COSMIC LUMBER V. CA, G.R.

NO 114311 (1996)
FACTS: Cosmic Lumber Corp, through its General Manager, executed a Special Power of
Attorney authorizing Paz Villamil-Estrada to initiate, institute and file any court action for the
ejectment of third persons and/or squatters in the parcel of land owned by petitioner and to
enter into a compromise agreement so far as it shall protect the rights and interests of the
company
1. Pursuant to the SPA, VIllamil-Estrada filed an ejectment suit against Isidro Perez.
2. Subsequently, Villamil-Estrada entered into a compromise agreement with Perez, in
which she agreed to sell a portion of the property for P26,640
3. Although the decision became final and executory, it was not executed within the 5-
year period due to the failure of petitioner to produce the owners copy of TCT in order to
segregate the portion sold by the agent
4. Petitioner Cosmic Lumber filed an action to declare the nullity of the sale and the
compromise agreement claiming that the agent did not have the authority to sell the
property or any portion thereof and that the SPA was confined to the institution and filing
of an ejectment case against third persons and/or squatters and to cause their eviction
therefrom

ISSUE: WON the agent in this case has authority to sell the property

HELD: No. The authority granted to the agent under the SPA was explicit and exclusionary: for her
to institute any action to eject all persons found in the petitioners property so the petitioner
could take material possession thereof, to appear at the pre-trial and enter into a compromise
agreement but only insofar as this was protective of the rights and interests of the petitioner in
the property. Nowhere in the SPA was Villamil-Estrada granted expressly or impliedly the power
to sell the subject property or a portion thereof.

Art 1874 NCC provides that when the sale of a piece of land or any interest thereon is through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. A Special
Power of Attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in general
terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. For the principal to confer the right upon the agent to sell real
property, a power of attorney must so express the powers of the agent in clear and
unmistakeable language. When there is any reasonable doubt that the language so used
conveys such power, no such construction shall be given the document.

CAB: It is therefore clear that by selling to Perez a portion of petitioners land through a
compromise agreement, Villamil-Estrada acted without authority. The sale ipso jure is
consequently void. So is the compromise agreement and the judgment based thereon.

The doctrine of imputed knowledge finds no application in this case since this doctrine is
intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence,
there is a well-established exception to the general rule as where the conduct and dealings of
the agent are such as to raise a clear presumption that he will not communicate to the principal
the facts in controversy. The logical reason for this exception is that where the agent is
committing a fraud. It would be contrary to common sense to presume or to expect that he
would communicate the facts to the principal. When an agent is engaged in the perpetration
of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal
but is really acting for himself, entirely outside the scope of his agency.


MERCADO V. ALLIED BANKING CORP, G.R. NO 171460 (2007)
FACTS: Perla Mercado owned several pieces of real property situated in different provinces of
the Philippines.
1. In May 1992, Perla executed a Special Power of Authority in favor of her husband, Julian,
over several pieces of real property registered in her name, authorizing the latter to sell,
alienate, mortgage, lease her properties in Oriental Mindoro, Pasig, among others
2. On the strength of the SPA, Julian obtained a loan from respondent bank for P3 million
secured by real estate mortgage on parcel of land (TCT RT-18206) located in Quezon
City
3. Julian thereafter obtained an additional loan from the respondent for P5 million using the
same property as security
4. It appears, however, that there was no property identified in the SPA as TCT RT-18206 in
Quezon City; what was identified in the SPA was the property covered by TCT RT-106338
in Pasig
5. Julian defaulted in the payment of his loan obligations. As such, the bank initiated
extrajudicial foreclosure proceedings over the subject property which was subsequently
sold at a public auction
6. Petitioners, as heirs of Perla, filed an action for the annulment of the real estate mortgage
on the ground that it was not covered by the SPA and that said SPA was revoked by the
principal on March 10, 1993
7. In its answer, Allied Banking Corp contended the discrepancy in the designation of the
Registry of Deeds in the SPA was merely an error that must not prevail over the clear
intention of Perla to include the property in said SPA
8. The trial court declared the real estate mortgage over the subject property null and void
on the ground that Julian was not authorized by the SPA to mortgage the same. On
appeal, CA reversed the decision and held in favor of the bank

ISSUE: WON Julian has authority, based on the SPA, to mortgage the subject property

HELD: No. Under Art 1878 NCC, a Special Power of Attorney is necessary in cases where real
rights over immovable property are created or conveyed. An examination of the literal terms of
the SPA shows that the subject property was not among those enumerated therein. There is no
obvious reference to the subject property registered with the RD of Quezon City. There is also
nothing in the language of the SPA that could be inferred the alleged intention of Perla to
include the said property.

It is well-settled that a Power of Attorney must be strictly construed and pursued. The instrument
will be held to grant only those powers which are specified therein, and the agent may neither
go beyond nor deviate from the power of attorney. Where powers and duties are specified and
defined in an instrument, all such powers and duties are limited and are confined to those which
are specified and defined, and all other powers and duties are excluded.

Assuming arguendo that the subject property was indeed included in the SPA executed by Perla
in favor of Julian, the said SPA was revoked by virtue of a public instrument. Art 1999 NCC
provides that an agency is extinguished, among others, by its revocation. The principal may
revoke the agency at will, and compel the agent to return the document evidencing the
agency. Such revocation may be express or implied.

In this case, the revocation of the SPA is express and by a public instrument executed on March
10, 1993.



VELOSO V. CA G.R. NO 102737 (1996)
FACTS: Petitioner Francisco Veloso was the owner of a parcel of land. In 1988, Veloso filed an
action for annulment of documents and reconveyance of property with damages. Petitioner
alleged that he was the absolute owner of the subject property and he never authorized
anybody, not even his wife Irma, to sell it.
1. Petitioner alleged that when his wife left for abroad, he discovered that the copy of his
title was missing. Upon inquiry with the Registry of Deeds, he found out that his title was
cancelled in favor of Aglaloma Escario. The transfer of property was supported by a
General Power of Attorney
2. Escario, on the other hand, alleged that she was a buyer in good faith and denied any
knowledge of the alleged irregularity. She allegedly relied on the GPA of Irma Veloso
which was sufficient in form and substance and was duly notarized
3. The trial court held in favor of Escario citing that she was an innocent purchaser for value.

ISSUE: WON the GPA of Irma includes the power to sell the property

HELD: Yes. An examination of the assailed power of attorney was valid and regular on its face. It
was notarized and as such, it carries the evidentiary weight conferred upon it with respect to its
due execution. While it is true that it was denominated as a general power of attorney, a perusal
thereof revealed that it stated an authority to sell. Thus, there was no need to execute a
separate SPA since the GPA had expressly authorized the agent the power to sell the subject
property. The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required.

There is no need to execute a separate and special power of attorney since the general power
of attorney had expressly authorized the agent or attorney in fact the power to sell the subject
property. The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required.

Whether the instrument be denominated as a general power of attorney or special power of
attorney, what matters is the extent of the power or powers contemplated upon the agent or
attorney in fact. If the power is couched in general terms, then such power cannot go beyond
acts of administration. However, where the power to sell is specific, it not being merely implied,
much less couched in general terms, there cannot be any doubt that the attorney may execute
a valid sale. An instrument may be captioned as special power of attorney but if the powers
granted are couched in general terms without mentioning any specific power to sell or
mortgage or to do other specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred.














BRAVO-GUERRERO V. BRAVO, G.R. NO 152658 (2005)
FACTS: Spouses Mauricio Bravo and Simona Bravo owned 2 parcels of land in Makati City. In
1966, Simon executed General Power of Attorney (GPA) appointing her husband Mauricio as her
attorney-in-fact. In the GPA, Simona authorized Mauricio to mortgage, sell, assign or dispose her
properties.
1. Mauricio then mortgaged the properties to PNB and DBP.
2. In 1970, Mauricio executed a Deed of Sale with Assumption of Real Estate Mortgage in
favor of Elizabeth, Roland and Ofelia (grandchildren). The sale was conditioned on the
payment of P1,000 and on the assumption by the vendees of the PNB and DBP
mortgages over the properties
3. Edward, one of the grandsons of the spouses, then filed an action for the judicial
partition of the properties. Edward claimed that he and petitioners were co-owners of
the properties by succession and that petitioners refused to share with him the possession
and rental income of the properties
4. The trial court upheld Mauricios sale of the properties to the vendees citing that it did
not prejudice the compulsory heirs since the sale was for a valuable consideration
5. Petitioners argue that the subject sale is valid as to Mauricios share in the properties
6. On the other hand, respondents contend that the sale is void because Mauricio
executed the Deed of Sale without Simonas consent

ISSUE: WON Simona authorized Mauricio the sell the properties when she executed the GPA

HELD: Yes. Art 1878 NCC requires a Special Power of Attorney for an agent to execute a
contract that transfers the ownership of an immovable. However, the Court has clarified that Art
1878 refers
To the nature of the authorization, not to its form. Even if a document is titled as a General Power
of Attorney, the requirement of a Special Power of Attorney is met if there is a clear mandate
from the principal specifically authorizing the performance of the act.

Thus, there was no need to execute a separate and special power of attorney since the GPA
had expressly authorized the agent or attorney-in-fact the power to sell the subject property. The
SPA can be included in the GPA when it is specified therein the act or transaction for which the
special power is required.

CAB: SImona expressly authorized Mauricio in the GPA to sell, assign, and dispose of any and all
my property, real, personal or mixed, of any kind whatsoever and wherever situated, or any
interest therein, as well as to act as my general representative and agent, with full authority to
buy, sell, negotiate and contract for me and in my behalf. Taken together, these provisions
constitute a clear and specific mandate to Mauricio to sell the properties. Even if is called a
GPA, the specific provisions in the GPA are sufficient for the purposes of Art 1878 NCC. These
provisions in the GPA likewise indicate that Simona consented to the sale of the properties.













SIASAT V. IAC, G.R. NO L-67889 (1985)
FACTS: Sometime in 1974, respondent Nacianceno convinced the officials of the Department of
Education and Culture to purchase, without public bidding, P1 million worth of national flags for
the use of public schools nationwide.
1. When Nacianceno was informed by the Chief of the Budget Division that the purchase
orders could not be released unless a formal offer to deliver the falgs is presented, she
contacted the owners of the United Flag Industry
2. The owner, Siasat, then authorized Nacianceno to deal with any entity or organization,
private or government, in connection with the marketing of their flags. In consideration
for such, Siasat agreed to pay Nancianceno 30% commission
3. On October 16, 1974, Siasat delivered the first batch of flags to the Department. The
following day, the agency was revoked by Siasat
4. After receiving payment for the first delivery, Siasat tendered a payment amounting to
5% which Nacianceno refused.
5. Respondent alleged that she accepted the same because of the petitioners assurance
that they would pay the commission in full after they delivered the other half of the order
6. However, when she confronted the petitioner, the denied receipt of the payment and at
the same time claimed that Nacianceno had no participation whatsoever with regard to
the second delivery of the flags
7. Petitioners alleged that there was no specific authorization for the sale of the flags to the
Department; that the letter appointing Nacianceno only authorized her to deal with any
entity in connection with the marking of their products

ISSUE: WON respondent had the capacity to represent Siasat with the Department

HELD: Yes. The Court noted several kinds of agents: (1) universal; (2) general or (3) special. A
universal agent is authorized to do all acts for his principal which can lawfully be delegated to
an agent.

A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a
particular place, or all acts pertaining to a business of a particular class or series. He has usually
authority either expressly conferred in general terms or in effect made general by the usages,
customs or nature of the business which he is authorized to transact.

A special agent is one authorized to do some particular act or upon some particular occasion.
He acts usually in accordance with specific instructions or under limitations necessarily implied
form the nature of the act to be done.

CAB: Based on the terms of the letter, the petitioner instituted a general agency. This can be
easily seen by the way general words were employed in the agreement that no restrictions were
intended as to the matter the agency was to be carried out or in the place where it was to be
executed. The power granted to the respondent was so broad that it practically covers the
negotiation leading to, and the execution of, a contract of sale of petitioners merchandise with
any entity or organization.







AIR FRANCE V. CA, G.R. NO L-57339 (1983)
FACTS: Jose Gana and his family purchased from Air France through Imperial Travels, 9 open-
dated tickets for Manila/Osaka/Tokyo/Manila route.
1. On April 24, 1970, Air France exchanged the tickets for the same route. At this time, Gana
and his family were booked for May 8, 1970 to Osaka and for the Tokyo/Manila trip on
May 22, 1970
2. The Gana family did not leave on May 8, 1970
3. Sometime in January 1970, Jose Gana sought the extension of the validity of their tickets,
which were set to expire on May 8, 1971. Ganas secretary sought the help of Lee Ella,
manager of the Philippine Travel Bureau. Ella was informed by the manager of Air France
that extension was not possible unless the fare differentials and increased travel tax were
first paid
4. Nevertheless, the Ganas scheduled their Japan trip on May 7, 1971. Ella informed Ganas
secretary (Teresita) that while the tickets were still valid if they lef.t on May 7, 1971, the
tickets would no longer be valid for the rest of their trip because the tickets would have
then expired on May 8, 1971. Teresita replied that it was up to the Ganas to make the
arrangements
5. Ella, on his own, attached to the tickets validating stickers for the Osaka/Tokyo flight and
the return flight to Manila
6. There was no problem with the departure from Manila to Osaka on May 7, 1971 but for
the Osaka/Tokyo flight on May 17, 1971, Japan Airlines refused to honor the tickets
because of their expiration and as a result, the Ganas had to purchase new tickets. They
encountered the same problem on their return trip to Manila as Air France refused to
honor their tickets
7. Gana then filed a civil action against Air France for damages arising from breach of
contract of carriage
8. Air France argued that the Ganas were at fault considering the arrangements they had
made and that the travel agent Ellas affixing of validating stickers were without the
knowledge and consent of Air France

ISSUE: WON Air France authorized the arrangements made by Ella with regard to the
Osaka/Tokyo and Tokyo/Manila flight

HELD: No. The circumstances that Air France personnel at the ticket counter in the airport
allowed the Ganas to leave is not tantamount to an implied ratification of travel agent Ellas
irregular actuations. It should be recalled that the Ganas left Manila the date before the
expiration of their tickets and that other arrangements were to be made with respect to the
remaining segments. Besides, the validating stickers that Ella affixed on his own merely reflect the
status of reservations on the specified flight and could not legally serve to extend the validity of
a ticket or revive an expired one.

Air France was even unaware of the validating SAS and JAL stickers that Ella affixed spuriously.
Consequently, JAL and Air France merely acted within their contractual rights when they
dishonored the tickets on the remaining segments and when Air France demanded payment of
the adjusted fare rates and travel taxes for the Tokyo/Manila flight.








OESMER V. PARAISO DEVELOPMENT CORP, G.R. NO 157493 (2007)
FACTS: Petitioners co-owned 2 parcels of land in Cavite which they inherited from their parents.
Sometime in March 1989, Ernesto, one of the petitioners (siblings) met with Sotero Lee, President
of Paraiso Devt Corp, a corporation engaged in real estate business. The meeting was set for the
purpose of brokering the sale of petitioners properties to respondent
1. A Contract to Sell was then executed between the corporation and the siblings Ernesto
and Enriqueta. In consideration therefor, a check amounting to P100,000 was given to
Ernesto as option money. Thereafter, the other petitioners Rizalino, Bibiano Jr. and
Librado signed the document
2. Subsequently, petitioners decided to rescind the Contract to Sell and return the option
money. However, the respondent did not respond. As such, petitioners filed a complaint
for the declaration of nullity or for annulment of contract to sell
3. Petitioners assert that the signatures of the 5 petitioners on the margins of the supposed
Contract to Sell does not confer authority on petitioner Ernesto as agent to sell their
respective shares and as such the Contract to Sell is void as to them

ISSUE: WON Ernesto had authority to sell the subject properties

HELD: No. The signature of the petitioners on the Contract to Sell did not confer authority on
Ernesto as agent authorized to sell their respective shares. Art 1874 requires that a written
authority before an agent can sell an immovable. The conferment of such authority should be in
writing, in as clear and precise terms as possible. It is worth noting that petitioners signatures are
found in the Contract to Sell. The Contract is absolutely silent on the establishment of any
principal-agent relationship between the five petitioners and their brother Ernesto as to the sale
of the subject parcels of land.

However, despite Ernestos lack of written authority from the petitioners to sell their shares, the
supposed Contract to Sell remains binding upon the latter. This is because all five petitioners
signed the Contract to Sell; by affixing their signatures, they were not selling their shares through
an agent but they were selling the same directly and in their own right.























AF REALTY V. DIESELMAN, G.R. NO 111448 (2002)
FACTS: Dieselman Freight Service Co (Dieselman), a domestic corporation, owned a parcel of
commercial lot
1. Manuel Cruz Jr., a member of Dieselmans Board of Directors, authorized Polintan,
through an Authority to Sell Real Estate, to look for potential buyers at P3,000 per sqm.
Cruz had no written authority from Dieselman to sell the lot
2. In turn, Polintan authorized Noble to sell the same lot. Noble then offered the property to
AF Realty & Developmente Inc at P2,500 per sqm. Ranullo, AF Realtys VP, issued a check
for P300,000 as partial payment
3. Manuel Cruz Sr., president of Dieselman, acknowledged the receipt of said payment but
required AF Realty to finalize the sale at P4,000 per sqm. Cruz Sr. subsequently terminated
the offer and demanded AF Realty to return the title of the lot which had been given
earlier by Noble
4. As such, AF Realty filed an action for specific performance to compel Dieselman to
execute and deliver a final deed of sale in favor of AF Realty
5. Dieselman alleged that there was no meeting of the minds between the parties in the
sale and that it did not authorized any person to enter into such transaction on its behalf
6. Meanwhile, Dieselman and Midas Development Corp (Midas) executed a Deed of
Absolute Sale over the same property

ISSUE: What is the effect of an absence of written authorization based on Art 1874 NCC?

HELD: Art 1874 NCC provides: When a sale of piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.

CAB: It is clear that Cruz Jr., Polintan and Noble were not authorized by Dieselman to sell its lot,
thus the supposed contract is void. Being a void contract, it is not susceptible of ratification by
clear mandate of Art 1409 NCC.

On the other hand, the sale to Midas is valid. As noted by CA, the sale was authorized by a
Board Resolution of Dieselman dated May 27, 1988.

ISSUE: What is the form of agency in the case of corporations?

HELD: Sec 23 Corp Code expressly provides that the corporate powers of all corporations shall
be exercised by the Board of Directors. Thus, contracts or acts of a corporation must be made
either by the Board of Directors of by a corporate agent duly authorized by the Board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director
relating to the affairs of the corporation, but not in the course of, or connected with, the
performance of authorized duties of such director, are held not binding on the corporation.

CAB: It is undisputed that Cruz Jr. had no written authority form the BOD of Dieselman to sell or
negotiate the sale of the lot, much less appoint other persons for the same purpose. Cruz Jr.s
lack of authority precludes him from conferring any authority to Polintan involving the same
property. Consequently, neither could Polintan authorize Noble. As such, the collective acts of
Cruz Jr., Polintan and Noble cannot bind Dieselman in the purported contract of sale.





UNILAND RESOURCES V. DBP, G.R. NO 95909 (1991)
FACTS: Uniland Resource is a private corporation licensed to engage in real estate brokerage.
1. Long before the controversy arose, Marinduqye Mining Corp obtained a loan from DBP
and as security therefor, it mortgaged certain real properties to the latter, among them 2
lots located in Makati
2. The said lots, however, have been previously mortgaged by Marinduque Corp to Caltex
and the mortgaged in favor of DBP was entered as a second mortgage. The account of
Marinduque Mining was later transferred to Assets Privatization Trust (APT).
3. For failure to pay its obligations to Caltex, Caltex foreclosed its mortgage on the subject
properties
4. APT, on the other hand, offered for sale to the public through DBP its right of redemption
on the subject properties by public bidding. Caltex required that both lots be redeemed,
the bidding guidelines set by DBP provided that any bid to purchase either of the two lots
would be considered only should there be two bids or a bid for the two items, which,
when combined, would fully recover the sale of the two lots in question
5. Seeing that it would make a profit if it redeemed the properties and then offer them for
sale, DBP retrieved the account from APT and subsequently redeemed the said lots from
Caltex
6. DBP called for a pre-bididng conference; however, there was only one bidder, Charges
Realty Corp. DBP approved the sale of the lots to Charges Realty
7. DBP admittedly paid 5% brokers fee on this sale to DBP Management Corp, which acted
as broker for said negotiated sale
8. After the sale, petitioner Uniland Resources wrote DBP and asked for the payment of its
brokers fee in instrumenting the sale to Charges Realty, which DBP refused to pay
9. As such Uniland filed an action against DBP for a sum of money
10. Petitioner invoked Art 1969 NCC in contending that an implied agency existed. It agrued
that it should have been stopped, dis-authorized and prevented outright form dealing
the subject property in question

ISSUE: WON an implied agency existed between petitioner and DBP

HELD: No. It is obvious that petitioner was never able to secure the required accreditation from
DBP to transact business on behalf of the latter. The letters sent by petitioner to the higher officers
of DBP and APT are merely indicative of petitioners desire to secure such accreditation. There is
no express reply from DBP or APT as to the accreditation sought by petitioner. From the very
beginning, therefore, petitioner was aware that it had no express authority form DBP to find
buyers of its properties.

Neither can petitioner argue that an implied agency existed. In the course of its dealings with
DBP, it was always made clear to petitioner that only accredited brokers may look for buyers on
behalf of DBP. This is not a situation wherein a third party was prejudiced by the refusal of DBP to
recognize petitioner as its broker. Art 1869 therefore, is not applicable in this case.










WOODCHILD HOLDINGS INC V. ROXAS, G.R. NO 140667 (2004)
FACTS: Respondent Roxas Electric & Construction Co (RECCI) owned two parcels of land.
RECCIs Board of Directors approved a resolution authorizing the corporation, through its
president Roxas, to sell one parcel of land
1. Petitioner Woodchild Holdings Inc (WHI) offered to purchase the property where it
planned to construct a warehouse and a portion of the adjoining lot which was also
owned by RECCI.
2. Roxas and Dy, the president of WHI, executed a Contract to Sell over the parcel of land
and a portion of the adjoining lot (right of way)
3. WHI complained to Roxas that the vehicles of RECCI were parked on the portion of the
property over which WHI had been granted a right of way. Roxas then offered to
purchase a portion of the said lot as provided in the Contract of Sale. However, RECCI
refused to sell the subject portion
4. As such, WHI filed a complaint against RECCI for specific performance
5. In its answer, RECCI alleged that it had never authorized its former president (Roxas) to
grant the benefit use of any portion of the adjoining lot nor did it agree to sell any portion
thereof. As such, the agreement to sell a portion of the adjoining lot was ultra vires
6. The trial court held in favor of WHI and held that RECCI was estopped from disowning the
apparent authority of Roxas.

ISSUE: WON Roxas acted within his authority in agreeing to sell a portion of the adjoining lot

HELD: No. Generally, the acts of the corporate officers within the scope of their authority are
binding on the corporation. However, under Art 1910 NCC, acts done by such officers beyond
the scope of their authority cannot bind the corporation unless it has ratified such acts expressly
or tacitly, or is estopped from denying them.

CAB: Respondent RECCI denied authorizing its then president to sell a portion of the adjoining lot
and to create a lien or burden thereon. The petitioner was thus burdened to prove that the
respondent authorized Roxas to sell the same and create a lien thereon.

The Court rejected the petitioners arguments that in allowing Roxas to execute the contract to
sell and the deed of absolute sale and failing to disapprove the same, RECCI thereby gave him
apparent authority to grant a right of way in the adjoining lot. Absent estoppel or ratification,
apparent authority cannot remedy the lack of the written power required under the Statute of
Frauds.

It bears stressing that apparent authority is based on estoppel and can arise from two instances:
(1) the principal may knowingly permit the agent to so hold himself out as having such authority,
and in this way, the principal becomes estopped to claim the agent does not have such
authority; or (2) the principal may so clothe the agent with the indicia or authority as to lead a
reasonably prudent person to believe that he actually has such authority. There can be no
apparent authority of an agent without acts or conduct on the part of the principal and such
acts or conduct of the principal must have been known and relied upon in good faith and as a
result of the exercise of reasonable prudence by a third person as claimant and such must have
produced a change of position to its detriment.

For the principle of apparent authority to apply, the petitioner was burdened to prove the
following:
(a) The acts of the respondent justifying belief in the agency by the petitioner
(b) The knowledge thereof by the respondent which is sought to be held; and
(c) Reliance thereon by the petitioner consistent with ordinary care and prudence
CAB: There is no evidence on record of specific acts made by the respondent showing or
indicating that it had full knowledge of any representations made by Roxas to the petitioner that
RECCI had authorized him to grant to the respondent an option to buy a portion of the
adjoining lot or to create a burden or lien thereon, or that RECCI allowed him to do so.
















































PROFESSIONAL SERVICE INC V. AGANA, G.R. NO 126297 (2007)
FACTS: In April 1984, Natividad Agana was rushed to the Medical City General Hospital (The
Medical City) because of difficulty of bowel movement and bloody anal discharge. After a
series of medical examinations, Dr. Ampil diagnosed her to be suffering from cancer of the
sigmoid
1. On April 11, Dr. Ampil, assisted by the medical staff of TMC performed anterior resection
surgery on Natividad. He found out that the cancer had spread on her left ovary, thus
the need to removal several portions of it. Dr. Ampil obtained Enriques consent
(Natividads husband) to permit Dr. Fuentes to perform hysterectomy (removal of uterus)
on Natividad
2. After Dr. Fuentes completed the hysterectomy, Dr. Ampil took over and completed the
operation
3. However, based on the report of the count nurse, the OR appeared to be missing 2
sponges and noted that announced [missing sponges] to the surgeon search (sic) done
but to no avail continue for closure.
4. A few days after the operation, Natividad complained of excruciating pain in her anal
region. She consulted both Dr. Ampil and Fuentes who told her that the pain was a
natural consequence of the surgery and recommended that she consult an oncologist
regarding the cancerous nodes which were not removed during the operation
5. In May 1984, spouses Agana flew to US to seek further treatment. After some consultation
and examination, Natividad was told she was cancer-free
6. When spouses Agana returned to the Philippines in August 1984, Natividad was still
suffering from pains. Thereafter, her daughter found a piece of gauze protruding from
her vagina. Upone being informed about it, Dr. Ampil extracted by hand a piece of
gauze and assured her that the pains would soon vanish
7. But instead, the pain intensified, prompting Natividad to seek treatment at the Polymedic
General Hospital. The attending physician, Dr. Gutierrez, detected another piece of
gauze in her vagina which led to vaginal infection (pus had formed in her vaginal area
which forced the stool to excrete through the vagina). Natividad underwent another
surgery to remove the foreign object
8. Subsequently, spouses Agana filed with RTC Quezon City a complaint for damages
against Professional Services Inc (PSI), owner of TMC, Dr. Ampil and Dr. Fuentes. They
alleged that Dr. Ampil and Dr. Fuentes were liable for negligence for leaving 2 pieces of
gauze inside Natividads body and malpractice for concealing their acts of negligence
9. Enrique also filed with the PRC an administrative complaint against Dr. Ampil and Dr.
Fuentes for gross negligence and malpractice. PRC heard the case only with respect to
Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who as in the US at the
time. PRC dismissed the case against Dr. Fuentes citing that the prosecution failed to
show that Dr. Fuentes was the one who left the gauze inside Natividads body and that
he concealed such fact from her.
10. Pending litigation, Natividad died
11. RTC Quezon City rendered its decision in favor of Agana, finding PSI, Dr. Ampil and
Fuentes liable for negligence and malpractice
12. PSI, Dr. Fuentes and Dr. Ampil filed an appeal to CA. CA dismissed the appeal.
13. PSI alleged that CA erred in holding that
a. It is estopped from raising the defense that Dr. Ampil is not an employee but an
independent contractor (consultant)
b. It is solidarily liable with Dr. Ampil; and
c. It is not entitled to its counterclaim against the Aganas
14. The Aganas maintained that CA erred in finding that Dr. Fuentes is not guilty of
negligence or medical malpractice, invoking the doctrine of res ipsa loquitur. They
contend that the gauze found on Natividad are prima facie evidence that the
operating surgeons had been negligent
15. Dr. Ampil argued that CA erred in finding that he was liable for negligence and
malpractice because:
a. It was Dr. Fuentes who used gauzes during the hysterectomy
b. The attending nurses failure to property count the gauze during the operation; and
c. The medical intervention of the American doctors who examined Natividad

ISSUE: WON PSI may be held solidarily liable with Dr. Ampil

HELD: Yes. Private hospitals, hire, fire and exercise real control over their attending and visiting
consultant staff. While consultants are not, technically employees, x x x, the control exercised,
the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-
employee relationship, with the exception of the payment of wages.

For purposes of apportioning responsibility in medical negligence cases, an employer-
employee relationship in effect exists between hospitals and their attending and visiting
physicians.

But the Ramos v. CA is not our only basis in sustaining PSIs liability. Its liability is also anchored
upon the agency principle of apparent authority or agency by estoppel and the doctrine of
corporate negligence which have gained acceptance in the determination of a hospitals
liability for negligent acts of health professionals. The present case serves as a perfect platform
to test the applicability of these doctrines, thus, enriching our jurisprudence.

Apparent authority, or what is sometimes referred to as the "holding out" theory, or doctrine of
ostensible agency or agency by estoppel, has its origin from the law of agency. It imposes
liability, not as the result of the reality of a contractual relationship, but rather because of the
actions of a principal or an employer in somehow misleading the public into believing that the
relationship or the authority exists.

Our jurisdiction recognizes the concept of an agency by implication or estoppel. Art 1869 NCC.

CAB: PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr. Ampil and
Dr. Fuentes. We concur with the Court of Appeals conclusion that it "is now estopped from
passing all the blame to the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence." Indeed, PSIs act is
tantamount to holding out to the public that Medical City Hospital, through its accredited
physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes and
publicly advertising their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As expected, these
patients, Natividad being one of them, accepted the services on the reasonable belief that
such were being rendered by the hospital or its employees, agents, or servants.

Recent years have seen the doctrine of corporate negligence as the judicial answer to the
problem of allocating hospitals liability for the negligent acts of health practitioners, absent facts
to support the application of respondeat superior or apparent authority. Its formulation proceeds
from the judiciarys acknowledgment that in these modern times, the duty of providing quality
medical service is no longer the sole prerogative and responsibility of the physician. The modern
hospitals have changed structure. Hospitals now tend to organize a highly professional medical
staff whose competence and performance need to be monitored by the hospitals
commensurate with their inherent responsibility to provide quality medical care.

CAB: It was duly established that PSI operates the Medical City Hospital for the purpose and
under the concept of providing comprehensive medical services to the public. Accordingly, it
has the duty to exercise reasonable care to protect from harm all patients admitted into its
facility for medical treatment. Unfortunately, PSI failed to perform such duty.

PSI, apart from a general denial of its responsibility, failed to adduce evidence showing that it
exercised the diligence of a good father of a family in the accreditation and supervision of the
latter. In neglecting to offer such proof, PSI failed to discharge its burden under the last
paragraph of Art 2180 and therefore, must be adjudged solidarily liable with Dr. Ampil.
Moreover. PSI is also directly liable to the Aganas.