AGENCY
QUESTION:
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?
(2000 Bar)
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% markup 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.
------------------------------------------------------------------------------------------------------
QUESTION:
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)
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. Art. 1898 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.
------------------------------------------------------------------------------------------------------
QUESTION:
A as principal appointed B as 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)
ANSWER:
The agency couched in general terms comprised only acts of administration (Art. 1877).
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).
The lease of the Caloocan City property to D is valid and binding upon A. Since the lease iswithout a
fixed term, it is understood to be from month to month, since the rental is payable monthly (Art. 1687).
The sale of the Quezon City parcel to E is not valid and not binding upon A. B needed a special power of
attorney to validly sell the land (Arts. 1877 and 1878). The sale of the land at a very good price does not cure the
defect of the contract arising from lack of authority.
------------------------------------------------------------------------------------------------------
QUESTION:
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. (2004 Bar)
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 s limited to the extent
of the value of the said property.
------------------------------------------------------------------------------------------------------
TRUST
QUESTION:
Joaquin Reyes bought from Julio Cruz a residential lot of 300 square meters in Quezon City for which Joaquin
paid Julio the amount of P300,000.00. When the deed was about to be prepared Joaquin told Julio that it be
drawn in the name of Joaquina Roxas, his acknowledged natural child. Thus, the deed was so prepared and
executed by Julio. Joaquina then built a house on the lot where she, her husband and children resided. Upon
Joaquin’s death, his legitimate children sought to recover possession and ownership of the lot, claiming that
Joaquina Roxas was but a trustee of their father. Will the action against Joaquina Roxas prosper? (1993 Bar)
ANSWER:
Yes, because there is a presumed donation in favor of Joaquin under Art. 1448 of the Civil Code. (De Los Santos
v. Reyes, 27 January 1992, 206 SCRA 437) However, the donation should be collated to the hereditary estate and
the legitime of the other heirs should be preserved.
------------------------------------------------------------------------------------------------------
QUESTION:
In 1980, Maureen purchased two lots in a plush subdivision registering Lot 1 in her name and Lot 2 in the name
of her brother Walter with the latter’s consent. The idea was to circumvent a subdivision policy against the
acquisition of more than one lot by one buyer. Maureen constructed a house on Lot 1 with an extension on Lot
2 to serve as a guest house. In 1987, Walter who had suffered serious business losses demanded that Maureen
remove the extension house since the lot on which the extension was built was his property. In 1992, Maureen
sued for the reconveyance to her of Lot 2 asserting that a resulting trust was created when she had the lot
registered in Walter’s name even if she paid the purchase price. Walter opposed the suit arguing that assuming
the existence of a resulting trust the action of Maureen has already prescribed since ten years have already
elapsed from the registration of the title in his name. Decide. Discuss fully. (1995 Bar)
ANSWER:
This is a case of an implied resulting trust. If Walter claims to have acquired ownership of the land by
prescription or if he anchors his defense on extinctive prescription, the ten-year period must be reckoned from
1987 when he demanded that Maureen remove the extension house on Lot No. 2 because such demand amounts
to an express repudiation of the trust and it was made known to Maureen. The action for reconveyance filed in
1992 is not yet barred by prescription.
------------------------------------------------------------------------------------------------------
QUESTION:
Explain the concept of trust de son tort (Constructive Trust) (2007 Bar)
ANSWER:
A constructive trust is a trust not created by any word or phrase, either expressly or impliedly, evincing
a direct intention to create a trust, but is one that arises in order to satisfy the demands of justice. It does not
come about by agreement or intention but mainly operation of law and construed as a trust against one who,
by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, to hold. (Heirs of Lorenzo Yap v. Court of Appeals, 371 Phil. 523 [1999])
The following are examples of constructive trust:
1. Article 1456 NCC which provides: “If property is acquired through mistake or fraud, the person
obtaining it is, by force of law considered a trustee of an implied trust for the benefit of the person from
whom the property comes.”
2. Article 1451 NCC which provides: “When land passes by succession to any person and he
causes the legal title to be put in the name of another, a trust is established by implication of law for the
benefit of the true owner.”
3. Article 1454 NCC which provides: “If an absolute conveyance of property is made in order to
secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him.”
4. Article 1455 NCC which provides: “When any trustee, guardian or other person holding a
fiduciary relationship uses trust funds for the purchase of property, and causes the conveyance to be
made to him or to a third person, a trust is established to whom the findings belong.
