PARTNERSHIP and TRUSR BAR EXAM

Partnership a. No. A corporation is managed by its

(2009 Bar Question) board of directors. If the
TRUE or FALSE. An oral partnership is valid. corporation were to become a
partner, co-partners would have
SUGGESTED ANSWER: the power to make the corporation
TRUE. Partnership is a consensual contract, party to transactions in an irregular
hence, it is valid even though not in writing. manner since the partners are not
agents subject to the control of the
ANOTHER SUGGESTED ANSWER: Board of Directors. But a
TRUE. An oral contract of partnership is valid corporation may enter into a Joint
even though not in writing. However, if it venture with another corporation
involves contribution of an immovable as long as the nature of the
property or a real right, an oral contract of venture is in line with the business
partnership is void. In such a case, the authorized by its charter. (Thdson
contract of partnership to be valid, must be & Co., Inc. v. Bolano, 95 Phil. 106).
in a public instrument (Art. 1771, NCC), and
the inventory of said property signed by the b. As a general rule a corporation
parties must be attached to said public may not form a general partnership
instrument (Art. 1773, NCC.). with another corporation or an
Individual because a corporation
ANOTHER SUGGESTED ANSWER: may not be bound by persons who
TRUE. Partnership is a consensual contract, are neither directors nor officers of
hence, it is valid even though not in writing. the corporation.
The oral contract of partnership is also valid
even if an immovable property or real right is However, a corporation may form a
contributed thereto. While the law in such a general partnership with another
case, requires the partnership to be in a corporation or an individual
public document, the law does not expressly provided the following conditions
declare the contract void if not executed in are met:
the required form (Article 1409[7], NCC). And 1) The Articles of Incorporation of
there being nothing in the law from which it the corporation expressly allows
can be inferred that the said requirement is the corporation to enter into
prohibitory or mandatory (Article 5, NCC), partnerships;
the said oral contract of partnership must 2) The Articles of Partnership must
also be valid. The interested party may provide that all partners will
simply require the contract to be made into a manage the partnership, and they
public document in order to comply with the shall be jointly and severally liable;
required form (Article 1357, NCC). The and
purpose of the law in requiring a public 3) In case of a foreign corporation,
document is simply to notify the public about it must be licensed to do business
the contribution. in the Philippines.

(1994 Bar Question) c. No. A corporation may not be a

1. Can two corporations organize a general partner because the
general partnership under the Civil principle of mutual agency in
Code of the Philippines? general partnership allowing the
2. Can a corporation and an individual other general partner to bind the
form a general partnership? corporation will violate the
corporation law principle that only
SUGGESTED ANSWER: the board of directors may bind the
1. corporation.

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 PARTNERSHIP and TRUSR BAR EXAM
2. No, for the same reasons given in the losses may be subject to the
Answer to Number 2 above. agreement of the partners.
(8) As to effect of death: Whereas the
(1988 Bar Question) death of a co-owner has no effect
Distinguish co-ownership from partnership. upon the existence of the co-
ownership, the death of a partner shall
SUGGESTED ANSWER: result in. the dissolution of the
Co-ownership is distinguished from an partnership.
ordinary partnership in the following ways:
Rights and Obligations of Partners
(1) As to creation: Whereas co-ownership Among Themselves
may be created by law, contract, (2012 Bar Question))
succession, fortuitous event, or A partner cannot demand the return of his
occupancy, partnership is always share (contribution) during the existence of a
created by contract. partnership. Do you agree? Explain your
(2) As to purpose: Whereas the purpose of answer.
co-ownership is the common
enjoyment of the thing or right owned SUGGESTED ANSWER:
in common, the purpose of a Yes, he is not entitled to the return of his
partnership is to obtain profits. contribution to the capital of the partnership,
(3) As to personality: Whereas a co- but only to the net profits from the
ownership has no juridical personality partnership business during the life of the
which is separate and distinct from partnership period. If he is a limited partner,
that of the owners, a partnership has. however, he may ask for the return of his
(4) As to duration: Whereas an agreement contributions as provided in Art 1856 and
not to divide the community property 1857, Civil Code.
for more than ten years is not allowed
by law such an agreement would be (2010 Bar Question)
perfectly valid in the case of A, B, and C entered into a partnership to
partnerships. This is so, because under operate a restaurant business. When the
the law, there is no limitation upon the restaurant had gone past break-even stage
duration of partnerships. and started to gamer considerable profits, C
(5) As to power of members: Whereas a died. A and B continued the business without
co-owner has no power to represent dissolving the partnership. They in fact
the co-ownership unless there is an opened a branch of the restaurant, incurring
agreement to that effect, a partner obligations in the process. Creditors started
has the power to represent the demanding for the payment of their
partnership, unless there is a obligations.
stipulation to the contrary.
(6) As to effect of disposition of shares: If Who are liable for the settlement of the
a co-owner transfers his share to a partnership’s obligations? Explain?
third person, the latter becomes
automatically a co-owner, but if a SUGGESTED ANSWER:
partner transfers his share to a third The two remaining partners, A and B, are
person, the latter does not become a liable. When any partner dies and the
partner, unless agreed upon by all of business is continued without any settlement
the partners. of accounts as between him or his estate,
(7) As to division of profits: Whereas in co- the surviving partners are held liable for
ownership the division of the benefits continuing the business despite the death of
and charges is fixed by law, in a C (Articles 1841, 1785, par. 2, and 1833 of
partnership the division of profits arid the New Civil Code).

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 PARTNERSHIP and TRUSR BAR EXAM
(2001 Bar Question) (1992 Bar Question)
Joe and Rudy formed a partnership to W, X, Y and Z organized a general
operate a car repair shop in Quezon City. Joe partnership with W and X as industrial
provided the capital while Rudy contributed partners and Y and Z as capitalist partners. Y
his labor and industry. On one side of their contributed P50.000.00 and Z contributed
shop, Joe opened and operated a coffee P20.000.00 to the common fund. By a
shop, while on the other side, Rudy put up a unanimous vote of the partners, W and X
car accessories store. May they engage in were appointed managing partners, without
such separate businesses? Why? any specification of their respective powers
and duties.
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the A applied for the position of Secretary and B
restaurant business because it is not the applied for the position of Accountant of the
same kind of business the partnership is partnership.
engaged in. On the other hand, Rudy may The hiring of A was decided upon by W and
not engage in any other business unless X, but was opposed by Y and Z.
their partnership expressly permits him to do
so because as an industrial partner he has to The hiring of B was decided upon by W and
devote his full time to the business of the Z, but was opposed by X and Y.
partnership (Art. 1789, CC).
Who of the applicants should be hired by the
(1998 Bar Question) partnership? Explain and give your reasons.
Dielle, Karlo and Una are general partners in
a merchandising firm. Having contributed SUGGESTED ANSWER:
equal amounts to the capital, they also agree A should be hired as Secretary. The decision
on equal distribution of whatever net profit is for the hiring of A prevails because it is an
realized per fiscal period. After two years of act of administration which can be performed
operation, however, Una conveys her whole by the duly appointed managing partners, W
interest in the partnership to Justine, without and X.
the knowledge and consent of Dielle and
Kaflo. B cannot be hired, because in case of a tie in
the decision of the managing partner, the
1. Is the partnership dissolved? deadlock must be decided by the partners
2. What are the rights of Justine, if any, owning the controlling interest. In this case,
should she desire to participate in the the opposition of X and Y prevails because Y
management of the partnership and in the owns the controlling interest (Art. 1801, Civil
distribution of a net profit of P360.000.00 Code).
which was realized after her purchase of
Una’s interest? (1989 Bar Question)
“X” used his savings from his salaries
SUGGESTED ANSWER: amounting to a little more than P2,000 as
1. No, a conveyance by a partner of his capital in establishing a restaurant. “Y” gave
whole interest in a partnership does not of the amount of P4,000 to “X” as “financial
itself dissolve the partnership in the absence assistance” with the understanding that “Y”
of an agreement. (Art. 1813, Civil Code) would be entitled to 22% of the annual
2. Justine cannot interfere or participate in profits derived from the operation of the
the management or administration of the restaurant. After the lapse of 22 years, “Y”
partnership business or affairs. She may, filed a case demanding his share in the said
however, receive the net profits to which Una profits. “X” denied that there was a
would have otherwise been entitled. In this partnership and raised the issue of
case, P120,000 (Art. 1813, Civil Code) prescription as “Y” did not assert his rights
anytime within ten (10) years from the start
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 PARTNERSHIP and TRUSR BAR EXAM
of the operation of the restaurant. Is “Y” a partner (Article 1829, 1835, par. 2; NCC,
partner of “X” in the business? Why? What is Testate Estate of Mota v. Serra, 47 Phil. 464
the nature of the right to demand one’s [1925]). However, the liability of C’s
share in the profits of a partnership? Does individual property shall be subject first to
this right prescribe? the payment of his separate debts (Article
1835,New Civil Code).
SUGGESTED ANSWER:
Yes, because there is an agreement to (1993 Bar Question)
contribute to a common fund and an intent A, B and C formed a partnership for the
to divide profits. It is founded upon an purpose of contracting with the Government
express trust. It is imprescriptible unless in the construction of one of its bridges. On
repudiated. June 30, 1992, after completion of the
project, the bridge was turned over by the
ALTERNATIVE ANSWER: partners to the Government. On August 30,
No, “Y” is not a partner because the amount 1992, D. a supplier of materials used in the
is extended in the form of a financial project sued A for collection of the
assistance arid therefore it is a loan, and the indebtedness to him. A moved to dismiss the
mere sharing of profits does not establish a complaint against him on the ground that it
partnership. The right is founded upon a was the ABC partnership that is liable for the
contract of loan whereby the borrower is debt. D replied that ABC partnership was
bound to pay principal and interest like all dissolved upon completion of the project for
ordinary obligations. Yes, his right prescribes which purpose the partnership was formed.
in six or ten years depending upon whether Will you dismiss the complaint against B if
the contract is oral or written. you were the judge?

Obligations of Partnership/Partners to SUGGESTED ANSWER:

Third Persons As Judge. I would not dismiss the complaint
(2010 Bar Question) against A because A is still liable as a general
A, B, and C entered into a partnership to partner for his pro rata share of 1/3 (Art.
operate a restaurant business. When the 1816, C. C.). Dissolution of a partnership
restaurant had gone past break-even stage caused by the termination of the particular
and started to gamer considerable profits, C undertaking specified in the agreement does
died. A and B continued the business without not extinguish obligations, which must be
dissolving the partnership. They in fact liquidated during the “winding up" of the
opened a branch of the restaurant, incurring partnership affairs (Articles 1829 and 1830,
obligations in the process. Creditors started par. 1-a, Civil Code).
demanding for the payment of their
obligations. Dissolution
(2010 Bar Question)
What are the creditors’ recourse/s? Explain. A, B, and C entered into a partnership to
operate a restaurant business. When the
SUGGESTED ANSWER: restaurant had gone past break-even stage
Creditors can file the appropriate actions, for and started to gamer considerable profits, C
instance, an action for the collection of sum died. A and B continued the business without
of money against the “partnership at will” dissolving the partnership. They in fact
and if there are no sufficient funds, the opened a branch of the restaurant, incurring
creditors may go after the private properties obligations in the process. Creditors started
of Aand B (Article 1816,New Civil Code). demanding for the payment of their
Creditors may also sue the estate of C. The obligations.
estate is not excused from the liabilities of
the partnership even if C is dead already but
only up to the time that he remained a

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 PARTNERSHIP and TRUSR BAR EXAM
A. Who are liable for the settlement of the partnership before the expiration of its term
partnership’s obligations? Explain? as they had an unproductive business
B. What are the creditors’ recourse/s? relationship with Philip in the past. On the
Explain. other hand, unaware of the move of Patricia
and Priscilla but sensing their negative
SUGGESTED ANSWER: reaction to his acquisition of Pauline’s
A. The two remaining partners, A and B, are interest, Philip simultaneously petitioned for
liable. When any partner dies and the the dissolution of the partnership.
business is continued without any settlement
of accounts as between him or his estate, 1. Is the dissolution done by Patricia and
the surviving partners are held liable for Priscilla without the consent of Pauline or
continuing the business despite the death of Philip valid? Explain.
C (Articles 1841, 1785, par. 2, and 1833 of 2. Does Philip have any right to petition for
the New Civil Code). the dissolution of the partnership before the
expiration of its specified term? Explain.
B. Creditors can file the appropriate actions,
for instance, an action for the collection of SUGGESTED ANSWER:
sum of money against the “partnership at 1. Under Art. 1830 (1) (c) of the NCC, the
will” and if there are no sufficient funds, the dissolution by Patricia and Priscilla is valid
creditors may go after the private properties and did not violate the contract of
of A and B (Article 1816, New Civil Code). partnership even though Pauline and Philip
Creditors may also sue the estate of C. The did not consent thereto. The consent of
estate is not excused from the liabilities of Pauline is not necessary because she had
the partnership even if C is dead already but already assigned her interest to Philip, The
only up to the time that he remained a consent of Philip is not also necessary
partner (Article 1829, 1835, par. 2; NCC, because the assignment to him of Pauline’s
Testate Estate of Mota v. Serra, 47 Phil. 464 interest did not make him a partner, under
[1925]). However, the liability of C’s Art. 1813 of the NCC.
individual property shall be subject first to
the payment of his separate debts (Article ALTERNATIVE ANSWER:
1835, New Civil Code). Interpreting Art. 1830 (1) (c) to mean that if
one of the partners had assigned his interest
(1997 Bar Question) on the partnership to another the remaining
Stating briefly the thesis to support your partners may not dissolve the partnership,
answer to each of the following cases, will the dissolution by Patricia and Priscilla
the death – of a partner terminate the without the consent of Pauline or Philip is not
partnership? valid.

SUGGESTED ANSWER: 2. No, Philip has no right to petition for

Yes. The death of a partner will terminate the dissolution because he does not have the
partnership, by express provision of par. 5, standing of a partner (Art. 1813 NCC).
Art. 1830 of the Civil Code.
(1993 Bar Question)
A, B and C formed a partnership for the
(1995 Bar Question) purpose of contracting with the Government
Pauline, Patricia and Priscilla formed a in the construction of one of its bridges. On
business partnership for the purpose of June 30, 1992, after completion of the
engaging in neon advertising for a term of project, the bridge was turned over by the
five (5) years. Pauline subsequently assigned partners to the Government. On August 30,
to Philip her interest in the partnership. 1992, D. a supplier of materials used in the
When Patricia and Priscilla learned of the project sued A for collection of the
assignment, they decided to dissolve the indebtedness to him. A moved to dismiss the

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 PARTNERSHIP and TRUSR BAR EXAM
complaint against him on the ground that it In the event that Tomas is made to pay the
was the ABC partnership that is liable for the liability to third person, he has the right to
debt. D replied that ABC partnership was seek reimbursement from Rene and Jose
dissolved upon completion of the project for (Articles 1837 to 1840; Goquiolay vs. Sycip, 9
which purpose the partnership was formed. SCRA 663).
Will you dismiss the complaint against B if
you were the judge? Limited Partnership
(1994 Bar Question)
SUGGESTED ANSWER: Can a husband and wife form a limited
As Judge. I would not dismiss the complaint partnership to engage in real estate
against A because A is still liable as a general business, with the wife being a limited
partner for his pro rata share of 1/3 (Art. partner?
1816, C. C.). Dissolution of a partnership
caused by the termination of the particular SUGGESTED ANSWER:
undertaking specified in the agreement does
not extinguish obligations, which must be a) Yes. The Civil Code prohibits a husband
liquidated during the “winding up" of the and wife from constituting a universal
partnership affairs (Articles 1829 and 1830, partnership. Since a limited partnership is
par. 1-a, Civil Code). not a universal partnership, a husband and
wife may validly form one.
(1987 Bar Question)
Tomas, Rene and Jose entered into a b) Yes. While spouses cannot enter into a
partnership under the firm name “Manila universal partnership, they can enter into a
Lumber.” Subsequently, upon mutual limited partnership or be members thereof
agreement, Tomas withdrew from the (CIR v. Suter, et al., 27 SCRA 152).
partnership and the partnership was
dissolved. However, the remaining partners,
Rene and Jose, did not terminate the 2011-2014 Bar Questions
business of “Manila Lumber.” Instead of
winding up the business of the partnership 2014 Bar Question
and liquidating its assets, Rene and Jose
continued the business in the name of Timothy executed a Memorandum of
“Manila Lumber” apparently without
Agreement (MOA) with Kristopher setting up
objection from Tomas. The withdrawal of
Tomas from the partnership was not a business venture covering three (3)
published in the newspapers. fastfood stores known as "Hungry Toppings"
that will be established at Mall Uno, Mall Dos,
Could Tomas be held liable for any obligation and Mall Tres.
or indebtedness Rene and Jose might incur
while doing business in the name of “Manila The pertinent provisions of the MOA
Lumber” after his withdrawal from the
provides:
partnership? Explain.

SUGGESTED ANSWER: 1. Timothy shall be considered a

Yes. Tomas can be held liable under the partner with thirty percent (30%)
doctrine of estoppel. But as regards the share in all of the stores to be set up
parties among themselves, only Rene and by Kristopher;
Jose are liable. Tomas cannot be held liable
since there was no proper notification or 2. The proceeds of the business, after
publication.
deducting expenses, shall be used to
pay the principal amount of

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 PARTNERSHIP and TRUSR BAR EXAM
P500,000.00 and the interest therein stipulated that they shall share in the profits
which is to be computed based on the of the business 30-70. The contributions of
bank rate, representing the bank loan the partners include a bank loan obtained by
Timothy and industry in the form of
secured by Timothy;
managing the properties by Kristopher. Thus,
the requisites for establishing a contract of
3. The net profits, if any, after partnership are complied with.
deducting the expenses and payments
of the principal and interest shall be (2013 Bar Questions)
divided as follows: seventy percent In 2005, L, M, N, 0 and P formed a
(70%) for Kristopher and thirty percent partnership. L, M and N were capitalist
(30%) for Timothy; partners who contributed P500,000 each,
while 0, a limited partner, contributed P1 ,
000,000. P joined as an industrial partner,
4. Kristopher shall have a free hand in
contributing only his services. The Articles of
running the business without any Partnership, registered with the Securities
interference from Timothy, his agents, and Exchange Commission, designated L and
representatives, or assigns , and 0 as managing partners; L was liable only to
should such interference happen, the extent of his capital contribution; and P
Kristopher has the right to buy back was not liable for losses.
the share of Timothy less the amounts
In 2006, the partnership earned a net profit
already paid on the principal and to of P800,000. In the same year, P engaged in
dissolve the MOA; and a different business with the consent of all
the partners. However, in 2007, the
5. Kristopher shall submit his monthly partnership incurred a net loss of P500,000.
sales report in connection with the In 2008,the partners dissolved the
business to Timothy. partnership. The proceeds of the sale of
partnership assets were insufficient to settle
its obligation. After liquidation, the
What is the contractual relationship between
partnership had an unpaid liability
Timothy and Kristopher? ofP300,000.

(l) Assuming that the just and equitable

SUGGESTED ANSWER: share of the industrial partner, P, in the profit
The contractual relationship between in 2006 amounted to P1 00,000, how much is
Timothy and Kristopher is that of the share of 0, a limited partner, in the
partnership. Article 1767 of the Civil Code P800,000 net profit?
provides that under a contract of (A) P160,000.
partnership, two or more persons bind (B) P175,000.
themselves to contribute money, property or (C) P280,000.
industry to a common fund, with the (D) P200,000.
intention of dividing the profits among (E) None of the above.
themsleves. Moreover, article 1769 of the
Civil Code states in part that receipt by a SUGGESTED ANSWER:
person of a share of the profits of a business (C) P280,000. First, deduct the share of P
is prima facie evidence that he is a partner in from the profits. P800,000 less P100,000 is
the business, provided that the said profits P700,000. Next, get the share of O by
were not received in payment for debt, as following the proportion that the shares of L,
wages, annuity, interest on a loan, or as M, N, O is 1:1:1:2, respectively.
consideration for a sale. In this case, the
MOA between Timothy and Kristopher

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 PARTNERSHIP and TRUSR BAR EXAM
(II) In 2007, how much is the share of 0, a SUGGESTED ANSWER:
limited partner, in the net loss of P500,000? (E) None of the above is completely
(A) P 0. accurate.
(B) P1 00,000.
(C) P125,000. 2011 Bar Questions
(D) P200,000. The liability of the partners, including
(E) None of the above. industrial partners for partnership contracts
entered into in its name and for its account,
SUGGESTED ANSWER: when all partnership assets have been
(D) P200,000 A limited partner shall not exhausted is
become liable a s a general partner unless,
in addition to the exercise of his rights and (A) Pro-rata.
powers as a limited partner, he takes part in
the control of the business (Art 1948, Civil (B) Joint.
Code). In the absence of stipulation as to
profits and losses, the share of each partner
in the losses shall be proportionate to what (C) Solidary.
he may have contributed (Art 1797).
(D) Voluntary.
(III) Can the partnership creditors hold L, 0
and Pliable after all the assets of the
partnership are exhausted?
Janice and Jennifer are sisters. Janice sued
(A) Yes. The stipulation exempting P from Jennifer and Laura, Jennifer’s business
losses is valid only among the partners. L is
partner for recovery of property with
liable because the agreement limiting his
liability to his capital contribution is not valid damages. The complaint did not allege that
insofar as the creditors are concerned. Janice exerted earnest efforts to come to a
Having taken part in the management of the compromise with the defendants and that
partnership, 0 is liable as capitalist partner. such efforts failed. The judge dismissed the
(B) No. P is not liable because there is a valid complaint outright for failure to comply with
stipulation exempting him from losses. Since a condition precedent. Is the dismissal in
the other partners allowed him to engage in
order?
an outside business activity, the stipulation
absolving P from liability is valid. For 0, it is
basic that a limited partner is liable only up (A) No, since Laura is a stranger to the
to the extent of his capital contribution. sisters, Janice has no moral obligation to
(C) Yes. The stipulations exempting P and L settle with her.
from losses are not binding upon the
creditors. 0 is likewise liable because the (B) Yes, since court should promote amicable
partnership was not formed in accordance settlement among relatives.
with the requirements of a limited
partnership.
(D) No. The Civil Code allows the partners to (C) Yes, since members of the same family,
stipulate that a partner shall not be liable for as parties to the suit, are required to exert
losses. The registration of the Articles of earnest efforts to settle their disputes before
Partnership embodying such stipulations coming to court.
serves as constructive notice to the
partnership creditors. (D) No, the family council, which would
(E) None of the above is completely
ordinarily mediate the dispute, has been
accurate.
eliminated under the Family Code.

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 PARTNERSHIP and TRUSR BAR EXAM
concealment of the facts giving rise
to the trust. (Fabian v. Fabian, 21
Trust SCRA 213).
Distinguish between express trust and
implied trust (1993). Express Trust; Prescription (1997)
On 01 January 1980, Redentor and Remedies
Answer: entered into an agreement by virtue of which
Express trust and implied trust may be the former was to register a parcel of land in
distinguished from each other in the the name of Remedies under the explicit
following ways: covenant to reconvey the land to Remigio,
(1) Our New Civil Code defines an son of Redentor, upon the son's graduation
express trust as one created by the from college. In 1981, the land was
intention of the trustor or of the registered in the name of Remedies.
parties, and an implied trust as one
that comes into being by operation Redentor died a year later or in 1982. In
of law. March 1983, Remigio graduated from
(2) Express trusts are those created by college. In February 1992, Remigio
the direct and positive acts of the accidentally found a copy of the document
parties, by some writing or deed or so constituting Remedies as the trustee of
will or by words evidencing an the land. In May 1994, Remigio filed a case
intention to create a trust. On the against Remedies for the reconveyance of
other hand, implied trusts are the land to him. Remedies, in her answer,
those which, without being averred that the action already prescribed.
expressed, are deducible from the How should the matter be decided?
nature of the transaction by
operation of law as matters of SUGGESTED ANSWER:
equity, in dependently of the The matter should be decided in favor of
particular intention of the parties. Remigio (trustee) because the action has not
(3) Thus, if the intention to establish a prescribed. The case at bar involves an
trust is clear, the trust is express; if express trust which does not prescribe as
the intent to establish a trust is to long as they have not been repudiated by
be taken from circumstances or the trustee (Diaz vs. Gorricho. 103 Phil, 261).
other matters indicative of such
intent, then the trust is implied. Implied Trust (1998)
(Cuayong v. Cuayong, 21 SCRA Juan and his sister Juana inherited from their
1192). mother two parcels of farmland with exactly
(4) No express trust concerning an the same areas. For convenience, the Torrens
immovable or any interest therein certificates of title covering both lots were
may be proved by parol evidence placed in Juan's name alone. In 1996, Juan
(Art.1443, NCC.), while the sold to an innocent purchaser one parcel in
existence of an implied trust may its entirety without the knowledge and
be proved by parol evidence consent of Juana, and wrongfully kept for
(5) Laches and prescription do not himself the entire price paid.
constitute a bar to enforce an 1. What rights of action, if any, does Juana
express trust, at least while the have against and/or the buyer?
trustee does not openly repudiate 2. Since the two lots have the same area,
the trust, and make known such suppose Juana flies a complaint to have
repudiation to the beneficiary, herself declared sole owner of the entire
while laches and prescription may remaining second lot, contending that her
constitute a bar to enforce an brother had forfeited his share thereof by
implied trust, and no repudiation is wrongfully disposing of her undivided share
required unless there is in the first lot. Will the suit prosper?

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 PARTNERSHIP and TRUSR BAR EXAM
seller in securing his title. (Eduarte vs. CA,
SUGGESTED ANSWER: 253 SCRA 391)
1. When, for convenience, the Torrens title to
the two parcels of land were placed in Joan's ADDITIONAL ANSWER:
name alone, there was created an implied 1. Juana has the right of action to recover (a)
trust (a resulting trust) for the benefit of her one half share in the proceeds of the sale
Juana with Juan as trustee of one-half with legal interest thereof, and (b) such
undivided or ideal portion of each of the two damages as she may be able to prove as
lots. Therefore, Juana can file an action for having been suffered by her, which may
damages against Joan for having fraudulently include actual or compensatory damages as
sold one of the two parcels which he partly well as moral and exemplary damages due to
held in trust for Juana's benefit. Juana may the breach of trust and bad faith (Imperial vs.
claim actual or compensatory damage for CA, 259 SCRA 65). Of course, if the buyer
the loss of her share in the land; moral knew of the co-ownership over the lot he was
damages for the mental anguish, anxiety, buying, Juana can seek (c) reconvenyance of
moral shock and wounded feelings she had her one-half share instead but she must
suffered; exemplary damage by way of implead the buyer as co-defendant and
example for the common good, and allege his bad faith in purchasing the entire
attorney's fees. lot. Finally, consistent with the ruling in
Imperial us. CA. Juana may seek instead (d) a
Juana has no cause of action against the declaration that she is now the sole owner of
buyer who acquired the land for value and in the entire remaining lot on the theory that
good faith, relying on the transfer certificate Juan has forfeited his one-half share therein.
of title showing that Juan is the registered
owner of the land. ADDITIONAL ANSWER:
1. Juana can file an action for damages
ANOTHER ANSWER: against Juan for having fraudulently sold one
1. Under Article 476 of the Civil Code, Juana of the two parcels which he partly held in
can file an action for quieting of title as there trust for Juana's benefit. Juana may claim
is a cloud in the title to the subject real actual or compensatory damage for the loss
property. Second, Juana can also file an of her share in the land; moral damages for
action for damages against Juan, because the mental anguish, anxiety, moral shock
the settled rule is that the proper recourse of and wounded feelings she had suffered;
the true owner of the property who was exemplary damage by way of example for
prejudiced and fraudulently dispossessed of the common good, and attorney's fees. Juana
the same is to bring an action for damages has no cause of action against the buyer who
against those who caused or employed the acquired the land for value and in good faith,
same. Third, since Juana had the right to her relying on the transfer certificate showing
share in the property by way of inheritance, that Juan is the registered owner of the land.
she can demand the partition of the thing
owned in common, under Article SUGGESTED ANSWER:
494 of the Civil Code, and ask that the title 2. Juana's suit to have herself declared as
to the remaining property be declared as sole owner of the entire remaining area will
exclusively hers. not prosper because while Juan's act in
selling the other lot was wrongful. It did not
However, since the farmland was sold to an have the legal effect of forfeiting his share in
innocent purchaser for value, then Juana has the remaining lot. However, Juana can file an
no cause of action against the buyer action against Juan for partition or
consistent with the established rule that the termination of the co-ownership with a
rights of an innocent purchaser for value prayer that the lot sold be adjudicated to
must be respected and protected Juan, and the remaining lot be adjudicated
notwithstanding the fraud employed by the and reconveyed to her.

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 PARTNERSHIP and TRUSR BAR EXAM
the action of Maureen has already prescribed
ANOTHER ANSWER: since ten years have already elapsed from
2. The suit will prosper, applying the ruling in the registration of the title in his name.
Imperial vs. CA cited above. Both law and Decide. Discuss fully.
equity authorize such result, said the
Supreme Court. SUGGESTED ANSWER:
This is a case of an implied resulting trust. If
Strictly speaking, Juana's contention that her Walter claims to have acquired ownership of
brother had forfeited his share in the second the land by prescription or if he anchors his
lot is incorrect. Even if the two lots have the defense on extinctive prescription, the ten
same area, it does not follow that they have year period must be reckoned from 1987
the same value. Since the sale of the first lot when he demanded that Maureen remove
on the Torrens title in the name of Juan was the extension house on Lot No. 2 because
valid, all that Juana may recover is the value such demand amounts to an express
of her undivided interest therein, plus repudiation of the trust and it was made
damages. In addition, she can ask for known to Maureen. The action for
partition or reconveyance of her undivided reconveyance filed in 1992 is not yet barred
interest in the second lot, without prejudice by prescription. (Spouses Huang v. Court of
to any agreement between them that in lieu Appeals, Sept. 13, 1994).
of the payment of the value of Juana's share
in the first lot and damages, the second lot Trust De Son Tort (2007)
be reconveyed to her. Explain the concept of trust de son tort
(constructive trust) and give an example.
ALTERNATIVE ANSWER:
2. The suit will not prosper, since Juan's SUGGESTED ANSWER:
wrongful act of pocketing the entire proceeds A constructive trust is a trust NOT created by
of the sale of the first lot is not a ground for any word or phrase, either expressly or
divesting him of his rights as a co-owner of impliedly, evincing a direct intention to
the second lot. Indeed, such wrongdoing by create a trust, but is one that arises in order
Juan does not constitute, for the benefit of to satisfy the demands of justice. It does not
Juana, any of the modes of acquiring come about by agreement or intention but
ownership under Art. 712, Civil Code. mainly operation of law and construed as a
Trust; Implied Resulting Trust (1995) trust against one who, by fraud, duress or
In 1960, Maureen purchased two lots in a abuse of confidence, obtains or holds the
plush subdivision registering Lot 1 in her legal right to property which he ought not, in
name and Lot 2 in the name of her brother equity and good conscience, to hold (Heirs of
Walter with the latter's consent. The idea Lorenzo Yap v. CA, 371 Phil 523, 1991). The
was to circumvent a subdivision policy following are examples of constructive trust:
against the acquisition of more than one lot 1. Art. 1456 NCC which provides: "If property
by one buyer. Maureen constructed a house is acquired through mistake or fraud, the
on Lot 1 with an extension on Lot 2 to serve person obtaining it is, by force of law
as a guest house. In 1987, Walter who had considered a trustee of an implied trust for
suffered serious business losses demanded the benefit of the person for whom the
that Maureen remove the extension house property comes." 2. Art 1451 NCC which
since the lot on which the extension was provides: "When land passes by succession
built was his property. In 1992, Maureen sued through any person and he causes the legal
for the reconveyance to her of Lot 2 title to be put in the name of another, a trust
asserting that a resulting trust was created is established by implication of law for the
when she had the lot registered in Walter's benefit of the true owner." 3. Art 1454 NCC
name even if she paid the purchase price. which provides: "If an absolute conveyance
Walter opposed the suit arguing that of property is made in order to secure the
assuming the existence of a resulting trust performance of an obligation of the grantor

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 PARTNERSHIP and TRUSR BAR EXAM
toward the grantee, a trust by virtue of law is the issuance of the certificate of title of the
established. If the fulfillment of the obligation property as long as the trust had not been
is offered by the grantor when it becomes repudiated. What is the exception to this 10-
due, he may demand the reconveyance of
year prescriptive period?
the property to him." 4. Art 1455 NCC which
provides: "When any trustee, guardian or any
person holding a fiduciary relationship uses (A) When the plaintiff had no notice of
trust funds for the purchase of property and the deed or the issuance of the
causes conveyance to be made to him or to certificate of title.
third person, a trust is established by
operation of law in favor of the person to (B) When the title holder concealed
whom the funds belong." the matter from the plaintiff.
2011-2014 Bar Questions
(C) When fortuitous circumstances
An action for reconveyance of a registered prevented the plaintiff from filing the
piece of land may be brought against the case sooner.
owner appearing on the title based on a
claim that the latter merely holds such title (D) When the plaintiff is in possession
in trust for the plaintiff. The action of the property.
prescribes, however, within 10 years from
the registration of the deed or the date of

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