Professional Documents
Culture Documents
CUIZON
G.R. No. 167552; April 23, 2007
Definition of Agency
FACTS: From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to P91,338.00 pesos.
Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents making a
down payment of P50,000.00. When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to
respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto
de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner. Impact systems is owned
by ERWIN Cuizon.
Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo Power Company the amount of
P365,135.29. Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result,
respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner's counsel sent respondents a final demand
letter wherein it was stated that as of 11 June 1996, respondents' total obligations stood at P295,000.00 excluding interests and
attorney's fees. Because of respondents' failure to abide by said final demand letter, petitioner instituted a complaint for sum of
money, damages, with application for preliminary attachment against herein respondents.
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to
him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was
very much aware of this fact.
Trial court directs that defendant Edwin B. Cuizon be dropped as party defendant. Petitioner brought the matter to the Court of
Appeals which, however, affirmed the order of the court a quo. Hence, this petition.
ISSUES:
1) WON the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems.
2) WON Edwin exceeded his authority when he signed the Deed of Assignment thereby binding himself personally to pay
the obligations to petitioner.
HELD:
1)
Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems. The Supreme Court held that in a
contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another with the latter's consent. Its purpose is to extend the personality of the principal or the party for
whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and
said acts have the same legal effect as if they were personally executed by the principal.
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.
In this case at hand, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal
and EDWIN as agent.
2) No.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party
with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable
to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his
authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his
powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes
a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and
concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an
agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management.
Applying the foregoing to the present case, we hold that EDWIN Cuizon acted well-within his authority when he signed the Deed
of Assignment.
2) Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978)
G.R. No. L-24332
to respondent whom she knew to be engaged in the business of lending money in exchange for personal checks through her capitalist
Arsenio Pua. She alleged that her friends borrowed money from respondent and issued personal checks in payment of the loan but the
checks bounced. In order to collect money, the respondent then threatened to initiate a criminal case against her for violation of Batas
Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to
avoid criminal prosecution, that the sale was void for lack of consideration. Further, petitioner contended that since the respondent is
also an agent, she does not have the capacity to sue her. It is an admitted fact by both petitioner and defendant, based on their
testimonies, that respondent knew that the money will be used by the friends of the petitioner; that the respondent was merely
representing Arsenio Pua; and that before the supposed friends of the petitioner defaulted in payment, each issued their personal
checks in the name of Arsenio Pua for the payment of their debt.
ISSUE: Whether or not petitioner and respondent were acting on their personal capacity or as mere agents.
RULING: NO. In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their
principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money and that this
sum indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and produces no
effect whatsoever where the same is without cause or consideration. The question that has to be resolved for the moment is whether
this debt can be considered as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from
respondent to her friends: first, the friends of petitioner never presented themselves to respondent and that all transactions were made
by and between petitioner and respondent; second; the money passed through the bank accounts of petitioner and respondent; third,
petitioner herself admitted that she was "re-lending" the money loaned to other individuals for profit; and fourth, the documentary
evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. On the first,
third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her cross-examination:
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed principal. She is also estopped to
deny that petitioner acted as agent for the alleged debtors, the friends whom she (petitioner) referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation. The question of whether an
agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention. Agency may even be implied from the words and conduct of the
parties and the circumstances of the particular case. Though the fact or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her
agency both as against the asserted principal and the third persons interested in the transaction in which he or she is engaged.
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers, did not present
themselves to [respondent]" as evidence that negates the agency relationship it is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends whom she referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the agent interacts. The law in fact contemplates, and to
a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent
transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent.
In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are representing someone else, and
so both of them are estopped to deny the same. It is evident from the record that petitioner merely refers actual borrowers and then
collects and disburses the amounts of the loan upon which she received a commission; and that respondent transacts on behalf of her
"principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally know each other, such
ignorance does not affect their juridical standing as agents, especially since the very purpose of agency is to extend the personality of
the principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for profit, it
must be stressed that the manner in which the parties designate the relationship is not controlling. If an act done by one person in
behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called.
The question is to be determined by the fact that one represents and is acting for another, and if relations exist which will constitute an
agency, it will be an agency whether the parties understood the exact nature of the relation or not.
That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment of the
loan in the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her name and not
directly paid to Pua. With respect to the second point, particularly, the finding of the CA that the disbursements and payments for the
loan were made through the bank accounts of petitioner and respondent, suffice it to say that in the normal course of commercial
dealings and for reasons of convenience and practical utility it can be reasonably expected that the facilities of the agent, such as a
bank account, may be employed, and that a sub-agent be appointed, such as the bank itself, to carry out the task, especially where
1. Essential clauses given due regard to classify a contract; Contract of purchase and sale
In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, the clauses,
constituting its cause and subject matter, are precisely the essential features of a contract of purchase and sale. There was the
obligation on the part of Quiroga to supply the beds, and, on the part of Parson, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price,
but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it,
here turns it. By virtue of the contract between Quiroga and Parson, the latter, on receiving the beds, was necessarily obliged to
pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.
2. Commission on sale merely a discount, other clauses are not incompatible with contract of purchase and sale
The contract by and between the defendant and the plaintiff is one of purchase and sale. Besides the clause made in the basis of a
commission on sales, none of the other clauses of the contract is found to substantially support Quirogas contention. None of
these conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else than a
mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only
one that could sell Quirogas beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract of purchase and sale.
3. Classification of a contract defined by law, and not one called by the parties
The agreements contained in the document that has been drafted, constitute a contract of purchase and sale, and not one of
commercial agency. In the classification of the contract, it must be understood that a contract is what the law defines it to be, and
not what it is called by the contracting parties.
4. Acts subsequent to contract suppletory, not considered when essential agreements are set forth in the contract
The acts of the parties merely show that, on the part of each of them, there was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they
performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be
considered for the purpose interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its
essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another.
breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the
plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and
sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by
agreement or by law.
Schmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988)
agency differentiated from broker
A broker is one whose occupation it is to bring parties together to bargain, or to bargain for them, in matters of trade,
commerce or navigation.
Judge Storey, in his work on Agency, defines a broker as an agent employed to make bargains and contracts between other
persons, in matters of trade, commerce or navigation, for compensation commonly called brokerage.
Commission Merchant:
A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is
placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or
vendors, but also with the property which is subject matter of the transaction.
Thus, the chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely
intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction.
Indent Relationships
Webster defines an indent as "a purchase order for goods especially when sent from a foreign country. It would appear that
there are three parties to an indent transaction, namely, the buyer, the indentor, and the supplier who is usually a nonresident manufacturer residing in the country where the goods are to be bought. An indentor may therefore be best
described as one who, for compensation, acts as a middleman in bringing about a purchase and sale of goods between a
foreign supplier and a local purchaser.
In the case at bar:
The evidences show that RJL Martinez admitted that Schmid was merely an indent for the purchase of the 12 generators.
The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company
itself invoiced the sale, and shipped the generators directly to the former. The only participation of SCHMID was to act as
an intermediary or middleman between NAGATA CO. and RJL MARTINEZ, by procuring an order from RJL
MARTINEZ and forwarding the same to NAGATA CO. for which the company received a commission from NAGATA
CO.
In this case however, there was no express agreement between the parties
that Schmid warrants in anyway the condition of the generators, hence the
court did not make the latter liable for any warranty.
SCHMID & OBERLY, INC. vs. RJL MARTINEZ
G.R. No. 75198 October 18, 1988
Facts:
RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its business, it needed
electrical generators for the operation of its business. Schmid and Oberly sells electrical generators with the
brand of Nagata, a Japanese product. D. Nagata Co. Ltd. of Japan was Schmids supplier. Schmid advertised
the 12 Nagata generators for sale and RJL purchased 12 brand new generators. Through an irrevocable line of
credit, Nagata shipped to the Schmid the generators and RJL paid the amount of the purchase price. (First sale =
3 generators; Second sale = 12 generators).
Later, the generators were found to be factory defective. RJL informed the Schmid that it shall return the 12
generators. 3 were returned. Schmid replaced the 3 generators subject of the first sale with generators of a
different brand. As to the second sale, 3 were shipped to Japan and the remaining 9 were not replaced.
RJL sued the defendant on the warranty, asking for rescission of the contract and that Schmid be ordered to
accept the generators and be ordered to pay back the purchase money as well as be liable for damages. Schmid
opposes such liability averring that it was merely the indentor in the sale between Nagata Co., the exporter and
RJL Martinez, the importer. As mere indentor, it avers that is not liable for the sellers implied warranty against
hidden defects, Schmid not having personally assumed any such warranty.
Issue:
1) WON the second transaction between the parties was a sale or an indent transaction? INDENT
TRANSACTION
2) Even is Schmid is merely an indentor, may it still be liable for the warranty? YES, under its contractual
obligations it may be liable. But in this case, Schmid did not warrant the products.
Held:
An indentor is a middlemen in the same class as commercial brokers and commission merchants. A broker is
generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property
with the custody of which he has no concern; the negotiator between other parties, never acting in his own name
but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both
parties. There are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a
non-resident manufacturer residing in the country where the goods are to be bought. The chief feature of a
commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or
middle-men, and act in a certain sense as the agent of both parties to the transaction.
RJL MARTINEZ admitted that the generators were purchased through indent order. RJL admitted in its
demand letter previously sent to SCHMID that 12 of 15 generators were purchased through your company, by
indent order and three (3) by direct purchase. The evidence also show that RJL MARTINEZ paid directly
NAGATA CO, for the generators, and that the latter company itself invoiced the sale and shipped the generators
directly to the former. The only participation of Schmid was to act as an intermediary or middleman between
Nagata and RJL, by procuring an order from RJL and forwarding the same to Nagata for which the company
received a commission from Nagata.
Sale vs. Indent Transaction:
The essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or promised. If
such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as
a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the
transaction is, a sale.
3 evidences pointing to fact that Schmid is merely an indentor:
a. the Quotation and the General Conditions of Sale on the dorsal side thereof do not necessarily lead to the
conclusion that NAGATA CO., was the real seller of the 12 generators.
b. When RJL complained to SCHMID, it immediately asked RJL to send the defective generators to its shop to
determine what was wrong. SCHMID informed NAGATA about the complaint of RJL. After the generators
were found to have factory defects, SCHMID facilitated the shipment of three (3) generators to Japan and, after
their repair, back to the Philippines.
c. the letter from NAGATA CO. to SCHMID regarding the repair of the generators indicated that the latter was
within the purview of a seller.
2)
Even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that
twelve (12) generators subject of the second transaction are free from any hidden defects. In other words,
SCHMID may be held answerable for some other contractual obligation, if indeed it had so bound itself. As
stated above, an indentor is to some extent an agent of both the vendor and the vendee. As such agent, therefore,
he may expressly obligate himself to undertake the obligations of his principal.
Notably, nowhere in the Quotation is it stated therein that SCHMID did bind itself to answer for the defects of
the things sold. Balagtas testified initially that the warranty was in the receipts covering the sale. Nowhere is it
stated in the invoice that SCHMID warranted the generators against defects. He again changed his mind and
asserted that the warranty was given verbally. Hence, RJL has failed to prove that SCHMID had given a
warranty on the 12 generators subject of the second transaction.
10) KER & CO., LTD. vs. LINGAD
G.R. No. L-20871 April 30, 1971
FACTS: CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and
compromise penalty against Ker & Co. There was a request on the part of petitioner for the cancellation of such
assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax
Appeals. CTA ruled that that Ker & Co is liable as a commercial broker under Section 194 (t) of the National
Internal Revenue Code.
Ker & Co signed a contract with the United States Rubber International, the former being referred to as the
Distributor and the latter specifically designated as the Company. The shipments would cover products for
consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the] province of
Davao. Ker & Co, as Distributor, was precluded from disposing such products elsewhere than in the above
places unless written consent would first be obtained from the Company. It was required to exert every effort to
have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. The
prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the
discretion of the Company.
ISSUE: WON the relationship Ker & Co and US Rubber was that of a vendor-vendee or principal-broker?
PRINCIPAL- BROKER, hence liable under Section 194 (t) of the NIRC.
HELD: The relationship between them is one of brokerage or agency. That the petitioner Ker & Co., Ltd. is, by
contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that:
1. petitioner can dispose of the products of the Company only to certain persons or entities and
within stipulated limits, unless excepted by the contract or by the Rubber Company;
2. it merely receives, accepts and/or holds upon consignment the products, which remain
properties of the latter company
3. every effort shall be made by petitioner to promote in every way the sale of the products (Par.
3); that sales made by petitioner are subject to approval by the company
4. on dates determined by the rubber company, petitioner shall render a detailed report showing
sales during the month
5. the rubber company shall invoice the sales as of the dates of inventory and sales report (Par.
14); that the rubber company agrees to keep the consigned goods fully insured under
insurance policies payable to it in case of loss
6. upon request of the rubber company at any time, petitioner shall render an inventory of the
existing stock which may be checked by an authorized representative of the former
7. upon termination or cancellation of the Agreement, all goods held on consignment shall be
held by petitioner for the account of the rubber company until their disposition is provided
for by the latter.
CONTROLLING TEST (cited CIR vs. Constantino):
Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to
customers, the price and terms of which were subject to the companys control, the relationship between the
company and the dealer is one of agency.
Sale vs. Agency
a. In sale, the essence is the transfer of title or agreement to transfer it for a price paid or promised. In agency,
the essence is the delivery to an agent.
b. In sale, the transfer puts the transferee in the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale. In agency, the transfer does not make the property as the agents own, but that of
principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive
the proceeds less the agents commission upon sales made.
Besides, the control by the United States Rubber International over the goods in question is pervasive.