132042249-San-Beda-Partnership.pdf

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2005 CENTRALIZED B AR OPERATIONS

for any sum of money paid or contributed by him 2. Right of SUBROGATION in place of the partnership creditors after payment of partnership liabilities; and 3. Right of INDEMNIFICATION by the guilty partner against all debts and liabilities of the partnership

MANNER OF WINDING UP 1. Extrajudicial – by the partners themselves without the intervention of the court 2. Judicial – under the control and direction of the court upon proper cause shown by any partner, his legal representative or his assignee PERSONS AUTHORIZED TO WIND UP 1. partners designated by the agreement 2. in the absence of such agreement, all partners who have not wrongfully dissolved the partnership 3. legal representative of last surviving partner not insolvent ORDER OF PAYMENT IN WINDING UP 1. General Partnership (ART 1839 (2)) a) those owing to creditors other than partners b) those owing to partners other than for capital or profits c) those owing to partners in respect of capital d) those owing to partners in respect of profits 2. Limited Partnership (ART 1863) a) those owing to creditors, except those to limited partners on account of their contribution, and to general partners b) those owing to limited partners in respect of their share of the profits and other compensation by way of income c) those owing to limited partners in respect of their capital contributions d) those owing to general partners other than for capital and profits e) those owing to general partners in respect of profits f) those owing to general partners in respect of capital

DOCTRINE OF MARSHALLING OF ASSETS ( Article 1839(8)) 1. Partnership creditors have preference in partnership assets 2. Separate or individual creditors have preference in separate or individual properties 3. Anything left from either goes to the other PARTNER’S LIEN Right of every partner to have the partnership property applied to discharge partnership liabilities AND to have the surplus assets, if any, distributed in cash to the respective partners, after deducting what may be due to the partnership from them as partners.

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LIMITED PARTNERSHIP  One formed by two or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for partnership debts. NOTE: The Supreme Court, declared a firm to be a general partnership in a case where it appears that the inclusion of “Ltd.” (limited) in the firm was only a subterfuge resorted to by the partners in order to evade liability for possible losses, while assuming their enjoyment of advantages to be derived from the relation. Jo Chung Cang vs. Pacific Commercial Co. 45 PHIL 142 [1923]). In other words if the parties intended a general partnership, they are general partners although their purpose is to avoid the creation of such a relation. Characteristics of Limited Partnership 1. Limited partnership is formed by substantial compliance in good faith with the statutory requirements 2. One or more general partners control the business and are personally liable to creditors 3. One or more limited partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for

2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS Maricel Abarentos (Over-all Chairperson), Ronald Jalmanzar (Over-all Vice Chair), Yolanda Tolentino(VC-Acads), Jennifer Ang(VC- Secretariat), Joy Inductivo (VC-Finance), Elaine Masukat (VC-EDP), Anna Margarita Eres (VC-Logistics) Jonathan Mangundayao (Political Law), Francis Benedict Reotutar (Labor Law), Romuald Padilla (Civil Law), Charmaine Torres (Taxation Law), Mark David Martinez (Criminal Law), Garny Luisa Alegre (Commercial Law), Jinky Ann Uy (Remedial Law), Jackie Lou Bautista (Legal Ethics)

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MEMORY AID IN CIVIL LAW partnership obligations beyond the amount of their capital contributions 4. The limited partners may ask for the return of their capital contributions under the conditions prescribed by law 5. The partnership debts are paid out of the common fund and the individual properties of the general partners

Limited Partner/Partnership

General Partner/ Partnership

1. Extent of liability Limited partner’s General liability extends only to partner is his capital contribution personally liable for partnership obligations 2. Right to participate in the management of partnership Limited partner has no General share in the partners have management of a an equal right limited partnership and in the renders himself liable to management of partnership creditors as the business a general partner if he (when the takes part in the control manner of of the business management has not been agreed upon) 3. Contribution Limited partner must General contribute cash or partner may property to the contribute partnership but not money, services property or industry to the partnership

5. Transferability of interest Limited partner’s interest is freely assignable, with assignee acquiring all the rights of the limited partner subject to certain qualifications

General partner’s interest in the partnership may not be assigned as to make the assignee a new partner without the consent of the other partners, although he may associate a third person with him in his share 6. Inclusion of partner’s name in the firm name

As a general rule, name of a limited partner must not appear in the firm name

7. Prohibition to engage in other business No such prohibition in the case of a limited partner who is considered a mere contributor to the partnership

4. Proper party to proceedings by or against the partnership Limited partner is not a proper party to proceedings by or against a partnership Unless: 1. he is also a general partner, or 2. where the object of the proceeding is to enforce a limited partner’s right against or liability to the partnership

General partner is the proper party to proceedings by or against a partnership

Name of a general partner may appear in the firm name

General partner is prohibited from engaging in a business which is of the SAME kind of business in which the partnership is engaged, if he is a capitalist partner, or in ANY of business for himself if he is an industrial partner

8. Effect of retirement, death, insanity or insolvency Retirement, death, insanity or insolvency of a limited partner does not dissolve the partnership for his executor or administrator shall have the rights of a limited partner for the purpose of selling his estate

Retirement, death, insanity or insolvency of a general partner dissolves the partnership

CIVIL LAW COMMITTEE CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad EDP: Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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9. Creation Limited partnership is General created by the members partnership, as after substantial a general rule, compliance in good may be faith with the constituted in requirements set forth any form by by law contract or conduct of the partnership 10. Members of the partnership Composed of one or Composed only more general partners of general and one or more limited partners partners 11. Firm name Firm name must be No such followed by the word requirement Limited 12. Rules governing dissolution and winding up Governed by Art. 1839 Governed by Art. 1863

ESSENTIAL REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP 1. A certificate or articles of limited partnership which states the matters enumerated in Article 1844, which must be signed and sworn; 2. Such certificate must be filed for record in the Office of the Securities and Exchange Commission. NOTE: A strict compliance with the legal requirements is not necessary. It is sufficient that there is substantial compliance in good faith. If there is no substantial compliance, the partnership becomes a general partnership as far as third persons are concerned, in which all the members are liable as general partners. (Jo Chung Cang vs. Pacific Commercial Co., 45 PHIL 142 [1923].) However, a firm which fails to substantially comply with the formal requirements of a limited partnership is a general partnership only as to its relations to third persons. The firm is a limited partnership, subject to all rules applicable to such partnership; and as between the partners they are bound by their agreement; and that all the limited partner’s relations to his co -partners and their obligations to him growing out of the relation remain unimpaired.

As to third persons or creditors guilty of estoppel, the firm shall not be treated as a general partnership despite lack of substantial compliance to the requirements of a limited partnership. If creditors deal with the firm as a limited partnership, they will be estopped from insisting that there is no such partnership, or that the terms of the partnership were not sufficiently stated in the notice of its formation. (40 Am. Jur. 476.)

CONTENTS OF THE CERTIFICATE OR ARTICLES OF LIMITED PARTNERSHIP 1. Name of the partnership, adding thereto the word “limited;” 2. Character of the business; 3. Location of the principal place of business; 4. Name and place of residence of each member, general and limited partners being respectively designated; 5. Term for which the partnership is to exist; 6. Amount of cash and description of and the agree value of the other property contributed by each limited partner; 7. Additional contributions to be made by each limited partner and the times at which or events on the happening of which they shall be made; 8. Time, if agreed upon, when to contribution of each limited partner is to be returned; 9. Share in the profits or other compensation by way of income which each limited partner shall receive by reason of his contribution; 10. Right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the substitution; 11. Right, if given, of the partners to admit additional partners; 12. Right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation by way of income, and the nature of such priority;


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MEMORY AID IN CIVIL LAW 13. Right, if given, of the remaining general partner or partners to continue the business on the death, retirement, civil interdiction, insanity or insolvency of a general partner; and 14. Right, if given, of a limited partner to demand and receive property other than cash in return of his contribution.

LIABILITY FOR FALSE STATEMENT IN CERTIFICATE Any partner to the certificate containing a false statement is liable to one who suffers loss by reliance on such certificate provided the following requisites are present: 1. He knew the statement to be false at the time he signed the certificate, or subsequently having sufficient time to cancel or amend it or file a petition for its cancellation or amendment, he failed to do so; 2. The person seeking to enforce liability has relied upon the false statement in transacting business with the partnership; 3. The person suffered a loss as a result of reliance upon such false statement. MANAGEMENT OF LIMITED PARTNERSHIP general partner in a limited  A partnership is vested with the entire control of the firm’s business and has all the rights and powers and is subject to all the liabilities and restrictions of a partner in a general partnership.  A general partner in a limited partnership however has no authority, without written consent or ratification of all limited partners, to: 1. Do any act in contravention of the certificate; 2. Do any act which would make it impossible to carry on the ordinary business of the partnership; 3. Confess judgment against the partnership;

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4. Possess partnership property, or assign their rights in specific partnership property, for other that a partnership purpose; 5. Admit a person as a general partner; 6. Admit a person as a limited partner, unless the right to do so is given in the certificate 7. Continue the business with the partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right to do so is given in the certificate. A limited partner is liable as a general partner for the firm’s obligations if he takes part or interferes in the management of the business.

RIGHTS OF A LIMITED PARTNER KEY: BIF 2 AR2 1. To have the partnership books kept at the principal place of business of the partnership 2. To inspect, at a reasonable hour, partnership books and copy any of them 3. To demand true and full information of the things affecting the partnership 4. To demand a formal account of the partnership affairs whenever circumstances render it just and reasonable 5. To ask for dissolution and winding up by decree of court 6. To receive a share in the profits or other compensation by way of income provided: that the partnership assets are in excess of partnership liabilities after such payment 7. To receive the return of his contribution provided: a) All the liabilities of the partnership have been paid OR the partnership assets are sufficient to pay partnership liabilities b) The consent of all the members (general and limited partners) has been obtained


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When the return of the contribution may be rightfully demanded: 1) On the dissolution of the partnership 2) Upon the arrival of the date specified in the certificate for the return 3) After he has given 6 months notice in writing to all other partners, if no time is specified in the certificate their for the return of the contribution or for the dissolution of the partnership c) The certificate is cancelled or so amended as to set forth the withdrawal or reduction

LIABILITIES OF A LIMITED PARTNER 1. Liability for unpaid contribution a) For the difference between his contribution as actually made and that stated in the certificate as having been made; AND b) For any unpaid contribution which he has agreed in the certificate to make in the future at the time and the conditions stated in the certificate 2. Liability as trustee a) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned; AND b) Money or other property wrongfully paid or conveyed to him on account of his contribution NOTE: These liabilities can be waived or compromised only by consent of all the members; but a waiver or compromise shall NOT affect the right of a creditor of a partnership who extended credit or whose claim arose after the filling and before the cancellation or amendment of the certificate, to enforce such liabilities.

SUBSTITUTED LIMITED PARTNER  A person admitted to all the rights of a limited partner who has died of has assigned his interest in the partnership. RAL RULE: He has all, the rights and powers, and is subject to all the restrictions and liabilities of his assignor. Those liabilities which he was ignorant at the time he became a limited partner AND which could not be ascertained from the certificate.

REQUISITES IN ORDER THAT THE ASSIGNEE MAY BECOME A SUBSTITUTED LIMITED PARTNER 1. All the members must consent to the assignee becoming a substituted limited partner, OR the limited partner, being empowered by the certificate must give the assignee the right to become a limited partner 2. The certificate must be amended in accordance with Art.1865 3. The certificate as amended must be registered in the Securities and Exchange Commission ALLOWABLE TRANSACTIONS OF A LIMITED PARTNER  Being merely a contributor to the partnership is not prohibited from: 1. granting loans to the partnership 2. transacting other business with the partnership 3. receiving a pro rata share of the partnership assets with the general creditors if he is NOT also a general partner NOTE: In transacting a business with the partnership as a non-member, the limited partner is considered a nonpartner creditor PROHIBITED TRANSACTIONS OF A LIMITED PARTNER 1. receiving or holding as collateral security any partnership property; or 2. receiving any payment, conveyance, or release from liability if it will prejudice the partnership creditors


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MEMORY AID IN CIVIL LAW NOTES:  Violation of the prohibition will give rise to the presumption that it has been made to defraud partnership creditors  The prohibition is NOT ABSOLUTE, there is no such prohibition if the partnership assets are sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.

AGENCY CONTRACT OF AGENCY  A contract whereby a person ( agent) binds himself to render some service or to do something in representation or on behalf of another ( principal), with the consent or authority of the latter. ( Article 1868) 

The parties to the contract are: 1. Principal- one whom the agent represents and from whom he derives authority; he is the person represented. 2. Agent- one who acts for and represents another; he is the person acting in a representative capacity.

AGENCY

LEASE OF SERVICES

1. Principle of representation is applied. 2. Extinguished at will of the principal. 3. Agent exercise discretionary power to attain an end for which he was appointed. 4. Preparatory Contract

1. Principle of employment is applied. 2. Concurrence of parties is necessary. 3. Employee exercise ministerial functions only.

4. Principal Contract

AGENCY TO SELL

SALE

1. Agent receives the goods as the goods of the principal. 2. Agent delivers the proceeds of the sale

1. The buyer receives goods as owner 2. Buyer pays the price.

3. Agent can return the object in case he is unable to sell the same 4. Bound to act according to the instructions of his principal.

3. the buyer, as a rule, cannot return the object sold 4. The buyer can deal with the thing as he please being the owner.

PURPOSE OF AGENCY  The purpose of agency is to extend the personality of the principal through the facility of the agent. It enables the activity of man which is naturally limited in its exercise by the impositions of his physiological conditions to be legally extended by permitting him to be constructively present in many different places and to perform diverse juridical acts and carry on many different activities through another when physical presence is impossible or inadvisable at the same time. (11 Manresa 434) ELEMENTS OF AGENCY A. Consent  Any person or entity having juridical capacity and capacity to act and not otherwise disqualified, may enter into an agency.  But as regards the party with whom the agent acts or contracts, the legal capacity of the principal rather than the agent, is of the greater import.

B. Object  the services to be undertaken by the agent  may cover all acts pertaining to a business of the principal ( general agency ) or one or more specific transactions ( special agency )  the extent of the agent’s authority to act, whether it be a general or a special agency, depends on how the agency is couched. C. Cause  May be onerous or gratuitous but presumed for compensation NOTE: The agent may not be deprived of his right to compensation by an unjustified revocation of the agency



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KINDS OF AGENCY 1. as to manner of creation a) express- one where the agent has been actually authorized by the principal, either orally or in writing; b) implied- one which is implied from the i.

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acts of the principal- from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. Acts of the agent- when he carries out the agency, or from his silence or inaction according to the circumstances.

2. as to its character a) gratuitous- one where the agent receives no compensation for his services. b) compensated or onerous one where the agent receives compensation for his services. 3. as to extent of business covered a) general- one which comprises all the business of the principal; b) special- one which comprises one or more specific transactions. 4. as to authority conferred a) couched in general terms one which is created in general terms and is deemed to comprise only acts of administration; b) couched in specific termsone authorizing only the performance of a specific act or acts. 5. as to its nature and effects a) ostensible or representative- one where the agent acts in the name and in representation of the principal. b) simple or commission- one where the agent acts in his own name but for the account of the principal.

ACTS WHICH MAY BE DELEGATED TO AN AGENT person, he may do thru another. 1. Personal actsif personal performance is required the doing of an act by a person on behalf of another does not constitute performance by the latter. a) Voting during an election; b) Making a will; c) Making statements which are required to be done under oath; d) A member of the board of directors or trustees in a corporation cannot validly act as such by proxy e) An agent cannot delegate to a sub-agent the performance of acts which he has been appointed to perform in person. 2. Criminal Acts or Acts not allowed by law - There can be no agency in the perpetration of a crime or unlawful act. Examples: a) An alien principal using an agent to acquire lands; b) Persons who, because of their position and relation with the persons under their charge or property under control, are prohibited from acquiring said property and cannot do so through an agent.

FORM OF AGENCY  Agency may be express or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. ( Article 1869 ) In an implied agency, the NOTE: principal is still bound by the acts of the agent just as in case of express agency There are no formal requirements governing the appointment of an agent. The agent’s authority may be oral or written. It may be in a public or private writing. When the law requires a specific form


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MEMORY AID IN CIVIL LAW IMPLIED ACCEPTANCE 1. De Jure Agent 2. Binds the principal for acts within the scope of his authority.

AGENCY BY ESTOPPEL 1. Not really an agent 2. Only the purported agent is liable.

Example: Sale of a piece of land or any interest therein through an agent:

NOTES:  authority to sell must be in writing; otherwise the sale is VOID (Art.1874)  the sale itself should be in writing in order to be enforceable.  The authority of an agent to execute a contract of sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. (Dizon et al. vs. CA et al., GR 124741, January 28, 2003) FORM OF ACCEPTANCE BY AGENT  Acceptance by the agent may also be express or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances

and he did not reply to the letter or telegram

RULE ON AGENCY BY ESTOPPEL who clothes another with  One apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person in good faith, and in the honest belief that he is what he appears to be. (Cuison vs. CA, GR.88531, October 26, 1993) CLASSES AND KINDS OF AGENTS 1. Universal Agent- one employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing. 2. General Agent- one employed to transact all the business of the principal, or all the business of a particular kind or in a particular place, or in other words to do all acts, connected with a particular trade, business or employment. 3. Special or Particular Agent- one authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion.

General Agent

Special Agent

1. Scope of Authority

Kinds of Implied Acceptance 1. Where persons are present  Acceptance may be implied if: a. principal delivers his power of attorney to the agent and b. agent receives it without any objection 2. Where persons are absent Acceptance cannot be implied from silence of the agent 1. principal transmits his power of attorney to the agent, who receives it without any objection; 2. principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent,

Usually authorized to do all acts connected with the business or employment in which he is engaged.

Authorized to do only acts in pursuance of particular instructions or with restrictions necessarily implied from the acts to be done

2. Continuity Conducts a series of transactions involving a continuity of service.

Usually involves a single transaction or a series of transactions not involving continuity


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3. Extent by which agent may bind principal Binds his principal by Cannot bind his an act within the principal in a scope of his authority manner beyond although it may be or outside the contrary to his special specific acts instructions which he is authorized to perform on behalf of the principal 4. Termination of Authority Apparent authority Mere revocation does not terminate by is effective to the mere revocation terminate the of his authority authority as to without notice to the third persons third party because the third person has a duty to inquire 5. Construction of Instructions of Principal Statement of Authority of agent principal with must be strictly respect to the pursued agent’s authority would ordinarily regarded as advisory only

SPECIAL POWER OF ATTORNEY (SPA)  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. NOTE: It need not be notarized; except where it is executed in a foreign country, must be certified in accordance with the Rules of Court. INSTANCES WHERE SPA IS NECESSARY (ART 1878) (PECWEM- LLB- BOCARO) 1. To make such payments as are not usually considered as acts of administration; 2. To effect novation which put an end to obligations already in existence at time the agency was constituted; 3. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;

4. To waive any obligation gratuitously; 5. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or foe a valuable consideration; 6. To make gifts, except customary ones for charity or those made to employees in the business managed by the agents; 7. To loan or borrow money, unless the latter’s act be urgent and indispensable for the preservation of the things which are under administration; 8. To lease any real property to another person for more than one year; 9. To bind the principal to render some service without compensation; 10. To bind the principal in a contract of partnership; 11. To obligate the principal as guarantor or surety; 12. To create or convey real rights over immovable property; 13. To accept or repudiate an inheritance; 14. To ratify or recognize obligations contracted before the agency; 15. Any other act of strict dominion.

NOTE: a third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney or the instructions as regards the agency; except private or secret orders. NOTE: The scope of the agent’s authority is what appears in the written terms of the power of attorney. While third persons are bound to inquire into the extent or scope of the agent’s authority, they are not required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent outside the written power of attorney. (Siredy Enterprises, Inc. vs. CA, et al. GR 129039, September 27, 2002)


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MEMORY AID IN CIVIL LAW NOTES:  SPA to sell does not include the power to mortgage; and vice versa.  SPA to mortgage includes the power to allow the extrajudicial foreclosure of the mortgaged property. to compromise does not  SPA authorize submission to arbitration  SPA for an agent to institute any action in court to eject all persons in the principal’s lots so that the principal could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this is protective of the rights and interests of the principal in the property, does not grant any power to the agent to sell the subject property nor a portion thereof. (Cosmic Lumber Corp vs. CA 265 SCRA 168) EFFECT OF LACK OF SPA WHERE ONE IS REQUIRED: UNENFORCEABLE When principal bound by act of agent 1. Agent must act within the scope of his authority 2. Agent must act in behalf of the principal

NOTE: 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. When a person NOT bound by act of another 1. Latter acts without or beyond the scope of his authority in the former’s name; and 2. Latter acts within the scope of his authority but in his own name (UNDISCLOSED PRINCIPAL), except when the transaction involves a thing belonging to the principal. In such case, the contract is deemed as entered between the principal and the third person.

EFFECTS OF AGENT’S A CTS 1. With Authority a. in principal’s name – valid; principal is bound; agent not personally liable unless he bound himself (Article 1897) b. in his own name – Apply Article 1883; generally not binding on the principal; agent and stranger are the only parties, except regarding things belonging to the principal or when the principal ratifies the contract or derives benefit therefrom. 2. Without Authority a. in principal’s name – unauthorized and unenforceable but may be ratified, in which case, may be validated retroactively from the beginning (Article 1407) b. in his own name – valid, whether or not the subject matter belongs to the principal, provided that at the time of delivery, the “agent” can transfer legally the ownership of the thing. Otherwise, he will be held liable for breach of warranty against eviction; Article 1883 does NOT apply

OCCASIONS WHEN PRINCIPAL IS BOUND BY THE ACTS OF THE AGENT BEYOND THE LATTER’S POWERS General Rule: The principal is not bound by the acts of the agent beyond his limited powers. Exceptions: 1. Where the principal’s acts have contributed to deceive the third person in good faith; 2. Where the limitations upon the power created by him could not have been known by the third person; 3. Where the principal has placed in the hands of the agent instruments signed by him in blank (Strong vs. Gutierrez Repide 6 PHIL 680 [1906]) 4. Where the principal has ratified the acts of the agent.


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Doctrine of Agency by Necessity  By virtue of the existence of an emergency, the authority of an agent is correspondingly enlarged in order to cope with the exigencies or the necessities of the moment  Requisites: 1. Real existence of an emergency 2. Inability of the agent to communicate with the principal 3. Exercise of the additional authority for the principal’s own protection 4. Adoption of fairly reasonable means, premises duly considered NOTE: Agency can never be created by necessity; what is created is additional authority in an agent appointed and authorized before the emergency arose. GENERAL OBLIGATIONS OF AGENT TO PRINCIPAL: 1. To act with utmost good faith and loyalty for furtherance of principal’s interests 2. To obey all lawful orders and instructions of principal within the scope of the agancy 3. To exercise reasonable care, skill and diligence SPECIFIC OBLIGATIONS OF AGENT TO PRINCIPAL 1. To carry out the agency which he has accepted 2. To answer for damages which through his performance the principal may suffer 3. To finish the business already begun on the death of the principal should delay entail any danger 4. To observe diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed 5. To advance the necessary funds should there be a stipulation to do so 6. To act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do

7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal 8. To answer for damages if there being a conflict between his interest and those of the principal, he should prefer his own 9. Not to loan to himself if he has been authorized to lend money at interest 10. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency 11. To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners 12. To be responsible in certain cases for the acts of the substitute appointed by him 13. To pay interest on funds he has applied to his own use 14. To inform the principal, where an authorized sale of credit has been made, of such sale 15. To bear the risk of collection, should he receive also on sale, a guarantee commission 16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due 17. To be responsible for fraud or negligence

NOTE: A stipulation exempting the agent from the obligation to render an account shall be VOID. Knowledge of agent is knowledge of principal. 1. Agent’s interests are adverse to those of the principal 2. Agent’s duty is not to disclose the information ( confidential information) 3. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal


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MEMORY AID IN CIVIL LAW SUB-AGENT person to whom the agent  A delegates, as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative. NOTE: The agent may appoint a substitute (sub-agent) except when he has been prohibited by the principal. (ART 1892) Instances when agent shall be responsible for the acts of the substitute: 1. when he was not given the power to appoint; or 2. when he was given such power but without designating the person, and the person appointed was notoriously incompetent or insolvent. 3. in these two cases the principal may further bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. NOTE: All acts of the substitute appointed against the prohibition of the principal shall be VOID. JOINT AGENTS  Agents appointed by one or more principals under such circumstances as to induce the inference that it was the principal’s intent that all should act in conjunction in consummating the transaction for which they were appointed.  Their responsibility is JOINT; except if solidarity has been expressly stipulated.  If solidarity has been agreed upon, each agent is responsible for the: a. non-fulfillment of the agency b. fault or negligence of his fellow agents; except when the fellow agents acted beyond the scope of their authority. NOTE: innocent agent has a right later on to recover from the guilty or negligent agent (ART 1217(2))

Instances when agent may incur personal liability: 1. When the agent expressly binds himself NOTE: The individual liability of the agent can be considered a further security in favor of the creditor and does not affect or preclude the liability of the principal; both are liable 2. When agent exceeds his authority 3. When agent by his acts prevents performance on the part of the principal 4. When a person acts as an agent without authority or without a principal 5. A person who acts as an agent of an incapacitated principal unless the third party was aware of the incapacity at the time of the making of the contract FACTOR/COMMISSION AGENT - one engaged in the purchase and sale for a principal of personal property, which for this purpose, has to be placed in his possession and at his disposal.  If the commission agent received goods consigned to him, he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment.  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.  A commission agent can sell on credit only with the express or implied consent of the principal. If such sale is made without authority, the principal is given two alternatives: i.

ii.

He may require payment in cash, in which case any interest or benefit from the sale on credit shall belong to the agent since t he principal cannot be allowed to enrich himself at the agent’s expense; He may ratify the sale on credit in which case it will have all the risks and advantages to him.



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



If the commission agent is authorized to sell on credit, he shall inform the principal with a statement of the names of the buyers. With such statement, the sale shall be deemed to be for cash as far as the principal is concerned. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves the exercise of due diligence for that purpose.

BROKER  A middleman or intermediary who, in behalf of others and for a commission or fee, negotiates contracts/transactions relating to real or personal property. Factorage  Compensation of commission agent.

a

factor

or

Ordinary Commission  Compensation for the sale of goods which are placed in his possession or at his disposal. Guaranty Commission (Del credere)  Fee that is given in return for the risk, which the agent has to bear in the collection of credits. agent with a del credere  An commission is liable to the principal if the buyer fails to pay or is incapable of paying. GENERAL OBLIGATIONS OF PRINCIPAL TO AGENT  Duties and liabilities of the principal are primarily based upon the contract and the validity of the contract between them SPECIFIC OBLIGATIONS OF PRINCIPAL TO AGENT (CARIP) 1. To comply with all the obligations which the agent may have contracted within the scope of his authority and in the name of the principal

2. To advance to the agent, should the latter so request, the sums necessary for the execution of the agency 3. To reimburse the agent for what the latter has advanced (plus interest), even if the business was not successful, provided the agent was free from fault 4. To 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 NOTE: The agent may retain in pledge the things which are the object of the agency until the principal effects this reimbursement and pays the indemnity. 5. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agent’s services LIABILITY OF PRINCIPAL FOR TORT OF AGENT RULE: The principal is civilly liable to third persons for torts of an agent committed at the principal’s direction or in the course and within the scope of the agent’s authority. Reason for liability: The rule is based upon the principle that he who does an act through another does it himself. CONDITIONS FOR RATIFICATION 1. principal must have capacity and power to ratify 2. principal must have had knowledge of material facts 3. principal must ratify the acts in its entirety 4. act must be capable of ratification 5. act must be done in behalf of the principal ESTOPPEL BY PRINCIPAL Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. JOINT PRINCIPALS  Two or more persons who appoint an agent for a common transaction or undertaking.


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MEMORY AID IN CIVIL LAW Liability: solidarily liable to the agent for all the consequences of the agency.  Requisites of solidary liability: 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 NOTE: Any one of them may revoke the agency 

RULES ON DOUBLE SALE BY PRINCIPAL AND AGENT 1 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 Article 1544(double sale). 2 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 is in bad faith, he alone shall be responsible. Instances when principal is not liable for the expenses incurred by the agent: 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 ensure, 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. MODES OF EXTINGUISHMENT OF AGENCY (EDWARD) 1. Expiration of the period 2. Death, civil interdiction, insanity or insolvency of the principal or of the agent

3. Withdrawal of the agent  agent may withdraw by giving notice to the principal, but must indemnify the principal for damages that he may suffer by reason of such withdrawal. 4. Accomplishment of the object or the purpose of the agency 5. R evocation 6. Dissolution of the firm or corporation, which entrusted or accepted the agency.

Instances when death of principal does not terminate agency 1. If the agency has been constituted in the common interest of the principal and the agent 2. If it has been constituted in the interest of a third person who has accepted the stipulation in his favor Revocation of Agency by Principal will of the principal, regardless of the term of the agreement. 1. If a bilateral contract depends upon it; 2. If it is the means of fulfilling an obligation already contracted; 3. If a partner is appointed manager of a partnership and his termination is unjustifiable; and 4. If it is created not only for the interest of the principal but also for the interest of third persons, who have accepted the stipulation in their favor

Agency coupled with an interest An agency wherein the agent has acquired some interest of his own in the execution of the authority granted to him, in addition to his mere interest in the contract of employment with the resulting gains.  The agency becomes merely a part of another obligation or agreement, or an incidental element thereof so it cannot be unilaterally revoked. NOTE: However, in Coleongco vs. Claparals (10 SCRA 577 ), the SC made a sweeping statement that coupled with an interest or not, the authority (agency) 


178


can certainly be revoked for a just cause.

Implied Revocation may be effected: 1. By the act of the principal in appointing another agent for the same business or transaction; 2. By the act of the principal in directly managing the business entrusted to the agent; or 3. By the act the principal in subsequently granting a special power of attorney as regards the same business to another agent, where he had previously granted a general power of attorney to one agent.

TRUSTS TRUST  A legal relationship between one person having an equitable ownership in property and another owning the legal title to such property. CLASSIFICATIONS 1. Effectivity - from the viewpoint of whether they become effective after the death of the trustor or during his life, it may be either: a. testamentary trusts b. trusts inter vivos (sometimes called “living trusts”) 2. Creation - from the viewpoint of the creative force bringing them into existence, it may be either: a) Express trust - created by the intention of the trustor or of the parties b) Implied trust - one which comes into being by operation of law. This may be either: 1) Resulting trust - one in which the intention to create a trust is presumed by law to exist from the transaction and facts of the case 2) Constructive trust - one imposed by law irrespective of and even contrary to the intention of the parties. It is designed to promote justice, frustrate fraud and prevent unjust enrichment.

TRUST

CONTRACT

Always involves owner-ship, embracing a set of rights and duties fiduciary in character which may be created by a declaration without consideration.

A legal obligation based on an undertaking supported by a consideration, which obligation may or may not be fiduciary in character.

TRUST

DONATION

1. An existing legal relationship and involves the separation of legal and equitable title

There is a transfer of property as well as the disposition of both legal and equitable ownership except in cases of gifts in trust.

2. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the trust in public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of article 1311(stipulations pour autrui).

2. The donee must comply with the legal requirements in accepting donations.

Persons involved in the creation of a trust: 1. Trustor - the one who intentionally creates a trust 2. Trustee - the person who holds the legal title to the trust property for the benefit of another and with certain powers and subject to certain duties 3. Beneficiary or the cestui que trust - the one who has the equitable interest in the property and enjoys the benefit of administration by the trustee. He may be a natural person or a legal entity. The trustor may establish a trust with himself as the beneficiary (usual case).


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MEMORY AID IN CIVIL LAW ELEMENTS OF EXPRESS TRUST 1. Competent trustor and trustee; 2. Ascertainable trust res; and 3. Sufficiently certain beneficiaries. TRUST PROPERTY The concept of a trust arises from or is the result of a fiduciary relation between the trustee and the cestui que trust as regards certain property- real, personal, funds or money, choses in action held by the trustee. (Pacheco vs. Arro, 85 PHIL 505 ) The trust property is owned by two or more persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The trustee is not a mere agent  but an owner. But his ownership is a mere matter of form rather than substance, and nominal rather than real. 

PROOF OF TRUST or implied may be proved by parol or oral evidence immovable property or any interest therein. This latter requirement however is not for validity but only for purposes of proof.

courts will appoint a trustee to fill the office that he declines. (see Sec.3 Rule 98 of the Rules of Court). NOTE: But a trustee’s acceptance of the trust is necessary to charge him with the office of the trustee and the administration of the trust and to vest the legal title in him. 2. Acceptance of the beneficiary  The acceptance by the beneficiary is essential to the creation and validity of a trust. However, such acceptance is presumed if there is no proof to the contrary and the trust does not impose any onerous condition upon the beneficiary.

Requisites for a Trustee to claim title by prescription: 1. He has performed open and unequivocal acts of repudiation 2. Such positive acts of repudiation have been made known to the beneficiary or the cestui que trust 3. The evidence thereon should be clear and convincing and 4. The period fixed by law has expired. (10 years from the time that the repudiation is made known to the beneficiary in cases of express trust or resulting trust while 10 years from the time a constructive trust arises). 

NOTES:  Trusts cannot be established in violation of law. Trust is founded in equity such that it cannot result from a contract formed for an illegal purpose.  Neither may a trust be created for the purpose of evading a legal prohibition. Example: there cannot be a trust created for the purpose of obtaining homestead patents, in favor of a person already disqualified to obtain additional homesteads. Necessity of Acceptance to the creation and validity of trust relationship 1. Acceptance of the trustee  The acceptance of the trustee is not necessary to its existence and validity since if he declines, the

In order that a trustee may sue or be sued alone, it is essential that his trust should 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. Rule 3, sec 3 does not apply in cases of implied trust that is, a trust which may be inferred merely by the acts of the parties or from other circumstances. (PAL vs. Heald Lumber Co.)

NOTES:  the 10-year prescriptive period in case of implied trust begins to run from the date the trustee repudiates the express trust. In the case Sps. Pascual, et al. vs. CA, et al. GR 115925, August 15, 2003, it was held that repudiation takes place when the adverse party registers the land.



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

the 4-year prescriptive period under Article 1391 applies only if the fraud does not give rise to an implied trust, and the action is to annul a voidable contract under Article 1390.

TRUST PURSUIT RULE  Equity will pursue property that is wrongfully converted by the fiduciary, or otherwise compel restitution to the beneficiary. A trust will follow the property through all changes in its state and form, provided its product or proceeds are capable of identification. IMPLIED TRUST  Are those, without being express, are deducible from the nature of the transaction as matters of intention, or which are superinduced on the transaction by operation of law, as matters of equity independently of the particular intention of the parties. RESULTING CONSTRUCTIVE TRUST TRUST 1. Intention to create trust: The intent of The trust is created the parties to irrespective of or even create a trust contrary to the is presumed or intention of the parties implied by law to promote justice, from the frustrate fraud and to nature of their prevent unjust transaction enrichment. 2. Prescriptive period: The 10 year The 10 year prescriptive prescriptive period period shall be shall be counted from counted from the time that the the time constructive trust repudiation is arises. made known to beneficiary. 3. Examples: Illustrated in Illustrated in Articles Articles 1448, 1450, 1454, 1455, 1456 1449, 1451, 1452, 1453

EXPRESS TRUST IMPLIED TRUST 1. As to creation Created by the intention of the parties

2. As to proof of trust An express trust over an immovable property or any interest therein cannot be proved by parol evidence

An implied trust over an immovable or any interest therein may be proved by oral evidence.

3. As regards repudiation of trust An express repudiation made known to the beneficiary is necessary in order that laches or acquisitive prescription may bar an action to enforce an express trust.

In constructive trusts, even if there is no repudiation, laches may bar an action to enforce an implied trust.

KINDS OF IMPLIED TRUSTS 1. Purchase money resulting trust (Article 1448) – There is a resulting trust when property is sold, and the legal estate is granted to one party but the price is paid by another party for the purpose of having the beneficial interest of the property.  To give rise to a purchase money resulting trust, it is essential that there be: a) an actual payment of money, property or services or an equivalent, constituting valuable consideration; b) and such consideration must be furnished by the alleged beneficiary of a resulting trust. EXCEPTIONS: a) Where A pays the purchase money and title is conveyed by absolute deed to A’s child or to a person to whom A stands in loco parentis and who makes no express promise, a trust does not result, the presumption being that a gift was intended; b) Where an actual contrary intention is proved; c) Where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of fraud. (Tigno vs. Court of Appeals 280 SCRA 262 [1997])

Come into being by operation of law.


132042249-San-Beda-Partnership.pdf

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