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AGENCY REVEIWER..

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PART I
A. DEFINITION OF AGENCY- Article 1868
defines the contract of agency:
Article 1868. By the contract of agency a person
binds himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter.
PURPOSE

The purpose of agency is to extend the


personality of the principal. It enables the
activity of man which is naturally limited
in its exercise by the impositions of his
physiological conditions to be legally
extended by permitting him to be
constructively present in many different
places and to perform diverse juridical
acts and carry on many different
activities through another when physical
presence is impossible or inadvisable at
the same time.

ELEMENTS OF AGENCY
(according to the Courts decision in Rallos vs
Felix Go Chan)
a. There is consent, express or implied,
of the parties to establish the
relationship;
b. The object is the execution of a
juridical act in relation to a third
person;
c. The agent acts as a representative
and not for himself; and
d. The agent acts within the scope of
his authority.
CONSENT ----to say there is consent
to enter into an agency, there
must be intent to enter in the
relationship
The intention of the parties is important in
determining the existence of agency.

Principal: there must be an actual intention to


appoint; an intention inferable from
the principals words or actions
Agent:

intention to accept the appointment


and act on it.

Absence of mutual intention between principal


and agent = no agency
OBJECT ----execution of juridical act in relation
to third person
*it is not necessary that the third person with
whom the agent is to transact be
identified nor is it required that the
specific juridical relation be
specified upon establishment of
agency.
Subject matter representation; this is the basis
of agency
*Requirements c & d are not conditions for
the existence of agency relationship
Effects of Agency: Integration and Extension
Integration- Personality of the principal is
merged with that of the agent.
Extension- Personality of the principal
reproduced in the persons of his agent

is

1. Authority to act.
By legal fiction, the agent
becomes the principal, authorized
to perform all acts which the latter
would have him do. (Orient Air
Services v. CA)
The actual or real absence of the
principal is converted into his
legal or juridical presence.
(Eurotech vs. Cuison)
The principal becomes liable for
obligations contracted by the
agent provided that the act is
within the authority of the agent.
(Prudential Bank vs. CA)

AGENCY REVEIWER..Page |2
2. Agent not real party-in-interest
Since the agent is a mere
extension of the personality of the
principal, he is not a party to the
contract with the third person.
The liability of the third party is to
the principal and not to the agent.

This rule does not apply in


criminal cases. (Ong vs. CA) If
the agent is being sued in a
criminal action, this cannot be
used as a defense. Otherwise,
the agent can commit any crime
and not be held liable for it.
3. Notice to agent is notice to principal.
General rule: information relayed
to the agent in connection with
the object of the contract is
deemed to have been relayed to
the principal. (this is known as the
theory of imputed knowledge)
However, the rule does not apply
conversely. Notice to the principal
is not notice to the agent.
(Sunace Intl vs. CA)
Exception to the rule: where the
conduct and dealings of the agent
re such as to raise a clear
presumption that he will not
communicate to the principal the
facts in controversy. (Cosmic
Lumber vs. CA)
o This is because if
the agent were
committing fraud, it
would be contrary
to common sense
to presume that he
would
communicate the
facts
to
the
principal. When an
agent is engaged
in the perpetration
of fraud upon his
principal for his

own
exclusive
benefit, he is not
really acting for the
principal but is
really acting for
himself.
4. Bad faith of the agent is bad faith of the
principal.
Distinguished General Agency from Agency
couched in general terms.
Article 1876, Civil Code: General
agency comprises all the business of the
principal.
Article 1877, CC: An Agency couched in
general terms comprises only acts of
administration, even if the principal
should state that she withholds no power
or that the agent may execute such acts
as he may consider appropriate, or
eventhough the agency should authorize
a general and unlimited management.

PHILIPPINE NATIONAL BANK (PNB) vs.


RITRATTO
GROUP,
INC
RIATTO
INTERNIONAL
INC.,
and
DADASAN
GENERAL MERCHANDISE
362 SCRA 216
GR# 142616, JULY 31, 2001
FACTS:
On 29 May 1996, PNB International
Finance Ltd. (PNB-IFL), a subsidiary company
of PNB, doing business in Hong Kong extended
a letter of credit to Ritratto Group, Inc in the
amount of US $ 300,000 secured by real estate
mortgages of four parcels of land in Makati. The
amount was later increased to US $ 1,140,000
in September 1996 to US $ 1,290,000 in
November 1996 to US $ 1,425,000 in February
1997, and decreased to US $ 1,421,316 in April
1998.
On 30 April 1998, their outstanding
obligations stood at US $ 1,497,274. PNB-IFL
through its attorney-in-fact PNB, told the
respondents about the foreclosure of the
mortgages and subject for auction on 27 May
1999.

AGENCY REVEIWER..Page |3
Respondents filed a writ of preliminary
injunction and/or temporary restraining order
against the petitioners. The Executive Judge of
the Trial Court of Makati issued a 72-hour
temporary restraining order.
Respondent contends that their contract
is with PNB-IFL and that PNB is just a mere
attorney-in-fact and does not have the authority
to foreclose and compute the interests.
ISSUE:
Whether or not PNB as an agent of PNBIFL has the full authority with the mortgage
properties and computation of interests?
HELD:
No, In a foreclosure of a mortgage
undertaken by an attorney-in-fact, the validity of
a loan contract cannot be raised against said
agent, as the matter is solely between the
principal and the other party to the contract; An
agent not a party to a contract of loan has no
power to re-compute the interest rates set forth
in the contract.
The contract questioned is one entered
into between respondent and PNB-IFL, not PNB.
In their complaint, respondents admit that
petitioner is a mere attorney-in-fact for the PNBIFL with full power and authority to, inter alia,
foreclose on the properties mortgaged to secure
their loan obligations with PNB-IFL. In other
words,herein petitioner is an agent with limited
authority and specific duties under a special
power of attorney incorporated in the real estate
mortgage. It is not privy to the loan contracts
entered into by respondents and PNB-IFL. The
issue of the validity of the loan contracts is a
matter between PNB-IFL, the petitioners
principal and theparty to the loan contracts, and
the respondents. Yet, despite the recognition
that petitioner is a mere agent, the respondents
in their complaint prayed that the petitioner PNB
be ordered to re-compute the rescheduling of
the interest to be paid by them in accordance
with the termsand conditions in the documents
evidencing the credit facilities and crediting the
amount previously paid to PNB by herein
respondents. Clearly, petitioner not being a party
to the contract has no power to re-compute the
interest rates set forth in the contract.
Respondents,therefore, do not have any cause
of action against petitioner.

BAD FAITH OF AGENT IS BAD FAITH OF


PRINCIPAL
CARAM vs. LAURETA
FACTS:
On June 10, 1945, Marcos Mata conveyed a
large tract of agricultural land in favor of Claro
Laureta, the respondent herein. The deed of
absolute sale was not registered because it was
not acknowledged before a notary public or any
other authorized officer. However, Mata
delivered to Laureta the peaceful and lawful
possession of the premises of the land together
with the pertinent papers thereof.
Since June 10, 1945, Laureta had been and is
stin in continuous, adverse and notorious
occupation of said land, without being molested,
disturbed or stopped by any of the defendants or
their representatives. In fact, Laureta had been
paying realty taxes due thereon and had
introduced improvements at the time of the filing
of the complaint.
On May 5, 1947, the same land was sold by
Mata to Fermin Z. Caram, Jr., petitioner herein.
The deed of sale in favor of Caram was
acknowledged
before
Atty.
Abelardo
Aportadera. The second sale between Mata
and Caram, Jr. was registered with the Register
of Deeds. On the same date, Transfer Certificate
of Title No. 140 was issued in favor of Caram Jr.
Laureta filed in the Court of First Instance of
Davao an action for nullity, recovery of
ownership and/or reconveyance with damages
and attorney's fees against Mata, Caram, Jr. and
the Register of Deeds of Davao City.
Mata admitted the existence of a record in the
Registry of Deeds regarding a document
allegedly signed by him in favor of Caram, Jr.
but denies that he ever signed the same.

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Caram Jr. filed his answer alleging that he has
no knowledge or information about the previous
encumbrances, transactions, and alienations in
favor of plaintiff until the filing of the complaints.
RTC favored Laureta and ordered the nullity of
the deed of sale of the land to Caram. CA
affirmed RTC decision.
Caram assails the finding of the trial court that
the second sale of the property was made
through his representatives, Irespe and Atty.
Aportadera. He argues that Pedro Irespe was
acting merely as a broker or intermediary with
the specific task and duty to pay Mata the sum
of P1,000.00 for the latter's property and to see
to it that the requisite deed of sale covering the
purchase was properly executed by Marcos
Mata; and that the other alleged representative,
Atty. Aportadera, merely acted as a notary public
in the execution of the deed of sale.
The petitioner also contends that he cannot be
considered to have acted in bad faith because
there is no direct proof showing that Irespe and
Aportadera, his alleged agents, had knowledge
of the first sale to Laureta.
ISSUE:
1.) Whether or not Irespe and Atty, Aportadera
acted as agents of Caram?
2.) Whether or not bad faith of agent is bad faith
of principal?
HELD:
1.) Yes. Irespe and Atty. Aportadera are agents
of Caram.
The facts of record show that Mata, the vendor,
and Caram, the second vendee had never met.
During the trial, Marcos Mata testified that he
knows Atty. Aportadera but did not know
Caram. Thus, the sale of the property could
have
only
been
through
Caram's
representatives, Irespe and Aportadera. The
petitioner, in his answer, admitted that Atty.

Aportadera acted as his notary public and


attorney-in-fact at the same time in the purchase
of the property.
2.) Yes. Bad faith of the agent is bad faith of the
principal.
In this case, the Court cannot help being
convinced that Irespe, attorney-in-fact of Caram,
Jr. had knowledge of the prior existing
transaction, between Mata and Laureta over the
land, was executed by Mata in favor of Caram,
Jr. and this knowledge has the effect of
registration as to Caram.
Even if Irespe and Aportadera did not have
actual knowledge of the first sale, still their
actions have not satisfied the requirement of
good faith. Bad faith is not based solely on the
fact that a vendee had knowledge of the defect
or lack of title of his vendor. There
is no doubt then
that Irespe and Aportadera,
acting
as agents of Caram,
purchased
the property of Mata in bad faith.
Applying the principle of agency, Caram as
principal, should also be deemed to have acted
in bad faith. Since Caram was a registrant in
bad faith, the situation is as if there was no
registration at all.
Dominion Insurance v CA
FACTS:
Rodolfo S. Guevarra instituted a civil
case for a sum of money against petitioner
seeking to recover the sum of P156, 473.90
which he claimed to have advanced in his
capacity as manager of Dominion Insurance to
satisfy certain claims filed by its clients.
The petitioner however stated that they
are not liable to pay Guevarra because he had
not acted within his authority as an agent for
petitioner. They have instructed the respondent
that the payment for the claims of the insured
should be taken from the revolving fund, not
from his (Guevarras) personal money.

AGENCY REVEIWER..Page |5
The RTC rendered its decision making
petitioner liable to repay Guevarra. On appeal,
the trial court decision was affirmed.
ISSUE:
Whether Gueverra acted within
his authority as agent of petitioner
HELD:
The Special Power of Attorney would
show that the parties intended to enter into a
principal-agent relationship but despite the word
special in the title of the document, the
contents reveal that what was constituted was
actually a general agency. The Court in
examining the language of the SPA found that it
was comprehensive enough to cover all the
business of the principal. A general power
permits the agent to do all acts for which the law
does not require a special power and contents I
the document did not require a special power of
attorney
In this case, although the agency
covered all of the business of the principal it was
couched in general terms which meant that his
authority was limited only to acts of
administration. The payment of claims, being an
act of strict dominion, requires a special power
of attorney (Art.1878). Thus, although he was a
general agent, he was not authorized to pay the
claims.
Under 1918 of CC, the principal will not be liable
for the expenses incurred by the agent who
acted in contravention of the formers instruction.
Fortunately for the agent, although he acted
beyond his authority, the Court allowed him to
recover the amounts he advanced on the basis
of 1246.

Veloso vs CA

Manila, with an area of 177 square meters. The


title was registered in the name of Francisco A.
Veloso. The said title was subsequently
cancelled and a new one issued in the name of
Aglaloma B. Escario. On August 24, 1988,
petitioner Veloso filed an action for annulment of
documents, reconveyance of property with
damages and preliminary injunction and/or
restraining order. Petitioner alleged therein that
he was the absolute owner of the subject
property and he never authorized anybody, not
even his wife, to sell it. He alleged that he was in
possession of the title but when his wife, Irma,
left for abroad, he found out that his copy was
missing. He then verified with the Registry of
Deeds of Manila and there he discovered that
his title was already canceled in favor of
defendant Aglaloma Escario. The transfer of
property was supported by a General Power of
Attorney and Deed of Absolute Sale executed by
Irma Veloso, wife of the petitioner and appearing
as his attorney-in-fact, and defendant Aglaloma
Escario. Petitioner Veloso, however, denied
having executed the power of attorney and
alleged that his signature was falsified. He also
denied having seen or even known Rosemarie
Reyes and Imelda Santos, the supposed
witnesses in the execution of the power of
attorney. He vehemently denied having met or
transacted with the defendant. Thus, he
contended that the sale of the property, and the
subsequent transfer thereof, were null and void.
Defendant Aglaloma Escario in her answer
alleged that she was a buyer in good faith and
denied any knowledge of the alleged irregularity.
She allegedly relied on the general power of
attorney of Irma Veloso which was sufficient in
form and substance and was duly notarized.

ISSUE:

FACTS:

Whether there was a valid sale of the subject


property?

Petitioner Francisco Veloso was the owner of a


parcel of land situated in the district of Tondo,

HELD:

AGENCY REVEIWER..Page |6
Yes, the sale of the subject property is valid. The
Supreme Court held that an examination of the
records showed that 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. Respondent Aglaloma relied on
the power of attorney presented by petitioner's
wife, Irma. Being the wife of the owner and
having with her the title of the property, there
was no reason for the private respondent not to
believe, in her authority. Thus, having had no
inkling on any irregularity and having no
participation thereof, private respondent was a
buyer in good faith. It has been consistently held
that a purchaser in good faith is one who buys
property of another, without notice that some
other person has a right to, or interest in such
property and pays a full and fair price for the
same, at the time of such purchase, or before he
has notice of the claim or interest of some other
person in the property. Besides, the records of
this case disclosed that the plaintiff is not
entirely free from blame. He admitted that he is
the sole person who has access to the TCT and
other documents appertaining thereto. However,
the fact remains that the Certificate of Title, as
well as other documents necessary for the
transfer of title were in the possession of
plaintiffs wife, Irma L. Veloso, consequently
leaving no doubt or any suspicion on the part of
the defendant as to her authority. Under Section
55 of Act 496, as amended, Irmas possession
and production of the Certificate of Title to
defendant operated as conclusive authority from
the plaintiff to the Register of Deeds to enter a
new certificate.
ANASTACIO G. DUGO, petitioner vs.
ADRIANO LOPENA, ROSA RAMOS and HON.
ANDRES, Judge of the Court of First
Instance of Rizal
G.R. No. L-18377, December 29, 1962

Facts:
Petitioner AnastacioDugo and one
Rodrigo S. Gonzales purchased three
parcels of land from the respondents
Adriano Lopena and Rosa Ramos. Down
payment was given with the agreement
that the balance would be paid in
installments.
To secure the payment of the balance,
the vendees executed over the same
three parcels of land Deed of Real Estate
Mortgage in favor of the respondents
with the condition that failure of the
vendees to pay any of the installments
on
their
maturity
dates
shall
automatically cause the entire unpaid
balance
to
become
due
and
demandable.
The vendees defaulted on the first
installment. It resulted then that the
vendors filed a complaint for the
foreclosure of the aforementioned real
estate mortgage with the Court of First
Instance of Rizal, the Honorable Judge
Andres Reyes presiding.
Meanwhile, there were two other civil
cases filed in the same lower court
against
the
same
defendants
AnastacioDugo
and
Rodrigo
S.
Gonzales. Both complaints involved the
same cause of action as that of the
respondents. As a matter of fact all three
cases arose out of one transaction. In
view of the identical nature of the three
cases, they were consolidated by the
lower court into just one proceeding.
Before the cases could be tried, a
compromise agreement was submitted to
the lower court for approval. It was
signed by the respondents on one hand,
and Rodrigo S. Gonzales, on the other. It
was not signed by the herein petitioner.
However,
Rodrigo
S.
Gonzales
represented that his signature was for
both himself and the petitioner.
Moreover, AnastacioDugos counsel of
record, Atty. Manuel O. Chan, the same

AGENCY REVEIWER..Page |7
lawyer who signed and submitted for him
the answer to the complaint, was present
at the preparation of the compromise
agreement and this counsel affixed his
signature thereto.
In the compromise agreement, the
plaintiffs have agreed to give the
defendants up to June 30, 1960 to pay
the
mortgage
indebtedness.
This
compromise agreement was approved
by the lower court on the same day it
was submitted, June 15, 1960.
Subsequently, a so-called Tri-Party
Agreement was drawn. The signatories
to it were AnastacioDugo and Rodrigio
S. Gonzales as debtors, Adriano Lopena
and Rosa Ramos as creditors, and, one
Emma R. Santos as payor. The
stipulations of the Tri-Party Agreement
provide the following, among others:

The payor with due knowledge and


consent of the debtor proposes to
pay the indebtedness to the creditor
for and in behalf of the debtor in
installments in the following schedule
of amounts and time: P50,000.00 on
or before May 31, 1960, P70,000.00
on or before June 30, 1960,
P70,000.00 on or before July 31,
1960, and P313,000.00 on or before
August 31, 1960;
That the debtor and the payor hereby
waive any right to object and oblige
themselves no to oppose the motion
that the creditors may file during the
first week of July 1960, or
subsequently thereafter, informing
the Court of the exact money
obligations of the debtor which shall
be P503,000.00 minus whatever
payments, if any, made before June
30, 1960 by the payor and praying for
the issuance of an order to sell the
property covered by the mortgage;
and
That the creditors, once they have
the order referred to, should not
execute the same by giving it to the
sheriff if the payor is regular and
punctual in the payment of all the

installments stated above. Provided,


however, if the payor defaults or fails
to pay anyone of the installments in
the manner stated above, the payor
and the debtors hereby permit the
creditors to execute the order of sale
referred to above, and the payor and
debtors hereby waive any and all
objections or oppositions to the
propriety of the public auction sale
and to the confirmation of the sale to
be made by the court.
When petitioner and Rodrigo S.
Gonzales failed to pay the balance of
their indebtedness on June 30, 1960, the
respondents filed a Motion for Sale of
Mortgaged Property. The lower court
granted the motion and ordered the sale
of the mortgaged property.
Consequently, the three parcels of land
above-mentioned were sold by the
Sheriff at a public auction and this sale
was later confirmed by the lower court.
After the lower court confirmed the sale
of the mortgaged property, the petitioner
filed a motion to set aside all the
proceedings on the ground that the
compromise agreement dated January
15, 1960 was void ab initio with respect
to him because he did not sign the same.
Corollary, he argued, all subsequent
proceedings under and by virtue of the
compromise agreement, including the
foreclosure sales were void and null as
regards him. This motion to set aside
was denied by the lower court.
Issue:
Whether or not the compromise
agreement, unsigned by the petitioner
and without special power of attorney
issued by him in favor of a third person to
sign on his behalf, dated January 15,
1960 was null and void.
Held:
No, the compromise agreement is valid.

AGENCY REVEIWER..Page |8
Article 2028 of the Civil Code provides
that a compromise is a contract whereby
the parties, by making reciprocal
concessions, avoid a litigation or put an
end to one already commenced.

judgment of foreclosure shall thereafter


be entered against the said defendants.
Beyond doubt, this was ratified by the
Tri-Party Agreement when it covenanted
that -

Under Article 1878 of the Civil Code, a


third person cannot bind another to a
compromise agreement unless the third
person has obtained a special power of
attorney for that purpose from the party
intended to be bound.

If the payor defaults or fails to pay


anyone of the installments in the
manner stated above, the payor and
the debtors hereby permit the
creditors to execute the order of sale
referred to above (the judgment of
foreclosure), and they (payor and
debtors) hereby waive any and all
objections or oppositions to the
propriety of the public auction sale
and to the confirmation of the sale to
be made by the Court.

However, although the Civil Code


expressly requires a special power of
attorney in order that one may
compromise an interest of another, it is
neither accurate nor correct to conclude
that its absence renders the compromise
agreement void. In such a case, the
compromise is merely unenforceable.
This results from its nature as a contract.
It must be governed by the rules and the
law on contracts.
Article 1403 of the Civil Code provides
that contracts entered into in the name of
another person by one who has been
given
no
authority
or
legal
representation, or who has acted beyond
his power are unenforceable unless
ratified.
In the case at bar, the ratification of the
compromise agreement was conclusively
established by the Tri-Party Agreement.
It is to be noted that the compromise
agreement was legally enforced by the
lower court on January 15, 1960. Now,
the Tri-Party Agreement referred itself to
that order when it stipulated thus:
Whereas, the payor, hereby submits
and binds herself to the force and
effect of the order dated January 15,
1960, of the Court of First Instance of
Pasig, Rizal, Branch which order is
hereby made an integral part of this
agreement as Annex A.
Furthermore, the compromise agreement
stated that, should the defendants fail to
pay the said mortgage indebtedness,

The court held that the Tri-Party


Agreement was an instrument intended
to render effective the compromise
agreement. It merely complemented and
ratified the same. Thus, the compromise
agreement is valid.

IGNACIO VICENTE and MOISES


ANGELES, petitioners,
vs.
HON. AMBROSIO M. GERALDEZ, as
Judge of the Court of First Instance of
Bulacan, Branch V (Sta. Maria), and HI
CEMENT CORPORATION, respondents
FACTS:
Hi Cement Corporation acquired a mining
license to give them the authority to to operate
mining facilities. Within the limits of Placer
Mining Claim Red Star VIII are three parcels of
land claimed by the petitioners Juan Bernabe,
Vicente and Angeles. Disagreement arose
between the petitioner and the respondents
because of the said mining area. During pretrial, the possibility of an amicable settlement
was explored where HI Cement offered to
purchase the areas of claims of Vicente et al at
the rate of P0.90 per square meter however
petitioners refused to accept the rate because
they wanted P10.00 per square meter.

AGENCY REVEIWER..Page |9
Consequently,the lawyers of HI Cement
agreed to enter into a compromise agreement
with the three whereby commissioners shall be
assigned by the court for the purpose of
assessing the value of the disputed areas of
claim. After the assessment was made, the
commissioners recommended a price rate of
P15.00 per square meter. However the Board of
Directors of HI Cement disapproved the said
compromise agreement. Consequently , Atty.
Ventura, lawyer of HI Cement, filed a motion
with the court to disregard the compromise
agreement.
The petitioners questioned the motion filed by
Atty. Ventura. Petitioners
insisted that the
compromise agreement is binding because prior
to entering into the compromise agreement, the
three lawyers of HI Cement declared in open
court that they are authorized to enter into a
compromise agreement for HI Cement; that one
of the lawyers of HI Cement, Atty. Florentino
Cardenas, is an executive official of HI Cement.
They also emphasized that being an executive
official means that such act ratified the
compromise agreement even if it was not
approved by the Board. On the other side, HI
Cement contended that the lawyers were not
authorized and that in fact there was no special
power of attorney executed in their favor for the
purpose of entering into a compromise
agreement
The trial court dismissed the complaint of the
petitioners and ruled in favor of HI Cement.
ISSUE:
Whether or not a compromise
agreement entered into by a lawyer
purportedly
in
behalf
of
the
corporation is valid without a written
authority.
HELD:
No, a compromise agreement entered
into by a lawyer purportedly in behalf

of the corporation is valid without a


written authority.
The law specifically requires that
"juridical persons may compromise only
in the form and with the requisites which
may be necessary to alienate their
property." Under the corporation law the
power to compromise or settle claims in
favor of or against the corporation is
ordinarily and primarily committed to the
Board of Directors. The right of the
Directors "to compromise a disputed
claim against the corporation rests upon
their right to manage the affairs of the
corporation according to their honest and
informed judgment and discretion as to
what is for the best interests of the
corporation." This power may however
be delegated either expressly or
impliedly to other corporate officials or
agents. Thus it has been stated, that as
a general rule an officer or agent of the
corporation has no power to compromise
or settle a claim by or against the
corporation, except to the extent that
such power is given to him either
expressly or by reasonable implication
from the circumstances. It is therefore
necessary to ascertain whether from the
relevant facts it could be reasonably
concluded that the Board of Directors of
the HI Cement Corporation had
authorized its lawyers to enter into the
said compromise agreement.
Petitioners claim that private respondent's
attorneys admitted twice in open court on
January 30, 1969, that they were authorized to
compromise their client's case, which according
to them, was never denied by the said lawyers in
any of the pleadings filed by them in the case.
The claim is unsupported by evidence. On the
contrary, in private respondent's "Reply to
Defendant Bernabe's Answer Dated November
8, 1969," said counsels categorically denied that
they ever represented to the court that they were
authorized to enter into a compromise. Indeed,
the complete transcript of stenographic notes
taken at the proceedings on January 30, 1969
are before Us, and nowhere does it appear
therein that respondent corporation's lawyers

A G E N C Y R E V E I W E R . . P a g e | 10
ever made such a representation. In any event,
assuming arguendo that they did, such a selfserving assertion cannot properly be the basis
for the conclusion that the respondent
corporation had in fact authorized its lawyers to
compromise the litigation.
It having been found by the trial court that "the
counsel for the plaintiff entered into the
compromise agreement without the written
authority of his client and the latter did not ratify,
on the contrary it repudiated and disowned the
same ...", We therefore declare that the orders
of the court a quo subject of these two petitions,
have not been issued in excess of its
jurisdictional authority or in grave abuse of its
discretion.

executory it was not executed within the 5 year


period from date of its finality allegedly due to
the failure of Cosmic Lumber to produce the
owners duplicate copy of title needed to
segregate from lot 443 the portion sold by the
attorney-in-fact, Paz Estrada to Perez under the
compromise agreement
ISSUE:
W/N there is a contract of agency
between Cosmic Lumber, principal and Paz
Estrada, agent thus binding the principal over
the compromise agreement made by the agent
to a third person, Perez in selling the portion of
the said property
RULING:

COSMIC LUMBER CORPORATION V CA


FACTS
Cosmic Corporation, through its General
Manager executed a Special Power of Attorney
appointing Paz G. Villamil-Estrada as attorneyin-fact to initiate, institute and file any court
action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 for the
said squatters to remove their houses and
vacate the premises in order that the corporation
may take material possession of the entire lot
Paz G. Villamil Estrada, by virtue of her
power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and
recover the possession of a portion of lot 443
before the RTC
Estrada entered into a Compromise
Agreement with Perez, the terms and conditions
such as:
In order for Perez to buy the said lot he
is presently occupying, he has to pay to plaintiff
through Estada the sum of P26,640 computed at
P80/square meter and that Cosmic Lumber
recognizes ownership and possession of Perez
by virtue of this compromise agreement over
said portion of 333 sqm of lot 443 and whatever
expenses of subdivision, registration and other
incidental expenses shall be shouldered by
Perez although the agreement was approved by
the trial court and the decision became final and

No
The authority granted to Villamil-Estrada
under the special power of attorney was explicit
and exclusionary: for her to institute any action
in court to eject all persons found on lots number
9127 and 443 so that Cosmic Lumber could take
material possession thereof and for this
purpose, to appear at the pre-trial and enter into
any stipulation of facts and/or compromise
agreement but only insofar as this was
protective of the rights and interests of Cosmic
Lumber in the property
Nowhere in this authorization was
Villamil-Estrada granted expressly or impliedly
any power to sell the subject property nor a
portion thereof
Neither can a conferment of the power to
sell be validly inferred from the specific authority
to enter into a compromise agreement
because of the explicit limitation fixed by the
grantor that the compromise entered into shall
only be so far as it shall protect the rights and
interest of the corporation in the aforementioned
lots.
In the context of special investiture of
powers to Villamil-Estrada, alienation by sale of
an immovable certainly cannot be deemed
protective of the right of Cosmic Lumber to
physically possess the same, more so when the
land was being sold for a price of P80/sqm , very
much less than its assessed value of P250/sqm
and considering further that plaintiff never
received the proceeds of the sale

A G E N C Y R E V E I W E R . . P a g e | 11
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 should be void. Thus, the
authority of an agent to execute a contract for
the sale of real estate must be conferred in
writing and must give him specific authority,
either to conduct the general business of the
principal or to execute a binding contract
containing terms and conditions which are in the
contract he did execute
For the principal to confer the right upon
an agent to sell real estate, a power of attorney
must so express the powers of the agent in clear
and unmistakable language
It is therefore clear that by selling to
Perez a portion of Cosmic Lumbers land
through a compromise agreement, VillamilEstrada acted without or in obvious authority.
The sale ipso jure is consequently void and so is
the compromise agreement. This being the
case, the judgment based thereon is necessarily
void
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 vs. Allied Banking Corporation

RTC rendered a decision in favor of the


petitioners. On appeal, CA reversed the decision
of the RTC, upholding the validity of the REM.
Issue
Whether Julian had authority to mortgage the
subject property.
Held
No. the SPA was revoked by virtue of a public
instrument executed by Perla before the loan
was contracted.
An agency is extinguished, among others, by its
revocation (Article 1999, New Civil Code of the
Philippines). 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 (Article
1920, supra).
The Register of Deeds of Quezon City was even
notified that any attempt to mortgage or sell the
subject property must have the full consent
documented in the form of a special power of
attorney duly authenticated at the Philippine
Consulate General.

Facts
The petitioners are heirs of Perla Mercado. Perla
instituted a Special Power of Attorney (SPA) in
favor of her husband, Julian, giving him authority
as her agent. Later, on the strength of the SPA,
Julian obtained two loans from Allied Banking
Corp. secured by real estate mortgage (REM) of
the same property. Julian defaulted on his loan
obligations so the bank initiated foreclosure
proceedings on the subject property where the
bank was the highest bidder.
Later, petitioners filed with the RTC an action for
the annulment of the REM over the subject
property, saying that it was not covered by the
SPA and that said SPA no longer had force and
effect at the time the loan was contracted.

BPI vs. De Coster


Facts:
De Coster, La Orden and Poizat issued a
promissory note in favor of BPI for P292,000.
The promissory note was secured by several
mortgages on the several properties of the
debtors. The debtors defaulted so BPI asked the
court to foreclose the mortgages. CFI issued an
execution order against the three debtors.
Gabriela de Coster, wife of Poizat, complained
that at the time of the filing of the complaint she
was in Paris and was absent in the Philippines
and has no knowledge of the actual facts. De
Coster also alleged that the mortgage was made
without her consent and made in excess of the
authority given his husband and therefore it was
null and void.

A G E N C Y R E V E I W E R . . P a g e | 12
Issue:
Whether or not Gabriela de Coster y Roxas is
liable fo the mortgage executed by her agenthusband Jean Poizat.

itself responsible to the drug company for the


amounts represented by the checks.

Held: No. Husband has no authority to execute


a promissory note in behalf of his wife or to
make the latter liable as an accommodation
maker. Also, the debt was a preexisting debt of
the husband wherein the wife was not a party
and has no legal obligation to pay. The
obligation of the husband stated in the power if
attorney was to borrow money for or in account
of his wife as her agent and as her attorney in
fact. That does not carry with it the power to
make his wife liable as a surety for his
preexisting debt. Also, the husband, the agent
of his wife, failed to represent the interest of his
principal in court.

The bank could relieve itself from


responsibility by pleading and proving that after
the money was withdrawn from the bank it
passed to the drug company which thus suffered
no loss, but the bank has not done so. Much
more could be said about this case, but it
suffices to state in conclusion that the bank will
have to stand the loss occasioned by the
negligence of its agents.

Insular Drug vs. PNB

ISSUE:
WON the agent had the implied
authority to indorse checks received in payment.

[No. 38816. November 3, 1933]

INSULAR DRUG Co., INC., plaintiff and


appellee, vs. THE PHILIPPINE NATIONAL
BANK ET AL., defendants. THE PHILIPPINE
NATIONAL BANK, appellant.

FACTS:
This is a case where 132 checks
made out in the name of the Insular Drug Co.,
Inc., were brought to the branch office of the
Philippine National Bank in Iloilo by Foerster, a
salesman of the drug company, Foerster's wife,
and Foerster's clerk.

The bank could tell by the checks


themselves that the money belonged to the
Insular Drug Co., Inc., and not to Foerster or his
wife or his clerk. When the bank credited those
checks to the personal account of Foerster and
permitted Foerster and his wife to make
withdrawals without there being any authority
from the drug company to do so, the bank made

HELD: No. The right of an agent to indorse


commercial paper is a very responsible power
and will not be lightly Inferred.
A salesman with authority to
collect money belonging to his principal does not
have the implied authority to indorse checks
received in payment.
Any person taking checks made
payable to a corporation, which can act only by
agents does so at his peril, and must abide by
the consequences if the agent who indorses the
same is without authority.

When a bank accepts the indorsements


on checks made out to a drug company of a
salesman of the drug company and the
indorsements of the salesman's wife and clerk,
and credits the checks to the personal account
of the salesman and his wife, permitting them to
make withdrawals, the bank makes itself
responsible to the drug company for the
amounts represented by the checks, unless it is
pleaded and proved that after the money was

A G E N C Y R E V E I W E R . . P a g e | 13
withdrawn from the bank, it passed to the drug
company which thus suffered no loss.

HODGES V. SALAS AND SALAS


63 Phil. 567
Facts: On September 2, 1923, the defendants
executed a power of attorney in favor of their
brother-in-law Felix S. Yulo to enable him to
obtain a loan and secure it with a mortgage on
the real property described in transfer certificate
of title No. 3335. The power of attorney was
registered in the registry of deeds of the
Province of Occidental Negros. Acting under
said power of attorney, Felix S. Yulo, on March
27,1926, obtained a loan of P28,000 from the
plaintiff, binding his principals jointly and
severally, to pay it within ten (10) years, together
with interest thereon at 12 per cent per annum
payable annually in advance, to which effect he
signed a promissory note for said amount and
executed a deed of mortgage of the real
property. It was stated in the deed that in case
the defendants failed to pay the stipulated
interest and the taxes on the real property
mortgaged and if the plaintiff were compelled to
bring an action to recover his credit, said
defendants would be obliged to pay 10 per cent
more on the unpaid capital, as fees for the
plaintiff's attorneys. The mortgage so constituted
was registered in the registry of deeds of the
Province of Occidental Negros and noted on the
back of the transfer certificate of title. The
defendants failed to pay at maturity the interest
stipulated which should have been paid one
year inadvance. Plaintiff therefore brought an
action for foreclosure of the mortgage. The trial
court ordered in favor of the defendants and
held that the loan and the mortgage were illegal.
Issue: Whether or not the loan obtained and the
mortgage executed by Yulo was valid and
therefore defendants are bound to pay?

Ruling: Yes.
The
loan
obtained and the
mortgage executed
by
Yulo
was valid and therefore defendants are bound to
pay for it. By virtue of the authority conferred by
the defendants by executing a power of attorney,
agent Yulo was authorized to borrow money and
invest it as he wished, without being obliged to
apply it necessarily for the benefit of his
principals.

EFFECT OF SPECIFIC AUTHORIZATION


BRAVO-GUERRERO VS. BRAVO
Facts: Spouses Mauricio and Simona Bravo
owned two parcels of land loacated alon
Evangelista Street, Makati City, Metro Manila.
The properties contain a large residential
dwelling, a smaller house and other
improvements. The spouses had three children
Roland, Cesar and Lily, all surnamed Bravo.
Cesar died without issue. Lily Lily Bravo married
David Diaz, and had a son, David B. Diaz, Jr.
(David Jr.). Roland had six children, namely, Lily
Elizabeth Bravo-Guerrero (Elizabeth), Edward
Bravo (Edward), Roland Bravo, Jr. (Roland Jr.),
Senia Bravo, Benjamin Mauricio Bravo, and their
half-sister, Ofelia Bravo (Ofelia).
Simona executed a General Power of Attorney
(GPA) on 17 June 1966 appointing Mauricio as
her attorney-in-fact. In the GPA, Simona
authorized Mauricio to mortgage or otherwise
hypothecate, sell, assign and dispose of any and
all of my property, real, personal or mixed, of
any kind whatsoever and wheresoever situated,
or
any
interest
therein
xxx. [6] Mauricio
subsequently mortgaged the Properties to the
Philippine
National
Bank
(PNB)
and
Development Bank of the Philippines (DBP)
for P10,000 and P5,000, respectively.
On a later date, Mauricio executed a Deed of
Sale with Assumption of Real Estate Mortgage
conveying the properties to Roland A. Bravo,
Ofelia A. Bravo and Elizabeth Bravo. The
consideration was for P1,000 and assumption of
mortgage obligation. When Mauricio died on

A G E N C Y R E V E I W E R . . P a g e | 14
November 20, 1973 followed by Simona in 1977.
Respondents herein moved for the judicial
partition of the Properties however the petitioner
refuses with the respondents the possession
and rental income of the Properties. The
complaint was amended to include the
annulment of the Deed of Sale.
The RTC ruled to the validity of the Sale,
However on appeal the CA reversed said
Decision. Hence this petition
Issue: Whether or not the General Power of
Attorney did not authorize Mauricio to sell the
property. (Agency issue only)
Ruling:
Yes, Mauricio was granted with such authority.
Article 1878 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 Article 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.
Simona authorized Mauricio to mortgage or
otherwise hypothecate, sell, x x x
II. ESTABLISHING AGENCY

A. ORAL OR WRITTEN EXPRESS KIND


OF AGENCY ( as opposed to implied)
Art. 1869. Agency may be express, or implied
from the acts of the principal, from his
silence or lack of action, or his failure to
repudiate the agency, knowing that another
person is acting on his behalf without
authority.
Agency may be oral, unless the law
requires a specific form. (1710a)

SIASAT V. IAC G.R NO.L-67889, OCTOBER 10


1985
FACTS: Nacianceno, as the agent of United
Flag Industry, got DECS to purchase 1 million
pesos worth of national flag to be used for public
schools throughout the country. Siasat, the
owner and general manager of United Flag,
formalized the companys agreement with
Nacianceno through a letter, where they agreed
to give Nacianceno 30% commission. After the
first delivery of flags was made, Nacianceno
received only 5% commission and her authority
revoked.
ISSUE: Whether or not Nacianceno is a general
agent.
HELD: Yes, Nacianceno is a general agent. The
agreement clearly showed that Nacianceno was
a general agent. It could easily be seen by the
way general words were employed in the
agreement that no restrictions were intended as
to the manner the agency was to be carried out.
The power granted to Nacianceno was so broad
that it practically covers the negotiations leader
to, and the execution of a contract of sale.
20. AIR FRANCE vs CA
G.R. No. L-57339 December 29, 1983
Facts:
In Februry 1970, the late Jose G. Gana and his
family, purchased from AIR FRANCE through
Imperial Travels, Incorporated, a duly authorized
travel agent an air passage tickets for the
Manila/Osaka/Tokyo/Manila route. On 24 April
1970, AIR FRANCE exchanged or substituted
the aforementioned tickets with other tickets for
the same route. At this time, the GANAS were
booked for the Manila/Osaka segment on AIR
FRANCE Flight 184 for 8 May 1970, and for the
Tokyo/Manila return trip on AIR FRANCE Flight
187 on 22 May 1970. The aforesaid tickets were
valid until 8 May 1971,
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought
the assistance of Teresita Manucdoc, a

A G E N C Y R E V E I W E R . . P a g e | 15
Secretary of the Company where Jose Gana
was the Director and Treasurer, for the
extension of the validity of their tickets,
which were due to expire on 8 May 1971.
Teresita enlisted the help of Lee Ella Manager of
the Philippine Travel Bureau, who used to
handle travel arrangements for the personnel of
the Sta. Clara Lumber Company. Ella sent the
tickets to Cesar Rillo, Office Manager of AIR
FRANCE. The tickets were returned to Ella who
was informed that extension was not possible
unless the fare differentials resulting from the
increase in fares triggered by an increase of the
exchange rate of the US dollar to the Philippine
peso and the increased travel tax were first paid.
Ella then returned the tickets to Teresita and
informed her of the impossibility of extension.
Despite repeated warnings by Ella, The GANAS
departed from Manila in the afternoon of 7 May
1971 on board AIR FRANCE to Osaka Japan.
There is no question with respect to this leg of
the trip.
However, for the Osaka/Tokyo flight on 17 May
1971, Japan Airlines refused to honor the tickets
because of their expiration, and the GANAS had
to purchase new tickets. They encountered the
same difficulty with respect to their return trip to
Manila as AIR FRANCE also refused to honor
their tickets. They were able to return only after
pre-payment in Manila, through their relatives, of
the readjusted rates.
Issue:
Whether or not the notice of the agent Ella of the
rejection of the request for extension of the
validity of the plane tickets, also notice to the
principal.
Held:
YES. The GANAS cannot defend by contending
lack of knowledge of those rules since the
evidence bears out that Teresita, who handled
travel arrangements for the GANAS, was duly
informed by travel agent Ella of the advice of
Reno, the Office Manager of Air France, that the
tickets in question could not be extended
beyond the period of their validity without paying
the fare differentials and additional travel taxes
brought about by the increased fare rate and
travel taxes.

The ruling relied on by respondent Appellate


Court, therefore, in KLM. vs. Court of Appeals,
65 SCRA 237 (1975), holding that it would be
unfair to charge respondents therein with
automatic knowledge or notice of conditions in
contracts of adhesion, is inapplicable. To all
legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the
rejection of the request for extension of the
validity of the tickets was notice to the GANAS,
her principals
Cosmic Lumber vs CA G.R. No. 114311
Facts: Petitioner Cosmic Lumber through its
General Manager executed a special power of
Attorney appointing Paz Villamil-Estrada as
attorney in fact to initiate, institute and file any
court action for the ejectment of third persons
and/or squatters of the entire lot 9127 and 433
for the said squatters to remove their houses
and vacate the premises in order that the
corporation may take material possession of the
entire lot.
Paz Villamil-Estrada, by virtue of her power of
attorney, instituted an action for the ejectment of
private respondent Isidro Perez and recover the
possession of a portion of lot.
Villamil-Estrada entered into a Compromise
Agreement with Perez which was then approved
by the trial court. It appeared later on that the
said Compromise Agreement was not known to
Cosmic Lumber. Petitioner sought annulment of
the decision of the RTC on the ground that the
compromise agreement was void for lack of
authority.
Issue: WON there is a contract of agency
between Cosmic Lumber, principal and Paz
Villamil-Estrada, agent thus binding the principal
over the compromise agreement made by the
agent to a third person, Perez in selling the
portion of the said property.
Held: No. The authority granted Villamil-Estrada
under the special power of attorney was explicit

A G E N C Y R E V E I W E R . . P a g e | 16
and exclusionary: for her to institute any action
in court to eject all persons found on lots number
9127 and 443 so that Cosmic Lumber could take
material possession thereof and for this
purpose, to appear at the pre-trial and enter into
any stipulation of facts and/or compromise
agreement but only insofar as this was
protective of the rights and interests of Cosmic
Lumber in the property.
Nowhere in this authorization was VillamilEstrada granted expressly or impliedly any
power to sell the subject property nor a portion
thereof. Neither can a conferment of the power
to sell be validly inferred from the specific
authority to enter into a compromise
agreement because of the explicit limitation
fixed by the grantor that the compromise entered
into shall only be so far as it shall protect the
rights and interest of the corporation in the
aforementioned lots. In the context of special
investiture of powers to Villamil-Estrada,
alienation by sale of an immovable certainly
cannot be deemed protective of the right of
Cosmic Lumber to physically possess the same,
more so when the land was being sold for a
price of P80/sqm , very much less than its
assessed value of P250/sqm and considering
further that plaintiff never received the proceeds
of the sale.
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
should be void. Thus, the authority of an agent
to execute a contract for the sale of real estate
must be conferred in writing and must give him
specific authority, either to conduct the general
business of the principal or to execute a binding
contract containing terms and conditions which
are in the contract he did execute or the
principal to confer the right upon an agent to sell
real estate, a power of attorney must so express
the powers of the agent in clear and
unmistakable language.

It is therefore clear that by selling to Perez a


portion of Cosmic Lumbers land through a
compromise agreement, Villamil-Estrada acted
without or in obvious authority. The sale ipso jure
is consequently void and so is the compromise
agreement. This being the case, the judgment
based thereon is necessarily void. 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.
OESMER VS. PARAISO DEVELOPMENT
OESMER VS. PARAISO DEVELOPMENT
CORPORATION
514 SCRA 228
GR # 157493, FEBRUARY 5, 2007
FACTS:
The heirs of BibianoOesmar and
EncarnacionDurumpili entered in a contract to
sell with their 6/8 part of the land to Paraiso
Development Corporation. Ernesto (one of the
siblings) acting on the behalf of Rizalino,
Leonora, BibianoJr, Librado, and Enriqueta,
transacted and met the contract to sell and
received the option money of PHP 100,000. In
the contract to sell signed by the 5 siblings,
contends that the contract to sell is invalid since,
it was only Ernesto who acted as their agent,
second, that ParaisoDevelopment Corpoationdid
not sign the contract to sell and lastly that the
contract to sell should be invalid.
ISSUE:
Whether or not the contract may be
invalid, since it was Ernesto who acted as their
agent who transacted the contract?
HELD:
No. The law itself explicitly requires a
written authority before an agent can sell an
immovable. The conferment of such an authority
should be in writing, in as clear and precise
terms as possible. It is worth notingthat
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 brotherand

A G E N C Y R E V E I W E R . . P a g e | 17
co-petitioner Ernesto as to the sale of the
subject parcels of land. Thus, the Contract to
Sell, although signed on the margin by the five
petitioners, is not sufficient to confer authority on
petitioner Ernesto to act as their agent in selling
their shares in the propertiesin question.
However, despite petitioner Ernestos lack of
written authority from the five petitioners to sell
their shares in the subject parcels of land, the
supposed Contract to Sell remains valid and
binding upon the latter. As can be clearly
gleaned from the contract itself, it is not
onlypetitioner Ernesto who signed the said
Contract to Sell; the other five petitioners also
personally affixed their signatures thereon.
Therefore, a written authority is no longer
necessary in order to sell their shares in the
subject parcels of land because, by affixing their
signatures on the Contract to Sell, they were
notselling their shares through an agent but,
rather, they were selling the same directly and in
their own right.
ESTABLISHING AGENCY- 2. WRITTEN- b.
EFFECT
AF REALTY vs. DIESELMAN
FACTS:
Dieselman Freight Service Co. (Dieselman for
brevity) is a domestic corporation and a
registered owner of a parcel of commercial lot.
Manuel C. Cruz, Jr., a member of the board of
directors of Dieselman, issued a letter
denominated as "Authority To Sell Real
Estate" to Cristeta N. Polintan, a real estate
broker of the CNP Real Estate Brokerage. Cruz,
Jr. authorized Polintan "to look for a
buyer/buyers and negotiate the sale" of the
lot. Cruz, Jr. has no written authority
from Dieselman to sell the lot.
In turn, Cristeta Polintan,
through a
letter, authorized Felicisima ("Mimi") Noble to
sell the same lot.
Felicisima Noble then offered for sale the
property to AF Realty & Development, Inc. (AF

Realty). Zenaida Ranullo, board member and


vice-president of AF Realty, accepted the offer
and issued a check payable to the order of
Dieselman. Polintan received the check and
signed an "Acknowledgement Receipt".
AF Realty confirmed its intention to buy the lot.
Hence, Ranullo asked Polintan for the board
resolution of Dieselman authorizing the sale of
the property. However, Polintan could only give
Ranullo the original copy of TCT No. 39849, the
tax declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of
Dieselman.
However, Mr. Cruz, jr. terminated the offer and
demanded from AF Realty the return of the title
of the lot earlier delivered by Polintan.
Claiming that there was a perfected contract of
sale between them, AF Realty filed with the
Regional Trial Court, a complaint for specific
performance against Dieselman and Cruz,
Jr.. The complaint prays that Dieselman be
ordered to execute and deliver a final deed of
sale in favor of AF Realty
In its answer, Dieselman alleged that there was
no meeting of the minds between the parties in
the sale of the property and that it did not
authorize any person to enter into such
transaction on its behalf.
After trial, the lower court rendered the
challenged Decision holding that the acts of
Cruz, Jr. bound Dieselman in the sale of the lot
to AF Realty.
Dissatisfied, all the parties appealed to the Court
of Appeals.
The Court of Appeals reversed the judgment of
the trial court holding that since Cruz, Jr. was not
authorized in writing by Dieselman to sell the
subject property to AF Realty, the sale was not
perfected;
ISSUE:

A G E N C Y R E V E I W E R . . P a g e | 18
Whether or not Cruz is an agent of Dieselman,
despite the fact that he has no written authority
to sell or negotiate the sale of the lot
HELD:
NO. Cruz is not an agent of Dieselman.
In the instant case, it is undisputed that
respondent Cruz, Jr. has no written authority
from the board of directors of respondent
Dieselman to sell or to negotiate the sale of the
lot, much less to appoint other persons for the
same purpose. Respondent Cruz, Jr.s lack of
such authority precludes him from conferring
any authority to Polintan involving the subject
realty. Necessarily, neither could Polintan
authorize
Felicisima
Noble. Clearly,
the
collective acts of respondent Cruz, Jr., Polintan
and Noble cannot bind Dieselman in the
purported contract of sale.
Petitioner AF Realty maintains that the sale of
land by an unauthorized agent may be ratified
where, as here, there is acceptance of the
benefits involved. In this case the receipt by
respondent Cruz, Jr. from AF Realty of the
partial payment of the lot effectively binds
respondent Dieselman.
The Court disagreed.
Involved in this case is a sale of land through an
agent. Thus, the law on agency under the Civil
Code takes precedence. This is well stressed
in Yao Ka Sin Trading vs. Court of Appeals:
Since a corporation, such as the private
respondent, can act only through its officers and
agents, all acts within the powers of said
corporation may be performed by agents of its
selection; and, except so far as limitations or
restrictions may be imposed by special charter,
by-law, or statutory provisions, the same general
principles of law which govern the relation of
agency for a natural person govern the officer or
agent of a corporation, of whatever status or
rank, in respect to his power to act for the

corporation; and
agents
when
once
appointed, or members acting in their stead, are
subject to the same rules, liabilities, and
incapacities as are agents of individuals and
private persons. (Emphasis supplied)
Pertinently, Article 1874 of the same Code
provides:
ART. 1874. 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. (Emphasis supplied)
Considering that respondent Cruz, Jr., Cristeta
Polintan and Felicisima Ranullo were not
authorized by respondent Dieselman to sell its
lot, the supposed contract is void. Being a void
contract, it is not susceptible of ratification.
Pahubad v CA
FACTS:
Sps.Pedro San Agustin and Agatona
Genil owned a 246-sqm parcel of land and they
died intestate, survived by their 8 children:
Eufemia, Raul, Ferdinand, Zenaida, Milagros,
Minerva, Isabelita and Virgilio. In 1992, Eufemia,
Ferdinand and Raul executed a Deed of
Absolute Sale of Undivided Shares conveying in
favor of Pahuds their respective shares from the
lot they inherited from their deceased parents for
P525K. Eufemia also signed the deed on behalf
of her sister Isabelita on the basis of a special
power of attorney and also for Milagros, Minerva
and Zenaida but without their apparent
authority. The deed of sale was also not
authorized. The Pahuds paid P35,792.31 to the
Los Banos Rural Bank where the subject
property was mortgaged. The bank issued a
release of mortgage and turned over the owners
copy of the OCT to the Pahuds. The Pahuds
made more payments to Eufemia and her coheirs drafted an extra-judicial settlement of
estate to facilitate the transfer of the title to the
Pahuds, Virgilio refused to sign it.

A G E N C Y R E V E I W E R . . P a g e | 19
In 1993, Virgilios co-heirs filed a
complaint for judicial partition. In the course of
the proceedings, a Compromise Agreement was
signed by 7 of the co-heirs agreeing to sell their
undivided shares tto Virgilio for P700K. it was
not approved by the trial court because Atty.
Dimetrio Hilbero, lawyer of Eufemia, refused to
sign the agreement because he knew of the
previous sale to the Pahuds.
Later, Eufemia acknowledged having
received P700K from Virgilio, who then sold the
entire property to spouses Belarmino sometime
in 1994. The Belarminos immediately constricted
a building on the subject property. The Pahuds
immediately confronted Eufemia who confirmed
to them that Virgilio had sold the property to the
Belrminos. Aggrieved, the Pahuds filed a
complaint in intervention in the pending case for
judicial partition.
ISSUE:
Whether the sale in favor of the
Pahuds made by Eufemia in behalf of her coheirs is valid
HELD:
The absence of a written authority to sell
a piece of land is ipso jure, void, to protect the
interest of an unsuspecting owner from being
prejudiced by the unwarranted act of the other.
Based on the foregoing, the Court ruled
that the sale with respect to the 3/8 portion,
representing the shares of Zenaida, Milagros,
and Minerva, is void because Eufemia could not
dispose of the interest of her co-heirs in the said
lot absent any written authority from the latter, as
explicitly required by law.
However, the Court upheld the validity of
the sale on the basis of the common law
principle of estoppel.
***the Court held the validity of the sale for the
following reasons: a) the admission of the heirs
regarding the sale of 7/8 of the property to the
Pahuds (during the preliminary conference); b)

failure of the three heirs (who did not authorized


Eufemia) to assail the validity of the transaction;
and c) the apparent authority given by the three
heirs to Eufemia by reason of their continued
silence.
Litonjua vs Eternit Corp.
Facts:
The Eternit Corporation (EC) manufactures
roofing materials and pipe products. Ninety
(90%) percent of the shares of stocks of EC
were owned by Eteroutremer S.A. Corporation
(ESAC), a corporation registered under the laws
of Belgium. Jack Glanville was the General
Manager and President of EC, while Frederick
Delsaux was the Regional Director for Asia of
ESAC. In 1986, because of the political situation
in the Philippines the management of ESAC
wanted to stop its operations and to dispose
their 8 parcels of land located in Mandaluyong
City. They engaged the services of realtor/broker
Lauro G. Marquez. Marquez thereafter offered
the land to Eduardo B. Litonjua, Jr. for
P27,000,000.00. Litonjua counter offered
P20,000,000.00 cash.
Marquez apprised
Glanville & Delsaux of the offer. Delsaux sent a
telex stating that, based on the "Belgian/Swiss
decision," the final offer was "US$1,000,000.00
and P2,500,000.00 to cover all existing
obligations prior to final liquidation. The Litonjua
brothers deposited US$1,000,000.00 with the
Security Bank & Trust Company, and drafted an
Escrow Agreement to expedite the sale.
Meanwhile, with the assumption of Corazon C.
Aquino as President, the political situation
improved. Marquez received a letter from
Delsaux that the ESAC Regional Office decided
not to proceed with the sale. When informed of
this, the Litonjuas, filed a complaint for specific
performance and payment for damages on
account of the aborted sale. Both the trial court
and appellate court rendered judgment in favor
of defendants and dismissed the complaint. The
lower court declared that since the authority of

A G E N C Y R E V E I W E R . . P a g e | 20
the agents/realtors was not in writing, the sale is
void and not merely unenforceable.
Issue:
WON there was already a perfected contract of
sale of the parcels of land that would in effect
make the respondents in default and therefore
liable for damages?
Ruling:
None. Respondents maintain that Glanville,
Delsaux and Marquez had no authority from the
stockholders of EC and its Board of Directors to
offer the properties for sale to the petitioners.
Petitioners assert that there was no need for a
written authority from the Board of Directors of
EC for Marquez to validly act as broker. As
broker, Marquez was not an ordinary agent
because his only job as a broker was to look for
a buyer and to bring together the parties to the
transaction. He was not authorized to sell the
properties; hence, petitioners argue, Article 1874
of the New Civil Code does not apply.
A corporation is a juridical person separate and
distinct from its stockholders and is not affected
by the personal rights, obligations and
transactions of the latter. It may act only through
its board of directors or, when authorized by its
board resolution, through its officers or agents.
The general principles of agency govern the
relation between the corporation and its officers
or agents, subject to the articles of incorporation,
by-laws, or relevant provisions of law. Agency
may be oral unless the law requires a specific
form. However, to create or convey real rights
over immovable property, a special power of
attorney is necessary. Thus, when a sale of a
piece of land or any portion thereof is
through an agent, the authority of the latter
shall be in writing, otherwise, the sale shall
be void. In this case, the petitioners failed to
adduce in evidence any resolution of the Board
of Directors of EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let
alone offer for sale, for and in its behalf, the

eight parcels of land owned by it. Moreover, the


evidence of petitioners shows that Adams and
Glanville acted on the authority of Delsaux, who,
in turn, acted on the authority of ESAC, through
its Committee for Asia, and the Belgian/Swiss
component of the management of ESAC. The
offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire
management or Board of Directors of ESAC.
While it is true that petitioners accepted the
counter-offer of ESAC, EC was not a party to the
transaction between them; hence, EC was not
bound by such acceptance. Decision of the
lower court is affirmed.
Estoppel vs. Implied
For an agency by estoppel to exist, the following
must be established: (1) the principal manifested
a representation of the agents authority or
knowlingly allowed the agent to assume such
authority; (2) the third person, in good faith,
relied upon such representation; (3) relying upon
such representation, such third person has
changed his position to his detriment. 48 An
agency by estoppel, which is similar to the
doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in
turn, needs proof that the representations
predated the action taken in reliance. ( Litonjua
vs. Eternit )
While implied agency is only extant when the
circumstances stated in Articles 1871 and 1872
are present.

Nagoles vs. Capitol Medical


ROGELIO P. NOGALES, for himself
and on behalf of the minors, ROGER
ANTHONY, ANGELICA, NANCY, and
MICHAEL
CHRISTOPHER,
all
surnamed NOGALES, petitioners vs.
CAPITOL MEDICAL CENTER, DR.
OSCAR
ESTRADA,
DR.
ELY

A G E N C Y R E V E I W E R . . P a g e | 21
VILLAFLOR, DR. ROSA UY, DR. JOEL
ENRIQUEZ, DR. PERPETUA LACSON,
DR. NOE ESPINOLA, and NURSE J.
DUMLAO, respondents.
G.R. No. 142625, December 19, 2006
Facts:
Pregnant with her fourth child, Corazon
Nogales (Corazon), who was then 37
years old, was under the exclusive
prenatal care of Dr. Oscar Estrada (Dr.
Estrada) beginning on her fourth month
of pregnancy. While Corazon was on her
last trimester of pregnancy, Dr. Estrada
noted an increase in her blood pressure
and development of leg edema indicating
preeclampsia, which is a dangerous
complication of pregnancy.
Around midnight of May 25, 1976,
Corazon started to experience mild labor
pains prompting Corazon and Rogelio
Nogases (Spouses Nogales) to see Dr.
Estrada at his home. After examining
Corazon, Dr. Estrada advised her
immediate admission for the Capitol
Medical Center (CMC).
Corazon was admitted at the CMC after
the staff nurse noted the written
admission request of Dr. Estrada. Upon
Corazons admission at the CMC,
Rogelio Nogales (Rogelio) executed and
signed the Consent on Admission and
Agreement and Admission Agreement.
Corazon was then brought to the labor
room of the CMC.
After various medical procedures and the
baby came out, Corazon become to
manifest moderate vaginal bleeding
which rapidly became profuse. On the
other hand, Rogelio was made to sign
Consent to Operation for hysterectomy.
However, Corazon died.
Petitioners filed a complaint for damages
with the Regional Trial Court of Manila
against CMC, Dr. Estrada, Dr. Villaflor,
Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr.
Espinola, and a certain Nurse J. Dumlao
for the death of Corazon. Petitioners

contended that defendant physicians and


CMC personnel were negligent in the
treatment and management of Corazons
condition. Petitioners charged CMC with
negligence in the selection and
supervision of defendant physicians and
hospital staff.
The trial court rendered judgment finding
Dr. Estrada solely liable for damages.
Furthermore, it ruled that in the pre-trial
order, plaintiffs and CMC agreed that
defendant CMC did not have any hand or
participation in the selection or hiring of
Dr. Estrada as attending physician of the
deceased. In other words, the doctor was
not an employee of the hospital and
therefore the hospital did not have
control over his professional conduct.
When Mrs. Nogales was brought to the
hospital, it was an emergency case and
defendant CMC had no choice but to
admit her. Such being the case, there is
therefore no legal ground to apply the
provisions of Articles 2176 and 2180 of
the New Civil Code referring to the
vicarious liability of an employer for the
negligence of its employees. If ever in
this case there is fault or negligence in
the treatment of the deceased on the
part of the attending physician who was
employed by the family of the deceased
such civil liability should be borne by the
attending physician.
Issue:
Whether or not CMC is vicariously liable
for the negligence committed by Dr.
Estrada.
Held:
Yes, CMC is vicariously liable for the
negligence committed by Dr. Estrada.
Dr. Estradas negligence in handling the
treatment and management of Corazons
condition which ultimately resulted in
Corazons death is no longer an issue.
Accordingly, the finding of the trial court
on Dr. Estradas negligence is already
final.

A G E N C Y R E V E I W E R . . P a g e | 22
Petitioners claim that CMC is vicariously
liable for Dr. Estradas negligence based
on Article 2180 in relation Article 2176 of
the Civil Code. These provisions
pertinently state:
Article 2180. The obligation imposed
Article 2176 is demandable not only
ones own acts or omissions, but also
those of persons for whom one
responsible.

by
for
for
is

CMC. Moreover, the fact that CMC made


Rogelio sign a Consent on Admission
and
Admission
Agreement and
a
Consent to Operation printed on the
letterhead of CMC indicates that CMC
considered Dr. Estrada as a member of
its medical staff.

xxxx

On the other hand, CMC disclaims


liability by asserting that Dr. Estrada was
a mere visiting physician and that it
admitted Corazon because her physical
condition then was classified an
emergency obstetrics case.

Employers shall be liable for the


damages caused by their employees and
household helpers acting within the
scope of their assigned task, even
though the former are not engaged in
any business or industry.

CMC alleges that Dr. Estrada is an


independent contractor "for whose
actuations CMC would be a total
stranger." CMC maintains that it had no
control or supervision over Dr. Estrada in
the exercise of his medical profession.

xxxx

Article 2176. Whoever by act or omission


causes damage to another, there being
fault or negligence, is obliged to pay for
the damage done. Such fault or
negligence, if there is no pre-existing
contractual relation between the parties,
is called a quasi-delict and is governed
by the provisions of this chapter.

The Court had the occasion to determine


the relationship between a hospital and a
consultant or visiting physician and the
liability of such hospital for that
physician's negligence in Ramos v. Court
of Appeals.While the Court in Ramos did
not expound on the control test, such test
essentially determines whether an
employment relationship exists between
a physician and a hospital based on the
exercise of control over the physician as
to details. Specifically, the employer (or
the hospital) must have the right to
control both the means and the details of
the process by which the employee (or
the physician) is to accomplish his task.

In the present case, petitioners maintain


that CMC, in allowing Dr. Estrada to
practice and admit patients at CMC,
should be liable for Dr. Estrada's
malpractice. Rogelio claims that he knew
Dr. Estrada as an accredited physician of
CMC, though he discovered later that Dr.
Estrada was not a salaried employee of
the CMC. Rogelio further claims that he
was dealing with CMC, whose primary
concern was the treatment and
management of his wife's condition. Dr.
Estrada just happened to be the specific
person he talked to representing

After a thorough examination of the


voluminous records of this case, the
Court finds no single evidence pointing to
CMC's exercise of control over Dr.
Estrada's treatment and management of
Corazon's condition. It is undisputed that
throughout Corazon's pregnancy, she
was under the exclusive prenatal care of
Dr. Estrada. At the time of Corazon's
admission at CMC and during her
delivery, it was Dr. Estrada who attended
to Corazon. There was no showing that
CMC had a part in diagnosing Corazon's
condition. While Dr. Estrada enjoyed staff

The responsibility treated of in this article


shall cease when the persons herein
mentioned prove that they observed all
the diligence of a good father of a family
to prevent damage.

A G E N C Y R E V E I W E R . . P a g e | 23
privileges at CMC, such fact alone did
not make him an employee of CMC.
CMC merely allowed Dr. Estrada to use
its facilities when Corazon was about to
give birth, which CMC considered an
emergency.
Considering
these
circumstances, Dr. Estrada is not an
employee of CMC, but an independent
contractor.
In general, a hospital is not liable for the
negligence of an independent contractorphysician. There is, however, an
exception to this principle. The hospital
may be liable if the physician is the
"ostensible" agent of the hospital.This
exception is also known as the "doctrine
of apparent authority."
The doctrine of apparent authority
essentially involves two factors to
determine the liability of an independentcontractor physician.
The first factor focuses on the hospital's
manifestations
and
is
sometimes
described as an inquiry whether the
hospital acted in a manner which would
lead a reasonable person to conclude
that the individual who was alleged to be
negligent was an employee or agent of
the hospital. In this regard, the hospital
need not make express representations
to the patient that the treating physician
is an employee of the hospital; rather a
representation may be general and
implied.
The doctrine of apparent authority is a
species of the doctrine of estoppel.
Article 1431 of the Civil Code provides
that "[t]hrough estoppel, an admission or
representation is rendered conclusive
upon the person making it, and cannot
be denied or disproved as against the
person relying thereon." Estoppel rests
on this rule: "Whenever a party has, by
his own declaration, act, or omission,
intentionally and deliberately led another
to believe a particular thing true, and to
act upon such belief, he cannot, in any
litigation arising out of such declaration,
act or omission, be permitted to falsify it."

In the instant case, CMC impliedly held


out Dr. Estrada as a member of its
medical staff. Through CMC's acts, CMC
clothed Dr. Estrada with apparent
authority thereby leading the Spouses
Nogales to believe that Dr. Estrada was
an employee or agent of CMC. CMC
cannot now repudiate such authority.
First, CMC granted staff privileges to Dr.
Estrada. CMC extended its medical staff
and facilities to Dr. Estrada. Upon Dr.
Estrada's
request
for
Corazon's
admission, CMC, through its personnel,
readily accommodated Corazon and
updated Dr. Estrada of her condition.
Second, CMC made Rogelio sign
consent forms printed on CMC
letterhead. Prior to Corazon's admission
and supposed hysterectomy, CMC asked
Rogelio to sign release forms, the
contents of which reinforced Rogelio's
belief that Dr. Estrada was a member of
CMC's medical staff.
Without any indication in these consent
forms that Dr. Estrada was an
independent contractor-physician, the
Spouses Nogales could not have known
that Dr. Estrada was an independent
contractor. Significantly, no one from
CMC informed the Spouses Nogales that
Dr. Estrada was an independent
contractor. On the contrary, Dr. Atencio,
who was then a member of CMC Board
of Directors, testified that Dr. Estrada
was part of CMC's surgical staff.
Third, Dr. Estrada's referral of Corazon's
profuse vaginal bleeding to Dr. Espinola,
who was then the Head of the Obstetrics
and Gynecology Department of CMC,
gave the impression that Dr. Estrada as
a member of CMC's medical staff was
collaborating with other CMC-employed
specialists in treating Corazon.
The second factor focuses on the
patient's reliance. It is sometimes
characterized as an inquiry on whether
the plaintiff acted in reliance upon the

A G E N C Y R E V E I W E R . . P a g e | 24
conduct of the hospital or its agent,
consistent with ordinary care and
prudence.
The records show that the Spouses
Nogales relied upon a perceived
employment relationship with CMC in
accepting Dr. Estrada's services. Rogelio
testified that he and his wife specifically
chose Dr. Estrada to handle Corazon's
delivery not only because of their friend's
recommendation, but more importantly
because of Dr. Estrada's "connection
with a reputable hospital, the [CMC]." In
other words, Dr. Estrada's relationship
with CMC played a significant role in the
Spouses Nogales' decision in accepting
Dr.
Estrada's
services
as
the
obstetrician-gynecologist for Corazon's
delivery. Moreover, as earlier stated,
there is no showing that before and
during Corazon's confinement at CMC,
the Spouses Nogales knew or should
have known that Dr. Estrada was not an
employee of CMC.
Further, the Spouses Nogales looked to
CMC to provide the best medical care
and support services for Corazon's
delivery. The Court notes that prior to
Corazon's fourth pregnancy, she used to
give birth inside a clinic. Considering
Corazon's age then, the Spouses
Nogales decided to have their fourth
child delivered at CMC, which Rogelio
regarded one of the best hospitals at the
time. This is precisely because the
Spouses Nogales feared that Corazon
might experience complications during
her delivery which would be better
addressed and treated in a modern and
big hospital such as CMC. Moreover,
Rogelio's
consent
in
Corazon's
hysterectomy to be performed by a
different physician, namely Dr. Espinola,
is a clear indication of Rogelio's
confidence in CMC's surgical staff.
Thus, the Court finds respondent Capitol
Medical Center vicariously liable for the
negligence of Dr. Oscar Estrada.

G.R. No. 167879


LEY CONSTRUCTION AND DEVELOPMENT
CORPORATION, Petitioner,
vs.
PHILIPPINE REALTY AND HOLDINGS
CORPORATION, Respondent.
FACTS:
Ley Construction and Development
Corporation (LCDC), herein petitioner , was the
project contractor for the construction of several
buildings for Philippine Realty & Holdings
Corporation (PRHC), herein respondent. The
petitioner and respondent entered into a contract
, by which the former committed to construct
buildings needed by the latter. In turn the
respondent committed to pay the contract price
agreed.
However LCDC president, Ley, met with
Abcede ( Project owner of PRHC) to discuss
the unanticipated delay in construction due to
sudden, unexpected hike in the prices of
construction materials. Abcede asked LCDC to
advance the amount necessary to complete
construction. Ley acceded on condition that
PRHC would allow escalation of contract price
and disregard the prohibition contained in the
agreements. However the PRHC board of
directors turned down the request, but it gave no
notice to LCDC of said denial neither Abcede.
Instead, Abcede signed a letter and sent it to
LCDC, asking for its conformity. The project
eventually infuse P36M, a contract price
escalation for the same amount would be
granted in LCDCs favor. However, it later
revealed no signature above PRHCs name.
Notwithstanding the absence of said signature,
LCDC proceeded with the construction of Tektite
Building.
The project incurred cost a total of P38.2M,
and religiously submitted to PRHC monthly
reports on the same. But PRHC never replied to
any of these monthly reports. When Ley inquired
from Abcede why its requests for extension of

A G E N C Y R E V E I W E R . . P a g e | 25
time were not granted in full, instead of informing
the real reason to Ley, Abcede assured that the
former will not incur any liability. However, when
the Tektite Building was almost complete and
LCDC requested the release of the P36M
escalation price, PRHC did not reply. PRHC
refused to pay the LCDC because they alleged
that the latter incurred delay it did not heed the
agreement regarding the escalation of contract
price.
LCDC filed a Complaint before the RTC to
recovered the amount, which ruled in its favor.
PRHC filed a Notice of Appeal. The Court of
Appeals (CA) reversed the RTC decision.
ISSUE:
Whether or not the signed letter of Abcede,
could bind PRHC to the escalation
agreement with LCDC.
HELD:
Yes, the signed letter of Abcede, could
bind PRHC to the escalation agreement with
LCDC.
In Yao Ka Sin Trading v. Court of Appeals, et
al,.43 this Court discussed the applicable rules on
the doctrine of apparent authority, to wit:
The rule is of course settled that "[a]lthough an
officer or agent acts without, or in excess of, his
actual authority if he acts within the scope of an
apparent authority with which the corporation
has clothed him by holding him out or permitting
him to appear as having such authority, the
corporation is bound thereby in favor of a person
who deals with him in good faith in reliance on
such apparent authority, as where an officer is
allowed to exercise a particular authority with
respect to the business, or a particular branch of
it, continuously and publicly, for a considerable
time." Also, "if a private corporation intentionally
or negligently clothes its officers or agents with
apparent power to perform acts for it, the
corporation will be estopped to deny that such
apparent authority is real, as to innocent third
persons dealing in good faith with such officers
or agents." 44

In Peoples Aircargo and Warehousing Co. Inc.


v. Court of Appeals, et al., 45 we held that
apparent authority is derived not merely from
practice:
Its existence may be ascertained through (1) the
general manner in which the corporation holds
out an officer or agent as having the power to
act or, in other words, the apparent authority to
act in general, with which it clothes him; or (2)
the acquiescence in his acts of a particular
nature, with actual or constructive knowledge
thereof, whether within or beyond the scope of
his ordinary powers.
The SC rule that Santos and Abcede held
themselves out as possessing the authority to
act, negotiate and sign documents on behalf of
PRHC; and that PRHC sanctioned these acts. It
would be the height of incongruity to now allow
PRHC to deny the extent of the authority with
which it had clothed both individuals. We find
that Abcedes role as construction manager, with
regard to the construction projects, was akin to
that of a general manager with regard to the
general operations of the corporation he or she
is representing.
Consequently, the escalation agreement
entered into by LCDC and Abcede is a valid
agreement that PRHC is obligated to comply
with. This escalation agreement whether
written or verbal has lifted, through novation,
the prohibition contained in the Tektite Building
Agreement.
SC further agreed with LCDC that the actions
of Abcede and Santos, assuming they were
beyond the authority given to them by PRHC
which they were representing, still bound PRHC
under the doctrine of apparent authority2. Thus,
the lack of authority on their part should not be
used to prejudice it, considering that the two
were clothed with apparent authority to execute
such agreements
RIEGO - The Rights of Agents
a. Compensation
Article 1875. Agency is presumed to be
for a compensation, unless there is

A G E N C Y R E V E I W E R . . P a g e | 26
proof to the contrary.

successful, provided the agent is free from


all fault.

b. Lend to/borrow money from the agency


Article 1890. If the agent has been
empowered to borrow money, he may
himself be the lender at the current rate
of interest. If he has been authorized to
lend money at interest, he cannot
borrow it without the consent of the
principal. (n)
c. Appoint substitute
Article 1892. The agent may appoint a
substitute if the principal has not
prohibited him from doing so; but he shall
be responsible for the acts of the
substitute:
(1) When he was not given the power to
appoint one;
(2) When he was given such power, but
without designating the person, and the
person appointed was notoriously
incompetent or insolvent.

All acts of the substitute appointed


against the prohibition of the principal
shall be void. (1721)

The reimbursement shall include interest on


the sums advanced, from the day on which
the advance was made. (1728)

J. DANON vs. A. BRIMO (1921)


Procuring Cause
NATURE:
Action to recover the sum of P60,000,
alleged to be the value of services by the plaintiff
as a broker.
QUICK FACTS & HELD:
Danon (Broker) found a purchaser for the
factory of his manager (Brimo), who promised
5% commission to Danon; Another broker found
anotherpurchaser who would buy the factory at
a higher price, said factory was sold to this
purchaser; As such, Danons client did not
perfect the sale with Brimo.
Held:
Danon not the procuring cause. A broker
is never entitled to commissions for
unsuccessful efforts. The risk of failure is only
his. Thereward comes only with his success.
Where no time for the continuance of the
contract is fixed by its terms, either party is at
liberty to terminate it atwill, subject only to the
ordinary requirements of good faith.

d. Retain in pledge objects of the agency


Article 1912. The principal must advance to
the agent, should the latter so request, the
sums necessary for the execution of the
agency.
Should the agent have advanced them, the
principal must reimburse him therefor, even if
the business or undertaking was not

DETAILED FACTS:
Antonio Brimo, informed the Danon, that
he (Brimo) desired to sell his factory, the Holland
American Oil Co., for the sum of P1,200,000
Brimo agreed and promised to pay to the
Danon commission of 5% provided the latter
could sell said factory for that amount3.

A G E N C Y R E V E I W E R . . P a g e | 27
No definite period of time was fixed
within which the Danon should effect the sale. It
seems that another broker, Sellner, was also
negotiating thesale, or trying to find a purchaser
for the same property and that the plaintiff was
informed of the fact either by Brimo himself or by
someone else;at least, it is probable that the
plaintiff was aware that he was not alone in
the field, and his whole effort was to forestall his
competitor by being the first to find a purchaser
and effect the sale.
Immediately after having an interview
with Mr. Brimo, Danon went to see Mr. Mauro
Prieto, president of the Santa Ana Oil Mill, a
corporation,and offered to sell to him the
defendant's property at P1,200,000.
The said corporation was at that time in
need of such a factory, and Mr. Prieto,instructed
the manager, Samuel E. Kane, to see Mr. Brimo
and ascertain whether he really wanted to sell
said factory, and, if so, to get permissionfrom
him to inspect the premises. Mr. Kane inspected
the factory and, presumably, made a favorable
report to Mr. Prieto. The latter asked for
anappointment with Mr. Brimo to perfect the
negotiation. In the meantime Sellner, the other
broker referred to, had found a purchaser for the
same property, who ultimately bought it for
P1,300,000.
For that reason Mr. Prieto, the would be
purchaser found by the plaintiff, never came to
seeMr. Brimo to perfect the proposed
negotiation.
ISSUE:
Whether Danon as broker was
theProcuring Causeof Sale? NO
Whether
Danon
is
entitled
to
Compensation -NO
HELD:
The most that can be said as to what the
plaintiff had accomplished is, that he had found
a person who might have bought the defendant's
factory.The evidence does not show that the
Santa Ana Oil Mill had definitely decided to buy
the property at the fixed price of P1,200,000.

The plaintiff claims that the reason why the sale


was not consummated was because Mr. Brimo
refused to sell.
Defendant agreed and promised to pay
him a commission of 5% provided he
(the plaintiff) could sell the factory at
P1,200.000.It is difficult to see how the plaintiff
can recover anything in the premises. The
plaintiff's action is an action to recover "the
reasonable value" of services rendered.
It is clear that his "services" did not
contribute towards bringing about the sale. He
was not "the efficient agent or the procuring
cause of the sale."
The broker must be the efficient agent
or the procuring cause of sale.The means
employed by him and his efforts must result in
the sale.
The duty assumed by the broker is to
bring the minds of the buyer and seller to an
agreement for a sale, and the price and terms
on which it is to bemade, and until that is done
his right to commissions does not accrue.
It follows, that a broker is never entitled
to commissions for unsuccessful efforts.The
risk of a failure is wholly his. The reward comes
only with hissuccess. He may have introduced to
each other parties who otherwise would have
never met; he may have created impressions,
which
under
laterand
more
favorable
circumstances naturally lead to and materially
assist in the consummation of a sale; he may
have planted the very seed from which others
reap the harvest; but all that gives him no claim.
The
failure
therefore
and
its
consequences were the risk of the broker only.
This however must be taken with one important
and necessarylimitation. If the efforts of the
broker are rendered a failure by the fault of
the employer; if
capriciously he changes his mind after the
purchaser,ready and willing, and
consenting to the prescribed terms, is
produced; or if the latter declines to
complete the contract because of some

A G E N C Y R E V E I W E R . . P a g e | 28
defectof title in the ownership of the seller,
some unremoved incumbrance, some defect
which is the fault of the latter, then the
broker does not losehis commissions.
But this limitation is not even an
exception to the general rule affecting the
broker's right for it goes on the ground that
thebroker has done his duty, that he has brought
buyer and seller to an agreement, but that the
contract is not consummated and fails though
theafter-fault of the seller.
One other principle applicable: Where no
time for the continuance of the contract is fixed
by its terms either party is at liberty to terminate
it at will ,subject only to the ordinary
requirements of good faith. Usually the broker is
entitled to a fair and reasonable opportunity to
perform his obligation, subject of course to the
right of the seller to sell independently. But
having been granted him, the right of the
principal to terminate his authority is absolute
and unrestricted, except only that he may not do
it in bad faith.
Although the present plaintiff could
probably have effected the sale,he is not
entitled to the commissions agreed upon
because he had no intervention whatever in,
and much sale in question. It must be borne
in mind that
no definite periodwas fixed by the defendant
within which theplaintiff might effect the sale of
its factory. Nor was the plaintiff given by the
defendant the exclusive agency of such sale.
Therefore, the plaintiff cannot complaint
of the defendant's conduct in selling the property
through another agent before the plaintiff's
efforts were crowned with success."One who
has employed a broker can himself sell the
property to a purchaser whom he has procured,
without any aid from the broker."
DISPOSITIVE:
For the foregoing reasons the judgment
appealed from is hereby revoked and the
defendant is hereby absolved from all liability
underthe plaintiff's complaint, with costs in both
instances against the plaintiff. So ordered

Tan vs Gullas
Facts
Respondents Spouses Gullas executed a
Special Power of Attorney (SPA) authorizing
petitioners Tan, a real estate broker, and his
associates to negotiate for the sale of a parcel of
land. The SPA was exclusive and effective for
one month.
Petitioners accompanied Sisters of Mary who
were interested in the property. The property
was sold, but when the petitioners went to claim
their commission, the respondents refused to
pay, saying it was another group of agents who
were responsible for the sale of the land to the
Sisters of Mary.
Petitioners filed a case against respondents,
saying they were the efficient procuring cause of
the consummation of the sale. Respondents
countered, saying that they were not the efficient
procuring cause the sale, but another group
instead.
Issue
Whether petitioners
commission.

are

entitled

to

their

Held
Yes. An agent receives a commission upon the
successful conclusion of a sale. On the other
hand, a broker earns his pay merely by bringing
the buyer and the seller together, even if no sale
is eventually made." Clearly, therefore,
petitioners, as brokers, should be entitled to the
commission whether or not the sale of the
property subject matter of the contract was
concluded through their efforts.

Philippine Health-Care Providers, Inc. v.


Estrada (2008)

A G E N C Y R E V E I W E R . . P a g e | 29
FACTS:Philippine Health-Care Providers, Inc.
(Maxicare) formally appointed Estrada as its
General Agent evidenced by a letter-agreement
dated February 16, 1991 granting him a
commission. Maxicare had a "franchising
system" in dealing with its agents whereby an
agent had to first secure permission from to list a
prospective company as client. MERALCO
account was included as corporate accounts
applied by Estrada. Estrada submitted proposals
and made representations to the officers of
MERALCO regarding the MAXICARE Plan but
MERALCO directly negotiated with MAXICARE
from December 1, 1991 to November 30, 1992
and was renewed twice for a term of 3 years
each March 24, 1992: Estrada through counsel
demanded his commission for the MERALCO
account and 9 other accounts but it was denied
by MAXICARE because he was not given a go
signal to intervene in the negotiations for the
terms and conditions. RTC ruled that Maxicare
liable for breach of contract and ordered it to pay
Estrada actual damages in the amount
equivalent to 10% of P20,169,335 representing
her commission for Meralco. CA affirmed in toto.
ISSUE: Whether or not Estrada as broker
should be paid his commission for the Maxicare
Plans subscribed by Meralco.
HELD: Yes. Both courts were one in the
conclusion that Maxicare successfully landed
the Meralco account for the sale of healthcare
plans only by virtue of Estradas involvement
and participation in the negotiations. Maxicares
contention that Estrada may only claim
commissions from membership dues which she
has collected and remitted to Maxicare as
expressly provided for in the letter-agreement
does not convince us. It is readily apparent that
Maxicare is attempting to evade payment of the
commission which rightfully belongs to Estrada
as the broker who brought the parties together.
The only reason Estrada was not able to
participate in the collection and remittance of
premium dues to Maxicare was because she
was prevented from doing so by the acts of
Maxicare, its officers, and employees. Even a
cursory reading of the Complaint and all the
pleadings filed thereafter before the RTC, CA,
and this Court, readily show that Estrada does
not concede, at any point, that her negotiations
with Meralco failed. strada is entitled to 10% of

the total amount of premiums paid by Meralco to


Maxicare as of May 1996 (includingsucceeding
renewals).
Additional Notes:
Agent vs. Broker:
agent
receives a commission
upon
the
successful
conclusion of a sale
broker
earns his pay merely by
bringing the buyer and the
seller together, even if no
sale is eventually made
"procuring cause" in describing a
brokers activity
cause originating a series of
events which, without break in
their continuity, result in the
accomplishment
efforts must have been the
foundation
on
which
the
negotiations resulting in a sale
began.

Sanchez vs. Medicard


G.R. No. 141525. September 2, 2005.*

CARLOS
SANCHEZ,
petitioner,
vs.
MEDICARD
PHILIPPINES,
INC.,
DR.
NICANOR
MONTOYA
and
CARLOS
EJERCITO, respondents.

A G E N C Y R E V E I W E R . . P a g e | 30

FACTS:
Sanchez
is an agent
of
MEDICARD
with
commission
based
compensation. MEDICARD entered into a
contract with UNILAB thru the petitioners
efforts, as a result, MEDICARD paid petitioner
his commission.
MEDICARD proposed an increase in
premium, but UNILAB rejected this proposal.
MEDICARD then requested the petitioner to
reduce his commission should the contract be
renewed, but petitioner disagreed.
MEDICARD decided to directly negotiate
with UNILAB to facilitate the renewal of contract
thus revoking its agency contract with the
petitioner.

ISSUE:
WON the petitioner, as an
agent, is entitled for a commission due to the
renewal of contract.

HELD:
No. It is dictum that in order for
an agent to be entitled to a commission, he must
be the procuring cause of the sale, which simply
means that the measures employed by him and
the efforts he exerted must result in a sale.
In other words, an agent receives
his commission only upon the successful
conclusion of a sale. Conversely, it follows that
where his efforts are unsuccessful, or there was
no effort on his part, he is not entitled to a
commission.

Note.There must be an actual intention by the


principal to appoint and on the part of the agent
an intention to accept the appointment and act
on it otherwise there is generally no agency.
(Dominion Insurance Corporation vs. Court of
Appeals, 376 SCRA 239 [2002])

Infante vs. Cunanan


G.R L- 5180 August 31, 1953
Bautista Angelo, J:
Facts:
Infante was the owner of the land with a house
built on it. Cunanan and Mijares were contracted
to sell the property from which they would
receive commission. Noche agreed to purchase
the lot but Infante informed C & M about her
change of mind to sell the lot and had them sign
a document stating that their authority to sell
was already cancelled. Subsequently, Infante
sold the lot & house to Noche. Defendants
herein demanded for their commission.RTC
ordered Infante to pay commission. CA affirmed.
Issue:
Whether or not petitioner was duty bound to pay
commission notwithstanding that authority to sell
has been cancelled.
Ruling:
A principal may withdraw the authority given to
an agent at will. But respondents agreed to
cancel the authority given to them upon
assurance by petitioner that should property be
sold to Noche, they would be given commission.
That petitioner had changed her mind even if
respondents had found a buyer who was willing
to close the deal, is a matter that would give rise
to a legal consequence if respondents agree to
call off to transaction in deference to the request
of the petitioner. Petitioner took advantage of the
services of respondents, but believing that she
could evade payment of their commission, she
made use of a ruse by inducing them to sign the
deed of cancellation.This act of subversion
cannot be sanctioned and cannot serve as basis
for petitioner to escape payment of the
commissions agreed upon.
Lim vs. Saban
The late Eduardo Ybaez (Ybaez), the owner of a
1,000-square meter lot in Cebu City (the lot),
entered into an Agreement and Authority to
Negotiate and Sell (Agency Agreement) with
respondent Florencio Saban (Saban) on

A G E N C Y R E V E I W E R . . P a g e | 31
February 8, 1994. Under the Agency Agreement,
Ybaez authorized Saban to look for a buyer of
the lot for Two Hundred Thousand Pesos
(P200,000.00) and to mark up the selling price
to include the amounts needed for payment of
taxes, transfer of title and other expenses
incident to the sale, as well as Sabans
commission for the sale.

The Court affirms the appellate courts finding

Through Sabans efforts, Ybaez and his wife


were able to sell the lot to the petitioner
Genevieve Lim (Lim) and the spouses Benjamin
and Lourdes Lim (the Spouses Lim) on March
10, 1994. It appears, however, that the vendees
agreed to purchase the lot at the price of Six
Hundred Thousand Pesos (P600,000.00),
inclusive of taxes and other incidental expenses
of the sale.

(Sabans) efforts, Ybaez executed the Deed of

Lim issued in the name of Saban four postdated


checks in the aggregate amount of Two Hundred
Thirty Six Thousand Seven Hundred Forty Three
Pesos (P236,743.00).(Sabans commission)
However, Ybaez sent a letter dated June 10,
1994 addressed to Lim. In the letter Ybaez
asked Lim to cancel all the checks issued by her
in Sabans favor and to extend another partial
payment for the lot in his (Ybaezs) favor. After
the four checks in his favor were dishonored
upon presentment, Saban filed a Complaint in
the RTC.(During the proceedings Ybaez died).

that the agency was not revoked since Ybaez


requested that Lim make stop payment orders
for the checks payable to Saban only after the
consummation of the sale on March 10, 1994. At
that time, Saban had already performed his
obligation as Ybaezs agent when, through his
Absolute Sale of the lot with Lim and the
Spouses Lim.
To deprive Saban of his commission subsequent
to the sale which was consummated through his
efforts would be a breach of his contract of
agency with Ybaez which expressly states that
Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00
due to Ybaez and the transfer taxes and other
incidental expenses of the sale.
PRATS V. CA G.R NOL-39822 JAN 31, 1978

RTC dismissed the complaint, On appeal the CA


reversed the DECISION stating the Saban was
entitled to the amounts on the checks issued.

FACTS: Doronila negotiated with SSS regarding


the sale of his land. The proposed sale din not
push through. Doronila then granted Prats the
authority to sell the land. Prats offered the sale
of land to SSS, but no sale was perfected. After
the expiration of the authority of Prats to sell the
land, Doronila once again offered the land to
SSS. They agreed on the price, and the sale
was consummated. Prats demanded that he be
paid his commission for the sale, but Doronila
refused to pay him.

Issue: Whether Saban is entitled to receive his


commission from the sale

ISSUE: Whether or not Prats is entitled to any


commission from the sale.

Ybaezs reason for cancellation - Ybaez claimed


that Saban was not entitled to any commission
because he concealed the actual selling price
from him and because he was not a licensed
real estate broker.

DOCTRINE: An agent who was not the


procuring cause of the sale may nevertheless be
awarded a sum of money if he were somehow
instrumental in bringing the parties together
again and finally consummating the transaction.

Ruling: Yes, Saban as an agent of Ybaezs is


entitled to his commission.

HELD: No, Prats is not entitled to any


commission from the sale. His authority to sell
the property was already expired. However, his

A G E N C Y R E V E I W E R . . P a g e | 32
efforts were somehow instrumental in bringing
the parties together and finally consummating
the sale. By reason of equity, he is awarded a
sum of money for his efforts.
Manotoc vs CA
G.R. No. 94753. April 7, 1993.

Private respondent filed a complaint against


petitioner, alleging that he had successfully
negotiated the sale of the property. He claimed
that it was because of his efforts that the
Municipal Board of Manila passed Ordinance
No. 6603 which appropriated the sum for the
payment of the property subject of the sale.

Facts:
Petitioners is the owner of a certain parcel of
land and building which were formerly leased by
the City of Manila and used by the Claro M.
Recto High School. By means of a letter 5 dated
July 5, 1966, petitioner authorized herein private
respondent Salvador Saligumba to negotiate
with the City of Manila the sale of the
aforementioned property. In the same writing,
petitioner agreed to pay private respondent a
(5%) commission in the event the sale is finally
consummated and paid.

Petitioner claimed otherwise. It denied the claim


of private respondent on the following grounds:
(1) private respondent would be entitled to a
commission only if the sale was consummated
and the price paid within the period given in the
respective letters of authority; and (2) private
respondent was not the person responsible for
the negotiation and consummation of the sale

And other letters, which executed the authority


of petitioner. Finally, through another letter 8
dated November 16, 1967, the corporation with
Rufino Manotok, its President, as signatory,
authorized private respondent to finalize and
consummate the sale of the property to the City
of Manila for not less than P410,000.00. With
this letter came another extension of 180 days.

Held:
Yes, the private respondent is entitled to the 5%
agents commission. The Court ruled that when
there is a close, proximate and causal
connection between the agent's efforts and labor
and the principal's sale of his property, the agent
is entitled to a commission. The Court agreed
that the City of Manila ultimately became the
purchaser of petitioner's property mainly through
the efforts of private respondent. Without
discounting the fact that when Municipal
Ordinance No. 6603 was signed by the City
Mayor on May 17, 1968, private respondent's
authority had already expired, it is to be noted
that the ordinance was approved on April 26,
1968 when private respondent's authorization
was still in force. Moreover, the approval by the
City Mayor came only three days after the
expiration of private respondent's authority. It is
also worth emphasizing that from the records,
the only party given a written authority by
petitioner to negotiate the sale from July 5, 1966
to May 14, 1968 was private respondent.

The Municipal Board of the City of Manila


eventually, on April 26, 1968, passed Ordinance
No. 6603, appropriating the sum for the
purchase of the property which private
respondent was authorized to sell. Said
ordinance however, was signed by the City
Mayor only on May 17, 1968, 183 days after
the last letter of authorization.
On January 14, 1969, the parties signed the
deed of sale of the subject property. The initial
payment having been made, the purchase price
was fully satisfied with a second payment on
April 8, 1969 by a check for full payment.
Notwithstanding the realization of the sale,
private respondent never received any
commission, which should have amounted to
P20,554.50. This was due to the refusal of
petitioner to pay private respondent said amount
as the former does not recognize the latter's role
as agent in the transaction.

Issue: Whether or not private respondent is


entitled to the five percent (5%) agent's
commission.

Unilad Resources vs. DBP G.R. No. 95909


Facts: Marinduque Mining Corporation got hold
of a loan from the DBP and mortgaged a
warehouse lot and an office building lot

A G E N C Y R E V E I W E R . . P a g e | 33
previously mortgaged by MMC to Caltex, and
the mortgage in favor of DBP was entered on
their titles as a second mortgage. The account
of the Marinduque Mining Corp., with the DBP
was later transferred to the Assets Privatization
Trust (APT).
Caltex foreclosed the mortgage due to the
nonpayment of MMC. APT on the other hand
offered for sale to the public through DBP its
right of redemption on said two lots by public
bidding. DBP subsequently retrieved the
account from APT and redeemed said lots from
Caltex . A public bidding for the sale of the two
lots was held and the warehouse lot was sold to
Charges Realty Corp . The office building lot
was later sold by DBP to a different buyer. After
the aforesaid sale, Unilad Resources sent two
letters to DBP asking for the payment of its
broker's fee in instrumenting the sale of its
warehouse lot to Charges Realty Corp. Unilad
filed a case to recover from DBP the broker's
fee.
The Trial Court ordered DBP to pay the brokers
fee to the petitioner. On appeal, the Court of
Appeals reversed the judgment of the lower
court.
Issue: WON there is a contract of agency
between DBP and Unilad in the sale of
warehouse lot.
Held: No. There is no contract of agency,
express or implied. The petitioner was never
able to secure the required accreditation from
respondent DBP to transact business on behalf
of the latter. It was always made clear to
petitioner that only accredited brokers may look
for buyers on behalf of respondent DBP. The
contract of Agency is one founded on mutual
consent: the principal agrees to be bound by the
acts of the agent and the latter in turn consents
to render service on behalf or in representation
of the principal.
Domingo vs. Domingo

DOMINGO VS. DOMINGO


No. L-30573. October 29, 1971
42 SCRA 131
FACTS:
Vicente granted Gregorio exclusive
agency to sell lot for P2 per square meter. 5%
commission was to be granted to Gregorio is
Vicente sells the property during the period of
agency or if the property is sold by Vicente
within three months from the termination of the
agency to a purchaser to whom it was submitted
by Gregorio during the continuance of the
agency with notice to Vicente. Gregorio
authorized Purisima to look for a buyer with the
agreement that Purisima will get half of the 5%
commission. Purisimaintroduced Oscar de Leon
to Gregorio as a prospective buyer. Written offer
of De Leon was really low but subsequent
conferences between De Leon and Gregorio led
to the 109K purchase price which Vicente
agreed to. De Leon issued 1K as earnest
money.
Vicente advanced to Gregorio 300 as
part of his commission. When De Leon
confirmed his former offer to pay, Vicente asked
for an additional 1000 which De Leon promised
to give. It was agreed that de Leon will vacate
his house in September as his house is part of
the purchase price. It was later moved to
December as de Leon's wife was pregnant. It
was also agreed that Vicente could stay in the
property until June 1956. Pursuant to his
promise to Gregorio, Oscar gave him as a gift or
propina P1000 for succeeding in persuading
Vicente to sell his lot at P1.20 per square meter
or a total of 109K. This gift was not disclosed by
Gregorio to Vicente. Neither did Oscar pay
Vicente the additional 1000 by way of earnest
money.
When the Deed of Sale was not
executed as stipulated in Oscar's offer to pay,
Oscar told Gregorio that he was giving up
negotiations. Vicente tore the Contract of
Agency when Gregorio came to claim the 5%
commission he was entitled to receive. Gregorio
was not worried as he still had a duplicate copy.
Gregorio later found out that Vicente proceeded
with the sale, not with Oscar but his wife
Amparo. Vicente apparently told Oscar to
eliminate Gregorio in the transaction and the
former would lower the price to 104K. Vicente
claims that Gregorio is not entitled to the 5%

A G E N C Y R E V E I W E R . . P a g e | 34
commission because he sold the property not to
Gregorio's buyer, Oscar but to another buyer,
Amparo.
ISSUE:
Whether or not Gregorio Domingo
forfeited his right to get his commission due to
the secrecy he did during the transaction?
HELD:
Yes. The obligation of an agent
according to Articles 1891 and 1909 of the Civil
Code demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the
agent to is principal. The agent has an absolute
obligation to make a full disclosure or complete
account to his principal of all his transactions
and other material facts relevant to the agency,
so much so that the law as amended does not
countenance any stipulation exempting the
agent from such an obligation and considers
such an exemption as void.
An agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same to
bis principal is guilty of a breach of his loyalty to
the latter and forfeits his right to collect the
commission that may be due him, even if the
principal does not suffer any injury by reason of
such breach of fidelity, or that he obtained better
results or that the agency is a gratuitous one, or
that usage or custom allows it; because the rule
is to prevent the possibility of any wrong, not to
remedy or repair an actual damage.

SUBSTITUTE CASES: ALTERNATE NOT


DELEGATE
BALTAZAR v. OMBUDSMAN
FACTS:
Paciencia Regala owns a seven (7)-hectare
fishpond located at Sasmuan, Pampanga. Her
Attorney-in-Fact Faustino R. Mercado leased the
fishpond for PhP 230,000.00 to Eduardo Lapid
for a three (3)-year period. Lessee Eduardo
Lapid in turn sub-leased the fishpond to Rafael
Lopez for PhP 50,000.00 during the last seven

(7) months of the original lease. Respondent


Ernesto Salenga was hired by Eduardo Lapid as
fishpond watchman (bante-encargado). In the
sub-lease, Rafael Lopez rehired respondent
Salenga.
Meanwhile, on March 11, 1993, respondent
Salenga, through a certain Francis Lagman,
sent his January 28, 1993 demand letter to
Rafael Lopez and Lourdes Lapid for unpaid
salaries and non-payment of the 10% share in
the harvest.
On June 5, 1993, sub-lessee Rafael Lopez
wrote a letter to respondent Salenga informing
the latter that for the last two (2) months of the
sub-lease, he had given the rights over the
fishpond to Mario Palad and Ambit Perez for
PhP 20,000.00. This prompted respondent
Salenga to file a Complaint before the Provincial
Agrarian Reform Adjudication Board (PARAB).
On November 24, 1994, pending resolution of
the agrarian case, the instant case was
instituted by petitioner Antonio Baltazar, an
alleged nephew of Faustino Mercado, through a
Complaint-Affidavit against private respondents
before the Office of the Ombudsman.
Petitioner charged private respondents of
conspiracy through the issuance of the TRO in
allowing
respondent
Salenga
to retain
possession of the fishpond, operate it, harvest
the produce, and keep the sales under the
safekeeping of other private respondents
Petitioner asserts that he is duly authorized by
Faustino Mercado to institute the suit and
presented a Special Power of Attorney (SPA)
from Faustino Mercado.
ISSUE:
Whether Faustino Mercado can delegate his
agency to his nephew Antonio Baltazar
HELD:

A G E N C Y R E V E I W E R . . P a g e | 35
NO. Faustino Mercado cannot delegate his
agency to his nephew Antonio Baltazar.
For one, petitioners principal, Faustino
Mercado, is an agent himself and as such
cannot further delegate his agency to another.
Otherwise put, an agent cannot delegate to
another
the
same
agency. The
legal
maxim potestas delegata non delegare potest; a
power once delegated cannot be re-delegated,
while applied primarily in political law to the
exercise of legislative power, is a principle of
agency.
For another, a re-delegation of the agency would
be detrimental to the principal as the second
agent has no privity of contract with the
former. In the instant case, petitioner has no
privity of contract with Paciencia Regala, owner
of the fishpond and principal of Faustino
Mercado.
Moreover, while the Civil Code under Article
1892 allows the agent to appoint a substitute,
such is not the situation in the instant case. The
SPA clearly delegates the agency to petitioner to
pursue the case and not merely as a
substitute. Besides, it is clear in the aforecited
Article that what is allowed is a substitute and
not a delegation of the agency.
Clearly, petitioner is neither a real party in
interest with regard to the agrarian case, nor is
he a real party in interest in the criminal
proceedings conducted by the Ombudsman as
elevated to the Sandiganbayan. He is not a
party who will be benefited or injured by the
results of both cases.
Serona v People
FACTS:
Leonida Quilatan delivered pieces of
jewelry to Virgie Serona to be sold on
commission basis. By oral agreement of the
parties, Serona was to remit payment or return
the pieces of jewelry to Quilatan if not sold within

30 days from receipt of the items. Because of


Seronas failure to pay, Quilatan required to
execute an acknowledgement receipt indicating
the agreement and the total amount due. But
unknown to Quilatan, Serona had earlier
entrusted the jewelry to one Marichu Labrador
for the latter to sell on commission basis. Serona
was not able to collect payment from Labrador
which caused her to likewise fail to pay her
obligation to Quilatan. Subsequently, Quilatan,
after sending a formal letter of demand to
Serona, executed a complaint affidavit against
her. Thereafter, an information for estafa was
filed against Serona. The lower courts convicted
Serona. They concluded that petitioners act of
entrusting the jewelry to Labrador is
characterized by abuse of confidence and that
Serona disposed the jewelry as if it was hers
(misappropriation or conversion).
ISSUE:

Whether the act of entrusting the


jewelry to Labrador is to be characterized
as abuse of confidence

HELD: No.
The law on agency in our jurisdiction
allows the appointment by an agent of a
substitute or sub-agent in the absence of
express agreement to the contrary between the
agent and the principal.
In the case at bar, the appointment of
Labrador was not expressly prohibited by
Quilatan, as the acknowledgement receipt does
not contain any such limitation. Neither does it
appear that petitioner was verbally forbidden by
Quilatan from passing on the jewelry to another
person before the acknowledgement receipt was
executed or at any other time.
Notably, Labrador testified that she
obligated herself to sell the jewelry in behalf of
the petitioner also on commission basis or to
return the same if not sold. In other words, the
pieces of jewelry were given by the petitioner to
Labrador to achieve the very same end for
which they were delivered to her in the first

A G E N C Y R E V E I W E R . . P a g e | 36
place. Consequently, there is no conversion
since the pieces of jewelry were not devoted to a
purpose or use different from that agreed upon.
Part III - B
Specific Obligations of Agent to Principal
1. To carry out the agency in accordance with its
terms (Art. 1884)
2. To answer the damages which is through his
non-performance the principal may suffer.
3. To finish the business already begun on the
death of the principal, should delay detail any
danger
4. To observe the diligence of the good father of
a family in the custody and preservation of the
goods forwarded to him by the owner in case he
declines an agency, until an agent is appointed.
(Art. 1885)
5. To advance the necessary funds should there
be a stipulation to that effect (Art. 1886)
6. To act in accordance with the instructions of
the principal (Art. 1887)
7. Not to carry out its agency if its execution
would manifestly result in loss or damage to the
principal (Art. 1888)
8. To answer for damages should he refer in
case of conflict, his own interests to those of the
principal (Art.1889)
9. Not to loan to himself without the consent of
the principal where he has been authorized to
lend at interest (Art. 1890)
10. To render an account of his transactions and
to deliver to the principal whatever he may have
received by virtue of the agency (art.1891)
11. To distinguish goods by countermarks and
designate the merchandise respective belonging
to each principal, in the case of a commission
agent who handles goods of the same kind and
mark, which belong to different owners. (Art.
1904)
12. To responsible in certain cases for the acts
of substitute appointed by him (Art. 1892)
13. To pay interest on funds he has applied to
his own use (Art. 1896)
14. To inform the principal, where an authorized
sale of credit has been made, of such sale (Art.
1906)
15. To bear the risk of collection, should he
receive also on sale, a guarantee commission
(Art. 1907)

16. To indemnify the principal for damages for


his failure to collect the credits of his principal at
the time that they become due (Art. 1908)
17. To answer for his fraud or negligence.
(Art.1909)
Woodchild vs Roxas Electric Company
Roxas Electric and Construction Company, Inc.
(RECCI) authorized its President Roberto B.
Roxas through a resolution to sell a parcel of
land owned by the corporation, and to execute,
sign and deliver for and on behalf of the
company. Petitioner Woodchild Holdings, Inc.
(WHI) through its President Jonathan Y. Dy,
offered to buy the land from RECCI. The offer to
purchase stated that it is made on the
representation
and
warranty
of
the
OWNER/SELLER, that he holds a good and
registrable title to the property, which shall be
conveyed clear and free of all liens and
encumbrances, and that in the event that the
right of way is insufficient for the buyers
purpose, the seller ag rees to sell additional
square meter from his current adjacent property
to allow the buyer full access and full use of the
property. Roxas accepted the offer. The sale
was consummated. WHI subsequently entered
into a construction agreement with Wimbeco
Builders Inc. (WBI) for the construction of a
warehouse, and a lease agreement with
Poderosa Leather Goods Company, Inc. with a
condition that the warehouse be ready by April
1, 1992.The building was finished and Poderosa
became the lessee. WHI complained to Roberto
Roxas that the vehicles of RECCI were parked
on a portion of the property over which WHI had
been granted a right of way. Roxas promised to
look into the matter. Dy and Roxas discussed
the need of the WHI to buy a 500-square-meter
portion of the adjacent lot as provided for in the
deed of absolute sale. However, Roxas died
soon thereafter. WHI wrote the RECCI,
reiterating its verbal requests to purchase a
portion of the said lot as provided for in the deed
of absolute sale, and complained about the

A G E N C Y R E V E I W E R . . P a g e | 37
latters failure to eject the squatters within the
three-month period agreed upon in the said
deed. RECCI rejected the demand of WHI, so
WHI filed a case for Specific Performance and
Damages in the RTC. The lower court ruled in
favor of WHI. But the CA reversed the RTC
decision and dismissed the complaint. The CA
ruled that, under the resolution of the Board of
Directors of RECCI, Roxas was merely
authorized to sell the first lot, but not to grant
right of way in favor of the WHI over a portion of
the second lot, or to grant an option to the
petitioner to buy a portion thereof.
Issue:
WON whether the respondent company is
bound by the provisions in the deed of absolute
sale granting to the petitioner beneficial use and
a right of way over a portion of the adjacent lot?
Ruling:
NO. Generally, the acts of the corporate officers
within the scope of their authority are binding on
the corporation. However, under Article 1910 of
the New Civil Code, 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. Thus, contracts entered into by corporate
officers beyond the scope of authority are
unenforceable against the corporation unless
ratified by the corporation. Evidently, Roxas was
not specifically authorized under the said
resolution to grant a right of way in favor of the
petitioner on a portion of Lot No. 491-A-3-B-1 or
to agree to sell to the petitioner a portion thereof.
The authority of Roxas, under the resolution, to
sell Lot No. 491-A-3-B-2 covered by TCT No.
78086 did not include the authority to sell a
portion of the adjacent lot, Lot No. 491-A-3-B-1,
or to create or convey real rights thereon.
Neither may such authority be implied from the
authority granted to Roxas to sell Lot No. 491-A3-B-2 to the petitioner on such terms and
conditions which he deems most reasonable

and advantageous. The general rule is that the


power of attorney must be pursued within legal
strictures, and the agent can neither go beyond
it; nor beside it. The act done must be legally
identical with that authorized to be done. In sum,
then, the consent of the respondent to the
assailed provisions in the deed of absolute sale
was not obtained; hence, the assailed provisions
are not binding on it.
Board of Liquidators vs Heir of maximo
Kalaw
THE BOARD
OF LIQUIDATORS
representing THE GOVERNMENT OF
THE REPUBLIC OF THE PHILIPPINES,
plaintiff-appellant vs. HEIRS OF
MAXIMO M. KALAW, JUAN BOCAR,
ESTATE
OF
THE
DECEASED
CASIMIRO GARCIA, and LEONRO
MOLL, defendants-appellees
G.R. No. L-18805, August 14, 1967
Facts:
The National Coconut Corporation
(NACOCO) was chartered as a non-profit
governmental organization avowedly for
the
protection,
preservation
and
development of the coconut industry in
the Philippines. NACOCOs charter was
amended (Republic Act 5) to grant that
corporation the express power to buy,
sell, barter, export, and in any other
manner deal in, coconut, copra, and
dessicated coconut as well as their byproducts, and to act as agent, broker or
commission merchant of the producers,
dealers, or merchants thereof.
General manager and board chairman
was Maximo M. Kalaw; defendants Juan
Bocar and Casimiro Garcia were
members of the Board; defendant Leonor
Moll became director only on December
22, 1947.
NACOCO, after the passage of Republic
Act 5, executed through General
Manager Kalaw contracts for the delivery
of copra.

A G E N C Y R E V E I W E R . . P a g e | 38
However, chain of events happened that
deter NACOCO from fulfilling these
contracts. Four devastating typhoons
visited the Philippines. Coconut trees
throughout
the
country
suffered
extensive damage. Copra production
decreased. Prices spiralled. Warehouses
were destroyed. Cash requirements
doubled. Deprivation of export facilities
increased the time necessary to
accumulate shiploads of copra. Quick
turnovers became impossible, financing
a problem.
When it became clear that contracts
would be unprofitable, Kalaw submitted
them to the Board for approval. When
the Board membership was completed, a
meeting was then held wherein Kalaw
made a full disclosure of the situation,
apprised the Board of the impending
heavy losses. Not long thereafter, the
Board met again with Kalaw, Bocar,
Garcia and Moll in attendance. They
unanimously approved the contracts
hereinbefore enumerated.
As was to be expected, NACOCO but
partially performed the contracts.
The buyers threatened damaged suits.
Some of the claims were settled.
However, one buyer, Louis Dreyfus &
Co., (Overseas) Ltd., did in fact sue
before the Court of First Instance of
Manila, upon claims as follows: For the
undelivered copra under the July 30
contract (Civil Case 4459); P287,028.00;
for the balance on the August 14 contract
(Civil Case 4398), P75,098.63; for that
per the September 12 contract reduced
to judgment (Civil Case 4322, appealed
to the Court in L-2829), P447,908.40.
These cases culminated in an out-ofcourt amicable settlement when the
Kalaw management was already out.
The corporation thereunder paid Dreyfus
P567,024.52 representing 70% of the
total claims. With particular reference to
the Dreyfus claims, NACOCO put up the
defenses that: (1) the contracts were
void because Louis Dresfus& Co.

(Overseas) Ltd. did not have license to


do business here; and (2) failure to
deliver was due to force majeure, the
typhoons.
To
project
the
utter
unreasonableness of this compromise,
the Court reproduce in haecverba the
finding below:
xxxHowever, in similar cases brought
by the same claimant [Louis Dreyfus
& Co. (Overseas) Ltd.] against
Santiago Syjuco for non-delivery of
copra also involving a claim of P345,
654.68 wherein defendant set up
same defenses as above, the plaintiff
accepted a promise of P5,000.00
only. Following the same proportion,
the claim of Dreyfus against
NACOCO
should
have
been
compromised for only P10,000.00 if
at all. Now, why should defendants
be held liable for the large sum paid
as compromise by the Board of
Liquidators? This is just a sample to
show how unjust it would be to hold
defendants liable for the readiness
with which the Board of Liquidators
disposed of the NACOCO funds,
although there was much possibility
of successfully resisting the claims,
or at least settlement for nominal
sums like what happened in the
Syjuco case.
All the settlements
P1,343,274.52.

sum

up

to

In this suit, NACOCO seeks to recover


the above sum from general manager
and board chairman MaximoKalaw, and
directors Juan Bocar, Casimiro Garcia
and Leonor Moll. It charges Kalaw with
negligence under Article 1902 of the old
Civil Code (now Article 2176, New Civil
Code); and defendant board members,
including Kalaw, with bad faith and/or
breach of trust for having approved the
contracts.
Issue:
Whether
general

or not contracts ofKalaw,


manager,
without
formal

A G E N C Y R E V E I W E R . . P a g e | 39
authorization of the Board of Directors
are valid corporate acts.
Held:
Yes, contracts of Kalaw, general
manager, without formal authorization of
the Board of Directors are valid corporate
acts.
Plaintiff leans heavily on NACOCO's
corporate by-laws which recite that as
amongst the duties of the general
manager is to perform or execute on
behalf of the Corporation upon prior
approval of the Board, all contracts
necessary and essential to the proper
accomplishment
for
which
the
Corporation was organized.
On other hand, a rule that has gained
acceptance through the years is that a
corporate officer intrusted with the
general management and control of its
business, has implied authority to make
any contract or do any other act which is
necessary or appropriate to the conduct
of the ordinary business of the
corporation. As such officer, he may,
without any special authority from the
Board of Directors perform all acts of an
ordinary nature, which by usage or
necessity are incident to his office, and
may bind the corporation by contracts in
matters arising in the usual course of
business.
Long before the disputed contracts came
into being, Kalaw contracted by himself
alone as general manager for forward
sales of copra which is entering into
sales agreement even though the goods
are not yet in the hands of seller. During
that period, from those copra sales,
NACOCO reaped a gross profit. These
previous contract it should be stressed,
were signed by Kalaw without prior
authority from the board. Said contracts
were known all along to the board
members. Nothing was said by them.
The aforesaid contracts stand to prove
one thing: Obviously, NACOCO board
met the difficulties attendant to forward

sales by leaving the adoption of means


to end, to the sound discretion of
NACOCO's general manager Maximo M.
Kalaw.
Settled jurisprudence has it that where
similar acts have been approved by the
directors as a matter of general practice,
custom, and policy, the general manager
may bind the company without formal
authorization of the board of directors. In
varying language, existence of such
authority is established, by proof of the
course of business, the usage and
practices of the company and by
the knowledge which the board of
directors has, or must be presumed to
have, of acts and doings of its
subordinates in and about the affairs of
the corporation. So also, authority to act
for and bind a corporation may be
presumed from acts of recognition in
other instances where the power was in
fact exercised. Thus, when, in the usual
course of business of a corporation, an
officer has been allowed in his official
capacity to manage its affairs, his
authority to represent the corporation
may be implied from the manner in which
he has been permitted by the directors to
manage its business.
In the case at bar, the practice of the
corporation has been to allow its general
manager to negotiate and execute
contracts in its copra trading activities for
and in NACOCO's behalf without prior
board approval. If the by-laws were to be
literally followed, the board should give
its stamp of prior approval on all
corporate contracts. But that board itself,
by its acts and through acquiescence,
practically laid aside the by-law
requirement of prior approval.
Under the given circumstances, the
Kalaw contracts are valid corporate acts.

G.R. No. 129459 September 29, 1998

A G E N C Y R E V E I W E R . . P a g e | 40
SAN JUAN STRUCTURAL AND STEEL
FABRICATORS, INC., petitioner,
vs.
COURT OF APPEALS, MOTORICH SALES
CORPORATION, NENITA LEE GRUENBERG,
ACL DEVELOPMENT CORP. and JNM
REALTY AND DEVELOPMENT CORP.,
respondents.
FACTS:
Petitioner entered into an agreement with
private respondent for the transfer of a parcel of
land. Petitioner then paid the unt f P100,000, for
down payment and the balance to be paid on or
before Consequently, Mr.Co, president of San
Juan, wrote a letter course through Motorich's
broker requesting for a computation of the
balance to be paid. March 2, 1989: San Juan
was ready with the amount corresponding to the
balance, covered by Metrobank Cashier's
Check, payable to Motorich.
The parties were supposed to meet in the
office of San Juan but Motorich's treasurer,
Nenita Lee Gruenberg, did not appear. In that
event, respondent refused to execute the
Transfer of Rights/Deed of Assignment which is
necessary to transfer the certificate of title.
Petitioner eventually learned that ACL and
respondent company entered into a Deed of
Absolute Sale regarding the same land. This
event, led Petitioner to file a complaint against
respondents. Motorich, in its defense, argued
that it is not bound by the acts of its treasurer,
Nenita, since her act in contracting with San
Juan was not authorized by the corporate board.
The RTC ruled in favor of the respondens and
affirmed by the Court of Appeals.
ISSUE:
Whether or not the act of corporate treasurer
bound the Board of Directors of the
company.
HELD:

No, the act of corporate treasurer do not


bound the Board of Directors of the
respondent company.
True, Gruenberg and Co signed on February
14, 1989, the Agreement, according to which a
lot owned by Motorich Sales Corporation was
purportedly sold. Such contract, however,
cannot bind Motorich, because it never
authorized or ratified such sale.
Indubitably, a corporation may act only
through its board of directors or, when
authorized either by its bylaws or by its board
resolution, through its officers or agents in the
normal course of business. The general
principles of agency govern the relation between
the corporation and its officers or agents, subject
to the articles of incorporation, bylaws, or
relevant provisions of law. 11 Thus, this Court has
held that "a corporate officer or agent may
represent and bind the corporation in
transactions with third persons to the extent that
the authority to do so has been conferred upon
him, and this includes powers which have been
intentionally conferred, and also such powers
as, in the usual course of the particular
business, are incidental to, or may be implied
from, the powers intentionally conferred, powers
added by custom and usage, as usually
pertaining to the particular officer or agent, and
such apparent powers as the corporation has
caused persons dealing with the officer or agent
to believe that it has conferred." 12
Furthermore, the Court has also recognized
the rule that "persons dealing with an assumed
agent, whether the assumed agency be a
general or special one bound at their peril, if
they would hold the principal liable, to ascertain
not only the fact of agency but also the nature
and extent of authority, and in case either is
controverted, the burden of proof is upon them
to establish it (Harry Keeler v. Rodriguez, 4 Phil.
19)." 13 Unless duly authorized, a treasurer,
whose powers are limited, cannot bind the
corporation in a sale of its assets. 14
In the case at bar, Respondent Motorich
categorically denies that it ever authorized
Nenita Gruenberg, its treasurer, to sell the
subject parcel of land. Consequently, petitioner

A G E N C Y R E V E I W E R . . P a g e | 41
had the burden of proving that Nenita Gruenberg
was in fact authorized to represent and bind
Motorich in the transaction. Petitioner failed to
discharge this burden. Its offer of evidence
before the trial court contained no proof of such
authority. 16 It has not shown any provision of
said respondent's articles of incorporation,
bylaws or board resolution to prove that Nenita
Gruenberg possessed such power.
That Nenita Gruenberg is the treasurer of
Motorich does not free petitioner from the
responsibility of ascertaining the extent of her
authority to represent the corporation. Petitioner
cannot assume that she, by virtue of her
position, was authorized to sell the property of
the corporation. Selling is obviously foreign to a
corporate treasurer's function, which generally
has been described as "to receive and keep the
funds of the corporation, and to disburse them in
accordance with the authority given him by the
board or the properly authorized officers." 17
Neither was such real estate sale shown to be
a normal business activity of Motorich. The
primary purpose of Motorich is marketing,
distribution, export and import in relation to a
18
general
merchandising
business.
Unmistakably, its treasurer is not cloaked with
actual or apparent authority to buy or sell real
property, an activity which falls way beyond the
scope of her general authority.
In this case, there is a clear absence of proof
that Motorich ever authorized Nenita Gruenberg,
or made it appear to any third person that she
had the authority, to sell its land or to receive the
earnest money. Neither was there any proof that
Motorich ratified, expressly or impliedly, the
contract. Petitioner rests its argument on the
receipt which, however, does not prove the fact
of ratification. The document is a hand-written
one, not a corporate receipt, and it bears only
Nenita Gruenberg's signature. Certainly, this
document alone does not prove that her acts
were authorized or ratified by Motorich.

FRANCISCO VS GSIS
Facts:

The plaintiff, Trinidad J. Francisco, in


consideration of a loan mortgaged in favor of the
defendant, Government Service Insurance
System a parcel of land known as Vic-Mari
Compound, located at Baesa, Quezon City. The
System extrajudicially foreclosed the mortgage
on the ground that up to that date the plaintiffmortgagor was in arrears on her monthly
instalments. The System itself was the buyer of
the property in the foreclosure sale. The
plaintiffs father, Atty. Vicente J. Francisco, sent
a letter to the general manager of the defendant
corporation, Mr. Rodolfo P. Andal. And latter the
System approved the request of Francisco to
redeem the land through a telegram. Defendant
received the payment and it did not, however,
take over the administration of the compound.
The System then sent a letter to Francisco
informing of his indebtedness and the 1 year
period of redemption has been expired. And the
System argued that the telegram sent to
Francisco saying that the System has approved
the request in redeeming the property is
incorrect due to clerical problems.
Issue:
WON the System is liable for the acts of its
employees regarding the telegram?
Held:
Yes. There was nothing in the telegram that
hinted at any anomaly, or gave ground to
suspect its veracity, and the plaintiff, therefore,
can not be blamed for relying upon it. There is
no denying that the telegram was within Andals
apparent authority. Hence, even if it were the
board secretary who sent the telegram, the
corporation could not evade the binding effect
produced by the telegram. Knowledge of facts
acquired or possessed by an officer or agent of
a corporation in the course of his employment,
and in relation to matters within the scope of his
authority, is notice to the corporation, whether he
communicates such knowledge or not. Yet,
notwithstanding this notice, the defendant
System pocketed the amount, and kept silent
about the telegram not being in accordance with
the true facts, as it now alleges. This silence,
taken
together
with
the
unconditional

A G E N C Y R E V E I W E R . . P a g e | 42
acceptance of three other subsequent
remittances from plaintiff, constitutes in itself a
binding ratification of the original agreement.
British Airways vs. CA
Facts
Mahtani decided to visit his relatives in Bombay,
India, but British Airways (BA) had no direct
flights from Manila to Bombay. He had to take a
flight to Hongkong via Philippine Airlines (PAL),
and upon arrival in Hongkong, take a connecting
flight to Bombay on BA. His luggage however,
which was supposed to be transferred PAL to BA
flight bound for Bombay, was missing.
Mahtani filed a case against BA, while the latter
passed the fault to PAL saying that the nontransfer of the luggage was due to its late arrival
leaving hardly any time to transfer the luggage
to BA. PAL on the other hand, disclaimed any
liability, arguing that there was adequate time to
transfer the luggage to BA.
Issue
Whether PAL is liable for damages
Held
Yes. PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA. It is awellsettled rule that an agent is also responsible for
any negligence in the performance of its
function and is liable for damages which the
principal may suffer by reason of its negligent
act.

Severino vs. Severino


Facts:
The plaintiff Fabiola Severino is the recognized
natural daughter of Melecio Severino, deceased.
Upon the death of Melecio Severino a number of
years ago, he left considerable property and
litigation ensued between his widow, Felicitas
Villanueva, and Fabiola Severino, on the one
part, and other heirs of the deceased on the

other part. In order to make an end of this


litigation a compromise was effected by which
Guillermo Severino, a son of Melecio Severino,
took over the property pertaining to the estate of
his father at the same time agreeing to pay
P100,000 to Felicitas Villanueva and Fabiola
Severino. To this contract the appellant Enrique
Echaus affixed his name as guarantor. The first
payment of P40,000 was made on July 11,
1924, the date when the contract of compromise
was executed; and of this amount the plaintiff
Fabiola Severino received the sum of P10,000.
Of the remaining P60,000, all as yet unpaid,
Fabiola Severino is entitled to the sum of
P20,000
This case is now filed by the plaintiff to recover
the 20,000. Enrique as a guarantor protested
because he received nothing for affixing his
signature as guarantor to the contract which is
the subject of suit and that in effect the contract
was lacking in consideration as to him.
Issue:
Whether or not the agreement is invalid due to
lack of consideration ton the part of the
guarantor.
Held:
No. The agreement as a guarantor is a
accessory contract to the principal and as such
the consideration in the principal contract is the
same as in the agreement signed by Enrique as
guarantor. A guarantor or surety is bound by the
same consideration that makes the contract
effective between the principal parties thereto.
(Pyle vs. Johnson, 9 Phil., 249.) The
compromise and dismissal of a lawsuit is
recognized in law as a valuable consideration;
and the dismissal of the action which Felicitas
Villanueva and Fabiola Severino had instituted
against Guillermo Severino was an adequate
consideration to support the promise on the part
of Guillermo Severino to pay the sum of money
stipulated in the contract which is the subject of
this action. The promise of the appellant Echaus
as guarantor therefore binding. It is never
necessary that the guarantor or surety should
receive any part of the benefit, if such there be,
accruing to his principal. But the true
consideration of this contract was the detriment

A G E N C Y R E V E I W E R . . P a g e | 43
suffered by the plaintiffs in the former action in
dismissing that proceeding, and it is immaterial
that no benefit may have accrued either to the
principal or his guarantor.
Murao v. People
G.R. No. 141485. June 30, 2005.*
PABLITO
MURAO
and
NELIO
HUERTAZUELA, petitioners, vs. PEOPLE OF
THE PHILIPPINES, respondent.

FACTS:
Murao is an owner of a company
engaged in a business of selling and refilling fire
extinguishers with several branches including
Palawan and Huertazuela is the branch
manager. Murao and Federico entered into a
Dealership Agreement for the marketing,
distribution and refilling within Puerto Princessa.

According to the Dealership Agreement,


private complainant Federico, as a dealer for
LMICE, could obtain fire extinguishers from
LMICE at a 50% discount, provided that he sets
up his own sales force, acquires and issues his
own sales invoice, and posts a bond with LMICE
as security for the credit line extended to him by
LMICE.

Failing to comply with the conditions


under the said Dealership Agreement, private
complainant Federico, nonetheless, was still
allowed to act as a part-time sales agent
forLMICE entitled to a percentage commission
from the sales of fire extinguishers.

The amount of private complainant


Federicos commission as sales agent for
LMICE was under contention.

Federico went to Huertazuela to collect


his commission based on a sale made in
Palawan, however, refused to pay private
complainant Federico his commission since the
two of them could not agree on the proper
amount thereof.
Federico filed an estafa case against the
petitioners claiming that he is a joint owner of
the money.
ISSUE:
WON a right to commission
makes and individual a joint owner of the
principal.
HELD: No, Private complainants right to a
commission does not make him a joint owner of
the money paid to LMICE by the City
Government of Puerto Princesa but merely
establishes the relation of agent and principal
His right to a commission does not make
private complainant Federico a joint owner of the
money paid to LMICE by the City Government of
Puerto Princesa, but merely establishes the
relation of agent and principal. It is unequivocal
that an agency existed between LMICE and
private complainant Federico. Article 1868 of the
Civil Code defines agency as a special contract
whereby a person binds himself to render some
service or to do something in representation or
on behalf of another, with the consent or
authority of the latter. Although private
complainant Federico never had the opportunity
to operate as a dealer for LMICE under the
terms of the Dealership Agreement, he was
allowed to act as a sales agent for LMICE. He
can negotiate for and on behalf of LMICE for the
refill and delivery of fire extinguishers, which he,
in fact, did on two occasionswith Landbank
and with the City Government of Puerto
Princesa.
All profits made and any advantage
gained by an agent in the execution of his
agency should belong to the principal. In the
instant case, whether the transactions
negotiated by the sales agent were for the sale

A G E N C Y R E V E I W E R . . P a g e | 44
of brand new fire extinguishers or for the refill of
empty tanks, evidently, the business belonged to
LMICE. Consequently, payments made by
clients for the fire extinguishers pertained to
LMICE. When petitioner Huertazuela, as the
Branch Manager of LMICE in Puerto Princesa
City, with the permission of petitioner Murao, the
sole proprietor of LMICE, personally picked up
Check No. 611437 from the City Government of
Puerto Princesa, and deposited the same under
the Current Account of LMICE with PCIBank, he
was merely collecting what rightfully belonged to
LMICE. Indeed, Check No. 611437 named
LMICE as the lone payee.

finally decided to allow Golden Savings to


withdraw from the proceeds of the warrants. In
turn, Golden Savings subsequently allowed
Gomez, to make withdrawals from his own
account. Later, Metrobank informed Golden
Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and
demanded the refunded of the amount Golden
Savings had previously withdrawn, to make up
for the deficit in its account.
Issue: Was Metrobank negligent in giving
Golden Savings the impression that the treasury

. METROBANK VS. CA

warrants

G.R. No. 88866 February 18, 1991

consequently, it was safe to allow Gomez to

had

been

cleared

and

that

withdraw the proceeds thereof from his account


FACTS: Gomez an account with Golden Savings

with it?

(a savings and loan association) and deposited


over a period of two months 38 treasury

special clearing. In the meantime, Gomez was

Held: Yes. Metrobank not entitled to refund of


amounts withdrawn by Golden Savings. The
argument of Metrobank that Golden Savings
would have exercised more care in checking the
personal circumstances of Gomez before
accepting his deposit does not hold water. It was
Gomez who was entrusting the warrants, not
Golden Savings that was extending him a loan.
And moreover, the treasury warrants were
subject to clearing pending which the depositor
could not withdraw its proceeds. In stressing that
it was acting only as a collecting agent for
Golden Savings, Metrobank seems to be
suggesting that as mere agent it cannot be held
liable to the principal. This is not exactly true. On
the contrary, Art. 1909 clearly provides: (see Art.
1909)

not allowed to withdraw from his account.

C. Liability of agents

warrants drawn by a government agency with a


total value of more than P1.7 million. Six of
these were directly payable to G while the others
appear

to

have

been

indorsed

by

their

respective payees followed by Gomez as


second

indorser.

The

warrants

were

subsequently indorsed by C, Cashier of Golden


Savings, and deposited to Golden Savings
account with a branch of Metrobank which
forwarded them to the Bureau of Treasury for

After more than two weeks, "exasperated"


over C's repeated inquiries as to whether the
warrants had been cleared, and also as an
accommodation for a "valued client," Metrobank

When solidary.

Art. 1895. If solidarity has been agreed upon,


each of the agents is responsible for the nonfulfillment of the agency, and for the fault and

A G E N C Y R E V E I W E R . . P a g e | 45
negligence of his fellow agents, except in the
latter case when the fellow agents acted beyond
the scope of their authority.

In excess of Authority
DBP vs. CA
Facts: Juan Dans, together with his wife
Candida, his son and daughter-in-law, applied
for a loan of P500,000.00 with the Development
Bank of the Philippines (DBP).
. As the principal mortgagor, Dans, then 76
years of age, was advised by DBP to obtain a
mortgage redemption insurance (MRI) with the
DBP Mortgage Redemption Insurance Pool
(DBP MRI Pool).
A loan, in the reduced amount of P300,000.00,
was approved by DBP on August 4, 1987 and
released on August 11, 1987. From the
proceeds of the loan, DBP deducted the amount
of P1,476.00 as payment for the MRI premium.
On August 15, 1987, Dans accomplished and
submitted the "MRI Application for Insurance"
and the "Health Statement for DBP MRI Pool.
On September 3, 1987, Dans died of cardiac
arrest. The DBP, upon notice, relayed this
information to the DBP MRI Pool. On September
23, 1987, the DBP MRI Pool notified DBP that
Dans was not eligible for MRI coverage, being
over the acceptance age limit of 60 years at the
time of application.
On February 10, 1989, respondent Estate,
through Candida Dans as administratrix, filed a
complaint with the Regional Trial Court, Branch
I, Basilan, against DBP and the insurance pool
for "Collection of Sum of Money with Damages.
The trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP
MRI Pool, however, was absolved from liability,
after the trial court found no privity of contract
between it and the deceased. On appeal the CA
affirmed in toto the decision of the trial court.

Issue:
Whether or not DBP exceeded its
authority as agent of DBP MRI Pool.
Ruling: Yes, DBP exceeded its authority.
As explained by the SC, In dealing with Dans,
DBP was wearing two legal hats: the first as a
lender, and the second as an insurance agent.
The DBP is not authorized to accept applications
for MRI when its clients are more than 60 years
of age (Exh. "1-Pool"). Knowing all the while that
Dans was ineligible for MRI coverage because
of his advanced age, DBP exceeded the scope
of its authority when it accepted Dan's
application for MRI by collecting the insurance
premium, and deducting its agent's commission
and service fee.
The liability of an agent who exceeds the scope
of his authority depends upon whether the third
person is aware of the limits of the agent's
powers. There is no showing that Dans knew of
the limitation on DBP's authority to solicit
applications for MRI.
If the third person dealing with an agent is
unaware of the limits of the authority conferred
by the principal on the agent and he (third
person) has been deceived by the nondisclosure thereof by the agent, then the latter is
liable for damages to him
BEAUMONT V PRIETO G.R NO 8988 MARCH
30 1916
FACTS: Borck wanted to purchase Legardas
property and was negotiating with the latters
agent, Valdes. Since there was a violation of the
agreement, particularly failure to deliver
pertinent documents, Borck filed a complaint
against Valdes and Legarda. Valdes claimed that
he should not be included for he was merely an
agent.
ISSUE: Whether or not Valdes can be included
in the complaint.
HELD: Yes, Valdes can be included in the
complaint. Since the Civil Code merely states

A G E N C Y R E V E I W E R . . P a g e | 46
that a person who contracts with an agent has
cause of action against the principal but is silent
to whether or not the agent may be included in
the suit, such agent may be included.
D. SPECIAL OBLIGATION OF COMMISSION
AGENTS
Art. 1903. The commission agent shall be
responsible for the goods received by him in
the terms and conditions and as described in
the consignment, unless upon receiving
them he should make a written statement of
the damage and deterioration suffered by the
same. (n)
A factor or commission agent is on whose
business is to receive and sell goods for a
commission (also called factorage) and who is
entrusted by the principal with the possession of
goods to be sold, and usually selling in his own
name.
Art. 1904. The commission agent who
handles goods of the same kind and mark,
which belong to different owners, shall
distinguish them by countermarks, and
designate the merchandise respectively
belonging to each principal. (n)
OBLIGATION OF COMMISSION AGENT
HANDLING GOODS OF SAME KIND AND
MARK
The provision explains itself. The evident
purpose is to prevent any possible confusion or
deception. He may not comingle the goods
without authority.
An agent is also under a duty not to mingle his
principals property with his own or to deal with
his principals property in a way which would
make it appear to be his own property.
Ordinarily, the agent must hold the property only
in the name of the principal. Where he violates
that duty by mingling the property with his own,
he becomes a debtor of the principal and liable

to him for any losses suffered as a result of the


mingling.
Art. 1905. The commission agent cannot,
without the express or implied consent of the
principal, sell on credit. Should he do so, the
principal may demand from him payment in
cash, but the commission agent shall be
entitled to any interest or benefit, which may
result from such sale. (n)
RIGHT OF PRINCIPAL WHERE SALE ON
CREDIT MADE WITHOUT AUTHORITY
A commission agent can sell on credit only with
the express or implied consent of the principal. If
such sale is made without authority, the principal
is given 2 alternatives:
1. He may require payment in cash, in
which case, any interest or benefit from
the sale on credit shall belong to the
agent since the principal cannot be
allowed to enrich himself at the agents
expense; or
2. He may ratify the sale on credit in which
case it will have all the risks and
advantages to him.
Art. 1906. Should the commission agent, with
authority of the principal, sell on credit, he
shall so inform the principal, with a
statement of the names of the buyers.
Should he fail to do so, the sale shall be
deemed to have been made for cash insofar
as the principal is concerned. (n)
OBLIGATION OF COMMISSION AGENT
WHERE SALE ON CREDIT AUTHORIZED
Under this article, an authorized sale on credit
shall be deemed to have been on cash basis
insofar as the principal is concerned, upon the
failure of the agent to inform the principal of
such sale on credit with a statement of the
names of the buyers. The purpose of the
provision is to prevent the agent from stating
that the sale was on credit when in fact it was
made for cash.

A G E N C Y R E V E I W E R . . P a g e | 47
Again, the agent shall be entitled to the benefits
arising from the credit sale. The principal may
also choose to ratify the sale on credit with all its
resulting benefits and risks.
Art. 1907. Should the commission agent
receive on a sale, in addition to the ordinary
commission, another called a guarantee
commission, he shall bear the risk of
collection and shall pay the principal the
proceeds of the sale on the same terms
agreed upon with the purchaser. (n)

To comply with all the obligations


which the agent may have contracted
within the scope of his authority.
When the agent exceeded his power,
principal is not bound except when
he ratifies it expressly or tacitly.
a.

Acts within the


authority (Article
1900)

May do such acts as may be


conducive
to
the
accomplishment
of
the
purpose of agency (Art. 1881)

Art. 1908. The commission agent who does


not collect the credits of his principal at the
time when they become due and demandable
shall be liable for damages, unless he proves
that he exercised due diligence for that
purpose. (n)

The authority, unless otherwise


agreed, includes only authority
to act for the benefit of the
principal, and the source of the
authority
is
always
the
principal and never the agent.
(Art. 1882

OBLIGATIONS OF COMMISION AGENT TO


COLLECT CREDITS OF PRINCIPAL
A commission agent who has made an
authorized sale on credit must collect the credits
due the principal at the time they become due
and demandable. If he fails to do so, he shall be
liable for damages unless he can show that the
credit could not be collected notwithstanding the
exercise of due diligence on his part. Where the
agent is not liable, the principals remedy is to
proceed against the debtor.
This article does not apply to a case where there
is a guarantee commission.
Art. 1909. The agent is responsible not only
for fraud, but also for negligence, which shall
be judged with more or less rigor by the
courts, according to whether the agency was
or was not for a compensation. (1726)
IV. Principal
A.

Obligations of the Principal


1. Comply
(Article 1910)

with

Obligations

scope of
1881-1882,

When third persons are


concerned, an act is deemed o
have been performed within
the agents authority, when
such act is within the terms of
the power of attorney, as
written. (Art. 1900)

b. Ratified Acts
Third persons cannot set up the fact
that the agent has exceeded his
powers if the principal has ratified, or
has signified his willingness to ratify
the agents acts. (Art. 1901)

Obligations which the agent may


have contracted within the scope
of his authority

Obligations which the agent may


have contracted beyond the
scope of his authority but were
ratified expressly or tacitly by the
principal

Conditions for Ratification

A G E N C Y R E V E I W E R . . P a g e | 48
o

The principal must have capacity


and power to ratify

The act must be done in behalf of


the principal

He must ratify the acts in its


entirety

The act must be capable of


ratification

He must have had knowledge of


material facts.

Prieto vs. CA
G.R. No. 158597
June 18, 2012
PETITIONER: MARCOS V. PRIETO
Respondents: The Hon. Court of Appeals
(Former Ninth Division), Hon. Rose Mary R.
Molina-Alim, In her Capacity as Pairing Judge
of Branch 67 of the RTC, First Judicial Region,
Buang, LaUnion, Far East Bank and Trust
Company, now the Bank of the Philippine
Islands, through Atty.Edilberto B. Tenefrancia,
and spouses Antonio and Monette Prieto

Facts:
The petitioner/plaintiff Marcos V. Prieto with his
spouse and Susan Prieto executed a Special
Power of Attorney (SPA) to spouses Antonio and
Monette Prieto to use their real property in La
Union. The real property with the Transfer
Certificate of Title (TCT) No. T-40223was used
as collateral for a loan of P 5,000,000 from Far
Eastern Bank and Trust Company (FEBTC). The
defendants spouses Antonio and Monette Prieto
obtained the load evidenced by promissory
notes and real estate mortgage contracts were i
n the name of the defendants, whichlater on was
extra-judicially foreclosed by FEBTC because of
the defendant failed to pay their loans.
The petitioner/plaintiff Marcos Prieto filed
Temporary Restraining Order (TRO) against the
bank with the RTC, which was granted,

contending that the real estate mortgage


and promissory notes was in the name of the def
endant spouses thus it should be null and void a
binitio. The RTC dismissed the application for
the writ of preliminary injunction stating that
although the name of the petitioner/plaintiff
Marcos as a registered owner did not appear in
the real estate contracts, the petitioner/plaintiff
cannot be absolved from liability because he
ratified the contract by acknowledging the
contract. Such acknowledgement was sent
through a said letter of acknowledgement and
was found as a document of adhesion.
As a principal, the contracts entered into by his
agent on his behalf even if assuming that the
agent has exceeded his authority. Thus, the
petitioner/plaintiff Marcos Prieto filed an appeal
with the CA, which was dismissed because of
the delay in filing and this petition was sought on
certiorari.
Issue:
Whether or not the ratification by the
petitioner/plaintiff would validate the real estate
mortgage and promissory notes and such
ratification in letter of acknowledgment could be
treated as a contract of adhesion.
Held:
Yes,
the Supreme
Court held
that the
petitioner/plaintiff had
precisely granted
the
defendant Antonio as his agent the authority to
borrow money, and to transfer and convey
the property by way of mortgage to FEBTC; to si
gn, execute and deliver promissory notes; and to
receive the proceeds of the loans on the
formers behalf. In other words, the mortgage
contracts were valid and enforceable against
petitioner/plaintiff, who is fully bound by their
terms. It is stipulated under Article 1898 of the
Civil Code, the acts of an agent done beyond
the scope of his authority do not bind
the principal unless the latter expressly or
impliedly ratifies the same.
As to the ratification by the contract of adhesion,
although his agent, the defendant, had
exceeded
the
express
authority,
the
petitioner/plaintiff is liable by virtue of the
expressed ratification. In agency, ratification is
the adoption or confirmation by one person of an

A G E N C Y R E V E I W E R . . P a g e | 49
act performed on his behalf by another without a
uthority. The substance of ratification is theconfir
mation after the act, amounting to a substitute
for a prior authority.
The court held that the petitioner/plaintiff was a
lawyer that he is aware of the import and
consequences of the letter of acknowledgment.
It is not a contract of adhesion for
the petitioner/plaintiff is not the weaker party bec
ause he is fully aware of the meaning of every p
hrase and letter of the letter of acknowledgment
as well as the legal effect of his confirmation
of the act of his agent.
Thus, the court affirms the decision of the CA.

Filipinas Life vs. Clemente Pedroso


G.R. No. 151319 Nov. 22,2004
Facts
Respondent Teresita O. Pedroso is a
policyholder of a 20-year endowment life
insurance issued by petitioner Filipinas Life
Assurance Company (Filipinas Life).Pedroso
claims Renato Valle was her insurance agent
since 1972 and Valle collected her monthly
premiums. In the first week of January 1977,
Valle told her that the Filipinas Life Escolta
Office was holding a promotional investment
program for policyholders. It was offering 8%
prepaid interest a month for certain amounts
deposited on a monthly basis. Enticed, she
initially invested and issued a post-dated check
dated January 7, 1977 for P10,000.[4] In return,
Valle issued Pedroso his personal check for
P800 for the 8%[5] prepaid interest and a
Filipinas Life Agents Receipt.
Pedroso inquired about the promotional
investment and Apetrior, branch manager,
confirmed that there was such a promotion. She
was even told she could push through with the
check she issued. From the records, the check,

with the endorsement of Alcantara at the back,


was deposited in the account of Filipinas Life
Pedroso waited for the maturity of her
initial investment. her investment of P10,000
was returned to her after she made a written
request for its refund. Satisfied, she made 7 to 8
more investments in varying amounts, totaling
P37,000 but at a lower rate of 5% prepaid
interest a month.
Pedroso told respondent Jennifer N.
Palacio, also a Filipinas Life insurance
policyholder, about the investment plan. Palacio
made a total investment of P49,550 but at only
5% prepaid interest.
However, when they both tried to
withdraw her investment, Valle did not want to
return their money. They went to Filipinas Life
Escolta Office to collect their respective
investments, and to inquire why they had not
seen Valle for quite some time. But their
attempts were futile. Hence, respondents filed
an action for the recovery of a sum of money.
RTC and CA held Filipinas Life and its
co-defendats Valle, Apetrior and Alcantara jointly
and solidarily liable to the respondents. Hence,
present petition.
Issue: WON Filipinas Life and its co-defendats
Valle, Apetrior and Alcantara could be held
jointly and solidarily liable.
Held:
Yes
Filipinas Life, as the principal, is liable for
obligations contracted by its agent Valle. By the
contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter. The general
rule is that the principal is responsible for the
acts of its agent done within the scope of its
authority, and should bear the damage caused
to third persons. When the agent exceeds his

A G E N C Y R E V E I W E R . . P a g e | 50
authority, the agent becomes personally liable
for the damage. But even when the agent
exceeds his authority, the principal is still
solidarily liable together with the agent if the
principal allowed the agent to act as though
the agent had full powers. In other words, the
acts of an agent beyond the scope of his
authority do not bind the principal, unless the
principal ratifies them, expressly or
impliedly.Ratification in agency is the
adoption or confirmation by one person of
an act performed on his behalf by another
without authority.
Filipinas Life cannot profess ignorance of
Valles acts. Even if Valles representations were
beyond his authority as a debit/insurance agent,
Filipinas Life thru Alcantara and Apetrior
expressly and knowingly ratified Valles acts.
It cannot even be denied that Filipinas Life
benefited from the investments deposited by
Valle in the account of Filipinas Life. Filipinas
Life had clothed Valle with apparent authority;
hence, it is now estopped to deny said authority.
Innocent third persons should not be prejudiced
if the principal failed to adopt the needed
measures to prevent misrepresentation, much
more so if the principal ratified his agents acts
beyond the latters authority. The act of the
agent is considered that of the principal itself.
Qui per aliumfacit per seipsumfacerevidetur. He
who does a thing by an agent is considered as
doing it himself. WHEREFORE, petition was
DENIED

G.R. No. 151319. November 22, 2004]


MANILA MEMORIAL PARK
CEMETERY, INC., petitioner, vs. PEDRO L.
LINSANGAN, respondent.
Facts
FlorenciaBaluyot offered Atty. Pedro L.
Linsangan a lot called Garden State at the Holy
Cross Memorial Park owned by petitioner

(MMPCI). According to Baluyot, a former owner


of a memorial lot under Contract No. 25012 was
no longer interested in acquiring the lot and had
opted to sell his rights subject to reimbursement
of the amounts he already paid. The contract
was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to
the former buyer, the contract would be
transferred to him.
Atty. Linsangan agreed and gave Baluyot
P35,295.00 representing the amount to be
reimbursed to the original buyer and to complete
the down payment to MMPCI. Baluyot issued
handwritten and typewritten receipts for these
payments. Contract No. 28660 has a listed price
of P132,250.00. Atty. Linsangan objected to the
new contract price, as the same was not the
amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document
confirming that while the contract price is
P132,250.00, Atty. Linsangan would pay only the
original price of P95,000.00.
Later on, Baluyot verbally advised Atty.
Linsangan that Contract No. 28660 was
cancelled for reasons the latter could not
explain. For the alleged failure of MMPCI and
Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint for Breach of
Contract and Damages against the former.
MMPCI alleged that Contract No. 28660
was cancelled conformably with the terms of the
contract because of non-payment of arrearages.
MMPCI stated that Baluyot was not an agent but
an independent contractor, and as such was not
authorized to represent MMPCI or to use its
name except as to the extent expressly stated in
the Agency Manager Agreement. Moreover,
MMPCI was not aware of the arrangements
entered into by Atty. Linsangan and Baluyot, as
it in fact received a down payment and monthly
installments as indicated in the contract.
The trial court held MMPCI and Baluyot
jointly and severally liable. The Court of Appeals

A G E N C Y R E V E I W E R . . P a g e | 51
affirmed the decision of the trial court. Hence,
the present petition for review.
ISSUES:
1. Whether or not there was a contract of
agency between Baluyot and MMPCI?
2. Whether or not MMPCI should be liable for
Baluyots act?

HELD:
1.

2.

Yes. By the contract of agency, a person


binds himself to render some service or
to do something in representation or on
behalf of another, with the consent or
authority of the latter. As properly found
both by the trial court and the Court of
Appeals, Baluyot was authorized to
solicit and remit to MMPCI offers to
purchase interment spaces obtained on
forms provided by MMPCI. The terms of
the offer to purchase, therefore, are
contained in such forms and, when
signed by the buyer and an authorized
officer of MMPCI, becomes binding on
both parties.

No. While there is no more question as


to the agency relationship between
Baluyot and MMPCI, there is no
indication that MMPCI let the public, or
specifically, Atty. Linsangan to believe
that Baluyot had the authority to alter the
standard contracts of the company.
Neither is there any showing that prior to
signing Contract No. 28660, MMPCI had
any knowledge of Baluyot's commitment
to Atty. Linsangan. Even assuming that
Atty. Linsangan was misled by MMPCI's
actuations, he still cannot invoke the
principle of estoppel, as he was clearly
negligent in his dealings with Baluyot,
and could have easily determined, had

he only been cautious and prudent,


whether said agent was clothed with the
authority to change the terms of the
principal's written contract.
To repeat, the acts of the agent
beyond the scope of his authority do not
bind the principal unless the latter ratifies
the same. It also bears emphasis that
when the third person knows that the
agent was acting beyond his power or
authority, the principal cannot be held
liable for the acts of the agent. If the said
third person was aware of such limits of
authority, he is to blame and is not
entitled to recover damages from the
agent, unless the latter undertook to
secure the principal's ratification. NO
ratification can be implied in this case.
WHEREFORE, petition was granted
Ratification in agency is the adoption or
confirmation by one person of an act performed
on his behalf by another without authority. The
substance of the doctrine is confirmation after
conduct, amounting to a substitute for a prior
authority. Ordinarily, the principal must have full
knowledge at the time of ratification of all the
material facts and circumstances relating to the
unauthorized act of the person who assumed to
act as agent. Thus, if material facts were
suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or
lack thereof in concealing such facts and
regardless of the parties between whom the
question of ratification may arise. Nevertheless,
this principle does not apply if the principals
ignorance
of
the
material
facts
and
circumstances was willful, or that the principal
chooses to act in ignorance of the facts.
However, in the absence of circumstances
putting a reasonably prudent man on inquiry,
ratification cannot be implied as against the
principal who is ignorant of the facts.
Woodchild Holdings v. Roxas Electric
G.R. No. 140667, August 12, 2004

A G E N C Y R E V E I W E R . . P a g e | 52
FACTS:

The respondent Roxas Electric and


Construction Company, Inc. (RECCI),
owned two parcels of land in Sumulong
Highway, Antipolo, Rizal, identified as Lot
No. 491-A-3-B-1 covered by Transfer
Certificate of Title (TCT) No. 78085 and
Lot No. 491-A-3-B-2 covered by TCT No.
78086.
The respondents Board of Directors
approved a resolution authorizing the
corporation, through its president,
Roberto B. Roxas, to sell Lot No. 491-A3-B-2 covered by TCT No. 78086, to
execute, sign and deliver the pertinent
sales documents and receive the
proceeds of the sale for and on behalf of
the company.
Petitioner Woodchild Holdings, Inc.
(WHI) wanted to buy Lot No. 491-A-3-B2 covered by TCT No. 78086 on which it
planned to construct its warehouse
building.
Petitioner offered to buy a portion of the
adjoining lot (Lot No. 491-A-3-B-1), so
that its 45-foot container van would be
able to readily enter or leave the
property.
Roxas indicated his acceptance of the
offer and a Deed of Absolute Sale in
favor of WHI was issued, under which
the Lot was sold for P5,000,000, receipt
of which was acknowledged by Roxas
under
the following
terms and
conditions:
The Vendor agree (sic), as it
hereby agrees and binds itself to
give Vendee the beneficial use of
and a right of way from Sumulong
Highway to the property herein
conveyed consists of 25 square
meters wide to be used as the
latter's egress from and ingress to
and an additional 25 square meters
in the corner of Lot No. 491-A-3-B1, as turning and/or maneuvering
area for Vendee's vehicles.
Woodchild Holdings, Inc constructed a
building on the subject lot and entered in

a lease agreement with another


company.
Roxas died soon thereafter. On April 15,
1992, the WHI wrote the RECCI,
reiterating its verbal requests to
purchase a portion of the Lot No. 491-A3-B-1.
RECCI rejected the demand of WHI.

RURAL BANK OF MILAOR (CAMARINES


SUR), petitioner,
vs.
FRANCISCA OCFEMIA, ROWENA BARROGO,
MARIFE O. NIO, FELICISIMO OCFEMIA,
RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.
G.R. No. 137686
February 8, 2000
FACTS:

During the lifetime of respondents


grandparents, 7 parcels of land was
mortgaged to Rural Bank of Milaor.
The respondents were not able to
redeem the mortgaged properties so
it was foreclosed and thereafter
ownership thereof was transferred to
the petitioner.
Out of the 7 parcels of land that were
foreclosed, 5 of them are in the
possession of the respondents
because said land was sold by the
petitioner bank to the respondents as
evidenced by a Deed of Sale.
The subject land, however, have not
been transferred in the name of the
respondents because there is a need
to have the document of sale
registered with the Registered of
Deeds.
The Register of Deeds, however,
informed her that the document of
sale cannot be registered without a
board resolution of the petitioner.
Respondent then went to the bank,
showed to it the Deed of Sale, the tax
declaration and receipt of tax
payments and requested the bank for
a board resolution so that the
property can be transferred to their
name.

A G E N C Y R E V E I W E R . . P a g e | 53

Despite several requests, the bank


refused her request for a board
resolution and made many alibis.
She was told that the bank had a new
manager and it had no record of the
sale.
The respondents filed an action
before the RTC which rendered
decision in favor of them and was
affirmed by the CA
Hence this petition.

ISSUE:
Whether or not the petitioner is
bound by the deed of sale executed by the bank
manager without prior authority of the board of
directors of the rural banking corporation?
HELD: YES.
As ruled in Board of Liquidators v. Kalaw:
Settled jurisprudence has it that where
similar acts have been approved by the directors
as a matter of general practice, custom, and
policy, the general manager may bind the
company without formal authorization of the
board of directors.
As already observed, it is familiar
doctrine that if a corporation knowingly permits
one of its officers, or any other agent, to do acts
within the scope of an apparent authority, and
thus holds him out to the public as possessing
power to do those acts, the corporation will, as
against anyone who has in good faith dealt with
the corporation through such agent, be estopped
from denying his authority.
Unquestionably, petitioner has authorized
Tena to enter into the Deed of Sale. Accordingly,
it has a clear legal duty to issue the board
resolution sought by respondent's. Having
authorized her to sell the property, it behooves
the bank to confirm the Deed of Sale so that the
buyers may enjoy its full use.

WHI filed a complaint against the RECCI


with the Regional Trial Court of Makati,
for specific performance and damages.
In its answer to the complaint, the RECCI
alleged that Roxas was not so authorized
under the May 17, 1991 Resolution of its
Board of Directors to impose a burden or
to grant a right of way in favor of the
petitioner on Lot No. 491-A-3-B-1, much

less convey a portion thereof to the


petitioner. Hence, the respondent was
not bound by such provisions contained
in the deed of absolute sale.
RTC ruled in favor of WHI. On appeal CA
reversed the decision of the lower court.
Hence this petition.
ISSUE: Whether or not RECCI is bound by the
conduct of Roxas granting the petitioner to buy a
portion of the subject land.
HELD: NO.
Generally, the acts of the corporate
officers within the scope of their authority are
binding on the corporation. However, under
Article 1910 of the New Civil Code, 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:
Art. 1910. The principal must comply with all the
obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.
Evidently, Roxas was not specifically
authorized under the said resolution to grant a
right of way in favor of the petitioner on a portion
of Lot No. 491-A-3-B-1 or to agree to sell to the
petitioner a portion thereof. The authority of
Roxas, under the resolution, to sell Lot No. 491A-3-B-2 covered by TCT No. 78086 did not
include the authority to sell a portion of the
adjacent lot, Lot No. 491-A-3-B-1, or to create or
convey real rights thereon. Neither may such
authority be implied from the authority granted to
Roxas to sell Lot No. 491-A-3-B-2 to the
petitioner on such terms and conditions which
he deems most reasonable and advantageous.
Ratification cannot be inferred from acts
that a principal has a right to do independently of
the unauthorized act of the agent. Moreover, if a
writing is required to grant an authority to do a
particular act, ratification of that act must also be
in writing. Since the respondent had not ratified
the unauthorized acts of Roxas, the same are
unenforceable Hence, by the respondents
retention of the amount, it cannot thereby be

A G E N C Y R E V E I W E R . . P a g e | 54
implied that it had ratified the unauthorized acts
of its agent, Roberto Roxas.
G.R. No. 88539 October 26, 1993
KUE CUISON vs. THE COURT OF APPEALS
and VALIANT INVESTMENT ASSOCIATES
Facts:
1. Petitioner (Kue Cuison) is a sole
proprietorship engaged in the purchase
and sale of newsprint, bond paper and
scrap. On the other hand, the private
respondent
(Valiant
Investment
Associates) is a partnership.
2. It was alleged that the private respondent
delivered various kinds of paper products
amounting to P297,487.30 to Lilian Tan
of LT Trading pursuant to orders of
petitioner's manager, Tiu Huy Tiac. Lilian
Tan paid for the merchandise by issuing
several checks payable to cash at the
specific request of Tiu Huy Tiac. In turn,
Tiac issued nine (9) postdated checks to
private respondent as payment for the
paper products.
3. After the said checks were later
dishonored by the drawee bank, the
private
respondent
made
several
demands upon petitioner to pay for the
merchandise in question, claiming that
Tiu Huy Tiac was duly authorized as the
manager of his Binondo office. However,
petitioner denied any involvement in the
transaction and refused to pay private
respondent.
4. Private respondent filed an action
against petitioner for the collection of
P297,487.30. After due hearing, the trial
court dismissed the complaint against
petitioner for lack of merit. On appeal,
however, the decision of the trial court
was reversed by the Court of Appeals
(CA) ordering petitioner to pay private
respondent, among others, the sum of
P297,482.30 with interest.
5. The petitioner filed to the Supreme Court
a petition for review which assails the

decision
of
the
respondent
CA
contending that the CA erred: (a) in
finding Tiu Huy Tiac as petitioners agent;
(b) in finding petitioner liable for an
obligation undisputedly belonging to Tiu
Huy Tiac, and (c) in reversing the wellfounded decision of the trial court.
Issue: Whether or not Tiu Huy Tiac possessed
the required authority from petitioner sufficient to
hold the latter liable for the disputed transaction.
Ruling: Yes. The Court denied the petition for
lack of merit.
It is evident from the records that by his own
acts and admission, the petitioner held out Tiu
Huy Tiac to the public as the manager of his
store.
Therefore,
by
petitioner's
own
representations and manifestations, Tiu Huy
Tiac became an agent of petitioner by estoppel,
an admission or representation is rendered
conclusive upon the person making it, and
cannot be denied or disproved as against the
person relying thereon (Article 1431, Civil Code
of the Philippines). A party cannot be allowed to
go back on his own acts and representations to
the prejudice of the other party who, in good
faith, relied upon them (Philippine National Bank
v. Intermediate Appellate Court, et al., 189
SCRA 680 [1990]).
Taken in this light, petitioner is liable for the
transaction entered into by Tiu Huy Tiac on his
behalf. Thus, even when the agent has
exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the
latter to act as though he had full powers (Article
1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac
defrauded his principal (petitioner) in not turning
over the proceeds of the transaction to the latter,
such fact cannot in any way relieve nor
exonerate petitioner of his liability to private
respondent. For it is an equitable maxim that as
between two innocent parties, the one who
made it possible for the wrong to be done should
be the one to bear the resulting loss (Francisco
vs. Government Service Insurance System, 7
SCRA 577 [1963]).

A G E N C Y R E V E I W E R . . P a g e | 55
G.R. No. 166044 June 18, 2012
COUNTRY
BANKERS
INSURANCE
CORPORATION (CBIC) vs. KEPPEL CEBU
SHIPYARD, UNIMARINE SHIPPING LINES,
INC.,
PAUL
RODRIGUEZ,
PETER
RODRIGUEZ, ALBERT HONTANOSAS, and
BETHOVEN QUINAIN
Facts:
1. On January 27, 1992, Unimarine, a
corporation engaged in the shipping
industry, contracted the services of Cebu
Shipyard, for dry docking and ship repair
works on its vessel, the M/V Pacific
Fortune.
2. In compliance with the agreement,
Unimarine secured a surety bond in favor
of Cebu Shipyard from CBIC through the
latters agent, Bethoven Quinain. The
expiration of this surety bond was
extended
through
endorsement.
Unimarine also obtained another bond
from Plaridel Surety and Insurance Co.
3. Unimarine failed to settle its account
despite repeated demands of Cebu
Shipyard which caused the latter to
inform the sureties, CBIC and Plaridel, of
Unimarines nonpayment and to ask
them to fulfill their obligations as sureties.
However, even the sureties failed to
discharge their obligations.
4. Cebu Shipyard filed a complaint before
the Regional Trial Court (RTC) against
Unimarine, CBIC, and Plaridel.
5. The RTC applied Articles 1900 and 1911
of the Civil Code in holding CBIC liable
for the surety bond. It held that CBIC
could not be allowed to disclaim liability
because Quinains actions were within
the terms of the SPA given to him.
6. On appeal, CBIC claimed that the RTC
erred in enforcing its liability on the
surety bond as it was issued in excess of
Quinains authority. Moreover, CBIC
averred, its liability under such surety
had been extinguished by reasons of
novation, payment, and prescription.
CBIC also questioned the RTCs order,
holding it jointly and severally liable with
Unimarine and Plaridel for a sum larger
than the face value of the surety bond
and why the RTC did not hold Quinain
liable to indemnify CBIC for whatever

amount it was ordered to pay Cebu


Shipyard.
7. The Court of Appeals (CA) dismissed
CBICs contention of novation for lack of
merit. It also did not allow CBIC to
disclaim liability on the ground that
Quinain exceeded his authority, because
third persons had relied upon Quinains
representation as CBICs agent. It based
its decision on Article 1911 of the Civil
Code and found CBIC to have been
negligent and less than prudent in
conducting its insurance business for its
failure to supervise and monitor the acts
of its agents, to regulate the distribution
of its insurance forms, and to devise
schemes
to
prevent
fraudulent
misrepresentations of its agents. Quinain
was, however, held solidarily liable with
CBIC.
8. CBIC elevated its case to the Supreme
Court seeking the reversal of the CAs
decision. CBIC argued that the Special
Power of Attorney (SPA) granted to
Quinain clearly set forth the extent and
limits of his authority with regard to
businesses he can transact for and in
behalf of CBIC and that it was incumbent
upon Cebu Shipyard to inquire and look
into the power of authority conferred to
Quinain. CBIC claims that the foregoing
is true even if Quinain was granted the
authority because third persons seeking
to hold the principal liable for
transactions entered into by an agent
should establish the the fact or existence
of the agency and the nature and extent
of authority.
Issue: Whether or not CBIC is liable on the
surety bond Quinain issued to Unimarine, in
favor of Cebu Shipyard.
Ruling: No. The Court dismissed the complaint
against CBIC for lack of merit and ordered to
release CBIC from its liability on the surety
bond.
In the case at bar, CBIC could be held liable
even if Quinain exceeded the scope of his
authority only if Quinains act of issuing the
surety bond is deemed to have been performed
within the written terms of the power of attorney

A G E N C Y R E V E I W E R . . P a g e | 56
he was granted. However, contrary to what the
RTC held, the SPA accorded to Quinain clearly
states the limits of his authority and particularly
provides that in case of surety bonds, it can only
be issued in favor of the Department of Public
Works and Highways, the National Power
Corporation, and other government agencies;
furthermore, the amount of the surety bond is
limited to P500,000.00. This Court finds that the
terms of the foregoing contract specifically
provided for the extent and scope of Quinains
authority, and Quinain has indeed exceeded
them.
Article 1911, on the other hand, is based on the
principle of estoppel, which is necessary for the
protection of third persons. It states that the
principal is solidarily liable with the agent even
when the latter has exceeded his authority, if the
principal allowed him to act as though he had full
powers. However, for an agency by estoppel to
exist, the following must be established:
1.
The
principal
manifested
a
representation of the agents authority or
knowingly allowed the agent to assume
such authority;
2. The third person, in good faith, relied
upon such representation; and
3. Relying upon such representation,
such third person has changed his
position to his detriment.68
CBIC not only clearly stated the limits of its
agents powers in their contracts, it even
stamped its surety bonds with the restrictions, in
order to alert the concerned parties. Moreover,
its company procedures, such as reporting
requirements, show that it has designed a
system to monitor the insurance contracts
issued by its agents. CBIC cannot be faulted for
Quinains deliberate failure to notify it of his
transactions with Unimarine. The settled rule is
that, persons dealing with an assumed agent are
bound at their peril. To hold the principal liable,
they are burdened to ascertain not only the fact
of agency but also the nature and extent of
authority. In the case, the petitioners failed to
discharge their burden; hence, petitioners are
not entitled to damages from respondent.
Mr. Perez - Topics missing

LUSTAN V CA (ART. 1921)


FACTS: Petitioner Adoracion Lustan is the
registered owner of a parcel of land in Calinog,
Iloilo containing an area of 10.0057 hectares.
Petitioner leased the above described property
to private respondent Nicolas Parangan for a
term of ten (10) years and an annual rent of One
Thousand (P1,000.00) Pesos. During the period
of lease, Parangan was regularly extending
loans in small amounts to petitioner to defray her
daily expenses and to finance her daughter's
education. On July 29, 1970, petitioner executed
a Special Power of Attorney in favor of Parangan
to secure an agricultural loan from private
respondent Philippine National Bank (PNB) with
the aforesaid lot as collateral.On February 18,
1972, asecond Special Power of Attorney was
executed by petitioner, by virtue of which,
Parangan was able to secure four (4) additional
loans, to wit: the sums of P24,000.00,
P38,000.00, P38,600.00 and P25,000.00 on
December 15, 1975, September 6, 1976, July 2,
1979 and June 2, 1980, respectively. The last
three loans were without the knowledge of
herein petitioner and all the proceeds therefrom
were used by Parangan for his own benefit.
These encumbrances were duly annotated on
the certificate of title. On April 16, 1973,
petitioner signed a Deed of Pacto de Retro Sale
in favor of Parangan which was superseded by
the Deed of Definite Sale dated May 4, 1979
which petitioner signed upon Parangan's
representation that the same merely evidences
the loans extended by him unto the former. For
fear that her property might be prejudiced by the
continued borrowing of Parangan, petitioner
demanded the return of her certificate of title.
Instead of complying with the request, Parangan
asserted his rights over the property which
allegedly had become his by virtue of the
aforementioned Deed of Definite Sale. Under
said document, petitioner conveyed the subject
property and all the improvements thereon unto
Parangan absolutely for and in consideration of
the sum of Seventy Five Thousand (P75,000.00)
Pesos.

A G E N C Y R E V E I W E R . . P a g e | 57
ISSUE: W/N petitioner's property is liable to PNB
for the loans contracted by Parangan by virtue of
the special power of attorney.
HELD: YES, the mortgages can be enforced
against petitioner. It is admitted that petitioner is
the owner of the parcel of land mortgaged to
PNB on five (5) occasions by virtue of the
Special Powers of Attorney executed by
petitioner in favor of Parangan. Petitioner argues
that the last three mortgages were void for lack
of authority. She totally failed to consider that
said Special Powers of Attorney are a continuing
one and absent a valid revocation duly furnished
to the mortgagee, the same continues to have
force and effect as against third persons who
had no knowledge of such lack of authority.
Article 1921 of the Civil Code provides:
Art. 1921. If the agency has been entrusted for
the purpose of contracting with specified
persons, its revocation shall not prejudice the
latter if they were not given notice thereof. The
Special Power of Attorney executed by petitioner
in favor of Parangan duly authorized the latter to
represent and act on behalf of the former.
Having done so, petitioner clothed Parangan
with authority to deal with PNB on her behalf
and in the absence of any proof that the bank
had knowledge that the last three loans were
without the express authority of petitioner, it
cannot be prejudiced thereby. As far as third
persons are concerned, an act is deemed to
have been performed within the scope of the
agent's authority if such is within the terms of the
power of attorney as written even if the agent
has in fact exceeded the limits of his authority
according to the understanding between the
principal and the agent. The Special Power of
Attorney particularly provides that the same is
good not only for the principal loan but also for
subsequent commercial, industrial, agricultural
loan or credit accommodation that the attorneyin-fact may obtain and until the power of
attorney is revoked in a public instrument and a
copy of which is furnished to PNB. Even when

the agent has exceeded his authority, the


principal is solidarily liable with the agent if the
former allowed the latter to act as though he had
full powers (Article 1911, Civil Code).

The mortgage directly and immediately subjects


the property upon which it is imposed. The
property of third persons which has been
expressly mortgaged to guarantee an obligation
to which the said persons are foreign, is directly
and jointly liable for the fulfillment thereof; it is
therefore subject to execution and sale for the
purpose of paying the amount of the debt for
which it is liable. However, petitioner has an
unquestionable right to demand proportional
indemnification from Parangan with respect to
the sum paid to PNB from the proceeds of the
sale of her property in case the same is sold to
satisfy the unpaid debts.

Ms. Franciso - Case and Topics - missing

ART. 1927: An agency cannot be revoked if


a bilateral contract depends upon it, or if it is
the means of an obligation already
contracted, or if a partner is appointed
manager of a partnership in the contract of
partnership and his removal from the
management is unjustifiable.
WHEN AN AGENCY IRREVOCABLE:
General Rule: Principal may revoke
agency at will.

A G E N C Y R E V E I W E R . . P a g e | 58
Exceptions:
When the agency is created not only
for the interest of the principal but
also for the interests of third persons
When the agency is created for the
mutual interest of both the principal
and the agent.

G.R. No. L-10881

September 30, 1958

EULOGIO DEL ROSARIO, AURELIO DEL


ROSARIO, BENITO DEL ROSARIO,
BERNARDO DEL ROSARIO, ISIDRA DEL
ROSARIO, DOMINGA DEL ROSARIO and
CONCEPCION BORROMEO, plaintiffappellees,
vs.
PRIMITIVO ABAD and TEODORICO
ABAD, defendants-appellants.
Appeal from a judgment rendered by the
Court of First Instance of Nueva Ecija in civil
case No. 1084.
FACTS:
The plaintiffs are the children and heirs of
the late Tiburcio del Rosario.
Tiburcio del Rosario obtained a loan from
Primitivo .As security for the payment
thereof he mortgaged the improvements of
the parcel of land in favor of the creditor. On
the same day, 24 February, the mortgagor
executed an "irrevocable special power of
attorney coupled with interest" in favor of the
mortgagee, authorizing him, among others,
to sell and convey the parcel of land. In
December 1945 the mortgagor died leaving
the mortgage debt unpaid. On 9 June 1947,
Primitivo Abad, acting as attorney-in-fact of
Tiburcio del Rosario, sold the parcel of land
to his son Teodorico Abad for and in
consideration of the token sum of P1.00 and

the payment by the vendee of the mortgage


debt of Tiburcio del Rosario to Primitivo
Abad. The vendee took possession of the
parcel of land. Upon the filing and
registration of the last deed of sale, the
Registrar of Deeds in and for the province of
Nueva Ecija cancelled original certificate of
title No. 4820 in the name of Tiburcio del
Rosario and in lieu thereof issued transfer
certificate of title No. 1882 in favor of the
vendee Teodorico Abad.
On 29 December 1952 the plaintiffs brought
suit against the defendants to recover
possession and ownership of the parcel of
land, damages, attorney's fees and costs.
The defendants answered the complaint and
prayed for the dismissal thereof, damages,
attorney's fees and costs.
The trial court ruled in favor the plaintiffs and
the reconveyance of the land to the original
owner.
The defendants appealed to the Court of
Appeals, which certified the case to Supreme
Court as no question of fact is involved.
ISSUE:
Whether the agency coupled with an interest in
the subject matter clothe the agency with an
irrevocable character.
HELD:
No.
In order that an agency may be irrevocable
because coupled with an interest, it is essential
that the interest of the agent shall be in the
subject matter of the power conferred and not
merely an interest in the exercise of the power
because it entitles him to compensation
therefore.

A G E N C Y R E V E I W E R . . P a g e | 59
The power of attorney executed by Tiburcio del
Rosario in favor of Primitivo Abad does not
create an agency coupled with an interest nor
does it clothe the agency with an irrevocable
character. A mere statement in the power of
attorney that it is coupled with an interest is not
enough.
Such must be stated in the power of attorney.
The fact that Tiburcio del Rosario, the principal,
had mortgaged the improvements of the parcel
of land to Primitivo Abad, the agent, is not such
an interest as could render irrevocable the
power of attorney executed by the principal in
favor of the agent.

G.R. No. 83122 October 19, 1990


ARTURO P. VALENZUELA and HOSPITALITA
N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS,
BIENVENIDO M. ARAGON, ROBERT E.
PARNELL, CARLOS K. CATOLICO and THE
PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC., respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela is a General
Agent of private respondent Philippine American
General Insurance Company, Inc. As such, he
was authorized to solicit and sell in behalf of
Philamgen all kinds of non-life insurance, and in
consideration of services rendered was entitled
to receive the full agent's commission of 32.5%
from
Philamgen
under
the
scheduled
commission rates. Valenzuela solicited marine
insurance from one of his clients, the Delta
Motors, Inc. in the amount of P4.4 Million from
which he was entitled to a commission of 32%.
However, Valenzuela did not receive his full
commission which amounted to P1.6 Million
from the P4.4 Million insurance coverage of the
Delta Motors.
Philamgen and its President, Bienvenido M.
Aragon insisted on the sharing of the

commission with Valenzuela. This was followed


by another sharing proposal dated June 1, 1978.
On June 16,1978, Valenzuela firmly reiterated
his objection to the proposals of respondents
stating that: Because of the refusal of
Valenzuela, Philamgen and its officers took
drastic action against Valenzuela.
The petitioners sought relief by filing the
complaint against the private respondents in the
court a quo.
The court accordingly rendered judgment in
favor of Valenzuela.
On appeal to the Court of Appeals, the appellate
court reversed the decision of the lower court,
hence this petition.
ISSUE:
Whether or not the agency is coupled with
interest.
HELD:
No.
An agency coupled with interest cannot be
terminated by the sole will of the principal
although it is revocable after the interest ceases.
The Court ruled that the principal cause of the
termination of Valenzuela as General Agent of
Philamgen arose from his refusal to share his
Delta commission. The records sustain the
conclusions of the trial court on the
apparent bad faith of the private respondents in
terminating the General Agency Agreement of
petitioners.
Furthermore, there is an exception to the
principle that an agency is revocable at will and
that is when the agency has been given not only
for the interest of the principal but for the interest
of third persons or for the mutual interest of the
principal and the agent. In these cases, it is
evident that the agency ceases to be freely
revocable by the sole will of the principal.
For the pivotal factor rendering Philamgen and
the other private respondents liable in damages

A G E N C Y R E V E I W E R . . P a g e | 60
is that the termination by them of the General
Agency Agreement was tainted with bad faith.
Hence, if a principal acts in bad faith and with
abuse of right in terminating the agency, then he
is liable in damages.
REPUBLIC VS. EVANGELISTA
G.R. No. 156015. August 11, 2005
466 SCRA 544
FACTS:
Private respondent Legaspi is the owner
of a land located in Bigte, Norzagaray, Bulacan.
In November 1999, petitioner Calimlim, head of
the Intelligence Service of the Armed Forces of
the Philippines and the Presidential Security
Group, entered into a Memorandum of
Agreement (MOA) with one Ciriaco Reyes. The
MOA granted Reyes a permit to hunt for
treasure in the land. Petitioner Diciano as
witness. Reyes, together with petitioners,
started, digging, tunneling and blasting works on
the said land of Legaspi. Calimlim assigned
about 80 military personnel to guard the area
and encamp thereon to intimidate Legaspi and
other occupants of the area from going near the
subject land.
On February 15, 2000, Legaspi executed
a special power of attorney (SPA) appointing his
nephew, private respondent Gutierrez, as his
attorney-in-fact. Gutierrez was given the power
to deal with the treasure hunting activities on
Legaspis land and to file charges against those
who mayenter it without the latters authority.
Legaspi agreed to give Gutierrez 40% of the
treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a
case for damages and injunction against
petitioners for illegally entering Legaspis land.
He hired the legal services of Atty.
HomobonoAdaza. Their contract provided that
as legal fees, Atty. Adaza shall be entitled to
30% of Legaspis share in whatever treasure
may be found in the land. In addition, Gutierrez
agreed to pay Atty. Adaza P5,000.00 as
appearance fee per court hearing and defray all
expenses for the cost of the litigation. Upon the
filing of the complaint, then Executive Judge
Perlita J. TriaTirona issued a 72-hour temporary
restraining order (TRO) against petitioners. The
case was subsequently raffled to the RTC of
Quezon City, Branch 223, then presided by
public
respondent
Judge
Victorino
P.

Evangelista. On March 2, 2000, respondent


judge issued another 72-hour TRO and a
summary hearing for its extension was set on
March 7, 2000.
They contended that the SPA of
Gutierrez was revoked, and Gutierrez failed to
establish that the alleged armed men guarding
the area were acting on orders of petitioners.
ISSUE:
Whether or not agency is revoked?
HELD:
Yes, when an agency is constituted as a clause
in a bilateral contract, that is, when the agency is
inserted in another agreement, the agency
ceases to be revocable at the pleasure of the
principal as the agency shall now follow the
condition of the bilateral agreement.In the
case at bar, we agree with the finding of the trial
and appellate courts that the agency granted by
Legaspi to Gutierrez is coupled with interest as a
bilateral contract depends on it. It is clear from
the records that Gutierrez was given by Legaspi,
inter alia, the power to manage the treasure
hunting activities in the subject land; to file any
case against anyone who enters the land
without authority from Legaspi; to engage the
services of lawyers to carry out the agency; and,
to dig for any treasure within the land and enter
into agreements relative thereto. It was likewise
agreed upon that Gutierrez shall be entitled to
40% of whatever treasure may be found in the
land. Pursuant to this authority and to protect
Legaspis land from the alleged illegal entry of
petitioners, agent Gutierrez hired the services of
Atty. Adaza to prosecute the case for damages
and injunction against petitioners. As payment
for legal services, Gutierrez agreed to assign to
Atty. Adaza 30% of Legaspis share in whatever
treasure may be recovered in the subject land. It
is clear that the treasure that may be found in
the land is the subject matter of the agency; that
under the SPA, Gutierrez can enter into contract
for the legal services of Atty. Adaza; and, thus
Gutierrez and Atty. Adaza have an interest in the
subject matter of the agency, i.e., in the
treasures that may be found in the land. This
bilateral contract depends on the agency and
thus renders it as one coupled with interest,

A G E N C Y R E V E I W E R . . P a g e | 61
irrevocable at the sole will of the principal
Legaspi. When an agency is constituted as a
clause in a bilateral contract, that is, when the
agency is inserted in another agreement, the
agency ceases to be revocable at the pleasure
of the principal as the agency shall now follow
the condition of the bilateral agreement.
Consequently, the Deed of Revocation executed
by Legaspi has no effect. The authority of
Gutierrez to file and continue with the
prosecution of the case at bar is unaffected.
A contract of agency is generally
revocable as it is a personal contract of
representation based on trust and confidence
reposed by the principal on his agent.Art.
1868 of the Civil Code provides that by the
contract of agency, an agent binds himself to
render some service or do something in
representation or on behalf of another, known as
the principal, with the consent or authority of the
latter. A contract of agency is generally
revocable as it is a personal contract of
representation based on trust and confidence
reposed by the principal on his agent. As the
power of the agent to act depends on the will
and license of the principal he represents, the
power of the agent ceases when the will or
permission is withdrawn by the principal. Thus,
generally, the agency may be revoked by the
principal at will.
The impugned Orders of the trial court in
Civil Case No. Q-00-40115, dated March 23 and
April 4, 2000, are AFFIRMED. The presiding
judge of the Regional Trial Court of Quezon City
to whom Civil Case No. Q-00-40115 was
assigned is directed to proceed with dispatch in
hearing the main case for damages. No
pronouncement as to costs.
CALEONGCO vs. CLAPAROLS
Reyes, JBL, J. (1964)
Caleongco plaintiff-appellant
Claparols defendant-appellee
FACTS:
Eduardo L. Claparols, operated a factory for the
manufacture of nails in Talisay, Occidental
Negros, under the style of "Claparols Steel &
Nail Plant". The raw material, nail wire, was
imported from foreign sources, specially from
Belgium; and Claparols had a regular dollar

allocation therefor, granted by the Import Control


Commission and the Central Bank.
Claparols was looking for someone to finance
his imports of nail wires. At first Kho To (not a
party to this case) who owned the company
handling the marketing of the nails agreed to do
it, but later on introduced his compadre
Coleongco and recommended him (Coleongco)
to be the financier in his stead.
Two days after the execution of the basic
agreement, Claparols executed in favor of
Coleongco, at the latter's behest a special power
of attorney to open and negotiate letters of
credit, to sign contracts, bills of lading, invoices,
and papers covering transactions; to represent
appellee and the nail factory; and to accept
payments and cash advances from dealers and
distributors. Thereafter, Coleongco also became
the assistant manager of the factory, and took
over its business transactions, while Claparols
devoted most of his time to the nail manufacture
processes.
- to open
and
negotiate
letters
credit,
papers
covering
transactions,
and
Sometime
dealers
and
after,
distributors.
Claparols
. wasofsurprised
when
received an alias writ of execution to enforce a
judgment obtained against him by PNB, despite
fact that he had submitted an amortization plan
to settle the account. He went to Manila to
confer with the bank authorities, and this is
where he starts to discover all the acts of
Caleongco.
Caleongcos acts of betrayal:
1. He wrote a letter to PNB saying that he had
acquired the whole interest of Claparols in the
plant and in the factory.
2. He wrote another letter telling the bank
wherein he charged Claparols of taking the
machines mortgaged to the bank.
3. He proposed to Agsam, the machinery
superintendent of the company, that the latter
pour acid on the machinery to paralyze the
factory.
4. He wrote a letter to Kho To where he
proposed that Kho To cut his monthly advances
to Claparols. He also mentioned their

A G E N C Y R E V E I W E R . . P a g e | 62
(Caleongco and Kho To) plan to acquire
ownership of the factory.
5. He surreptitiously disposed the Yates band
resaw machine in favor of
his cousins lumber yard.
Claparols managed to settle matters with the
bank. He also decided to revoke the power of
attorney and inform Caleongco of such by
registered mail. He also dismissed Caleongco
as assistant manager of the plant.
Caleongco filed suit against Claparols for breach
of contract and damages. He argued that
Claparols had no legal power to revoke the
power of attorney because it was coupled with
an interest.
ISSUE:
WON Caleongco was correct in his contention
that the power of attorney was made to protect
his interest and that Claparols did not have legal
power to revoke the power of attorney because
it was coupled with an interest.
HELD:
NO. This point cannot be sustained.
The financing agreement itself already contained
clauses for the protection of appellant's interest,
and did not call for the execution of any power of
attorney in favor of Coleongco. But granting
appellant's view, it must not be forgotten that a
power of attorney can be made irrevocable by
contract only in the sense that the principal may
not recall it at his pleasure; but coupled with
interest or not, the authority certainly can be
revoked for a just cause, such as when the
attorney-in-fact betrays the interest of the
principal, as happened in this case.
It is not open to serious doubt that the
irrevocability of the power of attorney may not be
used to shield the perpetration of acts in bad
faith, breach of confidence, or betrayal of trust,
by the agent for that would amount to holding
that a power coupled with an interest authorizes
the agent to commit frauds against the principal.

Our new Civil Code, in Article 1172, expressly


provides the contrary in prescribing that
responsibility arising from fraud is demandable
in all obligations, and that any waiver of action
for future fraud is void. It is also on this principle
that the Civil Code, in its Article 1800, declares
that the powers of a partner, appointed as
manager, in the articles of co-partnership
are irrevocable without just or lawful cause; and
an agent with power coupled with an interest
can not stand on better ground than such a
partner in so far as irrevocability of the power is
concerned.
It has been proven that Coleongco acted in bad
faith.
As to his justification that he wrote the letter to
PNB because of Claparols mal-administration,
the court said that it was to be expected that he
would have first protested to Claparols but he
didnt.
EXTRA: Coleongcos claim for damages and
lost profits because of the discontinuance of the
financing agreement may not proper because he
breached the his part of the contract. Instead of
putting up the money needed to finance the
imports, he merely advanced 25% in cash and
had the balance covered by surety agreements
executed by Claparols and others as solidary
guarantors. In some instances, Coleongco paid
the cost of the imports with the dealers;
advances without Claparols knowledge.
Also, the examination of the books showed that
Coleongco did not give Claparols his half of the
profits.
Art. 1928
The agent may withdraw from the
agency by giving due notice to the principal. If
the latter shall suffer any damage by reason of
the withdrawal, the agent must indemnify him
therefore, unless the agent should base his
withdrawal upon the impossibility of continuing
the performance of the agency without great
detriment to himself.

Agent may withdraw by giving due notice

A G E N C Y R E V E I W E R . . P a g e | 63

If principal shall suffer any damage by


reason of the withdrawal, the agent must
indemnify
o Unless the basis of withdrawal is
the impossibility of continuing the
performance of the agency
without grave detriment to himself

enunciation of the agent and that it also erred in


holding that the suit brought by Velasco against
him is but renunciation of powers conferred on
Velasco.
ISSUE:
correct

Whether Valeras contentions are

Valera vs Velasco

HELD: No.

FACTS:

The court ruled that although the agent


has not expressly told his principal that he
renounced the agency, yet neither dignity nor
decorum permits the latter to continue
representing a person who has adopted such an
antagonistic attitude towards him. When the
agent filed a complaint against his principal for
the recovery of a sum of money arising from the
liquidation of the accounts between them in
connection with the agency, Valera could not
have understood otherwise than that Velasco
renounced the agency because his act was
more expressive than words and could not have
caused any doubts.

Federico Valera appointed Miguel


Velasco as attorney-in-fact with authority to
manage his property in the Philippines,
consisting of the usufruct of a real property
located on Echague Street, City of Manila.
Velasco managed Valeras property, reported his
operations, and rendered accounts of his
administration. On March 31, 1923 Velasco
presented the final account of his administration
for the said month wherein it appears that there
is a balance of P3,058.33 in favor of Valera.The
liquidation of accounts revealed that Valera
owed Velasco P1,100, and as misunderstanding
arose between them, Velasco brought suit
against Valera. Judgment was rendered in his
(Velasco) favor, and after the writ of execution
was issued, the sheriff levied upon Valeras right
of usufruct, sold it at public auction and
adjudicated it to Velasco in payment of all his
claim.
Subsequently, Valera sold his right of
redemption to one Eduardo Hernandez. Later,
Hernandez conveyed the same right to Valera
for P200. Thereafter, Salvador Vallejo, who had
an execution upon a judgment against Valera
rendered in a civil action against him, levied
upon said right of redemption, which was sold by
the sheriff at public auction to Vallejo. Later,
Vallejo transferred said right of redemption to
Velasco.
Valera alleges that Velasco is still his
agent. He contends that the lower court erred in
holding that one of the ways in terminating
agency is by the express and or tacit

The fact that an agent institutes an action


against his principal is equivalent to an express
renunciation of the agency and terminates the
juridical relation between them.

VII. DISTINGUISHING AGENCY FROM


OTHER CONTRACTS
1. Determined by Acts
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;
Though that 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

A G E N C Y R E V E I W E R . . P a g e | 64
both as against the asserted
principal and the third persons
interested in the transaction in
which he or she is engaged.
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;
Though that 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.
The
important
characteristic
feature of an agency relationship
which distinguishes it from similar
contracts or relations is the
agents power to bring about
business relations between his
principal and third persons. This
power is perhaps the most
distinctive mark of the agent, as
contrasted with others who act in
representative capacities but are
not agents.
2. The Element of Control

Subject matter of agency. One


factor
which
most
clearly
distinguishes agency from other
legal concepts is control; one
person the agent agrees to
act under the control or direction
of another the principal. Indeed,
the very agency has come to
connote control by the principal.
The agent is subject to his
principals control with respect to
the matters relevant to the
agency relationship. Many legal
relationships are possessed of a

fiduciary quality and the quality of


a power in one of the parties, yet
the relationship falls short of
agency because of the absence
of control on the part of one of the
parties.

Act of agent. The extent of the


principals control over the
agents act varied both with the
type of the agency relationship
and the facts of the particular
case. But the general rule is that
the principal may direct the acts
of his agent even though the
principal has promised not to do
so. The principal, of course,
becomes liable in damages for
breach of his promise not to give
direction, but the agent cannot
act in disregard of the principals
demand.

Mr. Castro - Provisions missing

A contract of partnership is a contract of agency,


and it differs from pure agency in that while an
agent acts only for his principal, a partner acts
not only for his co-partners and the partnership
but also as principal of himself. A partnership is,
in effect, a contact of mutual agency.

AGENCY
An agent acts only for
his principal
An agents power to
bind the principal is
subject to the latterss
control
An agent does not
assume personal
liability if he acts
within the scope of his
authority.

PARTNERSHIP
A partner acts for the
other partners, the
partnership and himself
A partners power to
bind his co-partners is
not subject to their
control
A partner is personally
liable with all his
property, after
exhaustion of the
partnership properties

A G E N C Y R E V E I W E R . . P a g e | 65
An agent is not
entitled to profits, only
compensation

A partner is entitled to a
share in the profits of
the partnership

DR. CARLOS L. SEVILLA and LINA O.


SEVILLA,
vs.
THE COURT OF APPEALS, TOURIST WORLD
SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA,
G.R. No. L-41182-3 April 16, 1988
FACTS:
In 1960, private respondents Tourist World
Service, Inc. leased an office at Mabini St.,
Manila belonging to Mrs. Noguera for the
former's use as a branch office. When the
branch office was opened, the same was run by
the herein appellant Lina O. Sevilla payable to
Tourist World Service Inc. by any airline for any
fare brought in on the efforts of Mrs. Lina Sevilla,
4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
A year later, Tourist World Service, Inc. have
been informed that Lina Sevilla was connected
with a rival firm, the Philippine Travel Bureau.
Consequentlythe
Tourist
World
Service
considered closing down its office. This was
firmed up by two resolutions of the board of
directors of Tourist World Service, Inc. According
to the resolution it abolishing the office of the
manager and vice-president of the TWS Ermita
Branch, and authorizing the corporate secretary
to receive the properties of the Tourist World
Service then located at the said branch office.
It further appears that on Jan. 3, 1962, the
contract with the appellees for the use of the
Branch Office premises was terminated and
while the effectivity thereof was Jan. 31, 1962,
the appellees no longer used it. Subsequently,
Mr. Canilaothe corporate secretary of TWS to
comply with the directive of the company, went
over to the branch office. When he and, finding
the premises locked, and, being unable to
contact Lina Sevilla, he padlocked the premises
on June 4, 1962 to protect the interests of the

Tourist

World

Service.

When neither the appellant Lina Sevilla nor any


of her employees could enter the locked
premises, a complaint was filed by the herein
appellants against the appellees with a prayer
for the issuance of mandatory preliminary
injunction. Both appellees answered with
counterclaims. However the apparent lack of
interest of the parties therein, the trial court
ordered the dismissal of the case without
prejudice.
On June 17, 1963 , appellant Lina Sevilla
refiled her case against the herein appellees.
However the court a quo ordered dismiss for
lack
of
merit.
ISSUE:
Whether or not the contract between Tourist
World Service, Inc and Lina Sevilla is a contract
of
agency
HELD:
Yes, the contract between Tourist World Service,
Inc and Lina Sevilla is a contract of agency.
As a preliminary inquiry, the Court is asked to
declare the true nature of the relation between
Lina Sevilla and Tourist World Service, Inc. The
records will show that the petitioner, Lina Sevilla,
was not subject to control by the private
respondent Tourist World Service, Inc., either as
to the result of the enterprise or as to the means
used in connection therewith. As found by the
Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist
World Service, Inc. by any airline for any fare
brought in on the effort of Mrs. Lina Sevilla.
Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist
World Service, Inc. "as to the means used."
Sevilla in pursuing the business, obviously relied
on her own gifts and capabilities.
It is further admitted that Sevilla was not in the
company's payroll. For her efforts, she retained

A G E N C Y R E V E I W E R . . P a g e | 66
4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually,
she earned compensation in fluctuating amounts
depending on her booking successes.

the pleasure of the principal. Accordingly, the


revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.

The fact that Sevilla had been designated


'branch manager" does not make her, ergo,
Tourist World's employee. As we said,
employment is determined by the right-of-control
test and certain economic parameters. But titles
are weak indicators.
It is the Court's considered opinion, that
when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done
so pursuant to a contract of agency. It is the
essence of this contract that the agent renders
services "in representation or on behalf of
another. In the case at bar, Sevilla solicited
airline fares, but she did so for and on behalf of
her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds
in the concept of commissions. And as we said,
Sevilla herself, pre-assumed her principal's
authority as owner of the business undertaking.
We
are
convinced,
considering
the
circumstances and from the respondent Court's
recital of facts, that the ties had contemplated a
principal agent relationship, rather than a joint
management or a partnership.
But unlike simple grants of a power of
attorney, the agency that we hereby declare to
be compatible with the intent of the parties,
cannot be revoked at will. The reason is that it is
one coupled with an interest, the agency having
been created for mutual interest, of the agent
and the principal. 19 It appears that Lina Sevilla
is a bona fide travel agent herself, and as such,
she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a
personal obligation for the operation
thereof, holding herself solidarily liable for the
payment of rentals. She continued the business,
using her own name, after Tourist World had
stopped further operations. Her interest,
obviously, is not to the commissions she earned
as a result of her business transactions, but one
that extends to the very subject matter of the
power of management delegated to her. It is an
agency that, as we said, cannot be revoked at

AGENCY PART IV - DINGLASAN


IV
c. Agency Distinguished from Service
Provider ( Lease of Service) DINGLASAN

AGENCY
BASIS
PURPOSE

AUTHORIZED
ACTS

DISCRETION

PARTIES

basis is
representation
Execution of a
juridical act in
relation to a third
person
The agent is
destined to
execute juridical
acts (Creation,
modification or
extinction of
relations with
third parties)
Agent exercises
discretionary
powers
3 parties:
principal, agent
and the 3rd

LEASE OF
SERVICE
Basis is
employment
Execution of a
piece of work
or rendering of
service
Lease of
services
contemplate
only material
acts.

Lessor
ordinarily
performs only
ministerial
functions.
2 parties:
Lessor and
lessee

A G E N C Y R E V E I W E R . . P a g e | 67
person with
whom the agent
contracts

mentioned in thecontract are necessary or


incidental to the principal.
In the performance of this principal undertaking,
Nielson was not in any way executing juridical
acts forLepanto.

NIELSON & CO.,


INC. vs LEPANTO CONSOLIDATED MINING CO.
CASE NUMBER: L-2160 December 28,
1968PONENTE: Zaldivar, J.
FACTS:
Nielson & Company, Inc. and Lepanto Consolidated
Mining Company entered into a management contract.
Nielson had agreed, for a period of five years,
with the right to renew for a like period, to
explore, developand operate the mining claims
of Lepanto, and to mine, or mine and mill, such
pay ore as may be found andto market the
metallic products recovered therefrom which
may prove to be marketable, as well as torender
for Lepanto other services specified in the
contract.
Further, Nielson was to take complete charge,
subject at all times to the general control of the
Board of Directors ofLepanto, of the exploration
and development of the mining claims, of the
hiring of a sufficient andcompetent staff and of
sufficient and capable laborers, of the
prospecting and development of the mine, ofthe
erection and operation of the mill, and of the
benefication and marketing of the minerals
found on the mining properties.
Nielson was also to act as purchasing agent of
supplies, equipment and other necessary
purchases byLepanto, but no purchase shall be
made without the prior approval of Lepanto and
no commission shall beclaimed or retained by
Nielson on such purchase.
The principal and paramount undertaking of
Nielson under the management contract was the
operationand development of the mine and the
operation of the mill. All the other undertakings

Lepanto terminated the contract in 1945, 2 years


before its expiration, when it took over and
assumed exclusivemanagement of the work
previously entrusted to Nielson under the
contract.
Lepanto finally maintains that Nielson as an
agent is not entitled to damages since the law
gives to the principal theright to terminate the
agency at will.
ISSUE:
Was the management contract entered into by and
between Nielson and Lepanto a contract of agency such
that it hasthe right to revoke and terminate the contract at
will, or a contract of lease of services?
RULING:
Contract of Lease of Services
The management contract was one of contract of lease
of services and not a contract of agency.
In both agency and lease of services, one of the
parties binds himself to render some service to
the other party. Agency, however is distinguished
from lease of work or services in that:
The basis of agency is representation, while in
the lease of work or services, the basis is
employment
Galicinao - Cases / Topics Missing
[No. L-8169. 29 January 1957]

THE SHELL COMPANY OF THE PHILIPPINES,


LTD., petitioner, vs. FIREMENS INSURANCE
COMPANY OF NEWARK, NEW JERSEY

A G E N C Y R E V E I W E R . . P a g e | 68
COMMERCIAL CASUALTY INSURANCE CO.,
SALVADOR SlSON, PORFIRIO DE LA
FUENTE and THE COURT OF APPEALS (First
Division), respondents.

FACTS:
A car was brought to Shell for car
wash and greasing services. The operator of the
station, having agreed to do service upon
payment of P8.00, the car was placed on the
hydraulic lifter under the direction of the
personnel of the station.

While performing services, the car


swayed and fell suffering damages. It was then
brought to Firemens Insurance Company as
one of the three insurance service provider of
the car. After repairs, Firemens Insurance now
seeking payment from Shell for the damages it
made to the car.

However, Shell denied responsibility and


stated that it was his operator as independent
contractor who is the sole responsible for the
damages.

RTC and CA ruled in favor of the


Insurance Company, and is now brought to
Supreme Court for review.

ISSUE:
WON the operator acted
as an agent and not an independent contractor.

HELD:
Yes, the operator is an agent of
the company and not an independent contractor.

Where the operator of a gasoline and


service station owed his position to the company

and the latter could remove him or terminate his


services at will; that the service station belonged
to the company and bore its trade name and the
operator sold only the products of the company;
that the equipment used by the operator
belonged to the company and were just loaned
to the operator and the company took charge of
their repair and maintenance; that an employee
of the company supervised the operator and
conducted periodic inspection of the companys
gasoline and service station; that the price of the
products sold by the operator was fixed by the
company and not by the operator; and that the
receipts signed by the operator indicated that he
was a mere agent.

Quiroga vs Parsons
G.R. No. L-11491

Subject: Sales
Doctrine: Contract of Agency to Sell vs
Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the
respondent entered into a contract making
the latter an agent of the former. The
contract stipulates that Don Andres Quiroga,
here in petitioner, grants exclusive rights to
sell his beds in the Visayan region to J.
Parsons. The contract only stipulates that
J.Parsons should pay Quiroga within 6
months upon the delivery of beds.
Quiroga files a case against Parsons for
allegedly violating the following stipulations:
not to sell the beds at higher prices than

A G E N C Y R E V E I W E R . . P a g e | 69
those of the invoices; to have an open
establishment in Iloilo; itself to conduct the
agency; to keep the beds on public
exhibition, and to pay for the advertisement
expenses for the same; and to order the
beds by the dozen and in no other manner.
With the exception of the obligation on the
part of the defendant to order the beds by
the dozen and in no other manner, none of
the obligations imputed to the defendant in
the two causes of action are expressly set
forth in the contract. But the plaintiff alleged
that the defendant was his agent for the sale
of his beds in Iloilo, and that said obligations
are implied in a contract of commercial
agency. The whole question, therefore,
reduced itself to a determination as to
whether the defendant, by reason of the
contract hereinbefore transcribed, was a
purchaser or an agent of the plaintiff for the
sale of his beds.
Issue: Whether the contract is a contract of
agency or of sale.
Held: In order to classify a contract, due
attention must be given to its essential
clauses. In the contract in question, what
was essential, as constituting its cause and
subject matter, is that the plaintiff was to
furnish the defendant with the beds which
the latter might order, at the price stipulated,
and that the defendant was to pay the price
in the manner stipulated. Payment was to be
made at the end of sixty days, or before, at
the plaintiffs request, or in cash, if the
defendant so preferred, and in these last two
cases an additional discount was to be
allowed for prompt payment. These are
precisely the essential features of a contract
of purchase and sale. There was the
obligation on the part of the plaintiff to
supply the beds, and, on the part of the
defendant, 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, he returns it. By virtue of the
contract between the plaintiff and the
defendant, 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.
In respect to the defendants obligation to
order by the dozen, the only one expressly
imposed by the contract, the effect of its
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.
CIR v American Rubber Company GR No L19667, November 29, 1966

FACTS:
American Rubber Company sold its rubber
products locally and as prescribed by the
Commissioners regulation, the company
declared the same for tax purposes in which
the Commissioner accordingly assessed.
The company paid under protest the
corresponding sales taxes thereon, claiming
exemption under Section 188b of the Tax
Code, and subsequently claimed refund.
With the Commissioner refusing to do so,
the case was brought before the Court of Tax
Appeals, which upheld the Commissioners
stand that the company is not entitled to
recover the sales tax that had been
separately billed to its customers, and paid
by the latter.

ISSUE:

A G E N C Y R E V E I W E R . . P a g e | 70
Whether plaintiff is or is not entitled to
recover the sales tax paid by it, but passed
on to and paid by the buyers of its products

RULING:
Refund is proper. The sales tax is by law
imposed directly, not on the thing sold, but
on the act (sale) of the manufacturer,
producer or importer who is exclusively
made liable for its time payment. There is no
proof that the tax paid by plaintiff is the very
money paid by its customers. Where the tax
money paid by the plaintiff came from is
really no concern of the Government.
Anyway, once recovered, the plaintiff must
hold the refund taxes in trust for the
individual
purchasers
who
advanced
payment thereof, and whose names must
appear in plaintiffs records.
It would need to tend to perpetuate illegal
taxation; for the individual customers to
whom the tax is ultimately shifted will
ordinarily not care to sue for its recovery, in
view of the small amount paid by each and
the high cost of litigation for the reclaiming
of an illegal tax. Insofar, therefore, as it
favors the imposition, collection and
retention of illegal taxes, and encourages a
multiplicity of suits, the tax courts ruling
under appeal violates morals and public
policy.
Ker and Co. Ltd. vs. Lingad
FACTS: Ker and Co. Ltd. was assessed by then
Commissioner of Internal Revenue Domingo the
sum of P 20,273.33 as the commercial brokers
percentage tax, surcharge and compromise
penalty.
There was a request on the part of Ker
for the cancellation of such assessment which
request was turned down. As a result, it filed a
petition for review in the Court of Tax Appeals.

CTA: Ker taxable except as to the


compromise penalty of P 500, the amount due
from it being fixed at P 19,722.33
Such liability arose from a contract of Ker
from the US Rubber International. The former
being referred to as the distributor and the latter
specifically designated as the company. The
contract was to apply transactions between the
former and Ker, as distributor from July 1,1948
to continue in force until terminated by other
party giving to the other 60 days notice. Ker as
distributor is 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. It further agreed that this
agreement does not constitute Ker as gent or
legal representative of the company for any
purpose whatsoever.
ISSUE: Whether or not the relationship thus
created is a Contract of Sale or a Contract of
Agency.
HELD:It is a contract of Agency-the broker
and the principal.
By taking the contractual stipulations as a whole
and not just the disclaimer, it would seem that
the contract between them is contract of agency.
The CTA, in considering such stipulations
provided in the contract, concluded that all these
circumstances are irreconcilably antagonistic to
the idea of independent merchant.
NationalInternalRevenueCode:
defined
commercial broker as all persons, other than
importer, manufacturers, producers, or bonafide
employees who, forcompensation or profit,sell or
bring about salesor purchaser of merchandise
for other persons or bring proposed buyers
andsellers together andalsoincludes commission
merchants suchasKer in thiscase.
Themere disclaimer in acontract that anentity
likeKer isnot the the agent or legal
representative for any purposewhatsoever does

A G E N C Y R E V E I W E R . . P a g e | 71
not suffice to yield thatconclusion that it is
anindependent merchant if thecontrol over
thegoods for resale of goods consignedin
pervasive incharacter.
Thus, SC rejected Kers petition to reverse
decision of CTA.
PUYAT VS. ARCO AMUSEMENT
FACTS:
The petitioner is an exclusive agent of Starr
Piano Company, a provider of cinematographer
equipment and machinery. Arco, manager of a
corporation in the business of operating
cinematographs, and Puyat agreed that the
Puyat
would
obtain
Starr-manufactured
equipment (sound systems) for Arco in
exchange for the price of the equipment plus
10% commission and other expenses. The
equipment was delivered. However, Arco later
discovered that Puyat had charged Arco the list
price (SRP of the manufacturing compnany) and
not the net price. Apparently, Puyat as an agent
of Starr, obtained a 25% discount. Arco sued for
the reimbursement of the difference between the
list price and the purchase price, claiming that
Puyat was acting as Arcos agent when Puyat
purchased the equipment for them and that
Puyat had committed fraud against them.
ISSUE: Whether or not there is a contact of
agency between Puyat and Arco.
HELD: No, there is no contact of agency
between Puyat and Arco. There was a contract
of purchase and sales as can be construed from
the terms of the contract and the letters of
acceptance of the equipment price sent by Arco
to Puyat. In the contract, Arco agreed to
purchase from the seller the equipment at the
prices indicated. The contract is the law between
the parties, what does not appear on its face
should be regarded merely as dealers talk. The
stipulated commission was only an additional
price which the buyer bound itself to pay. Also,
to hold the petitioner an agent of the respondent

in the purchase of equipment and machinery


from the Starr Piano Company of Richmond,
Indiana, is incompatible with the admitted fact
that the petitioner is the exclusive agent of the
same company in the Philippines. It is out of the
ordinary for one to be the agent of both the
vendor and the purchaser. The facts and
circumstances indicated do not point to anything
but plain ordinary transaction where the
respondent enters into a contract of purchase
and sale with the petitioner, the latter as
exclusive agent of the Starr Piano Company in
the United States.

Chua vs Universal Trading Co.


87 scra 337
Facts:
Chua Ngo delivered, in Manila, to the Universal
Trading Company, Inc., a local corporation, the
price of 300 boxes of Sunkist oranges to be
gotten from the United States. The latter ordered
the said boxes from Gabuardi Company of San
Francisco. On the same date, the defendant
forwarded an order to Gabuardi Company of
San Francisco, U. S, A., The Universal Trading
Co., Inc., wrote Chua Ngo two letters informing
him that the contract for oranges (and onions)
had been confirmed by the suppliercould be
fulfilledand asking for deposit of 65% of the
price and certain additional charges.
Deposit of 40% of the contract price plus the
above charges to be payable immediately upon
receipt of telegraphic confirmation. Balance
payable upon arrival of goods in Manila. If
balance is not paid within 48 hours of notification
merchandise may be resold by Universal
Trading Co., Inc. and the deposit forfeited.
The 300 cases of oranges ordered by the
defendant from Gabuardi Company were loaded
in good condition on board the S/S Silversandal
in the port of San Francisco, together with other
oranges (totalling 6,380 cases) for other
customers. They were all marked "UTC Manila"
and were consigned to defendant. The
Silversandal arrived at the port of Manila on
March 7, 1946. , and in due course, the goods
were shipped from that port to Manila "F. O. B.
San Francisco." One hundred eighty boxes were

A G E N C Y R E V E I W E R . . P a g e | 72
lost in transit, and were never delivered to Chua
Ngo.
Chua Ngo filed a suit to recover the
corresponding price he had paid in advance.
Universal Trading Company refused to pay,
alleging it merely acted as agent of Chua
Ngo in purchasing the oranges. Chua Ngo
maintains he bought the oranges from Universal
Trading Company, and, therefore, is entitled to
the return of the price corresponding to the
undelivered fruit.
Issue:
Did Universal Trading Company merely agree to
buy for and on behalf of Chua Ngo the 300
boxes of oranges, or did it agree to selland
soldthe oranges to Chua Ngo?
Held:
The circumstances of record sufficiently
indicate a sale.
1. no commission was paid.
2. "if balance is not paid within 48 hours of
notification, merchandise may be resold by the
Universal Trading Company and the deposit
forfeited." "Resold" implies the goods had been
sold to Chua Ngo. And forfeiture of the deposit is
incompatible with a contract of agency.
3.Wherein oranges were quoted at $6.30 per
box, Universal Trading placed an order for
purchase of the same with Gabuardi Company
at $6 per box. If Universal Trading Company
was agent of Chua Ngo, it could not properly do
that. Inasmuch as good f aith is to be presumed,
we must hold that Universal Trading acted thus
because it was not acting as agent of Chua Ngo,
but as independent purchaser from Gabuardi
Company.
4. Fourth, the defendant charged the plaintiff the
sum of P218.87 for 3 percent sales tax,
thereby implying that their transaction was a
sale.
5.Fifth, if the purchase of the oranges had been
made on behalf of Chua Ngo, all claims for
losses thereof against the insurance company
and against the shipping company should have
been assigned to Chua Ngo.
SIDLACAN, ZHY
Agency distinguished from brokerage

Hahn vs CA G.R. No. 113074


FACTS:Petitioner Alfred Hahn is a Filipino
citizen doing business under the name and style
"Hahn-Manila". On the other hand, private
respondent (BMW) is a non-resident foreign
corporation existing under the laws of the former
Federal Republic of Germany, with principal
office at Munich, Germany.
On March 7, 1967, petitioner executed in favor
of private respondent a "Deed of Assignment
with Special Power of Attorney. Per the
agreement, the parties "continued business
relations as has been usual in the past without a
formal contract."
But on February 16, 1993, in a meeting with a
BMW representative and the president of
Columbia Motors Corporation (CMC), Jose
Alvarez, petitioner was informed that BMW was
arranging to grant the exclusive dealership of
BMW cars and products to CMC, which had
expressed interest in acquiring the same.
On February 24, 1993, petitioner received
confirmation of the information from BMW which,
in a letter, expressed dissatisfaction with various
aspects of petitioner's business, mentioning
among other things, decline in sales,
deteriorating services, and inadequate
showroom and warehouse facilities, and
petitioner's alleged failure to comply with the
standards for an exclusive BMW dealer.
Nonetheless, BMW expressed willingness to
continue business relations with the petitioner on
the basis of a "standard BMW importer"
contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no
alternative but to terminate petitioner's exclusive
dealership effective June 30, 1993.
Because of Hahn's insistence on the former
business relations, BMW withdrew on March 26,
1993 its offer of a "standard importer contract"
and terminated the exclusive dealer relationship
effective June 30, 1993.
On April 29, 1993, BMW proposed that Hahn
and CMC jointly import and distribute BMW cars
and parts.
Hahn found the proposal unacceptable. On May

A G E N C Y R E V E I W E R . . P a g e | 73
14, 1993, he filed a complaint for specific
performance and damages against BMW to
compel it to continue the exclusive dealership.
ISSUE: WON petitioner Alfred Hahn is the agent
or distributor in the Philippines of private
respondent BMW
HELD: Alfred Hahn is an agent of BMW. The
Supreme Court held that agency is shown when
Hahn claimed he took orders for BMW cars and
transmits them to BMW. Then BMW fixes the
down payment and pricing charges and will
notify Hahn of the scheduled production month
for the orders, and reconfirm the orders by
signing and returning to Hahn the acceptance
sheets.
The payment is made by the buyer directly to
BMW. Title to cars purchased passed directly to
the buyer and Hahn never paid for the purchase
price of BMW cars sold in the Philippines. Hahn
was credited with a commission equal to 14% of
the purchase price upon the invoicing of a
vehicle order by BMW. Upon confirmation in
writing that the vehicles had been registered in
the Philippines and serviced by him, Hahn
received an additional 3% of the full purchase
price. Hahn performed after-sale services,
including, warranty services. for which he
received reimbursement from BMW. All orders
were on invoices and forms of BMW.
Moreover, the Court distinguished an agent from
a broker. The court ruled that an agent receives
a commission upon the successful conclusion of
a sale. On the other hand, a broker earns his
pay merely by bringing the buyer and the seller
together, even if no sale is eventually made.

Tan vsGullas G.R. No. 143978


FACTS:Respondents were the registered
owners of a parcel of land. They executed a
special power of attorney authorizing petitioners
Tan, a licensed real estate broker, and his
associates, to negotiate for the sale of the land
at a commission of 3% of the gross price. Tan

contacted the Sisters of Mary of Banneaux, Inc.,


a religious organization interested in acquiring a
property. The Sisters, who had already seen and
inspected the land, found the same suitable for
their purpose and expressed their desire to buy
it. Respondents agreed to sell the property to
the Sisters of Mary. Petitioners went to see
respondents who refused to pay the brokers fee
and alleged that another group of agents was
responsible for the sale of land to the Sisters of
Mary. Petitioners filed a complaint against the
respondents for recovery of their brokers fee.
They alleged that they were the efficient
procuring cause in bringing about the sale of the
property but their efforts in consummating the
sale were frustrated by the respondents who, in
evident bad faith, malice and in order to evade
brokers fee, dealt directly with the buyer whom
petitioners introduced to them.
ISSUE: WON the petitioners are entitled to the
brokerage commission.
HELD:The records show that petitioner Tan is a
licensed real estate broker and other petitioners
his associates. Broker 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. Xxx a broker is one whose
occupation is to bring the parties together, in
matters of trade, commerce or navigation.
Petitioners were responsible for the introduction
of the representatives of the Sisters of Mary to
respondent.
There was no dispute as to the role that
petitioners played in the transaction. An agent
receives a commission upon a successful
conclusion of sale. On the other hand, a broker
earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually
made. Clearly, therefore, petitioners, as
brokers, should be entitled to the commission
whether or not the sale of the property subject

A G E N C Y R E V E I W E R . . P a g e | 74
matter of the contract was concluded through
their efforts.