I. Contract of Partnership 2007, the partnership incurred a net loss of P500,000.

In 2008,the partners
Timothy executed a Memorandum of Agreement (MOA) with Kristopher setting
up
a business venture covering three (3) fastfood stores known as "Hungry
Toppings" that will be established at Mall Uno, Mall Dos, and Mall Tres.
The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty percent (30%) share in all
of the stores to be set up by Kristopher;
2. The proceeds of the business, after deducting expenses, shall be used to
pay the principal amount of P500,000.00 and the interest therein which is to
be computed based on the bank rate, representing the bank loan secured
by Timothy;
3. The net profits, if any, after deducting the expenses and payments of the
principal and interest shall be divided as follows: seventy percent (70%) for
Kristopher and thirty percent (30%) for Timothy;
4. Kristopher shall have a free hand in running the business without any
interference from Timothy, his agents, representatives, or assigns , and
should such interference happen, Kristopher has the right to buy back the
share of Timothy less the amounts already paid on the principal and to
dissolve the MOA; and
5. Kristopher shall submit his monthly sales report in connection with the
business to Timothy.
What is the contractual relationship between Kris and Timothy?
dissolved the partnership. The proceeds of the sale of partnership assets were
insufficient to settle its obligation. After liquidation, the partnership had an
unpaid liability ofP300,000. (2013 BAR)
1) Assuming that the just and equitable share of the industrial partner, P, in the
profit in 2006 amounted to P1 00,000, how much is the share of 0, a limited
partner, in the P800,000 net profit? (1%) (2012 BAR)
(A) P160,000.
(B) P175,000.
(C) P280,000.
(D) P200,000.
(E) None of the above.
Answer:
Deduct 100K from the 800K as the just and equitable share of the industrial partner P.
In the absence of agreement as to sharing of profits losses, the three partners L, M, N,
will each have 1 share and O will have 2 shares in the remaining 700K according to the
proportion of their contribution to the capital. Thus, L, M, and N will receive 140K each
and O will receive 280K.

Answer:
In 2007, how much is the share of 0, a limited partner, in the net loss of
The contractual relationship between Timothy and Kristopher is a contract of
P500,000? (1%) (2012 BAR)
partnership under Art. 1767 of the New Civil Code since they have bound themselves (A) P 0.
to contribute money, property, or industry to a common fund with the intention of (B) P1 00,000.
dividing the profits among themselves. With a seed money of P500K obtained by (C) P125,000.
Timothy through a bank loan, they agree to divide the profits, 70% for Kristopher and (D) P200,000.
30% for Timothy. (E) None of the above

In 2005, L, M, N, 0 and P formed a partnership. L, M and N were capitalist Answer:

partners
who contributed P500,000 each, while 0, a limited partner, contributed P1 In the absence of contrary stipulation or prior agreement, the limited partner shall share
,000,000. P joined as an industrial partner, contributing only his services. The in the profits and losses proportionate to their contribution. Thus, O will 200K.
Articles of Partnership, registered with the Securities and Exchange
Commission, 3) Can the partnership creditors hold L, O and P liable after all the assets of the
designated L and 0 as managing partners; L was liable only to the extent of his partnership are exhausted? (1%) (2012 BAR)
capital contribution; and P was not liable for losses.
In 2006, the partnership earned a net profit of P800,000. In the same year, P Answer:
engaged in a different business with the consent of all the partners. However, in
A stipulation which excludes one or more partners from any share in the profits or
losses is void under Article 1799 of the New Civil Code. (Reason: Partnership is for the
common benefit.) This provision applies to capitalist partners only. A stipulation that
exempts an industrial from losses is valid. P, thus, may be exempt but that is only with
respect to the partners but not creditors. O, by taking part in the management even if
he is a limited partner becomes liable as a general partner.
A partner cannot demand the return of his share (contribution) during the
existence of a partnership. Do you agree? Explain your answer. (2012 BAR)
Answer:
No, a partner may not demand the return of his share of contribution during the
existence of a partnership. He may only do so until all liabilities of the partnership have
been paid, the consent of all members is had, and the certificate is cancelled. He is not
entitled to the return of his contribution to the capital of the partnership, but only to the
net profits from the partnership business during the life of the partnership period. If he
is a limited partner, however, he may ask for the return of his contributions as provided
in Arts. 1856 and 1857.
TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement
is false. Explain your answer in not more than two (2) sentences. (5%)
Answer:
TRUE. Partnership is a consensual contract, hence, it is valid even though not in
writing. However, if it involves contribution of an immovable property or a real right, an
oral contract of partnership is void. In such a case, the contract of partnership to be
valid, must be in a
public instrument (Art. 1771, NCC), and the inventory of said property signed by the
parties must be attached to said public instrument (Art. 1773, NCC.).
2) Can two corporations organize a general partnership under the Civil Code of
the Philippines?
3) Can a corporation and an individual form a general partnership? (1994 Bar
Question)
Answer:
No. A corporation is managed by its board of directors. If the corporation were to
become a partner, co-partners would have the power to make the corporation party to
transactions in an irregular manner since the partners are not agents subject to the
control of the Board of Directors. But a corporation may enter into a Joint Venture with
another corporation as long as the nature of the venture is in line with the business
authorized by its charter.
2b) As a general rule a corporation may not form a general partnership with another
corporation or an Individual because a corporation may not be bound by persons who
are neither directors nor officers of the corporation.
However, a corporation may form a general partnership with another corporation or an
individual provided the following conditions are met:
a. The Articles of Incorporation of the corporation expressly allows the
corporation to enter into partnerships;
b. The Articles of Partnership must provide that all partners will manage the
partnership, and they shall be jointly and severally liable; and
c. In case of a foreign corporation, it must be licensed to do business in the
Philippines.
Distinguish co-ownership from partnership
Answer:
Co-ownership is distinguished from an ordinary partnership in the following ways:
1. As to creation: Whereas co-ownership may be created by law, contract,
succession, fortuitous event, or occupancy, partnership is always created by
contract.
2. As to purpose: Whereas the purpose of co-ownership is the common enjoyment of
the thing or right owned in common, the purpose of a partnership is to obtain
profits.
3. As to personality: Whereas a co-ownership has no juridical personality which is
separate and distinct from that of the owners, a partnership has.
4. As to duration: Whereas an agreement not to divide the community property for
more than ten years is not allowed by law such an agreement would be perfectly
valid in the case of partnerships. This is so because under the law, there is no
limitation upon the duration of partnerships.
5. As to power of members: Whereas a co-owner has no power to represent the
coownership
unless there is an agreement to that effect, a partner has the power to
represent the partnership, unless there is a stipulation to the contrary.
6. As to effect of disposition of shares: If a co-owner transfers his share to a third
person, the latter becomes automatically a co -owner, but if a partner transfers his
share to a third person, the latter does not become a partner, unless agreed upon
by all of the partners.
7. As to division of profits: Whereas in co-ownership the division of the benefits and
charges is fixed by law, in a partnership the division of profits arid losses may be
subject to the agreement of the partners.
8. As to effect of death: Whereas the death of a co-owner has no effect upon the
existence of the co-ownership, the death of a partner shall result in. the dissolution
of the partnership.
Rights and Obligations of Partners Among Themselves
A, B, and C entered into a partnership to operate a restaurant business. When
the
restaurant had gone past break-even stage and started to gamer considerable
profits, C died. A and B continued the business without dissolving the
partnership. They in fact opened a branch of the restaurant, incurring obligations
in the process. Creditors started demanding for the payment of their obligations.
Who are liable for the settlement of the partnership’s obligations? Explain?
Answer:
The two remaining partners, A and B, are liable. When any partner dies and the
business is continued without any settlement of accounts as between him or his estate,
the surviving partners are held liable for continuing the business despite the death of C.
As a general rule when a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But no liquidation is needed
when there already is a settlement as to what the retiring partner shall receive.
(Article 1841, 1785, 1833 New Civil Code)
Joe and Rudy formed a partnership to operate a car repair shop in Quezon City.
Joe provided the capital while Rudy contributed his labor and industry. On one
side of their shop, Joe opened and operated a coffee shop, while on the other
side, Rudy put up a car accessories store. May they engage in such separate
businesses? Why?
Joe, the capitalist partner, may engage in the restaurant business because it is not the
same kind of business the partnership is engaged in. On the other hand, Rudy may not
engage in any other business unless their partnership expressly permits him to do so
because as an industrial partner he has to devote his full time to the business of the
partnership (Art. 1789, CC).
Dielle, Karlo and Una are general partners in a merchandising firm. Having
contributed equal amounts to the capital, they also agree on equal distribution of
whatever net profit is realized per fiscal period. After two years of operation,
however, Una conveys her whole interest in the partnership to Justine, without
the knowledge and consent of Dielle and Kaflo.
A. Is the partnership dissolved? [2%]
B. What are the rights of Justine, if any, should she desire to participate in the
management of the partnership and in the distribution of a net profit of
P360.000.00 which was realized after her purchase of Una’s interest? [3%] (1998
Bar Question)
Answer:
A. No, under 1813 of the New Civil Code, a conveyance of a partner of his whole
interest in the partnership does not itself dissolve the partnership, or, as
against other partners in the absence of agreement, entitle the assignee,
during the continuance of the partnership, to interfere in the management or
administration of partnership business or affairs. Assignee cannot even
demand information, accounting or inspection of the partnership books. The
assignor is still a partner. He is merely entitled to get whatever profits the
assignor partner would have obtained.
B. Justine cannot interfere in the management or administration of partnership
business or affairs. She may receive the net profits to which the assignor Una
would have otherwise been entitled.
W, X, Y and Z organized a general partnership with W and X as industrial
partners
and Y and Z as capitalist partners. Y contributed P50.000.00 and Z contributed
P20.000.00 to the common fund. By a unanimous vote of the partners, W and X
were appointed managing partners, without any specification of their respective
powers and duties.
A applied for the position of Secretary and B applied for the position of
Accountant of the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was opposed by X and Y.
Who of the applicants should be hired by the partnership? Explain and give your
reasons. (1992 Bar Question)
Answer:
A should be hired as Secretary since the decision is an act of administration which can
be performed by the duly appointed managing partners. Their decision as managing
partners must prevail.
B cannot be hired since in case of deadlock between the managing partners, the tie
must be decided by the partners owning the controlling interest. In this case, the
opposition shall prevail because Z has more controlling interest over Y given the
contribution of Z compared to Y.
Art. 1801 applies when: Each may separately execute all acts of administration
(a) two or more partners are managers;
(b) there is NO specifi cation of respective duties;
(c) there is no stipulation requiring unanimity.
THEREFORE: Art. 1801 does not apply if unanimity
is required; or when there is a designation of respective
duties.
The rights to oppose is not given to non-managers
because in appointing their other partners as
managers, they have stripped themselves of all participation
in the administration.
“X” used his savings from his salaries amounting to a little more than P2,000 as
capital in establishing a restaurant. “Y” gave the amount of P4,000 to “X” as
“financial assistance” with the understanding that “Y” would be entitled to 22%
of
the annual profits derived from the operation of the restaurant. After the lapse of
22 years, “Y” filed a case demanding his share in the said profits. “X” denied that
there was a partnership and raised the issue of prescription as “Y” did not assert
his rights anytime within ten (10) years from the start of the operation of the
restaurant. Is “Y” a partner of “X” in the business? Why? What is the nature of
the right to demand one’s share in the profits of a partnership? Does this right
prescribe? (1989 Bar Question)
Answer:
Yes, because there is an agreement to contribute to a common fund and an intent to
divide profits. It is founded upon an express trust. It is imprescriptible unless
repudiated.
IV. Obligations of Partnership/Partners to Third Persons
The liability of the partners, including industrial partners for partnership
contracts entered into in its name and for its account, when all partnership
assets
have been exhausted is (2011 BAR)
(A) Pro-rata.
(B) Joint.
(C) Solidary.
(D) Voluntary.
Answer
Article 1816 all partners including limited partners shall be liable pro rata with all their
poroperty and after all partenrshi p assets have been exhausted for the contracts
enetered into by the partnership p (in so far as third persons are concerned)
A, B, and C entered into a partnership to operate a restaurant business. When
the
restaurant had gone past break-even stage and started to gamer considerable
profits, C died. A and B continued the business without dissolving the
partnership. They in fact opened a branch of the restaurant, incurring obligations
in the process. Creditors started demanding for the payment of their obligations.
xxx
C. What are the creditors’ recourse/s? Explain.
Creditors can file the appropriate actions, for instance, an action for the collection of
sum of money against the “partnership at will” and if there are no sufficient funds, the
creditors may go after the private properties of A and B (Article 1816,New Civil Code).
Amu na may partnership at will
Creditors may also sue the estate of C. The estate is not excused from the liabilities of
the partnership even if C is dead already but only up to the time that he remained a
partner (Article 1829, 1835, par. 2; NCC, Testate Estate of Mota v. Serra, 47 Phil. 464
[1925]). However, the liability of C’s individual property shall be subject first to the
payment of his separate debts (Article 1835,New Civil Code).
Article 1835
The dissolution of the partnership does not itself discharge the existing liability of any
partner, unlessmay agreement between hiself, creditor and partners continuting the
business.
The individual property of a deceased shall be liable for obligations oft eh partnership
but only those incurred while he was a partenrs. Subject to prior payment of his
separate debts.
A, B and C formed a partnership for the purpose of contracting with the
Government in the construction of one of its bridges. On June 30, 1992, after
completion of the project, the bridge was turned over by the partners to the
Government. On August 30, 1992, D. a supplier of materials used in the project
sued A for collection of the indebtedness to him. A moved to dismiss the
complaint against him on the ground that it was the ABC partnership that is
liable
for the debt. D replied that ABC partnership was dissolved upon completion of
the project for which purpose the partnership was formed.
Will you dismiss the complaint against B if you were the judge? (1993 Bar
Question)
Answer:
As Judge. I would not dismiss the complaint against A because A is still liable as a
general partner for his pro rata share of 1/3 (Art. 1816, C. C.). Dissolution of a
partnership caused by the termination of the particular undertaking specified in the
agreement does not extinguish obligations, which must be liquidated during the
“winding
up" of the partnership affairs (Articles 1829 and 1830, par. 1-a, Civil Code).
1816
All partners inclduindg industrial ones shall be liable pro rata with all their poroperty and
after all ptp have been exhausted for the contracts entered into
1829
On dissolution of partnership the partnership is not terminated,but continutos until the
winding up of tpartnership affairs is completed
1830
Causes of Dissolution
1. Where the partnership agreement has not been violated
I. Terminantion of the defininte term or specific
undertaking
If the firm continutes he ptp becomes a partenship at
wills
II. By express will of a partner who must act in good faith
when there is no definite term or specific undertaking
III. By express of all partenrs except those who have
assigened their interest or whose interest has been
charged
IV. Expulsion in good faith of a member
2. Where there is violation of the agreement
Expressly withdrawing even before expiration of express term,
with or without justifiable cause (without prejudice to resulting
damages in case there is no justifiable cause)
3. Unlawfulness of the business
If from the beginning unlawful, no juridical personality
If the business later pa nagging unlawful, the firm will nto be
allowed to carry one
4. Loss
a. Specific thing promised as contribution is lost before delivery
(kay waray contribution he partner so nadissolve, if after delivery
the firm bears the loss, and the partner remains, since after all he
had given his contribution)
b. If only the use of a specific thing is contributed, and its lost
before or after delivery to the firm
i. Here the naked owner remained the owner, its loss is
borne by him, so it is as if he had not contributed
anything
5. Death of any partner
The death of any partner, whether known or unknown to
the others causes a decrease in the number of partners, hence
there is automatic dissolution (but not automatic termination
for the affairs must still be wound up).
V. Dissolution
A, B, and C entered into a partnership to operate a restaurant business. When
the
restaurant had gone past break-even stage and started to gamer considerable
profits, C died. A and B continued the business without dissolving the
partnership. They in fact opened a branch of the restaurant, incurring obligations
in the process. Creditors started demanding for the payment of their obligations.
Who are liable for the settlement of the partnership’s obligations? Explain? (3%)
(2010 Bar Question)
Answer:
The two remaining partners, A and B, are liable. When any partner dies and the
business is continued without any settlement of accounts as between him or his estate,
the surviving partners are held liable for continuing the business despite the death of C
(Articles 1841, 1785, par. 2, and 1833 of the New Civil Code).
What are the creditors’ recourse/s? Explain. (3%) (2010 Bar Question)
Creditors can file the appropriate actions, for instance, an action for the collection of
sum of money against the “partnership at will” and if there are no sufficient funds, the
creditors may go after the private properties of A and B (Article 1816, New Civil Code).
Creditors may also sue the estate of C. The estate is not excused from the liabilities of
the partnership even if C is dead already but only up to the time that he remained a
partner (Article 1829, 1835, par. 2; NCC, Testate Estate of Mota v. Serra, 47 Phil. 464
[1925]). However, the liability of C’s individual property shall be subject first to the
payment of his separate debts (Article 1835, New Civil Code).
Stating briefly the thesis to support your answer to each of the following cases,
will the death –
xxx
(b) of a partner terminate the partnership? (1997 Bar Question)
Answer:
Yes, death of a partner dissolves a partnership by express provision of the New Civil
Code Article1830
Pauline, Patricia and Priscilla formed a business partnership for the purpose of
engaging in neon advertising for a term of five (5) years. Pauline subsequently
assigned to Philip her interest in the partnership. When Patricia and Priscilla
learned of the assignment, they decided to dissolve the partnership before the
expiration of its term as they had an unproductive business relationship with
Philip in the past. On the other hand, unaware of the move of Patricia and
Priscilla
but sensing their negative reaction to his acquisition of Pauline’s interest, Philip
simultaneously petitioned for the dissolution of the partnership.
1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline
or Philip valid? Explain.
2. Does Philip have any right to petition for the dissolution of the partnership
before the expiration of its specified term? Explain. (1995 Bar Question)
ANSWER
1. Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is valid
and did not violate the contract of partnership even though Pauline and Philip did not
consent thereto. The consent of Pauline is not necessary because she had already
assigned her interest to Philip. The consent of Philip is not also necessary because the
assignment to him of Pauline’s interest did not make him a partner, under Art. 1813 of
the NCC
2. No, Philip has no right to petition for dissolution because he does not have the
standing of a partner (Art. 1813 NCC).
A, B and C formed a partnership for the purpose of contracting with the
Government in the construction of one of its bridges. On June 30, 1992, after
completion of the project, the bridge was turned over by the partners to the
Government. On August 30, 1992, D. a supplier of materials used in the project
sued A for collection of the indebtedness to him. A moved to dismiss the
complaint against him on the ground that it was the ABC partnership that is
liable
for the debt. D replied that ABC partnership was dissolved upon completion of
the project for which purpose the partnership was formed.
Will you dismiss the complaint against B if you were the judge? (1993 Bar
Question)
Answer:
As Judge. I would not dismiss the complaint against A because A is still liable as a
general partner for his pro rata share of 1/3 (Art. 1816, C. C.). Dissolution of a
partnership caused by the termination of the particular undertaking specified in the
agreement does not extinguish obligations, which must be liquidated during the
“winding
up" of the partnership affairs (Articles 1829 and 1830, par. 1-a, Civil Code).
Tomas, Rene and Jose entered into a partnership under the firm name “Manila
Lumber.”
Subsequently, upon mutual agreement, Tomas withdrew from the partnership
and
the partnership was dissolved. However, the remaining partners, Rene and Jose,
did not terminate the business of “Manila Lumber.” Instead of winding up the
business of the partnership and liquidating its assets, Rene and Jose continued
the business in the name of “Manila Lumber” apparently without objection from
Tomas. The withdrawal of Tomas from the partnership was not published in the
newspapers.
Could Tomas be held liable for any obligation or indebtedness Rene and Jose
might incur while doing business in the name of “Manila Lumber” after his
withdrawal from the partnership? Explain. (1987 Bar Question)
Answer:
Yes. Tomas can be held liable under the doctrine of estoppel. But as regards the
parties
among themselves, only Rene and Jose are liable. Tomas cannot be held liable since
there was no proper notification or publication.
In the event that Tomas is made to pay the liability to third person, he has the right to
seek reimbursement from Rene and Jose (Articles 1837 to 1840; Goquiolay vs. Sycip,
9
SCRA 663).
Can a husband and wife form a limited partnership to engage in real estate
business, with the wife being a limited partner? (1994 Bar Question)
Yes. The Civil Code prohibits a husband and wife from constituting a universal
partnership. Since a limited partnership is not a universal partnership, a husband
and wife may validly form one.
b. Yes. While spouses cannot enter into a universal partnership, they can enter into
a limited partnership or be members thereof (CIR v. Suter, et al., 27 SCRA 152).
AGENCY
I. Definition of Agency
Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the
supermarket. Was there a nominate contract entered into between Jo-Ann and
Aissa? In. the affirmative, what was it? Explain. (2003 Bar Question)
ANSWER
Yes, there was a nominate contract. On the assumption that Aissa accepted the
request
of her close friend Jo-Ann to buy some groceries for her in the supermarket, what they
entered into was the nominate contract of Agency. Article 1868 of the New Civil code
provides that 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.
1868
By a 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.
A foreign manufacturer of computers and a Philippine distributor entered into a
contract whereby the distributor agreed to order 1,000 units of the
manufacturer’s
computers every month and to resell them In the Philippines at the
manufacturer’s suggested prices plus 10%. All unsold units at the end of the
year
shall be bought back by the manufacturer at the same price they were ordered.
The manufacturer shall hold the distributor free and harmless from any claim for
defects in the units. Is the agreement one for sale or agency? (5%) (2000 Bar
Question)
Answer
The contract is one of agency not sale. The notion of sale is negated by the following
indicia; (1) the price is fixed by the manufacturer with the 10% mark-up constituting the
commission; (2) the manufacturer reacquires the unsold units at exactly the same
price;
and (3) warranty for the units was borne by the manufacturer. The foregoing Indicia
negate sale because they indicate that ownership over the units was never intended to
transfer to the distributor.
II. Powers
X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a
subagent
and if he does, what are the effects of such appointment? (5%) (1999 Bar
Question)
Answer
Yes, the agent may appoint a substitute or subagent if the principal has not prohibited
him from doing so, but he shall be responsible for the acts of the substitute:
a. when he was not given the power to appoint one;
b. when he was given such power, but without designating the person, and
the person appointed was notoriously incompetent or insolvent.
An agent, authorized by a special power of attorney to sell a land belonging to
the
principal succeeded in selling the same to a buyer according to the instructions
given the agent. The agent executed the deed of absolute sale on behalf of his
principal two days after the principal died, an event that neither the agent nor the
buyer knew at the time of the sale. What is the standing of the sale? (2011 BAR)
Answer
The sale is valid. The important fact is that he made a sale, a transaction
which requires a special power of attorney. (Art. 1878).
As a mere administrator, he had no right to alienate.
Art. 1884. The agent is bound by his acceptance to carry
out the agency and is liable for the damages which, through
his non-performance, the principal may suffer.
He must also finish the business already begun on the
death of the principal, should delay entail any danger.
A as principal appointed B is his agent granting him general and unlimited
management over A's properties, stating that A withholds no power from B and
that the agent may execute such acts as he may consider appropriate.
Accordingly, B leased A's parcel of land in Manila to C for four (4) years at
P60.000.00 per year, payable annually in advance.
B leased another parcel of land of A in Caloocan City to D without a fixed term at
P3,000.00 per month payable monthly.
B sold to E a third parcel of land belonging to A located in Quezon City for three
(3) times the price that was listed in the inventory by A to B.
All those contracts were executed by B while A was confined due to illness in the
Makati Medical Center.
Rule on the validity and binding effect of each of the above contracts upon A the
principal. Explain your answers. (1992 Bar Question)
Answer:
The agency couched in general terms comprised only acts of administration (Art. 1877,
Civil Code). The lease contract on the Manila parcel is not valid, not enforceable and
not binding upon A. For B to lease the property to C, for more than one (1) year, A
must
provide B with a special power of attorney (Art. 1878, Civil Code).
The lease of the Caloocan City property to D is valid and binding upon A. Since the
lease is without a fixed term, it is understood to be from month to month, since the
rental is payable monthly (Art. 1687, Civil Code).
The sale of the Quezon City parcel to E is not valid and not binding upon A. B needed
a abroad, she advised her sister Y via overseas call to sell the land and sign a
special power of attorney to validly sell the land (Arts. 1877 and 1878. Civil Code). The
sale of the land at a very good price does not cure the defect of the contract arising
from
lack of authority.
Fe, Esperanza, and Caridad inherited from their parents a 500 sq. m. lot which
they leased to Maria for three (3) years. One year after, Fe, claiming to have the
authority to represent her siblings Esperanza and Caridad, offered to sell the
leased property to Maria which the latter accepted. The sale was not reduced into
writing, but Maria started to make partial payments to Fe, which the latter
received and acknowledged. After giving the full payment, Maria demanded for
the execution of a deed of absolute sale which Esperanza and Caridad refused to
do. Worst, Maria learned that the siblings sold the same property to Manuel. This
compelled Maria to file a complaint for the annulment of the sale with specific
performance and damages.
If you are the judge, how will you decide the case? (2014 BAR)
Answer:
dismiss the case for annulment of the sale and specific performance filed by Maria
with respect to the shares pertaining to Esperanza and Caridad. Since the object of the
sale is a co-owned property, a co-owner may sell his undivided share or interest in the
property owned in common but the sale will be subject to the result of the partition
among the co-owners.
In a co-ownership there is no mutual agency except as provided under Art. 487. Thus,
Fe cannot sell the shares of Esperanza and Caridad without a special power of
attorney from them and the sale with respect to the shares of the latter without their
written authority is void under Art.1874. Hence, the sale of the property to Manuel is not
valid with respect to the shares of Esperanza and Caridad. Maria can only assail the
portion pertaining to Fe as the same has been validly sold to her by Fe.
X, who was abroad, phoned his brother, Y, authorizing him to sell X’s parcel of
land in Pasay. X sent the title to Y by courier service. Acting for his brother, Y
executed a notarized deed of absolute sale of the land to Z after receiving
payment. What is the status of the sale? (2011 BAR)
(A) Valid, since a notarized deed of absolute sale covered the transaction and full
payment was made.
(B) Void, since X should have authorized agent Y in writing to sell the land.
(C) Valid, since Y was truly his brother X’s agent and entrusted with the title needed
to effect the sale.
(D) Valid, since the buyer could file an action to compel X to execute a deed of sale.
contract of sale on her behalf.
Y thus sold the land to B1 on March 31, 2001 and executed a deed of absolute
sale on behalf of X. B1 fully paid the purchase price.
B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but
asked Y for her authority from X. Without informing X that she had sold the land
to B1, Y sought X for a written authority to sell.
X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1,
2001 to B2 on monthly installment basis for two years, the first installment to be
paid at the end of May 2001. Who between B1 and B2 has a better right over the
land? Explain. (5%)
(2010 Bar Question)
Answer
B-2 has a better title. This is not a case of double sale since the first sale was void. The
law provides that when a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be void
(Article 1874,New Civil Code). The property was sold by Y to B1 without any written
authority from the owner X. Hence, the sale to B1 was void.
b. In 1950, A executed a power of attorney authorizing B to sell a parcel of
lancl consisting of more than 14 hectares. A died in 1954. In 1956, his four
childen sold more than 12 hectares of the land to C. In 1957, B sold. 8
hectares of the same land to D. It appears that C did not register the sale
executed by the children. D, who was not aware of the previous sale,
registered the sale executed by B, whose authority to sell was annotated at
the back of the Original Certificate of Title.
1. What was the effect of the death of A upon B’s authority to sell the
land?
2. Assuming that B still had the authority to sell the land—who has a
better right over the said land, C or D? (1988 Bar Question)
Answer:
land, it has not been shown that he was aware of his principal s demise. Hence, the act
of such agent is valid and shall be fully effective with respect to third persons which
may
have contracted with him in good faith in conformity with Art. 1931 of the Civil Code.
(Buason vs. Panuyas, 105 Phil. 795, Herrera vs. Luy, 110 Phil. 1020.)
2. As the case at bar is a case of double sale of registered land he who recorded the
sale in good faith has a better right in conformity with Art. 1544 of the Civil Code. Since
D was not aware of the previous sale, he had to rely on the face of the certificate of title
of the registered owner. Hence, he now has a better right to the land. (Buason vs.
Panuyas, supra.)
Rule on Double Sale
Personal property –– possessor in good faith.
Real property —
1) registrant in good faith;
2) possessor in good faith;
3) person with the oldest title in good faith.
VIII. Agency by Operation of Law
IX. Rights and Obligations of Principal
CX executed a special power of attorney authorizing DY to secure a loan from
any
bank and to mortgage his property covered by the owner’s certificate of title. In
securing a loan from Mbank, DY did not specify that he was acting for CX in the
transaction with said bank.
Is CX liable for the bank loan? Why or why not? Justify your answer. (5%) (2004
Bar Question)
ANSWER:
CX is liable for the bank loan, because he authorized the mortgage on his property to
secure the loan contracted by DY. If DY later defaults and fails to pay the loan, CX is
liable to pay. However, his liability is limited to the extent of the value of the said
property.
While as a general rule the principal is not liable for the contract entered into by his
agent in case the agent acted in his own name without disclosing his principal, such
rule
does not apply if the contract involves a thing belonging to the principal. In such case,
the principal is liable under Article 1SS3 of the Civil Code. The contract is deemed
made on his behalf (Syjuco v. Syjuco 40 Phil. 634 [1920]).
As an agent, AL was given a guarantee commission, in addition to his regular
commission, after he sold 20 units of refrigerators to a customer, HT Hotel. The
customer, however, failed to pay for the units sold. AL’s principal, DRB1,
demanded from AL payment for the customer’s accountability. AL objected, on
the ground that his job was only to sell and not to collect payment for units
bought by the customer.
Is AL’s objection valid? Can DRBI collect from him or not? Reason. (5%) (2004
Bar Question)
ANSWER
No, AL’s objection is not valid and DRBI can collect from AL. Since AL accepted a
guarantee commission, in addition to his regular commission, he agreed to bear the
risk
of collection and to pay the principal the proceeds of the sale on the same terms
agreed
upon with the purchaser (Article 1907, Civil Code)
1907
Should the commission agent receive in addition to the ordinary commission
another called a guarantee commission, he shall bear the risk of collection and
shall pay the principal the proceeds of the sale on the same terms agreed upon
with the purchaser.
Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots
of its newly developed subdivision. Prime Realty told Nestor that he could not
collect or receive payments from the buyers. Nestor was able to sell ten lots to
Jesus and to collect the downpayments for said lots. He did not turn over the
collections to Prime Realty. Who shall bear the loss for Nestor's defalcation,
Prime Realty or Jesus?
ANSWER:
a) The general rule is that a person dealing with an agent must inquire into the
authority
of that agent.
In the present case, if Jesus did not inquire into that authority, he is liable
for the loss due to Nestor’s defaulting.
Unless Article 1900, Civil Code governs, in which
case the developer corporation bears the loss.
Art. 1900 Civil Code provides: “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.
However, if Jesus made due inquiry and he was not Informed by the principal Prime
Realty of the limits of Nestor’s authority. Prime Realty shall bear the loss.
b) Considering that Prime Realty Corporation only “told" Nestor that he could not
receive or collect payments, it appears that the limitation does not appear in his written
authority or power of attorney. In this case, insofar as Jesus, who is a third person, is
concerned, Nestor’s acts of collecting payments is deemed to have been performed
within the scope of his authority (Article 1900, Civil Code). Hence, the principal is liable.
However, if Jesus was aware of the limitation of Nestor's power as an agent, and Prime
Realty Corporation does not ratify the sale contract, then Jesus shall be liable (Article
1898, Civil Code).
A lawyer was given an authority by means of a Special Power of Attorney by his
client to sell a parcel of land for the amount of P3 Million. Since the client owed
the lawyer Pl Million in attorney's fees in a prior case he handled, the client
agreed that if the property is sold, the lawyer was entitled to get 5% agent's fee
plus Pl Million as payment for his unpaid attorney's fees. The client, however,
subsequently found a buyer of his own who was willing to buy the property for a
higher amount. Can the client unilaterally rescind the authority he gave in favor
of
his lawyer? Why or why not? (2015 BAR)
ANSWER
NO, the agency in the case presented is one which is coupled with an interest. As a
rule, agency is revocable at will except if it was established for the common benefit of
the agent and the principal. In this case, the interest of the lawyer is not merely limited
to his commission for the sale of the property but extends to his right to collect his
unpaid professional fees. Hence, it is not revocable at will (Art.1927).
Joe Miguel, a well-known treasure hunter in Mindanao, executed a Special Power
of Attorney (SPA) appointing his nephew, John Paul, as his attorney-in-fact.
John
Paul was given the power to deal with treasure-hunting activities on Joe Miguel’s
land and to file charges against those who may enter it without the latter’s
authority. Joe Miguel agreed to give John Paul forty percent (40%) of the
treasure
that may be found on the land. Thereafter, John Paul filed a case for damages
and
injunction against Lilo for illegally entering Joe Miguel’s land. Subsequently, he
hired the legal services of Atty. Audrey agreeing to give the latter thirty percent
(30%) of Joe Miguel’s share in whatever treasure that may be found in the land.
Dissatisfied however with the strategies implemented by John Paul, Joe Miguel
unilaterally revoked the SPA granted to John Paul. Is the revocation proper?
(2014 BAR)
Answer:
NO, the revocation was not proper. As a rule, a contract of agency may be revoked by
the principal at will. However, an agency ceases to be revocable at will if it is coupled
with an interest or if it is a means of fulfilling an obligation already contracted (Art.
1927). In the case at bar, the agency may be deemed an agency coupled with an
interest not only because of the fact that John Paul expects to receive 40% of whatever
treasure may be found but also because he also contracted the services of a lawyer
pursuant to his mandate under the contract of agency and he therefore stands to be
liable to the lawyer whose services he has contracted. (Sevilla v. Tourist World Service,
G.R. No. L-41182-3 April 16, 1988)
Richard sold a large parcel of land in Cebu to Leo for P100 million payable in
annual installments over a period of ten years, but title will remain with Richard
until the purchase price is fully paid. To enable Leo to pay the price, Richard
gave
him a power-of-attorney authorizing him to subdivide the land, sell the individual
lots, and deliver the proceeds to Richard, to be applied to the purchase price.
Five years later, Richard revoked the power of attorney and took over the sale of
the subdivision lots himself. Is the revocation valid or not? Why? (5%) (2001 Bar
Question)
ANSWER
The revocation is not valid. The power of attorney given to the buyer is irrevocable
because it is coupled with an interest: the agency is the means of fulfilling the
obligation
of the buyer to pay the price of the land (Article 1927, CC). In other words, a bilateral
contract (contract to buy and sell the land) is dependent on the agency.