Partnership, Agency and Trust

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PARTNERSHIP PARTNERSHIP By the contra contract ct of partne partnersh rship ip two or more persons persons bind themselves themselves to contribute contribute money, money, property property or industry industry to a common fund, with the intention of dividing the profits among themselves. Two or more more person personss may also also form a partnership for the exercise of a profession. (Art. 177!  A partnership has a "uridical person personali ality ty which which is separa separate te and distinct from that of the partners. A partnership partnership may sue and be sued in  its name or by its duly author authori#e i#ed d representatives. A managing partner of the partnership may execute all acts of administration including the right to sue debtors of the part partne ners rshi hip p in the the case case of thei theirr failure to pay their obligation when it beco become mess deman demanda dabl ble. e. (Tai (Tai Tong Tong Chua Chuach che e & Co. Co. vs. vs. Ins Insuran urance ce Commission 158 SCRA 336 [1988] FORM OF PARTNERSHIP CONRTRACT !"#"RA$ !"#"RA$ R%$" $o spec specia iall form form is re%uired for the validity or existence of the contract of partnership. "'C"TI)#S 1. &her &here e immo immova vable ble prop proper erty ty or real real rights rights are contribute contributed, d, the partnershi partnership p contract shall be void unless' a. t is reduced to writing in a public instrument (Art. 1771!. b. An inven invento tory ry of the the prop proper erty ty contributed is made, signed by the parties and attached to the public instrument. (Art.177)!. A partnership partnership  con contrac tractt which hich sta states tes tha that the the partnership is established to operate a fish fishp pond ond is not not rend render ered ed void void because no inventory of the fishpond was was made made (whe (where re it did did not not clear clearly ly appear in the articles of partnership that that the the real real prop proper erty ty had had been been contributed by anyone of the part partne ners rs). ). (Ag (Agad vs. vs. Mabo Mabolo lo and and Mabo Mabolo lo Agad Agad and and Co., Co., 23 SCRA SCRA 1223[1968])

*. &here the contract is by its terms not to be performed within a year from the ma+in a+ing g ther thereo eoff, such uch part partn ners ership hip cont contra ract ct is cover covered ed by the the stat statut ute e of frau frauds ds and and thus thus re%u re%uir ires es a writ writte ten n agreement to be enforceable. ). &her &here e the the cont contra ract ct of part partne ners rshi hip p has a capital of ), pesos or more, in money or property, it shall appear in a public instrument and must be recorded in the the -ffi -ffice ce of the the ecu ecuri riti ties es and and /xch /xchan ange ge 0omm 0ommis issi sion on.. owe oweve verr, a partne partnersh rship ip has a "uridi "uridical cal person personali ality ty even in case of failure to comply with this re%uirement.

Requisites: 1. intent intention ion to crea create te a part partner nershi ship p *. common fund obtained from the contributions ). "oint "oint intere interest st in the profit profitss Essential Features: 1. there there must must be a vali valid d cont contrac ract2 t2 *. the the parti parties es must must have have legal legal capa capaci city ty to enter into the contract2 NOTE NOTE:: &ith regard to number * (legal capac apacit ity y of cont contrracti actin ng par parties ties!, !, individua individuals ls not legally incapacitated incapacitated to contract and partnerships may enter into a contract of partnership. &ith respect to corpo orporratio ation ns, the cou court held eld in Aurbach vs. anitary &ares 3anufacturing 0orporation 14 05A 1) 6148 that that alth althou ough gh a corp corpor orat atio ion n cannot enter into a partnership contract, it may however engage in a "oint venture with others. others. A "oint ventur venture e has been gen general erally ly unde underrstood tood to mean ean an organi#ation formed for some temporary purpose. There is nothing against one corp corpor orat atio ion n bein being g repr repres esen ente ted d by a natural or "uridical person in a suit in court, for the true rule is that 9although a corporation has no power to enter a partnershi partnership, p, it may nevertheles neverthelesss enter into a "oint "oint venture venture with another where the nature of that venture is in line with the business authori#ed by the charter.

2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS Maricel Maricel Aare!"#$ Aare!"#$ (Over (Over-al -alll Chairp Chairpers erson) on),, R#!al% R#!al% Jal&a!'ar Jal&a!'ar (Ove (Overr-all -all Vice ice Chai Chair) r),, (#la!%a (#la!%a T#le!"i!#(VC-Acad T#le!"i!#(VC-Acads), s), Je!!i)er A!*(VCA!*(VC- Secretariat), Secretariat), J#+ J#+ I!%,c"i-# (VC-Finance), Elai!e Ma$,.a" Ma$,.a" (VCEDP), A!!a Mar*ari"a Ere$ (VC-Logistics) (VC-Logistics) J#!a"/a! Ma!*,!%a+a# Ma!*,!%a+a# (Politi (Politica call La), La), ra! ra!ci$ ci$ Be!e%ic" Be!e%ic" Re#"," Re#","ar ar (La! (La!or or La) La),, R#&,al% R#&,al% Pa%illa Pa%illa (Civil (Civil La), La), C/ar&ai!e T#rre$ #rre$ ("a#ation ("a#ation La), Mar. Da-i% Mar"i!e' Mar"i!e' (Cri$inal (Cri$inal La), ar!+ L,i$a Ale*re Ale*re (Co$$ercial La), Ji!.+ La), Ji!.+ A!! U+ (%e$edial U+ (%e$edial La), Jac.ie La), Jac.ie L#, Ba,"i$"a (Legal Ba,"i$"a (Legal Ethics)

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(*+ Tua,on an- Co. Inc vs. /o0anos 95 I$ 126 [195] ). there there must must be mutua mutuall contr contribu ibutio tion n of money money,, proper property ty and indust industry ry to a common fund

NOTE: A partnership partnership of a civil nature was formed because :atchalian ; 0o. put up money to buy a sweepsta+es tic+et for the sole purpose of dividing e%ually the pri#e which they may win win as they they did in fact in the amount of <=,. (!a4cha0ian vs. CIR 6 I$ 666 [1939] &here the father sold his rights over * parcels of land to his > children so they can build their residences, but the latter afte afterr 1 year year sold sold them them and and paid paid the the capital gains, they should not be treated to have formed an unregistered partnership and taxed corporate income tax on the sale and on dividend income tax on their shares of the profits from the sale. ()i00os ()i00 os *r. *r. vs. CIR [1985] >. the the ob"ec ob"ectt must must be be lawfu lawful2 l2 and and =. the primary purpose must be to obtain profits 7" C* 3  :; A
Co-ownership

1. Creation Always created by a :enerally created by con contra tract, ct, eith either er law, law, but may exist exist express or implied even without a contract 2. Juridical personality as a "uridical as no "uridical personality separate personality and and dist distin inct ct from from that of each partner 3. Purpose 5eali#ation of 0ommon 0ommon en"oyment en"oyment profits of a thing thing or right right22 does not necessarily invo involv lve e shar sharin ing g of profits 4. Duration $o limita limitatio tion n upon upon An agreement to the durati duration on is set +eep the thing by law undiv undivide ided d for more more than 1 years is not allowed 5. Transfer Transfer of interests A part partne nerr may may not not A co?owner can dispose of his dispose dispose of his share share individual interest in without the consent

the partne partnersh rship ip so of the others as to ma+e the assign assignee ee a partne partnerr without without unanimo unanimous us consent 6. Power to act act with third third persons persons n the the abse absenc nce e of A co?own co?owner er canno cannott stip stipul ulat atio ion n to the the repr repres esen entt the the co? co? contrary contrary,, a partner partner ownership may bind t he partnership 7. Dissolution @eath or incapacit incapacity y @eath or incapacit incapacity y of a partner results of a co?own co?owner er does does in the dissolution of not necessarily partnership dissolve the c o? ownership . !"ency or representation representation As a rule, rule, there there is As a rule, there is no mutual agency mutual representation (although it is enough for a co? owne ownerr to brin bring g an action for e"ectment against a stranger! #. Profits 3ay 3ay be stip stipul ulat ated ed 3ust always depend depend upon upon proportion proportionate ate shares and any stip stipul ulat atio ion n to the the contrary is -@ (Art.>4=! 1$. %or& 3ay be in any from $o public instrument exce except pt when when real real is need eeded even even if property is real real proper property ty is the contribu contributed ted (here a ob"ec b"ectt of the the co? co? public instrument is ownership re%uired!

7" C#* = +"R"T ;  <! Partnership Corporation 1. Creation 0reated by mere 0reate 0reated d by law agreement of the or by operat operation ion parties of law 2. 'u&(er of incorporators incorporators 3ay be organi#ed by at 5e%uires at least least two persons five incorporators (except a corporation sole! 3. Co&&ence&ent of )uridical )uridical personality Ac%uires "uridical Ac%uires pers person onal alit ity y from from the the "uridical

2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS Maricel Maricel Aare!"#$ Aare!"#$ (Over (Over-al -alll Chairp Chairpers erson) on),, R#!al% R#!al% Jal&a!'ar Jal&a!'ar (Ove (Overr-all -all Vice ice Chai Chair) r),, (#la!%a (#la!%a T#le!"i!#(VC-Acad T#le!"i!#(VC-Acads), s), Je!!i)er A!*(VCA!*(VC- Secretariat), Secretariat), J#+ J#+ I!%,c"i-# (VC-Finance), Elai!e Ma$,.a" Ma$,.a" (VCEDP), A!!a Mar*ari"a Ere$ (VC-Logistics) (VC-Logistics) J#!a"/a! Ma!*,!%a+a# Ma!*,!%a+a# (Politi (Politica call La), La), ra! ra!ci$ ci$ Be!e%ic" Be!e%ic" Re#"," Re#","ar ar (La! (La!or or La) La),, R#&,al% R#&,al% Pa%illa Pa%illa (Civil (Civil La), La), C/ar&ai!e T#rre$ #rre$ ("a#ation ("a#ation La), Mar. Da-i% Mar"i!e' Mar"i!e' (Cri$inal (Cri$inal La), ar!+ L,i$a Ale*re Ale*re (Co$$ercial La), Ji!.+ La), Ji!.+ A!! U+ (%e$edial U+ (%e$edial La), Jac.ie La), Jac.ie L#, Ba,"i$"a (Legal Ba,"i$"a (Legal Ethics)

Sa! Be%a C#lle*e #) La 152

MEMOR( A AID moment of execution of personality from the contract of the date of partnership issuan issuance ce of the cert certif ific icat ate e of incorporation by the the ecu ecuri riti ties es and /xch xchange 0ommission 4. Powers
6. +ffect of &is&ana"e&ent A part partne nerr as such such can can sue sue a co?p co?par artn tner er who who mismanages

The suit against a member of the board of directors or trustees who mismanages must must be in the the name of the corporation

7. ,i"ht of succession succession
0orporati 0orporation on has right of succession

. +-tent of lia(ility lia(ility to third third persons
IN CIVIL LA3

because the partnership is based on the principle of -e0ec4us >ersonarum

stoc+holders because corp corpor orat atio ion n is not based on this principle 1$. Ter& of e-istence part partn ners ership may be corporation may esta establ blis ish hed for for any not not be form formed ed period of time for a term in stipulated by the excess of = partners years extendible to not more than = years in any one instance 11. %ir& na&e limite limited d partne partners rship hip is corporation may re%uired by law to add adopt any name the word word 9td.C 9td.C To its prov provid ided ed it is name not the same as or similar to any regis register tered ed firm firm name 12. Dissolution may be dissolved at any can only be time by any or all of the diss dissol olve ved d with with partners the the cons consen entt of the tate 13. o/ernin" 0aw governed by the governed by the contra contract ct and the 0ivil 0ivil 0orporation 0ode 0ode

JOINT ENT!RE t is hard hardly ly dist distin ingu guis isha hable ble from from  partnership, since their elements are similar, i.e. community of interest in the business, sharing of profits and losses, and a mutual right of control.  The main distinction in common law "uri "urisd sdic icti tion on is that that part partne ners rshi hip p contemplates a general business with some some degree degree of contin continuit uity y, wh while ile "oin "ointt vent ventur ure e is form formed ed for for the the execution of a single transaction and is thus of temporary nature  n 7i0o 7i0os sa?a a?an n Inco Incor> r>or ora4 a4ee- vs. vs. !uingona *r ;3; SCRA 112 [199] the court defined a "oint venture as an association of persons or companies "ointly underta+ing some commercia commerciall enterprise2 enterprise2 generally all contribute assets and share ris+s. ts re%uisites are'

CIVIL LA3 COMMITTEE C&A'%PE%SO  %o$*ald Padilla ASS"+C&A'%PE%SO  Vida ocar, Joce Vidad EDP Alnai.a &assi$an, Do roth /aon S0JEC" &EADS Christopher %e 1arasigan (Persons (Persons and Fa$il %elations), %elations), Ale2andro Casa!ar(Propert), Casa!ar(Propert), 1a+ %hodora Ferrer(3ills and S*ccession), 'an Do$inic P*a(O!ligations and Contracts), Sha Eli2ah D*$a$a(Sales and Lease), John Stephen 4*ia$!ao 4*ia$!ao(P (PA A"), Christoph Christopher er Ca!igao( Ca!igao(Credi Creditt "ransacti ransactions), ons), Ligaa Ligaa Alipao(" Alipao("orts and Da$ages) Da$ages),, Anthon Anthon P*rganan(L"D), 1a+ %icasion "*gadi (Con5icts o6 La)

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a. A community of interest in the performance of the sub"ect matter2 b. A right to direct and govern the policy in connection therewith2 c. @uty to share profits and losses. NOTE: Dnder the 0ivil 0ode, a partnership may be particular or universal, and a particular partnership may have for its ob"ect a specific underta+ing. ence, a "oint venture may be treated li+e any other contract, innominate in nature to be regulated and governed primarily by the stipulations of the parties thereto and suppletorily by the general provisions of the 0ivil 0ode on obligations and contracts, by rules governing the most analogous contracts (e.g. 0a@ on >ar4nershi>!, and by the customs of the place.

Other Si"ilar Contra#ts $% Colla&oration- the act of wor+ing together in a "oint pro"ect. '% Asso#iation- act of a number of persons uniting together for some special purpose or business. R!(ES TO )ETERMINE E*ISTENCE OF PARTNERSHIP (A5T 17! 1.  ! "#"RA$ R%$" . 5eceipt of share in the profits is a strong presumptive evidence of partnership. owever, no such inference will be drawn if such profits were received in payment'

(a! as a -e4 by installments or otherwise2 (b! as @ages of a n employee or rent to a landlord2 (c! as an annui4? to a widow or representative of a deceased partner2 (d! as in4erest on a loan, though the amount of payment vary with the profits of the business2 and (e! as the consi-era4ion for the sale of a goodwill of a business or other property by installments or otherwise.

C(ASSIFICATION OF PARTNERSHIP 1. as 4o oec4 a! universal partnership i. universal partnership of all ii.

present property universal partnership of profits

b! particular partnership ;. as 4o 0iai0i4? oB >ar4ners a! general partnership b! limited partnership 3. as 4o -ura4ion a! partnership at will b! partnership with period

a

fixed

. as 4o 0ega0i4? oB eis4ence a! de "ure partnership b! de facto partnership 5. as 4o re>resen4a4ion 4o o4hers a! ordinary or real partnership b! ostensible or partnership by estoppel 6. as 4o >u0ici4? a! secret partnership b! notorious or open partnership . as 4o >ur>ose a! commercial or trading b! professional or non?trading

!NIERSA( PARTNERSHIP 1. A uni+ersal partnership o, all present propert is one wherein the partners contribute all the property which actually belong to them to a

2005 CENTRALIZED BAR OPERATIONS EXECUTIVE COMMITTEE AND SUBJECT CHAIRPERSONS Maricel Aare!"#$ (Over-all Chairperson), R#!al% Jal&a!'ar (Over-all Vice Chair), (#la!%a T#le!"i!#(VC-Acads), Je!!i)er A!*(VC- Secretariat), J#+ I!%,c"i-# (VC-Finance), Elai!e Ma$,.a" (VCEDP), A!!a Mar*ari"a Ere$ (VC-Logistics) J#!a"/a! Ma!*,!%a+a# (Political La), ra!ci$ Be!e%ic" Re#","ar (La!or La), R#&,al% Pa%illa (Civil La), C/ar&ai!e T#rre$ ("a#ation La), Mar. Da-i% Mar"i!e' (Cri$inal La), ar!+ L,i$a Ale*re (Co$$ercial La), Ji!.+ A!! U+ (%e$edial La), Jac.ie L#, Ba,"i$"a (Legal Ethics)

Sa! Be%a C#lle*e #) La 15

MEMOR( AID common fund, with the intention of dividing the same among themselves, as well as all the profits which they may ac%uire therewith. n a universal partnership of all present property, the property which belongs to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as the profits which they may ac%uire therewith. A stipulation for the common en"oyment of any other profits may also be made2 but the properties which the partners may ac%uire subse%uently by inheritance, legacy or donation cannot be included in such stipulation, except the fruits thereof. 

&here the articles of partnership do not specify the nature of the universal partnership, whether it is one of 9present propertyC or of 9profitsC only, it will be presumed that the parties intended merely a partnership of profits. NOTE: Euture properties cannot be contributed. Thus, property subse%uently ac%uired by (1! inheritance, (*! legacy or ()! donation cannot be included by stipulation except the fruits thereof. 

*. A uni+ersal partnership o, pro,its is one which comprises all that the partners may ac%uire by their industry or wor+ during the existence of the partnership and the usufruct of movable or immovable property which each of the partners may posses at the time of the celebration of the contract. 3ovable or immovable property which each of the partners may posses at the time of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership. 

NOTE:
IN CIVIL LA3

partnership. (Art. 7), Art. 47, Eamily 0ode!
PARTIC!(AR PARTNERSHIP A particular partnership is one which has for its ob"ect determinate things, their use and fruits, or a specific underta+ing, or the exercise of a profession or vocation. .ENERA( PARTNERSHIP A partnership consisting of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts. (IMITE) PARTNERSHIP -ne 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 the obligations of the partnership. PARTNERSHIP AT /I(( A partnership wherein no time is specified and is not formed for a particular underta+ing or venture and which may be terminated at anytime by mutual agreement of the partners, or by the will of anyone partner alone2 or one for a fixed term or particular underta+ing but has been continued by the partners after termination of such term or particular underta+ing without express agreement. PARTNERSHIP /ITH A FI*E) TERM A partnership wherein the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular underta+ing, and upon the expiration of the term or completion or the particular enterprise, the partnership is dissolved, unless continued by the partners. OTHER 0IN)S OF PARTNERSHIP

CIVIL LA3 COMMITTEE C&A'%PE%SO  %o$*ald Padilla ASS"+C&A'%PE%SO  Vida ocar, Joce Vidad EDP Alnai.a &assi$an, Do roth /aon S0JEC" &EADS Christopher %e 1arasigan (Persons and Fa$il %elations), Ale2andro Casa!ar(Propert), 1a+ %hodora Ferrer(3ills and S*ccession), 'an Do$inic P*a(O!ligations and Contracts), Sha Eli2ah D*$a$a(Sales and Lease), John Stephen 4*ia$!ao(PA"), Christopher Ca!igao(Credit "ransactions), Ligaa Alipao("orts and Da$ages), Anthon P*rganan(L"D), 1a+ %icasion "*gadi (Con5icts o6 La)


155

1. )e Jure Partnership- one which has 2. 3. 4.

5.

6.

7. 8.

complied will all the legal re%uirements for its establishment. )e Fa#to Partnership- one which has failed to comply with all the legal re%uirements for its establishment. Or1inar or real partnershipone which actually exists among the partners and also as to third persons. Ostensi&le partnership or partnership 1e ,a#to- one which in reality is not a partnership, but is considered a partnership only in relation to those who, by their conduct or admission, are precluded to deny or disprove its existence. Se#ret partnershipone wherein the existence of certain persons as partners is not avowed or made +nown to the public by any of the partners. Open or notorious partnershipone whose existence is avowed or made +nown to the public by the members of the firm. Co""er#ial or tra1in2 partnershipone formed for the transaction of business. Pro,essional or non-tra1in2 partnershipone formed for the exercise of a profession.

C(ASSIFICATION OF PARTNERS 1. as 4o C)#TRI/%TI)# a Capitalist partner  one who contributes money or property to the common fund.  ndustrial partner  one who contributes only his industry or personal service. ;. as 4o $IA/I$IT

a)

eneral partner  one whose liability to third persons extends to his separate property, he may either be a capitalist or industrial partner.  0i&ited partner  one whose liability to third persons is limited to his capital contribution. 3. as 4o +A#A!"+"#T

a *ana"in" partner  one who manages the business or affairs of the partnership2 he may be appointed in the articles of partnership or after constitution of the partnership.  ilent partner  one who does not ta+e any active part in the business although he may be +nown to be a partner. c 0iuidatin" partner  one who ta+es charge of the winding up of the partnership affairs upon dissolution. . +isce00aneous a stensi(le partner  one who ta+es active part and +nown to the public as a partner in the business, whether or not he has actual interest in the firm.  ecret partner ? one who ta+es active part in the business by is not +nown to be a partner by outside parties nor held out as a partner by the other partners. c Dor&ant partner  one who does not ta+e active part in the business and is not +nown or held out as partner. 7" C ;$ Capitalist Partner In1ustrial Partner 1. as to contri(ution contributes money contributes his or property industry (mental or physical! 2. as to prohi(ition to en"a"e in other (usiness 0annot generally cannot engage in engage in the same any business for or similar enterprise himself as that of his firm 3. as to profits 1. shares in the receives a "ust profits according and e%uitable to agreement share thereon2 *. if none, pro rata to his contribution 4. as to losses 1. first, the exempted as to stipulation as to losses (as losses2 between



MEMOR( AID *. if none, the agreement as to profits2 ). if none, pro rata to contribution

O3(I.ATIONS OF THEMSE(ES:

partners!2 but is liable to third persons, without pre"udice to reimbursement from the capitalist partners

PARTNERS

AMON.

I% O&li2ation with respe#t to #ontri&ution o, propert a! To contribute what had been promised b! To answer for eviction in case the partnership is deprived of determinate property contributed c! To answer to the partnership for the fruits of the property the contribution of which is delayed, from the date they should have been contributed to the time of actual delivery d! To preserve the property with the diligence of a good father of a family pending delivery to the partnership e! To indemnify the partners for any damages caused to it by the retention of the same or by delay in its contribution. II% O&li2ations with respe#t to #ontri&ution o, "one an1 "one #on+erte1 to personal use a! To contribute on the date due the amount he has underta+en to contribute to the partnership b! To reimburse any amount he may have ta+en from the partnership coffers and converted to his own personal use c! To pay the agreed or legal interest, if he fails to pay his contribution on time or in case he ta+es any amount from the common fund and converted to his own personal use d! To indemnify the partnership for the damages caused to it by the delay in the contribution or the

IN CIVIL LA3

conversion of any sum for his personal benefit.

III% O&li2ation Not to En2a2e in Other 3usiness ,or Hi"sel, 1. In1ustrial partner ? cannot engage in any business for himself unless the partnership expressly permits him to do so. The other partners have the remedy of either excluding the erring partner from the firm or of availing themselves of the benefits which he may have obtained. Note: The prohibition is absolute and applies whether the industrial partner is to engage in the same business in which the partnership is engaged or in any +ind of business. t is clear that the reason for the prohibition exists in both cases, which is to prevent any conflict of interest between the industrial partner and the partnership and to insure faithful compliance by said partner with his prestation (/vangelista ; 0o. vs. Abad antos, =1 05A >1, 17)! *. Capitalist partner? The prohibition extends only to any operation which is of the same +ind of business in which the partnership is engaged unless there is a stipulation to the contrary.

I% O&li2ation to Contri&ute A11itional Capital As a general rule, a capitalist partner is not bound to contribute to the partnership more than what he agreed to contribute but in case of an imminent loss of the business, and there is no agreement to the contrary, he is under obligation to contribute an additional share to save the venture. f he refuses to contribute, he shall be obliged to sell his interest in the partnership to other partners. % O&li2ation o, Mana2in2 Partner who Colle#ts )e&t &here a person is separately indebted to the partnership and to the managing partner at the same time, any


157


sum received by the managing partner shall be applied to the two credits in proportion to their amounts, except where he received it entirely for the account of the partnership, in which case the whole sum shall be applied to the partnership credit only.

Requisites ,or the appli#ation o, the rule: 1! There exists two debts, one where the collecting partner is creditor, the other, where the partnership is creditor. *! Both debts are demandable )! The partner who collects is authori#ed to manage and actually manages the partnership. I% O&li2ation o, Partner /ho Re#ei+es Share in Partnership Cre1it A partner who receives, in whole or in part, his share in the partnership, when the others have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only. Requisites ,or appli#ation o, rule: 1! A partner has received, in whole or in part, his share in the partnership credit *! The other partners have not collected their shares. )! The partnership debtor has become insolvent. II% O&li2ation o, Partner ,or )a"a2es to Partnership /very partner is responsible to the partnership for damages suffered by it through his fault. e cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. III% )ut to Ren1er In,or"ation
I*% O&li2ation to a##ount ,or an &ene,it an1 hol1 as trustee unauthori4e1 personal pro,its /very partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, li%uidation of the partnership or form any use by him of its property. RI.HTS OF A PARTNER: 1. . 5ight of access and inspection of partnership boo+s =. 5ight to true and full information of all things affecting the partnership . 5ight to a formal account of partnership affairs under certain circumstances NOTE: The ten year period to demand an accounting by a partner begins at the dissolution of the partnership. 7. 5ight to have partnership dissolved under certain conditions. R!(ES FOR )ISTRI3!TION OF PROFITS AN) (OSSES 1. Distri(ution of profits a! According to their agreement (but not ine%uitously to defeat Art.17! b! f none, 1! hare of capitalist partner shall be in proportion to his capital contribution *! ndustrial partner shall receive such share as may be "ust and e%uitable under the circumstances 2. Distri(ution of losses



MEMOR( AID a! According to their agreement as to losses (but not ine%uitously to defeat Art.17! b! f none, according to their agreement as to profits c! f none, in proportion to his capital contribution, but the purely industrial partner shall not be liable for the losses 

!"#"RA$ R%$" A stipulation excluding a partner from any share in the profits or losses is -@ (Article 17! "'C"TI)# Article 177(*! excludes an industrial partner from losses. Thus, a stipulation excluding an industrial partner from losses is A@, but he is $-T exempted from liability insofar as third persons are concerned. NOTE: n general, ABTF refers to responsibility towards third persons, and -/ refers to responsibility as among partners

CONTRACT OF S!3-PARTNERSHIP -ne formed between a member of a  partnership and a third person for a division of profits owing to him from the partnership enterprise.  t is a partnership within a partnership distinct and separate from the main or principal partnership. NOTE: n the absence of unanimous consent of all the partners, a sub? partner does not become a member of the partnership. ence, a sub?partner does not ac%uire the rights of a partner nor is he liable for its debts PROPERT5 RI.HTS OF A PARTNER 1. ,i"ht to specific partnership property  contemplates tangible property The specific partnership property  belongs to the partnership as a separate "uridical personality. The partners have no actual interest in it until after dissolution.  e%ual right with other partners to possess specific partnership property for partnership purposes







IN CIVIL LA3

not assignable, except in connection with the assignment of rights of all partners in the same property not sub"ect to attachment or execution, except on a claim against the partnership not sub"ect to legal support

NOTE: Any immovable property or an interest therein may be ac%uired in the partnership name. The title so ac%uired may be conveyed only in the partnership name sub"ect to the provisions of Ar4ic0e 1819 oB 4he Civi0 Co-e. 2. nterest in the partnership  share in the profits and surplus A partner actually owns his  respective share. E,,e#ts o, #on+ean#e & a partner o, his interest in the partnership 1. conveyance of his whole interest G partnership may either remain or be dissolved *. assignee does not necessarily become a partner ). assignee cannot interfere in the management or administration of the partnership business or affairs >. assignee cannot demand information, accounting and inspection of the partnership boo+s Re"e1ies o, separate 6u12"ent #re1itor o, a partner  Application for a charging order after securing "udgment on his credit to sub"ect the interest of the debtor partner with payment of unsatisfied amount of the "udgment debt Re1e"ption o, interest #har2e1 1. :eneral partnership a! with separate property of a partner2 or b! with partnership property, with the consent of all the partners whose interests are not so charged or sold *. imited partnership (interest of limited partner! a! with separate property of any general partner but $-T with partnership property



159

3. ,i"ht to &ana"e&ent

participate in the

MANA.EMENT OF PARTNERSHIP I% /hen the "anner o, "ana2e"ent has &een pro+i1e1 ,or in the partnership a2ree"ent

A. /hen a &ana"in" partner has &een appointe1 1 A>>oin4men4 in 4he ar4ic0es oB >ar4nershi> a.
ii.

to remove him for HDT cause, vote of partners representing controlling interest is necessary to remove him without "ust cause or for an D$HDT cause, there must be unanimity including his own vote

b. /xtent of power i.

ii.

if he acts in goo- Bai4h, he may do all acts of A@3$T5AT-$, despite opposition of his partners if in a- Bai4h, he cannot.

; A>>oin4men4 o4her 4han in 4he ar4ic0es oB >ar4nershi> a.
B. /hen two or &ore &ana"in" partners ha+e &een entruste1 with the "ana2e"ent o, partnership 1 Di4hou4 s>eciBica4ion oB 4heir res>ec4ive -u4ies an- @i4hou4 s4i>u0a4ion reEuiring unanimi4? oB ac4ion !"#"RA$ R%$" /ach managing partner may execute all acts of administration "'C"TI)# f any of the managing partners should oppose,

a! @ecision of the ma"ority of the managing partners shall prevail b! n case of a tie, decision of the partners representing the controlling interest shall prevail ; Di4h s4i>u0a4ion reEuiring unanimi4? oB ac4ion !"#"RA$ R%$" Dnanimous consent of all the managing partners shall be necessary for the validity of the acts and absence or inability of any managing partner cannot be alleged "'C"TI)# &hen there is an imminent danger of grave or irreparable in"ury to the partnership, partner may act alone without the consent of the partner who is absent or under disability

II% /hen "anner o, "ana2e"ent has not &een a2ree1 upon a! All partners shall be considered managers and agents b! Dnanimous consent re%uired for alteration of immovable property O3(I.ATIONS OF PARTNERS TO THIR) PERSONS I% (ia&ilit ,or #ontra#tual o&li2ations (A5T 141! 1. All partners, including industrial partners, are personally liable with all their property. Their individual liability is pro rata and subsidiary, unless otherwise stipulated 2. iability of partnership for acts of partners a) Ac4s Bor a>>aren40? carr?ing on in 4he usua0 @a? 4he usiness oB 4he >ar4nershi> !"#"RA$ R%$" Act binds the partnership. "'C"TI)#
acting partner has in fact no authority and



MEMOR( AID ii.

the third person +nows that the acting partner has no authority

b) Ac4s oB S4ric4 :ominion or )@nershi> (acts which are not apparently for carrying on in the usual way the business of the partnership! !"#"RA$ R%$" Act does not bind the partnership. "'C"TI)#
c) Ac4s in con4raven4ion oB a res4ric4ion on au4hori4? i.
II% (ia&ilit arisin2 ,ro" partner7s tort (A5T 14**! or 3rea#h o, Trust (A5T 14*)! 1. &here, by any wrongful act or omission of any partner acting in the ordinary course of business of the partnership or with authority of his co?partners, loss or in"ury is caused to any person, not being a partner in the partnership ( Ar4ic0e 18;;! *. &here one partner, acting within the scope of his apparent authority, receives money or property of a third person and misapplies it ( Ar4ic0e 18;3! ). &here the partnership, in the course of its business, receives money or property and it is misapplied by any partner while it is in the custody of the partnership ( Ar4ic0e 18;3! NOTE: All partners are so0i-ari0? 0ia0e with the partnership for any penalty or damage arising from a partnership tort or breach of trust #8 Cri"inal lia&ilit o, partnership 
IN CIVIL LA3

wrongdoing is regarded as individual in character. But where the crime is statutory, especially when it involves a fine rather than imprisonment, criminal liability may be imposed

(IA3I(IT5 OF STOC0HO()ERS IN A )EFECTIE(5 FORME) CORPORATION  t is ordinarily held that persons who attempt but fail to form a corporation and carry on business under the corporate name occupy the position of partners inter se. Thus where persons associate themselves together under articles to purchase property to carry on a business, and their organi#ation is so defective as to come short of creating a corporation within the statute, they become in legal effect partners inter?se. E9#eption: -ne who ta+es no part  except to subscribe for stoc+ in a proposed corporation, which was never legally formed, does not become a partner with other subscribers who engage in business under the name of the pretended corporation, so as to be liable as such in an action for settlement of the alleged partnership and contribution. (ioneer Insurance & Sure4? Cor>ora4ion vs. Cour4 oB A>>ea0s 15 SCRA 668 [1989]. PRINCIP(E OF D+0+CT P+,'!,* A rule inherent in every partnership  wherein no one can become a member of the partnership without the consent of all the partners. NOTE: This element of delectus personae is true only in case of a general partner, but $-T as regards a limited partner. M!T!A( A.ENC5
C&A'%PE%SO  %o$*ald Padilla ASS"+C&A'%PE%SO  Vida ocar, Joce Vidad EDP Alnai.a &assi$an, Do roth /aon S0JEC" &EADS Christopher %e 1arasigan (Persons and Fa$il %elations), Ale2andro Casa!ar(Propert), 1a+ %hodora Ferrer(3ills and S*ccession), 'an Do$inic P*a(O!ligations and Contracts), Sha Eli2ah D*$a$a(Sales and Lease), John Stephen 4*ia$!ao(PA"), Christopher Ca!igao(Credit "ransactions), Ligaa Alipao("orts and Da$ages), Anthon P*rganan(L"D), 1a+ %icasion "*gadi (Con5icts o6 La)

161


1. when he is expressly or impliedly authori#ed *. when he acts in behalf and in the name of the partnership

the partnership, nor the relations of the partners among themselves who remain as co?partners until the partnership is terminated.

PARTNERSHIP 35 ESTOPPE(  Arises when a person, by words spo+en or written or by conduct, represents himself or consents to another representing him to anyone, as partner in an existing partnership, or with one or more persons not actual partners2 he is liable to any such person to whom such representation has been made, who has, on the faith of such representation given credit to the actual or apparent partnership. ( Ar4 18;5!

/IN)IN. !P 
NOTE: Art. 14*= does not create a partnership as between the alleged partners. A contract, express or implied is essential to the creation of partnership. The law considers them partners and the association as a partnership insofar as it is favorable to third persons. owever, partnership liability is created only in favor of persons who on the faith of such representation given credit to the actual or apparent partnership

TERMINATION
)ISSO(!TION 0hange in the relation of the  partners caused by any partner ceasing to be associated in carrying on the business. ( Ar4ic0e 18;8!  t is the point in time when the partners cease to carry on the business together. t represents the demise of a partnership. NOTE: The dissolution of a partnership must not be understood in the absolute and strict sense so that at the termination of the ob"ect for which it was created the partnership is extinguished. (Tes4a4e oB +o4a vs. Serra  I$ 6 19;6. @issolution does not automatically result in the termination of the legal personality of

b.

n contravention of the agreement between the partners, where the circumstances do nor permit a dissolution under any other provision of this article by the express will of any partner at any time.



MEMOR( AID c.

By any event which ma+es it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. d. &hen a specific thing, a partner had promised to contribute, perishes before its delivery. -r where the partner only contributed the use or en"oyment of the thing and has reserved ownership thereof, its loss, before or after delivery dissolves the partnership. e. By the death of any partner2 f. By the insolvency of any partner or the partnership2 g. By the civil interdiction of any partner2 *. Ju1i#ial 1issolution (A5T 14)1! ? when so decreed by the court, the presiding "udge may place the partnership under receivership and direct an accounting to be made towards winding up the partnership affairs. )n a>>0ica4ion ? or Bor an? >ar4ner 4he cour4 sha00 -ecree a -isso0u4ion @henever a. A partner has been declared insane in any "udicial proceeding or is shown to be of unsound mind2 b. A partner becomes in any other way incapable of performing his part of the partnership contract2 c. A partner has been guilty of such conduct as tend to affect pre"udicially the carrying on of the business2 d. A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him.

IN CIVIL LA3

e.

The business of the partnership can only be carried on in a loss2 f. -ther circumstances render a dissolution e%uitable. )n a>>0ica4ion oB 4he >urchaser oB a >ar4nerFs in4eres4 un-er Ar4ic0e 1813 or 181 a. After the termination of the specified term or particular underta+ing2 b. At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued.

EFFECTS OF )ISSO(!TION A% As to partner7s authorit to a#t ,or the partnership !"#"RA$ R%$" @issolution terminates all authority of any partner to act for the partnership "'C"TI)#S 1. Acts necessary to wind up partnership affairs *. Acts necessary to complete transactions begun but not then finished $ote' Thus, dissolution terminates the A0TDA authority of a partner to underta+e $/& business for the partnership ;!A(IFICATIONS TO THE .ENERA( R!(E: 1. ith respect to the partners (in so far as partners themselves are concerned! a! @issolution is not by act, insolvency or death of a partner' :eneral 5ule applies. ence, dissolution terminates the A0TDA authority of a partner to underta+e $/& business for the partnership b! @issolution is by act, insolvency or death of a partner' !"#"RA$ R%$" Authority of partners inter se to act for the partnership is $-T deemed terminated. Thus, each partner is liable to his co?partners for his share of any liability created by



164

any partner acting for the partnership as if the partnership has not been dissolved 

"'C"TI)#S 1! The cause of dissolution is the A0T of a partner and the acting partner had I$-&/@:/ of such dissolution 2) The cause of dissolution is the @/AT or $-/$0F of a partner and the acting partner had I$-&/@:/ or $-T0/ of such dissolution *. ith respect to persons not partners (third persons! a! &hen partnership is oun- to third persons after dissolution 1! Act appropriate for winding up partnership affairs *! Act appropriate for completing unfinished transactions )! 0ompletely $/& transaction which would bind the partnership if dissolution had not ta+en place provided' the other party is in "ood faith, meaning' i.
circums4ances as -eBine- aove >! &here act is $-T appropriate for winding up partnership affairs or for completing unfinished transactions =! completely $/& transaction which would bind the partnership if dissolution had not ta+en place with third persons in bad faith

3% As to partner7s e9istin2 lia&ilit !"#"RA$ R%$" @issolution does not automatically discharge the existing liability of any partner "'C"TI)# A partner may be relieved from all existing liabilities upon dissolution -$F by an agreement between' 1. ! To continue the business in the same name during the



MEMOR( AID agreed term of the partnership, by themselves or "ointly with others =! To possess partnership property should they decide to continue the business b! 5ights of a partner who has wrongfully caused the dissolution 1! f the business is not continued by the other partners i.

ii.

To have partnership property applied to discharge partnership liabilities To receive in cash his share of the surplus less damages caused by his wrongful dissolution

*! f the business is continued i.

ii.

To have the value of his interest in the partnership at the time of the dissolution, surplus less damages caused by his wrongful dissolution to his co?partners, ascertained and paid in cash or secured by a bond approved by the court2 A$@ To be released from all existing and future liabilities

NOTE: The value of the goodwill of the business is not considered in ascertaining the value of the interest of the guilty partners. RI.HTS OF A PARTNER /HERE PARTNERSHIP CONTRACT IS RESCIN)E) ON THE .RO!N) OF FRA!) OR MISREPRESENTATION (NOTE: The following are the rights of the partner entitled to rescind! 1. 5ight of /$ on, or 5/T/$T-$ of, the surplus of partnership property after satisfying partnership liabilities for any sum of money paid or contributed by him 2. 5ight of DB5-:AT-$ in place of the partnership creditors after payment of partnership liabilities2 and

IN CIVIL LA3

). 5ight of $@/3$E0AT-$ by the guilty partner against all debts and liabilities of the partnership

MANNER OF /IN)IN. !P 1. /xtra"udicial G by the partners themselves without the intervention of the court *. Hudicial G under the control and direction of the court upon proper cause shown by any partner, his legal representative or his assignee PERSONS A!THORI

165


1.
PARTNER7S (IEN 5ight of every partner to have the partnership property applied to discharge partnership liabilities A$@ 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.



(IMITE) PARTNERSHIP  -ne 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 upreme 0ourt, declared a firm to be a general partnership in a case where it appears that the inclusion of 9td.C (limited! in the firm was only a subterfuge resorted to by the partners in order to evade liability for possible losses, while assuming their en"oyment of advantages to be derived from the relation. *o Chung Cang vs. aciBic Commercia0 Co. 5 I$ 1; [19;3]. n 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. Chara#teristi#s o, (i"ite1 Partnership 1. imited partnership is formed by substantial compliance in good faith with the statutory re%uirements *. -ne or more general partners control the business and are personally liable to creditors ). -ne 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 partnership obligations beyond the amount of their capital contributions

>. The limited partners may as+ for the return of their capital contributions under the conditions prescribed by law =. The partnership debts are paid out of the common fund and the individual properties of the general partners

(i"ite1 Partner=Partnership

.eneral Partner= Partnership

1. +-tent of lia(ility imited partnerJs :eneral partner liability extends only to is personally his capital contribution liable for partnership obligations 2. ,i"ht to participate in the &ana"e&ent of partnership imited partner has no :eneral share in the partners have management of a an e%ual right limited partnership and in the renders himself liable to management of partnership creditors as the business a general partner if he (when the ta+es part in the control manner of of the business management has not been agreed upon! 3. Contri(ution imited partner must :eneral partner contribute cash or may contribute property to the money, partnership but not property or services industry to the partnership 4. Proper party to proceedin"s (y or a"ainst the partnership imited partner is not a proper party to proceedings by or against a partnership nless 1. he is also a general partner, or *. where the ob"ect of the proceeding is to enforce a limited partnerJs right against or liability to the partnership

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

5. Transfera(ility of interest



MEMOR( AID imited partnerJs interest is freely assignable, with assignee ac%uiring all the rights of the limited partner sub"ect to certain %ualifications

:eneral partnerJs interest in the partnership may not be assigned as to ma+e 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. nclusion of partner8s na&e in the fir& na&e

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

$ame of a general partner may appear in the firm name

7. Prohi(ition to en"a"e in other (usiness $o such prohibition in the case of a limited partner who is considered a mere contributor to the partnership

:eneral partner is prohibited from engaging in a business which is of the A3/ +ind of business in which the partnership is engaged, if he is a capitalist partner, or in A$F of business for himself if he is an industrial partner

. +ffect of retire&ent9 death9 insanity or insol/ency 5etirement, 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

5etirement, death, insanity or insolvency of a general partner dissolves the partnership

IN CIVIL LA3

#. Creation imited partnership is :eneral created by the members partnership, as after substantial a general rule, compliance in good may be faith with the constituted in re%uirements set forth any form by by law contract or conduct of the partnership 1$. *e&(ers of the partnership 0omposed of one or 0omposed only more general partners of general and one or more limited partners partners 11. %ir& na&e Eirm name must be $o such followed by the word re%uirement imited 12. ,ules "o/ernin" dissolution and windin" up :overned by Art. 14) :overned by Art. 14)

ESSENTIA( RE;!IREMENTS FOR FORMATION OF (IMITE) PARTNERSHIP 1. A certificate or articles of limited partnership which states the matters enumerated in Article 14>>, which must be signed and sworn2 *. uch certificate must be filed for record in the -ffice of the ecurities and /xchange 0ommission. NOTE: A strict compliance with the legal re%uirements is not necessary. t is sufficient that there is substantial compliance in good faith. f 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. (*o Chung Cang vs. aciBic Commercia0 Co. 5 I$ 1; [19;3]. owever, a firm which fails to substantially comply with the formal re%uirements of a limited partnership is a general partnership only as to its relations to third persons. The firm is a limited partnership, sub"ect to all rules applicable to such partnership2 and as between the partners they are bound by their agreement2 and that all the limited partnerJs relations to his co?partners and


167


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 lac+ of substantial compliance to the re%uirements of a limited partnership. f 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. (2 Am. *ur. 6.

CONTENTS OF THE CERTIFICATE OR ARTIC(ES OF (IMITE) PARTNERSHIP 1. $ame of the partnership, adding thereto the word 9limited2C *. 0haracter of the business2 ). ocation of the principal place of business2 >. $ame and place of residence of each member, general and limited partners being respectively designated2 =. Term for which the partnership is to exist2 . Amount of cash and description of and the agree value of the other property contributed by each limited partner2 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 made2 4. Time, if agreed upon, when to contribution of each limited partner is to be returned2 . hare in the profits or other compensation by way of income which each limited partner shall receive by reason of his contribution2 1. 5ight, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the substitution2 11. 5ight, if given, of the partners to admit additional partners2 1*. 5ight, 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 priority2 1). 5ight, 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 partner2 and 1>. 5ight, if given, of a limited partner to demand and receive property other than cash in return of his contribution.

(IA3I(IT5 FOR FA(SE 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 re%uisites are present' 1. e +new the statement to be false at the time he signed the certificate, or subse%uently having sufficient time to cancel or amend it or file a petition for its cancellation or amendment, he failed to do so2 *. The person see+ing to enforce liability has relied upon the false statement in transacting business with the partnership2 ). The person suffered a loss as a result of reliance upon such false statement. MANA.EMENT OF (IMITE) PARTNERSHIP  A general partner in a limited partnership is vested with the entire control of the firmJs business and has all the rights and powers and is sub"ect 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. @o any act in contravention of the certificate2 *. @o any act which would ma+e it impossible to carry on the ordinary business of the partnership2



MEMOR( AID ).



0onfess "udgment against the partnership2 >.
RI.HTS OF A (IMITE) PARTNER 7" /I< ; AR; 1. To have the partnership boo+s +ept at the principal place of business of the partnership *. To inspect, at a reasonable hour, partnership boo+s and copy any of them ). To demand true and full information of the things affecting the partnership >. To demand a formal account of the partnership affairs whenever circumstances render it "ust and reasonable =. To as+ for dissolution and winding up by decree of court . 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 -5 the partnership assets

IN CIVIL LA3

are sufficient to pay partnership liabilities b! The consent of all the members (general and limited partners! has been obtained "'C"TI)# &hen the return of the contribution may be rightfully demanded' 1! -n the dissolution of the partnership *! Dpon the arrival of the date specified in the certificate for the return )! After he has given  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

(IA3I(ITIES OF A (IMITE) PARTNER 1. 0ia(ility for unpaid contri(ution a! Eor the difference between his contribution as actually made and that stated in the certificate as having been made2 A$@ b! Eor any unpaid contribution which he has agreed in the certificate to ma+e in the future at the time and the conditions stated in the certificate 2. 0ia(ility as trustee a! pecific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned2 A$@ b! 3oney 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 members2 but a waiver or compromise shall $-T affect the right of a creditor of


169


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.

S!3STIT!TE) (IMITE) PARTNER  A person admitted to all the rights of a limited partner who has died of has assigned his interest in the partnership. 

!"#"RA$ R%$" e has all, the rights and powers, and is sub"ect to all the restrictions and liabilities of his assignor. "'C"TI)# Those liabilities which he was ignorant at the time he became a limited partner A$@ which could not be ascertained from the certificate.

RE;!ISITES IN OR)ER THAT THE ASSI.NEE MA5 3ECOME A S!3STIT!TE) (IMITE) PARTNER 1. All the members must consent to the assignee becoming a substituted limited partner, -5 the limited partner, being empowered by the certificate must give the assignee the right to become a limited partner *. The certificate must be amended in accordance with Art.14= ). The certificate as amended must be registered in the ecurities and /xchange 0ommission A((O/A3(E TRANSACTIONS OF A (IMITE) PARTNER Being merely a contributor to the  partnership is not prohibited from' 1. granting loans to the partnership *. transacting other business with the partnership ). receiving a pro rata share of the partnership assets with the general creditors if he is $-T also a general partner NOTE: n transacting a business with the partnership as a non?member, the limited partner is considered a non? partner creditor

PROHI3ITE) TRANSACTIONS OF A (IMITE) PARTNER 1. receiving or holding as collateral security any partnership property2 or *. receiving any payment, conveyance, or release from liability if it will pre"udice the partnership creditors

NOTES:  iolation of the prohibition will give rise to the presumption that it has been made to defraud partnership creditors  The prohibition is $-T AB-DT/, there is no such prohibition if the partnership assets are sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.

A.ENC5 CONTRACT OF A.ENC5 A contract whereby a person ( a"ent!  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. ( Ar4ic0e 1868! 

The parties to the contract are' 1.
A.ENC5

(EASE OF SERICES

1.
1.


MEMOR( AID >.
>.
A.ENC5 TO SE((

SA(E

1. Agent receives the goods as the goods of the principal. *. Agent delivers the proceeds of the sale ). Agent can return the ob"ect in case he is unable to sell the same >. Bound to act according to the instructions of his principal.

1. The buyer receives goods as owner *. Buyer pays the price. ). the buyer, as a rule, cannot return the ob"ect sold >. The buyer can deal with the thing as he please being the owner.

P!RPOSE OF A.ENC5  The purpose of agency is to extend the personality of the principal through the facility of the agent. t 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 "uridical acts and carry on many different activities through another when physical presence is impossible or inadvisable at the same time. (11 +anresa 3! E(EMENTS OF A.ENC5 A. Consen4 Any person or entity having "uridical  capacity and capacity to act and not otherwise dis%ualified, 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.

/. )ec4  the services to be underta+en by the agent  may cover all acts pertaining to a business of the principal ( "eneral a"ency ! or one or more specific transactions ( special a"ency !



IN CIVIL LA3

the extent of the agentJs authority to act, whether it be a general or a special agency, depends on how the agency is couched.

C. Cause  3ay be onerous or gratuitous but presumed for compensation NOTE: The agent may not be deprived of his right to compensation by an un"ustified revocation of the agency

0IN)S OF A.ENC5 1. as 4o manner oB crea4ion a! e9press? one where the agent has been actually authori#ed by the principal, either orally or in writing2 b! i"plie1? one which is implied from the i.

ii.

acts of the principal? from his silence or lac+ of action, or his failure to repudiate the agency +nowing 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.

;. as 4o i4s charac4er a! 2ratuitous ? one where the agent receives no compensation for his services. b! #o"pensate1 or onerous? one where the agent receives compensation for his services. 3. as 4o e4en4 oB usiness covere- a! 2eneral? one which comprises all the business of the principal2 b! spe#ial? one which comprises one or more specific transactions. . as 4o au4hori4? conBerre- a! #ou#he1 in 2eneral ter"s? one which is created in general terms and is deemed to comprise only acts of administration2



171

b! #ou#he1 in spe#i,i# ter"sone authori#ing only the performance of a specific act or acts. 5. as 4o i4s na4ure an- eBBec4s or a! ostensi&le representati+e- one where the agent acts in the name and in representation of the principal. b! si"ple or #o""ission- one where the agent acts in his own name but for the account of the principal. ACTS /HICH MA5 3E )E(E.ATE) TO AN A.ENT !"#"RA$ R%$" Dha4 a man ma? -o in >erson he ma? -o 4hru ano4her. "'C"TI)#S 1. ersona0 ac4s if personal performance is re%uired the doing of an act by a person on behalf of another does not constitute performance by the latter. a! oting during an election2 b! 3a+ing a will2 c! 3a+ing statements which are re%uired to be done under oath2 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. *. Crimina0 Ac4s or Ac4s no4 a00o@e- ? 0a@ ? There can be no agency in the perpetration of a crime or unlawful act. /xamples' a! An alien principal using an agent to ac%uire lands2 b!
FORM OF A.ENC5 Agency may be e-press or i&plied  from the acts of the principal, from his silence or lac+ of action, or his

failure to repudiate the agency, +nowing that another person is acting on his behalf without authority. ( Ar4ic0e 1869 !

NOTE: n an implied agency, the principal is still bound by the acts of the agent "ust as in case of express agency 

!"#"RA$ R%$" There are no formal re%uirements governing the appointment of an agent. The agentJs authority may be oral or written. t may be in a public or private writing. "'C"TI)# &hen the law re%uires a specific form "am>0e Sa0e oB a >iece oB 0an- or an? in4eres4 4herein 4hrough an agen4

NOTES:  authority to sell must be in writing2 otherwise the sale is -@ (Art.147>!  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. (:i,on e4 a0. vs. CA e4 a0., !R 1;1 *anuar? ;8 ;223 FORM OF ACCEPTANCE 35 A.ENT Acceptance by the agent may also be  e-press or i&plied from his acts which carry out the agency, or from his silence or inaction according to the circumstances 0in1s o, I"plie1 A##eptan#e 1. here 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 ob"ection 2. here persons are a(sent



MEMOR( AID 

!"#"RA$ R%$" Acceptance cannot be implied from silence of the agent "'C"TI)# 1. principal transmits his power of attorney to the agent, who receives it without any ob"ection2 *. principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is hai4ua00? engage- as an agent, and he did not reply to the letter or telegram

IMP(IE) ACCEPTANCE 1. @e Hure Agent *. Binds the principal for acts within the scope of his authority.

A.ENC5 35 ESTOPPE( 1. $ot really an agent *. -nly the purported agent is liable.

R!(E ON A.ENC5 35 ESTOPPE(  -ne who clothes another with 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 !R.88531 )c4oer ;6 1993 C(ASSES AN) 0IN)S OF A.ENTS 1. Dniversal 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. *. :eneral Agent? one employed to transact all the business of the principal, or all the business of a particular +ind or in a particular place, or in other words to do all acts, connected with a particular trade, business or employment. ). pecial or
.eneral A2ent

IN CIVIL LA3

Spe#ial A2ent

1. cope of !uthority Dsually authori#ed to do all acts connected with the business or employment in which he is engaged.

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

2. Continuity 0onducts a series of transactions involving a continuity of service.

Dsually involves a single transaction or a series of transactions not involving continuity 3. +-tent (y which a"ent &ay (ind principal Binds his principal by 0annot 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 authori#ed to perform on behalf of the principal 4. Ter&ination of !uthority Apparent authority 3ere 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 in%uire 5. Construction of nstructions of Principal tatement of Authority of agent principal with must be strictly respect to the pursued agentJs authority would ordinarily regarded as advisory only

SPECIA( PO/ER OF ATTORNE5 >SPA8  An instrument in writing by which one person, as principal, appoints


174


another as his agent and confers upon him the authority to perform certain specified acts or +inds of acts on behalf of the principal. NOTE: t need not be notari#ed2 except where it is executed in a foreign country, must be certified in accordance with the 5ules of 0ourt.

INSTANCES /HERE SPA IS NECESSAR5 (A5T 1474! >PEC/EM- ((3- 3OCARO8 1. To ma+e such payments as are not usually considered as acts of administration2 *. To effect novation which put an end to obligations already in existence at time the agency was constituted2 ). To compromise, to submit %uestions to arbitration, to renounce the right to appeal from a "udgment, to waive ob"ections to the venue of an action or to abandon a prescription already ac%uired2 >. To waive any obligation gratuitously2 =. To enter into any contract by which the ownership of an immovable is transmitted or ac%uired either gratuitously or foe a valuable consideration2 . To ma+e gifts, except customary ones for charity or those made to employees in the business managed by the agents2 7. To loan or borrow money, unless the latterJs act be urgent and indispensable for the preservation of the things which are under administration2 4. To lease any real property to another person for more than one year2 . To bind the principal to render some service without compensation2 1. To bind the principal in a contract of partnership2 11. To obligate the principal as guarantor or surety2 1*. To create or convey real rights over immovable property2 1). To accept or repudiate an inheritance2 1>. To ratify or recogni#e obligations contracted before the agency2 1=. Any other act of strict dominion.

NOTE: a third person with whom the agent wishes to contract on behalf of the principal may re%uire the presentation of the power of attorney or the instructions as regards the agency2 ece>4 private or secret orders. NOTE: The scope of the agentJs authority is what appears in the written terms of the power of attorney. &hile third persons are bound to in%uire into the extent or scope of the agentJs authority, they are not re%uired 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 latterJs authority. n the same way, third persons need not concern themselves with instructions given by the principal to his agent outside the written power of attorney. (ire-? "n4er>rises Inc. vs. CA e4 a0. !R 1;9239 Se>4emer ; ;22; NOTES:   vs. CA ;65 SCRA 168 EFFECT OF (AC0 OF SPA /HERE ONE IS RE;!IRE): %#"#<)RC"A/$" /hen prin#ipal &oun1 & a#t o, a2ent 1. Agent must act @i4hin 4he sco>e of his authority



MEMOR( AID

IN CIVIL LA3

*. Agent must a ct in eha0B oB 4he >rinci>a0

warranty against eviction2 Article 144) does $-T apply

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

OCCASIONS /HEN PRINCIPA( IS 3O!N) 35 THE ACTS OF THE A.ENT 3E5ON) THE (ATTER7S PO/ERS

/hen a person NOT &oun1 & a#t o, another 1. atter acts @i4hou4 or e?on- 4he sco>e of his authority in the formerJs name2 and *. atter a cts @i4hin 4he sco>e oB his au4hori4? u4 in his o@n name (%#:ISC$)S": RI#CIA$, except when the transaction involves a thing belonging to the principal. n such case, the contract is deemed as entered between the principal and the third person.

EFFECTS OF A.ENT7S ACTS 1. &ith Authority a. in >rinci>a0Fs name = +ali12 principal is bound2 agent not personally liable unless he bound himself (Article 147! b. in his o@n name = Apply Article 144)2 generally not &in1in2 on the prin#ipal2 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. *. &ithout Authority a. in >rinci>a0Fs name = unauthori4e1 an1 unen,or#ea&le but may be ratified, in which case, may be validated retroactively from the beginning (Article 1>7! b. in his o@n name = +ali1, whether or not the sub"ect matter belongs to the principal, provided that at the time of delivery, the 9agentC can transfer legally the ownership of the thing. -therwise, he will be held liable for breach of

.eneral Rule: The principal is not bound by the acts of the agent beyond his limited powers. +-ceptions 1. &here the principalJs acts have contributed to deceive the third person in good faith2 *. &here the limitations upon the power created by him could not have been +nown by the third person2 ). &here the principal has placed in the hands of the agent instruments signed by him in blan+ (trong vs. :utierre# 5epide  < 4 618! >. &here the principal has ratified the acts of the agent.

)o#trine o, A2en# & Ne#essit  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. 5eal existence of an emergency *. nability of the agent to communicate with the principal ). /xercise of the additional authority for the principalJs own protection >. Adoption of fairly reasonable means, premises duly considered NOTE: Agency can never be created by necessity2 what is created is a--i4iona0 au4hori4? in an agent appointed and authori#ed before the emergency arose. .ENERA( O3(I.ATIONS OF A.ENT TO PRINCIPA(: 1. To act with utmost good faith and loyalty for furtherance of principalJs interests *. To obey all lawful orders and instructions of principal within the scope of the agancy


175


). To exercise reasonable care, s+ill and diligence

SPECIFIC O3(I.ATIONS OF A.ENT TO PRINCIPA( 1. To carry out the agency which he has accepted *. To answer for damages which through his performance the principal may suffer ). To finish the business already begun on the death of the principal should delay entail any danger >. 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 =. To advance the necessary funds should there be a stipulation to do so . 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. $ot to carry out the agency if its execution would manifestly result in loss or damage to the principal 4. To answer for damages if there being a conflict between his interest and those of the principal, he should prefer his own . $ot to loan to himself if he has been authori#ed to lend money at interest 1. 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 countermar+s and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same +ind and mar+, which belong to different owners 1*. To be responsible in certain cases for the acts of the substitute appointed by him 1). To pay interest on funds he has applied to his own use 1>. To inform the principal, where an authori#ed sale of credit has been made, of such sale

1=. To bear the ris+ of collection, should he receive also on sale, a guarantee commission 1. 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 -@. !"#"RA$ R%$" Inowledge of agent is +nowledge of principal. "'C"TI)#S 1. AgentJs interests are adverse to those of the principal *. AgentJs duty is not to disclose the information ( confidential infor&ation! ). &here the person claiming the benefit of the rule colludes with the agent to defraud the principal

S!3-A.ENT  A person to whom the agent 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 (su&-a2ent! except when he has been prohibited by the principal. (A5T 14*! Instan#es when a2ent shall &e responsi&le ,or the a#ts o, the su&stitute: 1. when he was not given the power to appoint2 or *. when he was given such power but without designating the person, and the person appointed was notoriously incompetent or insolvent. ). 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.



MEMOR( AID NOTE: All acts of the substitute appointed against the prohibition of the principal shall be -@. JOINT A.ENTS  Agents appointed by one or more principals under such circumstances as to induce the inference that it was the principalJs intent that all should act in con"unction in consummating the transaction for which they were appointed. Their responsibility is H-$T2 except  if solidarity has been expressly stipulated.  f solidarity has been agreed upon, each agent is responsible for the' a. non?fulfillment of the agency b. fault or negligence of his fellow agents2 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 (A5T 1*17(*!! Instan#es when a2ent "a in#ur personal lia&ilit: 1. &hen 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 principal2 &oth are lia&le *. &hen agent exceeds his authority ). &hen agent by his acts prevents performance on the part of the principal >. &hen a person acts as an agent without authority or without a principal =. 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 ma+ing of the contract FACTOR=COMMISSION A.ENT ? 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. CIVIL LA3 COMMITTEE







IN CIVIL LA3

f 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 +ind and mar+, which belong to different owners, shall distinguish them by countermar+s, 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. f such sale is made without authority, the principal is given two alternatives' i.

e may re%uire payment in cash, in which case any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agentJs expense2 ii. e may ratify the sale on credit in which case it will have all the ris+s and advantages to him. 



f the commission agent is authori#ed to sell on credit, he shall inform the principal with a statement of the names of the buyers. &ith 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.

3RO0ER  A middleman or intermediary who, in behalf of others and for a commission or fee, negotiates contractsKtransactions relating to real or personal property. Fa#tora2e 0ompensation of  commission agent.

a

factor

or

C&A'%PE%SO  %o$*ald Padilla ASS"+C&A'%PE%SO  Vida ocar, Joce Vidad EDP Alnai.a &assi$an, Do roth /aon S0JEC" &EADS Christopher %e 1arasigan (Persons and Fa$il %elations), Ale2andro Casa!ar(Propert), 1a+ %hodora Ferrer(3ills and S*ccession), 'an Do$inic P*a(O!ligations and Contracts), Sha Eli2ah D*$a$a(Sales and Lease), John Stephen 4*ia$!ao(PA"), Christopher Ca!igao(Credit "ransactions), Ligaa Alipao("orts and Da$ages), Anthon P*rganan(L"D), 1a+ %icasion "*gadi (Con5icts o6 La)

177


Or1inar Co""ission 0ompensation for the sale of goods  which are placed in his possession or at his disposal. .uarant Co""ission >)el #re1ere8  Eee that is given in return for the ris+, which the agent has to bear in the collection of credits. An agent with a del credere  commission is liable to the principal if the buyer fails to pay or is incapable of paying. .ENERA( O3(I.ATIONS OF PRINCIPA( TO A.ENT  @uties and liabilities of the principal are primarily based upon the contract and the validity of the contract between them SPECIFIC O3(I.ATIONS OF PRINCIPA( TO A.ENT (0A5. 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 ob"ect of the agency until the principal effects this reimbursement and pays the indemnity. =. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agentJs services

(IA3I(IT5 OF PRINCIPA( FOR TORT OF A.ENT R!(E: The principal is civilly liable to third persons for torts of an agent committed at the principalJs direction or in the course and within the scope of the agentJs authority. Reason ,or lia&ilit: The rule is based upon the principle that he who does an act through another does it himself. CON)ITIONS FOR RATIFICATION 1. principal must have capacity and power to ratify *. principal must have had +nowledge of material facts ). principal must ratify the acts in its entirety >. act must be capable of ratification =. act must be done in behalf of the principal ESTOPPE( 35 PRINCIPA( /ven 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 PRINCIPA(S  Two or more persons who appoint an agent for a common transaction or underta+ing. 

(ia&ilit: solidarily liable to the agent for all the conse%uences of the agency. Requisites o, soli1ar lia&ilit:  1. There are two or more principals *. The principals have all concurred in the appointment of the same agent2 and ). The agent is appointed for a common transaction or underta+ing NOTE: Any one of them may revo+e the agency R!(ES ON )O!3(E SA(E 35 PRINCIPA( AN) A.ENT 1 &hen 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



MEMOR( AID

*

other, that of prior date shall be preferred, without pre"udice to Article 1=>>(-ou0e sa0e!. f the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be re"ected. f the agent is in bad faith, he alone shall be responsible.

Instan#es when prin#ipal is not lia&le ,or the e9penses in#urre1 & the a2ent: 1. if the agent acted in contravention of the principalJs instructions, unless the latter should wish to avail himself of the benefits derived from the contract2 *. when the expenses were due to the fault of the agent2 ). when the agent incurred them with +nowledge that an unfavorable result would ensure, if the principal was not aware thereof2 >. when it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. MO)ES OF E*TIN.!ISHMENT OF A.ENC5 (/@&A5@! 1. Expiration of the period *. )eath, civil interdiction, insanity or insolvency of the principal or of the agent ). /ithdrawal 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. >. Accomplishment of the ob"ect or the purpose of the agency =. R evocation . )issolution of the firm or corporation, which entrusted or accepted the agency. Instan#es when 1eath o, prin#ipal 1oes not ter"inate a2en# 1. f the agency has been constituted in the common interest of the principal and the agent

IN CIVIL LA3

2. f it has been constituted in the interest of a third person who has accepted the stipulation in his favor

Re+o#ation o, A2en# & Prin#ipal L :/$/5A 5D/' Agency is revocable at will of the principal, regardless of the term of the agreement. L /M0/. f 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 A2en# #ouple1 with an interest An agency wherein the agent has ac%uired 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 revo+ed. NOTE: owever, in Co0eongco vs. C0a>ara0s (12 SCRA 5 !, the 0 made a sweeping statement that coupled with an interest or not, the authority (agency! can certainly be revo+ed for a "ust cause. 

I"plie1 Re+o#ation "a &e e,,e#te1: 1. By the act of the principal in appointing another agent for the same business or transaction2 *. By the act of the principal in directly managing the business entrusted to the agent2 or ). By the act the principal in subse%uently 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.


179


3. :eneficiary or the cestui ue trust

TR!STS TR!ST  A legal relationship between one person having an e%uitable ownership in property and another owning the legal title to such property. C(ASSIFICATIONS 1. +ffecti/ity ? from the viewpoint of whether they become effective after the death of the trustor or during his life, it may be either' a% testa"entar trusts b. trusts inter +i+os (sometimes called 9li/in" trustsC! *. Creation ? from the viewpoint of the creative force bringing them into existence, it may be either' a) E9press trust ? created by the intention of the trustor or of the parties b) I"plie1 trust ? one which comes into being by operation of law. This may be either' 1) Resu04ing 4rus4 ? one in which the intention to create a trust is presumed by law to exist from the transaction and facts of the case 2) Cons4ruc4ive 4rus4 ? one imposed by law irrespective of and even contrary to the intention of the parties. t is designed to promote "ustice, frustrate fraud and prevent un"ust enrichment.

Persons in+ol+e1 in the #reation o, a trust: 1. Trustor ? the one who intentionally creates a trust

? the one who has the e%uitable interest in the property and en"oys the benefit of administration by the trustee. e may be a natural person or a legal entity. The trustor may establish a trust with himself as the beneficiary (usual case!.

E(EMENTS OF E*PRESS TR!ST 1. 0ompetent trustor and trustee2 2. Ascertainable trust res2 and ). ufficiently certain beneficiaries. TR!ST PROPERT5 The concept of a trust arises from or is the result of a fiduciary relation between the trustee and the cestui %ue trust as regards certain property? real, personal, funds or money, choses in action held by the trustee. (acheco vs. Arro 85 I$ 525  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. 

TR!ST

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 underta+ing supported by a consideration, which obligation may or may not be fiduciary in character.

TR!ST

)ONATION

1. An existing legal relationship and involves the separation of legal and e%uitable title

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

*. The beneficiary of *. The donee must a trust may demand comply with the performance of the legal re%uirements legal title to the trust property for obligation without in accepting the benefit of another and with having formally donations. certain powers and sub"ect to accepted the certain duties benefit of the trust in public document, upon mere ac%uiescence in the 2005 CENTRALIZED BAR OPERATIONS EXECUTIVE C OMMITTEE AND SUBJECT formation of the CHAIRPERSONS Maricel Aare!"#$ (Over-all Chairperson), R#!al% Jal&a!'ar (Over-all trust and Vice Chair), (#la!%a T#le!"i!#(VC-Acads), Je!!i)er A!*(VC- Secretariat), J#+ I!%,c"i-# (VC-Finance), Elai!e Ma$,.a" (VCacceptance under EDP), A!!a Mar*ari"a Ere$ (VC-Logistics) J#!a"/a! Ma!*,!%a+a# (Political La), ra!ci$ Be!e%ic" Re#","arthe (La!or La),second R#&,al% Pa%illa (Civil La), C/ar&ai!e T#rre$ ("a#ation La), Mar. Da-i% Mar"i!e' (Cri$inal La), L,i$a Ale*re (Co$$ercial paragraph ofar!+ article La), Ji!.+ A!! U+ (%e$edial La), Jac.ie L#, Ba,"i$"a (Legal1)11(stipulations Ethics) pour autrui!.

2. Trustee ? the person who holds the


MEMOR( AID 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.

IN CIVIL LA3



PROOF OF TR!ST L :/$/5A 5D/' trust whether express or implied may be proved by parol or oral evidence L /M0/
Requisites ,or a Trustee to #lai" title & pres#ription: 1. e has performed open and une%uivocal acts of repudiation *. uch positive acts of repudiation have been made +nown to the beneficiary or the cestui %ue trust ). The evidence thereon should be clear and convincing and >. The period fixed by law has expired. (1 years from the time that the repudiation is made +nown to the beneficiary in cases of express trust or resulting trust while 1 years from the time a constructive trust arises!. 

n 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. 5ule ), sec ) does not apply in cases of implied trust that is, a trust which may be inferred merely by 4he acts of the parties or from other circumstances. (A$ vs. ea0- $umer Co.

Ne#essit o, A##eptan#e to the #reation an1 +ali1it o, 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 courts will appoint a trustee to fill the office that he declines. (see Sec.3 Ru0e 98 oB 4he Ru0es oB Cour4. NOTE: But a trusteeJs 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.

NOTES:  the 1?year prescriptive period in case of implied trust begins to run from the date the trustee repudiates the express trust. n the case S>s. ascua0 e4 a0. vs. CA e4 a0. !R 1159;5 Augus4 15 ;223 it was held that repudiation ta+es place when the adverse party registers the land.  the >?year prescriptive period under Article 1)1 applies only if the fraud does not give rise to an implied trust, and the action is to annul a voidable contract under Article 1).

*. Acceptance of the &ene,i#iar  The acceptance by the beneficiary is essential to the creation and validity of a trust. owever, such acceptance is presumed if there is no proof to the contrary and the trust does not impose any onerous condition upon the beneficiary.

TR!ST P!RS!IT R!(E  /%uity 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.



181

express trust.

IMP(IE) TR!ST 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 e%uity independently of the particular intention of the parties. RES!(TIN. CONSTR!CTIE TR!ST TR!ST 1. ntention 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 "ustice, from the frustrate fraud and to nature of their prevent un"ust transaction enrichment. 2. Prescripti/e period The 1 year The 1 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 +nown to beneficiary. 3. +-a&ples llustrated in llustrated in Articles Articles 1>>4, 1>=, 1>=>, 1>==, 1>= 1>>, 1>=1, 1>=*, 1>=)

0IN)S OF IMP(IE) TR!STS 1. >4! G 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 e%uivalent, constituting valuable consideration2 b! and such consideration must be furnished by the alleged beneficiary of a resulting trust. "'C"TI)#S a! &here A pays the purchase money and title is conveyed by absolute deed to AJs child or to a person to whom A stands in loco parentis and who ma+es no express promise, a trust does not result, the presumption being that a gift was intended2 b! &here an actual contrary intention is proved2 c) &here 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. Cour4 oB A>>ea0s ;82 SCRA ;6; [199]

E*PRESS TR!ST IMP(IE) TR!ST 1. !s to creation 0reated by the intention of the parties

0ome into being by operation of law.

2. !s 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. !s re"ards repudiation of trust An express repudiation made +nown to the beneficiary is necessary in order that laches or ac%uisitive prescription may bar an action to enforce an

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

*.

).

>.

@onations made to a person but the beneficial interest is vested in another. The donee is the trustee while the designated third person is the beneficiary. (A5T 1>>!. = ! egal title to land inherited by heir placed in the name of another. ( Ar4ic0e 151!


Partnership, Agency and Trust

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