatory in its
principal or of any other cause which terms and period, and can
extinguishes the agency, is valid and only be rescinded based on
shall be fully effective with respect to breach of trust;
third persons who may have contracted
Agent possesses property Trustee takes legal or naked
with him in good faith. (1738) under agency for and in the title of the subject matter of
behalf of the principal; trust;
Article 1932. If the agent dies, his heirs
must notify the principal thereof, and in Agent must act upon Trustee acts on his own
the meantime adopt such measures as instructions of the principal; business discretion;

the circumstances may demand in the

Agent enters into contract in Trustee enters into contracts
interest of the latter. (1739) the name of the principal; in his own name;

Agent is generally not liable in Trustee may be directly liable

the transactions made in as such.
behalf of the principal;

Elements of trust:

1. The parties to the trust must be present;

TRUSTS
CHAPTER 1
General Provisions
Trust it is the right to the beneficial enjoyment of
property, the legal title to which is vested in another; it
is a fiduciary relationship concerning property which
obliges the person holding it to deal with the property
for the benefit of another
2. There must be a trust property or a trust
estate or a subject matter of the trust.
The subject matter of a trust may be any property
of value real, personal, funds or money, or
choices in action. (Called a Trust Property)
Article 1441. 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.

Characteristics of a Trust: A trust will be presumed revocable unless the

creator has expressed a contrary intention in the
1. It is a fiduciary relationship; trust deed.
2. Created by law or agreement;
3. Where the legal title is held by one, and the
Article 1442. The principles of the
equitable title or beneficial title is held by
another. general law of trusts, insofar as they are
not in conflict with this Code, the Code
A co-ownership is a form of trust, with each other of Commerce, the Rules of Court and
being a trustee for each of the others. (Sotto v.
special laws are hereby adopted.
Teves, G.R. No. L-38010)

A trust is the right, enforceable in equity, to the

beneficial enjoyment of property the legal title to
which is in another. Trust is founded in equity and
can never result from acts violative of law.

Article 1440. 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.

CHAPTER 2
Express Trusts
Express Trust a trust intentional in fact (Art. 1441)
Article 1443. No express trusts
concerning an immovable or any interest
therein may be proved by parol
evidence. (Thus, dapat in writing jud to be
enforceable; pero kung movable property, pwede i-
prove by parol evidence.)
The burden of proving the existence of a trust is
on the party alleging its existence. (Ramos v.
Ramos, 61 SCRA 284)
Parol evidence to prove express trusts
concerning an immovable or any interest therein
may be admitted by waiver of the opposing party
by failure to object the presentation of parol
evidence.
Article 1444. No particular words are
required for the creation of an express
trust, it being sufficient that a trust is
clearly intended.
The trustor must be capacitated to convey the
property.
The trustee must be capacitated to hold the
property and to enter into contracts.
The beneficiary must be capacitated to receive
gratuitously from the trustor.
Kinds of Express Trust:
1. Charitable trust it is one created for
charitable, educational, social, religious, or
scientific purposes or for the general benefit
of humanity;
2. Accumulation trust one that will
accumulate income to be reinvested by the
trustee in the trust for the period of time
specified;
3. Spendthrift trust one established when the
beneficiary need to be protected, because of
his inexperience or immaturity from his
imprudent spending habits or simply
because the beneficiary is spindrift;
4. Sprinkling trust one that gives the trustee
the right to determine the income
beneficiaries who should receive income
each year and the amount thereof
Administration of the Trust:
1. The trustee must file a bond;
2. The trustee must make an inventory of the
real and personal property in trust;
3. The trustee must manage and dispose of the
estate and faithfully discharge his trust in
relation thereto, according to law or
according to the terms of the trust instrument
as long as they are legal and possible.
4. The trustee must render a true and clear
account;
5. The trustee cannot acquire the property held
in trust by prescription as long as the trust is
admitted.
If the trustee repudiates the trust and this is made
known to the party involved, the trustee may
acquire the property held in trust by prescription.
(Bancairen v. Diones, 98 Phil. 122)
Laches does not apply in express trusts because
the beneficiary is entitled to rely upon the fidelity
of the trustee, unless the latter openly repudiates
the trust and the beneficiary is notified thereof.
In the absence of an express stipulation that the
trust estate and not the trustee shall be liable on
the contract, the trustee is liable in its individual
capacity. (Tan Senguan & Co. v. Phil. Trust Co.,
58 Phil. 700) [But take note that in order for a
trustee to be liable as such, the trust must be
express.]
In order that a trustee may sue or be sued alone,
it is essential that his trust be express, that is, a
trust created by the direct and positive acts of the
parties, by some writing, deed, or will or by
proceedings in court. (PAL v. Heald Lumber Co.,
101 Phil. 1031)
Article 1445. No trust shall fail because
the trustee appointed declines the
designation, unless the contrary should
appear in the instrument constituting the
trust. (Reason: The court can appoint another
trustee. [Sec. 3, Rule 98, Rules of Court])
Article 1446. Acceptance by the
beneficiary is necessary. Nevertheless, if
the trust imposes no onerous condition
upon the beneficiary, his acceptance
shall be presumed, if there is no proof to
the contrary.
Acceptance by the beneficiary of a gratuitous
trust is not subject to the rules for the formalities
of donations. Therefore, even if real property is
involved, acceptance by the beneficiary need not
be in a public instrument. (Cristobal v. Gomez, 50
Phil. 810)
How trusts are ended:
1. Mutual agreement by all the parties;
2. Expiration of the term;
3. Fulfilment of the resolutory condition;
4. Rescission or annulment;
5. Loss of the subject matter of the trust;
6. Order of the court;
7. Merger;
8. Accomplishment of the purpose of the trust.
A testamentary trust for the administration and
eventual sale of certain properties of the testator
ends not at the time the trustees petition for sale
of the property is approved by the court, but at
the time said sale is actually made and the
proceeds thereof distributed to the proper
recipients. (Trusteeship of Estate of Benigno
Diaz)
CHAPTER 3
Implied Trusts
Implied Trusts 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 matters of equity, independently of the particular
intention of the parties
Two kinds of Implied Trust:
1. Resulting trust the law presumes that the
parties intended to create a trust based on
the circumstances and nature of the
transaction (So naa gihapoy intention.) [a
trust intentional in law] This kind of trust is
based on the equitable doctrine that valuable
consideration and not legal title determines
the equitable title.
2. Constructive trust one created by law
irrespective of any intention to create a trust
for the purpose of promoting justice,
frustrating fraud, or preventing unjust
enrichment. A constructive trust is not a trust
in a technical sense. It is substantially an
appropriate remedy against unjust
enrichment.
Article 1447. The enumeration of the
following cases of implied trust does not
exclude others established by the
general law of trust, but the limitation
laid down in article 1442 shall be
applicable.
Distinctions between Express Trusts and Implied
Trusts:
1. Express trusts are created by the intention of
the trustor or parties, while implied trusts
come into being by operation of law; (Thus,
if the intention to establish a trust is clear, it
is express; if such intention is to be taken
from the circumstances or other matters
indicative of such intent, then it is implied.)
2. An express trust concerning an immovable
property or any interest therein cannot be
proved by parol evidence, while an implied
trust concerning an immovable property or
any interest therein may be proved by parol
evidence;
3. In order that laches or acquisitive
prescription may bar an action to enforce an
express trust, an express repudiation made
known to the beneficiary is required, while
laches constitutes a bar to actions to enforce
an implied trust even where there is no
repudiation, unless there is concealment of
the fact giving rise to the trust.
GENERAL RULE: Action for reconveyance based on
express trust or resulting implied trust is not subject to
prescription.
EXCEPTION: When the trustee repudiates the
express trust or resulting implied trust.
Once a resulting trust is repudiated, it is
converted into constructive trust and is subject to
prescription. (Olaco v. Co Cho Chit, 220 SCRA
656)
The prescriptive period founded on adverse
possession (acquisitive prescription) begins from
the notice of the beneficiary of the repudiation of
the trust by the trustee.
In constructive implied trusts, prescription may
supervene even if the trustee does not repudiate
the trust because such trustee does not
recognize any trust. Therefore, the prescriptive
period begins from the moment the implied trust
is created by law. (Diaz v. Garricho, 103 Phil 244)
The trustee may claim title by acquisitive prescription
where it appears that:
1. He has performed open and unequivocal
acts of repudiation amounting to an ouster of
the beneficiary or the co-owners;
2. Such positive acts of repudiation have been
made known to the beneficiary or the other
co-owners;
3. The evidence thereon should be clear and
conclusive or convincing; and
4. The period fixed by law has prescribed.
It is now well-settled that an action for
reconveyance to enforce an implied trust
(constructive) in ones favour prescribes in ten
years. (Amerol v. Bagumbaran, 154 SCRA 396)
Generally, the prescriptive period begins from the
moment the law creates the implied trust or the
right of action arises, that is, from the time the
true owner discovers that the legal title over the
subject property is illegally taken away from
them, which discovery is deemed to have taken
place upon the registration or date of issuance of
the certificate of title over the property since such
registration or issuance operates as a
constructive notice to the whole world.
 It has been held, however, that where the
defendant acted in bad faith in securing title over
real property, he is not entitled to the protection of
the law for the law cannot be used as a shield for
frauds and the prescriptive period for the filing of
the action for reconveyance based on implied
trust must be reckoned from the actual discovery
of the fraud, that is, from the time the real owner
discovered the fraudulent registration or
issuance.
The prescriptive period does not apply when the
person enforcing the constructive trust is in actual
possession of the property because the action for
reconveyance is in reality an action to quiet title
which is imprescriptible. (Caragay-Layno v. CA,
133 SCRA 718)
Generally, an action for reconveyance of real
property based exclusively on fraud prescribes in
four years from the discovery of fraud; such
discovery is deemed to have taken place upon
the issuance of the certificate of title over the
property.
The only limitation upon the right of the
beneficiary to recover title over the property held
in trust is that the same must not have been
transferred to an innocent purchaser for value in
which event, his remedy is to ask for damages.
(Bogayos v. Guilao, 64 Phil. 347)
Constructive trusts may be barred by laches if
there is undue neglect or delay on the part of the
beneficiary to assert his right, that if still allowed
to do so would be inequitable and unjust to the
defendant.
Article 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. (Resulting Trust)
It would seem that inasmuch as a presumption
has been made by law, the formalities of donation
are not required, for if the formalities are still
complied with, there would be no need for the
presumption.
Article 1449. There is also an implied
trust when a donation is made to a
person but it appears that although the
legal estate is transmitted to the donee,
he nevertheless is either to have no
beneficial interest or only a part thereof.
(Resulting Trust)
Article 1450. If the price of a sale of
property is loaned or paid by one person
for the benefit of another and the
conveyance is made to the lender or
payor to secure the payment of the debt,
a trust arises by operation of law in favor
of the person to whom the money is
loaned or for whom its is paid. The latter
may redeem the property and compel a
conveyance thereof to him. (Constructive
Trust)
No fiduciary relationship exists between the
trustor and the trustee in a constructive trust.
(Carantes v. CA, 76 SCRA 514)
A trust receipt, as a contract, partakes of the
nature of a conditional sale the importer
becoming the absolute owner of the imported
merchandise as soon as he has paid its price;
until the owner or the person who advanced
payment has been paid in full, or if the
merchandise has already been sold, the
proceeds turned over to him, the ownership
continues to be vested in such person.
Trust receipt a security transaction intended to aid in
financing importers and retail dealers who do not
have sufficient funds or resources to finance the
importation or purchase of merchandise, and who
may not be able to acquire credit except thru
utilization, as collateral, of the merchandise imported
or purchased
Article 1451. 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. (Resulting Trust)
If a co-owner or co-heir possesses certain
property owned in common by him and others, he
is under the same situation as a trustee insofar
as the shares of the other co-owners are
concerned. (Bargayo v. Camumot, 40 Phil. 857)
The registration of property in the name of one
who hold in a trust character does not extinguish
the trust or destroy the rights of the beneficiary.
(Severino v. Severino, 44 Phil. 343)
One who acquires a Torrens Title in his own
name to property which he is administering for
himself and his brother and sisters as heirs from
a common ancestor, and in common descent,
may be compelled to surrender to each of his co-
heirs his appropriate share; and a proceeding for
partition is an appropriate remedy by which to
enforce this right. (Castro v. Castro, 57 Phil. 675)
Article 1452. If two or more persons
agree to purchase property and by
common consent the legal title is taken
in the name of one of them for the
benefit of all, a trust is created by force
of law in favor of the others in proportion
to the interest of each. (Resulting Trust)
Article 1453. When property is conveyed
to a person in reliance upon his declared
intention to hold it for, or transfer it to
another or the grantor, there is an
implied trust in favor of the person
whose benefit is contemplated.
(Resulting Trust) [Naay declaration diri, thus, he
could not say otherwise because of estoppel.]
Article 1453 would apply if the person conveying
the property did not expressly state that he was
establishing the trust. (Cuaycong v. Cuaycong,
21 SCRA 1192)
Article 1454. 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. (Constructive Trust)
Article 1455. When any trustee, guardian
or other person holding a fiduciary
relationship uses trust funds for the
purchase of property and causes the
conveyance to be made to him or to a
third person, a trust is established by
operation of law in favor of the person to
whom the funds belong. (Constructive
Trust)
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. (Constructive Trust)
Article 1457. An implied trust may be
proved by oral evidence.