AGENCY, TRUST AND PARTNERSHIP

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TOMAS CLAUDIO COLLEGES
COLLEGE OF LAW
Morong, Rizal
AGENCY, TRUST AND PARTNERSHIP LAW
1ST
Semester, AY 2022-2023
Syllabus
Atty. Samuel Aras Laurente
Reference: Agency & Trusts, Partnership & Joint Ventures
by Cesar L. Villanueva Teresa S. Villanueva-Tiansay
Course description
The course is focus on important provisions of the Civil Code on Agency (Title X),
Partnership (Title IX) and Trust (Title V).
I. AGENCY
A. Nature, Objective, & Kinds of Agencies
a. Definition and Objectives of Agency
b. Parties to a Contract of Agency
c. Elements of the Contract of Agency
1. Element of Consent
a. Capacity of the Parties in an Agency Arrangement
2. Element of Subject Matter
3. Element of Consideration (or Commission)
a. Agent’s Entitlement to Commission Anchored on the
Rendering of the Defined Service

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d. Essential Characteristics of Agency
1. Nominate and Principal
2. Consensual
3. Unilateral and Primarily Onerous
4. Personal, Representative and Derivative
a. Principle Flowing from Agency Characteristics of
“Personal, Representative, and Derivative
5. Fiduciary and Revocable
6. Preparatory and Progressive
e. Kinds of Agency
1. Based on the Business or Transaction Covered
a. General Agency
b. Special Agency
2. Whether or Not it Covers Litigation Matters
a. Attorney-at-Law
b. Attorney-in-Fact.
3. Whether it covers Acts of Administration or Acts of Ownership
a. General Power of Attorney
b. Special Power of Attorney
f. Agency Distinguish from Similar Contracts
1. From an Employment Contract
2. From a Contract of a Piece-of-work
3. From Management Agreement
4. From a Contract of Sale
5. From a Negotiorum Gestio
6. From a Contract of Brokerage

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a. How Different Are the Duties and Responsibilities of the Agent
and the Broker to Their Clients?
b. Broker is Not Legally Incapacitated to Purchase Property of the
Principal
c. Rules on Broker’s Entitlement to Commission
1. Doctrine of Efficient Procuring Cause
2. Stipulation as to Commission Prevails
d. Rules on Compensation for Brokers Apply Also to Commission
agents
e. Aberrant Rulings on Commission Issues
f. Broker of a Sale Distinguished from Broker Himself Purchasing
B. Formalities of Agency
a. How Agency may be constituted
1. Perfection from the side of the Principal
2. Perfection from the side of the Agent
3. Instances When There is Deemed to Be Meeting of Minds
Between the Principal and the Agent
b. Perfection of the Contract of Agency as it Affects Third Persons
1. Rules on the Existence of Agency , As to Third Parties
2. Agency by Estoppel
c. Formal Requirements on Grant of Powers to Agent
1. General Principles on Contracts Entered into by Agents
2. General Powers of Attorney
3. Must Powers of Attorney be in Writing
4. Special Powers of Attorney
a. What makes an agency a “Special Power of Attorney”?
b. Specific Instances Where the Law Requires a Special Power
of Attorney

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1. To make payments as are usually considered as acts
of Administration
2. To Effect Novation which put an end to obligations
in existence when the agency was constituted
3. Special Powers of Attorney with Respect to
Principal’s Causes of Action
4. To waive any obligation Gratuitously
5. To enter into any Contract by which Ownership of
an Immovable is transmitted or acquired
i. Does the grant of the special power to sell
include the power to mortgage and vice versa
ii. Does the power to sell for “any amount”
include the power to effect an exchange or
barter?
5-A. Sale of a Piece of Land Through an Agent
i. Article 1874 covers disposition of parcels of
land, done onerously or gratuitously
ii. Does Article 1874 cover Agency to purchase
land or any interest therein?
iii. Is an oral contract of agency to sell parcel of
land itself void?
iv. Is sale of a piece of land pursuant to an oral
special power to sell void or unenforceable?
v. How detailed must the special power of
attorney to sell be?
5-B. Agent cannot validly purchase the property of the
principal held for sale
6. To make gifts.
7. To loan or borrow money
i. When money is borrowed in the name of the
principal without the special power of attorney
ii. The Agent himself being the lender
8. To lease real property for more than one year
9. To bind the principal to render some service
without compensation

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10. to bind the principal in a contract of partnership
11. To obligate the principal as guarantor or surety
12. To create or convey real rights over immovable
13. To accept or repudiate an inheritance
14. To Ratify or Recognize Obligation contracted
before the agency
15. Any other act of strict dominion
c. Doctrine of implied powers flowing from express powers
d. Special Power of Attorney Excludes General Power
of Attorney over the matter covered
C. Power & Authority, Duties & Obligations, Rights of the Agent
a. General obligation of the agent who accepts the agency
b. Measures of Damages for Agent’s Non-Performance
c. Obligations of Agent who Declines Agency
d. General Rule on Agent’s Power and Authority
1. Statutory measures of compliance by the agent of his fiduciary duties
e. Duty of Obedience
1. Legal consequence of breach of duty of obedience
f. Duty of Diligence
1. Measure of liability for breach of duty of diligence
2. Responsibility for fraud or negligence
g. Duty of loyalty
1.Duty of loyalty in general
a. Measure of damages due to the principal when agent violates his
duty of loyalty
b. When agent contracts in his own name on a matter that falls
within the scope of the agency

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c. Particular rules on conflict-of-interest situations
1. Purchase of principal’s property
2. When agent empowered to borrow or lend money
d. Obligation to render an account and turn-over to principal what
is received by virtue of the agency
h. Specific obligation rules on funds
1. Obligation to advance funds
2. Liability of agent for interest
i. Power of agent to appoint a substitute
1. Effects when agent appoint a substitute
a. When the sub-agent appointed pursuant to the
instruction of the principal
b. When the sub-agent not prohibited by principal
c. When the sub-agent appointed against the principal prohibition
j. Consideration of the fiduciary duties of the agent as t third parties
1. Effect on the agent of contracts entered into within the Scope of his
authority
a. General Rule: Agent is not personally liable to third parties
b. Exception : When the agent expressly makes himself
personally liable
c. Exception : When the agent is guilty of fraud or negligence
2. Effects of acts done by agent without authority or in excess of his
authority
a. General rule: The Principal in not liable; agent may be liable
b. Exception: When the Principal May be bound
3. Consequences when agent acts in his own name

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a. Exception: When the property involved in the contract belongs to
the principal
b. Remedy of the principal is to recover damages from the agent
4. When two or more agents appointed by same principal
5. When third party liable to the agent himself
k. Specific obligation rules for commission agents
1. Nature of factor or commission agent
2. Specific obligation of a commission agent
a. To take custody of goods
b. Not to commingle similar goods belonging to
different principals
c. Not sell on credit without principal’s authorization
d. To inform the Principal of every pre-authorized sale
on credit
e. To bear the risk of collection under De Credere
f. To collect credits of the principal
g. To return goods unsold
D. Obligation of the Principal
a. Binding effects of the contract of agency
b. Principal bound by the contracts made by the agent in his behalf
1. Principal not bound by contracts made without authority or
outside the scope of authority
2. When principal is bound by the acts done outside the
scope of authority
c. Liability of the principal for agent’s tort
d. Obligation of the principal to agent
1. To pay agent’s compensation
2. To advance sums requested for execution of the agency
a. When principal not liable to reimburse agent for his
expenses

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3. To indemnify agent for the damage sustained
a. Right of agent to retain object of agency in pledge
for advances and damages
e. Obligation of two or more principals to agent appointed for
common transactions
f. Rights of persons when faced with conflicting contracts
E. Extinguishment of Agency
a. How and when Agency extinguish
b. Principal revocation
1. Express revocation
2. Implied revocation
a. appointment of new agent for same business
b. When principal directly manages the business
c. Special Power of Attorney revokes a General Power
of Attorney
3. Revocation on the basis of breach of trust
4. Effects of revocation on third parties
a. When it affects dealing with specified third parties
b. Revocation of General Powers of Attorney
c. Revocation of Special Powers of Attorney
5. Irrevocable Agencies
c. Withdrawal of the Agent from the Agency
d. Death, Civil Interdiction, Incapacity or Insolvency of the Principal
1. When the Agency continues despite death of principal
2. Effect of Acts done by Agent without knowledge of
Principal’s death
e. Death, Civil Interdiction, Incapacity or Insolvency of the Agent
1. In case of multiple agents
f. Dissolution of a corporation
g. Obligations of Agent when the Agency Extinguished

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II. TRUSTS
A. Introduction
a. Trust under the New Civil Code
1. Philippine Trusts Rooted on American Law on Trusts
b. The “Equity” Essence of Implied Trust
c. The Nature of Trusts
1. Trusts Do Not Create Separate Juridical Entities
2. Trust Divorce naked title of the Trusts Properties from the rest
of the Trustor’s Estate
3. Trusts anchored on splitting the naked title and beneficial
title
d. Kinds of Trusts
B. Express Trusts
a. Definition, and Nature of Express Trusts
b. Essential Characteristics of Express Trusts
1. Express trusts are essentially contractual in character
2. Essential elements of express trusts
a. Express Trusts establish contractual relationship built
around property relation
3. Nominate and Principal, yet Governed by Equity Principles
4. Unilateral and Gratuitous
5. Express Trust as a preparatory contract
a. Acquisitive Prescription on the Corpus Unavailing to
the Trustee
c. Rules of enforceability of express trusts
1. Express Trust is Essentially a Real, Not Consensual contract
2. Express Trust must nevertheless be clearly shown to have
been intended
3. Essence of the relationship between trustor and trustee prior
to the conveyance of the Res
4. Express Trusts over immovable must be in writing
d. Distinguishing Express Trusts from similar arrangement
1. Splitting of full dominion into naked/legal title and
beneficial/ equitable title

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a. Compared with Usufruct
b. Compared with lease
c. Compared with sale
2. On being bound to fiduciary duties and obligations
a. Compared with Agency
e. Kinds of Express Trusts
1. Contractual trusts
2. Inter Vivos Trusts
3. Testamentary Trusts
4. Eleemosynary or Charitable Trusts
5. Publicly-Regulated Trusts
f. Capacities, Rights, Duties and Obligations of the Parties to the
Express Trust
1. The Trustor
a. Trustor as the creator of the trust
b. Trustor must have legal capacity to convey the corpus
2. The Trustee
a. Trustee is the party primarily bound
b. Trustee must have legal capacity to accept the trust
c. When trustee declines the designation
d. Obligation of the Trustee
1. Contractually stated duties and
obligations of the Trustee
2. Common law duties of the Trustee
3. Trustee is prohibited from donating trust
property
4. Trustee cannot use funds of the trust to
acquire property for himself
5. Duties and Responsibilities of the Trustee
under the Rules of Court
6. Proper proceedings for sale or
Encumbrance of Trust Estate
7. Trustee does not assume general
personal liability on the trust

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8.Trustee is entitled to compensation for
management of the trust estate
9. Removal or Resignation of Trustee
3. The Beneficiary
a. Beneficiary is the passive recipient of benefits flowing
from the trust
b. Beneficiary need not have legal capacity
g. How Express Trust Extinguished or Terminated
1. Destruction
2. Revocation
3. Achievement of the objective, or happening of the
condition, provided for in the Trust Instrument
4. Death or legal incapacity of the Trustee
5. Confusion or merger of legal and beneficial titles in the same
person
6. Breach of Trust
C. IMPLIED TRUSTS
a. Nature, and Types of Implied Trusts
1. The two types of Implied Trust
a. Resulting Trusts
b. Constructive Trusts
2. Implied Trusts Distinguished from Express Trusts
b. Nature of evidence required to prove implied trusts
c. Resulting Trusts
1. Burden of proof in Resulting Trusts
2. Blurring of the distinctions between Express Trusts and
Resulting Trusts

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a. Rules of prescriptibility of Resulting Trusts
d. Constructive Trusts
1. Distinguishing from Resulting Trusts
2. Constructive Trusts similar in purpose to the Quasi-Contracts
of Solutio Indebiti
e. Implied Trusts particularly constituted by law
1. Purchase of property where Title placed in one person, but
price paid by another person
a. When title is placed in the name of a child
b. When it is the child that supplies the purchase price
c. When a contrary intention is proved
d. When purchase price extended as a loan
e. When the purchase is made in violation of an existing
statute
2. Purchase of property where title is place in the name of
person who loaned the purchase price
a. Akin to an Equitable Mortgage Arrangement
3. When Absolute Conveyance of Property Effected as a
means to secure performance of obligation
4. Two or more persons purchase property jointly but place title
in one of them
5. Property conveyed to a person merely as holder thereof
6. Donation of property to a done who shall have no beneficial
title
7. Land passes by succession but Heir places title in the trustee
8. When Trust fund used to purchased property which is
registered in Trustee’s name
9. Constructive Trust: When property is acquired through
mistake or fraud
a. Application of principle under the old civil code

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b. Applications under the New Civil Code
c. Recent application of Article 1456
D. RULES OF PRESCRIPTION FOR TRUSTS
a. Rules of prescription for Express Trusts
1. General Rule: Express Trusts not susceptible to acquisitive
prescription
2. Exception: When acquisitive prescription may arise in Express Trusts
a. Valid “Repudiation” in Express Trusts
b. Rules of prescription for Implied Trusts
1. Old Civil Code Jurisprudence
a. Continuing relevant jurisprudence under the Old Civil Code
Regime
2. Jurisprudence under the New Civil Code
a. What is the period applicable when prescription is allowed
b. When does the 10-Year Prescriptive Period begin to run
c. When registration in the name of Trustee was integral part of
the Trust Arrangement
d. When Cestui Que Trusts is in Possession of the Res
e. When circumstances did not grant cestui que trust sufficient
time to discover the fraud
3. For Land: Without registration, the 10-year period does not even
begin to run
4. When Registration covers a void title
5. Rules on prescription on Resulting Trusts follow those of Express Trusts
6. When Res has passed-on to a buyer in good faith and for value
c. Reclassification of Trusts

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III. PARTNERSHIPS
A. HISTORICAL BACKGROUND OF PHILIPPINE PARTNERSHIP LAW
a. Sources of Philippine Law on Partnership
1. Notion of Partnership of Ancient Origin
2. Civil and Common Law bases of Partnership Laws
3. Particular bases of the Philippine Law on Partnership
4. Significance of Historical Background of Philippine Partnership Law
b. Old Branches of Philippine Partnership Law
1. Distinguish between Civil and Commercial Partnerships
2. Significance of the Historical Distinctions between Civil and
Commercial Partnership
B. TRI-LEVEL EXISTENCE OF THE PARTNERSHIP
a. Interplay of the Tri-Level Existence of the Partnership
b. Partnership is Primary a Contractual Relationship
c. Partnership is a Medium of doing business, through the partnership
Juridical person
1. Legal bases of the partnership Juridical Personality
2. Underlying business ends of the partnership juridical person
a. The Case for “ Secret Associations”
b. Jurisprudence Application of the Doctrine of Separate
Juridical Personality of the Partnership
3. Applicability of the Doctrine of Piercing the Veil of Separate
Juridical Fiction
4. Entitlement to Constitutional Rights and Guarantees
d. Partnership as a business enterprises
C. ATTRIBUTES OF THE PARTNERSHIP

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a. Non-Solemn or Consensual Juridical Personality
1.Exceptions to Informal or Consensual Nature of Partnership Juridical
Personality
2. Weak Juridical Personality
b. Mutual Agency
c. Delectus Personae
d. Partners bound to unlimited liability
e. Partnership Distinguished from other business media
1. Distinguish from “Joint Venture”
2. Distinguish from Co-ownership
3. Distinguish from Joint Account (Sociedad de Cuentas en
Participacion)
4. Distinguish from Agency
a. Distinguishing Agency Principles from Doctrine of Mutual
Agency in Partnership Law
5. Distinguish from the Business Trust
6. Distinguish from the Corporation
a. Does a defective Incorporation Process Result into
Partnership
7. Distinguish from Cooperatives
D. THE CONTRACT OF PARTNERSHIP
a. Essential Elements of the Contract of Partnership
1. Element of “CONSENT”
a. Consent to pursue a business jointly is the nexus of the
partnership relationship
b. Admission of New Partner into an Existing Partnership
2. Subject Matter: Pursuit of a Business Enterprise
a. Co-ownership or Co-Possession does not Necessarily
Constitute a Partnership
b. Receipt by a Person of a Share of the Net Profit
c. Meeting of minds on the establishing a common fund is the
essence of a partnership contract
d. Existence of a going concern may support the existence of
a partnership

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e. Doctrine of “Attributes of Proprietorship” as a Means to
prove the Existence of a Partnership
f. When subject matter (the Business Venture) is Unlawful or
against public policy
3. CAUSE or CONSIDERATION : Promised Contributions
4. Other Essential Elements of Partnership
b. Essential Characteristics of the Partnership Contract
1. Nominate and Principal
2. Consensual
3. Onerous and Bilateral
4. Preparatory and Progressive
E. FORMAL REQUIREMENTS FOR PARTNERSHIP
a. Partnership Essentially Consensual in Character
b. Requirements Tied to Capital Contributions
1. When Capital Contributions Total P3,000.00 or More
a. Rational for Article 1772 of the New Civil Code
b. Registered Partnership deemed conclusive as to the
partnership set-up among partners
2. When Immovable Property Contributed
a. Historical Background of Article 1773
b. When Immovable Property deemed contributed
c. Rationale behind the formal requirements under Article 1773
d. Suggested Adverse Effect of Failure to Comply with
Registration Requirement of Article 1773
e. Article 1773 should be considered in relation to Rules for
Claims
c. Requirements Tied to Partnership Name
1.Historical Basis of Article 1815
2. SEC Rules on Partnership Name

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d. Summation: Registration of Little Usefulness in Partnership Law
1. Intra-Partnership Relationship
2. Dealing with third parties
3. Value of Statutory Rules on Form and Registration
F. CLASSES OF PARTNERS & PARTNERSHIPS
a. Kinds of Partnership
1. As to the object of the Partnership
2. As to Duration
3. As to Extent of Partners’ Liabilities
b. Kinds of Partners
c. Who may validly become partners?
1. May spouses validly enter into a partnership relation?
a. Spouses cannot enter into a universal partnership
b. Spouses are not qualified to enter into other forms of
partnership of gains
1. Spouses governed by the Absolute Community of
gains
2. Spouses governed by the Conjugal Partnership of
gains
3. Spouses governed by the complete separation of
property regime
c. Contract of Partnership may offend against the provisions of
the Family Code
1. Issue on control and binding effects of the acts of
partners
2. Charges to Partnership Properties
d. Professional Partnerships
2. May Corporation Validly Qualify to become Partners?
a. Jurisprudential Rule
b. SEC Rules

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G. RIGHTS, POWERS & AUTHORITY OF PARTNERS
a. Property Rights of every Partners
b. Partner’s Right to Manage the Partnership
1. General Rule on Partnership Management
a. Default Rule: Every Partner has a right to manage
b. Overturning of the Ruling in Council of Red Men
c. Effect of Internal and Non-Public Arrangement of
Partnership
2. Transaction not in the ordinary course of Partnership Business
3. Specific Modification on the Power of Management
4. Specific Rules on dealings with Immovable Properties of the
Partnership
c. Partner’s Right to Specific Partnership Property
1. Partner’s right in specific to partnership property limited to pursuing
the partnership business
2. Partners’ contributed property to the partnership can be dealt with
only for partnership purposes
d. Equity Rights of Partners
1. Assignment of a partner’s equity right
2. Right to participate in profits and obligation to share in losses
a. No guarantee as to profits
b. When the right to profit accrues
e. Other rights of a partner
1. Right to be reimbursed for expenses incurred on behalf of the
partnership
2. Right to inspect
3. Right to demand true and full information
4. Right to demand accounting

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5. Right to Dissolve the Partnership
f. Obligations of the Partnership to Third Parties
1. Liability arising from the firm name
2. Liability arising from the acts of the agent
H. Duties & Obligations of Partners
a. Obligation to contribute to common fund
1. When promised contribution is a sum of money
2. When promised contribution is property-in General
3. When contribution in goods
4. When contribution in real property
5. Contribution of Industry: the Industrial Partner
6. Remedies when there is default in obligation to contribute
7. Obligation for “Additional Contribution”
b. Personal Obligation for Partnership Debts; Doctrine of Unlimited Liability
1. Unlimited Liability of Existing Partners
2. Obligation of Subsequently Admitted Partners
3. Obligation of Non-Partners for Partnership Debts
c. Fiduciary Duties of Partners
1. Duty of diligence
2. Duty of loyalty
3. Duty of Account
4. Specific Fiduciary Duties of Industrial Partner
5. Specific Duty of Loyalty of Capitalist Partners
I. DISSOLUTION, WINDING-UP & TERMINATION
a. Introduction and Definition of Terms

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b. Dissolution
1. Dissolution in the light of the partnership being primarily a
contractual relationship
a. Dissolution effected with no breach of the partnership
contract
b. Dissolution effected in breach of the partnership contract
c. Force Majeure and other similar causes
d. Causes Equivalent to Rescission of the contract of
partnership
2. Legal effects of Dissolution-in general
a. Effect of Dissolution on the Partnership Contract
b. Effect on the partnership business enterprise
c. Effects on Contract entered into with third parties
d. Effects on determining liability of partners for damages to
one another
3. Effects of Dissolution among the partners inter Se
a. When Dissolution is Caused not in contravention of the
partnership agreement
b. When dissolution is caused by the bona fide expulsion of a
partner
c. When dissolution is caused in contravention of the
partnership agreement
d. When dissolution caused by rescission of the partnership
agreement due to fraud or misrepresentation (I,e., by
Judicial Decree)
4. Effects of dissolution on partnership liabilities existing or accrued at
the time
a. General rule on existing partnership liabilities
b. Discharge of Partner from existing partnership liabilities

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5. Effects of Dissolution on Partnership Liabilities Contracted or
Incurred After Dissolution
a. Where partnership not bound even for winding-Up Liabilities
b. Liabilities incurred constituting “New Business” during the
winding-up process
1. When dissolution is by the act, insolvency or death of
a partner
2. When Dissolution is not by the Act, Insolvency or death
of a partner
3. As to third Party Creditors
a. Particular Rule of “Limited Liability”
b. When creditors not deemed to be in good faith
c. Particular Rule on Partner by Estoppel
J. Winding-Up of Partnership Affairs
a. Who has authority to wind-up
b. Rules and Procedure for winding-up and liquidation
1. Enforcing Contribution from partners to cover partnership debts
2. Partner may demand share in net assets only after settlement of
claims of partnership creditors
c. Continuance of partnership business instead of winding-up
1. Who may continue partnership business and the obligations
assumed
2. Disposition of liabilities when partnership business is continued
3. Disposition of liabilities when dissolution is caused by the retirement
or death of a partner
d. Partner’s right to demand an accounting
K. LIMITED PARTNERSHIP
a. Nature, Formation and Registration
1. Essence of the Medium of Limited Partnership
2.Requirements for the formation of a limited partnership
3. False statement in the SEC Certificate
4. Name of limited partnership

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5. Contributions to the limited partnership
6. When Certificate must be cancelled or amended
b. General and Limited Partnership
1. The general partners
a. Who is a general partner in a limited partnership?
b. Rights and Powers of General Partnership
c. Duties and Obligations of the General Partner
2. The Limited Partners
a. Who is a Limited Partner?
b. Erroneous but in good faith limited partner
3. The right and powers of the limited partner
a. Right to Limited Liability
b. Right to Return of Contributions
c. Right to profits or compensation by way of income
d. Right to assign limited partner’s interest
e. Heirs of deceased General Partner succeed generally as
limited partners
f. Limited rights to partnership affairs
g. Limited Partner may Loan money to or Transact business with
the partnership
h. Right to dissolve the limited partnership
4. Obligations of Limited Partners
a. On original contributions to the partnership
b. On additional contributions
c. On returned contributions
d. Liable as Trustee of the partnership
e. Fiduciary duties of limited partners
f. General lack of standing in partnership suites
5. When Limited and General Partner at the same time
L. DISSOLUTION AND WINDING-UP OF LIMITED PARTNERSHIP

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a. Causes of Dissolution
b. Settling of Accounts