AGENCY, TRUSTS, PARTNERSHIPS, & JOINT VENTURES

Midterm Examination
S.Y. 2020-2021, Block 2B
Dake Mandocdoc

13 October 2020

INSTRUCTIONS

1. This questionnaire contains eight (8) pages including this instructions page.

2. Read each question very carefully and write your answers in the same order the questions
are posed. Your answers should be handwritten. Note well the allocated percentage points for
each number, question, or sub-question. In your answers, use the numbering system in the
questionnaire.

3. Answer the essay questions legibly, clearly, and concisely. Start each number on a separate
paper. An answer to a sub-question under the same number may be written continuously on
the same page.

Your answer should demonstrate your ability to analyze the facts presented by the question,
to select the material from the immaterial facts, and to discern the points upon which the
question turns. It should show your knowledge and understanding of the pertinent principles
and theories of law involved and their qualifications and limitations. It should demonstrate your
ability to apply the law to the given facts, and to reason logically in a lawyer-like manner to a
sound conclusion from the given premises.

A mere "Yes" or "No" answer without any corresponding explanation or discussion will not be
given any credit. Thus, always briefly but fully explain your answers although the question
does not expressly ask for an explanation. At the same time, remember that a complete
explanation does not require that you volunteer information or discuss legal doctrines that are
not necessary or pertinent to the solution to the problem.

4. MCQs are to be answered by writing the capital letter (e.g., A) corresponding to your chosen
answer. Explanations are not needed to answer the MCQs.

5. You have three (3) hours to answer the exam. At the end of the third hour, you will have
fifteen (15) minutes to scan/photograph, upload, and submit your answers in JPEG or PDF
format. The file naming convention is as follows: <Last Name and First Name><Subject and
Section><Page # of Total # of Pages, if JPEG, or Total # of Pages, if PDF>; e.g., Cruz
Fidel(Agency2B)(3 of 5). Submission shall be by sending an e-mail to
[email protected] (subject: Agency Midterms, [Name]) using your obf.ateneo.edu
account with scans/photos of your answers as attachments.

6. Inasmuch as you have three (3) hours to answer the exam and another fifteen (15) minutes
to submit your answers, late submissions will be penalized by a three (3)-point deduction for
every minute of tardiness.

Good luck!

“Juris praecepta sunt haec: “The precepts of law are:

honeste vivere, to live honorably,
alterum non laedere, not to harm anybody,
suum cuique tribuere.” to give everyone his due.”

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 I

Bryan is a businessman engaged in real estate flipping. He acquires real properties at a

bargain, improves them, then sells them at a premium. He is looking for a mango plantation
in Batangas. For this purpose, he engaged the services of Micah, a licensed real estate broker.
Since her engagement, Micah has been offering various parcels of land to Bryan, including a
land planted with atis trees. Nevertheless, Bryan was not interested in buying anything other
than a parcel of land with mango trees.

Early this year, Micah was finally able to find a parcel of land that satisfied Bryan. Micah
immediately contacted Jia, the agent of Don Himerio -- the owner of the land. As proof of her
authority, Jia has an unnotarized special power of attorney executed by Don Himerio naming
her as the exclusive agent for the sale of Don Himerio’s property.

After several exchanges, Micah and Jia were able to arrange a date for Bryan’s ocular
inspection. Unfortunately, the corona virus (“COVID-19”) pandemic happened and the entire
Philippines was placed on lockdown. Thus, this initial ocular inspection did not materialize.

Sometime in August, the government relaxed the quarantine regulations for the province of
Batangas. Because of this, it was possible for Bryan to visit the property. Micah, who was
observing a strict self-quarantine, could not accompany him. Bryan met with Don Himerio and
Jia. The three of them went to Don Himerio’s property, and Bryan fell in love with the place.
He expressed to Don Himerio and Jia his interest in getting the property. Bryan told them that
Micah would get in touch with them to discuss the terms of the sale.

A week later, Micah contacted Jia to negotiate the terms of the sale. Micah submitted Bryan’s
offer of PhP6 Million, but Jia told Micah that Don Himerio left specific instructions that the
property should not be sold at any amount lower than PhP8 Million. Jia promised Micah that
she would relay the offer to Don Himerio for his consideration.

Unknown to Jia, Micah coordinated directly with Don Himerio. Micah explained to Don Himerio
that Bryan was willing to pay PhP6 Million in cash upon execution of the deed of absolute sale.
Don Himerio challenged Micah -- he told her that he would sell the property at PhP6 Million if
Micah could prepare the necessary documents and the money before 5:00 p.m. that day.

Micah immediately called Bryan to relay the information. Bryan called Don Himerio to clarify
his challenge, and Don Himerio confirmed that he would sign the deed of absolute sale if
Bryan could arrange the execution of the contract and the delivery of money that same day.
Unfortunately, Bryan was in Pampanga that day for a very important meeting. Thus, he told
Don Himerio that his broker, Jia, would sign on his behalf. Don Himerio was initially hesitant,
but Bryan assured him that Micah was authorized to sign the deed of sale in his behalf.

At 4:30 p.m., Micah went to Don Himerio’s residence with a large box containing PhP6 Million
and all the documents for execution. Don Himerio called Bryan again and asked whether he
was sure about this. Bryan told Don Himerio that he was, and that he had authorized Micah
to sign the deed of sale for him. Thus, at 5:15 p.m., Don Himerio signed the absolute deed of
sale conveying his mango plantation to Bryan for PhP6 Million. Micah signed the document
too, indicating that he was signing as the agent of Bryan.

At 5:30 p.m., Jia called Don Himerio. She told him that Bryan’s offer was PhP6 Million, but she
was able to find another buyer who was willing to purchase the mango plantation for PhP9
Million. Don Himerio told her that he already sold the property to Bryan, through Mica, for
PhP6 Million.

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 A. Jia is questioning the validity of Micah’s direct negotiations with Don Himerio. She
claims that the direct negotiation was in violation of the exclusive power of attorney
given to her. Is she correct? (5%)

B. Don Himerio wants to question the validity of the sale of the mango plantation. He
believes that something is wrong with the authorization given to Micah. Does he
have basis to do so? (5%)

C. Bryan is no longer interested with the property. He understands that for sale
involving land, the authority of the agent must be in writing; otherwise, the sale
shall be void. Given that Micah was only his broker and not his agent, he opines
that the sale is void. Is he correct? (5%)

D. Upon Micah’s engagement as Bryan’s real estate broker, they agreed that the
former would be entitled to a commission of PhP100,000.00 in case she would be
able to find a mango plantation for Bryan at a price that is less than PhP7 Million.
Bryan already gave PhP100,000.00 to Micah, but she believes that she deserves
more because she was able to get the property at PhP6 Million, she acted as
Bryan’s agent, and she incurred expenses in preparing the contracts for the sale
of property of Don Himerio to Bryan. Is she correct? (5%)

II

Claudia owns a chain of restaurants popularly known as “Mukbang Queen”. Mukbang Queen
Rockwell is currently being managed by Jen. Pursuant to Claudia’s practice, she executed the
following Special Power of Attorney in favor of Jen:

I, CLAUDIA MUKBANG, Filipino, of legal age, do hereby appoint and constitute JEN DOE,
Filipino, of legal age, as my lawful attorney-in-fact with respect to Mukbang Queen Rockwell
(the “Restaurant”), with full power and authority to:

1. Manage and administer the day-to-day operations of the Restaurant.

2. Negotiate and transact with suppliers and vendors for the purpose of effectively
running the operations and sales of the Restaurant.

3. Enter into contracts with third-party logistic providers for the purpose of delivering
orders to customers of the Restaurant.

I have given and granted, as I hereby give and grant, unto said attorney-in-fact full power
and authority whatsoever requisite or necessary or proper to be done in and about the
premises, as fully to all intents and purposes as I might or could do if personally present,
with full power of substitution and revocation, and hereby ratify and confirm all that said
attorneys-in-fact or their substitutes shall lawfully do or cause to be done under and by
virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 10 December 2019 in Makati
City.

(signed)
CLAUDIA MUKBANG

Claudia left for the United States in early March this year. Because of the COVID-19 pandemic,
she is currently stranded there with intermittent Internet connection. She is able to
communicate with her branch managers on the first Monday of each month only.

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Currently, the Restaurant has been generating a weekly profit that is merely sufficient to
maintain its operations. The Restaurant has PhP100,000.00 cash on hand, kitchen utensils
and equipment worth PhP500,000.00, furniture worth PhP500,000.00, and inventory (i.e.,
uncooked ingredients) worth PhP20,000.00. For its operations, Jen has to pay:
PhP15,000.00/month to each Restaurant’s staff (five in total) and PhP50,000.00/month for
rent. Jen has disclosed everything to Claudia on 5 October 2020, and Claudia instructed her
to do what she thinks is best until their next Zoom videoconference on 2 November 2020.

A. One of the Restaurant’s employees has a family emergency related to COVID-19.

He is requesting that the Restaurant lend him PhP45,000.00 on 15 October 2020,
which he will pay through salary deduction in the next nine (9) months. Does Jen
have the authority to lend part of the Restaurant’s cash on hand? (5%)

B. Jen believes that the Restaurant’s operations need to adapt to the new normal to
increase its sales. She wants to obtain the services of Mark Averilla, known as
“Macoy Dubs” or “Tita Julie”, to promote the Restaurant. She also wants the
Restaurant to have its own website with capability to handle online orders. For this
purpose, she needs PhP500,000.00. She is thinking of advancing this money in
the meantime using her personal savings. Does Jen have the authority to borrow
money for the Restaurant if she will be the lender and she will only charge the
current rate of interest? (5%)

C. The owner of the property where the Restaurant is located has expressed concern
regarding the ability of the Restaurant to survive the COVID-19 pandemic. The
owner wants to obligate Jen as a guarantor or surety in relation to the Restaurant’s
monthly rent inasmuch as she is the manager. Does Jen have the authority to do
so? (5%)

D. To keep herself entertained, Jen started baking cookies at home after work hours.
Upon mastering the recipe, Jen decided to create an Instagram account
(@mukbakery) to sell these. She receives orders on weeknights, bakes at home
on Saturday early mornings, and delivers these to her customers before going to
the Restaurant. On 5 October 2020, Claudia told Jen that she was not unaware of
this. She also told Jen that because the latter had been with the Restaurant since
2015, Claudia would be willing to let this act of disloyalty slip, provided that Jen
would start remitting fifty percent (50%) of the profits of the cookie business to the
Restaurant. Jen thinks that she should accept the offer; otherwise, she would be
required under the law to remit all the profits to Claudia. Is Jen correct? (5%)

E. After computing her sales, Jen realized the potential of her cookie business. Jen
sent an email to Claudia on 12 October 2020 informing the latter of her withdrawal
as an agent. Surprisingly, Claudia immediately replied: “Noted. You are no longer
my agent.” This caused Jen to panic because, on 5 September 2020, she used
PhP20,000.00 from the Restaurant’s cash on hand to buy a new oven for her
cookie business at home. Additionally, the Restaurant’s cash sales from the past
couple of days (amounting to PhP15,000 in total) have been with her because she
was planning to buy additional supplies for the Restaurant. Jen decided to return
the money to Claudia via bank transfer on 30 October 2020. On this date, will she
be liable to pay interest? If so, from what date? (5%)

III

Multiple Choice. Choose the best answer. Right minus wrong. (10%)

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1. Jiggy’s car, worth PhP500,000.00, was sold by Billy in favor of Nikki. Billy sold the car
on the basis of Jiggy’s written authorization granting Billy the power to dispose all her
real properties as Billy may deem proper. The contract of sale was also in writing. What
is the status of the contracts?

A. The contract of agency is valid, the contract of sale is valid.

B. The contract of agency is unenforceable, the contract of sale is unenforceable.

C. The contract of agency is unenforceable, the contract of sale is valid.

D. The contract of agency is valid, the contract of sale is unenforceable.

E. None of the above.

2. Which of the following is correct with respect to the responsibility (liability) of principals
and agents?

A. The responsibility of two agents to the same principal is not solidary, unless when
they have been appointed simultaneously.

B. The responsibility of two principals to the same agent for a common transaction is
not solidary, if they have appointed the agent separately.

C. The responsibility of two agents to the same principal, even though they have been
appointed simultaneously, is solidary if it has been stipulated.

D. The responsibility of two principals to the same agent for a common transaction is
not solidary, if they have appointed the agent simultaneously.

E. The responsibility of two agents to the same principal, even though they have been
appointed separately, is solidary unless it has been stipulated otherwise.

3. To be a commission agent, one must --

A. Sell the goods for commission.

B. Have been entrusted by the principal with the possession of the goods to be sold.

C. Bear the risk of collection.

D. A and B.

E. A, B, and C.

4. In relation to death --

A. When the principal dies, his heirs are required to notify the agent; if not, the agency
continues to be in full force and effect.

B. When the agent dies, his heirs are required to notify the principal; if not, the agency
continues to be in full force and effect.

C. When the principal dies, his heirs are required to notify the agent.

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 D. When the agent dies, his heirs are required to notify the principal.

E. When the principal dies, his heirs are required to notify the agent; if not, the agency
continues to be in full force and effect if it has been constituted in the common
interest of the principal and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.

F. When the agent dies, his heirs are required to notify the principal; if not, the agency
continues to be in full force and effect if it has been constituted in the common
interest of the principal and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.

5. In relation to the obligations of a principal --

A. The principal must comply with all the obligations which the agent may have
contracted.

B. Even when the agent has exceeded his authority, the principal is solidarily liable with
the agent if the former ratifies the contract.

C. The principal must 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.

D. A and B.

E. B and C.

F. All of the above.

G. None of the above.

IV

David has a painting that he is keen on selling. Because he is busy taking care of his dog,
David executed a written Special Power of Attorney (“SPA”). The SPA named his good friend
Tum as David’s exclusive agent for the sale of the painting. Due to David’s hectic schedule,
he just signed the SPA and sent it to Tum without having it notarized. Tum failed to sign the
portion of the SPA indicating his acceptance.

On 3 May 2020, Tum started offering the painting to potential buyers. He was able to get
several offers, but the best one came from Freya, who offered to buy it for PhP1 Million. Tum
texted this to David, and David replied: “Ayos, bro. The higher the better, pero goods na ako
with PhP1M.”

On 4 May 2020, Matt learned about the potential sale of the painting. Thus, he iMessged David
to relay his interest in buying the painting for PhP1.2 Million. David replied: “Ayos, brother.
Please discuss with Tum, I think he is talking to Freyfrey.”

Matt, however, did not want to deal with an agent. Further, knowing that Freya would just
match his offer, Matt insisted that David just sell the painting to him directly. Matt also told
David that this would save David the commission fee, which Tum would get in case the
painting was sold through his efforts. David replied: “Dein, bro. Solid ‘yang si Tum. He agreed,
zero commission s’ya.” Matt called David and used the “friends since law school” card in order
to convince him to sell the painting to him directly.

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On 5 May 2020, Tum entered into a Deed of Sale with Freya -- selling the painting as David’s
agent for PhP1 Million. Because of Matt’s insistence, David felt pressured and sold the painting
to Matt on 6 May 2020. At that time, David and Matt had no knowledge that Tum had already
sold the painting to Freya.

After executing the Deed of Sale, David gave the painting to Matt. Thus, when Freya went
with Tum to David’s house to get the painting, he could no longer give it because it was with
Matt already. When David texted Matt and inquired whether it was possible to get the painting
back, Matt replied: “Sorry bro, nabenta ko na.”

A. Freya really wants to get the painting. She is threatening to sue Tum in case he is
unable to fix the problem. Does she have basis to do so? (3%)

B. Which of the two contracts must be rejected? (3%)

C. Who will be liable for damages? (3%)

D. If on 4 May 2020, David messaged Freya that he received an offer of PhP1.2

Million for the painting and this resulted in Freya offering to buy it for PhP1.3
Million, does Tum still have the authority to act as David’s agent? (3%)

E. Apparently, there was a miscommunication. Tum, in fact, did not agree to zero
commission. If Freya, did not proceed with the sale on 5 May 2020 and the only
sale of the painting was that between David and Matt, is Tum entitled to
commission? (3%)

Isay gave Rando a notarized Special Power of Attorney (“SPA”) authorizing the latter to sell
his condominium unit for PhP5 Million. The SPA provides that Rando shall be entitled to a
commission of ten percent (10%) in case he is able to sell the property. Additionally, because
Isay owed Rando PhP500,000.00, she promised the latter that she would definitely earmark
a portion of the proceeds of the sale to pay him the PhP500,000.00 with interest.

In case Rando is able to succeed in selling the property, can he legally retain the proceeds in
pledge as security for Isay’s payment of his commission (i.e., 10% of the proceeds) and her
outstanding payable to him (i.e., the PhP500,000.00 debt with interest)? (5%)

VI

Biboy and Barney are the best of friends. Biboy was born on 6 August 2001 while Barney was
born on 3 June 2002. Because of their closeness, Biboy and Barney decided to make one the
agent of the other in relation to certain transactions.

On the one hand, Biboy granted Barney a written special power of attorney authorizing the
latter to act as the former’s agent for the management of Biboy’s pet shop. The power of
attorney, which was executed on 3 September 2019, did not mention whether Barney could
appoint a sub-agent. Nevertheless, because Barney was busy with his online classes, he
requested Lily to personally handle the management of the business. Barney executed a
handwritten power of attorney in favor of Lily on 5 September 2019. In the power of attorney,
Barney authorized Lily, who has been managing pet shops the past twenty (20) years, to
manage Biboy’s pet shop.

On the other hand, Barney gave Biboy a written and notarized power of attorney on 3
September 2019 indicating that the latter was being appointed as Barney’s agent for the sale

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of his Siete Partidas collection. The power of attorney authorized Biboy to appoint a sub-agent,
but made no mention of any particular name. Because Biboy was busy helping in the family
business, he appointed Coco as his sub-agent for selling Barney’s Siete Partidas collection.
Unlike Lily, Coco has no experience in life. She is a twenty (20)-year old college dropout who
has been struggling to find work.

When Lily learned that Coco has been appointed by Biboy as a sub-agent to sell Barney’s
Siete Partidas collection, Lily saw an opportunity. She tried to convince Coco to sell the
collection to her at a bargain. Coco informed Biboy about this. Because Biboy felt that
something was wrong, he confronted Lily and explained to her the value of the Siete Partidas
collection. Lily apologized and paid Biboy PhP1 Million for the collection. Biboy felt that this
amount was worth more than the value of the Siete Partidas collection (the offers he received
via Facebook Marketplace was up to PhP500,000.00 only). Thus, he sold the collection to Lily
on 10 October 2019. Biboy delivered the book collection to Lily on the same day while Barney
was attending his class.

A. Is the contract of sale of the Siete Partidas collection valid? (5%)

B. Did Lily violate any of her legal duties as a sub-agent of Barney when she offered
to buy the Siete Partidas collection at a bargain? (5%)

C. Eventually, Biboy decided to revoke Barney’s power of attorney. He executed a

written power of attorney authorizing Lily to manage his pet shop. He did not
prohibit Lily from appointing a sub-agent, but he expressly indicated that Coco
should not be appointed as one. Contrary to this, however, Lily still appointed Coco
as her sub-agent in managing the pet shop. On her first day of work, Coco signed
on behalf of Biboy an overpriced contract (worth PhP20,000.00) with a dog food
supplier. To what extent is Lily responsible for this act of Coco? (5%)

D. If Coco, on behalf of Biboy, entered into additional overpriced contracts with other
dog food suppliers, can Biboy sue Coco with respect to these obligations that the
latter has contracted under the substitution? (5%)

E. On 1 October 2020, Barney decided to execute another power of attorney in favor

of Biboy. This time, Barney orally authorized Biboy to sell his Corpus Juris Civilis
collection. Lily offered to buy the collection for PhP1 Million, a price that would
have been acceptable to Barney. Biboy, however, has decided to buy the property
instead. Knowing that Barney would not allow him to pay the purchase price, Biboy
did not tell Barney that he was the purchaser. Instead, Biboy told Barney that a
mysterious buyer was willing to pay PhP2 Million for the Corpus Juris Civilis
collection. Barney was okay with the price, and authorized Biboy to proceed with
the transaction. Thus, Biboy proceeded with the sale and gave Barney PhP2
Million. Is the sale valid? (5%)