AGENCY 2009 (PASCUAL)

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I. Nature, Form and Kinds 3. Basis

A. ARTICLE 1868 Rallos v. Felix Go Chan (MAI)

January 31, 1978
Muñoz Palma, J.
Art. 1868. By the contract of agency a person binds
himself to render some service or to do something
FACTS: Concepcion and Gerundia Rallos were
in representation or on behalf of another, with the
sisters and registered co-owners of a parcel of land
consent or authority of the latter.
known as Lot No. 5983. In 1954, they executed a
special power of attorney in favor of their brother,
1. Definition Simeon Rallos, authorizing him to sell for and in
their behalf the aforementioned parcel of land. On
2. Nature
March 1955, Concepcion Rallos died. On
September 1955, Simeon Rallos sold the undivided
Orient Air Services & Hotel Rep. v CA (GEN)
shares of his sisters in lot 5983 to Felix Go Chan
May 29, 1991
and Sons Realty Corporation. The deed of sale was
Padilla, J.
registered and the previous TCT was cancelled.
FACTS: American Airlines Inc. (AAI) and Orient Air
On May 1956, Ramos Rallos, as administrator of
Services and Hotel Representatives (Orient Air)
the Intestate Estate of Concepcion Rallos, filed a
entered into a General Sales Agency Agreement
complaint with the CFI of Cebu, praying (1) that the
authorizing the latter to act as its exclusive general
sale of the undivided share of the deceased
sales agent within the Philippines for the sale of air
Concepcion Rallos be declared unenforceable, and
passenger transportation.
said share be reconveyed to her estate; (2) that
the TCT issued in the name of Felix Go Chan and
Due to the alleged failure of Orient Air to promptly
Sons Realty Corporation be cancelled; and (3) that
remit the net proceeds of sales for 6 months, AAI
the plaintiff be indemnified by way of attorney’s
undertook the collection of the proceeds of tickets
fees and payment of costs of suit.
sold originally by Orient Air and terminated the
agency agreement. AAI then instituted suit against
The trial court rendered judgment declaring the
Orient Air with CFI of Manila for Accounting with
deed of sale null and void, insofar as the one-half
Preliminary Attachment or Garnishment,
pro-indiviso share of Concepcion Rallos in the
Mandatory Injunction and Restraining Order.
property in question, and sentencing Juan
Borromeo, the administrator of the estate of
The CFI of Manila ruled in favor of Orient Air and
Simeon Rallos, to pay Felix Go Chan and Sons
dismissed the complaint. It then ordered AAI to
Realty Corporation the sum representing the price
reinstated Orient Air as its general sales agent for
of one-half of the lot. The appellate court reversed
passenger transportation in the Philippines. The
the decision and sustained the sale.
IAC affirmed with modifications the findings of CFI
of Manila.
ISSUE: Whether or not the sale of the agent of the
principal’s property after the latter’s death is valid
ISSUE: WON the lower court may compel AAI to
extend its personality to Orient Air?
HELD: NO. The general rule in Article 1919 of the
NCC is that death is one of the causes for the
HELD: NO. It would be violative of the principles
extinguishment of agency. There being an
and essence of agency, defined by law as a
integration of the personality of the principal into
contract whereby “a person binds himself to
that of the agent, it is not possible for the
another to render some service or to do something
representation to continue once the death of either
in representation or on behalf of another WITH THE
is established. There are certain exceptions,
CONSENT OR AUTHORITY OF THE LATTER”. In an
however, Article 1931 being one of them. Under
agent-principal relationship, the personality of the
this provision, an act done by the agent after the
principal is extended through the facility of the
death of the principal is valid and effective if two
agent. In so doing, the agent, by legal fiction,
conditions concur: (1) the agent acted without
becomes the principal, authorized to perform all
knowledge of the death of the principal; and (2)
acts which the latter would have him do. Such a
that the third person who contracted with the
relationship can only be effected with the consent
agent acted in good faith. But because it was
of the principal, which must not, in any way, be
established that Simeon Rallos had knowledge of
compelled by law or by any court.
the death of his principal when he made the sale,
Article 1931 will not apply. The general rule shall
apply then that any act of an agent after the death
of his principal is void ab initio. Simeon Rallos’ act

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of selling the share of Concepcion after her death
is therefore null and void.
AGENCY:
The relationship of agency is whereby one party,
called the principal (mandante), authorizes
another, called the agent (mandatario), to act for
and in his behalf in transactions with third persons.
The essential elements of agency are: (1) there is
consent, express or implied of the parties to
establish the relationship; (2) the object is the
execution of a juridical act in relation to a third
person; (3) the agents acts as a representative and
not for himself, and (4) the agent acts within the
scope of his authority.
Agency is basically personal representative, and
derivative in nature. The authority of the agent to
act emanates from the powers granted to him by
his principal; his act is the act of the principal if
done within the scope of the authority. Qui facit per
alium facit se. "He who acts through another acts
himself".
Victoria Milling v. CA (ROG)
Bordador v. Luz (TOFF)
Caram v. Laureta (REG)
1981
FACTS: In 1945, Mata conveyed a parcel of land in
favor of Laureta (first vendee). The deed of
absolute sale was unregistered because it was not
acknowledged before a notary public or any
authorized officer. However, Mata delivered
possession to Lauereta, as well as an Owner’s
Duplicate Original (wth!) certificate of title.
In 1947, the same land was sold by Mata to Caram
through his representatives Irespe and Aportadera.
The deed of sale was acknowledged by Attorney.
Aportadera. Aportadera and Arcilla filed with the
CFI of Davao a petition for the issuance of a new
Owner’s Duplicate of Original Certificate alleging as
ground the loss of said title. It was granted. The
second sale was later registered in the Registry of
Deeds.
Petitioner contends that Irespe was merely a
broker or intermediary with the task to make the
payment to Mata; and that Aportadera merely
acted as a notary public.
ISSUES:
1) WON Irespe and Aportadera served as agents
of Caram. (YES)
2) WON the two were in bad faith. (YES)
3) WON Caram, as principal, is deemed also in
bad faith. (YES)
HELD:
1. The facts of record show that Mata, the vendor,
and Caram, the second vendee had never met.
2
During the trial, Mata testified that he knows
Attorney. Aportadera but did not know Caram.
Thus, the sale of the property could have only
been through Caram's representatives, Irespe
and Aportadera.
2. When Leaning Mansaca narrated to Attorney.
Aportadera the circumstances under which his
property had been sold to Laureta, he must
have included in the narration the sale of the
land of Mata, for the two properties had been
sold on the same occassion and under the
same circumstances. Irespe, who was the
witness in most of the cases filed by Attorney.
Aportadera in his capacity as Provincial Fiscal
of Davao against Laureta, must have known of
the purchases of lands made by Laureta.
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. Irespe and
Aportadera had knowledge of circumstances
which ought to have put them an inquiry. Both
of them knew that Mata's certificate of title
together with other papers pertaining to the
land was taken by soldiers under the command
of Col. Laureta. Also, at the time of the second
sale, Laureta was already in possession of the
land. Irespe and Aportadera should have
investigated the nature of Laureta's
possession. Caveat emptor.
3. Applying the principle of agency, Caram as
principal, should also be deemed to have acted
in bad faith.
Effect: as if no there was no registration at all
Air France v CA, Jose Gana (ABBY)
Dec. 29, 1983
Melencio Herrera
FACTS: The Ganas purchased from Air France
through Imperial Travels, a duly authorized agent,
9 open dated tickets for a
Manila/Osaka/Tokyo/Manila. The expiry date was
May 8, 1970. Jose Gana sought the assistance of
Teresita Manucdoc, a secretary of the company
where Jose Gana worked, to procure the extension
of the validity of their tickets. Manucdoc talked
with Lee Ella, Manager of the Philippine Travel
Bureau. She was told that they would have to pay
fare differentials and that the extension is
impossible. The GANAS scheduled their departure
for May 7 and on May 6, Teresita again asked for
Lee Ella’s help in the revalidation. She was told
that it would only be valid until May 8 and no
longer valid for the rest of the trip after that.
However, Ella attached revalidation stickers on the
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tickets (revalidated by the Philippine Travel
Bureau), without informing Air France. The Ganas
departed and but the airlines refused to honor
their tickets at the start of the Osaka/Tokyo leg.
The GANAS had to purchase new tickets at
readjusted rates and arrived at Manila on different
dates. TC-Air France. CA- Ganas. SC-Air France
ISSUES:
1. WON Ella acted beyond his powers as travel
agent? YES
2. WON notice to Manucdoc is notice to the
Ganas? YES
HELD: 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.
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 Gana as her principal.
The circumstances that AIR FRANCE personnel at
the ticket counter in the airport allowed the GANAS
to leave is not tantamount to an implied ratification
of travel agent Ella's irregular actuations. The
validating stickers that Ella affixed on his own
merely reflect the status of reservations on the
specified flight and could not legally serve to
extend the validity of a ticket or revive an expired
one.
The conclusion is inevitable that the GANAS
brought upon themselves the predicament they
were in for having insisted on using tickets that
were due to expire in an effort, perhaps, to beat
the deadline and in the thought that by
commencing the trip the day before the expiry
date, they could complete the trip even thereafter.
It should be recalled that AIR FRANCE was even
unaware of the validating SAS and JAL. stickers
that Ella had affixed spuriously. Consequently,
Japan Air Lines and AIR FRANCE merely acted
within their contractual rights when they
dishonored the tickets on the remaining segments
of the trip and when AIR FRANCE demanded
payment of the adjusted fare rates and travel taxes
for the Tokyo/Manila flight.
4. Purpose
Orient Air Services v CA, supra
3
5. Essential Elements of Contract of Agency
Rallos v. Felix Chan, supra
6. Characteristics of an Agency Contract
Smith vs. Lopez (EARLA)
September 30, 1905
Torres, J.
FACTS: Nicasio Lopez, as administrator of the
house owned by his two daughters, contracted the
services of Philippine Gas Light Company for the
installation of a water system, urinals, closets,
shower baths, and drain pipes in the house at 142
Calle Dulumbayan, Santa Cruz Manila. This was
done pursuant to the order of the Board of Health.
The Company, with Smith and Reyes as
proprietors, incurred a total of P4020 Mexican
currency; P750 of which was already paid, leaving
a balance of P3270.
Failing to pay, Smith and Reyes instituted an action
to recover the P3270 plus interest, from the sisters,
Jacinta and Ignacia Lopez de Pineda. As a defense,
the sisters claimed, among others, that they are
not liable for the sum demanded since the works
done by Smith were done without the authority or
consent of the sisters. The CFI ruled in favor of
Smith and ordered the Lopez sisters to pay
P2717.40 local currency.
ISSUE: WON Nicasio Lopez is the agent of his two
daughters? Yes.
HELD: Nicasio is the administrator of the property
of the defendant. Pursuant to the order of the
Board of Health, he contracted the services of the
Phil. Gas Light Company for the installation of
certain fixtures. Accordingly, he did all these
voluntarily. Thus, although there was no express
consent given by the sisters, through a valid power
of attorney, there was an IMPLIED power, because
the sisters did not object to the work being done on
the house, which benefited them in the end. There
was a quasi-contract which created certain
reciprocal obligations between them and the
plaintiffs.
Moreover, it is presumed from their failure to
object to the work being done that they were
approving it, thereby ratifying the act of their
father, as though he acted under an express power
from them.
It cannot also be denied that they have benefited
from the work done by Smith, et al: The house was
not improved by said work. Likewise, If it were not
undertaken by the plaintiffs, the Board of Health
would have undertaken the same work at the
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expense of the sisters. Thus, it is only just that they
be ordered to pay the cost of the work and the
value of the materials used.
Thomas v. Pineda (JANCES)
Severino v. Severino (JILL)
January 16, 1923
Ostrand, J.
FACTS; Melecio Severino owned a land, by which
brother Guillermo served as administrator. Upon
the death of Melecio, Guillermo continued
occupation of the land, and in a cadastral
proceeding successfully had the land Titled in his
favor, considering that he has possessed it for 30
years. This action now is brought by the natural
daughter and sole heir of Melecio, Fabiola
Severino, to compel defendant Guillermo to convey
the lands in her favor. Meanwhile, administratrix of
Melecio’s estate, Felicitas Villanueva, also
intervened so the land will be conveyed in the
estate’s name.
Defendant argues that the land was owned in
common by their father and did not solely belong
to Melecio and that his Title is indefeasible under
the Land Registration Act.
ISSUE: WON defendant Guillermo has rights over
the property? NO.
HELD: The relation of an agent to a principal is
fiduciary, and the agent is estopped from acquiring
or asserting Title adverse to the principal. His
position is analogous to a trustee, and that
whatever he does inures to the benefit of the
cestui que vie.
In Gilbert v. Hewetson, a trustee or agent is utterly
disabled from acquiring for his own any property
committed in his custody. This is entirely
independent of the fact whether any fraud has
intervened. No fraud in fact need be show. The rule
stands on moral obligation to refrain from placing
one’s self in conflicts of self-interest and integrity.
It seeks to remove the temptation that might arise
out of one’s relation to serve another’s interest for
his own benefit.
Here, while the legal title of Guillermo is not
questioned, it must be deemed as to inure to the
benefit of the estate of Melecio Severino, as the
cestui que vie with superior equitable right.
It must be noted that the property shall inure to
the ESTATE’S benefit and not to the daughter who
brought the action since it is the estate who will
apportion all the claims. Moreover, the legitimacy
of Fabiola as a natural child is also being
questioned.
4
Dumaguin v. Reynolds (ALAIN)
Palma v Cristobal (GEN)
Dec. 11, 1946
Perfecto, J.
FACTS: In 1909, after registration proceedings, OCT
was issued in the names of petitioner and his wife
Luisa. After the latter’s death, a new certificate of
title was issued only in the name of petitioner.
The parcel of land is a community property held by
petitioner in trust for the real owners (respondent).
The registration was made in accordance with an
understanding between the co-owners of the
confidence they reposed upon the petitioner and
his wife. It was only after the death of Luisa and
after petitioner’s subsequent marriage that trouble
on religious matters arose between petitioner and
respondent.
Petitioner then sought to eject respondent from the
land. This was dismissed and another complaint
was filed, wherein the petitioner prays that he be
declared the owner of the land.
ISSUE: WON petitioner may be declared the owner
of the land?
HELD: NO. The registration of the property in the
name of the trustees in possession thereof, must
be deemed to have been effected for the benefit of
the cestui que trust. Whether or not there is bad
faith or fraud in obtaining a decree with respect to
a registered property, the same does not belong to
the person in whose favor it was issued, and the
real owners would be entitled to recover the
ownership of the property so long as the same has
not been transferred to a third person who has
acquired it in good faith and for valuable
consideration. Thus, the petitioner, being a trustee,
does not acquire the land registered in his name.
Araneta v. del Paterno (MAI)
August 22, 1952
Tuason, J.
FACTS: Paz Tuason de Paterno is the registered
owner of a parcel of land, which was subdivided
into lots. Most of these lots were occupied by
lessees who had contracts of lease that would
expire at a certain time, and carried a stipulation
giving the lessees a right of first refusal in case the
lots were to be sold.
In 1940 and 1941, Paz Tuason obtained from Jose
Vidal several loans, and constituted a mortgage on
the property to secure the debt. In 1943, she
obtained additional loans upon the same security.
She decided to sell the whole property to Gregorio
Araneta, Inc. The day after the agreement was
signed, Paz Tuason offered to Vidal a check in full
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settlement of her mortgage obligation but Vidal
refused to accept it or cancel the mortgage.
Gregorio Araneta instituted the case to compel Paz
Tuason to deliver to the former a clear title of the
lots.
One of the objections made against the sale is that
Jose Araneta, president of Gregorio Araneta Inc.,
was also the agent of Paz Tuason.
ISSUE: Whether or not Gregorio Araneta was the
agent of Paz Tuason
HELD: NO. Article 1459 of the Spanish Civil Code
provides: “The following persons cannot take by
purchase, even at a public or judicial auction,
either in person or through mediation of another:
2. An agent, any property of which the
management or sale may have been entrusted to
him;”
However, in the opinion of Manresa, an agent (in
the sense of Article 1459) is one who accepts
another’s representation to perform in his name
certain acts of more or less transcendency. The
ban of paragraph 2 of Article 1459 connotes the
idea of trust and confidence. To come under this
prohibition, the agent must be in a fiduciary
relation with his principal.
Tested by this standard, Jose Araneta was not an
agent within the meaning of Article 1459. He was
nothing more than a go-between or middleman
between Paz Tuason and Gregorio Araneta, Inc. to
bring them together to make the contract
themselves. Jose Araneta was not authorized to
make a binding contract for Paz Tuason. He had
no power or discretion, which he could abuse to his
advantage and to the owner’s prejudice.
Allied Free Workers v. Compania Maritima
(ROG)
Far Eastern Export v. Lim Tech Suan (TOFF)
1955
Montemayor, J.
FACTS: FEEIC agent Delizalde went to the store of
Suan to sell textile which offer was thereafter
agreed upon. Delizalde later on returned with
buyers order and a document signifying payment
be done by “Confirmed Irrevocable Letter of
Credit” among others. In accordance with this,
Suan established a letter of credit in favor of
Frenkel International Corporation. When the textile
arrived at Manila, Suan complained to FEEIC of the
inferior quality of the textile and had them
examined, where a report was submitted by the
examining body. Upon instructions by FEEIC, Suan
deposited goods with the United Warehouse Corp.
but subsequently withdrew 15 cases of textile to
offer them for sale. The net direct loss was
5
P11,476.66. A complaint for damages representing
difference in price between textile ordered and
received, unrealized profits and cost of suit was
instituted against FEEIC. FEEIC set up that it only
acted as broker in the transaction and took no
further action after placement of order as defense.
It averred that the cargo was directly taken by
Suan from Frenkel. The trial court acquitted FEEIC
but the Court of Appeals reversed decision based
on its ruling on Velasco v. Universal Trading Co.
ISSUE: WON FEEIC could act as agent of both Suan
and Frenkel.
HELD: NO. An agent could not serve two masters at
the same time. The same agent could not very well
act as agent for local buyers because the interest
of its foreign principal and those of the buyer would
be a direct conflict.
FEEIC was clearly an agent of Frenkel. As per the
facts: Suan was merely to be commissioning FEEIC
to procure for him the merchandise in question.
Furthermore, the price of the merchandise bought
was paid for by Suan by means of an irrevocable
letter of credit in favor of Frenkel.
Judgment of Court of Appeals affirmed.
7. Parties/Capacity
Mendoza v. De Guzman*
8. Distinguished from other juridical
relations
Sevilla v. CA (REG)
1998
FACTS: Tourist World Service, Inc. (TWS) leased
the premises belonging to Noguera for the former’s
use as a branch office. Petitioner Sevilla held
herself solidarily liable with the party of the part for
the prompt payment of the monthly rental. When
the branch office was opened, it was run by Sevilla
payable to TWS by any airline. For any fare brought
in on the efforts of Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the TWS.
Sevilla was paid no salaries. She even shared in the
expenses of maintaining the office, paid for the
salary of an office secretary and other sundry
expenses.
Later Tourist World considered closing down its
office because of business losses and news that
Sevilla was then connected with a rival firm. Thus,
an employee of TWS went to the branch and
padlocked its premises. Sevilla filed a complaint
claiming damages brought about by TWS’s
revocation of their relationship.
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ISSUE:
1) WON Sevilla was just an employee of TWS, and
as such was bound by the acts of her
employer. (NO)
2) WON Sevilla was an agent of TWS and thus
entitled to damages because TWS revoked
such relationship. (YES)
HELD:
1. Sevilla was not subject to control by
the private respondent TWS either as to the
result of the enterprise or as to the means
used in connection therewith.
- Under the contract of lease covering the
Tourist Worlds Ermita office, she had bound
herself in solidum as and for rental payments.
A true employee cannot be made to part with
his own money in pursuance of his employer's
business, or otherwise, assume any liability
thereof.
- Sevilla was not under the control of TWS
"as to the means used." Sevilla in pursuing the
business, obviously relied on her own gifts and
capabilities.
- She was not in the company's payroll. For her
efforts, she retained 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.
2. 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.
- An agency that has been created for mutual
interest, of the agent and the principal cannot
be revoked at will. 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.
Fressel v Mariano Uy Chaco Sons & Co.
(ABBY)
March 3, 1916
6
Trent, J.
FACTS: Merritt undertook and agreed with the
defendant to build for the defendant a costly
edifice in the city of Manila at the corner of Calle
Rosario and Plaza del Padre Moraga. In the contract
it was agreed between the parties thereto, that Uy
Chaco at any time, upon certain contingencies,
before the completion of said edifice could take
possession of said edifice in the course of
construction and of all the materials in and about
said premises acquired by Merritt for the
construction of said edifice.Fressel delivered to
Merritt at the said edifice in the course of
construction certain materials of the value of
P1,381.21Uy Chaco took possession of the
incomplete edifice in course of construction
together with all the materials on said premises
including the materials delivered. Neither Meritt
nor Uy Chaco paid for the materials even after
extrajudicial demand. The appellants insist that the
above quoted allegations show that Merritt acted
as the agent of the defendant in purchasing the
materials in question and that the defendant, by
taking over and using such materials, accepted
and ratified the purchase, thereby obligating itself
to pay for the same.
ISSUE: Fressel’s allegation “That in pursuance of
the contract between Merritt and the defendant,
Merritt acted as the agent for defendant in the
acquisition of the materials from plaintiffs. “ –W/N
Meritt acted as an agent for Uy Chaco and Sons
Held: NO. Meritt is an independent contractor.
Where one party to a contract was authorized to do
work according to his own method and without
being subject to the other party’s control, except
as to the result of the work, he is an independent
contractor and not an agent.
The fact that "the defendant entered into a
contract with one E. Merritt, where by the said
Merritt undertook and agreed with the defendant
to build for the defendant a costly edifice" shows
that Merritt was authorized to do the work
according to his own method and without being
subject to the defendant's control, except as to the
result of the work. He could purchase his materials
and supplies from whom he pleased and at such
prices as he desired to pay. Again, the allegations
that the "plaintiffs delivered the Merritt . . . .
certain materials (the materials in question) of the
value of P1,381.21, . . . . which price Merritt agreed
to pay," show that there were no contractual
relations whatever between the sellers and the
defendant. The mere fact that Merritt and the
defendant had stipulated in their building contract
that the latter could, "upon certain contingencies,"
take possession of the incompleted building and all
materials on the ground, did not change Merritt
from an independent contractor to an agent. In the
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absence of a statute creating what is known as
mechanics' liens, the owner of a building is not
liable for the value of materials purchased by an
independent contractor either as such owner or as
the assignee of the contractor.
Victoria Milling v CA, supra
9. Knowledge of agent imputed to principal
Art. 1821. Notice to any partner of any matter
relating to partnership affairs, and the knowledge
of the partner acting in the particular matter,
acquired while a partner or then present to his
mind, and the knowledge of any other partner who
reasonably could and should have communicated it
to the acting partner, operate as notice to or
knowledge of the partnership, except in the case of
fraud on the partnership, committed by or with the
consent of that partner.
B. Article 1869
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.
1. Oral, express
2. Implied
a. acts or conduct of principal
Gutierrez Hermanos vs. Orense (EARLA)
December 4, 1914
Torres, J.
FACTS: Engracio Orense is the original owner of a
parcel of land in Guinobatan, Albay. On February
14, 1907, Jose Duran, the nephew of Orense, sold
the land for P1500 to Gutierrez Hermanos, with
Orense’s knowledge and consent. The sale was
embodied in a public instrument, and contained a
provision giving Duran a right to repurchase within
a period of 4 years. Thereafter, by a contract of
lease executed between Gutierrez and Duran,
Orense continued occupying the land.
After the lapse of 4 years stipulated for the
redemption of the property, Gutierrez asked that
Orense deliver the property to the company and
pay rentals for the use of the property. Orense
however, refused to do so.
Orense claimed that the sale was void for having
been done without his authority, either written or
verbal. He further alleged that he did not
intentionally and deliberately performed acts as
would lead Gutierrez Hermanos that he authorized
his nephew to enter into the contract of sale.
7
As a result, the company instituted an estafa case
against Duran for allegedly misrepresenting
himself as the owner of the property when he sold
the same to Gutierrez. During trial, the defense
presented Orense as witness, where he stated that
the sale was done with his knowledge and consent.
By virtue of his testimony, confirming that he gave
his nephew authority to convey the subject land,
Duran was acquitted of the criminal charges
against him.
The Company then demanded that Orense execute
the proper deed of conveyance of the property
sold. The CFI thereafter ruled in its favor and
ordered that a delivery of the property be done,
through a public instrument.
ISSUE: WON Duran is the agent of Orense? Yes.
HELD: The sworn statement of Orense during the
trial of the estafa case confirmed and ratified the
sale of his property effected by his nephew. The
initial sale made by Duran was indeed null and
void, but it became perfectly valid and cured of the
defect of nullity by the confirmation solemnly made
by Orense, upon his stating under oath to the
judge that he himself consented to the making of
the said sale. Thus, Orense’s ratification produced
the effect of an express authorization to make the
said sale.
Lopez v. Rosario (JANCES)
Mache v. Campos (JILL)
February 27. 1907
Carson, J.
FACTS: Plaintiffs BH Macke & WH Chandler sold to
Ricardo Flores, on the alleged order of his principal
(defendant Camps), several bills of goods at the
Washington Café. Flores acknowledged receipt of
goods and made payments; however, he reserved
payment of the balance upon the return of the
principal Camps. Plaintiffs then investigated the
true status of Flores and found out that he is the
business manager of defendant’s Café. That in the
contract of lease of the building where Washington
Café is placed, he signed as the “managing agent”.
Defendant Camps meanwhile alleges that he did
not receive the goods and so will not pay the
balance.
ISSUE: WON Camps is liable for the balance?
HELD: YES. In the absence of proof, SC found that
Flores in the agent of Camps; he even signed as
“managing agent.” One who clothes another with
apparent authority as his agent, and holds him out
to the public as such, cannot be permitted to deny
the authority of such person to act as his agent, to
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the prejudice of innocent third persons. The
authority of the agent must be presumed to
include all the necessary and usual means of
carrying his agency into effect. Moreover, there is
sufficient proof that Flores did receive the goods,
thereby making Camps liable.
Linan v. Puno (ALAIN)
Dominion Insurance Corp. v CA (GEN)
Feb. 6, 2002
Pardo, J.
FACTS: Rodolfo Guevarra claimed to have
advanced P156, 473.90 in his capacity as a
manager of Dominion Insurance Corp. to satisfy
certain claims filed by the petitioner’s clients. He
then instituted a complaint for sum of money
against the petitioner. The petitioner denied any
liability to plaintiff and asserted a counterclaim of
P249,672.53, representing premium that Guevarra
failed to pay.
The RTC ruled in favor of Guevarra and ordered the
petitioner to pay him the sum he claims. The CA
affirmed the decision of the RTC.
ISSUE: WON Guevarra acted within his authority as
agent for petitioner?
HELD: NO. The Special Power of Attorney entered
into by petitioner and Guevarra would show that
they intended to enter into a principal-agent
relationship. Despite the word “special” in the
document, the contents reveal that what was
constituted was actually a general agency. The
agency comprises all the business of the principal
but couched in general terms; hence it is limited
only to acts of administration.
Thus, the general agency constituted does not
warrant the payment or settlement of claims as
they specifically require a Special Power of
Attorney as provided by Art. 1878 of the Civil Code.
But as provided by the Memorandum of
Management Agreement, Guevarra was authorized
to pay the claim but the payment shall come from
the revolving fund or collection in his possession.
Having deviated from the instructions of the
principal, the expenses that Guevarra incurred in
the settlement of the claims of the insured may not
be reimbursed from Dominion in accordance with
Art. 1918 of the Civil Code.
Nevertheless, under Art. 1236, to the extent that
the obligation of the petitioner has been
extinguished, Guevarra may demand for
reimbursement from his principal.
b. silence or lack of action
8
Conde v. CA (MAI)
December 5, 1982
Melencio – Herrera, J.
FACTS: 7 April 1938. Margarita Conde, Bernardo
Conde and the petitioner Dominga Conde, as heirs
of Santiago Conde, sold with right of repurchase,
within ten (10) years from said date, a parcel of
agricultural land to Casimira Pasagui, married to
Pio for P165.00. "Pacto de Retro Sale" provided
that after 10 yrs. If land is not repurchased a new
agreement shall be made between the parties and
in no case title and ownership shall be vested in
the hand of the party of the SECOND PART (the
Alteras).
Three years after Cadastral Court adjudicated land
to the Alteras "subject to the right of redemption
by Dominga Conde, within ten (10) years counting
from April 7, 1983, after returning the amount of
P165.00 and the amounts paid by the spouses in
concept of land tax …”
Neither of the vendees-a-retro, Pio Altera nor
Casimira Pasagui, was a signatory to the deed.
Conde maintains that because Pio Altera was very
ill at the time, Paciente Cordero executed the deed
of resale for and on behalf of his father-in-law.
Conde further states that she redeemed the
property with her own money as her co-heirs were
bereft of funds for the purpose.
30 June 1965 Pio Altera sold lot to the Sps Ramon
Conde and Catalina T. Conde (private
respondents).
Dominga contends that land was repurchased in
1945 and filed a case against Paciente Cordero and
his wife Nicetas Altera, Ramon Conde and his wife
Catalina T. Conde, and Casimira Pasagui Pio Altera
having died in 1966), for quieting of title to real
property and declaration of ownership.
Dominga’s Evidence: Paciente Cordero signed the
Memorandum of Repurchase in representation of
his father-in-law Pio Altera, who was seriously sick
on that occasion, and of his mother-in-law who was
in Manila at the time, and that Cordero received
the repurchase price of P65.00.
TC: Dominga was ordered to vacate property
CA: Upheld TC-petitioner
Neither of the vendees-a-retro signed the
"Memorandum of Repurchase", and that there was
no formal authorization from the vendees for
Paciente Cordero to act for and on their behalf.
ISSUE: WON there was an implied agency
HELD: Yes. From the execution of the repurchase
document in 1945, possession, which heretofore
had been with the Alteras, has been in the hands of
Dominga. Land taxes have also been paid for by
Dominga, yearly from 1947 to 1969 inclusive. If, as
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opined by both the TC and the Appellate Court,
petitioner had done nothing to formalize her
repurchase, by the same token, neither have the
vendees-a-retro done anything to clear their title of
the encumbrance therein regarding petitioner's
right to repurchase. No new agreement was
entered into by the parties as stipulated in the
deed of pacto de retro, if the vendors a retro failed
to exercise their right of redemption after ten
years. If, as alleged, petitioner exerted no effort to
procure the signature of Pio Altera after he had
recovered from his illness, neither did the Alteras
repudiate the deed that their son-in-law had
signed. Thus, an implied agency must be held to
have been created from their silence or lack of
action, or their failure to repudiate the agency.
Possession of the lot in dispute having been
adversely and uninterruptedly with petitioner from
1945 when the document of repurchase was
executed, to 1969, when she instituted this action,
or for 24 years, the Alteras must be deemed to
have incurred in laches. That petitioner merely
took advantage of the abandonment of the land by
the Alteras due to the separation of said spouses,
and that petitioner's possession was in the concept
of a tenant, remain bare assertions without proof.
Catalina is not buyer in good faith since the ten-
year period had lapsed in 1965 and there was no
annotation of any repurchase by Domingo, neither
had the title been cleared of that encumbrance.
The purchasers were put on notice that some other
person could have a right to or interest in the
property. It behooved Ramon Conde and Catalina
Conde to have looked into the right of redemption
inscribed on the title, and particularly the matter of
possession, which, as also admitted by them at the
pre-trial, had been with petitioner since 1945.
Altera and Catalina’s must be held bound by the
clear terms of the Memorandum of Repurchase
that he had signed wherein he acknowledged the
receipt of P165.00 and assumed the obligation to
maintain the repurchasers in peaceful possession
should they be "disturbed by other persons".
The imperatives of substantial justice, and the
equitable principle of laches brought about by
private respondents' inaction and neglect for 24
years, loom in petitioner's favor.
c. failure to repudiate
Dela Rosa v. Hidalgo (ROG)
Naguiat v. CA (TOFF)
2003
Tinga, J.
FACTS: Queano applied with Naguiat a loan of
P200,000 which was eventually granted. Naguiat
9
indorsed two checks to Queano amounting to
P95,000 each. To secure the loan, Queano
executed a Deed of Real Estate Mortgage and
surrendered to Naguiat her duplicates of titles
covering the mortgage. The mortgage was
notarized and a promissory note for P200,000 with
interest of 12% per annum was given by Queano.
She also issued a Security Bank check payable to
Naguiat. Upon presentment of the check, the
Security Bank check was dishonored for
insufficiency of funds. A month after, Queano
received a letter from Naguiat demanding
settlement of the loan. Queano and a certain
Reubenfeldt (who was alleged to be Naguiat’s
agent) met with Naguiat to manifest that Queano
did not receive the proceeds of the loan as the
checks were retained by Reubenfeldt. Naguiat
applied for extrajudicial foreclosure of the
mortgage but the same was declared null and void.
On appeal, the CA affirmed the decision of the trial
court. Among the issues raised by Naguiat is the
admissibility of the representations of
Reubendfeldt insisting that she was not her agent.
ISSUE: WON Reubenfeldt was Naguiat’s agent.
HELD: YES. Evidence showed that Naguiat
instructed Reubenfeldt to withhold the checks
pending the delivery of additional collateral by
Queano. He served as agent of Naguiat on the loan
application of Queano’s friend as to whom Queano
came to know of Naguiat. Furthermore, she also
drew a check for the sum of P220,000 payable to
Naguiat to cover for Queano’s liability.
As a consequence of the interaction between
Naguiat and Reubenfeldt, Queano was impressed
that she was Nagiat’s agent and Naguiat did not do
anything to correct that. The rule states that one
who clothes another with apparent authority as his
agent and holds him out in the public as such
cannot be permitted to deny the authority of such
person to act as his agent, to the prejudice of third
parties dealing in good faith. The CA correctly used
the rule on agency by estoppel.
Judgment affirmed.
Professional Services v. Agana (REG)
3. Other kinds
a. As to nature
- Conventional
- Legal
Art. 1803. When the manner of management has
not been agreed upon, the following rules shall be
observed:
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(1) All the partners shall be considered agents and
whatever any one of them may do alone shall bind
the partnership, without prejudice to the provisions
of Article 1801.
(2) None of the partners may, without the consent
of the others, make any important alteration in the
immovable property of the partnership, even if it
may be useful to the partnership. But if the refusal
of consent by the other partners is manifestly
prejudicial to the interest of the partnership, the
court's intervention may be sought.
Art. 1884. The agent is bound by his acceptance to
carry out the agency, and is liable for the damages
which, through his non-performance, the principal
may suffer.
Art. 1885. In case a person declines an agency, he
is bound to observe the diligence of a good father
of a family in the custody and preservation of the
goods forwarded to him by the owner until the
latter should appoint an agent or take charge of
the goods.
Art. 1929. The agent, even if he should withdraw
from the agency for a valid reason, must continue
to act until the principal has had reasonable
opportunity to take the necessary steps to meet
the situation.
Art. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
persons who may have contracted with him in
good faith.
Art. 1932. If the agent dies, his heirs must notify
the principal thereof, and in the meantime adopt
such measures as the circumstances may demand
in the interest of the latter.
b. As to consideration
- Gratuitous
Art. 1875. Agency is presumed to be for a
compensation, unless there is proof to the
contrary.
- Onerous
c. As to extent of transaction
- General
Art. 1876. An agency is either general or special.
10
- Special
d. As to management
- Couched in general terms
Art. 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power
or that the agent may execute such acts as he may
consider appropriate, or even though the agency
should authorize a general and unlimited
management.
- Specific terms
Art. 1878. Special powers of attorney are
necessary in the following cases:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to
obligations already in existence at the time the
agency was constituted;
(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an
action or to abandon a prescription already
acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration;
(6) To make gifts, except customary ones for
charity or those made to employees in the
business managed by the agent;
(7) To loan or borrow money, unless the latter act
be urgent and indispensable for the preservation of
the things which are under administration;
(8) To lease any real property to another person for
more than one year;
(9) To bind the principal to render some service
without compensation;
(10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a guarantor or
surety;
(12) To create or convey real rights over
immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted
before the agency;
(15) Any other act of strict dominion.
e. As to manner of appointment
- Direct
- Indirect, appointment through
another
f. As to nature and effects
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- Ostensible or representative
- Simple or commission
4. Forms of Agency
a. Contract
Art. 381. When a person disappears from his
domicile, his whereabouts being unknown, and
without leaving an agent to administer his
property, the judge, at the instance of an
interested party, a relative, or a friend, may
appoint a person to represent him in all that may
be necessary.
b. Articles (see below)
Art. 1874. When a sale of a 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.
Art. 1357. If the law requires a document or other
special form, as in the acts and contracts
enumerated in the following article, the contracting
parties may compel each other to observe that
form, once the contract has been perfected. This
right may be exercised simultaneously with the
action upon the contract.
Art. 1358. The following must appear in a public
document:
(1) Acts and contracts which have for their object
the creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein a governed by Articles 1403, No. 2, and
1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other
power which has for its object an act appearing or
which should appear in a public document, or
should prejudice a third person;
(4) The cession of actions or rights proceeding from
an act appearing in a public document.
All other contracts where the amount involved
exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods,
chattels or things in action are governed by
Articles, 1403, No. 2 and 1405
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
11
(1) Those 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
powers;
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary
evidence of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making thereof;
(b) A special promise to answer for the debt,
default, or miscarriage of another;
(c) An agreement made in consideration of
marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
action or pay at the time some part of the
purchase money; but when a sale is made by
auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount
and kind of property sold, terms of sale, price,
names of the purchasers and person on whose
account the sale is made, it is a sufficient
memorandum;
(e) An agreement of the leasing for a longer period
than one year, or for the sale of real property or of
an interest therein;
(f) A representation as to the credit of a third
person.
(3) Those where both parties are incapable of
giving consent to a contract.
5. Presumption of Agency
a. General rule
Harry Keeler Electric Co. vs. Rodriguez
(EARLA)
November 11, 1922
Johns, J.
FACTS: Harry Keeler is engaged in the electrical
business and is selling the “Matthews” plant in the
Philippine Islands. One day, A.C Montelibano went
to the office of Harry Keeler and told him that he
could find purchasers of the “Matthews” plant.
Keeler agreed with the understanding that for
every customer that he could find or any plant that
he could sell, he would be given a 10% commission
if the sale was consummated. Pursuant to this
agreement, Montelibano was able to negotiate the
sale of the the Matthews plant between Keeler and
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Rodriguez. After the machine had been installed,
Rodriguez paid the purchase price of P2513.55 to
Montelibano, without the knowledge of Keeler.
Keeler alleged that it was his employee Cenar who
installed the equipment in defendant’s premises.
Moreover, Keeler also claimed that it was Cenar
who gave him the statement of account totaling
P2563.95. Cenar did not make any effort to collect
the money since he was assured by Rodriguez that
he will pay it in Manila.
On the other hand, Rodriguez alleged that he paid
the purchase price to Montelibano, since he was
the one who sold, delivered and installed the
electrical plant; that he was the one who presented
the account; that he was assured by Montelibano
that he was authorized to collect the value of the
plant.
The lower court decided in favor of Rodriguez,
holding that Montelibano was an agent authorized
to collect the purchase price.
ISSUE: WON Montelibano was the agent of Harry
Keeler.
HELD: No. According to the Court, there is nothing
in the receipt issued by Montelibano that would
indicate that he was authorized by Keeler to collect
the money. Accordingly, what was contained
therein were his personal receipt and personal
signature. There were no more indications of his
authority.
Moreover, the Court also ruled that the receipt
presented in evidence by Rodriguez actually shows
that it was Cenar who gave the statement of
accounts to him; otherwise, there would have been
no need to incur shipping costs of P81.60 if it was
Montelibano who installed the plant in his
premises.
In sum, there was no evidence that Keeler ever
delivered any statement to Montelibano or that he
was ever authorized to receive the money.
It is a settled principle in agency that a person
dealing with an agent must be careful in
ascertaining the fact of the agency and the nature
and extent of authority of the agent. Accordingly,
“In approaching the consideration of the inquiry
whether an assumed authority exists in a given
case, there are certain fundamental principles
which must not be overlooked. Among these are,
as has been seen,
(1) that the law indulges in no bare presumptions
that an agency exists: it must be proved or
presumed from facts;
(2) that the agent cannot establish his own
authority, either by the representations or by
assuming to exercise it;
(3) that an authority cannot be established by
mere rumor or general reputation;
(4) that even a general authority is not an
unlimited one; and
12
(5) that every authority must find its ultimate
source in some act or omission of the principal.
Thus, when Rodriguez paid to Montelibano, he did
so at his own peril. He is therefore, still liable to
pay Keeler the amount of the electric plant.
b. Exceptions to the rule
Art. 1803. When the manner of management has
not been agreed upon, the following rules shall be
observed:
(1) All the partners shall be considered agents and
whatever any one of them may do alone shall bind
the partnership, without prejudice to the provisions
of Article 1801.
(2) None of the partners may, without the consent
of the others, make any important alteration in the
immovable property of the partnership, even if it
may be useful to the partnership. But if the refusal
of consent by the other partners is manifestly
prejudicial to the interest of the partnership, the
court's intervention may be sought
Compana Maritima v. Limson (JANCES)
6. Authority of attorney to appear is
presumed
Sec. 21. Authority of attorney to appear. - An
attorney is presumed to be properly authorized to
represent any cause in which he appears, and no
written power of attorney is required to authorize
him to appear in court for his client, but the
presiding judge may, on motion of either party and
on reasonable grounds therefor being shown,
require any attorney who assumes the right to
appear in a case to produce or prove the authority
under which he appears, and to disclose, whenever
pertinent to any issue, the name of the person who
employed him, and may thereupon make such
order as justice requires. An attorney wilfully
appearing in court for a person without being
employed, unless by leave of the court, may be
punished for contempt as an officer of the court
who has misbehaved in his official
transactions.chan robles virtual law library
Sec. 22. Attorney who appears in lower court
presumed to represent client on appeal. - An
attorney who appears de parte in a case before a
lower court shall be presumed to continue
representing his client on appeal, unless he files a
formal petition withdrawing his appearance in the
appellate court.
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Sec. 23. Authority of attorneys to bind clients. -
Attorneys have authority to bind their clients in any
case by any agreement in relation thereto made in
writing, and in taking appeals, and in all matters of
ordinary judicial procedure. But they cannot,
without special authority, compromise their client's
litigation, or receive anything in discharge of a
client's claim but the full amount in cash.
Air Phil Corp. v. International Business
(ALAIN)
Panganiban J.
Facts:
• APC was in need of the services of a
business establishment to ferry its B-737
airplane. It engaged the services of IBAPSI
as its agent to look for and engage, for
APC, a business enterprise to ferry the
airplane. IBASPI did engage the services of
Universal Weather & Aviation, Inc. (UWAI).
UWAI sent its ‘Billings’ to APC, through
IBASPI, in the total amount of
US$65,131.55 for its services for the ferry
of the airplane. But APC repeatedly failed
to pay its account. Exasperated, UWAI
blamed IBASPI. IBASPI was impelled to pay
UWAI. IBASPI demanded refund of the
amount advanced to UWAI. But still, no
payment was effected by API. IBASPI
demanded the payment of said amount
plus 10% commission.
• APC finally made its first partial payment of
P200,000.00 to IBASPI with a simultaneous
“Receipt/Agreement” executed by IBASPI
and APC, the latter, through Attorney.
Manolito A. Manalo, Officer-in-Charge of the
Legal Department of APC. After this partial
payment, no other payments were
executed by APC. APC refused to pay its
balance with IBASPI.
• IBASPI sued APC in court. However, the
counsel of APC filed at least three motions
to extend filing of petitioner’s Answer; did
not appear during the scheduled pretrials;
and failed to file petitioner’s pretrial Brief.
• Court ordered IBASPI to pay the balance,
the 10% commission and attorney’s fees.
APC submits that CA erred in upholding the
ruling of the RTC despite the fact that the
gross negligence, incompetence and
dishonesty of APC’s former counsel,
Attorney. Manolito A. Manolo, have
effectively denied APC of its day in court.
APC further contended that Attorney.
Manalo was not authorized to execute the
Receipt/Agreement in behalf of petitioner
APC.
• Thus APC asked for Motion for New Trial.
13
Issue: W/N the Motion for New Trial should be
granted since Attorney. Manalo who was supposed
to defend APC effectively denied said petitioner of
its day in court. NO!
Held:
• Axiomatic is the rule that "negligence of
counsel binds the client." The basis is the
tenet that an act performed by counsel
within the scope of a "general or implied
authority" is regarded as an act of the
client.
• While the application of this general rule
certainly depends upon the surrounding
circumstances of a given case, there are
exceptions recognized by this Court: "(1)
where reckless or gross negligence of
counsel deprives the client of due process
of law; (2) when its application will result in
outright deprivation of the client’s liberty
or property; or (3) where the interests of
justice so require." Woefully none of these
exceptions apply herein. Thus, the Court
cannot "step in and accord relief" to
petitioner, even if it may have suffered by
reason of its own arrant fatuity.
• The negligence of petitioner and that of its
counsel are concurrent. Attorney. Manalo is
an employee, not an outsider hired by
petitioner on a retainer basis. In fact, he is
the officer-in-charge of its Legal
Department. There is no showing that he
was not authorized to exercise the powers
of the corporation or to transact its
business, particularly the handling of its
legal affairs. Besides, it is presumed that
the ordinary course of business has been
followed. Therefore, counsel’s corporate
acts are supposed to be known and
assented to by petitioner.
• First, the Receipt/Agreement was entered
into by respondent and petitioner, which
was represented by its agent Attorney.
Manalo. As an agent, he rendered service
to, and did something in representation or
on behalf of, his principal and with its
consent and authority. It cannot be denied
that, on its part, there was an actual intent
to appoint its counsel; and, on the latter’s
part, to accept the appointment and "act
on it." Thus, the general principles of
agency govern its relationship with its
officers or agents, subject to the articles of
incorporation, bylaws and other relevant
provisions of law.
• Moreover, the Receipt/Agreement is not a
promise to pay that "amounts to an offer to
compromise and requires a special power
of attorney or the express consent of
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petitioner." A compromise agreement is "a
contract whereby the parties, by making
reciprocal concessions, avoid a litigation or
put an end to one already commenced." No
such reciprocal concessions were made in
this case. Thus, the Receipt/Agreement is
but an outright admission of petitioner of
its obligation, after making partial
payment, to pay the balance of its account.
And even if we were to consider the same
as a compromise, from its nature as a
contract, the absence of an SPA does not
render it void, but merely unenforceable.
PETITION DENIED.
Pittsburgh Plate v. Director of Patents (GEN)
March 29, 1974
Castro, J.
FACTS: On Nov. 5, 1962, the law firm of Lichauco,
Picazo and Agcaoili filed with the Philippine Patent
Office a petition for extension of 30 days within
which to file in behalf of the petitioner a notice of
opposition to the respondent's application for
registration of "Solex Bluepane" as trademark for
its glass products. The plea was made pursuant to
a cablegram from Langner, Parry, Card and
Langner International Patent and Trademark
Agents, USA, asking that the respondent's
application be opposed. The extension was
granted.
An unverified notice of opposition to the trademark
application was filed by Lichauco, Picazo and
Agcaoili before the Patent Office which authorizes
the filing of such a notice provided it is verified by
the opposer within 60 days thereafter. On the
same day, the same counsel filed a duly
authenticated power of attorney executed by the
petitioner on Nov. 12, 1962 in favor of the former
for the prosecution of its opposition. Thereafter
petitioner's verified opposition to the respondent's
application was filed.
The Director of Patents issued a resolution
dismissing the petitioner's opposition on the
ground that on Nov. 5, 1962 when petitioner's
counsel asked for an extension of time to file a
notice of opposition, the said counsel was not yet
authorized by the petitioner to file the said
pleading as the power of attorney was executed
only on Nov. 12, 1962.
ISSUE: WON the law firm was authorized to
represent the petitioner before the Philippine
Patent Office on Nov. 5, 1962 when the former
pleaded for an extension of time to register the
petitioner’s opposition to the respondent’s
application?
14
HELD: YES. Petitioner does not deny, as in fact it
asserted in writing, that the said law firm was
authorized to represent it by virtue of the powers it
had vested upon Langner, et al., a correspondent
of Lichauco, Picazo and Agcaoili, to handle all
foreign trademark matters affecting the petitioner.
It bears emphasis that the relationship between
counsel and client is strictly a personal one. It is a
relationship the creation of which courts and
administrative tribunals cannot but recognize on
the faith of the client's word, especially when no
substantial prejudice is thereby caused to any third
party.
Petitioner, who claims to be adversely affected by
the respondent's trademark application,
seasonably informed the Director of Patents that
its counsel had the authority to represent it before
the latter's office. There is no valid reason to
interpose chevaux-de frise1 upon that claim and
deny the petitioner its basic right to be heard.
C. Articles 1870 to 1872
Art. 1870. Acceptance by the agent may also be
express, or implied from his acts which carry out
the agency, or from his silence or inaction
according to the circumstances.
Art. 1871. Between persons who are present, the
acceptance of the agency may also be implied if
the principal delivers his power of attorney to the
agent and the latter receives it without any
objection.
Art. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied from
the silence of the agent, except:
(1) When the principal transmits his power of
attorney to the agent, who receives it without any
objection;
(2) When the principal entrusts to him by letter or
telegram a power of attorney with respect to the
business in which he is habitually engaged as an
agent, and he did not reply to the letter or
telegram.
1. Acceptance, not
compulsory
a. Express
b. Implied
i. from the acts of the agent
which carry out the agency;
1
Etymology: French, literally, horse from Friesland
1 : a defense consisting typically of a timber or an iron
barrel covered with projecting spikes and often strung
with barbed wire
2 : a protecting line (as of spikes) on top of a wall —
usually used in plural
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ii. from his silence or inaction
- where the persons are
present
Art. 1871. Between persons who are present, the
acceptance of the agency may also be implied if
the principal delivers his power of attorney to the
agent and the latter receives it without any
objection.
- where the persons are
absent
Art. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied from
the silence of the agent, except:
(1) When the principal transmits his power of
attorney to the agent, who receives it without any
objection;
(2) When the principal entrusts to him by letter or
telegram a power of attorney with respect to the
business in which he is habitually engaged as an
agent, and he did not reply to the letter or
telegram.
2. Power of attorney;
definition, purpose
- Notarization needed
Strong v. Gutierrez Repide (MAI)
February 21, 1912
Moreland, J.
FACTS: Prior to October 10, 1903, the plaintiff,
Eleanor Erica Strong, was the owner of 800 shares
of the capital stock of the Philippine Sugar Estates
Development Company, Limited, of the par value
of P100 each. On October 10, 1903, the defendant,
Francisco Gutierrez Repide, by means
subsequently found and adjudged to have been
fraudulent, obtained possession of said shares and
thereafter alleged to be the owner thereof. The CFI
of Manila subsequently held that the sale of these
shares was made without the authority of Mrs.
Strong, that she never ratified the sale but
repudiated it as soon as she learned of it, that this
sale was induced by fraud on the part of the
defendant, and therefore was a fraudulent sale.
This judgment was, on appeal to the Supreme
Court of the Philippine Islands, reversed, and
plaintiff's complaint dismissed on the merits.
Thereupon, plaintiff prosecuted an appeal to the
Supreme Court of the United States, which court,
on the 3rd of May, 1909, rendered its judgment,
reversing the decision of the Supreme Court of the
Philippine Islands and affirming the judgment of
the trial court.
15
From the 10th day of October, 1903, the date of
the said fraudulent purchase by the defendant,
until the 27th day of July, 1909, the defendant
retained said shares in his possession or under his
control and after the rendition of said judgment of
April 29, 1904, collected the dividends earned by
said shares for the years 1905, 1906, 1907, and
1908 at the rate of 6 per cent per annum,
amounting to a total of P19,200, which sum the
defendant retained and refused to pay over to the
plaintiff.
ISSUE: Whether or not the agreement entered into
between him and the plaintiff through her counsel
released him from all responsibility in connection
with the transaction relating to the stock
HELD: NO. There is nothing in the written discharge
which could properly be given the legal effects
which the appellant in this case assigns to it. It is a
discharge of a judgment and nothing more. Being
such, it reaches no further than the terms of the
judgment itself. It is to be presumed that an
instrument satisfying a debt or obligation
manifested in another instrument extends no
further than the terms of the instrument
which manifests the obligation to be
discharged, unless, from the terms of the
instrument, it is clear that the parties
intended something more. So far as the record
discloses, at the time this satisfaction was
executed nothing whatever occurred between the
parties relative to the dividends on the stock which
formed the subject-matter of that judgment, nor
did anything transpire as to any other relations
between the parties than those embraced within
the judgment itself. There was nothing in the
conduct of the parties, or in their relations or
attitudes, from which it could be implied or
inferred that they were dealing with aught
else than the judgment itself. There is no basis,
then, for the contention of the appellant unless it
be found in the wording of that instrument itself.
A power of attorney is an instrument in writing by
which one person, as principal, appoints another as
his agent and confers upon him the authority to
perform certain specified acts on behalf of the
principal. Except as may be required by statute, a
power of attorney is valid although no notary public
intervened in its execution.
Lim Pin v. Liao Tan (ROG)
FACTS: A compromise agreement between Lim Pin
represented by son George Hung and Liao Tan was
made incident to an unlawful detainer complaint
filed by Tan against Pin. On hearing, Lim Pin was
absent. Her son George Hung who attended with
his mother all previous hearings was present
together with counsel. Liao and counsel were also
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present. Through court's initiative the compromise
agreement was formulated and executed.
A motion for reconsideration was filed by Lim Pin
assailing the compromise agreement: 1) that she
never authorized her son nor her counsel on record
(Attorney. Pastor Mamaril) to enter into such
compromise agreement and 2) that had she been
present when said agreement was prepared; she
would not have acceded thereto.
Tan filed opposition to MR and prayed that son
George Hung and Attorney. Pastor P. Mamaril be
cited for contempt" in the event they should
belatedly deny that George Hung was duly
authorized by his mother to enter into the
compromise agreement.
TC: MR denied George Hung cited for contempt of
court. Writ to execute issued.
Lim Pin: Judge should not have allowed her son
George Hung and her then counsel, Attorney.
Pastor Mamaril in her absence to enter into
compromise agreement with Tan. Considering that
such compromise agreement would impose
onerous obligations upon her, such as a
tremendous increase of rentals in the premises
being leased from Tan from P1,500.00 a month to
P5,000.00 a month and that said agreement
contained admissions by her, the respondent Judge
should have required a written authority and power
of attorney from her son and counsel.
ISSUE: WON Judge should’ve required written
authority and Power of attorney before allowing
Lim's son and counsel to act on her behalf on
compromise agreement? NO
HELD:
1) Power of attorney need not be written but
authority must be duly established by evidence.
Art. 1878 NCC: a special power of attorney is
necessary to compromise, to submit questions to
arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an
action or to abandon a prescription already
acquired.
Section 23 of Rule 138 on Attorneys and Admission
to the Bar governs the authority of attorneys to
bind their clients and provides that "Attorneys have
authority to bind their clients in any case by any
agreement in relation thereto made in writing, and
in taking appeal, and in an matters of ordinary
Judicial Procedure, but they cannot, without special
authority, compromise their clients' litigation or
receive anything in discharge of their clients'
claims but the full amount in cash."
16
The requirements of a special power of attorney in
Article 1878 of the Civil Code and of a special
authority in Rule 138 of the Rules of Court refer to
the nature of the authorization and not its form.
The requirements are met if there is a clear
mandate from the principal specifically authorizing
the performance of the act.
Mandate may be oral or written BUT vital that it
must be express. If the special authority is not
written it must be duly established by evidence
other than mere assertion of counsel.
2) Judge considered evidence before allowing son
to execute agreement on mom's behalf.
Here, it was shown that Judge took necessary
precautionary measures and acted on the basis of
satisfactory evidence when he allowed the
compromise agreement to be executed by George
Hung the petitioner's son.
Prior to hearing, Lim Pin had repeatedly asked
court to approve her proposal for monthly increase
of 500php + that increases be pegged at that rate
till monthly rental reaches 5k. on Dec 1977. But at
the time, Tan not amenable to it, but Tan later
changed her mind so court later asked George to
execute agreement.
There were other reasons which led the lower court
to a finding that George Hung had the full authority
to enter into the compromise. The court itself
observed during the earlier hearings and it is not
disputed that ... defendant Lim Pin could not decide
on anything without first consulting her son."
George Hung's later denial that he never
manifested his authority to represent his mother
was rejected by the court. As a matter of fact, this
sudden turnabout of George Hung led the court to
cite him for contempt. He was fined Two Hundred
Pesos. The citation for contempt was never
appealed.
3) Even assuming George acted without authority,
agreement would not be void, merely
unenforceable, and capable of being ratified.
The compromise agreement was ratified by the
petitioner when a few days after the promulgation
of the questioned judgment and before the filing of
a motion for reconsideration, she filed a Motion To
Withdraw Deposits, a consignation case pending
before the same court between the same parties.
Such motion's expressly stated purpose was to
withdraw deposit made in order implement
compromise agreement.
Lim Pin vs. Liao Tan (ALAIN)
15 July 1982
Facts:
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• Spouses Conchita Liao Tan and Tan Cho
Hua alleged in their complaint for unlawful
detainer that the plaintiff Conchita Liao
Tan, as owner of a parcel of registered land
with improvements located at Francisco
Street, Caloocan City, had leased a portion
of it, more particularly known as 91
Francisco Street, Caloocan City to
defendant Lim Pin on a month to month
basis but that the latter starting April, 1977
had not paid the agreed rental stipulated
for such month and the succeeding months
thereafter. And that despite demand, the
defendant refused to vacate the leased
premises.
• Defendant Lim Pin, filed her Answer
denying the material allegations of the
complaint and protesting the alleged highly
"unconscionable and unreasonable"
increase of rental demanded by plaintiffs.
• On the scheduled October 19, 1977
hearing, defendant Lim Pin was absent. Her
son George Hung who attended with his
mother all the previous hearings was
present together with the defendant's
counsel. Plaintiff Conchita Liao Tan
together with her counsel was also present.
Through the initiative of the court a quo,
the subject compromise agreement was
formulated and executed and it finally
became the basis of the October 19, 1977
judgment.
• The aforesaid judgment was the subject of
a motion for reconsideration filed on
October 28, 1977 by defendant Lim Pin on
the following grounds: 1) that she never
authorized her son nor her counsel on
record (Attorney. Pastor Mamaril) to enter
into such compromise agreement and 2)
that had she been present when said
agreement was prepared, she would not
have acceded thereto.
• Petitioner argues that the respondent
Judge should not have allowed her son
George Hung and her then counsel,
Attorney. Pastor Mamaril in her absence to
enter into the October 19, 1977
compromise agreement with the private
respondent Conchita Liao Tan assisted by
her counsel. Said agreement contained
admissions by petitioner, the respondent
Judge should have required a written
authority and power of attorney from her
son and counsel. Her objections to the
validity of the compromise agreement are
premised on Article 1878 of the Civil Code
and Rule 138, Section 23 of the Rules of
Court.
Issue: Whether the respondent Judge committed
grave abuse of discretion in allowing the October
17
19, 1977 compromise agreement in the absence of
the petitioner. NO.
HELD:
• Article 1878 is found in Title X of the Civil Code
on Agency. It states that a special power of
attorney is necessary to compromise, to submit
questions to arbitration, to renounce the right
to appeal from a judgment, to waive objections
to the venue of an action or to abandon a
prescription already acquired.
• Section 23 of Rule 138 on Attorneys and
Admission to the Bar governs the authority of
attorneys to bind their clients and provides
that "Attorneys have authority to bind their
clients in any case by any agreement in
relation thereto made in writing, and in taking
appeal, and in an matters of ordinary Judicial
Procedure, but they cannot, without special
authority, compromise their clients' litigation or
receive anything in discharge of their clients'
claims but the full amount in cash."
• The requirements of a special power of
attorney in Article 1878 of the Civil Code and of
a special authority in Rule 138 of the Rules of
Court refer to the nature of the authorization
and not its form. The requirements are met if
there is a clear mandate from the principal
specifically authorizing the performance of the
act. As early as 1906, this Court in Strong v.
Gutierrez-Repide (6 Phil. 680) stated that such
a mandate may be either oral or written, the
one vital thing being that it shall be express.
And more recently, We stated that, if the
special authority is not written, then it must be
duly established by evidence:
... the Rules require, for attorneys
to compromise the litigation of
their clients, a special authority.
And while the same does not state
that the special authority be in
writing the Court has every reason
to expect that, if not in writing, the
same be duly established by
evidence other than the self-
serving assertion of counsel
himself that such authority was
verbally given him.
• Whereupon the following took place: (1)
The court asked George Hung whether he
was willing to enter into the compromise
agreement and whether he had the
authority of his mother to enter into such a
compromise agreement; (2) The
defendant's counsel confirmed in open
court the assurance of George Hung that
he had the full authority of his mother to
enter into a compromise agreement: (3)
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After the formulation of the compromise
agreement the Judge explained in Tagalog
to both parties, including George Hung its
terms and conditions after which the same
was reduced into writing; (4) George Hung
willingly signed the compromise
agreement, the terms and conditions of
which were those originally proposed by
the petitioner herself. Hung was all the
while assisted by their counsel.
PETITION DISMISSED.
3. General rule in Art.
1872; Exceptions
Art. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied from
the silence of the agent, except:
(1) When the principal transmits his power of
attorney to the agent, who receives it without any
objection;
(2) When the principal entrusts to him by letter or
telegram a power of attorney with respect to the
business in which he is habitually engaged as an
agent, and he did not reply to the letter or
telegram.
4. Differentiate Art. 1871
to Art. 1872
Art. 1871. Between persons who are present, the
acceptance of the agency may also be implied if
the principal delivers his power of attorney to the
agent and the latter receives it without any
objection.
Art. 1872. Between persons who are absent, the
acceptance of the agency cannot be implied from
the silence of the agent, except:
(1) When the principal transmits his power of
attorney to the agent, who receives it without any
objection;
(2) When the principal entrusts to him by letter or
telegram a power of attorney with respect to the
business in which he is habitually engaged as an
agent, and he did not reply to the letter or
telegram.
5. Cases
Calibo v. CA (TOFF)
J. Quisumbing
FACTS: Mike Abuella, private respondent’s son
leased the house of Calibo for residential purposes.
Pablo Abuella left the tractor with his son for
safekeeping. Rent and other expenses were
initially paid but subsequently defaulted in
payment thereof. When confronted by Calibo, Mike
18
Abuella manifested that he’ll only stay in the house
until end of the year 1986 and offered the tractor
as security. In order for him to pay his obligations
sooner, he asked Calibo to help him look for
buyers. In January 1987, a new tenant occupied the
house and Calibo moved the tractor to his father’s
garage also in the same city. Even after demands,
Mike failed to pay his arrears; he only assured
Calibo that the tractor would stand as guarantee to
his payment. When Pablo Abuella tried to get the
tractor from Calibo, he tried to negotiate with him
and offered to write a check in payment of the
rentals and postdated checks to cover the other
expenses but still had to verify with Mike. Calibo
would only accept the latter if Pablo would execute
a promissory note in his favor to cover the
remaining expenses. The two did not agree. Pablo
Abuella instituted an action for replevin, claiming
ownership of the tractor and seeking to recover
possession thereof from petitioner Both the trial
court and the CA ruled in favor of Abuella. Mike
Abuella could not have validly pledged the subject
tractor to petitioner since he was not the owner
thereof, nor was he authorized by its owner to
pledge the tractor.
ISSUE: WON there was an implied principal-agent
relationship between Pablo and Mike
HELD: No. Pablo Abuella categorically stated that
the tractor was only left to Mike for safekeeping;
not to be pledged or alienated. Mike acted without
authority or consent from Pablo. Article 1869 states
that there would only be implied agency is the
person is acting within the authority granted to him
by the principal.
Article 1911 mandates that the principal is
solidarily liable with the agent if the former allowed
the latter to act as though he had full
powers. Again, in view of Pablo’s lack of
knowledge of Mike’s pledging the tractor without
any authority from him, it shows that Pablo could
not have allowed the Mike to pledge the tractor as
if he had full powers to do so.
Petition denied. CA decision affirmed.
Linan v. Puno (REG)
Johnson, J.
1915
FACTS: Linan was the owner of a certain parcel of
land. In 1908, he executed a document which
conferred upon Puno the power, duties and
obligations to “purchase, sell, collect and pay, as
well as sue and be sued before any authority,
appear before the courts of justice and
administrative officers in any proceeding or
business concerning the good administration and
advancement of” his interests. In 1911, Puno, for
the sum of P800, sold and delivered said parcel of
land to the other defendants. Petitioner alleges
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that the said document he executed did not confer
upon the Puno the power to sell the land and
prayed that the sale be set aside; that the land be
returned to him, together with damages. Lower
court found for Puno.
ISSUE: WON the document did not give Puno
authority to sell the land.
HELD: YES. There seems to be no good reason for
saying that Puno had authority to administer and
not to sell when "to sell" was as advantageous to
the plaintiff in the administration of his affairs as
"to administer." To hold that the power was "to
administer" only when the power "to sell" was
equally conferred would be to give to special words
of the contract a special and limited meaning to
the exclusion of other general words of equal
import.
Whenever it is possible, effect is to be given to
every word and clause used by the parties. It is to
be presumed that the parties said what they
intended to say and that they used each word or
clause with some purpose and that purpose is, if
possible, to be ascertained and enforced.
Likewise, there was no allegation on proof that
Puno acted in bad faith or fraudulently in selling
the land. It will be presumed that he acted in good
faith and in accordance with his power as he
understood it
D. Article 1873
Art. 1873. If a person specially informs another or
states by public advertisement that he has given a
power of attorney to a third person, the latter
thereby becomes a duly authorized agent, in the
former case with respect to the person who
received the special information, and in the latter
case with regard to any person.
The power shall continue to be in full force until the
notice is rescinded in the same manner in which it
was given.
1. Effects of special information
Macke v. Camps (ABBY)
Feb 12, 1907
Carson, J.
FACTS: B.H. Macke and W.H. Chandler are partners
and sold to Jose Camps of the Washington Café
various bills of goods amounting to P351.50 but he
only received P174. Macke made a demand but
Camps failed to pay. Macke said that Ricardo
Flores the business manager of the hotel bar
restaurant signed the receipt and that Flores was
19
also the one who made the previous payments. A
witness, one Galmes, the lessor of the building said
that Flores also signed as a witness on the
sublease contract as managing agent, which Jose
Camps also signed. Camps now says that the
foregoing facts are not sufficient to establish the
fact that he received the goods for which payment
is demanded.
ISSUE: WoN Camps is estopped from proclaiming
that Ricardo Flores was not his agent
HELD: Yes. Flores was apparently in charge of the
business, performing the duties usually entrusted
to managing agent, leave little room for doubt that
he was there as authorized agent of the defendant.
One who clothes another apparent authority as his
agent, and holds him out to the public as such,
cannot be permitted to deny the authority of such
person to act as his agent, to the prejudice of
innocent third parties dealing with such person in
good faith and in the following presumptions or
deductions, which the law expressly directs to be
made from particular facts, are deemed conclusive:
"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 such declaration, act, or omission, be
permitted to falsify it" and unless the contrary
appears, the authority of an agent must be
presumed to include all the necessary and usual
means of carrying his agency into effect.
Rallos vs. Yangco (EARLA)
Sept 27, 1911
Moreland, J.
FACTS: On November 27, 1907, Teodoro Yangco
sent a letter to Florentino Rallos, offering Yangco
his services. Accordingly, he has just opened a
shipping and commission department for buying
and selling tobacco leaf and other native products
in his steamship office in Manila. He expressly
indicated in his letter that Florentino Collantes will
act for and in his behalf in transacting with Rallos.
He further stated that he has given Collantes a
power of attorney, notarized by Mr. Rodriguez.
On February 1909, Rallos sent to Collantes 218
bundles of tobacco in the leaf to be sold on
commission. After deducting the commission
(P206.96) from the total amount of P1744, Rallos is
entitled to P1537.08.
It appears that at the time Rallos gave the tobacco
to Collantes, he was not the agent of Yangco
anymore, Yangco having severed his relationship
with Collantes. This fact however was not known to
nor communicated with Rallos. As a result, when
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Rallos tried to collect from Yangco the P1537.08, FACTS: Cosmic, through its General Manager,
Yangco refused to pay him the amount, on the executed a Special Power of Attorney appointing
basis that Collantes was already acting on his Paz G. Villamil-Estrada as attorney-in-fact:
behalf at the time he collected the 218 bundles of
tobacco. x x x to initiate, institute and file any court action
for the ejectment of third persons and/or squatters
ISSUE: WON Yangco is still liable to pay Rallos the of the entire lot 9127 and 443 and covered by TCT
amount of P1537. Nos. 37648 and 37649, for the said squatters to
remove their houses and vacate the premises in
HELD: Yes. Having advertised the fact that order that the corporation may take material
Collantes was his agent and having given them a possession of the entire lot, and for this purpose, to
special invitation to deal with such agent, it was appear at the pre-trial conference and enter into
the duty of the defendant on the termination of the any stipulation of facts and/or compromise
relationship of principal and agent to give due and agreement so far as it shall protect the rights and
timely notice thereof to the plaintiffs. Failing to do interest of the corporation in the aforementioned
so, he is responsible to them for whatever goods lots.
may have been in good faith and without
negligence sent to the agent without knowledge, Estrada, by virtue of her power of attorney,
actual or constructive, of the termination of such instituted an action for the ejectment of private
relationship. respondent Isidro Perez and recover the possession
of a portion of Lot No. 443 before the RTC of
For his failure to inform Rallos of the termination of Dagupan.
the agency relationship with Collantes, Yangco is
liable. Later, Estrada entered into a Compromise
Agreement with Perez, wherein the latter agreed to
2. Effect of Public Advertisement pay the portion being occupied by him and to
3. Agency by estoppel v. implied deliver the sum of P26,640. The RTC approved the
agency Compromise Agreement. However, it was not
executed within the 5-year period from date of the
Macke v. Camps, supra finality of the judgment allegedly due to the failure
Naguiat v. CA (JANCES) of petitioner to produce the owner’s duplicate copy
of the title needed to segregate from Lot No. 443
4. Manner of termination the portion sold by Estrada to Perez under the
compromise agreement.
E. Article 1874:
Exception to the general rule that agent’s Cosmic asserts that it was only upon the revival of
authority may be oral or written the judgment that it came to know of the
compromise agreement between Estrada and
Art. 1874. When a sale of a piece of land or any Perez. Hence, it sought to annul the decision of the
interest therein is through an agent, the authority trial court alleging that it was void because Estrada
of the latter shall be in writing; otherwise, the sale had no authority to dispose of the property but
shall be void. merely confined to file an ejectment case in order
that the corporation may take material possession
1. Applicability; relate to Art. 1403 (2e) of the entire lot. Moreover, a board resolution was
needed for the disposition of the property.
Art. 1403. The following contracts are
The CA dismissed the complaint.
unenforceable, unless they are ratified:
ISSUE: WON Estrada was authorized to sell the
2(e): An agreement of the leasing for a longer property?
period than one year, or for the sale of real
property or of an interest therein; HELD: NO. The authority granted Estrada under the
special power of attorney was explicit and
2. Repurchase exclusionary. Nowhere in this authorization was
3. Cases: Estrada granted expressly or impliedly any power
to sell the subject property nor a portion thereof.
Lim v. CA (ALAIN) Neither can a conferment of the power to sell be
validly inferred from the specific authority “to
Cosmic Lumber v. CA (GEN) enter into a compromise agreement” because of
Nov. 29, 1996 the explicit limitation fixed by the grantor that the
Bellosillo, J. compromise entered into shall only be “so far as it

20
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shall protect the rights and interest of the
corporation in the aforementioned lots.”
Alienation by sale of an immovable certainly
cannot be deemed protective of the right of
petitioner to physically possess the same, more so
when the land was being sold for a price of P80.00
per square meter, very much less than its assessed
value of P250.00 per square meter, and
considering further that petitioner never received
the proceeds of the sale.
By selling to Perez a portion of petitioner’s land
through a compromise agreement, Estrada acted
without or in obvious authority. The sale ipso jure
is consequently void. So is the compromise
agreement.
*Other issue on agency:
It may be argued that petitioner knew of the
compromise agreement since the principal is
chargeable with and bound by the knowledge of or
notice to his agent received while the agent was
acting as such. But the general rule is intended to
protect those who exercise good faith and not as a
shield for unfair dealing. Hence there is a well-
established exception to the general rule as where
the conduct and dealings of the agent are such as
to raise a clear presumption that he will not
communicate to the principal the facts in
controversy. The logical reason for this exception is
that where the agent is committing a fraud, it
would be contrary to common sense to presume or
to expect that he would communicate the facts to
the principal.
Rodriguez vs. Court of Appeals (MAI)
August 29, 1969
Castro, J.
FACTS: On December 31, 1958, by virtue of a
document denominated "Kasunduan" written in the
vernacular and ratified before Notary Public Lazaro
C. Ison of that locality, Nieves Cruz, authorized the
spouses Atanacio Valenzuela, and Maximina
Victorio and Liberate Santos to sell a certain parcel
of land of about 44,634 square meters belonging to
her.
Nieves Cruz and her children, however, collected
from the agents, either thru Maximina Victorio or
thru Salud G. de Leon, daughter of Liberate Santos,
various sums of money during the period from July
3, 1959 up to September 3, 1961, all of which were
duly receipted for by Nieves Cruz and/or her
children and in which receipts it is expressly stated
that said amounts were "bilang karagdagan sa
ipinagbili naming lupa sa kanila” (additional
payments for the land we sold to them).
Nieves Cruz then sold the property in question to
Barbara Lombos Rodriguez, her "balae" because
21
the latter's son was married to her daughter, for
the sum of P77,216.00.
Nieves Cruz subsequently sought to rescind the
contract of sale with the private respondents.
ISSUE: Whether or not the agreement is
enforceable or can be proved under the law
HELD: YES. The fact that Atanacio Valenzuela, et al.
were agents of Nieves Cruz under the agency
agreement of December 31, 1958 is not material,
for if it is true that Nieves Cruz did agree to sell to
her agents the real estate subject of the agency,
her consent to the agreement took the transaction
out of the prohibition contained in article 1491(2)
of the Civil Code. Neither are articles 1874 and
1878(5) and (12) of the Civil Code relevant,
for they refer to sales made by an agent for a
principal and not to sales made by the owner
personally to another, whether that other be
acting personally or through a
representative. Thus, the agreement is valid.
The parties to the agency agreement subsequently
entered into a new and different contract by which
the landowner, Nieves Cruz, verbally agreed to sell
her interest in the litigated real estate to Atanacio
Valenzuela, et al. and this was established by
certain facts, such as: [1] Salud de Leon testified
that it was she who had the oral agreement with
Nieves Cruz for the purchase by Atanacio
Valenzuela, et al. of the litigated property and, as
found by the respondent Court, Salud de Leon was
the representative of Atanacio Valenzuela, et al.,
not of Nieves Cruz; [2] Cruz’s acceptance of the
sums of money given by the private respondents
and her subsequent issuance of receipts for these
sums; [3] the sale was established and recognized
in the land registration proceedings where the
certificates of title bear the annotation of the
aforesaid right of Atanacio Valenzuela, et al.
Pertinent provisions:
Art. 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction,
either in person or through the mediation of
another:
xxx
(2) Agents, the property whose administration or
sale may have been entrusted to them, unless the
consent of the principal has been given;
Art. 1874. When a sale of a 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.
Katigbak v. Tai Hing (ROG)
1928
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FACTS: Ejap was owner of land with Torrens Title
that was subject to a mortgage lien in favor of Phil
National Bank. Po Tecsi executed a general power
of attorney in favor of brother Ejap empowering
latter to perform on his behalf as his lawful agent,
the following: "to buy, sell, or barter, assign, or
admit in acquittance, or in any other manner to
acquire or convey all sorts of property, real and
personal, businesses and industries, credits rights
and actions... for whatever prices and conditions
he may stipulate, paying and receiving payment in
cash or in instalments and execute the proper
instruments..."
Po Tecsi executed instrument of indebtedness to
his brother Ejap for price of property which latter
sold to him. Ejap executed a 2nd mortgage on such
land to Limjenco. Later he sold land to bother Po
Tecsi subject to same encumbrances.
Ejap, using power given by his brother, sold
absolutely and forever to Katigbak the land,
mentioning only the mortgage to PNB without
recording either his power of attorney or sale in
proper certificate of title. Po Tecsi remained in
possession of land and leased land to Uy Chia for 5
years. Lease was recorded in title.
Po Tecsi complained to his brother that he had
been after him so much for the forwarding of he
rents of the property and explaining his precarious
financial condition, that he did not collect the rents
for himself, and promised to remit the balance
after having paid all expenses of repairs and
cleaning up together with vouchers so he could not
blame him for anything.
Po Tecsi answered that he had sent a draft of P2k
and was surprised that Ejap claimed such rent and
that if Ejap wanted to lease property to Smith Bell
he should not do so without first consulting him,
bec if someone offered a higher rent he wanted to
exercise his right to lease it.
Mortgage on land was cancelled. Po Tecsi died. His
son, Sun Suy, submitted to Ejap a liquidation of
accounts showing rents collected on property. Sun
was delayed in rental payments and begged Ejap
to let him pay later. Ejap assigned credit against
Tecsi to his son Sun Boo.
Katigbak sold property to Sun Boo. Latter notified
Sun Suy. Sun Boo now seeks recovery of rent
against Tai Hing Co. And members of such
company Sun Suy.
Sun Suy: Ejap not authorized under power
executed by Tecsi to sell land coz it was executed
before Ejap sold land to his brother Tecsi.
ISSUE: WON Ejap had authority to sell land to
Katigbak under POA executed by Tecsi even
22
though such POA was executed even before Tecsi
had bought land from Ejap? YES
HELD:
1) Ejap had authority. Power here was general and
authorizes Ejap to sell any kind of realty
"belonging" (pertenezcan) to the principal. The use
of subjunctive "pertenezcan" (might belong) and
not the indicative "pertenecen" (belong) means
that Po Tecsi meant not only the property he had
at the time of execution but also what he might
afterwards have.
2) Power of attorney not recorded in registry still
binds principal to acknowledge acts performed by
Ejap.
While it’s true that power of attorney not recorded
in registry of deeds is ineffective in order that an
agent or attorney in fact may validly perform acts
in the name of his principal, and any act performed
by agent by virtue of power is ineffective against
3rd person who, in good faith, may have acquired a
right, it does however, bind principal to
acknowledge acts performed by his attorney in fact
regarding said property.
Here, while it’s true that non-registration of POA by
Po Tecsi prevents sale made by Ejap to Katigbak
from being recorded in registry of deeds, it’s not
ineffective to compel Tecsi to acknowledge said
sale.
Sale was not fraudulent even if power and sale not
recorded in registry. Record shows that Po Tecsi
was aware of sale as shown by several letter
complaining of pressing demands of his bro Ejap to
send him rents of land, his promises to send them
and remittance were tacit acknowledgment that he
occupied land no longer as owner but only as
lessee.
Linan, supra (TOFF)
Strong, supra (REG)
J. Tracey
1906
FACTS: Mrs. Strong was the owner of 800 shares
of capital stock of the Phil. Sugar Estates
Development Company. The shares were
purchased by the respondent through a broker who
dealt with Strong’s agent, Jones, who had the script
on this possession and who made the sale without
the knowledge of Strong. Previous to the sale was
a conversation between petitioner and respondent
where the former told the latter, speaking of her
shares, “not to part with them until I got their face
value.” Jones had been acting gratuitously as agent
of Strong, not only under a written power special in
terms to collect money, but also as general agent
managing all her business. Even before the sale
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mentioned, there had been an occasion where
Jones without special instruction sold other stocks
owned by Strong, understanding that the act was
within the scope of his general agency.
Strong alleges that Jones, as her agent, did not
have the power to sell or deliver her stocks.
ISSUE: WON selling the shares was within the
authority of the agent Jones.
HELD: NO. The only evidence of the agency was
the conversation between Strong and Jones.
Gathering from it, the power may have been
general or special, express or merely assumed.
This would lead, however, to the assumption
prohibited by Art. 1713. The general management
of the property did not necessitate incidentally the
sale of stock. Therefore, there is no proof of an
effective power given Jones to dispose of the stock.
Acts of agents beyond their authority are null.
Third persons who deal with them at their own peril
and are bound to inquire as to the extent of the
power of the agent with whom they contract. In
this case, defendant is not shown to have made
any inquiry, but apparently relied unquestioningly
upon Jones’s assumption of authority and took risk
in so doing.
Pascual v Realty Investment Inc. (ABBY)
May 12, 1952
J. Bautista
FACTS: Ramon Pascual filed an action to compel
Realty Investment to sell to him the land that he is
occupying. He alleges that he has been occupying
the 450 sq.m. of land since 1912 while it was still
under Angela Tuason’s administration. When it was
sold to Realty in 1941, he said that he offered to
buy it at P15/sqm. He failed to perfect the sale
because Realty increased the price to P25 hence
this action. Realty filed a motion to dismiss and
was granted.
CFI basis: An agreement to sell real property
should be made in writing, or at least it should
appear in a note or a memorandum, in order that a
suit based thereon may be enforceable, the
present action cannot be maintained and should be
dismissed. –For our purposes apply 1403 also. The
point is W/N the sale to be enforceable, must be in
writing—YES!
23
The purpose of this action is to enforce an alleged
verbal agreement to sell to the plaintiff a parcel of
land which is claimed to have been occupied by
the plaintiff as at tenant since 1912, it appearing
that under the statute of frauds said verbal
agreement cannot be enforced, nor evidence
thereon presented, because it has not been made
in writing, nor does it appear in a note or
memorandum, as required by said statute (Rule
123, section 21 (e), Rules of Court).
ISSUE: W/N Pascual’s allegation takes his case out
of the operation of the statute of frauds. (If yes
then Realty is compelled to execute the deed of
sale)
HELD: No, this is not one of the exceptions. While it
is alleged that plaintiff has occupied the land since
1912, there is nothing alleged therein to the effect
that he has taken possession thereof in view of a
supposed verbal contract he had with the
defendant to purchase it, nor is there any
allegation that he has made improvements thereon
because and as a consequence of said supposed
contract to sell. This case having been dismissed
on a mere motion to dismiss, the merits of the
order of the court can only be gauged upon a
consideration of the allegations appearing in the
complaint, and upon no other.
Where a parol contract of sale is adduced not
for the purpose of enforcing it, but as a basis
of the possession of the person claiming to
be the owner of the land, the statute of
frauds is not applicable (Almirol et al., vs.
Monserrat, 48 Phil., 67), in the same way that it
does not apply to contracts which are either totally
or partially performed upon the theory that there is
a wide field for the commission of frauds in
executory contracts which only prevented by
requiring them to be in writing, a fact which is
reduced to a minimum in executed contracts
because the intention of the parties become
apparent by their execution). Pascual’s situation
does not here obtain for the reason that the
complaint does not contain the requisite
allegations. On the contrary, it alleges that plaintiff
occupied the land as a tenant since 1912.
Raet vs. CA (EARLA)
September 17, 1998
Mendoza, J.
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FACTS: In 1984, the Sps. Raet and Sps. Mitra paid
Amparo Gatus P40k and P35k, respectively, after
negotiations regarding the sale of Gatus’ rights in
certain units in Las Villas de Sto Nino in
Meyacauayan, Bulacan. This subdivision was
developed by the Phil-Ville Development and
Housing Corporation (PVDHC), primarily for parties
qualified to obtain loans from GSIS.
In 1985, the two spouses applied directly to PVDHC
for the purchase of units in the subdivision. They
then looked for GSIS members who can act as
accommodation parties by allowing them to use
their policies, for the purpose of enabling the two
spouses to buy units in the subdivision. The PVDHC
would then allow them to buy units after the GSIS
approved the loan applications of their “proxies”.
The two spouses then presented the GSIS policies
of Ernesto Casidsid (for Raets) and Edna Lim (for
Mitras) and paid PDVHC P32,653 and P27k,
respectively. However, the loan applications of
Casidsid and Lim were disapproved by GSIS, thus
prompting PVDHC to inform petitioners to look for
other sources of financing. But in the meantime,
they were allowed to occupy the units initially
granted to them.
On November 10, 1988, for failure of the
petitioners to look for alternative sources of
financing, PVDHC ordered them to vacate the
premises. The spouses however refused to heed
the order. An ejectment case was then filed
against them before the MTC Meycauayan, which,
in its decision dated May 24, 1991, ordered them
to vacate the premises.
On the other hand, a complaint for estafa was
filed against Gatus. The complaint was however
dismissed on the ground that Gatus never
represented herself to be the agent of PVDHC.
The spouses filed another complaint before the
RTC Malolos for the recovery of the
supplemental costs they had paid PVDHC. This
was however dismissed by the RTC on the ground
of lack of jurisdiction. Another case was then filed
to the HLURB in 1991 – a complaint for specific
performance and damages against Gatus and
PVDHC.
The Arbiter then ruled in favor of the spouses and
ordered them to reimburse the amounts paid by
the spouses to them. The Arbiter also found that
Gatus was an agent of PVDHC. On appeal, the
Board Commissioner ruled that the case has
already been decided by the ejectment case in the
MTC. Upon elevation to the Office of the
President, it sustained the decision of the Arbiter.
But on appeal to the CA, the case was dismissed
without prejudice to their right to proceed against
Gatus.
24
ISSUE: WON Gatus was an agent of PVDHC.
HELD: No. Gatus was not the agent of private
respondent PVDHC. The dismissal of the criminal
case for estafa against Gatus proves that she is not
an agent of PVDHC, especially since it was found
therein that she never represented herself to be an
agent of PVDHC.
Moreover, Art. 1874 of the Civil Code requires for
the validity of a sale involving land that the agent
should have an authorization in writing, which
Gatus did not possess. Petitioners knew from the
beginning that Gatus was negotiating with them in
her own behalf, and not as an agent of private
respondent PVDHC. There is, therefore, no basis in
fact for the finding of the Housing and Land Use
Arbiter that Gatus was the agent of private
respondent PVDHC with respect to the transactions
in question.
*In this case, the SC also said that there were no
perfected contracts of sale, since the purchase
price and the payment schemes have not been
agreed upon. At most, there was only a proposed
contract to sell.
Jimenez v. Rabot (JANCES)
City-Lite Realty Corp. v. CA (JILL)
February 10, 2000
J. Bellosillo
FACTS: Respondent FP Holdings was selling its
land, also known as the “Violago Property” (it’s a
subdivision in QC now), to the general public via
sales brochures. Its agent, Meldin Roy/Metro Drug
transacted with City-Lite for the sale of the front
portion of the land, provided that City-Lite would
put into writing its acceptance with the terms and
conditions. After City-Lite conveyed their
agreement into writing, FP Holdings refused to
execute the corresponding Deed of Sale,
prompting City-Lite to register an adverse claim in
the Title. FP Holdings then filed a Petition for the
cancellation of the adverse claim with the RTC QC
but this was dismissed by a finding that there is
sufficient ground for the adverse claim.
City-Lite now sued FP Holdings for specific
performance (execution of Deed of Sale). Pending
this case, FP Holdings transferred the property to
View Master, forcing City-Lite to again annotate a
notice of lis pendens over the new Title of View
Master.
The trial court rendered a decision favorable to
City-Lite, but this was reversed by the Court of
Appeals on the ground that there was no perfected
contract of sale since there was no definite
agreement as to the manner of payment.
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ISSUE: WON a contract of sale was perfected? NO.
RATIO: Under Art. 1874, when a sale of a piece of
land or any interest therein is made by an agent,
the authority of the latter must be made in writing;
otherwise, the sale shall be void. Here, the
authority of Meldin Roy/Metro Drug was just
established by testimonies and evidences: (1)
admissions of Roy/Metro Drug; (2) sales brochure
specifying Roy to be a contact person; (c) the
guard at the property saying Roy/Metro Drug are
authorized agents; and (d) common knowledge
among brokers. Roy/Metro Drug therefore was
merely a contact person.
Moreover, the President of FP Holdings, in a
memorandum, merely requested Metro Drug’s
“assistance in referring to us buyers for the
property. Please proceed to hold preliminary
negotiations with interested buyers and endorse
formal offers to us for final evaluation and
appraisal.” This only meant that the task of
Roy/Metro Drug was to look for buyers, but the
final evaluation of the offers shall be made only by
FP Holdings. In this case, the transaction was
finalized only by Roy. Other testimonies even said
that Roy/Metro Drug was a mere broker whose task
is to bring parties together for a possible
transaction. Given these circumstances, the sale is
declared null and void, with no legal effects.
F. Article 1875: The
General Rule
Art. 1875. Agency is presumed to be for a
compensation, unless there is proof to the
contrary.
1. Exceptions
2. When is an agent entitled to
compensation: General rule
3. Measure of compensation: General
Rule
4. Double Agency: General Rule
5. Cases
Medrano v Court of Appeals (GEN)
Feb. 18, 2005
Callejo, Sr., J.
FACTS: Bienvenido Medrano, the Vice-Chairman of
Ibaan of Rural Bank owned by the Medrano family,
asked Estela Flor, a cousin-in-law, to look for a
buyer of a foreclosed asset of the bank.
The property was a 17-ha mango plantation
(P2.2M) located in Ibaan, Batangas.
Flor advised Pacita Borbon, a licensed real estate
broker, that Medrano owned a mango plantation
which was up for sale. Borbon told Flor to confer
with Medrano and to give them a written authority
25
to negotiate the sale of property to Dominador Lee,
a client of Borbon.
In the authority given by Medrano to Borbon it
stated that:
“For your labor and effort in finding a purchaser
thereof, I hereby bind myself to pay you a
commission of 5% of the total purchase price to be
agreed upon by the buyer and seller.”
Respondents Flor, Borbon and Josefina Antonio
arranged for an ocular inspection of the property
together with Lee which never materialized.
Instead, Lee was instructed to get in touch with
Medrano’s daughter, Teresa Ganzon, regarding the
property.
Antonio called Lee to make a follow-up of the
latter’s visit to the property. Lee informed her that
he already purchased the property and had made a
down payment of P1M. The remaining balance was
to be paid upon approval of the incorporation
papers. Lee further was surprised that the
respondents had not yet received their
commission.
A deed of sale was executed. Since its
consummation, respondents asked from the
petitioners for their commission or 5% of the
purchase price. The petitioners refused to pay and
offered a measly sum of P5,000 each. Hence, the
respondents filed an action against petitioners.
The trial court ruled in favor of the respondents.
The petitioners were ordered to pay jointly and
severally the 5% broker’s commission to the
respondents. It ruled that the sale of the property
could not have been possible without the
representation and intervention of the
respondents.
The Court of Appeals affirmed the decision of the
trial court.
ISSUE: WON the respondents are entitled to their
commission
HELD: YES. Respondents were instrumental in the
sale of the property to Lee. Without their
intervention, no sale could have been
consummated.
The respondents were the only ones who knew
about the property for sale and were responsible in
leading a buyer to its consummation. All these
circumstances lead to the inescapable conclusion
that the respondents were the procuring cause of
the sale.
When there is a close, proximate and causal
connection between the broker’s efforts and the
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principal’s sale of his property, the broker is
entitled to a commission.
Moreover, despite the lack of participation in the
negotiations as required in the letter of authority,
respondents are still entitled to their commission.
The clear intention is to reward the respondents for
procuring a buyer for the property. Before
negotiating a sale, a broker must first bring in a
prospective buyer. A broker earns his pay by
merely bringing the buyer and the seller together
even if no sale is eventually made. The essential
feature of a broker’s conventional employment is
merely to procure a purchaser for a property
ready, able, and willing to buy at the price and on
the terms mutually agreed upon by the owner and
the purchaser. And it is not a prerequisite to the
right to compensation that the broker conduct the
negotiations between the parties after they have
been brought into contact with each other through
his efforts.
Notes:
Broker – one who is engaged, for others, on a
commission negotiating contracts relative to
property with the custody of which he has no
concern; the negotiatior between other parties,
never acting in his own name but in the name of
those who employed him; he is strictly a
middleman and for some purposes the agent of
both parties.
National Brewery & Allied Industries Labor
Union v. San Miguel Brewery Inc. (MAI)
December 27, 1963
Bautista Angelo, J.
Facts: The National Brewery and Allied Industries
Labor Union of the Philippines (PAFLU)filed before
the Court of First Instance of Manila against the
San Miguel Brewery, Inc. a complaint alleging that:
as per their CBA, San Miguel agreed to pay the
basic daily rates of those workers within the
bargaining unit who may participate in the Labor
Day parade held on May 1st of every year.
However, said company refused to pay the basic
wages for the day of the union members who
participated in the parade. The complaint prayed
for the payment of the wages of those union
members, and damages.
The company in its answer set up special and
affirmative defenses. Among the latter, the
company alleged that (a) the union has no cause of
action against the company, and (b) the court has
no jurisdiction over the subject matter of the
action. With respect to the first ground, the
company contends that the union is not the real
party in interest but the individual members whose
right to recover the one day's wage is personal to
them.
26
Issue: Whether or not the union can file the action
in behalf of its members
Held: YES.
The complaint filed by the union comes under the
jurisdiction of the court a quo for the same is based
upon the collective bargaining agreement
concluded between the union and the company
and the basis of the right which is sought to be
enforced is the agreement itself and not the wages
to be collected.
The wages accrued mainly on the strength of an
agreement entered into between the union and the
company. The action then may be brought in the
name of the union that has obliged itself to secure
those wages for these members. The union is the
party with whom or in whose name the collective
bargaining agreement in question has been
entered into for the benefit of its members and, in
line with the above rule, the union may sue
thereon without joining the members for whose
benefit the action has been presented.
Disposition: Case remanded for further
proceedings.
Macondray v. Sellner (ROG)
Feb. 2, 1916
J. Carson
Facts: Sellner, a real estate broker, sold land to
Macondray. Formal deed of sale not executed until
delivery of a Torrens title. In the meantime, land
was flooded by high tides and Macondray became
highly dissatisfied with its purchase. When final
transfer was made company informed Sellner that
land as wholly unsuited for use as a coal-yard, for
which it had been bought and requested him to
find another purchaser. Both parties had an
understanding that Sellner was to have as
commission for getting a purchaser anything over
amount which he could get.
Sellner found another buyer Barretto. A formal
deed of sale was executed together with Torrens
which was delivered to Sellner by Company.
Barretto agreed to accept land if upon
examination, title and deed be satisfactory. Sellner
retained the Torrents title but left deed of sale with
Barretto with understanding that if both were
satisfactory, latter would just issued check to
former. A few days later Barretto was detained by
typhoon on his way to Tayabas so his return was
delayed. During his absence, company advised
Sellner that latter must consummate sale and
collect money without delay upon Barretto's return.
All the while company kept asking Sellner to speed
up in closing the deal but Barretto could not
immediately do so coz he was indisposed from his
trip. Barretto arrived Saturday and promised he'd
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get to checking the docs in a day or two. By
Monday, Company gave an ultimatum.
-Young, Company's general manager then formally
notified Sellner that unless purchase price was paid
before 5pm of that afternoon deal was off. Barretto
then asked Sellner to turn over the Torrens title
which latter did but latter would only receive the
check 36hrs later, Wednesday morning. Upon
receipt of check, Sellner immediately tendered to
Co but Co's manager refused to accept and filed
this action claiming that sale had been "cancelled"
upon failure of Selner to turn over price.
Issue: WON sale be cancelled on ground of late
delivery of purchase price? NO
WON Macondray entitled to damages from real
estate broker Sellner? NO
Held:
Court's preliminaries:
-No reason given by Company for delivery of price
at certain hour other than that manager had been
annoyed by delays or changed mind about selling
because he found a better deal or land worth more
than he offered.
-As to value of land--no real diff actual and true
market value of land. Witness Company provided
was of a rival real estate broker, who had never
been on the land but claimed familiarity with
general location. Such witness insufficient to
establish such fact. It may be that land has
speculative value higher than actual market value
at time of sale but the question of fact ruled upon
is the actual market value at time of sale and NOT
speculative value.
-Market value = price which property will bring in
a fair-market after fair and reasonable efforts have
been made to find a purchaser who will give the
highest price for it.
2. Macondray no cause of action to file for
damages v Sellner its real estate agent.
-Measure of damages recoverable from real estate
agent = actual market value of property, title to
which had been lost as a result of the sale. This is
damages which company has a right to should he
choose to ratify sale and recoup from agent any
loss resulting from latter's alleged unauthorized
consummation of the sale.
-Company still liable to real estate agent in event
that former terminate negotiations, for the amount
of commission, which former agreed to pay latter
upon his agency contract. Market value of land =
18k of this company received 17k leaving a bal of
1,717 unpaid. The commission agreed upon was all
over 17k which Sellner would secure from
property---allowing Sellner this commission, and
offsetting it against the unpaid balance, Macondray
not entitled to money judgment against Sellner.
27
-At the time fixed by manager of Co for the
termination of the negotiations, Sellner had already
earned the commissions agreed upon, and could
not be deprived thereof by arbitrary action of Co in
declining to execute the contract of sale for some
reason personal to itself.
3. Real estate agent already entitled to
commission at moment he finds a buyer
willing to take the property.
-The business of a real estate broker or agent is
generally only to find a purchaser, and RULE IS in
absence of an express contract between broker
and his principal, the implication generally is that
the broker becomes entitled to the usual
commissions whenever he brings to his principal a
party who is able and willing to take the property
and enter into a valid contract upon the terms then
named by the principal although the particulars
may be arranged and matter negotiated and
completed between the principal and the
purchaser directly.
4. Rights of real estate broker should be
protected from arbitrary revocation of
agency without remuneration for his services
rendered in finding a buyer prior to
revocation.
-It would be injustice to permit principal to
withdraw authority after efforts made by agent in
finding a buyer after principal reaps the benefit of
the agent's labors. This would make the contract
an unconscionable one would offer a premium for
fraud by enabling one of the parties to take
advantage of his own wrong.
5. Macondray cannot cancel or rescind
agreement for sale on sole ground that price
not paid at hour designated in letter.
Company could not validly terminate negotiations
at the time and then decline to sell land to
Barretto, who had accepted offer of sale, subject
only to examination of docs of title and stood ready
to pay price upon delivery of deed of sale and
other necessary docs of title.
-Time does not appear to be the essence of the
contract. The agreement to sell was made without
any express stipulation as to time within which
purchase price was to be paid, except that
purchaser reserved right to examine docs of title
before paying, though it was understood that sale
was for cash upon delivery of docs of title executed
in due form.
-While seller has right to couple agreement with
stipulation to pay at certain day hour minute HERE
there was no such stipulation. Time may be and
often the essence of contract but absence of
stipulation here shows that intention of parties was
to allow reasonable time for examination of docs so
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vendor can’t now arbitrarily demand payment at
specified time.
-IN absence of stipulation, it will be implied that
time to pay = reasonable time dependent on
circumstances of case. -this rule also applies to
time within which any condition precedent is to be
performed, or within which contingency upon
which transaction depends is to happen and to
performance of various acts by parties to precede
conveyance or payment.
Lim v. Saban (TOFF)
Perez de Tagle v. Luzon Surety (REG)
Quijano v. Esguerra (ABBY)
JM Tuason vs. Collector of Internal Revenue
(EARLA)
June 30, 1960
Labrador, J.
Facts: JM Tuason and Varsity Hills, Inc., as owner of
5 parcels of land entered into a contract whereby it
ceded the said lands to JM Tuason for the purpose
of having it surveyed, platted, monumented, and
otherwise developed into a subdivision. Aside from
the customary broker’s duties (recommending
sales prices of lots (Sec. 3), signing contracts of
sale or lease, or contracts to sell, releases of
mortgage (Sec. 4), collecting sales prices or other
accounts due the Owner (Sec. 7), organizing offices
and personnel to attend to the work relating to all
the above (Sec. 8)), it was also tasked to undertake
the laying out of parks, playgrounds, the
construction of streets, culverts, pavements,
sewage system, drainage, the installation of
utilities. As payment for its service, it was
stipulated that it shall be given 8% administration
fee, in addition to the 10% commission it is entitled
to. As a result of this transaction, the Collector of
Internal Revenue assessed against the petitioner
the broker's tax on the 8 per cent received by the
latter as "administration fee" in the amount of
P8,724.84, representing the broker's percentage
tax and surcharge thereon. It paid the amount
under protest, and immediately sought refund of
the said amount. The CIR however, denied its
request, which was affirmed by the CTA. The CTA
ratiocinated that the prestation is indivisible,
hence, the administration fee given to JM Tuason is
only part of the whole transaction - that the
activities of the petitioner of subdividing the
property or collecting accounts, which petitioner
denominated `acts of administration' are not in
fact detached, distinct, nor transcendental to the
brokerage relationship created by aforesaid
contract, but rather acts which are merely
incidental to the primary purpose for which the
agreement was entered into.
28
ISSUE: WON it is entitled to a tax refund.
HELD: NO.
The so-called administration fee corresponds to the
incidental duties of a broker in the sale of real
property. The only duty that is separate and
distinct from that of a broker is the obligation to
build roads, parks, sewage system, etc. But all the
others are necessary parts of the work of a broker.
“A broker engaged in the sale of real estate is not
limited to bringing vendor and vendee together
and arranging the terms and conditions of a sale of
real estate. As sales of real estate must be in
writing the preparation of the documents is part of
the functions of the broker. So the only function
entrusted to petitioner under the contract which
may not be embraced in those of a broker, is that
of constructing the subdivision, as above explained
and detailed out. It follows, therefore, that the
parties have agreed on giving compensation
denominated administration fees for services which
may well be included in the duties of a broker. But
the duty of developing the subdivision, with its lots,
streets, playgrounds, sewage, etc. is also a
necessary incident to the duty of selling the lands
subject of the contract. The lands must be
subdivided into residential lots, with streets laid
out, before said lots can be sold. And while this
work may be entrusted to another, the parties
have seen fit to have the same entrusted to the
petitioner.”
Moreover, although JM Tuason may be regarded as
a contractor, insofar as the buildings of
infrastructures is concerned, it failed however to
show which portion of the administration fee is
specifically designated for such service.
People v Castillo (JANCES)
June 16, 2000
J. Pardo
Facts: The victim engaged in real estate business.
The spouses Castillo were both her sales agents on
commission basis. Prior to her kidnapping, a
certain “Albert Gutierrez” called and represented
that he was interested in buying a property sold by
the victim. The spouses Castillo were the ones who
referred the property to Mr. Gutierrez. When the
victim met with Albert Gutierrez, she found out
that it was really Malapayon. She was brought to a
safe house, were Gonzales was the one who
watched over her and held her captive at gunpoint.
The spouses Castillo also went to the safe house
and were able to walk the premises freely.
TC: Malapayon and Gonzales guilty of illegal
possession of fire arms. ALL guilty of kidnapping
with ransom.
Only the spouses Castillo, Abello and Gonzales
appealed.
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Issue: WON accused-appellants participated as
conspirators
HELD: The spouses Castillo were conspirators.
Mercedita was the one who referred Malapayon to
the victim. However, Malapayon never mentioned
that he was referred by the Castillos, which is
suspicious as it is common practice for a buyer to
inform the seller who referred him. Also, the
Castillos being agents working on commission,
should have also informed their principal of the
referral, them having to gain upon such referral
should the buyer proceed with the acquisition.
Lastly, both Castillos were able to freely enter and
exit the safe house.
With regard to Abello, his explanation that he was
there to do a painting job is tenable. Malapayon
confirmed this by stating that at that time he hired
helpers to paint the apartment. This defense was
also not rebutted by the prosecution.
Concerning Gonzales, his defense that he too was
hired to do a painting job cannot give way to his
acquittal. He was the one who guarded the victim.
By doing so, he concurred with the criminal design
of the principals and performed an act
indispensable to the crime’s commission.
Disposition: appeals of spouses Castillo and
Gonzales denied. Abello acquitted.
Inland Realty Investment v. CA (ALAIN)
June 9, 1997
Hermosisisima, Jr., J.:
FACTS: On September 16, 1975, defendant
corporation (Araneta, Inc.) thru its co-defendant
Asst. Gen. Mgr. Eduque, granted to Inland Realty
Investment Service, Inc. (Inland) represented by
one Roman de los Reyes (entitled to ½ of the claim
asserted which is 5% broker’s commission) a 30-
day authority to sell its shares stock in another
corporation.
Inland was able to find a prospective buyer, the
Stanford Microsystems, Inc., but the offer of said
buyer was rejected by Araneta, Inc. Thus, Inland
looked for other buyers and found two more
prospective ones.
The authority was extended several times: first on
Oct. 2, 1975, for 30 days from the said date, the
second on Oct. 28, 1975 for 30 days from said
date, and on Dec. 2, 1975 for 30 days from the said
date.
On July 8, 1977 or 1 year and 5 months after the
last extension granted to Inland, the shares of
stock were finally sold to Standford Microsystems,
Inc.
29
Thus, Inland and de los Reyes formally demanded
their 5% broker’s commission, which was denied
by Araneta, Inc. on the ground that the claim has
no factual or legal basis.
Inland and de los Reyes claimed that a letter dated
October 28, 1976 was signed by Araneta II,
renewing their authority to act as sales agent for a
period of 30 days from said date. They also
asserted that a broker is automatically entitled to
the stipulated commission merely upon securing
for, and introducing to, the seller the particular
buyer who ultimately purchases from the former
the object of the sales, regardless of the expiration
of the broker’s contact of agency and authority to
sell.
Trial court and CA ruled in favor of Araneta, Inc.
ISSUE: W/N Inland and de los Reyes are entitled to
the broker’s commission. NO.
RATIO:
1. The alleged letter extending the authority 30
more days from October 28, 1976 is a blatant lie.
Inland and de los Reyes failed to attach a certified
copy of this letter. Thus, their contract already
expired thirty days from its last renewal on
December 2, 1975.
2. On the claim of “automatic broker’s
commission”, this is devoid of merit. From
September 16, 1975 to January 1, 1976, when
Inland’s authority to sell was subsisting, if at all,
petitioners had nothing to show that they actively
served their principal’s interests, pursued to sell
the shares in accordance with their principal’s
terms and conditions, and performed substantial
acts that proximately and causatively led to the
consummation of the sale to Stanford of Araneta,
Inc.’s shares.
Danon v. Brimo (MARK)
Sept. 12, 1921
J. Johnson
FACTS:
 Defendant Antonio A. Brimo, in a conversation
with the plaintiff Julio Danon, informed the
latter that he (Brimo) desired to sell his factory,
the Holland American Oil Co., for the sum of
P1,200,000. He agreed and promised to pay to
the plaintiff a commission of 5 per cent
provided the latter finds a buyer that will buy
said factory for the said amount.
 No definite period of time was fixed within
which the plaintiff should effect the sale. There
was likewise another broker (Sellner) who was
negotiating the sale of said property.
 Sellner, the other broker referred to, had found
a purchaser who ultimately bought the factory
for P1,300,000. For that reason Mr. Prieto, the
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would be purchaser found by the plaintiff,
never came to see Mr. Brimo to perfect the
proposed negotiation.
 Danon filed an action to recover the sum of
P60,000, alleged to be the value of services
rendered by him, as broker, to the defendant.
ISSUES WON Danon is entitled to the commission
agreed upon. NO.
RATIONALE
 Plaintiff is not entitled to the commission.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 if the defendant had not sold it to
someone else. The evidence does not show
that the Santa Ana Oil Mill had definitely
decided to buy the property in question at the
fixed price of P1,200,000. The board of
directors of said corporation had not resolved
to purchase said property; and even if its
president could legally make the purchase
without previous formal authorization of the
board of directors, yet said president does not
pretend that he had definitely and formally
agreed to buy the factory in question on behalf
of his corporation at the price stated.
 It is undisputed that plaintiffs services did not
any way contribute towards bringing about the
sale of the factory in question. He was not "the
efficient agent or the procuring cause of the
sale."
 Sibbald vs Betlehem Iron Co –
o 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 be
made, and until that is done his right to
commissions does not accrue.
o It follows, as a necessary deduction
from the established rule, that a broker
is never entitled to commissions for
unsuccessful efforts. The risk of a
failure is wholly his. The reward comes
only with his success. The broker may
devote his time and labor, and expend
his money with ever so much of
devotion to the interest of his
employer, and yet if he fails, if without
effecting an agreement or
accomplishing a bargain, he abandons
the effort, or his authority is fairly and
in good faith terminated, he gains no
right to commissions. He loses the
labor and effort which was staked upon
success. And in such event it matters
not that after his failure, and the
termination of his agency, what he has
30
done proves of use and benefit to the
principal.
o The rule however must be taken with
one important and necessary
limitation. 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 defect of
title in the ownership of the seller,
some unremoved incumbrance, some
defect which is the fault of the latter,
then the broker does not lose his
commissions. And that upon the
familiar principle that no one can avail
himself of the nonperformance of a
condition precedent, who has himself
occasioned its nonperformance. This
limitation is not an exception to the
general rule affecting the broker's right
for it goes on the ground that the
broker has done his duty, that he has
brought buyer and seller to an
agreement, but that the contract is not
consummated and fails though the
after-fault of the seller.
o NO STIPULATED PERIOD. 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, and as a mere device to
escape the payment of the broker's
commissions.
 Although Danon could probably have effected
the sale of the defendant's factory had not the
defendant sold it to someone else, he is not
entitled to the commissions agreed upon
because he had no intervention whatever the
sale in question. It must be borne in mind that
no definite period was fixed by the defendant
within which the plaintiff 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 complain 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
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property to a purchaser whom he has
procured, without any aid from the broker."
Fiege and Brown v Smith, Bell & Co and
Cowper (GEN)
March 7, 1992
Johns, J.
FACTS: Cowper was an employee of Smith, Bell &
Co. which was engaged in the sale of machinery
and equipment for the use of manufacturers of
coconut oil.
Under the terms of the Harden Contract, Cowper
and plaintiff Fiege were entitled to receive half of
the profits received from the sale of machinery to
Mr. Schmidt.
Later, the plaintiffs were associated with Cowper,
and they entered into a contract with the
Company. They were to seek to buyers for the
machinery which were acceptable to the Company
and that the prices were to be fixed by the
plaintiffs, as brokers.
In the contract, it was stipulated that the plaintiffs
as brokers were to receive one-half of the
difference between the cost of the machinery and
equipment laid down in Manila and the prices at
which they were sold to buyers secured by the
brokers.
The plaintiffs were able to secure orders for
machinery and equipment, which were delivered to
and accepted by the Company. The defendant
imported all of the specified machinery but that it
has failed and refused to make any settlement with
the plaintiffs or to render any accounting of the
cost of the machinery, or to make any payment,
either in full or on account, of the services
rendered.
The plaintiffs allege that when the contracts were
signed by the Company with the buyers, their
services were completed and are entitled to
recover P35,000.
The defendants on the other hand allege that aside
from the P2,000 paid by one of the buyers, no
other payments have been made on the respective
contracts by any of the other purchasers which
were secured by the plaintiffs. Until such payments
have been made, the Company cannot ascertain
net profits.
The trial court rendered a judgment for the
plaintiffs for P6,511.17, the only amount admitted
by the defendant as commission for the sale of the
machinery.
ISSUES: WON the plaintiffs are entitled to their
compensation
31
HELD: NO. The plaintiffs and Cowper and the
Company were to divide equally the profits of each
contract, and the plaintiffs are entitled to one-half
of the profits out of each contract, and until such
time as the company made a profit on a given
contract, plaintiff’s commission was not earned as
to that contract.
There was no profit through the mere signing of
the contract by the purchaser and its acceptance
by the company. There would not be any profit
until the purchaser paid all the money and
complied with his contract. Until such time as the
company realized a profit on the contracts, there
was nothing to share or divide.
No payment was tendered before October 15,
1919, the date of the filing of the complaint.
Ramos vs. CA and Calanoc (MAI)
April 04, 1975
Makalintal, C.J.
Facts: FIMCO entered into several contracts with
local merchants for the resale to them of certain
imported goods. One such contract was concluded
with Mrs. Salustiana Dee, or Wellington & Co., in
the amount of $1,333.000.00 or P2,666,000.00.
Cesario P. Calanoc instituted this action, claiming
that Emerito M. Ramos of FIMCO had engaged his
services to procure purchasers for the imported
goods and that he was directly instrumental in
bringing about the contracts in question, and thus,
he was entitled to the agreed commissions of 2%
on the contract with Wellington & Co. and 1% on
those with the International Mercantile Co.
Jose Ang Uco testified that he introduced Mrs.
Salustiana Dee to Calanoc as a prospective buyer
of imported merchandise. Together, the three of
them went to Mr. Recto of the Equitable Bank who
explained to Mrs. Dee about the banking procedure
involved in the transaction. Thereafter, he and the
plaintiff Calanoc were in frequent communication
with Mrs. Dee until the latter went directly to
Ramos and closed the contract in question without
their presence. Mrs. Dee had agreed to pay him a
2% commission on the transaction.
Issue: Whether or not Calanoc was entitled to a
fixed commission
Held: NO.
The contract between Ramos and Calanoc is quite
explicit: the arrangement was for Calanoc to sell
the merchandise to any buyer at a mark-up price of
23% over the invoice value of the importation and
any overprice successfully collected above the
stated 23% would accrue to Calanoc as his
commission. The amount of such commission was
therefore fluid, depending upon the overprice
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obtained above the 23% mark-up price of the
invoice value set by Ramos.
Nothing in the agreement guaranteed Calanoc a
fixed commission, which depended upon the
overprice the buyer would pay. And it is a fact,
undisputed by Calanoc that what Ramos received
in the Wellington & Co. transaction in excess of his
original 23% mark-up price was only P13,330.00
and not P53,320.00, the amount claimed and
awarded by the trial court and the Court of
Appeals.
While it is true, as Calanoc claims, that he informed
petitioner that Mrs. Dee had already agreed to pay
the 25% premium, there is absent in the records of
the case any evidence to show that Mrs. Dee
confirmed such agreement with petitioner and that
the latter could have bound her to it. Petitioner had
fixed for himself a 23% mark-up, allowing anything
over that amount as commission. If Mrs. Dee
changed her mind and refused to pay the 25%
premium, and paid only 23-1/2%, that was her
prerogative; petitioner had neither the duty nor the
right to compel her to contract for more than what
she was willing to pay, when she was ready to
meet his price.
Pratts v. CA (ROG)
1978
Facts: This complaint for sum of money filed by
Prats, doing business under name of Philippine
Real Estate Exchange, against Doronila and PNB.
Doronila was registered owner of 300hectares of
land. He wrote to SSS Chair offering his property to
SSS at P4 per square meter (per sqm). There were
several counter offers made as to the price.
Doronilla requested certification from Board of
Realtor regarding the actual prices of his real
estate raw-land properties. The Board replied that
the fair market value of raw land is P3-P3.50 per
sqm. Current prices before reaching Doronilla's
property range from 6-7 per sqm.
Doronilla granted an exclusive option and authority
to Prats to sell former's property. Commission will
be 10% based on P2.10 per sqm or at any price
finally agreed upon. Doronilla asked SSS to return
all papers related to his property in view of the
exclusive option granted to Prats.
SSS asked for a meeting with Doronilla but latter
asked that SSS meet with Philippine Real Estate
Exchange instead because Doronilla had given
exclusive option to it. Prats gave notice to Doronilla
that SSS had agreed to purchase the land. The
32
latter replied that he had not received any written
offer from SSS during the 60day period of the
exclusive authority nor during its extension.
Doronilla wrote to SSS renewing his offer to sell
revising his original offer of P4 per sqm to P3.25.
SSS passed a resolution NO. 636 making a counter
offer of Php3.25 per sq m subject to an appraisal of
the property and to submit a report thereon. After
a favorable appraisal report of the Toples &
Harding SSS passed Res no. 738 approving
purchase of the land for Php3.25 or for total of
P9.7m. Deed of Sale was executed. Doronilla
received the full purchase price. Prats then
demanded payment of his professional fee.
TC: ordered Doronilla to pay
CA: reversed.
Issue: WON Prats was not the efficient procuring
cause in bringing about the sale of Doronila's land
to SSS? YES
Held:
1. Doronilla's offer to sell land to SSS was
formally accepted only on June 1968 after
the exclusive authority in favor of Prats had
expired.
The CA's factual finding that Prats not the efficient
procuring cause in bringing about the sale are final.
Prats was not categorical that it was through his
efforts that the meeting between SSS
Administrator Teodoro and Doronilla took place. He
refers to a phone call he made a few days before
May 29, 1968 but in the conversation he had with
Mr. Teodoro, the latter requested him NOT to be
present in the meeting. It is manifest that SSS
officials never wanted to be in any way guided by,
or mediated by Prats relative to the negotiation for
purchase of property. The meeting was done
independently and not by virtue of Prat's efforts.
2. In equity, court notes that Prats had
diligently taken steps to bring back together
Doronilla and SSS and therefore grants him
100k by way of compensation for his efforts
and assistance in the transaction. .
Among others: He wrote to the Office of
Presidential Housing Commission offering the land
and wrote a follow up letter which was answered
by Commission suggesting that property be offered
directly to SSS.
Sale was perfected only at the price offered by
Doronila when he alone was dealing exclusively
with buyer long before Prats came along but Prats
efforts were instrumental in bringing them together
again and finally consummating the sale although
sale finalized after expiration of Prats' extended
exclusive authority.
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Manotok Brothers v. CA (MARK)
April 7, 1993
J. Campos, Jr.
**Um Mark, I don’t recall assigning this to
you. Sorry!
FACTS:
 Petitoner Manotok Brothers Inc was the owner
of a certain parcel of land and building which
were formerly leased by the city of Manila and
used by Claro M. Recto High School. By means
of lettter dated July 5, 1966, petitioner
authorized respondent Salvador Saligumba to
negotiate with the city of Manila the sale of
aforementioned property. In the same writing
petitoner agreed to pay respondent 5%
commisssion in the event the sale is
consummated.
 Petitoner exended respondent’s authority to
sell several times. Within the extended period,
the city of Manila passed Ordinace No. 6603
appropriating the sum of P410,816 for the
prurchase of Manotok Brothers’ property. Said
ordinance however was signed by the mayor
only on May 17, 1968, three days after the
lapse of respondent’s extended authority.
 Sale was consummated. Notwithstanding the
realization of the sale, Saligumba never
received any commission. Consequently, he
filed a complaint against petioner.
ISSUES WON Saligumba is entitled to the 5%
agent’s commission. YES.
RATIONALE
 In Prats vs CA, the SC awarded a sum of
money to agent-claimant in view of his
assistance and efforts in the transaction,
although he was not the efficient procuring
cause in bringing about the sale and
notwithsatnding the expiration of his authority.
In the case at bar, respondent Saligumba is the
efficient procuring cause for without his efforts
the municipality would not have anything to
pass and the Mayor would not have anything to
approve. It is clear therefore from the
foregoing authority that respondent is entitled
to the commission.
 Distinguished from Danon vs Brimo: The case
of Danon is not in point. In that case, claimant-
agent fully comprehended the possibility that
he may not realize the agent’s commission as
he was informed that another agent was also
negotiating the sale and thus, compensation
will pertain to the one who finds a purchaser
and eventually effects the sale.
LG Marquez v. Valera (REG)
J. Labrador
33
1952
FACTS: Lora was authorized by defendants Varela
to negotiate the sale of their share or interest in a
parcel of land on Plaza Goiti, Manila. He and real
estate broker Marquez agreed to work together for
the sale of the property. They found a ready,
willing, and able buyer, which accepted
defendants' price and terms, but that thereafter
defendants, without any justifiable reason, refused
to carry out the sale and execute the necessary
deed. As a consequence, petitioners failed to
receive the commission which they were entitled to
receive.
Defendants argued that petitioner Marquez had no
cause of action because they never dealt with
Marquez, directly or indirectly.
ISSUE: WON Marquez is entitled to be paid his
commission. YES.
RULING: Lora and Marquez acted jointly in
rendering services to defendants under Lora's
contract (of agency), and the same questions of
law and fact govern their claims. The Rules of
Court do not require the existence of privity of
contract between Marquez and the defendants as
required under the common law.
All that petitioners demand is that Marquez has a
material interest in the subject of the action, the
right to share in the broker's commission to be paid
Lora under the latter's contract, which right Lora
does not deny. This is sufficient to justify the
joinder of Marquez as a party plaintiff, even in the
absence of privity of contract between him and the
defendants.
Infante v. Cunanan, Mijares, CA (ABBY)
Aug. 31, 1953
J. Bautista Angelo
Facts:
• Consejo Infante owned 2 parcels of land with a
house in Taft Manila. Infante contracted the
services of Cunanan and Mijares to look for a
buyer. The selling price was for P30,000, buyer
must assume mortgage on the property; 5%
commission on selling price.
• Cunanan and Mijares found a buyer, Pio S.
Noche and introduced him to Infante. She
informed them that she was no longer
interested in selling the property and
succeeded in making them sign a document
stating therein that the written authority she
had given them was already can-celled.
• It turns out that Infante dealt with Noche
directly and sold the property for P31,000. The
respondents found out and instituted an action
for recovery of the commission when she
refused to give the respondents anything.
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• Infante said she procured their services but
only for P1,200, only on condition that they buy
her a property somewhere in Taft Avenue to
where she might transfer after selling her
property. Defendant avers that while plaintiffs
took steps to sell her property as agreed upon,
they sold the property at Taft Avenue to
another party and because of this failure it was
agreed that the authority she had given them
be cancelled
• Respondents claim that while they agreed to
cancel the written authority given to them,
they did so merely upon the verbal assurance
given by petitioner that, should the property be
sold to their own buyer, Pio S. Noche, they
would be given the commission agreed upon.
True, this verbal assurance does not appear in
the written cancellation, Exhibit 1, and, on the
other hand, it is disputed by petitioner, but
respondents were allowed to present oral
evidence to prove it, and this is now assigned
as error in this petition for review.
• LC found for the Cunanan and Mijares ordering
Infante to pay them P2,500 w/ legal interest.
• CA affirmed LC
Issue: WoN Infante was liable to pay Cunanan and
Mijares commission despite the written
cancellation of authority signed by the
respondents.
Held: Yes. Petition denied
• There is enough justification for the conclusion
reached by the lower court as well as by the
Court of Appeals to the effect that respondents
are entitled to the commission originally
agreed upon. It is a fact found by the Court of
Appeals that after petitioner had given the
written authority to respondents to sell her
land for the sum of P30,000, respondents
found a buyer in the person of one Pio S. Noche
who was willing to buy the property under the
terms agreed upon, and this matter was
immediately brought to the knowledge of
petitioner. But the latter, perhaps by way of
strategem, advised respondents that she was
no longer interested in the deal and was able
to prevail upon them to sign a document
agreeing to the cancellation of the written
authority.
• 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 not
give rise to a legal consequence if respondents
agree to call off the transaction in deference to
the request of the petitioner. But the situation
varies if one of the parties takes advantage of
the benevolence of the other and acts in a
manner that would promote his own selfish
interest. This act is unfair as would amount to
bad faith. This act cannot be sanctioned
34
without ac-cording to the party prejudiced the
reward which is due him. This is the situation in
which respondents were placed by petitioner.
Petitioner took advantage of the services
rendered by 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 Exhibit 1. This act
of subversion cannot be sanctioned and cannot
serve as basis for petitioner to escape payment
of the commission agreed upon.
Goduco vs. CA and Maria Castro (EARLA)
Feb 28, 1964
Paredes, J.
Facts: Herminia Goduco instituted a complaint
against Maria Castro for recovery of sums of
money as commission due her for the sale of a
land in Paranaque. She alleged that the buyer
indicated in the deed of sale, Sostenes Campillo,
was a mere dummy, and that Castro was the real
buyer of the property. She further claimed that
when the purchase price of P150k was paid to the
seller, the amount of P7500 as her commission was
deducted from it. This particular information was
allegedly given to her by the son of the owner of
the property, Dr. Francisco.
On the other hand, Castro alleged that she was not
the real buyer in the transaction. She also alleged
that Goduco repeatedly offered her certain pieces
of property to purchase, but she refused since her
properties were already levied at that time.
After trial, the trial court dismissed the complaint.
The CA thereafter affirmed this decision, saying
that the claims of Goduco are merely based on
conjectures and surmises.
ISSUE: WON Goduco is entitled to the commission.
HELD: No.
The SC agreed with the CA that there is not one
iota of evidence presented to support Goduco’s
claim. Her reference to the case of Marvel Bldg
Corp vs. Saturnino David is misplaced. Although
that case ruled that the stockholders in the
corporation were mere dummies of Maria Castro,
the same conclusion could not be applied in the
case at bar. This is especially so, since the deed of
sale categorically states that the buyer is Campillo,
and not Castro. The fact that the heirs of Castro
registered an adverse claim in the said property
could not support plaintiff’s claim, since this was
not put in issue in this case and should therefore
be ventilated in the proper forum.
Assuming arguendo that Goduco was authorized to
sell the land, it does not automatically entitle her
to a commission from the buyer. At most, the
owner of the property and the one who promised to
give her a commission should be the one liable to
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pay the same and to whom the claim should have
been directed. And even assuming that Castro was
the real buyer, the claim did not accrue
automatically against her, but against the person
who promised her a commission.
Domingo v Domingo (JANCES)
Oct. 29, 1971
J. Makasiar
Facts: Vicente Domingo executed an exclusive
contract of agency with Gregorio Domingo. The
contract was to last for 30 days. It was stated that
Vicente authorized Gregorio to sell his lot with a
commission of 5% on the total price. Gregorio
would still be entitled to the commission if Vicente
or anyone else sold the property within the 30 day
period or if the property is sold by Vicente within 3
months from the termination of the agency to a
purchaser previously submitted by Gregorio during
the continuance of the agency.
Gregorio authorized Purisima to look for a buyer,
promising ½ of the 5% commission.
Gregorio then submitted that Oscar de Leon
wanted to buy the property. The latter paid P1000
earnest money to Vicente and gave P1000 as gift
to Gregorio. Gregorio did not inform Vicente of this
P1000 propina/gift. However, Vicente persuaded
Oscar to buy the property from him directly at
P104,000 (as opposed to the P109,000 previously
agreed upon). Gregorio found out that the property
was sold the Amparo Diaz, wife of Oscar de Leon.
He then demanded the 5% commission from
Vicente.
TC: Vicente should pay Gregorio and Purisima.
CA affirmed. Amparo Diaz being the wife of Oscar
de Leon, the sale by Vicente of his property is
practically a sale to Oscar since husband and wife
have common interests.
Vicente having died, his heirs appealed.
Issue: WON the failure on the part of Gregorio to
disclose to Vicente the payment to him by Oscar of
the P1000 gift constitutes fraud as to cause
forfeiture of his commission. [YES]
HELD: The duties and liabilities of a broker to his
employer are those which an agent owes to his
principal. Art 1891 provides that an agent is bound
to render an acct of his transactions and to deliver
to the principal whatever he may have received by
virtue of the agency, even though it may not be
owing to the principal. Art 1909 provides that an
agent is responsible not only for fraud but also for
negligence.
Hence, an agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit from
35
the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his
loyalty to the principal and forfeits his right to
collect the commission from his principal, 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. By taking such
profit or bonus or gift or propina from the vendee,
the agent thereby assumes a position wholly
inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as
his commission is concerned, as if no agency had
existed. The fact that the principal may have been
benefited by the valuable services of the said
agent does not exculpate the agent who has only
himself to blame for such a result by reason of his
treachery or perfidy.
Art 1891 will not apply if the agent acted only as a
middleman with the task of merely bringing
together the vendor and the vendee, who
themselves will negotiate on the terms and
conditions of the transaction. In this case however,
Gregorio was not merely a middleman of Vicente
and Oscar. He was the broker of Vicente ONLY.
G. Article 1876, 1877
Art. 1876. An agency is either general or special.
The former comprises all the business of the
principal. The latter, one or more specific
transactions.
Art. 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power
or that the agent may execute such acts as he may
consider appropriate, or even though the agency
should authorize a general and unlimited
management.
1. Classes of Agency: General, Special,
Universal
Siasat v. IAC (MARK)
Oct. 10, 1985
J. Gutierrez, Jr.
FACTS
 Sometime in 1974, respondent Teresita
Nacianceno succeeded in convincing officials of
the then Department of Education and Culture
to purchase without public bidding, one million
pesos worth of national flags for the use of
public schools throughout the country. The
respondent was able to expedite the approval
of the purchase by hand-carrying the different
indorsements from one office to another, so
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that by the first week of September, 1974, all
the legal requirements had been complied
with, except the release of the purchase
orders.
 When Nacianceno was informed by the Chief of
the Budget Division that the purchase orders
could not be released unless a formal offer to
deliver the flags in accordance with the
required specifications was first submitted for
approval, she contacted the owners of the
United Flag Industry. The next day, after the
transaction was discussed, a document was
drawn up authorizing Nacianceno to represent
United Flag Industry to deal with any entity or
organization, private or government, in
connection with the marketing of United’s
products-flags and its accessories, subject to
30% commission.
 On October 16, 1974, the first delivery of 7,933
flags was made by the United Flag Industry.
The following day the respondent's authority to
represent the United Flag Industry was revoked
by petitioner Primitivo Siasat.
 After receiving the payment for the first
delivery, tendered the amount of P23,900.00 or
five percent (5%) of the amount received to
the respondent as payment of her commission.
The latter refused to accept the said amount
insisting on the 30% commission agreed upon.
The respondent, however, was prevailed upon
to accept the same because of the assurance
of the petitioners that they would pay the
commission in full after they delivered the
other half of the order.
 Respondent Nacianceno later on learned that
petitioner Siasat had already received payment
for the second delivery of 7,833 flags. When
she confronted the petitioners, they
vehemently denied receipt of the payment, at
the same time claiming that the respondent
had no participation whatsoever with regard to
the second delivery of flags and that the
agency had already been revoked.
 The respondent originally filed a complaint with
the Complaints and Investigation Office in
Malacañang but when nothing came of the
complaint, she filed an action in the Court of
First Instance of Manila to recover the following
commissions: 25%, as balance on the first
delivery and 30%, on the second delivery. CFI
ruled in favor of respondent. CA affirmed.
ISSUES WON Nacianceno is entitled to the
commission despite the absence of specific
authorization for the sale of 15,666 Philippine flags
to DECS.
36
HELD Yes. Nacianceno is a general agent.
RATIONALE
 There are several kinds of agents. To quote a
commentator on the matter:
An agent may be (1) universal: (2) general,
or (3) special. A universal; agent is one
authorized to do all acts for his principal
which can lawfully be delegated to an
agent. So far as such a condition is
possible, such an agent may be said to
have universal authority. (Mec. Sec. 58).
A general agent is one authorized to do all
acts pertaining to a business of a certain
kind or at a particular place, or all acts
pertaining to a business of a particular
class or series. He has usually authority
either expressly conferred in general terms
or in effect made general by the usages,
customs or nature of the business which he
is authorized to transact.
An agent, therefore, who is empowered to
transact all the business of his principal of
a particular kind or in a particular place,
would, for this reason, be ordinarily
deemed a general agent. (Mec Sec. ,30).
A special agent is one authorized to do
some particular act or to act upon some
particular occasion. lie acts usually in
accordance with specific instructions or
under limitations necessarily implied from
the nature of the act to be done. (Mec. Sec.
61) (Padilla, Civil Law The Civil Code
Annotated, Vol. VI, 1969 Edition, p. 204).
 One does not have to undertake a close
scrutiny of the document embodying the
agreement between the petitioners and the
respondent to deduce that the 'latter was
instituted as a general agent. Indeed, it can
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 or in the place where it
was to be executed. The power granted to
the respondent was so broad that it
practically covers the negotiations
leading to, and the execution of, a
contract of sale of petitioners'
merchandise with any entity or
organization.
2. Couched in general terms; acts of
administration
Veloso v CA (GEN)
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Aug. 21, 1996
Torres, Jr., J.
FACTS: Francisco Veloso owned a parcel of land in
Tondo, Manila. A TCT was issued in his name but
later on it was cancelled and another one was
issued in the name of the private respondents.
Petitioner alleged that he was the absolute owner
of the property and that 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. After verifying with the Register
of Deeds, he found that the transfer of property
was supported by a General Power of Attorney.
Petitioner denied executing the power of attorney
and alleged that his signature was falsified. He
contends that the sale and transfer of the property
was null and void.
Private respondent, Aglaloma Escario, on the other
hand alleged that she was a buyer in good faith
and denied any knowledge of irregularity. She
relied on the general power of attorney of Irma
which was sufficient in form and substance and
was duly notarized.
The general power of attorney stated that:
To buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments
or other forms of real property, more specifically
TCT No. 49138, upon such terms and conditions
and under such covenants as my said attorney
shall deem fit and proper.
The trial court ruled that Escario was the lawful
owner of the property as she was deemed an
innocent purchaser for value. The general power of
attorney was held to be valid and sufficient for the
purpose. It ruled that there was no need for a
special power of attorney when the special power
was mentioned in the general one.
The Court of Appeals affirmed in toto the ruling of
the trial court.
ISSUE: WON the general power of attorney was
valid and regular
HELD: YES. While the power of attorney was
denominated as “general”, a perusal revealed that
it stated an authority to sell.
There was no need to execute a separate and
special power of attorney since the general power
of attorney had expressly authorized the agent or
attorney-in-fact the power to sell the subject
property. The special power of attorney can be
included in the general power when it is specified
37
therein the act or transaction for which the special
power is required.
It is not the denomination that matters but the
extent of the power/s contemplated upon the
agent or attorney-in-fact.
Escario was an innocent purchaser for value. She
relied on the power of attorney presented by Irma,
petitioner’s wife. Being the wife of the owner, and
having with her the title of the property, there was
no reason for Escario not to believe in her
authority. Moreover, the power of attorney was
notarized and carried with the presumption of due
execution.
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.
Macke v. Camps, supra
Germann & Co. vs. Donaldson, Sim & Co.
(Mai)
November 11, 1901
Ladd, J.
Facts: Max Leonard Tornow is the sole owner of the
business carried on in Berlin and Manila under the
name of Gemann & Co. On February 5, 1900, he
executed in Berlin an instrument, constituting
Fernando Kammerzell as his “true and lawful
attorney with full power to enter the firm name of
Germann & Co. in the Commercial Registry of the
city of Manila as a branch of the house of Germann
& Co. in Berlin, it being the purpose of this power
to invest said attorney will full legal powers and
authorization to direct and administer in the city of
Manila for us and in our name a branch of our
general commercial business of important and
exportation, for which purpose he may make
contracts of lease and employ suitable assistants,
as well as sign every kind of documents, accounts,
and obligations connected with the business which
may be necessary, take charge in general of the
receipt and delivery of merchandise connected
with the business, sign all receipts for sums of
money and collect them and exact their
payment by legal means, and in general execute
all the acts and things necessary for the perfect
carrying on of the business committed to his
charge in the same manner as we could do
ourselves if we were present in the same place.”
On October 27, 1900, Fernando Kammerzell
executed a general power for suits, purportedly as
a substitution to the instrument executed by
Tornow. This instrument was authenticated by a
notary with the formalities required by the
domestic laws. The other was not so authenticated.
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Issue: Whether or not the original power can be
construed as conferring upon Kammerzell authority
to institute or defend suits for the recovery of
money
Held: YES.
It appears to be expressly and specially authorized
by the clause conferring the power to “exact the
payment” of sums of money “by legal means.” This
must mean the power to exact the payment of
debts due the concern by means of the institution
of suits for their recovery.
The main object of the instrument is clearly to
make Kammerzell the manager of the Manila
branch of the plaintiff’s business, with the same
general authority with reference to its conduct
which his principal would himself possess if he
were personally directing it. It can not be
reasonably supposed, in the absence of very clear
language to that effect, that it was the intention of
the principal to withhold from his agent a power so
essential to the efficient management of the
business entrusted to his control as that to sue for
the collection of debts.
Yu Chuck v. Kong Li Po (ROG)
Cited Corpus Juris: In the absence of express
limitations, a manager has authority to hire an
employee for such period as is customary or
proper. But unless he is expressly authorized he
can’t make a contract of employment for a long
future period, such as for 3 years although contract
not rendered invalid by mere fact that employment
extends beyond term of manager's own
employment.
While Chen as general manager of Kong Li Po, had
implied authority to bind corp by a reasonable and
usual contract of employment with Yu Chuck such
contract here cannot be so considered. The term of
employment is unusually long and conditions are
so onerous that possibility of corp being thrown
into insolvency is expressly contemplated in
contract. This fact should have put Yu Chuck upon
inquiry as to extent of business manager's
authority.
2. Evidence does not support contention that
contract was impliedly ratified by corp.
It is merely based on fact that Kim Hua, president
of corp for 1920, admitted on stand that he saw Yu
Chuck work as printers in the office but he denied
any knowledge of existence of contract and said it
was never presented to him nor the Board.
Before a contract may be ratified, knowledge of its
existence must be brought to parties who have
authority to ratify it. No such knowledge shown
here.
38
A ratification by Pres would have been no avail
either because in order to validate a contract,
ratification by the board of directors was
necessary. Fact that pres was required by by-laws
to sign docs evidencing contracts of the corp, does
not mean he had power to make the contracts.
3. Notice given by a Chen Yu Man posted in
the newspaper making null and void all
contracts not signed by TC Chen did not lead
Yu Chuck to think Chen had authority to
make contract.
Notice was published a month after contract was
entered into. Evidence also shows that Chen Yu
Man and Chen is one and the same person.
The notice confers no special powers, but is only an
assertion by Chen that he would recognize no
contracts not duly signed by him.
NO evidence to show that notice ever brought to
attention of officers of corp.
Tropical Homes v. Villaluz (TOFF)
Insular Drug v. PNB (REG)
J. Malcolm
1933
FACTS: U.E. Foerster, a salesman and collector of
Insular Drug for the Islands of Panay and Negros.
was instructed to take the checks for the drug
company to the Iloilo branch of the Chartered Bank
of India, Australia and China and deposit the
amounts to the credit of the drug company.
Instead, Foerster deposited the checks, including
those of four people, with the Iloilo branch of the
PNB, in his personal account. The amount of the
checks were subsequently withdrawn by U. E.,
Foerster and Carmen E. de Foerster (the former’s
wife).
The drug company investigated the transactions of
Foerster. Upon the discovery of anomalies,
Foerster committed suicide.
The bank argued that the fraud was not proved,
and that Foerster had implied authority to indorse
all checks made out in the name of the Insular
Drug Co.
ISSUE: WON PNB is liable. YES.
RULING: As to the first argument, no such special
defense was relied upon by the bank in the trial
court.
As to the second, 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
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by agent does so at his peril, and must same by
the consequences if the agent who indorses the
same is without authority. That the bank acted in
good faith does not relieve it from responsibility.
Even so, the Bank was not even in good faith. 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 made
authority from the drug company to do so, the
bank made itself responsible to the drug company
for the amounts represented by the checks.
Soriano v. People (ABBY)
March 19, 1951
J. Jugo
Facts:
• Federico Soriano was charged and convicted
with the crime of theft of 1 Cyclix electric
motor, 1 lantern slide projector including
accessories.
• Because of the disturbance caused by the war,
the Eagle Cinema Co.,(owner of the materials)
was indebted to the Saenz for rents due on
account of the lease; and that appellant in the
exercise of the powers conferred upon him
could have sued said debtor to foreclose the
mortgage executed by the Eagle Cinema Co.,
Inc., in favor of his principals. The items were
seized by Soriano and later found at his house
after having repeatedly denied any knowledge
of the equipment and accessories of the Cine
and declined any responsibility for their loss.
• Defense of Soriano - With regard to the
"taking," appellant contends that he did not
execute this element of theft because being an
attorney-in-fact of the heirs of Saenz, he acted
for his principals, and for all intents and
purposes of the power conferred upon him, he
was the principal himself and, naturally, he
could not steal something belonging to him
under the principle that "Rei nostrae furtum
facera non pos sumus". The power of attorney
clearly empowered the appellant "to ask,
demand, sue for, recover, collect and receipt
for any and all sums of money . . . and other
things of value of whatever nature or kind,"
and gave him "full power to do anything
requisite and necessary to be done in the
premises as fully as I (Emilia Saenz) could if
personally present, hereby ratifying and
confirming all that my said attorney and
substitute attorney shall lawfully do or cause to
be done by virtue hereof."
• But the CA affirmed the conviction for theft
citing firstly, that when he took, as he finally
39
admitted to have taken, the lantern slide
projector and the "Cyclix" motor generator
from the Eagle-Theater, he did not really act in
behalf and representation of this principals, for
otherwise he would not have repeatedly denied
having taken said properties and insinuated
that they had been taken by the Japanese; and
secondly, that even his principals could not
have taken and appropriated said properties
for themselves without previous and proper
action in court, because no mortgage creditor
can foreclose the property mortgage to him
without judicial proceedings.
Issue: WoN the taking was an act of administration
Held: No, it was theft. Conviction affirmed.
• It is clear that said power of attorney did not
authorize the petitioner to take away the
projector and the generator, hiding them in his
house and denying to the owner and the police
authorities that he had them in his
possessions, which was an illegal act, not
covered by his power-of-attorney. He was
authorized only to ask, take, sue for, recover,
collect, etc., sums of money, debts, dues,
accounts and other things which were or might
thereafter be due, etc., to his principal Emilia
Saenz. This authority referred mainly to the
collection of the rents of the building rented by
the Eagle Cinema Co., Inc. The projector and
the generator were not due or owing to Emilia
Saenz. It is not to be supposed that Saenz
herself would have denied the possession of
those articles. It is was the purpose of the
petitioner only to protect those instruments
from looting, there is o reason why he should
have concealed them from the owner and
denied having them.
• Even though the equipment, including those
articles, were mortgaged to Sanez to
guarantee the payment of the rents due on the
building, yet there had been no foreclosure and
neither she nor the petitioner had the authority
to take away and conceal those articles from
the owner or the police authorities. The Eagle
Cinema Co., Inc., had the right to possess said
articles.
• As to the element of intent, it is clear that
when the petitioner carried away and
concealed from the owner and the police
authorities the above-mentioned articles, he
acted with intent of gain. Intent is a mental
state, the existence of which is shown by the
overt acts of a person, which in the present
case unmistakably point to that intent.
Antonio Goquilay vs. Washington Sycip
(Earla)
July 26, 1960
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Reyes, JBL
Facts: Antonio Goquilay and Tan Sin An entered
into a general commercial partnership under the
partnership name “Tan Sin An and Antonio C.
Goquilay” for the purpose of dealing in real estate.
Embodied in their agreement is the stipulation that
Tan has the exclusive management of the
partnership, while Goquilay’s role is limited to
examining the book of accounts of the partnership.
It was further stipulated that the partnership shall
have a life of 10 years, and the death of either one
of the partners will not result to the dissolution of
the partnership, but both parties, by mutual
agreement, can decide to terminate the
partnership before the expiration of the period.
Thereafter, Goquilay executed in favor of Tan a
general power of attorney stipulating that Tan shall
act as his Manager in the partnership for the whole
period of the partnership. The partnership
eventually bought 3 parcels of lands, while Tan
bought 46 parcels. These 49 lots were later
mortgaged to Banco Hipotecario de Filipinas for the
payment of ~53k obligation, payable within 8
years.
During the lifetime of the partnership, Tan died,
and he was thereafter succeeded by his wife, Kong
Chai Pin and his 4 minor children. Eventually, a
certain Sing Yee and Cuan Co., upon request of
Yutivo Sons Hardware Co. (which advanced the
downpayment and the amortization for the
purchase of the 49 lots), paid the remaining
balance of the mortgage debt. These two entities
eventually filed their respective claims in the
probate court, as a result of which, Kong Chai Pin
sought permission from the Court to sell these
lands for settling the debts of Tan and the
partnership. These lands were then sold to
Washington Sycip and Betty Lee, who then
executed a Deed of Transfer in favor of Insular
Development Co..
After learning about the sale, Goquilay, as the
surviving partner of the partnership filed an action
to annul the sale made to Sycip and Lee. The SC in
a separate decision ordered the case to be
remanded for new trial due to non-inclusion of
indispensable parties. On remand, the lower court
dismissed the amended complaint. Hence, this
petition.
ISSUE: WON the sale executed in favor of Sycip and
Lee is valid.
HELD: Yes.
The Court preliminarily held that Kong Chai Pin, as
the widow of the Tan, did not succeed her husband
in the administration of the partnership. Antonio
Goquiolay conferred upon Tan Sin An the exclusive
management of the business, such power,
premised as it is upon trust and confidence, was a
40
mere personal right that terminated upon Tan's
demise. The provision in the articles stating that
"in the event of death of any one of the partners
within the 10-year term of the partnership, the
deceased partner shall be represented by his
heirs", could not have referred to the managerial
right given to Tan Sin An; more appropriately, it
related to the succession in the proprietary interest
of each partner. The covenant that Antonio
Goquiolay shall have no voice or participation in
the management of the partnership, being a
limitation upon his right as a general partner, must
be held coextensive only with Tan's right to
manage the affairs, the contrary not being clearly
apparent. Since the Articles of co-partnership
provided for the continuatin of the firm
notwithstanding the death of one of the partners,
the heirs of the deceased, by never repudiating or
refusing to be bound under the said provision in
the articles, became individual partners with
Antonio Goquiolay upon Tan's demise.
Kong Chai Pin, by her affirmative actions
manifested her intent to be bound by the
partnership agreement not only as a limited
partner, but also as a limited partner as well. In
fact, by selling the land, she was actually acting as
a managing partner.
The Court further held that the sale was valid,
inasmuch as it was made by a partner.
Accordingly, strangers dealing with a partnership
have the right to assume, in the absence of
restrictive clauses in the co-partnership
agreement, that every general partner has power
to bind the partnership, specially those partners
acting with ostensible authority. The latter may
rightfully assume that the contracting partner was
duly authorized to contract for and in behalf of the
firm and that, furthermore, he would not ordinarily
act to the prejudice of his co- partners.
In this case, the records show that Goquilay did not
contest the sale made to Sycip and Lee; it was only
after the deed of conveyance was executed did he
make his protest known. His opposition then came
too late.
H. Article 1878: acts of
strict dominion or ownership
Art. 1878. Special powers of attorney are
necessary in the following cases:
(1) To make such payments as are not usually
considered as acts of administration;
(2) To effect novations which put an end to
obligations already in existence at the time the
agency was constituted;
(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an
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action or to abandon a prescription already
acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration;
(6) To make gifts, except customary ones for
charity or those made to employees in the
business managed by the agent;
(7) To loan or borrow money, unless the latter act
be urgent and indispensable for the preservation of
the things which are under administration;
(8) To lease any real property to another person for
more than one year;
(9) To bind the principal to render some service
without compensation;
(10) To bind the principal in a contract of
partnership;
(11) To obligate the principal as a guarantor or
surety;
(12) To create or convey real rights over
immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted
before the agency;
(15) Any other act of strict dominion
1. form
2. cases
Home Insurance v. US Lines (JANCES)
Veloso v. CA, supra
Cosmic Lumber v. CA (MARK)
Nov. 29, 1996
Bellosillo, J.
FACTS
 COSMIC LUMBER CORPORATION through its
General Manager executed on 28 January 1985
a Special Power of Attorney appointing Paz G.
Villamil-Estrada as attorney-in-fact -
x x x to initiate, institute and file any court
action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 and
covered by TCT Nos. 37648 and 37649, 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, and for this purpose, to appear
at the pre-trial conference and enter into any
stipulation of facts and/or compromise
agreement so far as it shall protect the rights
and interest of the corporation in the
aforementioned lots.
41
 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 No. 443
before the Regional Trial Court of Dagupan. On
25 November 1985, she entered into a
Compromise Agreement with respondent
Perez, the one of the terms of which follows:
2. That to buy peace said defendant pays unto
the plaintiff through herein attorney-in-fact the
sum of P26,640.00 computed at P80.00/square
meter;
 On 27 November 1985 the “Compromise
Agreement” was approved by the trial court
and judgment was rendered in accordance
therewith.
 Although the decision became final and
executory it was not executed within the 5-
year period from date of its finality allegedly
due to the failure of petitioner to produce the
owner’s duplicate copy of Title No. 37649
needed to segregate from Lot No. 443 the
portion sold by the attorney-in-fact, Paz G.
Villamil-Estrada, to private respondent under
the compromise agreement. Thus on 25
January 1993 respondent filed a complaint to
revive the judgment.
 Petitioner asserts that it was only when the
summons for the revival of judgment was
served upon it that it came to know of the
compromise agreement entered into between
Paz G. Villamil-Estrada and respondent Isidro
Perez. Forthwith, upon learning of the
fraudulent transaction, petitioner sought
annulment of the decision of the trial court
before respondent Court of Appeals.
ISSUE WON Villamil-Estrada has the authority to
sell the property of Cosmic. NO.
RATIONALE
 The authority granted 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 Nos.
9127 and 443 so that petitioner 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
petitioner 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.
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 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 the
specific investiture of powers to Villamil-
Estrada, alienation by sale of an immovable
certainly cannot be deemed protective of the
right of petitioner to physically possess the
same, more so when the land was being sold
for a price of P80.00 per square meter, very
much less than its assessed value of P250.00
per square meter, and considering further that
petitioner 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 shall 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.
 The express mandate required by law to
enable an appointee of an agency (couched) in
general terms to sell must be one that
expressly mentions a sale or that includes a
sale as a necessary ingredient of the act
mentioned. For the principal to confer the right
upon an agent to sell real estate, a power of
attorney must so express the powers of the
agent in clear and unmistakable language.
When there is any reasonable doubt that the
language so used conveys such power, no such
construction shall be given the document.
Vicente v Geraldez (GEN)
July 31, 1973
Antonio, J.
FACTS: Hi Cement Corporation acquired a Placer
Lease Contract from Banahaw Shale Mining
Association. The lease contract covered two mining
claims over 51 ha of land. Included in the mining
claims were the three parcels of land owned by the
petitioners.
On several occasions, the Corporation informed the
petitioners, thru its representatives, of the its
acquisition of the placer mining claims. The
Corporation requested the petitioners to allow its
workers to enter their lands to explore and develop
the claims, with the promise to pay the petitioners
42
reasonable amounts. However, the petitioners
refused and threatened the workers with bodily
harm.
Hence, the Corporation filed with the CFI of
Bulacan a complaint for injunction and damages
against the petitioners.
The trial court directed the issuance of a writ of
injunction and suggested the relocation of the
boundaries of the Corporation’s claims in relation
to the properties of the petitioners. It named a
Commissioner to conduct a survey plan on
relocation and to submit a report to the court. The
trial court also directed the parties to send their
representatives to the place of the survey. The
Commissioner’s report was approved by the trial
court.
In a subsequent amendment of the complaint of
the Corporation, it alleged that the petitioners were
willing to sell their properties for P10/sq.m. but
when it offered to pay only P0.90/sq.m., the
petitioners stated that they were wiling to go to
trial on the issue of what would be the reasonable
price.
The counsels of the parties conferred among
themselves on the possibility of terminating the
case by compromise, as the defendants were
willing to sell the properties at reasonable prices.
Hence, the counsels executed a Compromise
Agreement to determine the prices.
The trial court approved the Agreement and
enjoined the parties to comply with the terms and
conditions. Pursuant to the terms, the counsels of
both parties submitted the names of the persons
designated by them as their commissioners. The
trial court later appointed the commissioners.
The Commissioners submitted to the court a
Consolidated Report regarding the applicable unit
prices.
However, the Corporation’s counsel, Attorney.
Ventura, filed a manifestation in Court stating that
the Board of Directors did not approve the
Compromise Agreement entered into by the
counsels.
Petitioners filed an answer to Attorney. Ventura’s
manifestation praying that the court ignore and
disregard the manifestation. It alleged that when
the Court inquired if the lawyers of the Corporation
were duly authorized to enter into a compromise
agreement, the lawyers answered in the
affirmative.
The trial court rendered a decision upholding the
Agreement. The petitioners then filed a motion for
execution which the trial court granted. However,
upon an opposition of the Corporation, the trial
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court reversed its decision and set aside the
motion for execution. It held that the Agreement
was contrary to law because the lawyers had no
special power of attorney as required by Art. 1878
of the Civil Code.
ISSUE: WON the Compromise Agreement is valid
HELD: NO. Art. 1878 of the Civil Code and Rule
138, Sec. 23 of the Rules of Court specifically
require that a special power of attorney be had
when entering into a compromise agreement.
The Compromise Agreement between the parties
was signed only by the parties’ respective lawyers
but it was not disputed that the lawyers of the
Corporation had not submitted to the Court any
written authority from their client to enter into a
compromise.
Also, it has been held that an officer or an 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
circumstance. It is thus necessary to ascertain
whether the Board of Directors of the Corporation
had authorized its lawyers to enter into the
Compromise Agreement.
But as presented by evidence, the counsels
categorically deny that they ever represented to
the court that they were authorized to enter into a
compromise. Nowhere does it appear that the
Corporation’s lawyers ever made such a
representation.
Also, contrary to petitioner’s claims, Attorney.
Cardenas, as administrative manager of the
corporation, did not tacitly ratify the agreement
entered into by the parties. He had no authority to
ratify. It has been held that ratification must be by
the officer or governing body having authority to
make such contract, and must be with full
knowledge.
Lastly, the counsels of the Corporation have not
demonstrated any act or declaration of the
corporation amounting to false representation or
concealment of material facts calculated to
mislead the petitioners. Hence, the doctrine of
estoppel cannot be used against them.
Petition dismissed.
PNB v. Maximo Sta. Maria (MAI)
August 29, 1969
Teehankee, J.
Facts: Two sugar crop loans were obtained by
defendant Maximo Sta. Maria from plaintiff bank
under a special power of attorney, executed in his
43
favor by his six brothers and sisters to mortgage a
16-odd hectare parcel of land, jointly owned by all
of them. Said SPA indicated that the sibling
constitute and appoint Dr. MAXIMO STA. MARIA as
their true and lawful attorney of and in their place,
name and stead to mortgage, or convey as security
to any bank, company or to any natural or juridical
person, their undivided shares over a certain parcel
of land together with the improvements thereon.
In addition, Valeriana Sta. Maria alone also
executed in favor of her brother, Maximo, a special
power of attorney to borrow money and mortgage
any real estate owned by her. By virtue of the two
above powers, Maximo Sta. Maria applied for two
separate crop loans with the plaintiff bank. As
security for the two loans, Maximo Sta. Maria
executed in his own name in favor of plaintiff bank
two chattel mortgages on the standing crops,
guaranteed by surety bonds for the full authorized
amounts of the loans executed by the Associated
Insurance & Surety Co., Inc. as surety with Maximo
Sta. Maria as principal.
The trial court ruled in favor of PNB.
Issue: Whether or not the special power of attorney
issued by the siblings authorized Sta. Maria to
borrow money
Held: NO.
Plaintiff bank has not made out a cause of action
against defendants-appellants (except Valeriana),
so as to hold them liable for the unpaid balances of
the loans obtained by Maximo under the chattel
mortgages executed by him in his own name
alone. In the early case of Bank of P.I. vs. De
Coster, the Court, in holding that the broad power
of attorney given by the wife to the husband to
look after and protect the wife's interests and to
transact her business did not authorize him to
make her liable as a surety for the payment of the
pre-existing debt of a third person, cited the
fundamental construction rule that “where in an
instrument powers and duties are specified
and defined, that all of such powers and
duties are limited and confined to those
which are specified and defined, and all other
powers and duties are excluded.” This is but in
accord with the disinclination of courts to enlarge
an authority granted beyond the powers expressly
given and those which incidentally flow or derive
therefrom as being usual or reasonably necessary
and proper for the performance of such express
powers.
The fact that Maximo presented to the plaintiff
bank Valeriana's additional special power of
attorney expressly authorizing him to borrow
money, aside from the authority to mortgage
executed by Valeriana together with the other
defendants-appellants also in Maximo's favor,
lends support to our view that the bank was not
satisfied with the authority to mortgage alone. For
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otherwise, such authority to borrow would have
been deemed unnecessary and a surplusage. And
having failed to require that Maximo submit a
similar authority to borrow, from the other
defendants-appellants, plaintiff bank, which
apparently was satisfied with the surety bond for
repayment put up by Maximo, cannot now seek to
hold said defendants-appellants similarly liable for
the unpaid loans.
Director of Public Works v. Sing Juco (ROG)
(1929)
Facts: Title to land was owned by de La Rama,
Tanbootien, Sing Juco and Sing Bengco. Rama's
interest was subsequently transferred to Echaus.
Owners mortgaged the land to PNB to secure credit
of P170k. Indebtedness has not been satisfied.
Land is located on Point Llorente at mouth of Iloilo
River and of so low level that it is subject to
frequent flooding. In 1921 Phil Govt was planning
harbor improvements in this vicinity, requiring
extensive dredging by Bureau of Public Works in
mouth of said river. Such dredging made necessary
for Director of Public Works to find a place of
deposit for dirt and mud taken from place dredged.
As land was low and accessible the material
deposited on such property. A contract was made
between Dir. Public Works (representing the Phil
Govt) and 4 owners Rama, Sing Juco, Tanboontien
and Sing Bengco where owners would pay to have
material to be deposited on their land.
Dir Public Works required a bond in penal amount
of P150k to be supplied by owners, conditioned for
payment of amount due from owners. Bond was
executed; one of names appearing on it was Casa
Viuda de Tan Toco purporting to be signed by de la
Rama.
After Dir made substantial compliance it demanded
payment but none was made so now it seeks the
amount due the Government from the original
owners and from sureties. PNB was made a party
defendant as having interest under its prior
mortgage upon property, while Echaus was made
defendant as successor in interest of De La Rama
and tan Ong widow of Tan Toco. Complaint sought
to enforce the Government's lien and that property
should be sold "subject to the first mortgage in
favor of the PNB".
Owner: Govt had not complied with contract in that
dredged material deposited had not been sufficient
in quantity to raise level of land above high water
therefore owners not obligated to pay for the filling
operation.
Issue: WON Govt had complied with oblig
therefore it is entitled to payment for the filling?
YES
44
WON Widow of Tan Toco is bound by suretyship?
NO
Held:
1. Contract did not obligate government to
raise the land on which the dredged material
was deposited to any specified level.
It only obligated itself to place upon land the
material which should be dredged from mouth of
Iloilo River in course of improvement done by Govt
near that place.
In indorsement of Director, accepted by owners, it
was made clear that Bureau did not undertake to
furnish material to complete the filling of land to
any specified level.
Allegation that because parts filled were still
subject to flooding during rains and that owners
were unable to sell land and therefore entitled to
damages untenable because no breach done by
Govt.
2. Tan Ong Sze not bound by contract of
suretyship.
Contract purports to be signed by de la Rama,
acting for defendants under a power of attorney.
But the Govt has not shown a power of attorney
that would authorize creation, by attorney-in-fact,
of an obligation in nature of suretyship binding
upon principal.
2 Powers of Attorney conferred by Tan Ong Sze
upon De La Rama presented by Govt does not
confer upon de la Rama the power to bind principal
by a contract of suretyship. The clauses relate
more to the execution of contracts relating to
property. The more general words, under rule of
ejusdem generis, refer to contracts of like
character. Power to execute a contract of so
exceptional a nature as a contract of suretyship or
guaranty can’t be inferred from general words
contained in these powers.
In Art. 1827: guaranty not presumed but must be
express and can’t be extended beyond its specified
limits. By analogy a power of attorney to execute a
contract of guaranty SHOULD NOT BE inferred from
vague or general words, especially when such
words have their origin and explanation in
particular power of a wholly different nature. TC
erred in judgment against Tan Ong Sze upon bond.
BA Finance v. CA (TOFF)
Melendrez v. CA (REG)
Per Curiam
1989
FACTS: The complainants (petitioners) accused a
certain Pineda of estafa. The respondent Attorney.
Decena was the private prosecutor of the said
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case. Without the knowledge and consent of
complainants, the respondent "settled" the estafa
case amicably for P2,000.00. He informed
complainants of the amicable "settlement" and of
the P500.00 advance payment he received only
after petitioner Narciso Melendrez had confronted
him about these matters. And respondent never
turned over to complainants the P500.00.
ISSUE: WON a lawyer can enter into an amicable
settlement with the other party without the
knowledge and consent of his client.
RULING: NO.
Respondent, as a lawyer, is presumed to be aware
of the rule that lawyers cannot "without special
authority, compromise their clients' litigation or
receive anything in discharge of a client's claim,
but the full amount in cash..” Respondent's failure
to turn over to complainants the amount given by
accused Pineda as partial "settlement" of the
estafa case underscores his lack of honesty and
candor in dealing with his clients.
Phil. Aluminum v. FASGI (ABBY)
Facts:
• FASGI Enterprises Incorporated ("FASGI"), an
American Corporation entered into an
agreement wherein PAWI Fratelli Pedrini
Sarezzo S.P.A. ("FPS"), an Italian corporation
and woud manufacture and deliver 8,594
wheels to them for purchase, importation and
distributorship. FASGI found the shipment to
be defective and was not in compliance with
requirements.
• FASGI sought for a rescission of the
distributorship agreement and for refund of
payments in the US Courts. They won but PAWI
failed to open Letters of Credit in favor of
FASGI allegedly due to Central Bank "inquiries
and restrictions," prompting FASGI to pursue its
complaint for damages against PAWI before the
California district court. In the interim, the
parties, realizing the protracted process of
litigation, resolved to enter into another
arrangement, this time entitled "Supplemental
Settlement Agreement," on 26 November
1980. This was entered into by the American
lawyer for PAWI.
• Basically, PAWI would refund and FASGI would
return the shipments. FASGI returned 2
shipments all the while waiting for LCs from
PAWI but to no avail. FASGI sought to enforce
the judgement in the Philippine Courts in RTC
Makati.
• PAWI contends that the Supplemental
Settlement Agreement was entered into by
Attorney. Ready without authority and
therefore is not enforceable. Verily, in this
jurisdiction, it is clear that an attorney cannot,
45
without a client's authorization, settle the
action or subject matter of the litigation even
when he honestly believes that such a
settlement will best serve his client's interest.
Issue: WoN the SSAgreement was validly entered
into by Attorney. Ready.
Held: Yes. CA affirmed against PAWI
• In the instant case, the supplemental
settlement agreement was signed by the
parties, including Mr. Thomas Ready, on 06
October 1980. The agreement was lodged in
the California case on 26 November 1980 or
two (2) days after the pre-trial conference held
on 24 November 1980. If Mr. Ready was indeed
not authorized by PAWI to enter into the
supplemental settlement agreement, PAWI
could have forthwith signified to FASGI a
disclaimer of the settlement. Instead, more
than a year after the execution of the
supplemental settlement agreement,
particularly on 09 October 1981, PAWI
President Romeo S. Rojas sent a
communication to Elena Buholzer of FASGI that
failed to mention Mr. Ready's supposed lack of
authority. On the contrary, the letter confirmed
the terms of the agreement when Mr. Rojas
sought forbearance for the impending delay in
the opening of the first letter of credit under
the schedule stipulated in the agreement.
• It is an accepted rule that when a client,
upon becoming aware of the compromise
and the judgment thereon, fails to
promptly repudiate the action of his
attorney, he will not afterwards be heard
to complain about it.
• Nor could PAWI claim any prejudice by the
settlement. PAWI was spared from possibly
paying FASGI substantial amounts of damages
and incurring heavy litigation expenses
normally generated in a full-blown trial. PAWI,
under the agreement was afforded time to
reimburse FASGI the price it had paid for the
defective wheels. PAWI, should not, after its
opportunity to enjoy the benefits of the
agreement, be allowed to later disown the
arrangement when the terms thereof
ultimately would prove to operate against its
hopeful expectations.
• Additional issue: PAWI assailed not only Mr.
Ready's authority to sign on its behalf the
Supplemental Settlement Agreement but
denounced likewise his authority to enter into a
stipulation for judgment before the California
court on 06 August 1982 on the ground that it
had by then already terminated the former's
services. For his part, Mr. Ready admitted that
while he did receive a request from Manuel
Singson of PAWI to withdraw from the motion
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of judgment, the request unfortunately came
too late. In an explanatory telex, Mr. Ready
told Mr. Singson that under American Judicial
Procedures when a motion for judgment had
already been filed a counsel would not be
permitted to withdraw unilaterally without a
court order. From the time the stipulation for
judgment was entered into on 26 April 1982
until the certificate of finality of judgment was
issued by the California court on 07 September
1982, no notification was issued by PAWI to
FASGI regarding its termination of Mr. Ready's
services. If PAWI were indeed hoodwinked by
Mr. Ready who purportedly acted in collusion
with FASGI, it should have aptly raised the
issue before the forum which issued the
judgment in line with the principle of
international comity that a court of another
jurisdiction should refrain, as a matter of
propriety and fairness, from so assuming the
power of passing judgment on the correctness
of the application of law and the evaluation of
the facts of the judgment issued by another
tribunal.
Lim Pin vs. Liao Tan (EARLA)
July 20, 1982
Gutierrez, Jr., J.
Facts: Sps Liao Tan and Tan Cho Hua owned a
certain real property in Caloocan, which it leased to
Lim Pin for Php1500 per month. Due to Lim Pin’s
refusal to pay 5k monthly rental, the Sps filed an
unlawful detainer case against Lim Pin. After
several postponements (Sept 1, Sept 14, Sept 27),
the parties, in their Oct 19 hearing, upon the
initiative of the Court a quo, approved the
Compromise Agreement entered into by the
parties. Lim Pin was not present that time, but she
was represented by her son, George Hung, who
always accompanied her in previous hearings. On
the other hand, Liao Tan and her counsel were
present during the said hearing and agreed with
the terms of the Compromise Agreement, which
provided that the monthly rental shall increase by
P500 a month, until it reaches P5k.
However, Lim Pin was not agreeable to the
Agreement. Hence, she instituted another action,
asking that the Agreement be declared null and
void, contending that her son does not have the
power to represent her, considering the lack of
written power-of-attorney.
ISSUE: WON George Hung is the agent of Lim Pin.
HELD: YES. The requirement of special power of
attorney in Art 1878 (with regard to entering into
compromise agreements, etc for agents) and Sec
23, Rule 138 (with regard to compromising the
client’s litigation) does not refer to the form, but
46
merely refer to the nature of authorization. The
requirements are met if there is a clear mandate
from the principal specifically authorizing the
performance of the act; such a mandate may be
either oral or written, the one vital thing being that
it shall be express and duly established by
evidence.
The records show that Judge Cancio took the
necessary precautions in allowing Hung to enter
into the Agreement with Liao Tan. Moreover, the
fact that, on previous hearings, Liao could not
decide anything without first consulting her son
clearly shows that he had full authority to do so.
Even assuming that the Hung was not an
authorized agent, the contract, being merely
unenforceable, was ratified by the act of filign the
“Ex-Parte Motion to Withdraw Deposits”, alleging in
her petition that there is another case pending
between the same parties to which the parties
have agreed to enter into a compromise
agreement.
San Juan Structural and Steel v CA (JANCES)
Facts: San Juan Structural and Steel Fabricators
Inc. entered into an agreement with Motorich Sales
Corporation for the transfer of the latter’s parcel of
land to the former. Nenita Gruenberg, Motorich’s
treasurer, was the one who entered the agreement
for Motorich. She was, however, not authorized by
the board of directors. There is also no evidence
that she represented that she was authorized. San
Juan Structural and Steel made a downpayment of
P100,000. However, the transfer did not push
through despite repeated demands made by San
Juan Structural and Steel.
Ruling:
RTC – dismissed.
CA – dismissed. Nenita to refund the down
payment of 100,000 given by San Juan Structural
and Steel.
Issue: WON sale is valid [NO]
HELD: Motorich cannot be bound by the contract
because it never authorized the sale. The general
principles of agency govern the relation between
the corporation and its officers or agents, subject
to the article of incorporation, bylaws, or relevant
provisions of law. Consequently, Selling is foreign
to a corporate treasurer’s function. Neither is real
estate sale shown to be a normal business activity
of Motorich since it’s primary purpose is marketing,
distribution, export and import in relation to a
general merchandising business. Moreover, Art
1874 states that a sale of a piece of land through
an agent must be in writing. Nenita was not
authorized. Neither is there any proof that Motorich
ratified, expressly or impliedly, the contract.
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Rural Bank of Caloocan v. CA (ALAIN)
April 21, 1981
De Catro, J.:
FACTS: Maxima Castro, a 70 year-old lady who
can not read and write the English language since
she only finished 2nd grade, needed money in the
amount of P3,000.00 to invest in the business of
spouses Valencia.
Castro, accompanied by spouses Valencia, went to
the Rural Bank of Caloocan to apply for an
industrial loan. Severino Valencia arranged
everything about the loan and also supplied the
personal data required for Castro’s application.
Few days later, when the loan was approved,
Castro, again accompanied by spouses Valencia,
signed a promissory note corresponding to her loan
in favor of the bank. On the same day, Valencia
spouses also obtained from the bank an equal
amount of P3,000.00. They signed a promissory
note corresponding to their loan in favor of the
bank and had Castro affixed thereon her signature
as co-maker. The two loans were also secured by a
real-estate mortgage on Castro’s house and lot.
Unable to satisfy the obligation covering the two
promissory notes, a notice of sheriff’s sale on her
property was addressed to Castro. Problems and
issues started to come-out. Castro learned for the
first time that the mortgage contract was for
P6,000.00 and not only P3,000.00 – the amount
she loaned. It was also her first time to realize that
she was made to sign as co-maker of the
promissory note and claimed that this was done
without her being consent. Eventually, her property
was successfully sold by the sheriff.
Castro filed a suit. Trial court, affirmed by CA,
declared the promissory note making Castro as co-
maked invalid because this was obtained by fraud
perpetrated on her by the Valencias who has
abused her confidence, taking advantage of her old
age and ignorance of her financial need. The
decision relieved Castro of any liability to the
promissory note (partially) and the mortgage
contract was deemed valid up to the amount of
P3,000.00 only (her personal loan to the bank). It
was also declared that the Rural Bank return to the
highest bidder the purchase price it paid for the
mortgaged property at the public auction.
ISSUE: (for our purposes) Who between Castro
and the bank should suffer the consequences of
the fraud perpetrated by the Valencias.
HELD: The bank was as much guilty, as Castro
was, of negligence in giving consent to the
contracts.
RATIO:
The Bank argue that Castro’s act of holding the
Valencias as her agent led the bank to believe that
they were authorized to speak and bind her. She
cannot now be permitted to deny the authority of
the Valencias to act as her agent.
The authority of the Valencias was only to follow-
up Castro’s loan application with the bank. They
were not authorized to borrow for her. This is
apparent from the fact that Castro went to the
bank to sign the promissory note for her loan of
P3,000.00. if her act had been understood by the
Bank to be a grant of an authority to the Valencias
to borrow in her behalf, it should have required a
special power of attorney executed by Castro in
their favor. Since the bank did not, We can rightly
assume that it did not entertain the notion, that the
Valencia spouses were in any manner acting as an
agent of Castro.
The bank should have exercised due care and
prudence by making proper inquiry if Castro’s
consent to the mortgage was without taint or
defect.
I. Articles 1879, 1880
Art. 1879. A special power to sell excludes the
power to mortgage; and a special power to
mortgage does not include the power to sell.
Art. 1880. A special power to compromise does not
authorize submission to arbitration.
1. cases
National Bank v Tan Ong Sze (GEN)
Sept. 2, 1929
Johns, J.
FACTS: Tan Ong Sze vested Tan Buco, her
attorney-in-fact, the power “for me and in my
name to sign, seal and execute, and as my act and
deed, deliver any lease, any other deed for
conveying (of) any real or personal property.”
Tan Buco loaned P300,000 from the National Bank.
He then executed a promissory note and a real
estate mortgage over a property in Iloilo owned by
the defendant to secure the loan.
When no part of the defendant has been paid, the
Bank filed a complaint and prayed that the
property be foreclosed and that the proceeds be
applied to the satisfaction of the debt.
The lower court rendered judgment in favor of the
Bank. Upon appeal, the defendant alleged that Tan

47
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Buco had no authority to borrow money and
mortgage her properties.
ISSUE: WON Tan Buco had the authority to borrow
money and execute the promissory note and
mortgage defendant’s real property
HELD: NO. Under the American Jurisprudence:
1. Cyclopedia of Law and Procedure:
- that the authority to borrow money, conferred on
an agent, must be created by express terms or
necessarily implied from the nature of the agency,
for authority to borrow money is one of the most
dangerous powers a principal can confer upon an
agent
2. Hawxhurst v Rathgeb:
- The words ‘sell and transfer’ are of no broader
signification that the words ‘sell and convey’ used
with reference to a conveyance of real estate; and
the latter, employed as the operative words in a
power to convey land, do not carry authority to
mortgage or otherwise dispose of the property.
3. Campbell v Foster Home Association:
- A power to mortgage land is not included in a
power of attorney to sell and convey, uncoupled
with any interest in the land or the fund.
4. Golinsky v Allison
- A power of attoney, like any other instrument, is
to be construed according to the natural import of
its language; and the authority which the principal
has conferred upon his agent is not to be extended
by implication beyond the natural and ordinary
significance of the terms in which that authority
has been given.
No authority of any court has been cited and none
will ever be found holding that a power “to sign,
seal and execute, and as my act and deed, deliver,
any lease, any other deed for conveying (of) any
real or personal property” or any similar language,
standing alone and within itself, carries with it or
implies the power to borrow money or to execute a
real mortgage to secure the payment of a debt.
Appeal granted. Decision of the lower court
reversed and set aside.
PNB v. Paz Agudelo y Gonzaga, et al. (MAI)
Villareal, J.
Facts: On November 9, 1920, Paz Agudelo y
Gonzaga executed in favor of her nephew, Mauro
A. Garrucho, a document conferring upon him a
special power of attorney sufficiently broad in
scope to enable him to sell, alienate and mortgage
in the manner and form he might deem
convenient, all her real estate situated in the
municipalities of Murcia and Bacolod, Occidental
48
Negros, consisting in lots Nos. 61 and 207 of the
cadastral survey of Bacolod, Occidental Negros,
together with the improvement thereon.
On December 22, 1920, Amparo A. Garrucho
executed a document whereby she conferred upon
her brother Mauro A Garrucho a special power of
attorney sufficiently broad in scope to enable him
to sell, alienate, mortgage or otherwise encumber,
in the manner and form he might deem
convenient, all her real estate situated in the
municipalities of Murcia and Bago, Occidental
Negros.
Nothing in the aforesaid powers of attorney
expressly authorized Mauro A. Garrucho to contract
any loan nor to constitute a mortgage on the
properties belonging to the respective principals,
to secure his obligations.
Subsequently, Mauro A. Garrucho executed in the
favor of the Philippine National bank several
mortgages on Agudelo’s properties to secure the
payment of credits, loans, commercial overdrafts,
etc., together with interest thereon, which he
might obtain from the bank, issuing the
corresponding promissory notes to that effect.
The mortgage deeds, as well as the corresponding
promissory notes, were executed in Mauro A.
Garrucho's own name and signed by him in his
personal capacity, authorizing the mortgage
creditor, the Philippine National Bank, to take
possession of the mortgaged properties, by means
of force if necessary, in case he failed to comply
with any of the conditions stipulated therein
Issue: Whether or not Garrucho acted within the
authority given to him in obtaining the mortgages
Held: NO.
A promissory note and two mortgages executed by
the agent for and on behalf of his principal, in
accordance with a power of attorney executed by
the principal in favor of the agent, are valid, and as
provided by article 1727 of contracted by the
agent; but a mortgage on real property of the
principal not made and signed in the name of the
principal is not valid as to the principal.
The records do not show that the loan obtained by
Mauro A. Garrucho, evidenced by the promissory
note, was for his principal Paz Agudelo y Gonzaga.
The special power of attorney, does not authorize
Mauro A. Garrucho to constitute a mortgage on the
real estate of his principal to secure his personal
obligations. Therefore, in doing so by virtue of the
document, he exceeded the scope if his authority
and his principal is not liable for his acts
PNB v. Sta. Maria, supra
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Rodriguez v. Pamintuan & De Jesus (ROG)
Bicol Savings v. CA (TOFF)
J. Articles 1881, 1882
Art. 1881. The agent must act within the scope of
his authority. He may do such acts as may be
conducive to the accomplishment of the purpose of
the agency.
Art. 1882. The limits of the agent's authority shall
not be considered exceeded should it have been
performed in a manner more advantageous to the
principal than that specified by him.
1. distinguish between authority and
power
2. kinds of authority
3. cases
Tan Tiong Teck v. SEC (REG)
Avanceña
1939
FACTS: Tan Tiong Gong purchased and sold
shares of stock through respondent Cua Oh & Co.
as his broker. It was alleged that the respondent
purchased shares of stock for P3,649.86 and sold
others for P2,385, without the consent or authority
of the petitioner
ISSUE: WON transactions effected by the
respondent are null and void with respect to the
petitioner because they were not consented or
authorized by the latter.
RULING: NO.
The Securities and Exchange Commission, after
going into evidence, reached the conclusion that
the petitioner failed to establish his contention. The
appeal from the resolution of the Commission is
based upon a pure question of fact, and the factual
findings of the commission is final under section 35
of Commonwealth Act No. 83.
Bay View Hotel v. Ker & Co., and Phoneix
Assurance Co. Ltd. (ABBY)
Facts:
• Bay View Hotel secured a fidelity guarantee
bond from Ker & Co., Ltd., for its accountable
employees against acts of fraud and
dishonesty whose principal is Phoenix
Assurance.
• One of the EES, Tomas E. Ablaza, while acting
in his capacity as cashier, was discovered by
plaintiff-appellant to have had a cash shortage
and unremitted collections in the total amount
49
of P42,490.95, it filed claims for payments on
the said fidelity guarantee bond but Ker & Co.
denied and refused indemnification and
payment. To enforce its claims, Bay View
instituted its complaint at the TC
• Ker & Co. justified its denial of the claims of
plaintiff-appellant on various reasons, such as
non-compliance with the conditions stipulated
in the insurance policy; non-presentation of
evidence regarding the various charges of
dishonesty and misrepresentation against
Tomas E. Ablaza and non-production of the
documents to prove the alleged loss. Ker & Co.
likewise averred that it was merely an agent
and- as such it was not liable under the policy.
(Guys this is procedure so it’s sort of
complicated if we are not there yet)
• Ker filed a request for admission that it was
Phoenix Assurance that actually issued and
renewed the policy, and later denied the claim.
• When Bay View failed to make any answer
to the request for admission within the
period prescribed by the rules, Ker & Co. filed a
Motion to Dismiss on Affirmative Defense,
dated July 6, 1966, insisting that since under
Sec. 2, Rule 26 of the Rules of Court, plaintiff-
appellant was deemed to have impliedly
admitted each of the matters enumerated
in the request for admission, it followed
that the proper party in interest against
whom plaintiff-appellant might have a
claim was the principal Phoenix
Assurance Co. (Phoenix) and not the
agent Ker & Co.
• Bay View filed an opposition arguing that the
proper remedy, under the circumstances was
not to dismiss the complaint but to amend it in
order to bring the necessary or indispensable
parties to the suit. Ker & Co. filed a reply to the
opposition reiterating its stand that since it
merely acted as an agent, the case should be
dismissed and plaintiff-appellant should file the
necessary action against the principal Phoenix.
• Plaintiff. Bay View filed a Motion for Leave to
Admit Amended Complaint, attaching copy of
the complaint, as amended, this time
impleading Phoenix as party defendant. On
August 16, 1966, Ker filed their joint answer to
the amended complaint. Again, Ker & Co., Ltd.,
argued that it was merely an agent and
therefore not liable under the policy. On the
other hand, Phoenix, averred that under
Condition 8 of the insurance policy, plaintiff-
appellant was deemed to have abandoned its
claim in view of the fact that it did not ask for
an arbitration of its claim within twelve (12)
months from June 22, 1965 the date of receipt
of the denial of the claim.
Issue: WoN the TC was right to dismiss the case
against both Ker & Co., and Phoenix Assurance
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Held: Dismissed against Ker & Co. Remanded as to
Phoenix Assurance
• Admission is in the nature of evidence and its
legal effects were already part of the records of
the case and therefore could be availed of by
any party even by one subsequently
impleaded. The amendment of the complaint
per se cannot set aside the legal effects of the
request for admission since its materiality has
not been affected by the amendment. If a fact
is admitted to be true at any stage of the
proceedings, it is not stricken out through the
amendment of the complaint. To allow a party
to alter the legal effects of the request for
admission by the mere amendment of a
pleading would constitute a dangerous and
undesirable precedent. The legal effects of
plaintiff- appellant's failure to answer the
request for admission could and should have
been corrected below by its filing a motion to
be relieved of the consequences of the implied
admission with respect to respondent Phoenix.
• Since an agent may do such acts as may be
conducive to the accomplishment of the
purpose of the agency, admissions secured by
the agent within the scope of the agency ought
to favor the principal. This has to be the rule,
for the act or declarations of an agent of the
party within the scope of the agency and
during its existence are considered and treated
in turn as the declarations, acts and
representations of his principal and may be
given in evidence against such party.
• But the motion for summary judgment was
filed after the complaint had been amended
and answer thereto had been filed. The issues,
therefore, with respect to Phoenix had already
been likewise joined. Moreover, a reading of
the said motion for summary judgment, more
particularly the prayer thereof, shows that
Phoenix did join Ker & Co. in moving for the
dismissal of the case and prayed "that the
present action be dismissed as against Ker &
Co., Ltd., because being purely and simply the
agent of the insurer, it is not liable under the
policy and as against the Phoenix Assurance
Co., Ltd. because by failing to seek an
arbitration within twelve months from the date
of its receipt of the denial of its claim on June
22, 1965, plaintiff Bay View Hotel, Inc., is
deemed under condition 8 of ,, the policy, to
have abandoned its claim against said
defendant phoenix Assurance Co., Ltd."
• But under Condition 8, arbitration is only as to
amount of the claim so the Court held that the
action may proceed against Phoenix.
• As to appellee Ker & Co., Ltd., however, there
appears to be no serious contradiction as to
the fact that it merely acted as the agent of its
principal, Phoenix. Considering that there was
50
full disclosure of such agency since the
insurance policy was actually issued by
Phoenix, We find no error in the dismissal of
the case against said defendant Ker & Co., Ltd.
Esperanza vs. Catinding (EARLA)
March 30, 1914 Carson, J.
Facts: The land subject of this litigation was
originally the owner and possessor of the land.
When he died, this land was given to his daughter,
Venancia Catmon, who together with her husband,
Ramon Catinding and 4 children (Andrea, et al)
lived in the property for many years. When
Venancia died, Ramon married Sabina Butron and
came to live in the property for several years. In
1898, they sold the land to Baltazar Bullo who was
buying the land in favor of his grandson, Florentino
Esperanza. To rectify the mistakes made in the
original deed, they went before the Justice of the
Peace in 1904 and executed another deed of sale.
Because they could not take possession of the said
property, Luis Esperanza and Baltazar Bullo as
apoderados (attorneys-in-fact) of Florentino
Esperanza filed an action to recover a certain piece
of land in Surigao. They alleged that Andrea
Catinding was unlawfully depriving them of
Florentino’s property. They further assert that the
land was entered upon by Ramon Catinding and
Sabina Butron while it was yet unclaimed and
uncultivated land; that it was first cultivated by
them and that their title in the land was by reason
of this original occupancy.
The trial court dismissed their complaint on the
ground that the evidence presented failed to prove
the claim of the plaintiffs. Even the witnesses they
presented contradicted their claim that Catinding
and Butron were the original occupant of the
property. As a matter of fact, their witnesses
categorically stated that the land in question
formerly belonged to Julian Catmon.
ISSUE: WON they can recover the land.
HELD: No. The SC agreed with the conclusions of
fact reached by the trial court, saying that the
plaintiffs were not even able to prove by a
preponderance of evidence the claims ventilated in
the action. The record strongly revealed that
Ramon only came into possession of the land by
reason of his wife’s ownership, and not through
original occupancy.
However, it modified the decision of the trial court,
dismissing it, not based on merits but based on
procedural grounds. Accordingly, the case was not
brought in the name of the real party in interest,
but only in the name of the apoderados.
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Ang v Fulton Fire Insurance (JANCES)
Facts: Sally Ang insured her P & S Department
Store to Fulton Fire Insurance. Her store consisted
mainly of dry goods. Soon after, the goods were
destroyed by fire. The plaintiffs executed a claim
form. Their claim was however denied subsequent
to the filing of charge for arson against Paulo Ang.
There received the denial of the claim on April 19,
1956. Mr. Ang was, however, acquitted of the
crime. The spouses Ang, then brought an action
against the Paramount Surety & Insurance
Company on May 11, 1956. It was dismissed
without prejudice on September 3, 1957. They then
brought an action against Fulton Fire Insurance on
May 5, 1958. Fulton Fire Insurance alleges that
since paragraph 13 of the policy states that if the
claim is made and rejected but no action is
commenced within 12 months after such rejection,
all benefits under the policy would be forfeited, the
spouses Ang can no longer claim the benefits of
the policy.
Ruling:
CFI – Plaintiffs committed a procedural mistake in
first suing the agent instead of principal but the
mistake being merely procedural, decision was
rendered in favor of plaintiffs.
Issue: WON the action should be dismissed [YES]
HELD: The condition contained in the insurance
policy is not merely a procedural requirement. The
condition is an important matter, essential to a
prompt settlement of claims against insurance
companies, as it demands that insurance suits be
brought by the insured while the evidence as to the
origin and cause of destruction have not yet
disappeared. It is in the nature of a condition
precedent to the liability of the insurer, or in other
terms, a resolutory cause, the purpose of which is
to terminate all liabilities in case the action is not
filed by the insured within the period stipulated.
The bringing of the action against Paramount
Surety cannot have legal effect except that of
notifying the agent of the claim.
Disposition: Judgment set aside. Case dismissed.
K. Article 1883
Art. 1883. If an agent acts in his own name, the
principal has no right of action against the persons
with whom the agent has contracted; neither have
such persons against the principal.
In such case the agent is the one directly bound in
favor of the person with whom he has contracted,
as if the transaction were his own, except when the
contract involves things belonging to the principal.
The provisions of this article shall be understood to
be without prejudice to the actions between the
principal and agent.
51
1. disclosed v. undisclosed principal,
partially disclosed principal
2. genera rule; exception
3. cases
Commercial Bank v. Republic Armored Car
Services Corp. al (MARK)
FACTS
 Defendants were given credit accommodation
by Commercial Bank in the form of an
overdraft line to which they drew regularly
certain amounts. Demands were made for the
payment of the drawings but defendants have
failed to pay the amounts demanded.
Commercial Bank thus filed complaints against
them.
 Defendants in their answer admit the opening
of the credit line in their favor and that
demands for the indebtedness were made
upon them, but allege as special defenses
that the directors and officers of the defendant
corporation deliberately defrauded and
mismanaged the said corporation breach of
trust in order to deprive Damaso Perez of his
control and majority interest in the defendant
corporation, as a result of which fraud,
mismanagement and breach of trust the
defendants suffered tremendous losses; that
the amounts drawn by defendant corporation
upon the credit line were received and used by
the former directors and officers and same
constitute part of the funds of the defendant
corporation misapplied and mismanaged by
said former officers and directors of said
corporation.
ISSUES
WON the obligation of the defendants-appellants to
pay for the amount due under the overdraft line
ceases due to the misappropriations on
mismanagement of the funds of the corporation by
the directors and employees thereof. NO.
RATIONALE
 The obligation of the defendants-appellants to
pay for the amount due under the overdraft
line is not in any way qualified; there is no
statement that the responsibility of the
defendants-appellants for the amount taken on
overdraft would cease or be defeated or
reduced upon misappropriations on
mismanagement of the funds of the
corporation by the directors and employees
thereof. The special defense is, therefore, a
sham defense.
 Under general rules and principles of law
the mismanagement of the business of a
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party by his agents does not relieve said
party from the responsibility that he had
contracted to third persons, especially in
the case at bar where the written agreement
contains no limitation to defendants-appellants'
liability.
Ortega v Bauang Farmers Cooperative (GEN)
Dec. 29, 1959
Montemayor, J.
FACTS: Ortega sold and delivered to defendant
2,643 kilos of flue-cured Virginia leaf tobacco at
P7,136.10. The defendant paid Ortega 2
installments leaving a balance of P3,136.10. In
spite of repeated demands made, the defendant
has failed and refused to pay. Ortega filed an
action against the defendant to collect payment.
The defendant admitted the allegations of the
complaint but set up the affirmative defense:
 That the tobacco leaf it bought was shipped
and delivered to and received by the ACCFA
(Agricultural Credit and Cooperative Financing
Administration), in accordance with an agency
contract entered into between ACCFA as
principal, and the defendant Bauang FACOMA,
as agent, for the purchase of local Virginia leaf
tobacco; and
 That final liquidation had not been made
between principal and agent.
Shortly after filing its answer, defendant filed a
"Motion to Bring in Third Party Defendant,"
attaching thereto its "Third Party Complaint"
against the ACCFA praying that judgment be
rendered against it for all sums that may be
adjudged against defendant in favor of the plaintiff.
The trial court, finding the ACCFA to be a necessary
party in the case, granted the motion to bring it as
a third-party defendant. However, it later ordered
that the third-party complaint be stricken out
because it was filed without leave of court.
The CFI of La Union ordered the defendant to pay
Ortega the sum of P3,136.10, with legal interest
from the date of the filing of the complaint, plus
costs.
ISSUE: WON the defendant acted in behalf of
ACCFA?
HELD: YES. Although at the time of the purchase
of the tobacco in question, the attention of the
plaintiff was not called to the existence of the
agency agreement between the ACCFA and the
Bauang FACOMA, there is reason to believe that he
actually knew that agency and that the tobacco
leaf was purchased not on account of the Bauang
FACOMA, but actually for the ACCFA, which is the
agency of the Government charged with the
52
purchase of Virginia leaf tobacco, in the
implementation of the policy of the Government to
buy all Virginia leaf tobacco grown locally, for
purposes of aiding Virginia tobacco growers and to
foster the tobacco industry.
The FACOMA (Farmers Cooperative and Marketing
Association) as its name implies, is concerned
mainly, if not exclusively, in the sale and marketing
of the agricultural produce of the farmers. It is not
engaged in the buy and sell business for profit.
The P4,000.00 sum total of the two installments of
P1,325.00 and P2,675.00 delivered to plaintiff on
account of the total purchase price of P7,136.10
was actually paid by ACCFA itself.
Art. 1883 is not applicable because the agent, the
defendant, did not act in its name, but rather acted
in behalf of the principal, ACCFA.
Appealed decision set aside.
PNB v. Agudelo, supra
Sy Juco v. Sy Juco (MAI)
January 12, 1920
Avanceña, J.
Facts: In 1902, Santiago Sy-juco was appointed by
the Vicente and Cipriane Sy-juco as administrator
of their property and the former acted as such until
June 30, 1916, when his authority was cancelled.
The plaintiffs are defendant's father and mother
who allege that during his administration the
defendant Santiago acquired the property claimed
in the complaint in his capacity as plaintiffs'
administrator with their money and for their
benefit.
The trial court ordered Santiago to return the
properties in question, which he bought in his
name.
Issue: Whether or not the plaintiffs have a cause of
action
Held: YES. From the rule established in article 1717
of the Civil Code that, when an agent acts in his
own name, the principal shall have no right
of action against the person with whom the
agent has contracted, cases involving things
belonging to the principal are excepted.
According to this exception (when things belonging
to the principal are dealt with) the agent is bound
to the principal although he does not assume the
character of such agent and appears acting in his
own name (Decision of the Supreme Court of
Spain, May 1, 1900). This means that in the case of
this exception the agent's apparent representation
yields to the principal's true representation and
that, in reality and in effect, the contract must be
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considered as entered into between the principal
and the third person; and, consequently, if the
obligations belong to the former, to him alone must
also belong the rights arising from the contract.
The money with which the launch was bough
having come from the plaintiff, the exception
established in article 1717 is applicable to
the instant case.
Disposition:
Supreme Court affirms the appealed decision. All
the properties in question, except the casco No.
2545 which is owned by the defendant by virtue of
a sale, must be returned to the plaintiffs, who are
the owners of such properties.
Phil. Bank of Commerce v. Aruego (ROG)
(1981)
Facts: PBC filed action for sum of money P35k plus
interest until fully paid and commission of 3/8% for
every 30d plus attorney's fees 10% of total
amount. Complaint contains 22 causes of action
referring to 22 transactions between them. Sum
represents cost of printing of "World Current
Events", a periodical published by Aruego. Aruego
had a credit accommodation from PBC. For every
printer, the printer, Encal Press collected cost by
drawing draft against PBC, draft being sent later to
Aruego for acceptance. As added security, PBC also
required Aruego to execute a trust receipt in favor
of bank.
-MTD filed by Aruego: when bills of exchange were
presented to him for acceptance, the amounts had
already been paid by PBC to Encal without former's
knowledge or consent.
-Aruego's defense: a) he signed the bills of
exchange in a representative capacity as Pres of
Phil. Education Foundation Company, publisher of
World Current Events and Decision Law Journal. b)
He signed not as principal debtor but as
accommodation or additional party.
Issue: WON Arguego's defense is valid? NO
Held:
1. -first defense: sec. 20 Negotiable Instruments
Law: Where instrument contains or a person adds
his signature words indicating he signs for or on
behalf of a principal or in a representative capacity,
he is not liable on the instrument if he was duly
authorized; but the mere addition of words
describing him as an agent or as filing a
representative character, without disclosing his
principal, does not exempt him from personal
liability.
-Draft here shows that nowhere has he disclosed
that he was signing as a representative of the
53
Philippine Education Foundation. He is therefore
personally liable for the drafts he accepted.
2. -Accommodation party = one who signed the
instrument as maker, drawer, indorser, without
receiving value and for purpose of lending his
name to some other person. In lending his name to
accommodated party, accommodation party is in
effect a surety for latter. He lends name to enable
accommodated party to obtain credit
-A drawee is primarily liable. Aruego should not
have signed as an acceptor / drawee. In doing so,
he became primarily liable for draft.
Nicolas v. Bormacheco (TOFF)
Arroyo v. Granada (REG)
J. Moreland
1911
FACTS: Felix Granada was indebted to Blas
Gerona, with the debt made while both were still
alive. A suit was commenced by Ignacio Arroyo as
the administrator of Gerona of the recovery of this
debt, and that final and amicable settlement was
arranged between him and defendants. was not
complied with by Matias Granada, and as a
settlement of that, an arrangement was made
between him and Ignacio Arroyo, whereby Matias
Granada executed a mortgage as security for the
payment. However, Granada failed to comply
again.
In 1907, Jose M. Arroyo, son of Ignacio and a
lawyer, and with the full power of attorney from his
father to transact his affairs, entered into a
settlement with Granada whereby the latter would,
instead of paying money, would transfer a piece of
land, which Granada said was first quality land,
good for the raising of sugar cane and rice.
Experts testified later that the lands were of low
quality. Trial court found that the documents in
question were executed by means of false and
fraudulent representations of the defendants in this
case and ordered their annulment and
cancellation.
ISSUE: WON petitioner Jose M. Arroyo had an
interest in the case.
RULING: NO. Jose M. Arroyo, as apoderado, has
absolutely no interest in this litigation. He has
absolutely no right to bring the defendant into
court or put him to the expense of a litigation. The
real and only party in interest is Ignacio Arroyo.
Under articles 114 and 122 of the Code of Civil
Procedure he should be plaintiff.
A judgment for or against Jose M. Arroyo personally
or as apoderado in no way binds or affects Ignacio.
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As a necessary result a decision in this case is
utterly futile.
Uy & Roxas v. CA, Hon. Robert Balao, NHA
(ABBY)
Facts:
• William Uy and Rodel Roxas are agents
authorized to sell eight parcels of land by the
owners thereof. By virtue of such authority,
petitioners offered to sell the lands, located in
Tuba, Tadiangan, Benguet to respondent
National Housing Authority (NHA) to be utilized
and developed as a housing project. The NHA
paid for the 5 parcels but after a test was done,
the remaining 3 parcels were found to be
unsuitable for housing or any civil structures.
The NHA cancelled the contract and offered
P1.225M to the landowners.
• Uy and Roxas found a complaint for damages
and the RTC said the cancellation of the
contract was justified but still awarded the
P1.225M damages.
• The CA reversed the RTC since there was
"sufficient justifiable basis" in cancelling the
sale, "it saw no reason" for the award of
damages. The CA also noted that petitioners
were mere attorneys-in-fact and, therefore, not
the real parties-in-interest in the action before
the trial court.
• The damages prayed for were intended not for
the benefit of their principals but to indemnify
petitioners for the losses they themselves
allegedly incurred as a result of such
termination. These damages consist mainly of
"unearned income" and advances. They
brought the action in their own name and in
their own behalf.
Issue: WoN the agents have a cause of action
against the NHA suing in their own name.
Held: No. Petition dismissed.
• Petitioners are not parties to the contract of
sale between their principals and NHA. They
are mere agents of the owners of the land
subject of the sale. As agents, they only render
some service or do something in
representation or on behalf of their principals.
54
The rendering of such service did not make
them parties to the contracts of sale executed
in behalf of the latter. Since a contract may be
violated only by the parties thereto as against
each other, the real parties-in-interest, either
as plaintiff or defendant, in an action upon that
contract must, generally, either be parties to
said contract.
• An agent, in his own behalf, may bring an
action founded on a contract made for his
principal, as an assignee of such contract.
Petitioners, however, have not shown that they
are assignees of their principals to the subject
contracts. While they alleged that they made
advances and that they suffered loss of
commissions, they have not established any
agreement granting them "the right to receive
payment and out of the proceeds to reimburse
[themselves] for advances and commissions
before turning the balance over to the
principal[s]."
• Restatement: Unless otherwise agreed, an
agent who has or who acquires an interest in a
contract which he makes on behalf of his
principal can, although not a promisee,
maintain such action thereon maintain such
action thereon as might a transferee having a
similar interest.
• It does not appear that petitioners are
beneficiaries of a stipulation pour autrui under
the second paragraph of Article 1311 of the
Civil Code. Indeed, there is no stipulation in
any of the Deeds of Absolute Sale "clearly and
deliberately" conferring a favor to any third
person.
• That petitioners did not obtain their
commissions or recoup their advances because
of the non-performance of the contract did not
entitle them to file the action below against
respondent NHA.
• As petitioners are not parties, heirs, assignees,
or beneficiaries of a stipulation pour autrui
under the contracts of sale, they do not, under
substantive law, possess the right they seek to
enforce. Therefore, they are not the real
parties-in-interest in this case.
• Petitioners not being the real parties-in-
interest, any decision rendered herein would
be pointless since the same would not bind the
real parties-in-
interest.
• Now, on the merits of the case NHA: The
cancellation was based on the negation of the
cause arising from the realization that the
lands, which were the object of the sale, were
not suitable for housing. The NHA was justified
in canceling the contract. The realization of the
mistake as regards the quality of the land
resulted in the negation of the motive/cause
thus rendering the contract inexistent.
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• Assuming that petitioners are parties,
assignees or beneficiaries to the contract of
sale, they would not be entitled to any award
of damages.
Awadv. Filma Mercantile (EARLA)
Dec 24, 1926
Ostrand, J.
Facts: E. Awad & Co. delivered to Chua Lioc
(operating under the name of Hang Chuan Co.)
certain merchandise in the amount of P11,140.
Chua Lioc, representing himself as the owner of the
merchandise sold them to Filma Mercantile for a
total of P12,155.60. After deducting Chua Lioc
debts to Filma and to the Phil. Manufacturing Co.
(which Filma agreed to pay), Filma is still indebted
to Chua Lioc in the amount of P6,657.52.
Thereafter, E. Awad obtained authorization from
Chua Lioc to collect the P11,140 due it. Filma
however refused to directly pay to E. Awad the
purchase price.
Subsequently, the Phil. Trust Company brought an
action against Chua Lioc for the payment of
P1,036.36. As a result, the balance due from Filma
was attached in that action. This balance was
further attached in another action instituted by E.
Awad for the payment of P11,140.
E. Awad then filed a separate action against Filma,
for the payment of the purchase price. Filma
however averred that it was a buyer in good faith.
It further alleged that it was holding the balance of
P6657.52 (having been attached in two separate
cases) subject to the orders of the court.
The trial court dismissed the complaint on the
ground that the plaintiff was only entitled to
payment of the sum of P6,657.52, but which sum
the defendant had the right to retain subject to the
orders of the court in the two separate cases.
ISSUE: WON E. Awad can collect from Filma.
HELD: No. According to the Court, the law
applicable to the case is well settled. Article 246 of
the Code of Commerce reads as follows: "When the
agent transacts business in his own name, it shall
not be necessary for him to state who is the
principal and he shall be directly liable, as if the
business were for his own account, to the persons
with whom he transacts the same, said persons not
having any right of action against the principal, not
the latter against the former, the liabilities of the
principal and of the agent to each other always
55
being reverse." Hence, he can have no right of
action against the buyer.
Moreover, Awad’s claim that Filma is not a buyer in
good faith and had knowledge of the condition
under which the merchandise was entrusted to
Chua Lioc, was not supported by evidence.
Awad v. Filma Mercantile (MARK)
*Mark, promise hindi ito assigned sayo dun sa
email ko. Sorry!
FACTS
 Early in the month of September, 1924, the
plaintiff, doing business in the Philippine
Islands under the name of E. Awad & Co.,
delivered certain merchandise of the invoice
value of P11,140 to Chua Lioc, a merchant
operating under the name of Hang Chua Co. in
Manila, said merchandise to be sold on
commission by Chua Lioc.
 Representing himself as being the owner of the
merchandise, Chua Lioc sold it to the
defendant Filma Mercantile. The merchandise
so purchased was delivered to the defendant,
who immediately offered it for sale.
 D. J. Awad, in behalf of E. Awad & Co., wrote a
letter to the defendant corporation advising it
that, inasmuch as the merchandise belonged
to E. Awad & Co., the purchase price should be
paid to them. Filma in its answer stated that
they received the goods from Chua Lioc hence
payment is due to Chua Lioc.
 The complaint in the present action was filed
on November 26, 1924, the plaintiff demanding
payment of the same sum of P11,140 for which
action had already been brought against Chua
Lioc. The defendant, its answer, set up as
special defense that it brought the
merchandise in good faith and without any
knowledge whether of the person from whom
or the condition under which the said
merchandise had been acquired by Chua Lioc
or Hang Chuan Co.; that the defendant
therefore had acquired title to the merchandise
purchased; that the balance of P6,657.52, now
in the hands of the defendant had been
attached in the two actions brought on
September 18, and October 7, respectively,
and garnishment served upon the defendant,
who therefore, holds the money subject to the
orders of the court in the cases above-
mentioned, but which sum the defendant is
able and willing to pay at any time when the
court decides to whom the money lawfully
pertains.
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ISSUES WON Awad can recover from Filma
Mercantile. NO.
RATIONALE
 Article 246 of the Code of Commerce reads as
follows:
When the agent transacts business in his own
name, it shall not be necessary for him to state
who is the principal and he shall be directly
liable, as if the business were for his own
account, to the persons with whom he
transacts the same, said persons not having
any right of action against the principal, nor
the latter against the former, the liabilities
of the principal and of the agent to each other
always being reserved.
Smith Bell & Co. v Sotelo Matti (JANCES)
Facts: In August 1918, Smith, Bell & Co and Sotelo
Matti entered into contracts whereby the former
obligated itself to sell and deliver 2 steel tanks, 2
expellers and 2 electric motors. The tanks were to
be delivered within 3-4 months, the expellers Sept
18 or as soon as possible, and the motors within 90
days (but not guaranteed). In all the contracts, it
was stated that the seller was not responsible for
delays caused by fires, riots on land or on sea,
strikes or other causes known as force majeure.
Note also that the contracts were executed at the
time of the world war.
The tanks arrived at Manila on April 27, 1919, the
expellers on Oct 18, 1918, and motors on February
27, 1919. The plaintiff corporation notified Mr.
Sotelo of the arrival of the goods but Mr. Sotelo
refused to receive them.
Smith, Bell and Co. brought suit against Mr. Sotelo.
The latter’s defense was that he made the
contracts in question as manager of the Manila Oil
Refining and By-Products Co. Manila Oil Co.
intervened and alleged that it was notified by
Smith Bell of the arrival only in May 1919.
Ruling:
CFI: absolved defendants insofar as the tanks and
motors were concerned but ordered them to
receive the expellers.
Smith Bell and Sotelo Matti appealed the judgment.
Issue: WON Sotelo Matti can be ordered to receive
and pay for the goods [YES]
HELD: The term which the parties attempted to fix
were so uncertain that one cannot tell just whether
those articles could be brought to Manila or not.
The obligations were conditional. In cases like this,
the obligor will be deemed to have sufficiently
performed his part of the obligation, if he has done
56
all that was in his power, even if the condition has
not been fulfilled in reality. Smith, Bell & Co was
able to deliver the goods even though the
conditions for delivery were not completely
fulfilled. [No agency concept expressly discussed in
case. My guess why Mr. Sotelo was the one
ordered to accept and receive the goods: (1) he
was notified by Smith Bell of the arrival of the
goods and yet he did not inform Manila Oil Co. – it
is his duty as the manager of the company to
inform his principal. (2) he was the only one who
appealed judgment, intervenor Manila Oil Co. did
not]
Disposition: Mr. Sotelo Matti is sentenced to accept
and receive from plaintiff the tanks, expellers, and
motors in question.
Smith Bell v. Sotto Matti (MARK)
*MARK! Di rin ito assigned sayo. Andami mong
ginawa :)
FACTS
 In August, 1918, the plaintiff corporation and
the defendant, Mr. Vicente Sotelo, entered into
contracts whereby the former obligated itself
to sell, and the latter to purchase from it, two
steel tanks, two expellers, and two electric
motors. As to the delivery of which stipulation
was made, couched in these words:
"Approximate delivery within ninety days. —
This is not guaranteed."
 The tanks arrived at Manila on the 27th of
April, 1919: the expellers on the 26th of
October, 1918; and the motors on the 27th of
February, 1919. The plaintiff corporation
notified the defendant, Mr. Sotelo, of the arrival
of these goods, but Mr. Sotelo refused to
receive them and to pay the prices stipulated.
 The plaintiff brought suit against the
defendant.
 In their answer, the defendant, Mr. Sotelo, and
the intervenor, the Manila Oil Refining
and By-Products Co., Inc., denied the
plaintiff's allegations as to the shipment of
these goods and their arrival at Manila, the
notification to the defendant, Mr. Sotelo, the
latter's refusal to receive them and pay their
price, and the good condition of the expellers
and the motors, alleging as special defense
that Mr. Sotelo had made the contracts in
question as manager of the intervenor, the
Manila Oil Refining and By-Products Co., Inc
which fact was known to the plaintiff, and that
"it was only in May, 1919, that it notified the
intervenor that said tanks had arrived, the
motors and the expellers having arrived
incomplete and long after the date stipulated."
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 As a counterclaim or set-off, they also
allege that, as a consequence of the
plaintiff's delay in making delivery of the
goods, which the intervenor intended to
use in the manufacture of cocoanut oil,
the intervenor suffered damages
ISSUES
WON the intervenor has a cause of action against
plaintiff due to the alleged delay in the delivery of
the machineries. NO.
RATIONALE
 When an agent acts in his own name, the
principal has no right of action against the
persons with whom the agent has contracted,
or such persons against the principal. In
such case, the agent is directly liable to the
person with whom he has contracted, as if the
transaction were his own (Art. 1717, Civil
Code).
Maritime Agencies & Services v. CA (ALAIN)
July 12, 1990
J. Cruz
FACTS:
Transaction: shipment of bagged urea from USSR
to the Philippines, so need to charter a motor
vessel
Motor vessel: named Hongkong Island
Owner of vessel: Hongkong Island Shipping Co.
Charterer: Transcontinental Fertilizer Company of
London
Consignee in the Philippines: Atlas Fertilizer
Company (Manila and Cebu)
Insurer of goods: Union Insurance Society of
Canton, Ltd (against all risks)
Charterer’s agent: Maritime Agencies & Services,
Inc.
Owner’s agent: Macondray Company, Inc.
The parties signed for this purpose a Uniform
General Charter. But problem occurred in the
transaction.
Trial court found out that upon receipt of goods,
1,383 bags were damaged or lost on board the
vessel before unloading of the shipment. There
were also goods that were damaged or lost during
unloading.
Consignee filed a formal claim, and after its claims
rejected, went to Insurer Union, which on demand
paid the total indemnity pursuant to the insurance
contract. Thus, as subrogee of the consignee,
Union filed complaint for reimbursement against
57
Hongkong Island Company, Ltd., Maritime Agencies
& Services Inc, and Macondray Company, Inc.
Principal Issue: Who should be held liable for the
loss or damaged cargos?
In order to answer this, the nature of the charter
must first be identified – whether it is a demise or
“bareboat charter”, a time charter or a voyage
charter. According to the court, the agreement
entered into (Uniform General Charter) in the cases
at bar should be considered.
A voyage charter being a private carriage, the
parties may freely contract respecting liability for
damage to the goods and other matters. The basic
principle is that “the responsibility for cargo loss
falls on the one who agreed to perform the duty
involved.” This is true in the present cases where
the charterer was responsible for loading, stowage
and discharging at the ports visited, while the
owner was responsible for the care of the cargo
during the voyage.
As the bags were in good order when received in
the vessel, the presumption is that they were
damaged or lost during the voyage as a result of
their negligent improper stowage. FOR THIS THE
SHIP OWNER SHOULD BE LIABLE (so its agent,
Macondray is liable, but action has prescribed).
Secondary ISSUE (for our purposes): W/N the
charterer’s agent is liable considering the finding of
the court that the other goods were damaged or
lost during the unloading, and unloading was the
principal duty of the charterer according to the
Uniform General Charter? NO.
Ratio: The charterer assumed this activity under
the charter party. However, the liability imposable
against Transcontinental cannot be borned by
Maritime, which as a mere agent, is not answerable
for injury caused by its principal. It is a well-settled
principle that the agent shall be liable for the act or
omission of the principal only if the latter is
undisclosed.
The agent may be held liable if it represented the
vessel when it took charge of the unloading of the
cargo and issued cargo receipts in its own name. It
should have also received and processed claims
against the vessel for the losses/damages
sustained by the cargo. If this is the case, the
charterer’s agent is also considered a ship agent
and so should be held to be solidarily liable with its
principal.
The charterer in this case did not represent itself
as a carrier and indeed assumed responsibility only
for the unloading of the cargo, i.e. after the goods
were already outside the custody of the vessel. In
supervising the unloading of the cargo and issuing
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Daily Operations Report and Statement of Facts
indicating and describing the day-to-day discharge
of the cargo, Maritime acted in representation of
the charterer and not of the vessel. It thus cannot
be considered a ship agent. As a mere charterer’s
agent, it cannot be held solidarily liable with the
Transcontinental for the losses/damages to the
cargo outside the custody of the vessel. Notably,
Transcontinental was disclosed as the charterer’s
principal and there is no question that Maritime
acted within the scope of its authority.
II. Obligations of the Agent
A. Article 1884: General and specific
obligations (GEN)
Art. 1884. The agent is bound by his acceptance to
carry out the agency, and is liable for the damages
which, through his non-performance, the principal
may suffer.
He must also finish the business already begun on
the death of the principal, should delay entail any
danger.
1. Effects of acceptance of
agency
PNB v. Manila Surety (ROG)
1965
Facts: PNB had opened a letter of credit and
advanced thereon $120k to Edgington Oil for 8k
tons of hot asphalt. Of this amount, 2k tons worth
$279k were released and delivered to Adams &
Taguba Corp (ATACO) under a trust receipt
guaranteed by Manila Surety up to amount of P75k.
To pay for the asphalt, ATACO constituted the Bank
its assignee and attorney-in-fact to receive and
collect from the Bureau of Public Works the amount
out of funds payable to the assignor under
Purchase Order No. 71947.
Ataco delivered to the Bureau of Public Works and
the latter accepted asphalt worth P431k. Of this
amount the Bank regularly collected but the bank
subsequently ceased to collect for unexplained
reasons, until its investigators found that more
moneys were payable to ATACO from the Public
Works office, because latter had allowed another
creditor to collect funds due to ATACO under the
same purchase order, to a total of P311k.
Its demands on the principal debtor and the Surety
having been refused, the bank sued both in CFI to
recover balance of P158k plus interest and costs.
CFI: ruled for PNB.
58
Only Surety Co perfected its appeal. Central Bank
did not appeal while ATACO failed to perfect its
appeal.
CA: ruled against Bank and modified judgment as
to surety's liability hence this appeal by bank to
SC. CA found Bank negligent in having stopped
collecting from Bureau the moneys falling due in
favor of principal debtor ATACO before the debt
was fully collected, thereby allowing such funds to
be taken and exhausted by other creditors to the
prejudice of the surety, and held that Bank's
negligence resulted in exoneration of Manila
Surety.
PNB: Power of attorney obtained from ATACO was
merely an additional security in its favor and it was
the duty of surety, and not that of the creditor, to
see to it that obligor fulfills his obligation, and that
the creditor owed the surety no duty of active
diligence to collect any sum from the principal
debtor.
Issue: WON PNB exercised due diligence in
collecting from Bureau of Public Works? NO
Held:
1. Bank liable fro neglect in collecting money
due to principal debtor.
PNB's argument totally misses the point. CA did not
hold it liable for negligence for failing to collect
from the principal debtor but for its neglect in
collecting the sums due to debtor from the Bureau,
contrary to its duty as holder of an exclusive and
irrevocable power of attorney to make such
collections, since an agent is required to act with
the care of a good father of a family and becomes
liable for the damages which the principal may
suffer through his nonperformance.
Bank's power was expressly made irrevocable such
that Bureau could very well refuse to pay to
principal debtor itself, and a fortiori reject any
demands by surety.
2. Even assuming power of attorney was
mere additional security, Bank still precluded
from recovering from surety.
By allowing assigned funds to be exhausted
without notifying the surety, PNB deprived surety
of any possibility of recoursing against that
security. PNB thereby exonerated surety pursuant
to Art. 2080 of CC.
Letter of demand no bearing here since letter was
addressed to ATACo and funds were to come from
elsewere. As to letter of demand on Bureau, it does
not appear that any reply was made nor that
demand was pressed nor that debtor or the surety
were ever apprised that paymnet was not being
made. Fact remains that because of PNB's
inactivity the other creditors were enabled to
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collect P173k when balance due to PNB was only
P158k. Finding of negligence by CA is not only
conclusive on SC but also fully supported by
evidence.
British Airways vs. Court of Appeals (Mai)
January 29, 1998
Romero, J.
Facts: On April 16, 1989, Mahtani decided to visit
his relatives in Bombay, India. In anticipation of his
visit, he obtained the services of a certain Mr.
Gumar to prepare his travel plans. The latter, in
turn, purchased a ticket from British Airways. Since
British Airways had no direct flights from Manila to
Bombay, Mahtani had to take a flight to Hongkong
via PAL, and upon arrival in Hongkong he had to
take a connecting flight to Bombay on board British
Airways.
Prior to his departure, Mahtani checked in at the
PAL counter in Manila his two pieces of luggage
containing his clothing and personal effects,
confident that upon reaching Hongkong, the same
would be transferred to the British Airways flight
bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he
discovered that his luggage was missing and that
upon inquiry from the British Airways
representatives, he was told that the same might
have been diverted to London. After patiently
waiting for his luggage for one week, British
Airways finally advised him to file a claim by
accomplishing the “Property Irregularity Report.”
Mahtani subsequently filed a complaint for
damages and attorney’s fees against British
Airways and Mr. Gumar. British Airways, in turn,
filed a third-party complaint against PAL. The trial
court ruled in favor of Mahtani and dismissed the
third-party complaint against PAL. The Court of
Appeals affirmed the decision, stating that British
Airways had no cause of action against PAL.
Issue: Whether or not the dismissal of the third-
party complaint against PAL was valid
Held: NO. The contract of air transportation was
exclusively between Mahtani and British Airways,
the latter merely endorsing the Manila to
Hongkong leg of the former’s journey to PAL, as its
subcontractor or agent. In fact, the fourth
paragraph of the “Conditions of Contracts” of the
ticket issued by British Airways to Mahtani confirms
59
that the contract was one of continuous air
transportation from Manila to Bombay.
Well-settled is the 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. Hence, the Court of Appeals
erred when it opined that British Airways, being the
principal, had no cause of action against PAL, its
agent or sub-contractor.
Also, it is worth mentioning that both British
Airways and PAL are members of the International
Air Transport Association (IATA), wherein member
airlines are regarded as agents of each other in the
issuance of the tickets and other matters
pertaining to their relationship. Therefore, in the
instant case, the contractual relationship between
British Airways and PAL is one of agency, the
former being the principal, since it was the one
which issued the confirmed ticket, and the latter
the agent.
A carrier like PAL, acting as an agent of another
carrier, is also liable for its own negligent acts or
omission in the performance of its duties.
Accordingly, to deny British Airways the procedural
remedy of filing a third-party complaint against PAL
for the purpose of ultimately determining who was
primarily at fault as between them, is without legal
basis.
B. Article 1885: Effect when person declines
agency (ABBY)
Art. 1885. In case a person declines an agency, he
is bound to observe the diligence of a good father
of a family in the custody and preservation of the
goods forwarded to him by the owner until the
latter should appoint an agent or take charge of
the goods.
Obligation: Bound to observe the diligence of a
good father of a family in the custody and
preservation of the goods forwarded to him by the
owner.
Owner must as far as practicable:
1. appoint an agent
2. take charge of the goods
C. Article 1886: Exception to the general
rule that the principal must advance to
the agent the sums necessary for the
execution of the agency (EARLA)
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Art. 1886. Should there be a stipulation that the
agent shall advance the necessary funds, he shall
be bound to do so except when the principal is
insolvent.
- Exception to the
exception
D. Article 1887 (JANCES)
Art. 1887. In the execution of the agency, the
agent shall act in accordance with the instructions
of the principal.
In default thereof, he shall do all that a good father
of a family would do, as required by the nature of
the business.
1. Effect of violation of principal’s
instructions
2. Instructions v. authority
3. Rule in absence of instructions
4. When departure is justified
5. Cases
Gutierrez Hermanos v. Oria Hermanos
(ALAIN)
March 30, 1915
Torres, J.:
FACTS: ALLEGATIONS by defendant ORIA
HERMANOS & CO.: By reason of mercantile
relations and the opening of a mutual current
account from May 1, 1900, the plaintiff (Gutierrez
Hermanos) had obligated itself periodically to send
to the defendant firm a memorandum or statement
of the current account, and further obligated itself,
in case the said mercantile relations should be
finally terminated, to present a general and
complete account, duly supported by vouchers and
other proofs; that plaintiff, Gutierrez Hermanos,
had contended itself by sending to Oria Hermanos
and Co. some memoranda or abstracts of account,
accepted by defendant as such "abstract of
account," without the latter's having waived its
right to demand the presentation, as agreed upon,
of the vouchers and other proofs upon the closing
of the current account, a stipulation which
Gutierrez Hermanos had failed to comply with.
Defendant therefore prayed that the plaintiff,
Gutierrez Hermanos, be sentenced to render and
present the said final account, duly accompanied
by vouchers, in conformity with the agreement
made.
PLAINTIFF’S ALLEGATIONS: Gutierrez
Hermanos denied in its answer the allegations
made by Oria Hermanos & Co. in its cross-
complaint, and set forth that, in consequence of
the mutual current account opened between the
60
parties from the year 1900, plaintiff transmitted
weekly or fortnightly, according to circumstances,
a specific statement of the transactions effected,
as well as, semiannually, a general account of the
business done during the six months last elapsed,
and that defendant, after an examination of such
semiannual account together with its details and
vouchers, and after some objections thereto had
been explained, was accustomed to prove the
same. This was the produre carried on for more
than nine years during which Oria Hermanos & Co.
from time to time approved each one of the 17
account that were presented to it, and upon
Gutierrez Hermanos closing the current account
from January to June, 1909, it also presented to
defendant a general detailed account, which,
nothwithstanding that no objection whatever was
made to it, was not approved. Therefore the
complaint was filed that initiated this litigation.
ISSUE: Whether or Not Gutierrez Hermanos
actually bound itself to present to Oria Hermanos
and Co., besides the semiannual accounts
rendered, a general account comprising all the
business undertaken between 1900 and June,
1909, on which latter date it was considered by
Gutierrez Hermanos as terminated.
HELD: The allegation made by defendant relative
to this point had not been substantiated by any
evidence whatever, and therefore there is no
reason nor legal ground whereby plaintiff could be
compelled to present that general account
requested in the first cross-complaint.
It is, in our opinion, appropriate it insert hereinafter
what the trial court, in the judgment rendered,
says with respect to this matter: "If commission
agents be obliged to render to their principals
itemized accounts, supported by vouchers, of the
sums they collect as commission and of the
transactions effected by them in relation with their
principals, as often as the latter may desire, in
cases where there arises some trouble, some
difference of opinion or a conflict of interests, or
where the commission agents close the account, as
occurs in the case at bar because the principals did
not pay what they were owing or because, instead
of the debt being diminished, it was increased, the
commission contract would become an
inexhaustible and never ending source of litigation
and of claims without number, a formidable arm for
spiteful principals against which it would be
insufficient to oppose an arsenal of vouchers such
as might be treasured by the most prescient
commission agent, because there could be avoided
neither the brother resulting from their necessary
examination, nor the heavy expenses and loss of
time that are the inevitable accompaniment of this
class of work."
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When an account has been presented or rendered
and has been approved by the party
whom it concerns or interests, it is not proper to
revise it, unless it should be proved that in its
approval there was deceit, fraud, or error seriously
prejudicial to the party who gave such approval.
Arts. 1265 and 1266, Civil Code.)
In the decision rendered in the case of Pastor vs.
Nicasio, (6 Phil. Rep., 152), the following doctrine
was laid down;
When accounts of the agent to the
principal are once approved by the
principal, the latter has no right to ask
afterwards for a revision of the same or for
a detailed account of the business, unless
he can show that there was fraud, deceit,
error or mistake in the approval of the
accounts — facts not proven in this case.
The record does not show it to have been duly
proven that upon Oria Hermanos & Co. giving its
approval to the 17 accounts presented by Gutierrez
Hermanos there was deceit, fraud, or mistake
prejudicial to the former's interests. For the sole
reason that Gutierrez Hermanos, upon closing the
current account with Oria Hermanos & Co. was
obliged, certainly an unwarranted obligation, to
render a general account comprehensive of all the
business transacted between both parties during
more than nine years, and there being no proof of
the alleged agreement between them, it would be
improper to hold that the plaintiff is obliged to
render and present a general account in the sense
requested by Oria Hermanos & Co. in its first cross-
complaint.
PNB v. Manila Surety & Fidelity Co., supra
E. Article 1888: When agent shall not carry
out agency (JILL)
Art. 1888. An agent shall not carry out an agency if
its execution would manifestly result in loss or
damage to the principal. (n)
The agent should not carry out the agency if its
execution will manifestly result in a loss or
damage to the principal.
The reason is that the agent is a mere extension of
the personality of the principal. His duty is to
render service FOR THE BENEFIT of the principal
and not to act to his detriment. Moreover, agent
must exercise due diligence in carrying out the
agency.
61
F. Article 1889 (JILL)
Art. 1889. The agent shall be liable for damages if,
there being a conflict between his interests and
those of the principal, he should prefer his own
1. Rule on conflict of interest
The rule is that the agent is not permitted, without
the knowledge and consent of the principal, to
assume two distinct characters in the same
transaction – for himself and pretending to act for
the principal.
The agent will be liable for damages if, there being
a conflict, he chooses his own than those of the
principal. However, if the principal chooses to
waive the benefit and he does so with knowledge
of facts, the rule will not apply. The rule will not
also apply if the agent’s interests are superior (e.g.
he has a security interest in the goods; he will be
exposed to great physical risks).
The rule does not distinguish whether the agency is
onerous or gratuitous.
The basis for the rule is the fiduciary relationship
between the principal and agent, with the latter
expected to observe utmost good faith and loyalty
towards his principal. The rule should also preclude
an agent from temptations (to engage in self-
dealing).
This rule is preventive, not remedial justice.
2. Cases
Aboitiz v. De Silva (MARK)
Facts:
• Aboitiz sold his shares in G. & R. Aboitiz and
Viuda e Hijos de P. Aboitiz, partnership to the
De Silvas.
• There was an unpaid balance of 159,000.
Aboitiz filed a complaint to recover said
amount.
• Defendants maintains that their liability under
the "Hipoteca-Venta" had, with the plaintiff's
implied consent, been transferred to Aboitiz &
Co.
ISSUE: WON defendants’ liability under the
"Hipoteca-Venta" had, with the plaintiff's implied
consent, been transferred to Aboitiz & Co.
Held: No
• There is nothing in this contention. It is true
that the three defendants transferred all the
assets and liabilities of G. & R. Aboitiz to the
corporation Aboitiz & Co., and that at the time
at least two of the defendants, Guillermo and
Vidal Aboitiz, held a general power of attorney
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from the plaintiff. But, in the first place, the
defendants appear to have acted for
themselves only and none of them pretended
to act on behalf of Ramon Aboitiz; in the
second place, the defendant's liability under
the "Hipoteca-Venta" was a personal and
individual liability, while the transfer in
question related to the business of the
partnership of G. & R. Aboitiz; and, in the third
place, the defendants who held powers of
attorney could not represent both themselves
and their principal in a transaction involving
the shifting of the liability from themselves to
another party.
• Neither does the fact that the plaintiff
subsequently accepted payments on the
"Hipoteca-Venta Account" from Aboitiz & Co.
work a novation. Novation is never presumed.
Unless it is clearly shown either by express
agreement of the parties or by acts of
equivalent import, this defense will never be
allowed.
Severino v. Severino, supra
Barton vs. Leyte Asphalt & Mineral Oil Co.
(ANJ S.)
(Note: The case has too many facts irrelevant to
our topic. I decided not to include in the digest the
facts that are irrelevant so as not to confuse us.
Thanks.)
Facts:
• James D. Barton, an American citizen residing in
the City of Manila, was given by Leyte Asphalt &
Mineral Oil Co. the sole and exclusive sales
agency for the sale of their bituminous limestone
and other asphalt products in the countries of
Australia, New Zealand, Tasmania, Saigon, India,
Sumatra, Java, China and Hong Kong until May 1,
1922, and until May 1, 1921 in Siam and the
Straits Settlements of US. It was also stipulated
in the letter of authority that should the sales of
Barton in the US reach 5,000 tons on or before
May 1, 1921, he would be awarded the sole
rights for the said territory for an additional 1
year and should his sales in the second year
reach or exceed 10,000 tons, he would be given
the option to renew the agreement for the said
territory on the same terms for an additional 2
years. Further, it was stated that should his sales
equal or exceed 10,000 in the year ending
October 1, 1921, or 20,000 tons by May 1,1922,
then the contract will automatically be continued
for an additional of 3 years.
• Very soon after the contract became effective,
Barton requested the company to give him a
similar selling agency for Japan. To this request,
the company through its president, Anderson,
replied that at that moment, they do not feel like
giving him the same authority until he can make
some large sized sales there, because some
62
other people have given the company
assurances that they can handle the Japanese
sales, therefore, the company have decided to
leave the agency for that company open for a
time.
• Meanwhile, Barton embarked for San Francisco
and upon arriving at that port, he entered into an
agreement with Ludvigsen & McCurdy, whereby
the said firm was constituted a subagent and
given the sole selling rights for the bituminous
limestone products of the company for a period
of 1 year.
• Upon an earlier voyage during the same year to
Australia, Barton had already made an
agreement with Frank B. Smith of Sydney,
whereby the latter was to act as the plaintiff’s
sales agent for limestone products of the
company. Later, the same agreement was
extended for a period of one year.
• In Tokio, Japan, Barton came in contact with H.
Hiwatari. In a letter, Hiwatari speaks of himself as
if he had been appointed exclusive sales agent
for Barton in Japan, but no document expressly
appointing him such is in evidence.
• Barton then received a letter from Ludvigsen &
McCurdy that it might enter an order for 6,000
tons of bituminous limestone. In turn, Barton
informed the company to be prepared to ship the
products. Anderson, however, informed him that
the company, with its current facilities, wouldn’t
be able to handle big contracts.
• Barton expressed surprise at this and told
Anderson that he had not only that particular
order from San Francisco but other orders for
large quantities to be shipped to Australia and
Shanghai.
• Subsequently, Barton informed the company at
different dates to prepare shipments to US and
Australia, and later on, to Japan.
• It will be noted that in connection with the letters
(totaling to 4) sent by Barton to the company
informing the latter to prepare shipments, no
mention was made of the names of the persons,
or firms, for whom the shipments were really
intended. The obvious explanation that occurs in
connection with this is that the plaintiff did not
care to reveal the fact that the orders
originated from his own subagents in San
Francisco and Sydney.
• The company, in its reply to one of Barton’s
letter, stated that “no orders can be entertained
unless cash has been actually deposited with
either the International Banking Corporation or
the Chartered Bank of India, Australia, and China,
at Cebu.”
• To this, Barton, in turn, replied questioning the
right of the company to insist upon cash deposit
in Cebu prior to the filling of the orders. In
conclusion, Barton gave some more orders for
shipment to Australia in the quantities of 5,000
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tons, and 10,000, and stated that he would

arrange for deposits to be made on these
additional shipments if the company will signify
its ability to fulfill the orders. Again, no name was
mentioned as the purchaser, or purchasers, of
these intended consignments.
• Barton then instituted in the CFI of Manila, an
action to recover from Leyte Asphalt & Mineral
Oil Co., Ltd., as damages for breach of contract,
the sum of $318,563.30 and to secure a judicial
pronouncement to the effect that the plaintiff be
entitled to an extension of the terms of the sales
agencies specified in the contract.
• The Trial Court absolved the company from 4 of
the 6 causes of action set forth in the complaint.
For the two remaining causes of action, the court
adjudged the company liable to pay Barton the
sum of $202,500 (equivalent to 405,000php) as
damages. From this judgment, the company
appealed.
Issue: WON the company is liable to pay Barton
damages for breach of contract.
Held/Ratio: No.
• The original contract by which the plaintiff
was appointed sales agent for a limited period of
time in Australia and the US contemplated that
he should find reliable and solvent buyers who
should be prepared to obligate themselves to
take the quantity of bituminous limestone
contracted for upon terms consistent with the
contract. These conditions were not met by
the taking of these orders from Barton’s
own subagents, which was as if the plaintiff
had bought for himself the commodity
which he was authorized to sell to others.
• Article 267 of the Code of Commerce
declares that no agent shall purchase for himself
or for another that which he has ordered to sell.
The law has placed its ban upon a broker’s
purchasing from his principal unless the
latter with full knowledge of all the facts
and circumstances acquiesces in such
course; and even then the broker’s action
must be characterized by utmost good
faith.
• A sale made by a broker to himself
without the consent of the principal is
ineffectual whether the broker has been
guilty of fraudulent conduct or not.
Dispositive: Judgment Reversed.
Malcolm, J., dissenting:
• Nowhere in the contract was the plaintiff
prohibited to secure subagents.
• The majority decision misses out on the point
that the only objection of the company when
the orders were communicated was related to
the manner of payment.
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G. Article 1890 (JESSA)
Art. 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.
1. Reason for allowing agent to
be the lender
• The agent cannot, without special power
of attorney, loan or borrow money (See Art
1878[7]).
• If the agent is expressly empowered to
borrow money, he may himself be the lender
at the current rate of interest
o REASON: There is no danger of the
principal suffering any damage
since the current rate of interest
would have to be paid in any case
if the loan were obtained from a
third person
• If the agent is authorized to lend money at
interest, he cannot be the borrower without the
consent of the principal
o REASONS: the agent may prove to
be a bad debtor; possible conflict of
interest; prejudicial to the principal
H. Article 1891 (BAMBI)
Art. 1891. Every agent is bound to render an
account of his transactions and to deliver to the
principal whatever he may have received by virtue
of the agency, even though it may not be owing to
the principal.
Every stipulation exempting the agent from the
obligation to render an account shall be void.
(1720a)
RULE: It is the duty of the agent to ACCOUNT FOR
and to DELIVER to the principal ALL money and
property which may have come into his hands or of
a sub-agent appointed by him BY VIRTUE OF or AS
A RESULT of the agency.
1. Duty to render account
2. Criminal liability of agent
Two obligations of an agent under Art. 1981
Obligation to render accounts
Agent must disclose to the principal the following:
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1. Source of profits of agency
• All profits of the agency belong to the
principal, regardless of whether profit is the
result of the performance or violation of
the agency.
o Rationale for rule: It is the principal
who assumes responsibility for the
transaction. Also, the agent cannot
be permitted to derive advantage
from his own default
2. Secret profit agent may have received
• An agent who takes secret profit is guilty of
breach of his loyalty to the principal and
forfeits his right to collect commission.
o Regardless of benefit/injury to the
principal, usage/custom, or
gratuitous nature of the agency.
Exemptions to obligation to account:
If agent acted only as a middleman with the task of
merely bringing together the vendor and
vendee, who themselves thereafter will
negotiate the terms and conditions of the
transaction.
If agent informed principal of gift/bonus/profit he
received from vendee and principal did not
object thereto.
When right of lien exists in favor of agent (i.e.
Article 19142; Sec. 37, Rule 138, ROC3)
Obligation to turn over proceeds
Obligation to render an accounting and report of
collections presupposes the duty of simultaneously
turning over collections.
Nature of agent’s possession of
goods/proceeds received in agency
• Agent has physical and juridical possession
2
Art. 1914. The agent may retain in pledge the things
which are the object of the agency until the principal
effects the reimbursement and pays the indemnity set
forth in the two preceding articles. (1730)
3
Sec. 37. Attorneys' liens. - An attorney shall have a lien
upon the funds, documents and papers of his client which
have lawfully come into his possession and may retain
the same until his lawful fees and disbursements have
been paid, and may apply such funds to the satisfaction
thereof. He shall also have a lien to the same extent upon
all judgments for the payment of money, and executions
issued in pursuance of such judgments, which he has
secured in a litigation of his client, from and after the
time when he shall have caused a statement of his claim
of such lien to be entered upon the records of the court
rendering such judgment, or issuing such execution, and
shall have caused written notice thereof to be delivered
to his client and to the adverse party; and he shall have
the same right and power over such judgments and
executions as his client would have to enforce his lien
and secure the payment of his just fees and
disbursements.
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o Unlike a servant or messenger who
only has physical possession
• Agent has autonomous right to retain
possession of goods/proceeds (i.e., when
principal fails to reimburse him for advances or
indemnify him for damages suffered without
his fault)
o Unlike a bank teller who, as mere a
custodian/keeper of funds received,
has no independent right to retain.
Other notes
Any stipulation exempting the agent from his
obligation to render accounts (par. 1 of 1891) is
void. (par 2. of 1891).
Rationale for rule: Stipulation contrary to par. 1
encourages fraud and is contrary to public
policy. It is in the nature of a waiver of an
action for future fraud, thus void.
If agent fails to deliver and instead converts for his
own use the money of property belonging to the
principal, the agent is liable for estafa.
Agent also cannot subtract from his collections the
commission due him.
Domingo v. Domingo (REX)
FACTS On June 2, 1956 Vicente Domingo granted
Gregorio Domingo, a real estate broker, the
exclusive agency to sell a lot with an area of about
88k square meters at the rate of 2 pesos per sqm,
with a 5% commission of the total price if sold by
Vicente or anyone else during the 30 day duration
of the agency or if the property is sold by Vicente
within three months from the agency’s termination
to a buyer submitted by Gregorio during the
continuance of the agency with notice to Vicente.
This contract was in triplicate, 1 copy given to
Vicente, the original and another copy with
Gregorio.
The next day, Gregorio authorized one Teofilo
Purisima to look for a buyer, promising him half of
the 5% commission. Purisima later then introduced
Oscar de Leon to Gregorio as a prospective buyer.
De Leon submitted a written offer much lower than
2 pesos per sqm, at 1.2 pesos per sqm. Vicente
directed Gregorio to ask De Leon to raise his offer.
After several conferences between Gregorio and
De Leon, the latter raised his offer to 109k, to
which Vicente agreed by signing on it. Upon
demand of Vicente, Oscar issued a 1k check as
earnest money, after which Vicente gave 300
pesos to Gregorio.
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De Leon confirmed his former offer to pay for 1.20
pesos per sqm, and Vicente asked for an additional
1k as earnest money, which De Leon promised to
deliver. The original 109k offer signed by Vicente
was amended to the effect that De Leon will vacate
about September his house and lot at QC which is
part of the purchase price, and again amended to
December.
Pursuant to his promise to Gregorio, De Leon gave
him a gift or propina of 1k for succeeding in
persuading Vicente to sell his lot at a lower price.
This gift was not disclosed by Gregorio to
Vicente. De Leon also never paid the additional 1k
earnest money. By August the deed of sale still
hadn’t been executed. De Leon then told Gregorio
that he did not receive his money from his brother
in the US, for which reason he was giving up the
negotiations and the amounts he had already paid
and given.
Gregorio then sensed something fishy, so he went
to Vicente and read the 5% commission part of the
contract. Vicente grabbed the contract and tore it
to pieces, but Gregorio did not react as he still had
another copy. Gregorio then proceeded to the QC
Register of Deeds where he learned that a deed of
sale had been executed by Amparo Diaz, De Leon’s
wife, over their house and lot on the purchase price
of Vicente’s property.
Upon learning this, he demanded in writing his
commission on the sale price of 109k. He talked to
De Leon who told him that Vicente went to him and
asked him to eliminate Gregorio in the transaction
and that he would sell his property for 104k only.
Gregorio then went to court, where the CA, in
affirming the TC, sentenced Vicente to pay
Gregorio and Purisima their commissions, plus
moral and exemplary damages with attorney’s fees
and costs. Vicente’s heirs now seek the reversal of
this decision.
ISSUES
1. WON the failure of Gregorio to disclose the
gift by De Leon constitutes fraud as to cause
forfeiture of the commission
2. WON Vicente should be liable to Purisima
HELD/RATIO
1. YES. The CA was wrong in not finding this
fraudulent. Article 1891’s second paragraph is
a new addition designed to stress the highest
loyalty required of an agent, voiding any
stipulation exempting the agent from the duty
and liability of rendering an account of
transactions received by virtue of the agency,
even if the amount is not due to the principal.
Article 1909 of the CC makes the agent liable
not only for fraud, but also negligence, whether
the agency was gratuitous or for price or
65
reward. These provisions demand the utmost
good faith by the agent to his principal. An
agent who takes a secret profit without
revealing this to his principal is guilty of a
breach of loyalty, and forfeits his right to
collect the commission, even if the principal
does not suffer any injury by reason of such
breach of fidelity, or even gains from it: the
rule is to prevent possible damage.
By taking such profit or bonus, the agent
assumes a position wholly inconsistent with
that of being an agent for his principal.
Gregorio’s acceptance of De Leon’s monetary
gift corrupted his duty to serve Vicente’s
interests only, and he succeeded in persuading
Vicente in selling the property at a much lower
price than the original.
The duty of the agent in 1891 will not apply if
the agent acted only as middleman, tasked
only with bringing the vendor and vendee
together. Neither will it apply if he informs his
principal of the bonus or gift he received and
his principal did not object. Here, Gregorio was
not merely a middleman, and Vicente was not
told of the gift.
The fact that the wife of De Leon is now the
buyer in the deed of sale does not matter,
since De Leon himself would still be the buyer
both in law and in fact, his consent being
needed as administrator of the conjugal assets
of the house which was part of the purchase
price.
2. No. Only Gregorio would be liable, since
Purisima is his sub-agent alone. He should get
his half share of whatever amounts Gregorio
received from the agency with Vicente (300
from Vicente, 1000 from de Leon, 1,300 total),
which amounts to 650 pesos.
The SC also rewards moral damages to Vicente by
1k and attorney’s fees in the same amount. CA
reversed.
Severino v. Severino, supra
Ojinaga v. Estate of Perez (EVA)
U.S. v. Kiene (TOPE)
1907
Facts:
• Kiene was an insurance agent.
• On account of his employers, China Mutual Life
Insurance Company, P1,539.20, was paid to
him, which he failed and refused to turn
over to them.
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• Hence, he was convicted of the crime of
estafa in the CFI which sentenced him to be
imprisoned in Bilibid.
• During the trial, accused offered no evidence
on his own behalf and rest his appeal
substantially upon the alleged failure of the
prosecution to establish the existence of
a duty or obligation imposed on the
defendant to turn over his principal the
funds which he is charged with appropriating
to his own use.
• Defendant contends that the trial court
erroneously admitted in evidence a certain
document purporting to be a contract of
agency signed by the defendant.
• The name of the accused is attached to this
document, and one of the witnesses, the
district agent of the Insurance Company,
stated that it was the contract of agency it
purported to be, but failed to state specifically
that the signature attached thereto was the
signature of the defendant, though he declared
that he knew his signature and had seen him
write it on various occasions.
ISSUE: WoN defendant is obliged to return the
amount in question to his principal.
HELD: YES.
• Court: it’s not anymore necessary to review the
action of the court in admitting the alleged
document in evidence, because the obligation
of the defendant to deliver the funds in
question to his employers is determined
by the provision of article 1720 of the
Civil Code:
"Every agent is bound to give an account
of his transactions and to pay to the
principal all that he may have received by
virtue of the agency, even though what has
been received is not owed to the principal."
• Since nothing to the contrary appears in the
record, and the existence of the agency and
the collection of the funds on account of the
principal having been established, the
obligation to deliver these funds to the
principal must be held to have been
imposed upon the agent by virtue of the
contract of agency.
• Appellant, however, contented that the court
erred in admitting in evidence a certain letter
written by the defendant wherein he admitted
the collection of certain funds on account of his
principal. Court said that the execution of this
letter was conclusively established, and that it
was properly admitted, being pertinent and
material to the issue in the case.
• There were other objections to the admission
of certain testimony at the trial of the case, but
66
Court found no error in the proceedings
prejudicial to the real rights of the accused,
and it is unnecessary to discuss the
assignments of error based on these
objections.
Guzman v Court of Appeals (GEN)
July 31, 1956
Reyes, J.B.L., J
FACTS: Jonathan Guzman was a traveling sales
agent of New Life Commercial, selling various La
Tondena wine in a truck together with a driver and
a helper. He made cash sales amounting to
P4,873.62 in Aparri, Cagayan.
He informed the driver that P2,840.50 was stolen
and reported the matter to the police. Meanwhile,
on their way home, they were stopped by
authorities requesting Guzman to execute an
affidavit regarding the alleged theft. Guzman
instructed the driver to deliver P1,630 in cash and
P403.12 in check to the manager, Enrique Go.
Go reported the matter to the police and Guzman
was subsequently questioned. The latter requested
that Go defer the filing of the complaint and that
he promised to refund the amount lost. However,
Guzman was still prosecuted for theft for the
unreturned amount of P804.70.
ISSUE: WON Guzman was liable for theft
HELD: NO. An agent, unlike a servant or
messenger, has both the physical and juridical
possession of the goods received in agency, or the
proceeds thereof, which takes the place of the
goods after their sale by the agent. His duty to turn
over the proceeds of the agency depends upon his
discharge, as well as the result of the accounting
between him and the principal; and he may set up
his right of possession as against that of the
principal until the agency is terminated.
As the accused converted to his own use proceeds
of sales of merchandise delivered to him as agent,
which he received in trust for and under obligation
to deliver and turn over to his principal, he is guilty
of the crime of estafa. This has been the consistent
ruling of the Court in cases where a sales agent
misappropriates or fails to turn over to his principal
proceeds of things or goods he was commissioned
or authorized to sell for the latter.
The information failed to allege the essential
element of misappropriation or conversion to the
prejudice of another; hence the accused must be
acquitted of the crime of theft.
Chua-Burce vs. Court of Appeals (MAI)
April 27, 2000
Quisumbing, J.
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Facts: On August 16, 1985, Ramon Rocamora, the
Manager of Metrobank, requested Fructuoso
Peñaflor, Assistant Cashier, to conduct a physical
bundle count of the cash inside the vault, which
should total P4,000,000.00, more or less. During
this initial cash count, they discovered that there
was a shortage of P150,000.00. The One Hundred
Peso bills actually counted was P3,850,000.00 as
against the balance of P4,000,000.00 in the Cash in
Vault (CIV) Summary Sheet, or a total shortage of
P150,000.00. The next day, to determine if there
was actually a shortage, a re-verification of the
records and documents of the transactions in the
bank was conducted. There was still a shortage of
P150,000.00.
Four investigations were conducted and these
investigations concluded that there was a shortage
of P150,000.00, and the person primarily
responsible was the bank’s Cash Custodian,
Cristeta Chua-Burce.
A criminal case for estafa was filed against Chua-
Burce, while a civil case for sum of money and
damages w/ preliminary attachment and
garnishment was filed against petitioner and her
husband. The trial court rendered a consolidated
decision finding petitioner (a) guilty of estafa under
Article 315 (1) (b) of the Revised Penal Code in the
criminal case, and (b) liable for the amount of
P150,000.00 in the civil case.
Issue: Whether or not the elements of estafa
through conversion or misappropriation were
proven beyond reasonable doubt
Held: NO.
The first element [that personal property is
received in trust, on commission, for
administration or under any other circumstance
involving the duty to make delivery of or to return
the same, even though the obligation is
guaranteed by a bond] is absent. When the money,
goods, or any other personal property is received
by the offender from the offended party (1) in trust
or (2) on commission or (3) for administration, the
offender acquires both material or physical
possession and juridical possession of the thing
received. Juridical possession means a possession
which gives the transferee a right over the thing
which the transferee may set up even against the
owner. In this case, petitioner was a cash custodian
who was primarily responsible for the cash-in-vault.
Her possession of the cash belonging to the bank is
akin to that of a bank teller, both being mere bank
employees.
There is an essential distinction between the
possession by a receiving teller of funds received
from third persons paid to the bank, and an agent
who receives the proceeds of sales of merchandise
67
delivered to him in agency by his principal. In the
former case, payment by third persons to the teller
is payment to the bank itself; the teller is a mere
custodian or keeper of the funds received, and has
no independent right or title to retain or possess
the same as against the bank. An agent, on the
other hand, can even assert, as against his
own principal, an independent, autonomous,
right to retain money or goods received in
consequence of the agency; as when the
principal fails to reimburse him for advances
he has made, and indemnify him for damages
suffered without his fault.
Petitioner herein being a mere cash custodian had
no juridical possession over the missing funds.
Hence, the element of juridical possession being
absent, petitioner cannot be convicted of the crime
of estafa under Article 315, No. 1 (b) of the Revised
Penal Code.
I. Articles 1892, 1893 (ROG)
Art. 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)
Art. 1893. In the cases mentioned in Nos. 1 and 2
of the preceding article, the principal may
furthermore bring an action against the substitute
with respect to the obligations which the latter has
contracted under the substitution.
1. Relation among principal,
agent, and sub-agent
2. General rule: Agent may
appoint substitute
3. Consequence of lack of
prohibition
4. Effects of substitution
Sub-agent defined: a person to whom agent
delegates as his agent, the performance of an act
for the principal which the agent has been
empowered to perform through his representative.
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Power of agent to appoint sub-agent or substitute
allowed. Agent here is a principal with respect to
the substitute. Law allows such substitution for
reasons of convenience and practical utility.
Principal need not fear prejudice as he has right of
action not only against agent but also against
substitute with respect to obligation which latter
has contracted under the substitution. This right of
action against substitute is an exception to general
rule that contracts are binding only between the
contracting parties.
Relation among principal, agent and sub-agent:
1. Sub-agent appointed by agent on
latter's sole account- sub agent a stranger to
principal who originally gave life to agency.
2. Sub-agent appointed by agent with
authority from principal- where agent
authorized to appoint sub-agent, relation of
principal and agent, exists between principal
and sub-agent.
3. Effect of death of principal/agent -
if authority of sub-agent proceeds from
principal, death of agent who appointed him
does not affect his authority.
Effects of substitution
Substitution prohibited - when substitution is
appointed by agent against the express
prohibition of principal agent exceeds limits of
his authority thus acts of substitute will be
void.
Substitution authorized - if agent given power to
appoint, substitution has effect of releasing
agent from responsibility unless person
appointed is notoriously incompetent or
insolvent because this would be abuse of
principal's confidence.
Substitution not authorized, but not prohibited -
substitution valid if it is beneficial to principal
because agency has been executed.
5. Cases
Macias & Co. v. Warner Bros. (REG)
J. Johns
1922
FACTS: Respondent was the resident agent of
insurance companies The China fire Insurance
Company, Ltd., The Yang-Tsze Insurance
Association, Ltd., and The State Assurance Co., Ltd.
which are all foreign companies. Respondent
served as the agent of petitioner for the acquisition
of several insurance policies. Fire occurred
sometime in 1919, in the building in which the
goods covered by the insurance policies were
stored. Petitioner made a claim for damages under
its policies against respondent.
68
ISSUE: WON respondent was a mere agent and
thus not liable for the loss.
RULING: YES. Warner, Barnes & Co., was just an
agent of the insurance companies. It did not make
any contract with the petitioner, and is not liable to
the plaintiff on any contract, either as principal or
agent. For such reason, petitioner is not entitled to
recover its losses from Warner, Barnes & Co.,
either as principal or agent. There is no breach of
any contract with the plaintiff by Warners, Barnes
& Co., either as agent or principal, for the simple
reason that Warner as agent or principal, never
made any contract, oral or written, with the
plaintiff.
Serona v. CA (ABBY)
2002
J. Ynares-Santiago
Facts:
Leonida Quilatan delivered pieces of jewelry to
petitioner Virgie Serona to be sold on commission
basis. By oral agreement of the parties, Serona
shall remit payment or return the pieces of jewelry
if not sold to Quilatan, both within 30 days from
receipt of the items.
Serona had earlier entrusted the jewelry to one
Marichu Labrador for the latter to sell on
commission basis. Petitioner was not able to collect
payment from Labrador, which caused her to
likewise fail to pay her obligation to Quilatan.
Quilatan sent a demand letter to Serona but she
failed to pay the principal. Labrador says that she
sold some of the jewelry to a 3rd person who did
not pay her.
Serano is charged with estafa and is now appealing
to have the decision of the TC reversed.
Issue: WoN Serona is liable for the acts of her sub-
agent Labrador
Held: Found Not Guilty on the Estafa charge but
sentenced to pay the civil liability of the value of
the unreturned jewelry.
Petitioner did not ipso facto commit the crime of
estafa through conversion or misappropriation by
delivering the jewelry to a sub-agent for sale on
commission basis. We are unable to agree with the
lower courts’ conclusion that this fact alone is
sufficient ground for holding that petitioner
disposed of the jewelry "as if it were hers, thereby
committing conversion and a clear breach of trust."
The law on agency in our jurisdiction allows the
appointment by an agent of a substitute or sub-
agent in the absence of an express agreement to
the contrary between the agent and the principal.
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In the case at bar, the appointment of Labrador as
petitioner’s sub-agent was not expressly prohibited
by Quilatan, as the acknowledgment 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 acknowledgment receipt was
executed or at any other time. Thus, it cannot be
said that petitioner’s act of entrusting the jewelry
to Labrador is characterized by abuse of
confidence because such an act was not proscribed
and is, in fact, legally sanctioned.
In the case at bar, it was established that the
inability of petitioner as agent to comply with her
duty to return either the pieces of jewelry or the
proceeds of its sale to her principal Quilatan was
due, in turn, to the failure of Labrador to abide by
her agreement with petitioner. Notably, Labrador
testified that she obligated herself to sell the
jewelry in behalf of petitioner also on commission
basis or to return the same if not sold. In other
words, the pieces of jewelry were given by
petitioner to Labrador to achieve the very same
end for which they were delivered to her in the first
place. Consequently, there is no conversion since
the pieces of jewelry were not devoted to a
purpose or use different from that agreed upon.
Similarly, it cannot be said that petitioner
misappropriated the jewelry or delivered them to
Labrador "without right." Aside from the fact that
no condition or limitation was imposed on the
mode or manner by which petitioner was to effect
the sale, it is also consistent with usual practice for
the seller to necessarily part with the valuables in
order to find a buyer and allow inspection of the
items for sale.
The agents to whom personal property was
entrusted for sale, conclusively proves the inability
to return the same is solely due to malfeasance of
a subagent to whom the first agent had actually
entrusted the property in good faith, and for the
same purpose for which it was received; there
being no prohibition to do so and the chattel being
delivered to the subagent before the owner
demands its return or before such return becomes
due, we hold that the first agent can not be held
guilty of estafa by either misappropriation or
conversion. The abuse of confidence that is
characteristic of this offense is missing under the
circumstances.
An agent who is not prohibited from appointing a
sub-agent but does so without express authority is
responsible for the acts of the sub-agent.
Considering that the civil action for the recovery of
civil liability arising from the offense is deemed
instituted with the criminal action, petitioner is
liable to pay complainant Quilatan the value of the
unpaid pieces of jewelry.
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People v. Flores (EARLA)
Lorca v. Dineros (JANCES)
February 28, 1958
J. Bengzon
Facts: In another civil case, Dineros as Deputy
Sheriff and in name of sheriff, pursuant to the writ
of execution, sold the property involved in that
case, disregarding third party claim of Lorca. Lorca
then instituted action for damages against Dineros.
Ruling: CFI - action dismissed. Responsibility should
be attributed to the sheriff, not his deputy.
Issue: WON Dineros as Deputy Sheriff is liable for
damages
HELD: Sec 334 of the Revised Admin Code, which
states that deputies may be required to give
adequate personal bond as security against loss…,
is applicable only when the deputy acts in his own
name or is guilty of active malfeasance or where
he exceeds the limits of his agency. In this case,
the certificate of sale clearly shows that Dineros
acted in the name of the Ex-Officio Provincial
Sheriff.
The Sheriff is the one liable to third persons on the
acts of his deputy, in the same manner that the
principal is responsible for the acts of his agent,
that is why he is required to post a bond for the
benefit of whom it may concern under Sec 330 of
the Revised Admin Code.
Disposition: Judgment affirmed.
Marquez v. Varela (ALAIN)
December 24, 1952
Labrador, J.:
FACTS: Plaintiff Gutierrez Lora was authorized by
defendants (spouses Varela) to negotiate the sale
of their share or interest in a parcel of land on
Plaza Goiti, Manila, and having meet his co-plaintiff
L. G. Marquez, a real estate broker, both of them
agreed to work together for the sale of defendant's
property; that they found a ready, willing, and able
buyer, which accepted defendants' price and
terms, but that thereafter defendants, without any
justifiable reason, refused to carry out the sale and
execute the necessary deed therefore; and that as
a consequence plaintiffs failed to receive the
commission which they were entitled to receive.
Thus, plaintiffs filed complaint. Objection was filed
by the defendants.
Objection to the complaint, however, is not that
Marquez has no right to share in the compensation
to be paid Lora, whom defendants had directly
engaged, but that Marquez can not join in this
action and enforce therein his rights directly
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against the defendants, evidently because
defendants never dealt with Marquez, directly or
indirectly, or, in other words, that both Marquez
and his services were not known to dismiss show
that such in fact was the objection
ISSUE: Is there a cause of action in favor of
Marquez against the defendants?
Held: It is not denied that Lora, if he rendered the
service alleged in the complaint, would have a
right to be paid compensation for the service he
rendered jointly with Marquez. He acted as a
broker, and a broker is entitled to a commission for
his services. There is no prohibition in law against
the employment of a companion to look for a
buyer; neither is it against public policy. Neither
was there even any implied understanding
between Lora and the defendants that no part of
the compensation to which Lora would be entitled
to receive could be paid to any companion or
helper of Lora. Marquez's right to compensation
can not, therefore, be disputed under the operative
facts set forth in the complaint.
Under section 6 of Rule 3, "All persons in whom . . .
any right to relief in respect to or arising out of the
same transaction . . . is alleged to exist, whether
jointly, severally, or in the alternative, may, . . . join
as plaintiffs . . . where any question of law or fact
common to all such plaintiffs . . . may arise in the
action; Plaintiff Marquez, in the case at bar, clearly
falls under the above rule. He is entitled to be paid
his commission out of the very contract of agency
between Lora and the defendants; Lora and he
acted jointly in rendering services to defendants
under Lora's contract, and the same questions of
law and fact govern their claims. The rules do not
require the existence of privity of contract between
Marquez and the defendants as required under the
common law; all that they demand is that Marquez
has a material interest in the subject of the action,
the right to share in the broker's commission to be
paid Lora under the latter's contract, which right
Lora does not deny. This is sufficient to justify the
joinder of Marquez as a party plaintiff, even in the
absence of privity of contract between him and the
defendants.
J. Articles 1894, 1895 (MARK)
Art. 1894. The responsibility of two or more agents,
even though they have been appointed
simultaneously, is not solidary, if solidarity has not
been expressly stipulated. (1723)
Art. 1895. If solidarity has been agreed upon, each
of the agents is responsible for the non-fulfillment
of agency, and for the fault or negligence of his
fellows agents, except in the latter case when the
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fellow agents acted beyond the scope of their
authority.
1. Rule when 2 agents appointed
independently
Municipal Council of Iloilo vs. Evangelista
(ANJ S.)
Facts:
• Tan Ong Sze Vda. De Tan Toco was awarded by
the CFI of Iloilo 42,966.40php for the strip of land
belonging to her that was taken by the Municipal
Council to widen a public street.
• After the case was remanded to the court of
origin, and the judgment rendered therein had
become final and executory, Attorney. Jose
Evangelista (Tan Ong Sze’s counsel in the
expropriation case), in his own behalf and as
counsel for the administratrix of Attorney. Jose
Ma. Arroyo’s intestate estate (who was the
previous counsel of Tan Ong Sze in this case),
filed a claim in the same case for professional
services rendered by them, which the court,
acting with the consent of Tan Ong Sze, fixed at
15% of the amount of the judgment.
• At the hearing of the said claim, Philippine
National Bank (PNB) and a representative of the
late Antero Soriano appeared. PNB prayed that
the amount of the judgment be turned over to it
because the land taken over had been
mortgaged to the bank. The representative of the
late Antero (previous counsel of Tan Ong in other
cases concerning her other properties), on the
other hand, claimed the amount of the judgment
as it had been assigned to Antero by the
attorney-in-fact of Tan Ong Sze, Tan Boon Tiong.
Antero, in turn, assigned the said credit to
Maurico Cruz & Co., Inc.
• After hearing all the adverse claims on the
amount of the judgment, the court ordered that
the attorney’s lien in the amount of 15% of the
judgment, be recorded in favor of Attorney Jose
Evangelista, in his behalf and as counsel for the
administratrix of Attorney. Jose Ma. Arroyo, and
directed the Municipality of Iloilo to file an action
of interpleading against the adverse claimants,
PNB, Antero Soriano, Mauricio Cruz & Co., Jose
Evangelista and Jose Arroyo at the CFI of Iloilo.
• CFI Iloilo: declared the deed of assignment of
credit executed by Tan Ong Sze, through her
attorney-in-fact Tan Boon Tiong, in favor of the
late Antero Soriano was valid; likewise, the
assignment executed by Antero Soriano in favor
of Mauricio Cruz & Co was declared valid. Tan
Ong Sze was also ordered to deposit said sum in
a local bank within the period of 90 days from
the time the judgment shall become final, at the
disposal of Mauricio Cruz & Co., and in case that
Tan Ong shall not make such deposit in the
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manner indicated, said amount shall bear the
legal interest of 6% per annum from the date
when Tan Ong shall fail to make the deposit
within the period set forth, until fully paid.
• Tan Ong filed an appeal.
Issue:
1. WON Tan Boon Tiong, as attorney-in-fact of
Tan Ong, was empowered by his principal to
make an assignment of credits, rights, and
interests, in payment of debts for professional
services rendered by lawyers for Tan Ong.
2. WON the failure of the other
attorney-in-fact of Tan Ong, Tan Montano,
to consent to the deed of assignment, the
latter being also authorized to pay in the
name and behalf of the principal, all her
debts and the liens and encumbrances on
her property, invalidates the assignment of
credits by Tan Boon Tiong to the late
Antero.
Held / Ratio:
1.Yes, he was empowered. In Paragraph VI of the
power of attorney executed by Tan Ong in favor
of Tan Boon Tiong, Tan Boon Tiong is authorized
to employ and contract the services of lawyers
upon such conditions as he may deem
convenient, to take charge of any actions
necessary or expedient for the interests of his
principal, and to defend suits brought against
her. This power necessarily implies the authority
to pay for the professional services thus
engaged.
In the present case, the assignment made by Tan
Boon Tiong in favor of Attorney Antero for
professional services rendered in other cases in
the interest of Tan Ong and her coheirs, was that
credit which she had against the municipality of
Iloilo, and such assignment was equivalent to the
payment of the amount of said credit to Antero
for professional services.
2. With regard to the failure of the other
attorney-in-fact of Tan Ong, Tan Montano, to
consent to the deed of assignment, the latter
being also authorized to pay, in the name and
behalf of the principal, all her debts and the liens
and encumbrances on her property, the very fact
that different letters of attorney were given to
each of these two representatives shows that it
was not the principal’s intention that they should
act jointly in order to make their acts valid.
Furthermore, the appellant was aware of that
assignment and she not only did not repudiate it,
but she continued employing Attorney. Antero
Soriano to represent her in court.
The Court is of the opinion and so holds that
when a person appoints two attorneys-in-fact
71
independently, the consent of one will not be
required to validate the acts of the other unless
that appears positively to have been the
principal’s intention.
Dispositive: Decision Affirmed in its entirety.
K. Article 1896 (JESSA)
Art. 1896. The agent owes interest on the sums he
has applied to his own use from the day on which
he did so, and on those which he still owes after
the extinguishment of the agency.
• Two distinct cases contemplated here:
1) sums belonging to the principal which
the agent applied to his own use
 agent is liable for interest
by way of compensation or
indemnity (not to be confused with
interest for delay)
 interest shall be computed
from the day on which the agent
did so (applied to own use)
 agent’s liability is without
prejudice to a criminal action that
may be brought against him
because of conversion
2) sums which the agent still owes the
principal after the expiration of the
agency
 general rule: there is no
liability for interest on sums which
have not been converted for
agent’s use
 exception: the agent who is
found to owe the principal sums
after the extinguishment of the
agency is liable for interest
 interest shall be computed
from the date the agency is
distinguished
Mendezona v. C. Viuda de Goitia (BAMBI)
March 11, 1930
Villamor, J.
Facts:
• Benigno Goitia was representative and
attorney-in-fact of plaintiffs Leonor Mendezona
and Valentina Izaguirre Y Nazabal in the joint-
account partnership known as the "Tren de
Aguadas."
• As he was also manager of the partnership
at that time and because plaintiffs lived in
Spain, Goitia collected the dividends due
plaintiffs.
• Prior to 1915, Benigno Goitia remitted to
plaintiffs their dividends every year.
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• However, from 1915 until his death in
1926, he failed to remit any dividends to
plaintiffs.
• When Goitia died, counsel for both
plaintiffs filed their claims with the committee
of claims and appraisal of Goitia’s estate.
• COMMITTEE disapproved plaintiffs’claims.
• Plaintiffs appealed to trial court.
• During trial, it was found that from 1915 to
1926, Benigno Goitia indeed failed to remit and
account for the dividends he received in behalf
of plaintiffs.
• Thus, trial court directed respondent
Encarnacion C. Vda, de Goitia, who was judicial
administratrix of her husband’s estate, to
render a judicial account of:
1. The intestate estate of the
deceased Benigno Goitia and
2. The amounts collected by her
husband as attorney-in-fact and
representative of the plaintiffs.
• After hearing, TRIAL COURT ordered
respondent to pay the P13,140 to Mendezona
and P5,256 to Izaguirre, noth amounts with
legal interest from the date of filing of the
complaint. The amounts were based chiefly on
the testimonies of Ruperto Santos, Benigno
Goitia’s successor as manager of the
partnership, and Ramon Salinas, a stockholder
of the company.
Issues4/Held:
1. WON trial court had jurisdiction to
admit the amended complaints, which
claimed a greater amount than was
claimed before the committee.5
YES. Section 776 of the Code of Civil
Procedure provides that “upon the lodging of
such appeal with the clerk, the disputed claim
shall stand for trial in the same manner as any
other action in the Court of First Instance, the
creditor being deemed to be the plaintiff, and
the estate the defendant, and pleading as in
other actions shall be filed.” Considering the
distance that separated the plaintiffs from their
attorney-in-fact and that the latter failed to
supply them with data from 1915 to 1926, it is
natural that they had to resort to calculating
the amounts due them from their stocks in
"Tren de Aguadas."
To deny them the right to amend their
complaint in accordance with section 776,
when they had secured more definite
information as to the amounts due them, would
be an injustice, especially since this action
4
Excludes Evidence-related issues.
5
Plaintiffs only asked for annual dividends before the
committee whereas the amended complaint in the trial
court asked for ordinary and extraordinary dividends.
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arises from trust relations between the
plaintiffs and the deceased Goitia.
2. WON plaintiffs are the real parties in
interest.
YES. Benigno Goitia recognized that plaintiffs
owned shares in the partnership. The
company’s balance sheet also contains
plaintiffs’names are shareholders.
Furthermore, respondent failed to file a
demurrer on the ground of misjoinder of
parties. In accordance with Sec. 93 of the Code
of Civil Procedure, respondent is deemed to
have waived any objection on this ground.
3. WON trial court had power to order
defendant to render an account of
dividends supposed to have been
received by her deceased husband.
YES. The purpose of the order was to give
respondent an opportunity of showing what
amounts her husband received on account of
the appellees' stock. The complaint demanded
the return of these amounts alleged to have
been received by respondent’s deceased
husband so it was necessary to determine
whether such amounts were really received or
not.
4. WON respondent is liable for interest
on the amounts allegedly due.
YES. According to Article1724 of the (Old) Civil
Code, an agent shall be liable for interest upon
any sums he may have applied to his own use,
from the day on which he did so, and upon
those which he still owes, after the expiration
of the agency, from the time of his default.
A.L. Ammen Transportation Co. vs De
Margallo (REX)
FACTS: In February 1926, A.L. Ammen
Transportation Company applied for a certificate of
public convenience with the Public Service
Commission (PSC) to operate an autotruck service
between all principal points of Albay, Camarines,
and Sorsogon. At the time of the decision, Ammen
was already plying a route between Legaspi and
Banquerohan.
Later, the PSC granted a similar certificate to Felipe
Lotivio to operate an autotruck service between
Legaspi and Manito, a farther destination. This was
approved, although the road was not constructed
yet. For value and consent and approval of the
PSC, Ammen purchased and acquired the rights
which had been granted to Lotivio for the said
service.
A month before Lotivio applied for his certificate,
Maria de Margallo (De Margallo) applied for the
same certificate to operate an autobus line
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between Legaspi and Manito. This application was
set for hearing November of that year. When the
case was called upon, it was postponed, the reason
being that the road over which the license was
sought was not yet constructed. Notably, however,
in Lotivio’s application, which was approved, the
road had also not yet been constructed. It would
take more than 2 years for her application to be
finally granted.
What happened was that, although De Margallo’s
application was earlier than Lotivio’s by one month,
Lotivio was granted his certificate more than two
years before De Margallo was granted hers. This is
compounded by the fact that De Margallo was not
notified or a party of Lotivio’s hearing.
Now Lotivio’s rights on his certificate are now held
by Ammen, which in any case had already been
granted a certificate plying a route 40 percent of
the way between Legaspi and Manito (Legaspi and
Banquerohan), and was rendering good and
efficient services without complaint from the
public. Ammen now contests the license granted to
de Margallo by the PSC.
ISSUE:
WON Lotivio’s license is legally binding on de
Margallo
HELD/RATIO
NO. Although the court gives Ammen the right to
operate between Legaspi and Banquerohan, as
they had the earliest application and service, the
story is different on the road between
Banquerohan and Manito had not yet been
constructed.
Ideally, De Margallo will have acquired rights
before Lotivio by virtue of her prior filing to
operate between Banquerohan and Manito.
Since she was not a party to Lotivio’s hearing
and was not served notice, none of her rights
will be divested on the granting of Lotivio’s
certificate.
However the court is not disposed to define the
legal rights of either party because the roads had
not yet been constructed between Banquerohan
and Manito. As for the Legaspi and Banquerohan
route, an exclusive certificate should be issued to
Ammen to operate between these two points.
Decision reversed.
L. Article 1897 (TOPE)
Art. 1897. The agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
73
exceeds the limits of his authority without giving
such party sufficient notice of his powers.
1. General rule; exception
Duties and liabilities of agent to third
persons
• The rule is that the principal is responsible for
the acts of the agent done within the scope of
his authority and should bear any damage
caused to third persons (Art 1910)
1. In general
The duties of an agent to third persons and his
corresponding liabilities must be considered
with reference to the character of his act as to
whether it is authorized or unauthorized, and
also with reference to the nature of liability
which it sought to assert as being in contract or
tort.
2. Unauthorized assumption of agency
One who unauthorizedly assume to act for
another is guilty of a wrong, and is liable for
the damage to those dealing with him in
reliance on his assumed authority in that they
are deprived of the benefit of the principal.
Of course, if no damages have been sustained,
no liability for the agent’s false assumption of
authority exists.
3. Nature of liability
A purported agent will be held personally liable
as principal on a contract executed without
authority if the contract contains apt words to
bind him personally, or if such was the
intention of the parties.
HOWEVER, in the absence of an apt expression
or intention, the nature of his liability is the
subject of some divergence in judicial opinion:
a. In some jurisdictions, in the absence of
statute, the purported agent is held
liable as principal on the contract itself,
based, it has been said on the theory
that since the contact was intended to
bind someone, it must necessarily bind
the purported agent even if the
principal is unaffected.
b. According to the weight of authority,
the purported agent is not liable on the
contract itself, for the reason that there
has been no intention to bind the
agent, and to hold that he is bound
would, in effect, create a new contract
for the parties. Of course, if there is a
statute, the purported agent will be
held liable on the contract itself.
4. Torts cases
Agency is no defense to action against an
agent based upon commission of tort, his
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liability being neither increased nor decreased
by the fact of his agency. If the tort is
committed by the agent within the scope of his
authority, both the principal and the agent are
liable.
5. Where duty violated owed solely to the
principal
An agent is liable to third persons for injury
resulting from his misfeasance or malfeasance,
meaning by these terms, the breach of a duty
owed to third persons generally independent of
the particular duties imposed by his agency.
But an agent is generally not liable to third
persons for injury resulting to nonfeasance,
meaning by that term, the omission of the
agent to perform a duty owed solely to his
principal by reason of his agency.
When agent may incur personal liability
• An agent who acts as such within the scope of
his authority represents the principal so that
his contract is really the principal’s. Hence, the
agent is not personally liable to the party with
whom he contracts unless he expressly binds
himself or he exceeds the limits of his authority
without giving such party sufficient notice of
his powers or by his acts incurs liabilities of a
principal under the contract.
• When the agent expressly binds himself, he
thereby obligates himself personally and by his
own act.
• When the agent exceeds authority, he really
acts without authority and, therefore, the
contract is unenforceable against the principal
unless the latter ratifies the act.
o The agent becomes personally liable
because by his wrong or omission, he
deprives the third person wit whom he
contracts of any remedy against the
principal.
o Inasmuch as the non-disclosure of the
limits agency carries with it the
implication that a deception was
perpetuated on the unsuspecting
client, the provisions on Arts. 19, 20,
and 21 come into play.
o That the agent exceeded his authority
must be proved by the principal if he
denies liability, or by third person if he
wants to hold the agent personally
liable, on that ground.
Third party’s liabilities toward agent.
• Four main instances in which a third party
subjects himself to liability at the hands of an
agent:
o Where the agent contracts in his own
name for an undisclosed principal, in
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which case, the agent may sue the
third party to enforce the contract;
o Where the agent possesses a beneficial
interest in the subject matter of the
agency.
o Where the agent pays money of his
principal to third party by mistake or
under the contract which proves
subsequently to be illegal, the agent
being ignorant with respect to its illegal
nature; and
o Where the third party commits a tort
against the agent.
2. Cases
DBP v. CA (EVA)
1994
Quaison, J.
Facts:
• Juan B. Dans, together with his wife Candida,
his son and daughter-in-law, applied for a loan
of P500K with DBP Basilan. 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).
• The MRI premium was deducted by DBP from
the approved loan of P300K and credited this
[less 10% service fee] to the MRI Pool Account
on Aug. 20, 1987. Dans was also made to
accomplish and submit the "MRI Application for
Insurance" and the "Health Statement for DBP
MRI Pool."
• On Sept. 3, 1987 Dans died of cardiac arrest.
On Sept. 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.
• DBP apprised Candida Dans of the disapproval
of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00
which the deceased had paid, but Candida
Dans refused to accept the same, demanding
payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise,
refused to accept an ex gratia6 settlement of
P30K, which the DBP later offered.
• Respondent Estate, through Candida Dans as
administratrix, filed a complaint for Collection
of Sum of Money with Damages against DBP
and DBP MRI Pool
• TC rendered a decision in favor of the 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. The trial court declared DBP in
6
(Latin) “as a favor”
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estoppel for having led Dans into applying for
MRI and actually collecting the premium and
the service fee, despite knowledge of his age
ineligibility.
• CA affirmed TC decision in toto.
ISSUE: WON DBP should be held liable?
HELD. YES, but for a reduced amount.
• In dealing with Dans, DBP was wearing two
legal hats: the first as a lender, and the second
as an insurance agent.
• As an insurance agent, DBP is not authorized to
accept applications for MRI when its clients are
more than 60 years of age. 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. Art. 1897 applies.
• 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 non-
disclosure thereof by the agent, then the latter
is liable for damages to him.
Philippine Products v Primateria Societe
Anonyme Pour Le Commerce (GEN)
Nov. 29, 1965
Bengzon, C.J.
FACTS: Primateria Zurich (respondent), through
Alexander Baylin, entered into an agreement with
Philippine Products Company (PPC) whereby the
latter undertook to buy Copra in the Philippines for
the account of Primateria Zurich.
PPC shipped copra to foreign countries pursuant to
the instructions of Primateria Zurich, through
Primateria Phils, with Baylin and Jose Crame as
officers. The total amount due to petitioner was
P31,009.71.
PPC filed a complaint against Primateria Zurich,
Primateria Phils, Baylin and Crame to recover the
amount due. The trial court rendered a judgment
holding Zurich liable but absolved Baylin and
Crame. PPC appealed the decision as regards the
dismissal of the three defendants.
PPC alleges that Zurich is a foreign corporation
under Sec. 68 of the Corporation Law; and since it
has transacted business in the Philippines without
75
the necessary license, its agents here are
personally liable under Art. 1897 for contracts
made in behalf.
ISSUE: WON Primateria Phils, Baylin and Crame
may be held personally liable
HELD: NO. There is no proof that as agents they
exceeded the limits of their authority. The
principal, who should be the one to raise the point,
never raised it, denied its liability on the ground of
excess of authority. Art. 1897 does not hold that in
cases of excess of authority, both the agent and
the principal are liable to the other contracting
party.
Benguet Consolidated v. BCI Employees
Union (MAI)
March 27, 1968
Bengzon, J.P., J.
Facts: Benguet Consolidated, Inc., is a domestic
corporation engaged in the mining industry with
respondents Stanley Willimont, Eugene Kneebone,
C.W. Herold, G.N. Wright, O.M. Westerfield, A.P.
Davidson and William Johnson as its officers.
Respondent BCI Employees and Workers Union
(PAFLU) is a legitimate labor union while
respondent Donaciano Andrada is a member
thereof.
On August 28, 1954, Andrada and several others
petitioned the respondent company that they be
given the rates of pay as prescribed in the
collective bargaining contrac, and petitioner
company, in compliance thereto made the
necessary salary adjustment with the exception of
complainant Andrada who, although he was
reclassified from clerk second class to clerk first
class, did not receive any corresponding increase
in his pay.
Andrada also declared that on or about August 26,
1967, on the occasion of a grievance meeting
concerning the adjustment of his wages, Eugene
Kneebone, one of the respondent herein, said to
him, "am spending much of my time for your
complaint. My time is precious. I tell you that as
long as I am still connected with Benguet
Consolidated, Inc., this office cannot give you any
change of classification whatsoever"; That Mr.
Kneebone further said, "By representing your
grievance to the union, you are cutting your neck
entirely, and I tell you to think it over or retract
your complaint"; that complaint again met Mr.
Kneebone who said to him, "The question with you
is, you are too vocal of your union activities. Had
you shut your mouth, your case should not have
happened like that."
The lower court ordered the petitioners to
implement the salary scale with respect to the
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daily wage of complainant Donaciano S. Andrada
from 1954 until his wage reaches the level as
embodied in the collective bargaining agreements
between the Benguet-Balatoc Workers Union, the
complainant labor organization, and the
respondent company."
Issue: Whether or not petitioners were liable for
discriminating against Andrada
Held: YES. First, what was charged was not
discrimination committed in 1954 alone but rather
continuing acts of discrimination committed
"starting 1954" as alleged in par. 3 of the
complaint for unfair labor practice. The charge of
discrimination, consisting in petitioners' refusal to
implement the proper salary scale as to
respondent Andrada is adequately supported by
the following findings of the court a quo. In August,
1954, Andrada's category was changed to clerk
first class but he received no salary adjustment
unlike the other employees. In 1955, after he was
transferred to the Purchasing Department and was
assigned to perform the work done by one Ramon
Alvia who held the category of bodeguero (with a
higher pay rate) respondent Andrada still received
no corresponding pay increase. In July, 1962, there
was a general pay hike but Andrada was not
benefitted.
Second, the militant union activity, involved is not
Andrada's having been elected as Union District
Governor and Steward and his actuations as such,
but rather Andrada's having sought the help of his
union in pursuing what he believed was his right to
salary adjustment. It should be noted that the
damaging statement on this score imputed to co-
petitioners Stanley Willimont and Eugene
Kneebone by respondent Andrada in his testimony
to which the court a quo gave credence, were
never denied or controverted by them. And it is
unquestionable that the seeking of the union's help
by one of its members in connection with the
latter's correct wages constitutes proper union
activity.
Agency related: (just a guess because there’s
really nothing in this case about agency)
Mr. Willimont and Mr. Kneebone are agents of the
petitioner company. Whatever they said is
considered to be acts of discrimination by the
petitioner company, because they are acting as
mere agents. Therefore, they are not personally
liable for those statements.
NPC v. National Merchandising Corp (ROG)
1982
Facts: This case is about the recovery of
liquidated damages from a seller's agent that
allegedly exceeded its authority in negotiating the
sale. NPC and National Merchandising Corp
76
(Namerco) of Manila, as the representative of the
International Commodities Corp of New York City,
executed in Manila a contract for the purchase by
NPC from the New York firm of 4k long tons of
crude sulfur for it s Maria Cristina Fertilizer Plant in
Iligan City. On that same date a performance bond
for P90k was executed by Domestic Insurance CO
in favor of NPC to guarantee the seller's
obligations.
It was stipulated in the contract of sale that seller
would deliver sulfur at Iligan City within 60days
from notice of establishment in its favor of a letter
of credit for $212k and that failure to effect
delivery would subject seller and it surety to
payment of liquidated damages at rate of 2/5 of
1% of the full contract price for the first 30 days of
default and 4/5 of 1% for every day thereafter until
complete delivery is made.
NPC advised John Sycip, president of Namerco of
the opening of a letter of credit in favor of Inter
Commodities which would expire on Jan 31, 1957.
Notice of the letter of credit was received by cable
by the New York firm on Nov 15, 1956. Thus the
deadline for the delivery of the sulfur was Jan 15,
1957.
The New York supplier was not able to deliver the
sulfur due to its inability to secure shipping space.
During period from Jan20-26, 1957 there was a
shutdown of the NPC's fertilizer plant because
there was no sulfur. Nor fertilizer was produced.
NPC's general manager advised Namerco and
Domestic Insurance that under Art. 9 of the
contract of sale "nonavailability of bottom or
vessel" was not a fortuitous event that would
excuse non-performance and that NPC would resort
to legal remedies to enforce its rights.
Govt Corporate Counsel in his letter to Sycip
rescinded the contract of sale due to New York
supplier's non-performance of its obligations. He
also demanded from Namerco payment of P360k
as liquidated damages. He explained that time was
of the essence of the contract. A similar demand
also made upon the surety.
NPC sued the New York firm, Namerco and
Domestic Insurance Co for recovery of stipulated
liquidated damages.
TC: dismissed case as to New York firm for lack of
jurisdiction coz it was not doing business in the
Philippines. Namerco and Domestic Insurance
contend that delivery of sulfur was conditioned on
availability of a vessel to carry the shipment and
that Namerco acted within scope of its authority as
agent in signing the contract of sale.
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Issue: WON Namerco and Domestic Insurance
liable for liquidated damages? YES
Held:
1. Namerco acted beyond its authority as
agent of New York firm.
Documentary evidence belies these contentions.
The invitation to bid issued by NPC provides that
nonavailability of a steamer to transport the sulfur
is a ground for payment of liquidated damages in
case of non-performance by seller.
Namerco's bid or offer is even more explicit. It
provides that it was "responsible for availability of
bottom or vessel" and that it "guarantees the
availability of bottom or vessel to ship the quantity
of sulfur within the time specified in this bid".
In the contract of sale itself, item 15 of the
invitation to bid is reproduced in Art. 9 which
provides that "it is clearly understood that in no
event shall seller be entitled to an extension of
time or be exempt from payment of liquidated
damages herein specified fro reason of lack of
bottom or vessel".
It is true that New York corp in its cable to Namerco
stated that sale was subject to availability of a
steamer. However, Namerco did not disclose
that cable to NPC and contrary to its
principal's instruction; it agreed that
nonavailability of a steamer was not a
justification for nonpayment of liquidated
damages.
TC rightly concluded that Namerco acted beyond
bounds of its authority because it violated its
principal's cabled instructions.
2. Namerco liable to NPC for damages.
Defendants: it was incumbent upon NPC to inquire
into extent of agent's authority and for its failure to
do so, it could not claim any liquidated damages
which were provided for merely to make seller
more diligent in looking for a steamer to transport
the sulfur.
NPC: Namerco should have advised NPC of the
limitations on its authority to negotiate the sale.
SC: TC correct that Namerco liable for damages
because under Art. 1987 of NCC the agent who
exceeds the limits of his authority without giving
the party with whom he contracts sufficient notice
of his powers is personally liable to such party.
The truth is that even before the contract of sale
was signed Namerco was already aware that its
principal was having difficulties in booking shipping
space. In a cable one day before the contract of
sale was signed, the New York supplier advised
Namerco that latter should not sign the contract
77
unless Namerco wished to assume sole
responsibility for the shipment.
Sycip, Namerco's president replied that he had no
choice but to finalize the contract of sale because
the NPC would forfeit Namerco's bidder's bond of
P45k posted by Domestic Insurance if the contract
was not formalized.
Three days later the New York firm cabled Namerco
that it did not consider itself bound by contract that
Namerco signed on its own responsibility. It
informed Namerco in its letters that since latter
acted contrary to its instructions, former
disclaimed responbility for the contract and that
responsibility for the sale rested on Namerco.
3. Rule that every person dealing with an
agent is put upon inquiry and must discover
upon his peril the authority of agent would
apply if principal is sought to be held liable
on the contract entered into by the agent
BUT It is not so in this case.
Here it is the agent that is sought to be held liable
on a contract of sale which was expressly
repudiated by the principal because the agent took
chances, it exceeded its authority and in effect, it
acted in its own name.
Agent who exceeds limits of his authority is
personally liable and the third person who
contracts with the agent in such a case would be
defrauded if he would not be allowed to sue the
agent
3. Stipulation for liquidated damages is
enforceable even if executed by agent in
excess of his authority.
Art. 1403 "contract entered into in name of another
person by one who has acted beyond his powers is
unenforceable" refers to unenforceability against
the principal. HERE, the contract containing
stipulation not being enforced against principal but
against agent and its surety.
Namerco never disclosed to NPC the cabled
instructions of its principal. For that reason and
because Namerco exceeded its authority, it
virtually acted in its own name and not as agent
and is therefore bound by contract of sale which
however is not enforceable against principal.
If Namerco is bound under contract of sale, then it
follows it is bound by stipulation for liquidated
damages.
National Bank v. Welch (REG)
J. Street
1923
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FACTS: La Compañía Naviera, a shipping
company, was instituted in Manila in 1918. Among
its shareholders was respondent Welch, Fairchild &
Co. La Compañia Naviera applied to the Philippine
National Bank for a loan of $125,000. with which to
purchase a boat called Benito Juarez. It was the
president of Welch which helped in the transfer of
the Benito Juarez to Philippine registry. However,
the vessel needed repairs before it could be
dispatched; and it became impracticable to deliver
the bill of sale and insurance policy that were
required by PNB in San Francisco at the time the
money was needed to effect the transfer. So,
Welch in Manila, addressed a letter on August 8,
1918, to the PNB, requesting it to cable its
correspondent in San Francisco to release the
money and make payment for the vessel without
requiring the delivery of the bill of sale or policy of
insurance, and that La Compañia would just deliver
the bill of sale and insurance policy later. The Bank
acceded. After the repair of the Benito Juarez, it
was insured by Welch & Co. for $150,000 and was
dispatched to the Philippines. A few months after,
the vessel encountered a storm off Hawaii and
became a total loss.
The proceeds of the insurance came to the hands
of Welch, Fairchild & Co. in Manila and has been
applied by Welch, Fairchild & Co. in part
satisfaction of indebtedness incurred by La
Compañía to it (instead of paying the bank). This
disposition of the insurance money was made with
the tacit approval of La Compañía.
ISSUE: WON PNB has a cause of action against
respondent.
RULING: YES. While it is true that an agent who
acts for a revealed principal in the making of a
contract does not become personally bound to the
other party in the sense that an action can
ordinarily be maintained upon such contract
directly against the agent, yet that rule clearly
does not control in this case; for even conceding
that the obligation created by the letter of August
8, 1918, was directly binding only on the principal,
and that in law the agent may stand apart
therefrom, yet one who has intervened in the
making of a contract in the character of agent
cannot be permitted to intercept and appropriate
the thing which the principal is bound to deliver,
and thereby make performance by the principal
impossible.
The agent in any event must be precluded from
doing any positive act that could prevent
performance on the part of his principal. This
much, ordinary good faith towards the other
contracting party requires. The situation before us
in effect is one where, notwithstanding the promise
held out jointly by principal and agent in the letter
of August 8, the two have conspired to make an
78
application of the proceeds of the insurance
entirely contrary to the tenor of said letters.
Albert v. University Publishng (ABBY)
1965
J. Bengzon
Facts:
• Mariano Albert sued University Publishing
alleged inter alia that defendant was a
corporation duly organized and existing under
the laws of the Philippines; that on July 19,
1948, defendant, through Jose M. Aruego, its
President, entered into a contract with
plaintifif; that defendant had thereby agreed to
pay plaintiff P30,000.00 for the exclusive right
to publish his revised Commentaries on the
Revised Penal Code and for his share in
previous sales of the book's first edition; that
defendant had undertaken to pay in eight
quarterly installments of P3,750.00 starting July
15, 1948; that per contract failure to pay one
installment would render the rest due; and that
defendant had failed to pay the second
installment.
• UPC admitted its corporate existence, the
execution and terms of the contract, but that it
was Albert who breached the contract by
failing to deliver his manuscript and filed a
counterclaim.
• It is not hard to decipher why "University
Publishing Co., Inc.," through counsel, would
not want Jose M. Aruego to be considered a
party to the present case: should a separate
action be now instituted against Jose M.
Aruego, the plaintiff will have to reckon with
the statute of limitations.
• Corporation by estoppels not invoked nor
applicable.
• The estate of Albert (dead already) say that
UPC was not registered with the SEC and that
he acted not on behalf of UPC but on his own
and that he should be the real party defendant.
Issue: WoN the real party defendant is Aruego or
UPC
Held: Aruego
• Jose M. Aruego, acting as representative of a
non-existent principal, was the real party to the
contract sued upon; that he was the one who
reaped the benefits resulting from it, so much
so that partial payments of the consideration
were made by him; that he violated its terms,
thereby precipitating the suit in question; and
that in the litigation he was the real defendant.
• A person acting or purporting to act on behalf
of a corporation which has no valid existence
assumes such privileges and obligations and
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becomes personally liable for contracts entered
into or for other acts performed as such agent.
• Parties to a suit are "persons who have a right
to control the proceedings, to make defense, to
adduce and cross-examine witnesses, and to
appeal from a decision" (67 C.J.S. 887) — and
Aruego was, in reality, the person who had and
exercised these rights. Clearly, then, Aruego
had his day in court as the real defendant; and
due process of law has been substantially
observed.
Dy Peh v. CIR (EARLA)
PNB v. Ritratto Group (JANCES)
July 31, 2001
J. Kapunan
Facts: PNB-IFL, subsidiary of PNB extended a letter
of credit in favor of Ritratto Inc. to secured real
estate mortgages constituted over 4 parcels of
land in Makati. Ritratto was not able to pay, thus
PNB-IFL moved to foreclose the mortgages. Ritratto
filed complaint for injunction with prayer for
issuance of writ of preliminary injunction. Petitioner
filed a motion to dismiss complaint for injunction
on grounds of failure to state a cause of action and
absence of any privity between the petitioner and
respondents.
Ruling: RTC – issued writ of preliminary injunction;
denied motion to dismiss. PNB-IFL is a wholly
owned subsidiary of defendant Philippine National
Bank, the suit against the defendant PNB is a suit
against PNB-IFL.
CA – affirmed
Issue: WON PNB is the real party-in-interest [NO]
HELD: PNB was sued because it acted as an
attorney-in-fact of PNB-IFL in initiating the
foreclosure proceedings. A suit against an agent
cannot without compelling reasons be considered a
suit against the principal. Respondents committed
the mistake of filing the case against the wrong
party. They do not have a cause of action against
the petitioner as the latter is not privy to the
contract the provisions of which respondents seek
to declare void.
Disposition: petition granted.
Macias & Co. v. Warner Bros., supra
Salvatierra v. Garlitos (ALAIN)
Facts: Salvatierra owned a parcel of land in Leyte.
She entered into a contract of lease with Philippine
Fibers Producers Co., Inc. allegedly a corporation
duly organized and existing under the Philippine
laws, as represented by its President Rufuerzo. The
land will be leased for ten years and the lessor
79
would be entitled to 30% of the net income
accruing from the harvest of any crop.
The alleged corporation did not comply with said
obligation. Salvatierra filed with the CFI a
complaint against PFPC for accounting, rescission
and damages. The corporation defaulted and the
court rendered judgment in favor of Salvatierra.
The court issued a writ of execution and the three
parcels of land under the name of Rufuerzo were
attached because no property of PFPC was found
available.
Rufuerzo filed a motion claiming that the decision
was null and void since there was no allegation of
his personal liability. The court granted the motion
and released his land from attachment. Hence, this
petition by Salvatierra.
Held. The failure of Salvatierra to specify
Rufuerzo’s personal liability was due to the fact
that Salvatierra was under the impression that
PFPC, represented by Rufuerzo was a duly
registered corporation, but subsequently, inquiry
with the SEC yielded otherwise. While as a general
rule, a person who has contracted of dealt with an
association in such a way as to recognize its
existence as a corporate body is estopped from
denyng the same in an action arising out of such
transaction or dealing. Yet, this doctrine is
inapplicable where fraud takes a part in said
transaction. Here Rufuerzo gave no confirmation of
denial as to PFPC’s juridical personality and
Salvatierra was made to believe that the
corporation was duly organized.
The grant of separate juridical personality to
corporations refer merely to registered
corporations and cannot be made applicable to the
liability of members of an unincorporated
association. Since an organization which, before
law, in non-existent and has no personality and
would be incompetent to act and appropriate for
itself the power and attributes of a corporation, it
cannot create agents or confer authority on
another to act in its behalf, thus, those who act or
purport to act as its representatives or agents do
so without authority and at their own risk.
A person acting or purporting to act in behalf of a
corporation which has no valid existence assumes
such privileges and obligations and becomes
personally liable for contracts entered into or for
other acts performed as such agent.
Here, Rufuerzo as president of the unregistered
corporation was the spirit behind the
consummation of the lease contract. Thus, his
liability cannot be limited or restricted to that
imposed upon corporate SH’s. In acting on behalf
of a corporation, which he knew to be unregistered,
he assumes the risk of reaping the consequential
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damages or resultant rights, if any arising from the
transaction.
Sec. 21 Corporation by estoppel – All persons who
assume to act as a corporation knowing it to be
without authority to do shall be liable as general
partners for all debts, liabilities and damages
incurred or arising as a result thereof; Provided,
however, that when any such ostensible
corporation is sued on any transaction entered by
it as a corporation or any tort committed by it as
such, it shall not be allowed to use a defense its
lack of corporate personality.
Tuason v. Orozco (MARK)
Facts:
• Juan de Vargas y Amaya, the defendant's
husband, executed a power of attorney to
Enrique Grupe, authorizing him, among other
things, to dispose of all his property, and
particularly of a certain house and lot known as
No. 24 Calle Nueva, Malate, Manila. He was
also authorized to mortgage the house for the
purpose of securing the payment of any
amount advanced to his wife, Dolores Orozco
de Rivero, who, inasmuch as the property had
been acquired with funds belonging to the
conjugal partnership, was a necessary party to
its sale or incumbrance.
• On the 21st of January, 1890, Enrique
Grupe and Dolores Orozco de Rivero obtained a
loan from plaintiff Tuazon secured by a
mortgage on the property referred to in the
power of attorney. In the caption of the
instrument evidencing the debt it is stated that
Grupe and Dolores Orozco appeared as the
parties of the first part and Gonzalo Tuason,
the plaintiff, as the party of the second part;
that Grupe acted for himself and also in behalf
of Juan Vargas by virtue of the power granted
him by the latter, and that Dolores Orozco
appeared merely for the purpose of complying
with the requirement contained in the power of
attorney. Said instrument was duly recorded in
the Registry of Property,
• Tuazon filed an action to recover the debt.
Issue: WON Orozco is liable.
Held: Yes.
• The appellant claims that the instrument is
evidence of a debt personally incurred by
Enrique Grupe for his own benefit, and not
incurred for the benefit of his principal, Vargas,
as alleged in the complaint. As a matter of fact,
Grupe, by the terms of the agreement, bound
himself personally to pay the debt. The
appellant's contention however, can not be
sustained. The agreement, so far as that
amount is concerned, was signed by Grupe as
attorney in fact for Vargas. Pursuant to
80
instructions contained in the power of attorney
the money was delivered to Varga's wife, the
defendant in this case. To secure the payment
of the debt, Varga's property was mortgaged.
His wife likewise took part in the execution of
the mortgage as required in the power of
attorney.
• A debt thus incurred by the agent is binding
directly upon the principal, provided the former
acted, as in the present case, within the scope
of his authority. The fact that the agent has
also bound himself to pay the debt does not
relieve from liability the principal for whose
benefit the debt was incurred. The individual
liability of the agent constitutes in the present
case a further security in favor of the creditor
and does not affect or preclude the liability of
the principal. In the present case the latter's
liability was further guaranteed by a mortgage
upon his property. The law does not provide
that the agent can not bind himself personally
to the fulfillment of an obligation incurred by
him in the name and on behalf of his principal.
On the contrary, it provides that such act on
the part of an agent would be valid.
M. Article 1898 (ANJ)
Article 1898. If the agent contracts in the name of
the principal, exceeding the scope f his authority,
and the principal does not ratify the contract, it
shall be void if the party with whom the agent
contracted is aware of the limits of the powers
granted by the principal. In this case, however, the
agent is liable if he undertook to secure the
principal’s ratification.
1. Reason why agent is liable
Article 1910, par.2 states that if the agent acts in
excess of his authority, even if he contracts in the
name of the principal, the agent is the one
personally liable unless there is subsequent
ratification by the principal.
2. Status of contracts entered
into by an agent in excess of
his authority
The rule that a contract entered into by one who
has acted beyond his powers shall be
unenforceable (Arts.1317, par 2; 1403 [1]), refers
to the unenforceability of the contract against the
principal, and does not apply where the action is
against the agent himself, for contracting in excess
of the limits of his authority. The contract, which is
unenforceable as against the principal, is void as
between the agent and the third person, and
consequently, not legally binding.
3. Effect of ratification
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from Warner, Barnes and Co., Ltd., as agent of

If ratification is obtained, then the principal the insurance company in the Philippines
becomes liable. • Warner having refused to pay the claim, on
April 17, 1947, plaintiff instituted the present
4. Liability of agent when he action.
exceeds authority • American President Lines, in a letter dated
November 25, 1946, agreed to pay to the
The liability of an agent who exceeds the scope of plaintiff the amount of P476.17 under its
his authority depends upon WON the third person liability in the bill of lading
is aware of the limits of the agent’s power.
• When this offer was rejected, the claim was
finally settled in the amount of P1,021.25  As
The agent is not bound or liable for damages in
a result, the amount claimed in the complaint
case he gave notice of his powers to the third
as the ultimate liability of Warner under the
person, nor in a case where the third person is
insurance contract was reduced to P717.82
aware of the limits of the powers granted by the
only.
principal.
• CFI: ordered Warner, as agent of Westchester
If the agent promised or undertook to secure the Fire Insurance Company of New York, to pay to
principal’s ratification and failed, he is personally the plaintiff the sum of P727. 82 with legal
liable. interest thereon from the filing of the
complaint until paid, and the costs
If ratification is obtained, then the principal
becomes liable. Issue: Main issue: WON the trial court erred in
holding that Warner, as agent of Westchester Fire
5. Cases Insurance Company of New York, United States of
America, is responsible upon the insurance claim
Lorca v. Dineros, supra subject to the suit

Salonga v. Warner (JESSA) Sub-issues:

January 31, 1951
Bautista Angelo, J.
Facts:
• On August 28, 1946, Westchester Fire
Insurance Company of New York entered into a
contract with Gamboa whereby said company
insured one case of rayon yardage which said
Gamboa shipped from San Francisco,
California, on steamer Clovis Victory, to Manila
and consigned to Salonga.
• According to the contract of insurance, the
insurance company undertook to pay to the
sender or her consignee the damages that may
be caused to the goods shipped subject to the
condition that the liability of the company will
be limited to the actual loss which the insured
may suffer not to the exceed the sum of
P2,000
• The ship arrived in Manila on September 10,
1946.
• On October 7, the shipment was examined by
C. B. Nelson and Co., marine surveyors, at the
request of the plaintiff, and in their
examination the surveyors found a shortage in
the shipment in the amount of P1,723,12.
• On October 9, plaintiff filed a claim for
damages in the amount of P1,723.12 against
the American President Lines, agents of the
ship Clovis Victory, demanding settlement
• When apparently no action was taken on this
claim, plaintiff demanded payment thereof
81
(1) WON Warner has no contractual relation with
either the plaintiff or his consignor
(2) WON Warner is not the real party in interest
against whom the suit should be brought
(3) WON a judgment for or against an agent in no
way binds the real party in interest.
Held: YES (the main issue is answered by
answering the sub-issues)
1. YES. It is a well known rule that a contractual
obligation or liability, or an action ex-contractu,
must be founded upon a contract, oral or written,
either express or implied. If there is no contract,
there is no corresponding liability, and no cause of
action may arise therefrom. This is what is
provided for in article 1257 of the Civil Code. This
article provides that contracts are binding upon the
parties who make them and their heirs, excepting,
with respect to the latter, where the rights and
obligations are not transmissible, and when the
contract contains a stipulation in favor of a third
person, he may demand its fulfillment if he gives
notice of his acceptance before it is revoked.
Warner has not taken part, directly or indirectly, in
the contract in question. The evidence shows that
Warner did not enter into any contract either with
the plaintiff or his consignor Gamboa. The contract
of marine insurance was made and executed only
by and between the Westchester Fire Insurance
Company of New York and Gamboa. The contract
was entered in New York. There is nothing therein
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which may affect, in favor or adversely, Warner,
the fulfillment of which may be demanded by or
against it. That contract is purely bilateral, binding
only upon Gamboa and the insurance company.
When the lower court, therefore, imposed upon
Warner an obligation which it has never assumed,
either expressly or impliedly, or when it extended
to Warner the effects of a contract which was
entered into exclusively by and between the
Westchester Fire Insurance Company of New York
and Gamboa, the error it has committed is evident.
This is contrary to law.
There is no material variance between this case
and the case of E. Macias and Co. vs. Warner,
Barnes and Co. in so far as the principle herein
considered is concerned. Both cases involve similar
facts which call for the application of a similar
ruling. In both cases the issue is whether an agent,
who acts within the scope of his authority, can
assume personal liability for a contract entered
into by him in behalf of his principal. And in the
Macias case we said that the agent did not assume
personal liability because the only party bound was
the principal. And in this case this principle
acquires added force and effect when we consider
the fact that Warner did not sign the contract as
agent of the foreign insurance company as Warner
did in the Macias case. The Macias case, therefore,
is on all fours with this case and is decisive of the
question under consideration.
2. YES. Section 2, Rule 3 of the Rules of Court
requires that "every action must be prosecuted in
the name of the real party in interest." A corollary
proposition to this rule is that an action must be
brought against the real party in interest, or
against a party which may be bound by the
judgment to be rendered therein. The real party in
interest is the party who would be benefited or
injured by the judgment, or the "party entitled to
the avails of the suit". In the case at bar, Warner is
sued upon in its capacity as agent of Westchester
Fire Insurance Company of New York in spite of the
fact that the insurance contract has not been
signed by it. Warner did not assume any obligation
thereunder either as agent or as a principal. It
cannot, therefore, be made liable under said
contract, and hence it can be said that this case
was filed against one who is not the real party in
interest.
While Warner is a settlement and adjustment agent
of the foreign insurance company and that as such
agent it has the authority to settle all the losses
and claims that may arise under the policies that
may be issued by or in behalf of said company in
accordance with the instructions it may receive
from time to time from its principal, it cannot be
that as such adjustment and settlement agent,
Warner has assumed personal liability under said
82
policies, and, therefore, it can be sued in its own
right. An adjustment and settlement agent is no
different from any other agent from the point of
view of his responsibility, for he also acts in a
representative capacity. Whenever he adjusts or
settles a claim, he does it in behalf of his principal,
and his action is binding not upon himself but upon
his principal. And here again, the ordinary rule of
agency applies. It, therefore, clearly appears that
the scope and extent of the functions of an
adjustment and settlement agent do not include
personal liability. His functions are merely to settle
and adjusts claims in behalf of his principal if those
claims are proven and undisputed, and if the claim
is disputed or is disapproved by the principal, like
in the instant case, the agent does not assume any
personal liability. The recourse of the insured is to
press his claim against the principal.
3. YES. An action is brought for a practical purpose,
nay to obtain actual and positive relief. If the party
sued upon is not the proper party, any decision
that may be rendered against him would be futile,
for it cannot be enforced or executed. The effort
that may be employed will be wasted. Such would
be the result of this case if it will be allowed to
proceed against Warner, for even if a favorable
judgment is obtained against it, it cannot be
enforced because the real party is not involved.
Warner cannot be made to pay for something it is
not responsible.
PNB v Bagamaspad and Ferrer (BAMBI)
June 29, 1951
Montemayor, J.
Facts:
• Due to the acute food shortage resulting from
the Pacific War, President Roxas instructed PNB
to extend crop loans to farmers to enable them
to rehabilitate their farms.
• In compliance, PNB passed a resolution
authorizing the granting of special crop loans
to bona fide food producers, landowners or
their tenants, under special conditions.
• Thereafter, rules and regulations in the
granting of said loans were issued.
• Two circulars about the rules were distributed
and a conference was held for the bank’s
employees, which included defendants
Bernardo Bamaspad and Bienvenido Ferrer.
• Bagamspad and Ferrer were then Agent and
Assistant Agent, respectively, of PNB’s
Cotabato Agency.
• Ferrer personally received the circulars and
attended the conference.
• From July 1946 to March 1947, the Cotabato
Agency, under the management of defendants,
granted loans to 5,000 borrowers in the total
amount of P8.5 million.
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• Due to heavy loan disbursements and
exhaustion of funds, the Cotabato Agency, on
several ocassions, had to obtain additional
cash from the Zamboanga Agency
• The central office repeatedly emphasized to
defendants strict compliance with the rules and
regulations in granting loans, especially in
making sure that the borrowers were qualified.
Central office also informed defendants that
the additional funds from the Zamboana
Agency is for the second installments of crop
loans only and not for granting new loans.
• However, defendants, according to PNB,
violated such instructions and even acted
negligently by releasing loans to unqualified
borrowers.
• Thus, PNB instructed defendants were to
discontinue granting new crop loans in a
telegram dated November 26, 1946.
• Notwithstanding such instruction, defendants
still extended new special crop loans.
• In 1948, PNB sued defendants to recover the
uncollected balance of crop loans alleged to
have been improperly released by defendants.
• PNB also sued the defaulting borrowers.
• TRIAL COURT ordered defendants to pay PNB
the uncollected balance of crop loans, which
amounted to P699, 803.57.
• CA certified case to SC in view of the amount
involved.
Issues and Held:
1. WON defendants violated bank’s
instructions in extending new special crop
loans after receiving PNB’s telegram of
November 26, 1946.
YES. It may be that there was no such express
instruction directly ordering the defendants to
stop granting new special crop loans. However,
defendants should have gathered that idea
from the central office’s letters. That defendant
understood this clearly was evidenced by the
fact that Bagamaspad, in one of his letters to
the central office, asked “still entertain new
applicants on Special Crop Loans.”
2. WON defendants acted with extreme
laxity, negligence, and carelessness in
granting said new special crop loans.
YES. SC agrees with the trial court that “äll
precautions to protect the interest of the
Philippine National Bank as the principal of the
defendants were thrown overboard.” This is
evidenced by the following facts:
• Defendants released large loans to 103
borrowers who were neither
landowners or tenants but were
merely applicants for the purchase of
public lands.
83
• Defendants allowed intermediaries to
intervene in the granting of special
crop loans, contrrary to PNB’s rules.
• Defendants released loans without the
approval of the loan board.
3. WON PNB, in suing the defaulting
borrowers, ratified defendants’ acts.
NO. Ordinarily, a principal who collects either
judicially or extrajudicially a loan made by an
agent without authority, thereby ratifies the
said act of the agent. In the present case,
however, in filing suits against some of the
borrowers to collect at least part of the
unauthorized loans, there was no intention
on the part of PNB to ratify the acts of
appellants. Such act of the bank’s will even
benefit defendants because their financial
liability will be decreased if the bank can
recover from the defaulting borrowers.
4. WON the action was premature because
there is no showing that the defaulting
borrowers are insolvent.
NO. It is not necessary for the plaintiff Bank to
first go against the individual borrowers,
exhaust all remedies against them and then
hold the defendants liable only for the balance
which cannot be collected.
Air France v. CA, supra
Cervantes v. CA (TOFF)
DBP v. CA, supra
N. Article 1899 (REX)
Article 1899. If a duly authorized agent acts in
accordance with the orders of the principal, the
latter cannot set up the ignorance of the agent as
to circumstances whereof he himself was, or ought
to have been, aware.
Nepomuceno v. Heredia (TOFF)
O. Article 1900 (TOPE)
Art. 1900. So far as third persons are concerned,
an act is deemed to have been performed within
the scope of the agent's authority, if such act 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 an
understanding between the principal and the
agent.
Scope of agent’s authority as to third
persons
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• Includes not only the actual authorization rule of law or to

conferred upon the agent by his principal but dispense with a
also that which has apparently or impliedly formality required (as
been delegated to him. in Statute of Frauds)
• Where it is sought to
1. Where the authority not in writing vary an essential
- Every person dealing with an agent is quality of the agency
put in inquiry and must discover upon relationship
his peril, if he would hold the principal  The general rule requires that
liable, not only the fact of the agency the principal must have notice
but the nature and extent of authority of the alleged custom before
of the agent. the agent’s acts, in accordance
- One must act with ordinary prudence therewith, may bind the
and reasonable diligence to ascertain principal. But in the ff cases,
whether the agent is acting and principal deemed to have
dealing with him within the scope of his notice of a given usage, even
powers. though he did not in fact have
- The fact that one is dealing with an such notice:
agent whether the agency be general • Where the principal
or special, should be a danger signal. and the agent reside in
- The mere opinion of an agent as to the the same community,
extent of his powers will not bind the the usage is definite
principal who may act on the and well-known, and
presumption that third persons dealing the agent has no notice
with his agent will not be negligent to that he is to act to the
ascertain the extent of his authority as contrary; and
well as the existence of the agency. • Where the agent is
authorized to deal in a
Methods of broadening and restricting particular market or
agent’s authority exchange (upon the
• A principal may assume rights and incur ground that the
liabilities in respect of his agent’s acts or principal , as a
transactions other than those for which express reasonable man, must
authorization has been given and an agent’s have anticipated that
authority may be enlarged or restricted in a such usages were likely
number of ways: to prevail and,
o By implication therefore, in the
 Authority extends to acts and absence of any
transactions incidental to what contrary intention,
have been expressly must have authorized
authorized. the dealing in
o By usage and custom (may enlarge contemplation of
as well as restrict) them).
 Agent’s authorization may not, o By necessity
however, be enlarged through  Actually, an agency can never
usage and custom in the be created by necessity; what
following four classes of cases: is created is additional
• Where it is sought to authority in agent appointed
vary the terms of an and authorized before the
express authorization, emergency arose. The
as where the agent existence of an emergency or
appointed to sell for other unusual conditions may
credit; operate to invest in an agent
• Where it is sought appointed and authorized to
thereby to dispense meet the agency, provided:
with a legal • The emergency really
requirement enacted exists;
for the principal’s • The agent is unable to
benefit; communicate with the
• Where it is sought principal;
thereby to change a
84
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• The agent’s enlarged
authority is exercised
for the principal’s
protection; and
• The means adopted are
reasonable under the
circumstances
o By certain doctrines
 Of apparent authority (Art.
1911)
 Of liability by estoppel (ibid)
 Of ratification (Art. 1910)
are additional methods by which
authorization may be created.
o By the rule of ejusdem generis.-
• A method for stating the rule
that where in an instrument of
any kind, an enumeration of
specific matters is followed by
a general phrase, the general
phrase is held to be limited in
scope by the specific matters.
Responsibility of principal where agent acted
with improper motives.
General rule
• The motive of the agent in
entering into a contract with a third person
is immaterial.
• Where a written authority given
to an agent covers the thing done by him
on behalf of the principal, it is not
competent to the court to look into the
mind of the agent, and if he had applied his
authority for his own ends, to hold that the
principal is not bound.
Exceptions
• Where the third person knew
that the agent was acting for his private
benefit (that the principal is not liable)
• Where the owner is seeking
recovery of personal property which he has
been unlawfully deprived.
Principal’s responsibility for agent’s
misrepresentation.
• Within the scope of agent’s authority.-
o A principal is subject to liability for loss
caused to another by the other’s
reliance upon a deceitful
representation of an agent in the
course of his employment if the
representation is authorized, or within
the implied authority of the agent to
make for the principal, or apparently
authorized by him or not to make the
representation
• Beyond the scope of agent’s authority.-
o Principal not bound by the
misrepresentation of the agent.
85
• For the agent’s own benefit.-
o As to this aspect, the weight of
authority says YES, principal is liable, if
the agent acted for his own benefit and
even if the agent acted within the
authority given.
Eugenio v CA and Pepsi Cola Bottling Co.
(EVA)
1994
Regalado, J.
FACTS
• Nora Eugenio was a dealer of the softdrinks
product of respondent company while her
husband Alfredo used to be a route manager of
Pepsi7.
• Pepsi filed a complaint for a collection of
sum of money against the Eugenio spouses
alleging an outstanding account of P94,651
representing balances both from the Quezon
City and Muntinlupa plants where Nora
maintains a regular charge account with them.
• During trial, the Eugenio spouses
presented four Trade Provisional Receipts
(TPRs) allegedly issued and received by them
from Pepsi’s current route manager Jovencio
Estrada of its Malate Warehouse showing
payments in the total amount of P80,500.
• The Eugenios contend that had the
amounts in the TPRs been credited on their
favor, they would not be indebted to Pepsi but
it is the latter who would be indebted to them
in the sum of P3,546 representing
overpayment.
• TC ruled for Pepsi. CA affirmed.
ISSUE: WON the TPRs are sufficient evidence to
prove Sps Eugenio’s payment of their
accountabilities to Pepsi?
HELD: YES. CA judgment annulled and set aside;
Pepsi ordered to pay back petitioners
overpayment.
RATIO
• The TPRs presented in evidence are
disputably presumed as evidence of payments
made on the accounts of the Eugenios. There
are presumptions juris tantum in law that
private transactions have been fair and regular
and that the ordinary course of business has
been followed. In this case, Pepsi failed to
rebut the aforestated presumptions. (Pepsi
failed to present Estrada as witness; it also
submitted in evidence falsified documents).
• Even assuming arguendo that Pepsi’s
cashier never received the amounts reflected
7
Prior to the instant case, Alfredo filed an illegal dismissal
case against Pepsi which was decided in his favor.
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in the TPRs, it still failed to prove that Estrada,
who is duly authorized agent with respect to
the Eugenio spouses, did not receive those
amounts from the latter.
• In so far as the customers are concerned,
for as long as they pay their obligations to the
sales representative of the private respondent
using the latter's official receipt, said payment
extinguishes their obligations. Otherwise, it
would unreasonably cast the burden of
supervision over its employees from Pepsi to
its customers.
• The substantive law is that payment shall
be made to the person in whose favor the
obligation has been constituted, or his
successor-in-interest or any person authorized
to receive it [Art. 1240,CC]. 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 an understanding
between the principal and his agent.
Ch. Veloso and Rosales v La Urbana and Del
Mar (GEN)
Nov. 3, 1933
Imperial, J.
FACTS: Petitioner Corazon Ch. Veloso owned
undivided portions of 5 parcels of land in Manila.
Defendant Del Mar forged 2 powers of attorney
purporting to have been executed by the petitioner
spouses conferring upon him authority to mortgage
the petitioner’s participation in the properties.
These powers of attorney were duly registered in
the office of the Register of Deeds.
Del Mar proceeded in mortgaging the petitioner’s
participations to La Previsora Filipina.
Subsequently, he cancelled the mortgage and
transferred it to La Urbana which granted him a
loan of P13,475. He delivered the owner’s
duplicates of the certificates of title to La Urbana.
However, Del Mar violated the conditions of the
mortgage which prompted La Urbana to foreclose
the mortgages.
Petitioners filed a criminal action against Del Mar
for the fraudulent transactions which resulted into
his eventual conviction. The trial court also held
that pursuant to Art. 1714 (Old Civil Code) and
Torrens Act, the forged powers of attorney were
null and void and could not prejudice the rights of
the petitioners.
ISSUE: WON La Urbana should be liable for
damages
HELD: YES. Inasmuch as Del Mar is not the
registered owner of the mortgaged properties and
86
inasmuch as the appellant was fully aware of the
fact that it was dealing with him on the strength of
the alleged powers of attorney purporting to have
been conferred upon him by the plaintiff, it was his
duty to ascertain the genuineness of the
instruments and not rely absolutely and exclusively
upon the fact that the powers of attorney appeared
to have been registered. In view of its failure to
proceed in this manner, it acted negligently and
should suffer the consequences and damages
resulting from the transactions.
Safic Alcan vs. Imperial Vegetable Oil Co.
Inc. (MAI)
March 28, 2001
Ynares – Santiago, J.
Facts: On July 1, 1986 and September 25, 1986,
Safic Alcan placed purchase orders with
IVO(Imperial) for 2,000 long tons of crude coconut
oil, valued at US$222.50 per ton, covered by
Purchase Contract Nos. A601446 and A601655,
respectively, to be delivered within the month of
January 1987. Private respondent, however, failed
to deliver the said coconut oil and, instead, offered
a "wash out" settlement, whereby the coconut oil
subject of the purchase contracts were to be "sold
back" to IVO at the prevailing price in the
international market at the time of wash out. Thus,
IVO bound itself to pay to Safic the difference
between the said prevailing price and the contract
price of the 2,000 long tons of crude coconut oil,
which amounted to US$293,500.00. IVO failed to
pay this amount despite repeated oral and written
demands.
The contracts performed in 1985, on one hand, and
the 1986 contracts subject of this case, on the
other hand, differed in that under the 1985
contracts, deliveries were to be made within two
months. This, as alleged by Safic, was the time
needed for milling and building up oil inventory.
Meanwhile, the 1986 contracts stipulated that the
coconut oil were to be delivered within period
ranging from eight months to eleven to twelve
months after the placing of orders. The coconuts
that were supposed to be milled were in all
likelihood not yet growing when Dominador
Monteverde sold the crude coconut oil. As such,
the 1986 contracts constituted trading in futures or
in mere expectations.
Issue: Whether or not IVO's President, Dominador
Monteverde, validly entered into the 1986
contracts for and on behalf of IVO
Held: NO.
It can be clearly seen from IVO's By-laws that
Monteverde had no blanket authority to bind IVO to
any contract. He must act according to the
instructions of the Board of Directors. Even in
instances when he was authorized to act according
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to his discretion that discretion must not conflict
with prior Board orders, resolutions and
instructions. The evidence shows that the IVO
Board knew nothing of the 1986 contracts and that
it did not authorize Monteverde to enter into
speculative contracts. In fact, Monteverde had
earlier proposed that the company engage in such
transactions but the IVO Board rejected his
proposal. Since the 1986 contracts marked a sharp
departure from past IVO transactions, Safic should
have obtained from Monteverde the prior
authorization of the IVO Board. Safic can not rely
on the doctrine of implied agency because before
the controversial 1986 contracts, IVO did not enter
into identical contracts with Safic. The basis for
agency is representation and a person dealing with
an agent is put upon inquiry and must discover
upon his peril the authority of the agent. In the
case of Bacaltos Coal Mines v. Court of Appeals, we
elucidated the rule on dealing with an agent thus:
Every person dealing with an agent is put upon
inquiry and must discover upon his peril the
authority of the agent. If he does not make
such inquiry, he is chargeable with knowledge
of the agent's authority, and his ignorance of
that authority will not be any excuse. Persons
dealing with an assumed agent, whether the
assumed agency be a general or special one,
are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the
agency but also the nature and extent of the
authority, and in case either is controverted,
the burden of proof is upon them to establish
it.
The most prudent thing petitioner should have
done was to ascertain the extent of the authority of
Dominador Monteverde. Being remiss in this
regard, petitioner can not seek relief on the basis
of a supposed agency.
Harry Keeler v. Rodriguez, supra
BPI v. De Coster (ROG)
1925
Facts: BPI alleges that for value, Gabriela de
Coster having consent and permission of her
husband, and he acting as her agent, defendants
made promissory note to BPI for P292k which also
provided that in the event of a suit or action,
defendants should pay further sum of P10k, as
attorney's fees. To secure payment thereof, Jean
Poizat and JM Poizat & Co. executed a chattel
mortgage to BPI on the steamers Roger Poizat and
Gabrielle Poizat, with machinery and materials
belonging to Poizat Vegetable Oil Mills. Gabriela
Coster and husband acknowledged and delivered
to BPI a mortgage on real property and such real
property was subject to a prior mortgage in favor
87
of La Orden de Domincios or PP Predicadores dela
Provincia del Sanitsimo Rosario (La Orden) hence it
is made a party defendant.
Promissory is long past due and owing. CFI: ruled
against Gabriela, Poizat to be solidarily liable for
P292k but such amount defendants have not paid.
BPI now prays for an order to direct sheriff to take
immediate possession of property described in the
chattel mortgage and sell it. -La Orden: prays that
its credit be also taken into account when 2nd
mortgage is foreclosed.
Gabriela, Poizat and Poizat Co declared in default
for failure to appear or answer.
CFI: granted BPI and that Dominican Fathers should
have judgment for amount of their claim and
property be sold and proceeds applied.
Through her attorney, Gabriela filed motion
alleging: she is legit wife of Poizat, she had been
absent from Phils and living in Paris till 1924 when
she returned to Manila; at tiem of filing of
complaint and issuance of summons she was not in
the Phils; that summons were delivered by sheriff
to her husband and that through latter's malicious
negligence, default was taken and judgment
entered; that she never had any knowledge for the
amounts; no knowledge of actual facts till 1924
when through the local newspapers, she learned
that a default judgment been made against her;
when she first found out, she was unable to obtain
rendition of accounts, because her husband had
left the Phils 2 days previous and gone to Hong
Kong; that she went to HK and learned that her
hubby had left there under a false name and had
gone to Singapore from whence he went to other
places unknown to her; that she then returned to
Manila; and that in 1924, she came into possession
of docs showing the illegality of the notes and
mortgage in question.
Gabriela's defense: involves validity of order of
Dominican Fathers in this, that their mortgage
does not guarantee any loan made to her; it is a
security only given for a credit of a 3rd person;
mortgage executed without marital consent of
wife; Husband no authority to make her liable as
surety on debt of a 3rd person.
As to notes to BPI: a) it does not represent
any money paid to Gabriela by BPI b) it is
exclusively the personal debt of Jena Poizat
and his company, c) it was executed by her
husband, because BPI desired more security
for payment of her husband's debt to the
bank, d) it was executed in excess of powers
given to husband under his power of
attorney, e) it was executed as a result of
collusion between bank and her husband for
purpose of making her liable for oblig of 3rd
person.
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As to mortgage: a) it was executed to secure
a void oblig b)it does not guarantee any loan
made to her c)it was executed without
express marital consent which law requires,
d) executed through collusion.
Prayer: annul judgment and case be
reopened and be permitted to file answer
and case be tried on the merits. --DENIED.
Issue: WON Gabriala bound by promissory notes
and mortgage signed by her husband on her
behalf? NO
Held:
1. Service of Gabriela's summons made to
husband's residence NOT valid therefore
court never acquired jurisdiction.
It is expressly admitted by BPI that since 1908 to
1924, wife was residing in City of Paris. Residence
of wife in Paris was for 16 years.
Residence of wife would continue to remain to be
that of husband's if where in the ordinary course of
business wife is absent from husband's residence
on a pleasure trip or for business or to visit friends
or relatives. But HERE, that is not so. For 16 years
residence of husband was in City of Manila and
residence of wife was in City of Paris.
Since residence of hubby not the usual place of
residence of wife, the substituted service made is
null and void and by such service court never
acquired jurisdiction over Gabriela's person.
2. The contention that under husband's
power of attorney, he was the general agent
of wife with authroity to accept service of
process for her and in her name not valid.
Nothing in record to show that husband accepted
service of nay process for wife or as her agent, or
that he was acting for or representing her in his
failure and neglect to appear or answer.
3. Husband was with no authority to sign the
promissory note on behalf of wife Gabriela.
Gabriel: Under the power of attorney, husband had
no authority for and on behalf of wife to execute a
joint and several note or to make her liable as an
accommodation maker. Debt was a preexisting
debt of husband and Company to which she was
not a party and so she had no legal oblig to pay.
She never borrowed any money from BPI nor ever
had dealing with it nor was she indebted to BPI.
Record shows there is no evidence to show wife
was a party to notes nor was she under any legal
liability to pay them. Notes were merely additional
security for the different debts of husband. At the
time notes were executed, husband was attorney
in fact for wife and bank knew or should have
88
known nature and extent of his authority and
limitation upon his power.
Power of attorney does not contain any provisions
giving husband authority to make wife liable as
surety for payment of preexisting debt of a 3rd
person.
Par 5 of Power of attorney authorizes husband for
and in name of wife "to loan or borrow sums of
money or fungible things, etc". = should be
construed to mean that husband had power only to
loan his wife's money and to borrow money for or
on account of his wife as her agent and attorney in
fact. That does not carry with it or imply that he
had legal right to make wife liable as surety for
preexisting debt of 3rd person.
4. While power of attorney authorizes
husband to… accept notices and summons,
there is no proof to show husband accepted
service of any notice or summons in the
action on behalf of bank and even so, if he
had, it would not be a defense to open up
and vacate a judgment.
Fact that agent failed and neglected to perform his
duties and to represent the interests of his
principal is not a bar to the principal obtaining legal
relief for the negligence of her agent, provided that
application such a relief is duly and properly made.
***Whole purpose and intent of power of attorney
was to empower and authorize husband to look
after and protect wife's interests and for her and in
her name to transact any and all of her business.
But nowhere does it provide or authorize him to
make her liable as a surety for the payment of the
preexisting debt of a 3rd person.
Husband no authority to sign note on behalf of wife
therefore, as to her, the note is void for want of
power of her husband to execute it. Same is true
for the real mortgage to the bank.
Judgment: Lower court decision vacated and as to
bank case remanded to lower court with leave for
wife to file answer to BPI's cause of action and
have case tried on merits.
Bacaltos Coal Mines v. CA (REG)
J. Davide
1995
FACTS: In an “Authorization,” petitioner Bacaltos
authorized Savellon, to use the coal operating
contract of Bacaltos Coal Mine of which he is the
proprietor, “for any legitimate purpose that it may
serve” and particularly: (1) to acquire purchase
orders; (2) to engage in trading; (3) to collect all
receivables due or in arrears; (4) to extend to any
person or company by substitution the same
extent of authority that is granted to Rene
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Savellon; (5) in connection with the preceeding
paragraphs to execute and sign documents,
contracts, and other pertinent papers.
In 1988, a Trip Charter Party was executed
between Bacaltos Coal Mines (represented by
Savellon) and San Miguel. The agreement was that
for Php 650,000 to be paid within seven days after
the execution of the contract, it "lets, demises" the
vessel to charterer SMC "for three round trips to
Davao." The vessel was able to make only one trip,
so SMC filed an action for specific performance.
Petitioners alleged that Savellon was not their
Chief Operating Officer and that the powers
granted to him are only those clearly expressed in
the Authorization which do not include the power
to enter into any contract with SMC.
ISSUE: WON Savellon was duly authorized by the
petitioners to enter into the Trip Charter Party.
RULING: NO. The broadest scope of Savellon's
authority is limited to the use of the coal operating
contract and the clause cannot contemplate any
other power not included in the enumeration or
which are unrelated either to the power to use the
coal operating contract or to those already
enumerated. In short, while the clause allows some
room for flexibility, it can comprehend only
additional prerogatives falling within the primary
power and within the same class as those
enumerated.
There is no evidence at all that Bacaltos Coal Mines
as a coal mining company owns and operates
vessels, and even if it owned any such vessels, that
it was allowed to charter or lease them.
Also, the Authorization is not a general power of
attorney. It is a special power of attorney for it
refers to a clear mandate specifically authorizing
the performance of a specific power and of express
acts subsumed therein.
Furthermore, had SMC exercised due diligence and
prudence, it should have known in no time that
there is absolutely nothing on the face of the
Authorization that confers upon Savellon the
authority to enter into any Trip Charter Party.
P. Article 1901 (ABBY)
Art. 1901. A third person 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 agent's acts.
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1. Effects of ratification and
expression of willingness to
ratify
• If the principal does not ratify the acts of the
agent it is unenforceable and he is not bound
by it.
• If the principal ratifies the acts of the agent, i.e.
authorizes, receives benefits, the THIRD
PERSON cannot set up the fact that the agent
has exceeded his authority. The THRID PERSON
may be compelled to abide by his contract.
• The ratification shall have a retroactive effect.
• It is only the PRINCIPAL NOT THE AGENT who
may stamp the imprimatur of ratification.
• Before ratification by the principal or
expression of willingness on his part to ratify,
the third person may repudiate the acts of the
agent.
2. Implied ratification
• Where a person acts for another who accepts
or retains the benefits or proceeds of his effort
with knowledge of the material facts
surrounding the transaction, the latter mus be
DEEMED to have ratified the methods
employed.
• Principle of Principal may not accept the
benefits of the transaction and repudiate the
burdens.
3. Cases
Commission on Public Highways v San Diego
(EARLA)
Rafferty v. Province of Cebu (JANCES)
December 29, 1928
Johns
Facts: An instrument was executed by plaintiff, by
and through his agent and attorney-in-fact, in
which the said agent undertook to convey title of
the plaintiff to 6700 sq. meters of a lot for a
consideration of P226. The part of the lot was to be
expropriated within the provincial park. Plaintiff
received and accepted the P226 consideration.
Plaintiff, however, contends that the agent had no
authority to execute the instrument in question.
Ruling: CFI – dismissed plaintiff’s complaint;
judgment for defendants’ cross-complaint.
Issue: WON the instrument executed is valid [YES]
HELD: If it be true that the agent had no authority
to execute the instrument, the plaintiff ought not
to have accepted and receipted for its
consideration. Having received the consideration,
he could not wait for fifteen years to rescind and
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set it aside upon the ground of fraud. The actions
of the defendant after the instrument was
executed in taking possession of the land and
making improvements thereon were open and
notorious and were a matter of common
knowledge and were known or legally should have
been known to the plaintiff.
Disposition: judgment of lower court affirmed.
Sta. Catalina v. Espitero (ALAIN)
Q. Article 1902 (MARK)
Art. 1902. A third person with whom the agent
wishes to contract on behalf of the principal may
require the presentation of the power of attorney,
or the instructions as regards the agency. Private
or secret orders and instructions of the principal do
not prejudice third persons who have relied upon
the power of attorney or instructions shown them.
1. Effects of private or secret
instructions upon third persons
Dizon v CA (JESSA)
January 28, 2003
Ynares-Santiago, J.
Facts:
• These involve two consolidated petitions
seeking to set aside and annul the decisions
and resolutions of respondent Court of Appeals
 essentially, the facts are:
 Overland Express Lines, Inc. (lessee)
entered into a Contract of Lease with
Option to Buy with petitioners (lessors)
involving a 1,755.80 square meter
parcel of land
 term of the lease was for one (1)
year commencing from May 16, 1974 up to
May 15, 1975.
 During this period, private
respondent was granted an option to
purchase for the amount of P3,000.00 per
square meter.  the lease shall be on a per
month basis with a monthly rental of
P3,000.00
 For failure of private respondent to
pay the increased rental of P8,000.00 per
month effective, petitioners filed an action
for ejectment
 MTC: private respondent to vacate the
leased premises and to pay the sum of
P624,000.00 representing rentals in
arrears and/or as damages in the form
of reasonable compensation for the use
and occupation of the premises during
the period of illegal detainer
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 CA: the alleged question of whether
petitioner was granted an extension of
the option to buy the property; whether
such option, if any, extended the lease
or whether petitioner actually paid the
alleged P300,000.00 to Fidela Dizon, as
representative of private respondents
in consideration of the option and,
whether petitioner thereafter offered to
pay the balance of the supposed
purchase price, are all merely
incidental and do not remove the
unlawful detainer case
 private respondent filed before the RTC
an action for Specific Performance and
Fixing of Period for Obligation with
prayer for the issuance of a restraining
order pending hearing on the prayer
for a writ of preliminary injunction (it
sought to compel the execution of a
deed of sale pursuant to the option to
purchase and the receipt of the partial
payment, and to fix the period to pay
the balance)
 Unable to secure an injunction, private
respondent also filed a complaint for
Annulment of and Relief from Judgment
with injunction and damages
 dismissed the complaint for annulment
on the ground of res judicata, and the
writ of preliminary injunction previously
issued was dissolved
 two cases were the after consolidated
before the RTC (both dismissed)
 CA: concluded that there was a
perfected contract of sale between the
parties on the leased premises and
that pursuant to the option to buy
agreement, private respondent had
acquired the rights of a vendee in a
contract of sale opined that payment
by private respondent of P300,000.00
as partial payment for the leased
property, which petitioners accepted
(through Alice A. Dizon) and for which
an official receipt was issued, was the
operative act that gave rise to a
perfected contract of sale, and that for
failure of petitioners to deny receipt
thereof, private respondent can
therefore assume that Alice A. Dizon,
acting as agent of petitioners, was
authorized by them to receive the
money in their behalf
Issue (relevant): WON there was a perfected
contract of sale
Held: NONE. There was no perfected contract of
sale between petitioners and private respondent.
Private respondent argued that it delivered the
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check of P300,000.00 to Alice A. Dizon who acted
as agent of petitioners pursuant to the supposed
authority given by petitioner Fidela Dizon, the
payee thereof. Private respondent further
contended that petitioners' filing of the ejectment
case against it based on the contract of lease with
option to buy holds petitioners in estoppel to
question the authority of petitioner Fidela Dizon. It
insisted that the payment of P300,000.00 as partial
payment of the purchase price constituted a valid
exercise of the option to buy.
Under Article 1475 of the New Civil Code, "the
contract of sale is perfected at the moment there is
a meeting of minds upon the thing which is the
object of the contract and upon the price. From
that moment, the parties may reciprocally demand
performance, subject to the provisions of the law
governing the form of contracts." Thus, the
elements of a contract of sale are consent, object,
and price in money or its equivalent. It bears
stressing that the absence of any of these essential
elements negates the existence of a perfected
contract of sale. Sale is a consensual contract and
he who alleges it must show its existence by
competent proof.
In an attempt to resurrect the lapsed option,
private respondent gave P300,000.00 to petitioners
(thru Alice A. Dizon) on the erroneous presumption
that the said amount tendered would constitute a
perfected contract of sale pursuant to the contract
of lease with option to buy. There was no valid
consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered
into by Alice A. Dizon, as petitioners' alleged agent,
and private respondent. The basis for agency is
representation and a person dealing with an agent
is put upon inquiry and must discover upon his
peril the authority of the agent. As provided in
Article 1868 of the New Civil Code, there was no
showing that petitioners consented to the act of
Alice A. Dizon nor authorized her to act on their
behalf with regard to her transaction with private
respondent. The most prudent thing private
respondent should have done was to ascertain the
extent of the authority of Alice A. Dizon. Being
negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals, SC
explained the rule in dealing with an agent:
Every person dealing with an agent is put
upon inquiry and must discover upon his
peril the authority of the agent. If he does
not make such inquiry, he is chargeable
with knowledge of the agent's authority,
and his ignorance of that authority will not
be any excuse. Persons dealing with an
assumed agency, whether the assumed
agency be a general or special one, are
91
bound at their peril, if they would hold the
principal, to ascertain not only the fact of
the agency but also the nature and extent
of the authority, and in case either is
controverted, the burden of proof is upon
them to establish it.
Toyota Shaw, Inc. V CA (BAMBI)
May 23, 1995
Davide, Jr., J.
Facts:
• Luna L. Sosa wanted to purchase a Toyota
Lite Ace so he and his son, Gilbert, went to
Toyota Shaw’s office and met Popong
Bernardo, a sales representative of Toyota.
• Sosa emphasized to Bernardo that he
needed the Lite Ace not later than June 17,
1989 because he, his family, and a balikbayan
guest would use it on June 18 for a trip to
Marinduque where he would celebrate his
birthday. He added that if he does not arrive in
his hometown with the new car, he would
become a “laughing stock.”
• Bernardo assured Sosa that a unit would be
ready for pick up at 10:00 a.m. on June 17.
• Bernardo then signed a document entitled
“Agreement Between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc,” stipulating that:
o All necessary documents will be
submitted to Toyota Shaw (Popong
Bernardo) upon arrival of Mr. Sosa from
Marinduque.
o The downpayment of P100,000.00
will be paid by Mr. Sosa on June 15.
o The vehicle will be released for
pick-up on June 17.
o It was also agreed upon by the
parties that the balance of the
purchase price would be paid by credit
financing through B.A. Finance.
• On June 15, Sosa and Gilbert went to
Toyota to deliver the downpayment of
P100,000.00.
• They met Bernardo who then accomplished
a printed Vehicle Sales Proposal (VSP) 928, on
which Gilbert signed under the subheading
“conforme”. In this document, the spaces
provided for “delivery terms” were not filled-
up.
• Rodrigo Quirante, the Sales Supervisor of
Bernardo, checked and approved said VSP.
• On June 17, Bernardo called Gilbert to
inform him that the vehicle would not be ready
for pick up at 10:00 a.m. but instead at 2:00
p.m. that same day.
• At 2:00 p.m., Sosa and Gilbert met
Bernardo at the latter’s office. After waiting for
about an hour, Bernardo told them that the car
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could not be delivered because “nasulot ang
unit ng ibang malakas.”
• Toyota contends:
o The Lite Ace was not delivered to
Sosa because B.A. Finance disapproved
Sosa’s credit financing application.
o A particular unit had already been
earmarked for Sosa but could not be
released due to the uncertainty of
payment of the balance of the
purchase price.
o Toyota gave Sosa the option to
purchase the unit by paying the full
purchase price in cash but Sosa
refused.
o Toyota returned the downpayment
to Sosa upon his request.
• Thereafter, Sosa sent two letters to Toyota
demanding the refund of downpayment as well
as the payment of damages.
• Toyota refused to accede to the Sosa’s
demands.
• Sosa filed a complaint against Toyota for
damages under Articles 19 and 21 of the Civil
Code in the total amount of P1,230,000.00.
• TRIAL COURT held that
o The “Agreement between Mr. Sosa
and Popong Bernardo,” was a valid
perfected and contract of sale Toyota
which bound Toyota to deliver the
vehicle to Sosa.
o Toyota acted in bad faith in selling
the car to another person.
o Bernardo, as an authorized sales
executive of Toyota Shaw, was the
latter’s agent and thus bound Toyota
Shaw.
o Therefore, Toyota should pay Sosa
moral and exemplary damages as well
as attorney’s fees, compensation for
Sosa and his lawyer’s transportation
fare, and the costs of the suit.
• CA affirmed in toto.
Issue and Held:
1. WON there was a perfected contract
of sale.
NO. Article 1475 of the Civil Code specifically
provides that “the contract of sale is perfected
at the moment there is a meeting of minds
upon the thing which is the object of the
contract and upon the price. From that
moment, the parties may reciprocally demand
performance, subject to the provisions of the
law governing the form of contracts.”
The “Agreement” is not a contract of sale
because it imposed no obligation on the part of
Toyota to transfer ownership and no correlative
obligation on the part of Sosa to pay therefor a
92
price certain. This is true notwithstanding the
provision on the downpayment of P100,000.00
because such provision made no specific
reference to a sale of a vehicle. If it was
intended for a contract of sale, it could only
refer to a sale on installment basis. Nothing
was mentioned about the full purchase price
and the manner the installments were to be
paid. The rule is that a definite agreement on
the manner of payment of the price is an
essential element in the formation of a binding
and enforceable contract of sale. This is so
because disagreement on the manner of
payment is tantamount to a failure to agree on
the price.
Moreover, the "Agreement" shows the absence
of a meeting of minds between Toyota and
Sosa. For one thing, Sosa did not even sign it. It
was clear from the title of the document,
“Agreement between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc” that Sosa was
not dealing with Toyota but with Bernardo who
not misrepresent that he had authority to sell
Toyota vehicles.. Sosa knew Bernardo was only
an agent and it was incumbent upon Sosa to
act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's
authority as an agent. A person dealing with an
agent is put upon inquiry and must discover
upon his peril the authority of the agent.
At most, the transaction only reached the
negotiation stage of a contract of sale with the
execution of the VSP. The VSP was a mere
proposal which was aborted when BA Finance
disapproved Sosa’s credit financing application.
It created no demandable right in favor of Sosa
for the delivery of the vehicle to him, and its
non-delivery did not cause any legally
indemnifiable injury.
Siredy Enterprises, Inc. vs. CA (REX)
FACTS: Siredy Enterprises, Inc. (Siredy) is the
owner and developer of Ysmael Village, a
subdivision in Bulacan. Its president is Ismael
Yanga. In its Articles of Incorporation, Siredy’s
primary corporate prupose is to acquire and
develop lands, erect buildings and houses thereon,
and sell, lease, or otherwise dispose the said
properties to buyers.
Sometime before October 1978, Yanga executed
an undated Letter of Authority in favor of
Hermogenes Santos. In this letter, Yanga
constituted in Santos “to do and execute”, among
other things, the authority of negotiating and
entering into “contract/s to build Housing Units” in
Ysmael Village.
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On October 15, 1978, Santos entered into a deed
of agreement with Conrado de Guzman. In this
deed, it expressly stated that Santos was
representing Siredy, while De Guzman was referred
to as the contractor and Siredy was the principal.
For almost 12 years, until April 1990, De Guzman
constructed 26 residential units in Ysmael Village.
13 were fully paid, but the other 13 remained
unpaid. The total price exceeded 400k, verified
correct and signed by Santos. De Guzman then
tried to collect this from Siredy, but failed. Thus he
instituted an action for specific performance
against Siredy, Yanga, and Santos, who all denied
liability.
During the trial, Santos disappeared. Siredy in its
defense presented testimonial evidence that Siredy
had no contract with De Guzman and had not
authorized Santos to enter into a contract with
anyone to build houses in the said village.
The TC ruled in favor of Siredy, saying that the
deed of agreement was between De Guzman and
Santos only, and held that Siredy and Yanga
cannot be held liable. Santos was ordered to pay
the amount and the case against Siredy and Yanga
was dismissed.
Upon appeal, the CA reversed, saying that the
Letter of Authority clearly constituted Santos as
Siredy’s agent. Consequently Siredy cannot deny
liability for the contract between Santos and De
Guzman, and there was no need for Yanga himself
to be a signatory to it, in order to be bound. Siredy
now appeals to the SC, the relevant argument
in this case that Santos’ instructions were
only to SELL the lots and not build houses.
ISSUE:
WON there was an agency (YES)
WON assuming Santos was an agent, Siredy
is liable under the Deed of Agreement (YES)
HELD/RATIO
A reading of the Letter of Agreement between
Yanga and Santos undoubtedly constitutes Santos
as an agent. There are express stipulations
contained therein, and it was on the authority of
this document that De Guzman transacted
business with Santos in the first place.
As to Siredy’s defense that it was only interested in
selling the lots, it does not matter. First of all, its
Articles of Incorporation show that it undertakes
construction of buildings and houses. Such Articles,
coupled with the Letter of Authority, is sufficient to
have given De Guzman reason to believe that
Santos was duly authorize to represent Siredy.
Secondly, even assuming that Santos’
mandate was only to sell the lots as Siredy
93
asserts, Siredy is still bound to pay De
Guzman. De Guzman is a third party to the
agency who had no knowledge of the specific
instructions between principal and agent.
What De Guzman saw was the Letter of
Authority, and the scope of the agent’s
authority is what appears written therein.
Third persons may be bound to inquire into
the extent or scope of the agent’s authority,
but they are not required to go beyond the
terms of the written power of attorney. Third
persons cannot be adversely affected by an
understanding between principal and agent
of limits of that authority. In the same way,
third persons need not concern themselves
with instructions given by the principal to his
agent outside of the written power of
attorney.
As to the contention that the Letter of Authority
was defective and needed reformation, this does
not warrant consideration, especially with Yanga
being an MD and a businessman. That the present
case is in effect a revocation of the Letter of
Authority is also erroneous. As for an alleged
violation by De Guzman of the Deed of Agreement,
it was only brought as an issue on appeal and was
not raised in the courts below.
PETITION DENIED, CA AFFIRMED.
R. Article 1903 (TOPE)
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.
Definition
Factor or commission Ordinary agent
agent
• One whose business • Need not have the
is to receive and sell possession of the
goods for a goods of his
commission principal, while the
• Entrusted by the commission agent
principal with the must be in
possession of goods possession
to be sold, and
usually selling in his
own name.
• May act on his own
name or in that of
the principal
Liability of commission agent as to goods
received
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• If the commission agent received goods
consigned to him, he is responsible for any
damage or deterioration suffered by the same
in the terms and conditions and as described in
the consignment.
• The phrase “in the terms and conditions and as
described in the consignment” refers to the
quantity, quality, and physical condition of the
goods.
• To avoid liability, the commission agent should
make a written statement of the damage or
deterioration if the goods received by him do
not agree with the description in the
consignment.
S. Article 1904 (GEN)
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.
Santos v. Bernabe (MAI)
November 6, 1929
Villareal, J.
Facts: Urbano Santos deposited in Jose Bernabe’s
warehouse 778 cavans and 38 kilos of palay while
Pablo Tiongson deposited in the same warehouse
1,026 cavans and 9 kilos of the same grain.
On March 20, 1928, Pablo Tiongson filed with the
Court of First Instance of Bulacan a complaint
against Jose C. Bernabe, to recover from the latter
the 1,026 cavans and 9 kilos of palay deposited in
the defendant's warehouse. At the same time, the
application of Pablo Tiongson for a writ of
attachment was granted, and the attachable
property of Jose C. Bernabe, including 924 cavans
and 31 1/2 kilos of palay found by the sheriff in his
warehouse, were attached, sold at public auction,
and the proceeds thereof delivered to said
defendant Pablo Tiongson, who obtained judgment
in said case.
It does not appear that the sacks of palay of
Urbano Santos and those of Pablo Tiongson,
deposited in Jose C. Bernabe's warehouse, bore
any marks or signs, nor were they separated one
from the other.
Urbano Santos contends that Pablo Tiongson
cannot claim the 924 cavans and 31 ½ kilos of
palay attached by the defendant sheriff as part of
those deposited by him in Jose C. Bernabe's
warehouse, because, in asking for the attachment
thereof, he impliedly acknowledged that the same
belonged to Jose C. Bernabe and not to him.
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Issue: Whether or not Pablo Tiongson can claim the
entire 924 cavans and 31 ½ kilos of palay
Held: NO. The 778 cavans and 38 kilos of palay
belonging to the plaintiff Urbano Santos, having
been mixed with the 1,026 cavans and 9 kilos of
palay belonging to the defendant Pablo Tiongson in
Jose C. Bernabe's warehouse; the sheriff having
found only 924 cavans and 31 1/2 kilos of palay in
said warehouse at the time of the attachment
thereof; and there being no means of separating
form said 924 cavans and 31 1/2 of palay
belonging to Urbano Santos and those belonging to
Pablo Tiongson, the following rule prescribed in
article 381 of the Civil Code for cases of this
nature, is applicable:
Art. 381. If, by the will of their owners, two
things of identical or dissimilar nature are
mixed, or if the mixture occurs
accidentally, if in the latter case the things
cannot be separated without injury, each
owner shall acquire a right in the mixture
proportionate to the part belonging to him,
according to the value of the things mixed
or commingled.
The number of kilos in a cavan not having been
determined, we will take the proportion only of the
924 cavans of palay which were attached and sold,
thereby giving Urbano Santos, who deposited 778
cavans, 398.49 thereof, and Pablo Tiongson, who
deposited 1,026 cavans, 525.51, or the value
thereof at the rate of P3 per cavan.
Montelibano v. Bacolod-Murcia Milling (ROG)
1954
Facts: Montelibano et al are sugar planter,
member of Bacolod Murcia or assignees of sugar
planter. They have contracts with Bacolod (Central)
for the delivery of their sugar cane to the sugar mill
of Central for milling and processing into sugar.
Sugar cane delivered by each planter was to be
divided between planter and Central this way: 60%
for planter, 40% for Central. Central was to provide
planter from time to time as the milling progressed
with info as to share of sugar that planter was
entitled to receive, give planter quedans or
warehouse receipts therefor. After the milling, and
for period of 90days, Central was to keep sugar in
its warehouse free of charge, and planter to pay
5centavos per picul /month for storage aside.
At time of Japanese occupation of Negros
Occidental on May 1942 there were on deposit at
Central's warehouse 664k piculs of sugar, of which
128k belonged to Montelibano et al, 284k to
Central and the balance to planters not parties
here. In '43, Japanese Military Admin designated
Fidel Henares president of Sugar Planters' Assoc
with authority to "contract, deliver, to receive
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payments, to pay various accounts to members of
Assoc; to open accounts, to contract overdraft
accounts with bank of Taiwan, and perform such
other powers as may be necessary in the premises.
Japanese Military Admin issued regulation
governing purchases of sugar by Military Admin by
virtue of which, upon purchase of sugar by Admin,
any claim of PNB or any other enemy corp thereto
shall automatically be cancelled, and sugar thus
purchased deposited as new "Regenesis a/c" in the
name of buyer, Bank of Taiwan. Planters or owners
of sugar were authorized, if they chose, to borrow
funds from the Bank of Taiwan. As per Admin
regulations, checks in payment of sugar bought
shall be Bank of Taiwan checks which however
were to be deposited with said bank and set off
against mortgages on old crop loans of planters as
Farmer Rehabilitation Funds. New crop loans could
be granted within limits of the proceeds of their
sugar sold.
Mitsui Bussan Kaisha Ltd. notified president of
Planters' Assoc that it was buying all the sugar of
the planters, whether they could be located or not.
Warehouse orders for release of sugar he had sold
were issued at the request of the president of the
Planters' Assoc. From the time Kaisha made
purchases, it began withdrawing sugar from
Central in sacks. Withdrawals were made but
without indication as to whose sugar each
withdrawal was being made. As the sugar
belonging to the planters and that of Central were
mixed up, and there being nothing to show what
buyer was withdrawing, it could not be determined
whose sugar had been actually sold or withdrawn.
At time of liberation, there were about 150k piculs
sugar but such was impounded by US Enemy
Property Custodian but was finally released. Parties
agreed that 60% be provisionally assigned to them
to be prorated among them accdg to sugar they
had on deposit with Central prior to military
occupation. After liberation and before this
proration, Montelibano withdrew from warehouse
some 12k piculs.
Montelibano: This present action now is predicated
on claim that Central has already been fully paid
for its share of sugar as it had sold during 1943 to
1945 some 284k piculs in excess of 175 piculs of
its own share and had received total price of P2.4m
so that sugar remaining pertained exclusively
them.
TC: sugar remaining at time of liberation was
already purchased by Military Admin but it could
not withdraw same coz of advent of liberation; as
sugar were all mixed up, none of owners could
claim exclusive ownership. This the parties had
already accepted and carried out by the proration.
The taking of sugar belonging to Montelibano and
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Central was an act of confiscation by Japanese
which was legal valid from which no recourse may
be had against Jap Govt or against Central. Action
was dismissed
Issue: who are the legal owners of the sugar
remaining at Central's warehouse at time of
liberation?
Held:
The determination of nature or validity of act of
Japanese Military Admin in purchasing
Montelibano's sugar from president of the planters
whom it appointed without the planters or owners
consent is absolutely immaterial; whether the act
of purchase was an act of confiscation of enemy
property by military occupant or one of requisition,
or one of voluntary sale, is beside the fundamental
issue, which is stated above.
Irrespective of the legality or illegality of purchase
of plaintiff's sugar (by Japanese Military Admin) the
fact remains that in consequence thereof of
warehouse orders for release of Montelibano's
sugar were issued and sugar actually taken from
the warehouse. Also by sale of Central's sugar,
release were authorized to the purchase and
withdrawals made. As to the sugar remaining, title
thereto remained in the original owners, because
ownership of personal property sold is not
transferred until actual delivery--non nudis pactis,
sed traditione dominia rerum transferuntur.
As sugar of the planters and of Central were stored
together in a single mass it's absolutely impossible
physically or legally, to determine whose sugar it
was that remained after the withdrawals. There is
no legal basis for planters' position that as taking
of sugar was without their consent, and that of
Central's was with its consent, all that remained
was theirs. The only solution is that the mass
remaining must pertain to original owners in
proportion of the original amounts owned by each
of them.
T. Article 1905 (REG)
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.
• If sale is made without authority, the principal
is given two alternatives:
1. require payment in cash; but the
interest or benefit from the sale on
credit shall belong to the agent since
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the principal cannot be allowed to
enrich himself at the agent’s expense
2. ratify the sale on credit and have all
the risks and advantages to himself
Green Valley Poultry v. IAC & Squibb (ABBY)
1984
J. Abad Santos
Facts:
• Green Valley was appointed as the
noexclusive distributor of verinary products of
Squibb in northern Luzon.
• Squibb filed a suit to collect on goods
delivered but unpaid.
• Green Valley claimed that the contract with
Squibb was a mere agency to sell; that it never
purchased goods from Squibb; that the goods
received were on consignment only with the
obligation to turn over the proceeds, less its
commission, or to return the goods ff not sold,
and since it had sold the goods but had not
been able to collect from the purchasers
thereof, the action was premature.
• Upon the other hand, Squibb claimed that
the contract was one of sale so that Green
Valley was obligated to pay for the goods
received upon the expiration of the 60-day
credit period.
• Green Valley was ordered by the CA to pay
the sum of P48,374.74 plus P96.00 with
interest at 6% per annum from the filing of this
action; plus attorney's fees in the amount of
P5,000.00 and to pay the costs to Squibb.
Issue:
1.WoN it is a contract of sale or a contract to sell.
2. WoN Green Valley is liable to pay the unsold
products
Held: According to the SC:
We do not have to categorize the contract.
Whether viewed as an agency to sell or as a
contract of sale, the liability of Green Valley is
indubitable. Adopting Green Valley's theory that
the contract is an agency to sell, it is liable
because it sold on credit without authority from its
principal. The Civil Code has a provision exactly in
point. It reads:
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.
U. Article 1906-1908 (EARLA)
96
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)
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)
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.
V. Article 1909 (JANCES)
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.
MBTC vs. CA (ALAIN)
Feb 18, 1991
Cruz, J.
FACTS: In January 1979, a certain Eduardo Gomez
opened an account with Golden Savings and
deposited over a period of two months 38 treasury
warrants with a total value of P1,755,228.37. They
were all drawn by the Philippine Fish Marketing
Authority and purportedly signed by its General
Manager and countersigned by its Auditor. Six of
these were directly payable to Gomez while the
others appeared to have been indorsed by their
respective payees, followed by Gomez as second
indorser.
On various dates between June 25 and July 16,
1979, all these warrants were subsequently
indorsed by Gloria Castillo as Cashier of Golden
Savings and deposited to its Savings Account No.
2498 in the Metrobank branch in Calapan, Mindoro.
They were then sent for clearing by the branch
office to the principal office of Metrobank, which
forwarded them to the Bureau of Treasury for
special clearing.
More than two weeks after the deposits, Gloria
Castillo went to the Calapan branch several times
to ask whether the warrants had been cleared. She
was told to wait. Accordingly, Gomez was
meanwhile not allowed to withdraw from his
account. Later, however, "exasperated" over
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Gloria's repeated inquiries and also as an
accommodation for a "valued client," the petitioner
says it finally decided to allow Golden Savings to
withdraw from the proceeds of the warrants.
Withdrawals were made on July 9, 1979, July 13,
1979, and July 16, 1979.
In turn, Golden Savings subsequently allowed
Gomez to make withdrawals from his own account,
eventually collecting the total amount of
P1,167,500.00 from the proceeds of the apparently
cleared warrants.
On July 21, 1979, Metrobank informed Golden
Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19,
1979, and demanded the refund by Golden Savings
of the amount it had previously withdrawn, to
make up the deficit in its account.
The demand was rejected. Metrobank then sued
Golden Savings in the Regional Trial Court of
Mindoro.
ISSUE: W/N until such time as Metrobank is
actually paid, its obligation is that of a mere
collecting agent which cannot be held liable for its
failure to collect on the warrants.
HELD: Metrobank exhibited extraordinary
carelessness. The amount involved was not trifling
— more than one and a half million pesos (and this
was 1979). There was no reason why it should not
have waited until the treasury warrants had been
cleared; it would not have lost a single centavo by
waiting. Yet, despite the lack of such clearance —
and notwithstanding that it had not received a
single centavo from the proceeds of the treasury
warrants, as it now repeatedly stresses — it
allowed Golden Savings to withdraw — not once,
not twice, but thrice — from the uncleared treasury
warrants in the total amount of P968,000.00. It’s
reason? It was "exasperated" over the persistent
inquiries of Gloria Castillo about the clearance and
it also wanted to "accommodate" a valued client. It
"presumed" that the warrants had been cleared
simply because of "the lapse of one week."
To gloss over its carelessness, Metrobank would
invoke the conditions printed on the dorsal side of
the deposit slips through which the treasury
warrants were deposited by Golden Savings with
its Calapan branch. The conditions read as follows:
Kindly note that in receiving items on
deposit, the bank obligates itself only as
the depositor's collecting agent, assuming
no responsibility beyond care in selecting
correspondents, and until such time as
actual payment shall have come into
97
possession of this bank, the right is
reserved to charge back to the depositor's
account any amount previously credited,
whether or not such item is returned. This
also applies to checks drawn on local banks
and bankers and their branches as well as
on this bank, which are unpaid due to
insufficiency of funds, forgery,
unauthorized overdraft or any other
reason. (Emphasis supplied.)
According to Metrobank, the said conditions clearly
show that it was acting only as a collecting agent
for Golden Savings and give it the right to "charge
back to the depositor's account any amount
previously credited, whether or not such item is
returned. This also applies to checks ". . . which are
unpaid due to insufficiency of funds, forgery,
unauthorized overdraft of any other reason." It is
claimed that the said conditions are in the nature
of contractual stipulations and became binding on
Golden Savings when Gloria Castillo, as its Cashier,
signed the deposit slips.
Doubt may be expressed about the binding force of
the conditions, considering that they have
apparently been imposed by the bank unilaterally,
without the consent of the depositor. Indeed, it
could be argued that the depositor, in signing the
deposit slip, does so only to identify himself and
not to agree to the conditions set forth in the given
permit at the back of the deposit slip. We do not
have to rule on this matter at this time. At any
rate, the Court feels that even if the deposit slip
were considered a contract, the petitioner could
still not validly disclaim responsibility thereunder in
the light of the circumstances of this case.
In stressing that it was acting only as a collecting
agent for Golden Savings, Metrobank seems to be
suggesting that as a mere agent it cannot be liable
to the principal. This is not exactly true. On the
contrary, Article 1909 of the Civil Code clearly
provides that —
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.
Tan Tiong Teck v. SEC (MARK)
British Airways v. CA, supra
Domingo v. Domingo, supra
Austria vs. CA (ANJ)
Facts:
• Maria G. Abad received from Guillermo Austria
one pendant with diamonds valued at 4,500phph
to be sold on commission basis or to be returned
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on demand. Said transaction was acknowledged
in a receipt dated Jan 30, 1961.
• On Feb 1,1961, while walking home to her
residence in Mandaluyong, Abad was said to
have been accosted by two men, one of whom
hit her on the face, while the other snatched her
purse containing cash and pieces of jewelry,
which included the pendant. The incident
became a subject of a criminal case for robbery
filed in the CFI of Rizal.
• As Abad failed to return the jewelry or pay its
value despite demands, Austria filed an action
against her and her husband for recovery of the
pendant or of its value, and damages before the
CFI of Manila.
• The Abads set up the defense that the alleged
robbery had extinguished their obligation.
• Trial Court ruled in favor of Austria, ordering the
Abads to jointly and severally pay the sum of
4,500, with legal interests, plus 450 for
attorney’s fees, and costs. It was held that the
Abads failed to prove the fact of the robbery, or,
if indeed it was committed, that Maria Abad was
guilty of negligence when she went home
without any companion, given that it was already
getting dark and she was carrying a large
amount of cash and valuables on the day in
question, and such negligence did not free her
from liability for damages.
• The Abads appealed to the Court of Appeals,
which rendered a decision in favor of the
defendants, ruling that the facts of the robbery
and Maria Abad’s possession of the pendant on
that day had been duly established. The CA
declared the Abads were not responsible for the
loss of the jewelry on account of a fortuitous
event, and relieved them from liability for
damages.
Issues:
1.WON the alleged robbery falls under the category
of fortuitous event and relieved the obligor from
his obligation under the contract of agency
(consignment of goods for sale), pursuant to
Article 1174 of the Civil Code, even though there
has been no final judgment of conviction in the
robbery case.
2.WON Abad, as an agent, is guilty of concurrent or
contributory fault or negligence, making her
liable for damages.
Held/Ratio:
1. Yes, the robbery was a fortuitous event that
relieved the Abads from liability.
• To constitute a fortuitous event that would
exempt a person from responsibility, it is
necessary that (1) the event must be
independent of the human will (or rather, of the
debtor’s or obligor’s); (2) the occurrence must
render it impossible for the obligor to fulfill the
obligation in a normal manner; and that (3) the
98
obligor must be free of participation in, or
aggravation of, injury to the creditor.
• It must be noted that in Article 11748, the
emphasis of the provision is on the event, not on
the factors responsible for them. To avail of the
exemption granted in law, it is not necessary that
the persons responsible for the occurrence
should be found or punished; it would only be
sufficient to establish that the unforeseeable
event, the robbery in this case, did take place
without any concurrent fault on the debtor’s part,
and this can be done by preponderant evidence.
To require in the present action for the prior
conviction of the culprits in the criminal case in
order to establish the robbery as a fact, would be
to demand proof beyond reasonable doubt.
2. No, Maria Abad is not guilty of concurrent or
contributory fault or negligence.
• As stated in Article 11709, in order to completely
exonerate the obligor from liabilities, such
obligor must be free of any concurrent or
contributory fault or negligence.
• In 1961, when the robbery in question did take
place, criminality had not by far reached the
level attained in the present day (1971). Given
this, Maria Abad could not be held
negligent. Should the incident had happen at
present time, where there is high incidence of
crimes against persons and property, that
renders travel after nightfall a matter to be
sedulously avoided without suitable precaution
and protection, the conduct of Maria, carrying
jewelry of considerable value, would be negligent
per se and would not exempt her from
responsibility in the case of a robbery.
Dispositive: Petition for review DISMISSED.
III. Obligations of Principal
A. Article 1910 (EVA)
Article 1910. 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.
8
Art. 1174. Except in cases expressly specified by law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk,
no person shall be responsible for those events which
could not be foreseen, or which, though foreseen, were
inevitable.
9
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof,
are liable for damages.
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GENERAL OBLIGATIONS:
1. Contractual obligations – duties and liabilities
of the principal are primarily based upon the
contract and the validity of the contract
between them.
2. To deal with the agent fairly and in good faith.
SPECIFIC OBLIGATIONS:
1. To comply with the obligations which the
agent may have contracted within the scope of
his authority and in the name of the principal;
2. To advance to the agent, should the latter so
request, the sums necessary for the execution
of the agency;
3. To reimburse the agent of all the advances
made by him, provided the agent is free from
fault;
4. To indemnify the agent for all the damages
which the execution of the agency may have
caused the latter without the fault or
negligence on his part; and
5. To pay the agent the compensation agreed
upon, or if no compensation was specified, the
reasonable value of the agent’s services.
Note: Even if 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 [Estoppel].
LIABILITY OF THE PRINCIPAL TO THIRD PERSONS
General Rule: Where the relation of agency
legally exists, the principal will be liable to third
persons for ALL the acts committed by the agent in
his behalf in the course and within the actual or
apparent scope of his authority, and this is not
altered by the fact that the agent also may be
liable, nor by the fact that some of the acts are to
the principal’s advantage while the others to his
disadvantage.
Reason for the Rule
o For express and implied agency – the act of
agent is the act of principal
o For apparent authority and agency by estoppel
– to prevent fraud upon innocent third parties
LIABILITY OF THIRD PERSONS TO PRINCIPAL
An agent is the instrumentality of the principal
whose primary design is to obtain rights against
third parties. The principal’s rights are the third
parties’ liabilities.
1. In contract. – A third person is liable to the
principal upon contracts entered into by his
agent, in the same manners as though the
contract were entered into by the principal
himself. This proposition results from the
representative nature of agency.
99
2. In tort. – The third person’s tort liability to the
principal, insofar as the agent is involved in
tort, arises in three factual situations:
(a) Where the third person damages or
injures property or interest of the
principal in the possession of the
agent;
(b) Where the third person colludes with
the agent to injure or defraud the
principal; and
(c) Where the third person induces the
agent to violate the contract with the
principal to betray the trust reposed b
him by the principal.;
3. In respect to property received. – An agent
does not have legal title to property entrusted
to his possession by the principal. In the
absence of law or the possession of the agent
of apparent authority or circumstances working
on estoppels against the principal, the latter
may recover property from the agent’s
transferee.
Exception: bona fide holders of negotiable
instruments.
LIABILITY OF PRINCIPAL FOR TORT OF AGENT
General Rule: The principal is civilly liable to third
persons for torts of an committed at the principal’s
direction or in the course of within the scope of the
agent’s employment.
Reason for liability: based on the principle that
he who acts through another does it himself.
Note: Agent is also liable – he is SOLIDARILY liable
with the principla to third persons and so such third
persons may sue both.
TEST of liability (Motivation-deviation test)
The bounds of the agent’s authority are not the
limits of the principal’s tort liability, but rather the
“scope of employment” which may or may not be
within the bound of authority; hence, wider in
scope. But an act is not necessarily done within the
scope of employment by reason merely of the fact
that it is done during the employment.
Two factors must concur for liability to be imposed:
1. satisfactory evidence that the employee in
doing the act, in doing of which the tort was
committed, was motivated in part, at least, by
desire to serve his employer; AND
2. satisfactory evidence that the act, in doing of
which the tort is committed, was not an
extreme deviation from the normal conduct of
the employee.
Article 1910, par. 1: When agent acts in a
representative capacity, the principal is evidently
liable
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Article 1910, par. 2: When agent exceeded his
authority, the principal is not bound unless he
RATIFIES that act of the agent expressly or
impliedly.
RATIFICATION is the adoption or the affirmance
by a person of a prior act which did not bind him,
but which was done or professed to be done on his
account thus giving effect to the acts as if
originally authorized.
Act of ratification purely voluntary: principal has
option to ratify or not.
Conditions for ratification
(1) The principal must have the capacity
or power to ratify;
(2) He must have knowledge of material
facts;
o knowledge must be full, complete and
actual.
o material facts are those which reasonably
ought to be known by the principal, having
in mind the time, place, circumstances and
the situation of the parties.
(3) He must ratify the acts in its entirety;
(4) The act must be capable of ratification;
and
o those which may be authorized (i.e. valid),
voidable acts, and unrevoked acts
(ratification of unauthorized contract must
be done before it is revoked by the other
contracting party.
o acts which are absolutely void cannot be
ratified.
(5) The act must be done in behalf of the
principal.
General rule: Ratification has RETROACTIVE
effect.
Exceptions:
(1) Where to do so would be to defeat the rights
of third parties which have accrued between
the time of the making of the unauthorized
contract and the time of ratification.
(2) Where to do so would be to render wrongful
an otherwise rightful act or omission which
has taken place during the intervening period.
(3) Where to do so would be to allow the
circumvention of a rule of law formulated
for the interest of public policy.
(4) If the third person has withdrawn from the
contract.
Domingo v. Robles (Bambi)
March 18, 2005
Panganiban, J.
Facts:
100
• Petitioner Norma Domingo and her husband,
Valentino Domingo owned a parcel of lot in a
subdivision in Marikina.
• Because her husband failed to come up with
enough money to finish the construction of a
house on the said lot, petitioner decided to
dispose of the property.
• Flor Bacani, petitioner’s friend, volunteered to
act as petitioner’s agent in selling the lot.
• Petitioner gave Bacani their owner’s copy of
the TCT, which was later said to have been
lost.
• In the petition for its reconstitution, petitioner
gave Bacani all her receipts of payment for real
estate taxes. At the same time, Bacani asked
petitioner to sign what she recalled was a
record of exhibits.
• Thereafter, petitioner never saw Bacani again.
• When petitioner visited the lot, she was
surprised to see respondent Yolanda Robles
and her family starting to build a house on the
subject lot.
• Upon verification with the Register of Deeds,
she found out that the reconstituted TCT had
already been cancelled with the registration of
a Deed of Absolute Sale in favor of the
Robleses. On the Deed were the signatures of
petitioner and her husband.
• Claiming that she did not know the Robleses
and that the signatures on the Deed were
forged, petitioner filed a case to have the Deed
of Aboslute Sale nullified and for the
reconveyance of the property.
• The Robleses, for their part claimed that they
were buyers in good faith. According to them:
o The subject lot was offered to them by
Flor Bacani, as the agent of the
owners;
o When they were already prepared to
buy the lot, Bacani introduced to them
the supposed owners and agreed on
the sale;
o Thereafter, Bacani presented a Deed of
Absolute Sale which had the signatures
of petitioner and her husband, and the
owner’s copy of the TCT.
o At that meeting, Robles paid full
purchase price.
o Sometime later, Robles contracted to
sell the lot for P250,000. When only
P20,000 remained unpaid, her buyers
stopped payment because Robles was
notified that petitioner is suing her.
• RTC dismissed the complaint.
• CA affirmed in toto and held that petitioner
failed to disprove that the Robleses were
purchasers in good faith.
Issues and Held:
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1. WON the sale in favor of the Robleses was
valid. YES.
A notarized instrument enjoys a prima facie
presumption of authenticity and due execution.
To overcome that presumption, clear and
convincing evidence must be presented.
Forgery cannot be presumed. Hence, it was
incumbent upon petitioner to prove it. This
petitioner failed to do.
Petitioner also failed to convince the trial court
that the person with whom Robles transacted
was in fact not her husband. She only alleged
that her husband was out of the country at the
time of the sale. However, bare allegations,
unsubstantiated by evidence, are not
equivalent to proof.
Furthermore, the sale was admittedly made
with the aid of Bacani, petitioner’s agent, who
had with him the original of the owner’s
duplicate Certificate of Title to the property,
free from any liens or encumbrances. The
registered owner who places in the hands of
another an executed document of transfer of
registered land effectively represents to a third
party that the holder of such document is
authorized to deal with the property.
2. WON the Robleses are buers in good faith.
PRESUMED TO BE YES.
In the absence of a finding of fraud and a
consequent finding of authenticity and due
execution of the Deed of Absolute Sale, a
discussion of whether respondents were
purchasers in good faith is wholly
unnecessary. Without a clear and persuasive
substantiation of bad faith, a presumption of
good faith in their favor stands.
Limketkai & Sons Milling v. CA (REX)
Rural Bank of Milaor v. Ocfemia, 325 SCRA 99
(JESSA)
Facts:
• On April 10, 1996, Rural Bank was declared
in default on motion of the respondents for
failure to file an answer within the
reglementary-period after it was duly served
with summons
• On April 26, 1996, bank filed a motion to
set aside the order of default with objection
thereto filed by respondents
• On June 17, 1996, an order was issued
denying bank's motion to set aside the order of
default
• On July 31, 1996, respondents filed a
motion to set case for hearing.
• The bank did not file any opposition and so
respondents were allowed to present their
evidence ex-parte.
101
• A certiorari case was filed by the bank with
the Court of Appeals but the petition was
denied in a decision and the same is now final.
• The evidence presented by the
respondents through the testimony of Niño,
one of the respondents in this case, shows
that:
 she is the daughter of Francisca
Ocfemia, a co-respondent in this case,
and the late Renato Ocfemia
(deceased)
 the parents of her father, Renato
Ocfemia, were Juanita Arellano Ocfemia
and Felicisimo Ocfemia
 her other co-respondents Rowena
O. Barrogo, Felicisimo Ocfemia, Renato
Ocfemia, Jr. and Winston Ocfemia are
her brothers and sisters
• Niño knows the five (5) parcels of land
which are located in Bombon, Camarines Sur
and that they are the ones possessing them
which were originally owned by her
grandparents, Juanita Arellano Ocfemia and
Felicisimo Ocfemia.
• During the lifetime of her grandparents,
respondents mortgaged the said five (5)
parcels of land and two (2) others to the bank
as shown by the Deed of Real Estate Mortgage
and the Promissory Note
• The spouses Felicisimo Ocfemia and Juanita
Arellano Ocfemia were not able to redeem the
mortgaged properties consisting of seven (7)
parcels of land and so the mortgage was
foreclosed and thereafter ownership thereof
was transferred to the bank.
• Out of the seven (7) parcels that were
foreclosed, five (5) of them are in the
possession of the respondents because these
five (5) parcels of land were sold by the bank
to the parents of Niño as evidenced by a Deed
of Sale executed in January 1988
• The aforementioned five (5) parcels of land
subject of the deed of sale, have not been,
however transferred in the name of the parents
of Niño after they were sold to her parents by
the bank because according to the Assessor's
Office the five (5) parcels of land, subject of the
sale, cannot be transferred in the name of the
buyers as there is a need to have the
document of sale registered with the Register
of Deeds of Camarines Sur.
• Niño went to the Register of Deeds of
Camarines Sur with the Deed of Sale in order to
have the same registered.
• The Register of Deeds, however, informed
her that the document of sale cannot be
registered without a board resolution of bank.
• Niño then went to the bank, showed to if
the Deed of Sale, the tax declaration and
receipt of tax payments and requested the
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bank for a board resolution so that the property
can be transferred to the name of Renato
Ocfemia the husband of petitioner Francisca
Ocfemia and the father of the other
respondents having died already.
• 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; She was asked and she
complied with the request of the bank
for a copy of the deed of sale and
receipt of payment; The president of
the bank told her to get an authority
from her parents and other
respondents and receipts evidencing
payment of the consideration
appearing in the deed of sale; She
complied with said requirements and
after she gave all these documents,
Niño was again told to wait for two (2)
weeks because the bank would still
study the matter.
• After two (2) weeks, Niño returned to the
bank and she was told that the resolution of
the board would not be released because the
bank had no records from the old manager.
• Because of this, Niño wrote to the bank
inquiring why no action was taken by the board
of the request for the issuance of the resolution
considering that the bank was already fully
paid for the consideration of the sale since
January 1988 as shown by the deed of sale
itself
• On January 15, 1996 the bank answered
respondents' lawyer's letter informing the
latter that the request for board resolution had
already been referred to the board of directors
of the bank with another request that the latter
should be furnished with a certified machine
copy of the receipt of payment covering the
sale between the respondents and the bank 
This request of the bank was already complied
with by Niño even before she brought the
matter to her lawyer.
• On January 23, 1996 respondent’s lawyer
wrote back the branch manager of the bank
informing the latter that they were already
furnished the receipts the bank was asking for
and that the respondents wanted already to
know the stand of the bank whether the board
would issue the required board resolution as
the deed of sale itself already showed that the
respondents were clearly entitled to the land
subject of the sale
• The manager of the bank received the
letter which was served personally to him and
the latter told Niño that since he was the one
himself who received the letter he would not
sign anymore a copy showing him as having
already received said letter
102
• After several days from receipt of the letter
when Niño went to the bank again and
reiterated her request, the manager of the
bank told her that they could not issue the
required board resolution as the bank had no
records of the sale.
• Because of this, this petition is filed
• The respondents are interested in having
the property transferred to their names
because their mother and co-petitioner,
Francisca Ocfemia, is very sickly and they want
to mortgage the property for the medical
expenses of Francisca Ocfemia.
• The illness of Francisca Ocfemia began
after her husband died and her suffering from
arthritis and pulmonary disease already
became serious before December 1995.
• Niño declared that her mother is now in
serious condition and they could not have her
hospitalized for treatment as they do not have
any money and this is causing the family
sleepless nights and mental anguish, thinking
that their mother may die because they could
not submit her for medication as they do not
have money.
• RTC: granted the petition
• CA: affirmed
Issue: WON the bank manager was authorized by
the bank to sign on its behalf
Held:
YES. In failing to file its answer specifically denying
under oath the Deed of Sale, the bank admitted
the due execution of the said contract. Such
admission means that it acknowledged that the
manager was authorized to sign the Deed of Sale
on its behalf.
The bank acknowledged, by its own acts or failure
to act, the authority of the manager to enter into
binding contracts. After the execution of the Deed
of Sale, respondents occupied the properties in
dispute and paid the real estate taxes due thereon.
If the bank management believed that it had title
to the property, it should have taken some
measures to prevent the infringement or invasion
of its title thereto and possession thereof.
Likewise, the manager had previously transacted
business on behalf of the bank, and the latter had
acknowledged her authority. A bank is liable to
innocent third persons where representation is
made in the course of its normal business by an
agent like the manager, even though such agent is
abusing her authority. Clearly, persons dealing
with her could not be blamed for believing that she
was authorized to transact business for and on
behalf of the bank.
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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. In varying
language, existence of such authority is
established, by proof of the course of business, the
usages 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.
Notwithstanding the putative authority of the
manager to bind the bank in the Deed of Sale, the
bank has failed to file an answer to the petition
below within the reglementary period. Thus, the
bank is estopped from questioning the authority of
the bank manager to enter into the contract of
sale. If a corporation knowingly permits one of its
officers or any other agent to act within the scope
of an apparent authority, it holds the agent out to
the public as possessing the power to do those
acts; thus, the corporation will, as against anyone
who has in good faith dealt with it through such
agent, be estopped from denying the agent's
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.
China Airlines v. Chiok (MARK)
Facts:
• On September 18, 1981, Daniel Chiok
purchased from China Airlines a passenger
ticket for air transportation covering Manila-
Taipei-Hongkong-Manila. Said ticket was
exclusively endorseable to Philippine Airlines.
• Subsequently, on November 21, 1981, Chiok
took his trip from Manila to Taipei using [the]
CAL ticket. Before he left for said trip, the trips
covered by the ticket were pre-scheduled and
confirmed by the former. When he arrived in
Taipei, he went to the CAL office and confirmed
his Hongkong to Manila trip on board PAL Flight
No. PR 311. The CAL office attached a yellow
sticker appropriately indicating that his flight
status was OK.
103
• When Chiok reached Hongkong, he went to the
PAL office and sought to reconfirm his flight
back to Manila. The PAL office confirmed his
return trip on board Flight No. PR 311 and
attached its own sticker.
o On November 24, 1981, Chiok
proceeded to Hongkong International
Airport for his return trip to Manila.
However, upon reaching the PAL
counter, Chiok saw a poster stating
that PAL Flight No. PR 311 was
cancelled because of a typhoon in
Manila. He was then informed that all
the confirmed ticket holders of PAL
Flight No. PR 311 were automatically
booked for its next flight, which was to
leave the next day.
o On November 25, 1981, Chiok went to
the airport. Lok called the attention of
Carmen Chan, PAL’s terminal
supervisor, and informed the latter that
Chiok’s name was not in the computer
list of passengers. Subsequently,
Carmen informed Chiok that his name
did not appear in PAL’s computer list of
passengers and therefore could not be
permitted to board PAL Flight No. PR
307.
o Chiok then decided to use another CAL
ticket with No. 297:4402:004:370:5
and asked if this ticket could be used
to book him for the said flight. He was,
once again, booked and confirmed, this
time on board PAL Flight No. PR 311
scheduled to depart that evening.
Later, Chiok went to the PAL check-in
counter and it was Carmen who
attended to him. As this juncture,
Chiok had already placed his travel
documents, including his clutch bag, on
top of the PAL check-in counter.
Thereafter, Carmen directed PAL
personnel to transfer counters. In the
ensuing commotion, Chiok some of his
personal belongings. Subsequently, he
was placed on stand-by and at around
7:30 p.m., PAL personnel informed him
that he could now check-in.
• Chiok filed a complaint for damages.
ISSUE: WON CAL is liable.
Held: Yes.
• It is significant to note that the contract of air
transportation was between petitioner and
respondent, with the former endorsing to PAL
the Hong Kong-to-Manila segment of the
journey. Such contract of carriage has always
been treated in this jurisdiction as a single
operation. This jurisprudential rule is supported
by the Warsaw Convention, to which the
Philippines is a party, and by the existing
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practices of the International Air Transport
Association.
• In American Airlines v. Court of Appeals, the
court have noted that under a general pool
partnership agreement, the ticket-issuing
airline is the principal in a contract of carriage,
while the endorsee-airline is the agent.
• In the instant case, following the jurisprudence
cited above, PAL acted as the carrying agent of
CAL. In the same way that we ruled against
British Airways and Lufthansa in the
aforementioned cases, we also rule that CAL
cannot evade liability to respondent, even
though it may have been only a ticket issuer
for the Hong Kong-Manila sector.
Cuison v. CA, 227 SCRA 391 (TOPE)
Facts:
• Petitioner Kue Cuison is a sole proprietorship
engaged in the purchase and sale of newsprint,
bond paper and scrap while Private
respondent Valiant Investment Associates, on
the other hand, is a partnership duly organized
and existing under the laws.
• From December 4, 1979 to February 15, 1980,
respondent delivered various kinds of paper
products amounting to P297,487.30 to a
certain Lilian Tan of LT Trading.
• The deliveries were made by respondent
pursuant to orders allegedly placed by Tiu Huy
Tiac who was then employed in the Binondo
office of petitioner.
• It was likewise pursuant to Tiac's instructions
that the merchandise was delivered to Lilian
Tan.
• Upon delivery, 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 9 postdated checks to
private respondent as payment for the paper
products.
• Unfortunately, sad checks were later
dishonored by the drawee bank.
• Respondent made several demands upon
petitioner to pay for the merchandise in
question, claiming that Tiu Huy Tiac was duly
authorized by petitioner as the manager of his
Binondo office, to enter into the questioned
transactions with private respondent and Lilian
Tan.
• Respondent filed an action against petitioner
for the collection of P297,487.30 representing
the price of the merchandise.
• Trial court dismissed. Court of Appeals
reversed.
Issue: Whether or not Tiu Huy Tiac possessed the
required authority from petitioner sufficient to hold
the latter liable for the disputed transaction.
Held: YES.
104
• It is a well-established rule that one who
clothes another with apparent authority as his
agent and holds him out to the public as such
cannot be permitted to deny the authority of
such person to act as his agent, to the
prejudice of innocent third parties dealing with
such person in good faith and in the honest
belief that he is what he appears to be.
• It is evident from the records that by his own
acts and admission, petitioner held out Tiu Huy
Tiac to the public as the manager of his store.
• More particularly, petitioner explicitly
introduced Tiu Huy Tiac to Bernardino
Villanueva, respondent's manager, as his
(petitioner's) branch manager as testified to by
Bernardino Villanueva.
• Secondly, Lilian Tan, who has been doing
business with petitioner for quite a while, also
testified that she knew Tiu Huy Tiac to be the
manager of petitioner's Sto. Cristo, Binondo
branch.
• This general perception of Tiu Huy Tiac as the
manager of petitioner's Sto. Cristo store is
even made manifest by the fact that Tiu Huy
Tiac is known in the community to be the
"kinakapatid" (godbrother) of petitioner.
• Petitioner's unexplained delay in disowning the
transactions entered into by Tiu Huy Tiac
despite several attempts made by respondent
to collect the amount from him, proved all the
more that petitioner was aware of the
questioned commission was tantamount to an
admission by silence.
• In a futile attempt to discredit Villanueva,
petitioner alleges that the former's testimony is
clearly self-serving inasmuch as Villanueva
worked for private respondent as its manager.
• Court said, The argument that Villanueva's
testimony is self-serving and therefore
inadmissible on the lame excuse of his
employment with private respondent utterly
misconstrues the nature of "'self-serving
evidence" and the specific ground for its
exclusion.
• Petitioner cites Villanueva's failure, despite his
commitment to do so on cross-examination, to
produce the very first invoice of the transaction
between petitioner and private respondent as
another ground to discredit Villanueva's
testimony.
• Court: it was petitioner's counsel himself who
withdrew the reservation to have Villanueva
produce the document in court.
• In the same manner, petitioner assails the
credibility of Lilian Tan by alleging that Tan was
part of an intricate plot to defraud him.
However, petitioner failed to substantiate or
prove that the subject transaction was
designed to defraud him.
• Moreover, petitioner's unexplained delay in
disowning the transactions entered into by Tiu
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Huy Tiac despite several attempts made by
respondent to collect the amount from him,
proved all the more that petitioner was aware
of the questioned commission was tantamount
to an admission by silence under Rule 130
Section 23 of the Rules of Court.
• All of these point to the fact that at the time of
the transaction Tiu Huy Tiac was admittedly
the manager of petitioner's store in Sto. Cristo,
Binondo. Consequently, the transaction in
question as well as the concomitant obligation
is valid and binding upon petitioner.
• By his representations, petitioner is now
estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his
behalf. It matters not whether the
representations are intentional or merely
negligent so long as innocent, third persons
relied upon such representations in good faith
and for value.
• Tiu Huy Tiac, therefore, by petitioner's own
representations and manifestations, 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).
• 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 fact as though
he had full powers (Article 1911 Civil Code), as
in the case at bar.
• Petition DENIED
Woodchild Holdings v. Roxas Electric (MARK)
Facts:
• The respondent Roxas Electric and
Construction Company, Inc. (RECCI), formerly
the Roxas Electric and Construction Company,
was the owner of two parcels of land. On May
17, 1991, the respondent’s Board of Directors
approved a resolution authorizing the
corporation, through its president, Roberto B.
Roxas, to sell the lots at a price, and under
such terms and conditions, which he deemed
most reasonable and advantageous to the
corporation. He was likewise authorized to
execute, sign, and deliver the pertinent sales
documents and receive the proceeds of the
sale for and on behalf of the company.
• Petitioner WHI bought one of the lots and a
portion of the other. It was stipulated in the
Deed of Sale that the vendor agrees, in the
event that the right of way is insufficient for
the vendee’s use (ex entry of a 45-foot
container), to sell additional square meters
from its current adjacent property.
105
• WHI constructed a warehouse. Said warehouse
was leased by Ponderosa Leather Goods
Company subject to a monthly rental of
300,000 php. In the meantime, 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
WHI to buy a 500-square-meter portion of the
other but Roxas died soon thereafter.
• The WHI demanded that the RECCI sell a
portion of the other lot for its beneficial use
otherwise the appropriate action would be filed
against it. RECCI rejected the demand of WHI.
On June 17, 1992, the WHI filed a complaint
against the RECCI with the Regional Trial Court
of Makati, for specific performance and
damages.
ISSUE: WON Roxas Electric is bound by the
provisions of the deed of absolute sale granting to
the WHI beneficial use and a right of way over a
portion of the other lot.
Held: No.
• Generally, the acts of the corporate officers
within the scope of their authority are binding
on the corporation. However, under Article
1910 10of 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. Evidently, Roxas
was not specifically authorized under the said
resolution to grant a right of way agree to sell
to the petitioner a portion thereof.
• Neither may such authority be implied from
the authority granted to Roxas to sell “on such
terms and conditions which he deems most
reasonable and advantageous.” Under
paragraph 12, Article 1878 of the New Civil
Code, a special power of attorney is required to
convey real rights over immovable property.
Article 1358 of the New Civil Code requires that
contracts which have for their object the
creation of real rights over immovable property
must appear in a public document. The
petitioner cannot feign ignorance of the need
for Roxas to have been specifically authorized
in writing by the Board of Directors to be able
to validly grant a right of way and agree to sell
a portion of the adjacent lot. The rule is that if
the act of the agent is one which requires
10
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.
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authority in writing, those dealing with him are
charged with notice of that fact.
• For the principle of apparent authority to apply,
the petitioner was burdened to prove the
following: (a) the acts of the respondent
justifying belief in the agency by the petitioner;
(b) knowledge thereof by the respondent which
is sought to be held; and, (c) reliance thereon
by the petitioner consistent with ordinary care
and prudence. In this case, there is no
evidence on record of specific acts made by
the respondent showing or indicating that it
had full knowledge of any representations
made by Roxas to the petitioner that the
respondent had authorized him to grant to the
respondent an option to buy a portion of the
other lot or to create a burden or lien thereon,
or that the respondent allowed him to do so.
PNB v. Bagamaspad, 89 Phil 365 (IVY)
Vicente v. Geraldez, 52 SCRA 210 (EVA)
1973
Antonio, J.
Relate ruling to: Liability of principal to
thirdpersons/principal ratified the unauthorized
acts of his agent/full and complete knowledge by
ratifier of material facts essential
FACTS:
• HI Cement Corporation acquired from
Banahaw Shale Mining Association a Placer
Lease Contract covering 2 mining claims; this
included three parcels of land owned by
Petitioners Vicente, Bernabe and Angeles.
• The Corporation, several occasions,
informed the petitioners, of its acquisition
aforesaid placer mining claims which included
the areas occupied by them. It also requested
them to allow its workers to enter the area in
question for exploration, development and
extraction of minerals therefrom, promising to
pay them reasonable amounts as damages,
but they refused to allow entry of the
Corporation’s representatives.
• Hence, the Corporation filed a complaint
for injunction and damages against petitioners.
TC issued a writ of injuction and named
Commissioners to conduct a survey and plan
on the suggested relocation of the boundaries
of the Corporation’s claim.
• Subsequently, the respective counsels
conferred among themselves the possibility of
terminating the case by compromise. For this
purpose, they executed and submitted for
court approval a Compromise Agreement
which contains:
1. That the plaintiff is willing to buy the
properties subject of litigation, and the
106
defendants are willing to sell their respective
properties;
2. That this Honorable Court authorizes the
plaintiff and the defendants to appoint their
respective commissioners, that is, one for the
plaintiff and one for each defendant;xxx
• TC approved the Compromise Agreement
and enjoined the parties to comply with its
terms and conditions. The Commissioners thus
appointed submitted a Consolidated Report
regarding the recommended unit prices which
the court approved.
• However, Atty. Ventura, one of
Corporation’s counsel, filed a manifestation to
the court that the Board of Directors did not
approve of the Compromise Agreement.
• Petitioner Bernabe asked the court to
ignore Atty. Ventura’s manifestation, saying
that
- when the court inquired from the
parties and their respective lawyers if
all the attorneys appearing in the case
had been duly authorized and/or
empowered to enter into a compromise
agreement, and the three lawyers for
the Corporation answered in the
affirmative
- it was Atty. Ventura himself who
prepared the draft of the Compromise
Agreement in his own handwriting and
was the first to sign the agreement
- one of the three lawyers for the
plaintiff, Atty. Florentino V. Cardenas,
who also signed the Compromise
Agreement, was the official
representative and executive official, of
corporation
- that the nomination plaintiff of Mr.
Larry G. Marquez as its Commissioner
pursuant to the Compromise
Agreement, was a clear indication of
the Corporation's tacit approval of the
terms and conditions of the
Compromise Agreement, if not an
implied ratification of Atty. Ventura's
acts.
• On MR, the TC declared the Agreement
contrary to law.
ISSUE: WON the Compromise Agreement is valid
HELD: NO First, the lawyers who entered the
Compromise Agreement have no SPA in violation of
Art. 1878 CC and Rule 138, Sec. 23 ROC.
Contrary to the petitioners’ contention, Atty.
Cardenas, as administrative manager of the
Corporation, did not tacitly ratify the agreement
entered into by the parties as he has no authority
to do so.
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To ratify the unauthorized acts of an agent
and make it binding on the corporation, it
must be shown that the governing body or
officer authorized to ratify had full and
complete knowledge of all the material facts
connected to the transaction. The petitioner
failed to do this.
Ratification by a corporation cannot be made
by the same person who wrongfully assumed
the power to make the contract.
Manila Park Cemetery v. Linsangan (JESSA)
Facts:
• Sometime in 1984, Florencia Baluyot offered
Atty. Pedro L. Linsangan a lot called Garden
State at the Holy Cross Memorial Park owned
by MMPCI
• According to Baluyot, a former owner of a
memorial lot 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.
• Sometime in March 1985, Baluyot informed
Atty. Linsangan that he would be issued a new
contract covering the subject lot in the name of
the latter.
• Atty. Linsangan protested, but Baluyot assured
him that he would still be paying the old price
of P95,000.00 with P19,838.00 credited as full
down payment leaving a balance of about
P75,000.00.
• Subsequently, on 8 April 1985, Baluyot brought
an Offer to Purchase a lot for the amount of
P19,838.00.
• Contract 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
• Baluyot wrote Atty Linsangan saying that while
the offer to purchase under the contract states
that the total price of P132,250.00, the
undertaking is to pay only the total sum of
P95,000.00 under the old price
• By virtue of this letter, Atty. Linsangan signed
the contract
107
• As requested by Baluyot, Atty. Linsangan
issued 12 postdated checks of P1,800.00 each
in favor of MMPCI.
• The next year, Atty. Linsangan again issued 12
postdated checks in favor of MMPCI.
• Baluyot verbally advised Atty. Linsangan that
the contract was cancelled for reasons the
latter could not explain, and presented to him
another proposal for the purchase of an
equivalent property.
• He refused the new proposal and insisted that
Baluyot and MMPCI honor their undertaking.
• 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.
• TC: MMPCI and Baluyot jointly and severally
liable  Baluyot was an agent of MMPCI and
that the latter was estopped from denying this
agency, having received and enchased the
checks issued by Atty. Linsangan and given to
it by Baluyot. While MMPCI insisted that
Baluyot was authorized to receive only the
down payment, it allowed her to continue to
receive postdated checks from Atty. Linsangan,
which it in turn consistently encashed.
• CA: affirmed RTC  upheld the trial court's
finding that Baluyot was an agent of MMPCI at
the time the disputed contract was entered
into, having represented MMPCI's interest and
acting on its behalf in the dealings with clients
and customers; if an agent misrepresents to a
purchaser and the principal accepts the
benefits of such misrepresentation, he cannot
at the same time deny responsibility for such
misrepresentation
Issue:
1. WON MMCI is liable
2. WON there is ratification
3. WON the contract was validly entered into by
MMCI and Atty Linsangan
Held: 1. NO. 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.
Thus, the elements of agency are (i) consent,
express or implied, of the parties to establish the
relationship; (ii) the object is the execution of a
juridical act in relation to a third person; (iii) the
agent acts as a representative and not for himself;
and (iv) the agent acts within the scope of his
authority.
As properly found both by the trial court and the
Court of Appeals, Baluyot was an agent of MMPCI,
having represented the interest of the latter, and
having been allowed by MMPCI to represent it in
her dealings with its clients/prospective buyers.
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Nevertheless, contrary to the findings of the Court
of Appeals, MMPCI cannot be bound by the
contract procured by Atty. Linsangan and
solicited by Baluyot.
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.
The Offer to Purchase duly signed by Atty.
Linsangan, and accepted and validated by MMPCI
showed a total list price of P132,250.00. Likewise,
it was clearly stated therein that "Purchaser agrees
that he has read or has had read to him this
agreement, that he understands its terms and
conditions, and that there are no covenants,
conditions, warranties or representations other
than those contained herein." By signing the Offer
to Purchase, Atty. Linsangan signified that he
understood its contents. That he and Baluyot
had an agreement different from that
contained in the Offer to Purchase is of no
moment, and should not affect MMPCI, as it
was obviously made outside Baluyot's
authority. To repeat, Baluyot's authority was
limited only to soliciting purchasers. She had
no authority to alter the terms of the written
contract provided by MMPCI. The
document/letter "confirming" the agreement
that Atty. Linsangan would have to pay the
old price was executed by Baluyot alone.
Nowhere is there any indication that the
same came from MMPCI or any of its officers.
It is a settled rule that persons dealing with an
agent are 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. The basis for
agency is representation and a person dealing with
an agent is put upon inquiry and must discover
upon his peril the authority of the agent. If he does
not make such an inquiry, he is chargeable with
knowledge of the agent's authority and his
ignorance of that authority will not be any excuse.
The ignorance of a person dealing with an agent as
to the scope of the latter's authority is no excuse to
such person and the fault cannot be thrown upon
the principal. A person dealing with an agent
assumes the risk of lack of authority in the agent.
He cannot charge the principal by relying upon the
agent's assumption of authority that proves to be
unfounded. The principal, on the other hand,
may act on the presumption that third
persons dealing with his agent will not be
negligent in failing to ascertain the extent of
108
his authority as well as the existence of his
agency.
In the instant case, it has not been established that
Atty. Linsangan even bothered to inquire whether
Baluyot was authorized to agree to terms contrary
to those indicated in the written contract, much
less bind MMPCI by her commitment with respect
to such agreements. Even if Baluyot was Atty.
Linsangan's friend and known to be an agent of
MMPCI, her declarations and actions alone are not
sufficient to establish the fact or extent of her
authority. Atty. Linsangan as a practicing lawyer
for a relatively long period of time when he signed
the contract should have been put on guard when
their agreement was not reflected in the contract.
More importantly, Atty. Linsangan should have
been alerted by the fact that Baluyot failed to
effect the transfer of rights earlier promised, and
was unable to make good her written commitment,
nor convince MMPCI to assent thereto, as
evidenced by several attempts to induce him to
enter into other contracts for a higher
consideration. As properly pointed out by MMPCI,
as a lawyer, a greater degree of caution should be
expected of Atty. Linsangan especially in dealings
involving legal documents. He did not even bother
to ask for official receipts of his payments, nor
inquire from MMPCI directly to ascertain the real
status of the contract, blindly relying on the
representations of Baluyot. A lawyer by profession,
he knew what he was doing when he signed the
written contract, knew the meaning and value of
every word or phrase used in the contract, and
more importantly, knew the legal effects which
said document produced. He is bound to accept
responsibility for his negligence.
2. NONE. 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 principal's 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.
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A perusal of Baluyot's Answer reveals that the real
arrangement between her and Atty. Linsangan was
for the latter to pay a monthly installment of
P1,800.00 whereas Baluyot was to shoulder the
counterpart amount of P1,455.00 to meet the
P3,255.00 monthly installments as indicated in the
contract. Thus, every time an installment falls due,
payment was to be made through a check from
Atty. Linsangan for P1,800.00 and a cash
component of P1,455.00 from Baluyot. However, it
appears that while Atty. Linsangan issued the post-
dated checks, Baluyot failed to come up with her
part of the bargain. This was supported by
Baluyot's statements in her letter to Mr. Clyde
Williams, Jr., Sales Manager of MMPCI, two days
after she received the copy of the Complaint. In the
letter, she admitted that she was remiss in her
duties when she consented to Atty. Linsangan's
proposal that he will pay the old price while the
difference will be shouldered by her. She likewise
admitted that the contract suffered arrearages
because while Atty. Linsangan issued the agreed
checks, she was unable to give her share of
P1,455.00 due to her own financial difficulties.
Baluyot even asked for compassion from MMPCI for
the error she committed.
Atty. Linsangan failed to show that MMPCI had
knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as
stated in the Offer to Purchase signed by Atty.
Linsangan and MMPCI's authorized officer. The
down payment of P19,838.00 given by Atty.
Linsangan was in accordance with the contract as
well. Payments of P3,235.00 for at least two
installments were likewise in accord with the
contract, albeit made through a check and partly in
cash. In view of Baluyot's failure to give her share
in the payment, MMPCI received only P1,800.00
checks, which were clearly insufficient payment. In
fact, Atty. Linsangan would have incurred
arrearages that could have caused the earlier
cancellation of the contract, if not for MMPCI's
application of some of the checks to his account.
However, the checks alone were not sufficient to
cover his obligations.
If MMPCI was aware of the arrangement, it would
have refused the latter's check payments for being
insufficient. It would not have applied to his
account the P1,800.00 checks. Moreover, the fact
that Baluyot had to practically explain to MMPCI's
Sales Manager the details of her "arrangement"
with Atty. Linsangan and admit to having made an
error in entering such arrangement confirm that
MMCPI had no knowledge of the said agreement. It
was only when Baluyot filed her Answer that she
claimed that MMCPI was fully aware of the
agreement.
The acts of the agent beyond the scope of his
authority do not bind the principal unless the
109
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.
3. YES. The contract was validly entered into both
by MMPCI and Atty. Linsangan. By affixing his
signature in the contract, Atty. Linsangan assented
to the terms and conditions thereof. When Atty.
Linsangan incurred delinquencies in payment,
MMCPI merely enforced its rights under the said
contract by canceling the same.
Being aware of the limits of Baluyot's authority,
Atty. Linsangan cannot insist on what he claims to
be the terms of contract. The agreement, insofar
as the P95,000.00 contract price is concerned, is
void and cannot be enforced as against MMPCI.
Neither can he hold Baluyot liable for damages
under the same contract, since there is no
evidence showing that Baluyot undertook to secure
MMPCI's ratification. At best, the "agreement"
between Baluyot and Atty. Linsangan bound only
the two of them. As far as MMPCI is concerned, it
bound itself to sell its interment space to Atty.
Linsangan for P132,250.00 under contract, and had
in fact received several payments in accordance
with the same contract. If the contract was
cancelled due to arrearages, Atty. Linsangan's
recourse should only be against Baluyot who
personally undertook to pay the difference
between the true contract price of P132,250.00
and the original proposed price of P95,000.00. To
surmise that Baluyot was acting on behalf of
MMPCI when she promised to shoulder the said
difference would be to conclude that MMPCI
undertook to pay itself the difference, a conclusion
that is very illogical, if not antithetical to its
business interests.
B. Article 1911 (REX)
Article 1911. 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.
Lustan v. CA, 266 SCRA 663 (JESSA)
Facts:
• Lustan is the registered owner of a parcel of
land
• petitioner leased the property to Parangan for
a term of 10 years and an annual rent of
P1,000.00
• During the period of lease, Parangan was
regularly extending loans in small amounts to
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petitioner to defray her daily expenses and to
finance her daughter's education
• petitioner executed an SPA in favor of
Parangan to secure an agricultural loan from
PNB with the aforesaid lot as collateral
• a second SPA was executed by petitioner, by
virtue of which, Parangan was able to secure 4
additional loans
• the last three loans were without the
knowledge of herein petitioner and all the
proceeds therefrom were used by Parangan for
his own benefit (but these encumbrances were
duly annotated on the certificate of title)
• petitioner signed a Deed of Pacto de Retro Sale
in favor of Parangan which was superseded by
the Deed of Definite Sale 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]
• Aggrieved, petitioner filed an action for
cancellation of liens, quieting of title, recovery
of possession and damages against Parangan
and PNB
• RTC: Deeds of Sale (with pacto de retro and
absolute) are null and void  equitable
mortgage
• CA: reversed
Issues:
A. WON the Deed of Definite Sale is in reality an
equitable mortgage
B. WON petitioner's property is liable to PNB
for the loans contracted by Parangan by
virtue of the special power of attorney
Held:
1. YES. A contract is perfected by mere
consent. More particularly, a contract of sale is
perfected at the moment there is a meeting of
minds upon the thing which is the object of the
contract and upon the price. This meeting of
the minds speaks of the intent of the parties in
entering into the contract respecting the
subject matter and the consideration thereof. If
the words of the contract appear to be contrary
to the evident intention of the parties, the
latter shall prevail over the former. In the case
110
at bench, the evidence is sufficient to warrant
a finding that petitioner and Parangan merely
intended to consolidate the former's
indebtedness to the latter in a single
instrument and to secure the same with the
subject property. Even when a document
appears on its face to be a sale, the owner of
the property may prove that the contract is
really a loan with mortgage by raising as an
issue the fact that the document does not
express the true intent of the parties. In this
case, parol evidence then becomes competent
and admissible to prove that the instrument
was in truth and in fact given merely as a
security for the repayment of a loan.
Art. 1602, (6), in relation to Art 1604 provides
that a contract of sale is presumed to be an
equitable mortgage in any other case where it
may be fairly inferred that the real intention of
the parties is that the transaction shall secure
the payment of a debt or the performance of
any other obligation. That the case clearly falls
under this category can be inferred from the
circumstances surrounding the transaction as
herein set forth:
 Petitioner had no knowledge that the
contract she signed is a deed of sale.
The contents of the same were not
read nor explained to her so that she
may intelligibly formulate in her mind
the consequences of her conduct and
the nature of the rights she was ceding
in favor of Parangan. Petitioner is
illiterate and her condition constrained
her to merely rely on Parangan's
assurance that the contract only
evidences her indebtedness to the
latter. When one of the contracting
parties is unable to read, or if the
contract is in a language not
understood by him, and mistake or
fraud is alleged, the person enforcing
the contract must show that the terms
thereof have been fully explained to
the former. Settled is the rule that
where a party to a contract is illiterate
or cannot read or cannot understand
the language in which the contract is
written, the burden is on the party
interested in enforcing the contract to
prove that the terms thereof are fully
explained to the former in a language
understood by him. This burden has
not been satisfactorily discharged.
2. YES. Third persons who are not parties to a
loan may secure the latter by pledging or
mortgaging their own property. So long as valid
consent was given, the fact that the loans were
solely for the benefit of Parangan would not
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invalidate the mortgage with respect to
petitioner's property. In consenting thereto,
even granting that petitioner may not be
assuming personal liability for the debt, her
property shall nevertheless secure and respond
for the performance of the principal obligation.
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 as
provided in Article 1921 of the Civil Code [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 SPA 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 SPA 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 attorney-in-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
111
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.
C. Articles 1912, 1913, 1914 (ANGELA)
Art. 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 successful,
provided the agent is free from all fault.
The reimbursement shall include interest on the
sums advanced, from the day on which the
advance was made.
Obligations of principal to the agent under
this Article:
1. Obligation to advance funds. – The agent is
bound by his acceptance to carry out the
agency; on the other hand, the principal is
under obligation to provide the means with
which it execute the agency.
In the absence of stipulation that the agent
shall advance the necessary funds, the
principal must advance to the agent the sums
necessary for the execution of the agency;
otherwise, he cannot held the liable for
damages which he may incurred by the latter’s
non-performance.
2. Obligation to reimburse agent for funds
advance by latter. – An agency is for the
principal’s benefit. In case the agent advanced
the sums necessary for the execution of the
agency, whether in his own initiative or by
stipulation, the said advances must be
reimbursed by the principal with INTEREST
from the day the advance was made.
Demand is not necessary in order that delay on
part of the principal shall exist.
Such obligation is founded on the implied
promise to repay since the proper execution of
the agency involves an implied request on part
of the principal to incur the necessary
expenses.
Moreover, the obligation is NOT affected even if
the undertaking turns out to be unsuccessful.
Art. 1913. The principal must also indemnify the
agent for all the damages which the execution of
the agency may have caused the latter, without
fault or negligence on his part. (1729)
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A. Where damages caused by the
execution of the agency – principal is liable.
C. Where damages is caused by wrongful acts of
third persons – principal not liable if he is not
responsible for such third persons.
D. Where agent acted upon his own account – no
obligation to indemnify since no agency exists
in the legal sense.
Art. 1914. The agent may retain in pledge the
things which are the object of the agency until the
principal effects the reimbursement and pays the
indemnity set forth in the two preceding articles.
Right of agent to retain in pledge object of
agency – an example of a legal pledge (i.e.
imposed by law, as opposed to contractual
pledges).
NATURE of agent’s right of lien:
(1) Right limited to the subject matter of
the agency – it is a specific, not a general lien.
(2) Right requires the possession, custody,
control or disposing power of the agent of the
subject matter.
(3) Right generally only in favor of agent
(not to be extended to a sub-agent in the
absence of ratification by the principal of sub-
agent’s acts).
Albaladejo v. Phil. Refining, 48 Phil 556
(TOPE)
FACTS:
• Albaladejo y Cia. was engaged in the
buying and selling of copra.
• Visayan Refining Co was engaged in
manufacture coconut oil.
• On August 28, 1918, the plaintiff made a
contract with the Visayan wherein the former
bind itself to sell to the latter (Visayan) all the
Copra it will buy in Albay.
• Pursuant to this agreement the plaintiff,
during the year therein contemplated, bought
copra extensively for the Visayan Refining Co.
• At the end of said year both parties found
themselves satisfied with the existing
arrangement, and they therefore continued by
tacit consent to govern their future relations by
the same agreement.
• This situation affairs remained until July 9,
1920, when the Visayan Refining Co. closed
down its factory at Opon, Cebu and withdrew
from the copra market.
• When the contract was originally made,
Albaladejo y Cia. apparently had only one
commercial establishment, i.e., that at Legaspi;
112
but the large requirements of the Visayan
Refining Co. for copra appeared so far to justify
the extension of the plaintiff's business that
during the course of the next two or three
years it established some 20 agencies, or
subagencies, in various ports and places of the
Province of Albay and neighboring provinces.
• After the Visayan Refining Co. had ceased
to buy copra, as above stated, of which fact the
plaintiff was duly notified, the supplies of copra
already purchased by the plaintiff were
gradually shipped out and accepted by the
Visayan Refining Co.
• In the course of the next 8 or 10 months
the accounts between the two parties were
liquidated.
• The last account rendered by the Visayan
Refining Co. to the plaintiff was for the month
of April, 1921, and it showed a balance of P288
in favor of the defendant. Under date of June
25, 1921, the plaintiff company addressed a
letter from Legaspi to the Philippine Refining
Co. (which had now succeeded to the rights
and liabilities of the Visayan Refining Co.),
expressing its approval of said account.
• In this letter no dissatisfaction was
expressed by the plaintiff as to the state of
affairs between the parties; but about six
weeks thereafter the present action was
begun.
• The cause of action was hinged from the
clause in the contract which says that Visayan
was obligated to provide transportation for the
copra collected by the plaintiff and deposited
for shipment at various places. To quote the
allegation:
“That, from the month of September,
1918, until the month of June, 1920,
the plaintiff opportunely advised the
Visayan of the stocks that the former
had for shipment, and, from time to
time, requested the Visayan to send
vessels to take up said stocks; but that
the Visayan culpably and negligently
allowed a great number of days to
elapse before sending the boats for the
transportation of the copra to Opon,
Cebu…”
• TC said there’s no negligence on part of
Visayan in providing for the transportation,
hence they did not cause the shrinkage of the
copra.
• Court said Visayan was still liable and the
fact that it paid an amount of P15,610.41 does
not mean it already paid its liability for the
amount was for another claim.
• Plaintiff then claimed that its expense in
maintaining and extending its organization for
the purchase of copra in the period between
July, 1920, to July, 1921, were incurred at the
instance and request of the defendant, or upon
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any promise of the defendant to make the
expenditure good. Court said a careful
examination of the evidence, mostly of a
documentary character, is, in our opinion,
convincing that the supposed liability does not
exist.
• Plaintiff then advanced its contention is
advanced that the contract between the
plaintiff and the Visayan Refining Co. created
the relation of principal and agent between the
parties, and the reliance is placed upon article
1729 of the Civil Code which requires the
principal to indemnify the agent for damages
incurred in carrying out the agency.
Issue: Was an agency relationship
created?
Held: NO.
• The relation between the parties was not
that of principal and agent in so far as
relates to the purchase of copra by the
plaintiff. It is true that the Visayan Refining
Co. made the plaintiff one of its
instruments for the collection of copra; but
it is clear that in making its purchases from
the producers the plaintiff was buying upon
its own account and that when it turned
over the copra to the Visayan Refining Co.,
pursuant to that agreement, a second sale
was effected.
• In paragraph 3 of the contract it is
declared that during the continuance of
this contract the Visayan Refining Co.
would not appoint any other agent for the
purchase of copra in Legaspi; and this
gives rise indirectly to the inference that
the plaintiff was considered its buying
agent.
• Court said that the use of this term in one
clause of the contract cannot dominate the
real nature of the agreement as revealed in
other clauses, no less than in the caption of
the agreement itself.
• In some of the trade letters also the
various instrumentalities used by the
Visayan Refining Co. for the collection of
copra are spoken of as agents.
• Court said that this designation was
evidently used for convenience; and it is
very clear that in its activities as a buyer
the plaintiff was acting upon its own
account and not as agents, in the legal
sense, of the Visayan Refining Co.
• The title to all of the copra purchased by
the plaintiff undoubtedly remained in it
until it was delivered by way of subsequent
sale to said company.
• Appealed judgment will therefore be
affirmed
113
D. Articles 1915, 1916, 1917, 1918
(MARK)
Art. 1915. If two or more persons have appointed
an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the
consequences of the agency. (1731)
Art. 1916. When two persons contract with regard
to the same thing, one of them with the agent and
the other with the principal, and the two contracts
are incompatible with each other, that of prior date
shall be preferred, without prejudice to the
provisions of Article 1544. (n)
Art. 1917. In the case referred to in the preceding
article, if the agent has acted in good faith, the
principal shall be liable in damages to the third
person whose contract must be rejected. If the
agent acted in bad faith, he alone shall be
responsible. (n)
Art. 1918. The principal is not liable for the
expenses incurred by the agent in the following
cases:
(1) If the agent acted in contravention of the
principal's instructions, unless the latter should
wish to avail himself of the benefits derived from
the contract;
(2) When the expenses were due to the fault of the
agent;
(3) When the agent incurred them with knowledge
that an unfavorable result would ensue, if the
principal was not aware thereof;
(4) When it was stipulated that the expenses would
be borne by the agent, or that the latter would be
allowed only a certain sum.
De Castro v. CA, 384 SCRA 607 (IVY)
Sta. Romana v. Imperio, 15 SCRA 625 (IVY)
IV. Modes of Extinguishment
A. Articles 1919, 1920 (IVY)
Art. 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent;
(4) By the dissolution of the firm or corporation
which entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose
of the agency;
(6) By the expiration of the period for which the
agency was constituted. (1732a)
Art. 1920. 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.
Perez v. PNB, 17 SCRA 833 (IVY)
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Bicol Savings and Loan Assoc. v CA (GEN)
March 31, 1989
Melencio-Herrera, J.
FACTS: Juan de Jesus was the owner of a parcel of
land in Naga City. He executed a Special Power of
Attorney in favor of his son, Jose de Jesus:
"To negotiate, mortgage my real property in any
bank either private or public entity preferably in
the Bicol Savings Bank, Naga City, in any amount
that may be agreed upon between the bank and
my attorney-in-fact."
Jose de Jesus obtained a loan of P20,000 from
petitioner bank. To secure payment, he executed a
deed of mortgage on the real property referred to
in the Special Power of Attorney. Then, Juan de
Jesus died.
Jose failed to pay the loan. Hence the bank
extrajudicially foreclosed the mortgage. In the
subsequent public auction, the mortgaged property
was sold to the bank as the highest bidder to
whom a Provisional Certificate of Sale was issued.
Private respondents failed to redeem the property
within one year from the date of the registration of
the Provisional Certificate of Sale. Hence, a Definite
Certificate of Sale was issued in favor of the bank.
They negotiated with the bank for the repurchase
of the property. But no agreement was reached.
The bank subsequently sold the properties to third
parties.
Private respondents filed a Complaint with the CFI
of Naga City for the annulment of the foreclosure
sale or for the repurchase by them of the property.
It dismissed the case, ruling that the title of the
bank over the mortgaged property had become
absolute upon the issuance and registration of the
said deed in its favor.
CA reversed the ruling of the CFI. It applied Article
1879 and stated that since the special power to
mortgage granted to Jose de Jesus did not include
the power to sell, the foreclosure proceedings and
auction sale held were null and void because the
Special Power of Attorney given by Juan de Jesus to
Jose de Jesus was merely to mortgage his property,
and not to extrajudicially foreclose the mortgage
and sell the mortgaged property in the said
extrajudicial foreclosure. The bank should have
resorted to judicial foreclosure.
ISSUE: WON the agent-son exceeded the scope of
his authority in agreeing to a stipulation in the
mortgage deed that petitioner bank could
extrajudicially foreclose the mortgaged property.
114
HELD: NO. The sale proscribed by a special power
to mortgage under Article 1879 is a voluntary and
independent contract, and not an auction sale
resulting from extrajudicial foreclosure, which is
precipitated by the default of a mortgagor. Absent
that default, no foreclosure results. The stipulation
granting an authority to extrajudicially foreclose a
mortgage is an ancillary stipulation supported by
the same cause or consideration for the mortgage
and forms an essential or inseparable part of that
bilateral agreement
The power to foreclose is not an ordinary agency
that contemplates exclusively the representation of
the principal by the agent but is primarily an
authority conferred upon the mortgagee for the
latter's own protection. That power survives the
death of the mortgagor.
The right of the mortgagee bank to extrajudicially
foreclose the mortgage after the death of the
mortgagor Juan de Jesus, acting through his
attorney-in-fact, Jose de Jesus, did not depend on
the authorization in the deed of mortgage
executed by the latter. That right existed
independently of said stipulation and is clearly
recognized in Section 7, Rule 86 of the Rules of
Court, which grants to a mortgagee three remedies
that can be alternatively pursued in case the
mortgagor dies, to wit: (1) to waive the mortgage
and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (2) to foreclose
the mortgage judicially and prove any deficiency as
an ordinary claim; and (3) to rely on the mortgage
exclusively, foreclosing the same at any time
before it is barred by prescription, without right to
file a claim for any deficiency.
It matters not that the authority to extrajudicially
foreclose was granted by an attorney-in-fact and
not by the mortgagor personally. The stipulation in
that regard, although ancillary, forms an essential
part of the mortgage contract and is inseparable
therefrom. No creditor will agree to enter into a
mortgage contract without that stipulation
intended for its protection.
Barretto v. Santa Marina, 20 Phil 440 (MAI)
Diolosa v. CA, 130 SCRA 350 - ROG
Danon v. Brimo, 44 Phil 133, supra
Wylie v. Marine National Bank, 42 Phil 133 -
TOFF
Sevilla v. CA, 160 SCRA 171, supra
Valenzuela v. CA, 190 SCRA 1 - REG
Florentino v. Sandiganbayan, 202 SCRA 309
-EARLA
CMS Logging v. CA, 211 SCRA 374, supra
Valera v. Velasco, 51 Phil 695 - JANCES
March 13, 1928
J. Villa-Real
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Facts: Plaintiff appointed defendant as his
attorney-in-fact with authority to manage his
property consisting of usufruct of real property in
Manila. In the liquidation of the accounts made my
defendant, plaintiff was revealed to owe defendant
P1100. Misunderstanding arose between them,
thus the defendant brought suit against the
plaintiff. Judgment was rendered in favor of
defendant. The sheriff then levied upon the
plaintiff's right of usufruct, sold it at public auction
and adjudicated it to the defendant in payment of
all of his claim.
Plaintiff sold his right of redemption to a person but
recovered the same after some time. After which,
his right of redemption was sold by the sheriff at a
public auction to Vallejo due to judgment rendered
against plaintiff in another civil case. Vallejo then
sold this right to defendant Velasco. Plaintiff then
filed a complaint against Velasco alleging that the
sale of the right to redemption to Velasco was null
and void since Velasco was still his agent, there
being no express renunciation.
Ruling: CFI – dismissed complaint; no right of
action.
Issue: WON the agency was terminated despite
lack of express renunciation [YES}
HELD: When the agent filed a complaint against his
principal for recovery of a sum of money arising
from the liquidation of the accounts between them
in connection with the agency, Federico Valera
could not have understood otherwise than that
Miguel Velasco renounced the agency; because his
act was more expressive than words and could not
have caused any doubt.
The fact that an agent institutes an action against
his principal for the recovery of the balance in his
favor resulting from the liquidation of the accounts
between them arising from the agency, and
renders and final account of his operations, is
equivalent to an express renunciation of the
agency, and terminates the juridical relation
between them.
Disposition: Judgment appealed from affirmed.
B. Articles 1921, 1922, 1923 – ALAIN
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. (1734)
Art. 1922. If the agent had general powers,
revocation of the agency does not prejudice third
persons who acted in good faith and without
knowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is
a sufficient warning to third persons. (n)
Art. 1923. The appointment of a new agent for the
same business or transaction revokes the previous
115
agency from the day on which notice thereof was
given to the former agent, without prejudice to the
provisions of the two preceding articles.
Effect of revocation in relation to third persons:
1. Agent authorized to contract with specified
persons (1921) – The reason for the law is
obvious. Since the third persons have been
made to believe by the principal that the agent
is authorized to deal with them, they have a
right to presume that the representation
continues to exist in the absence of notification
by the principal. Of course, notice is not
required if the third persons already know of
the revocation.
2. Agent authorized to contract with public in
general – In case the agent has general powers
(as when the agent has been appointed to
manage a business), innocent third persons
dealing with the agent will not be prejudiced b
the revocation before they had knowledge
thereof. In this case, however, the fact that the
revocation was advertised in a newspaper of
general circulation would be sufficient warning
to third persons.
Under Article 1921, the notice of revocation must
be personal; under Article 1922, it may be
personal.
Revocation by appointment of new agent:
1. Implied revocation of previous agency. –
There is implied revocation of the previous
agency when the principal appoints a new
agent for the same business or transaction
provided there is no incompatibility. But the
revocation does not become effective as
between the principal and the agent until it is
in some way communicated to the latter.
There is no implied revocation where the
appointment of another agent is not
incompatible with the continuation of a like
authority in the first agent, or the first agent is
not given notice of the appointment of the new
agent.
2. Substitution of counsel of record. – No
substitution of counsel of record is allowed
unless the following essential requisites of a
valid substitution of counsel concur:
a. There must be a written request for
substitution;
b. It must be filed with the written
consent of the client;
c. It must be with the written consent
of the attorney to be substituted; and
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d. In case, the consent of the attorney
to be substituted cannot be obtained,
there must be at least a proof of
notice,that the motion for substitution
was served on him in the manner
prescribed by the Rules of Court.
Lustan v. CA, 266 SCRA 683, supra
Rammani v. CA, 196 SCRA 731 – ALAIN
Central Surety vs Hodges (JESSA)
Facts:
• Prior to January 15, 1954, lots had been sold by
C. N. Hodges to Vicente M. Layson, for the sum
of P43,000.90, payable on installments.
• As of January 15, 1954, the outstanding
balance of Layson's debt, after deducting the
installments paid by him prior thereto,
amounted to P15,516.00.
• In order that he could use said lots as security
for a loan he intended to apply from a bank,
Layson persuaded Hodges to execute in his
favor a deed of absolute sale over the
properties, with the understanding that he
would put up a surety bond to guarantee the
payment of said balance.
• Accordingly, Layson executed, in favor of
Hodges, a promissory note for P15,516.00, with
interest thereon at the rate of 1% per month,
and the sum of P1,551.60, for attorney's fees
and costs, in case of default in the payment of
the principal or interest of said note.
• To guarantee the same, on January 23, 1954,
the petitioner through the manager of its
branch office in Iloilo, Mrs. Rosita Mesa,
executed in favor of Hodges the surety bond,
which was good for 12 months from the date
thereof.
• When Layson defaulted in the discharge of his
aforesaid obligation, Hodges demanded
payment from the petitioner, which, despite
repeated extensions of time granted thereto,
at its request, failed to honor its commitments
under the surety bond.
• On October 24, 1955, Hodges commenced, the
present action against Layson and petitioner
herein, to recover from them, jointly and
severally, the sums of P17,826.08,
representing the principal and interest due up
to said date, and P1,551.60, as attorney's fees.
• Having failed to file its answer within the
reglementary period, the petitioner was, on
January 18, 1956, declared in default.
• When the case was called for trial, insofar as
Layson was concerned, the latter did not
appear, and Hodges was allowed to introduce
his evidence.
• RTC: rendered a partial decision against Layson
(petitioner having, in the meantime, filed a
motion to set aside the order of default, which
motion was still pending resolution)
116
• Thereafter, said motion was denied, and upon
presentation of the evidence of Hodges against
herein petitioner, judgment was rendered
against the latter as prayed for in the
complaint.
• Thereupon, petitioner filled a motion for
reconsideration and a motion for relief under
Rule 38.
• RTC later set aside its decision against the
petitioner and admitted its answer, attached to
the motion to set aside the order of default.
• In its answer, petitioner disclaimed liability
under the surety bond in question, upon the
ground (a) that the same is null and void, it
having been issued by Mrs. Rosita Mesa after
her authority therefor had been withdrawn on
March 15, 1952; (b) that even under her
original authority Mrs. Mesa could not issue
surety bonds in excess of P8,000.00 without
the approval of petitioner's main office which
was not given to the surety bond in favor of
Hodges; and (c) that the present action is
barred by the provision in the surety bond to
the effect that all claims and actions thereon
should be filed within three (3) months from
the date of its expiration on January 23, 1955
• RTC: Central Surety ordered to pay Hodges
P8000
• Hodges appealed insofar as limiting his award
to P8000 and upon the ground that the trial
court had erred in holding petitioner liable
under a contract entered into by its agent in
excess of her authority
• CA: petitioner was liable on a bond issued by
an agent
• petitioner has appealed to SC, alleging that the
CA has erred in finding that petitioner was
liable on a bond issued by an agent whose
authority had already been withdrawn and
revoked (this is predicated upon the fact that
prior to when the surety bond involved in this
case was executed, petitioner herein had
withdrawn the authority of its branch manager
Mrs. Rosita Mesa, to issue surety bonds)
Issues:
1. WON the surety bond issued by Mesa is valid
2. WON Article 1922 is applicable
Held:
1. YES
Said surety bond is valid. In the first place, there
appears to be no showing that the revocation
of authority was made known to the public in
general by publication, nor was Hodges
notified of such revocation despite the fact
that he was a regular client of the firm.
Secondly, some surety bonds issued by Mrs. Mesa
in favor of Hodges after her authority had allegedly
been curtailed, were honored by the Central Surety
despite the fact that these were not reported to the
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main office at the time of their issuance. These
accounts were paid and by these acts, Central
Surety ratified Mrs. Mesa's unauthorized acts and
as such it is now estopped from setting forth Mrs.
Mesa's lack of authority to issue surety bonds. It
has been held that although the agent may
have acted beyond the scope of his authority,
or may have acted without authority at all,
the principal may yet subsequently see fit to
recognize and adopt the act as his own.
Ratification being a matter of assent to and
approval of the act as done on account of the
person ratifying any words or acts which
show such assent and approval are ordinarily
sufficient. Moreover, the relocation of agency
does not prejudice third persons who acted in
good faith without knowledge of the
revocation.
2. YES
Indeed, Article 1922 of our Civil Code provides:
If the agent had general powers, revocation of the
agency does not prejudice third persons who acted
in good faith and without knowledge of the
revocation. Notice of the revocation in a newspaper
of general circulation is a sufficient warning to third
persons.
It is not disputed that petitioner has not caused to
be published any notice of the revocation of Mrs.
Mesa's authority to issue surety bonds on its
behalf, notwithstanding the fact that the powers of
Mrs. Mesa, as its branch manager in Iloilo, were of
a general nature, for she had exclusive authority,
to represent petitioner herein, not with a particular
person, but with the public in general, "in all the
negotiations, transactions, and business in wherein
the Company may lawfully transact or engage on
subject only to the restrictions specified in their
agreement, copy of which was attached to
petitioner's answer. Contrary to petitioner's claim,
Article 1922 applies whenever an agent has
general powers, not merely when the
principal has published the same, apart from
the fact that the opening of petitioner's branch
office amounted to a publication of the grant of
powers to the manager of said office. Then, again,
by honoring several surety bonds issued in its
behalf by Mrs. Mesa, petitioner induced the public
to believe that she had authority to issue such
bonds. As a consequence, petitioner is now
estopped from pleading, particularly against a
regular customer thereof, like Hodges, the absence
of said authority.
Dy Buncio & Co., Inc. v Ong Guan Can (JESSA)
FACTS
• Ong Guan Can JR. as agent of Ong Guan Can
sells the rice mill and camarin for p13,000 and
gives as power of attorney dated May 23,
1928. A copy of this public instrument is
117
attached to the deed and recorded with the
deed in the office of the Registry of Deeds in
Capiz
• Dy Buncio (as creditor) claims that that the
property belongs to its judgment creditor, Ong
Guan Can, thus can be subject to execution.
• Defendants Juan Tong and Puan Giok Eng claim
as owner and lessee of the owner by virtue of a
deed dated July 31, 1931, by Ong Guan Can,
Jr.
• CFI Capiz held that the deed was invalid and
that the property was subject to the execution
which has been levied on said properties by
the judgment creditor of the owner.
• Juan Tong and Pua Giok appealed.
ISSUE: WON the deed of July 31, 1931 is valid.
HELD: NO.
• The 1928 power of attorney is not a general
power of attorney but a limited one and does
not give the express power to alienate the
properties in question.
• Petioners claim that the that this defect is
cured by Exh.1, which purports to be a general
power of attoney given to the same agent in
1920.
• The making and accepting of a new power
of attorney, whether it enlarges or
decreases the power an agent under a
prior power of attorney, must be held to
supplant and revoke the latter provided
there is INCONSISTENCY or
incompatibility.
• If the new appointment with the limited powers
does not revoke the general power of attorney,
the execution of the second power of attorney
would be a mere futile gesture.
• The title of Ong Guan Can not having been
divested by the so-called deed of July 31, 1931,
his properties are subject to attachment and
execution.
Garcia v. de Manzano, 39 Phil 577 – ANGELA
1919
Moir, J.
FACTS
• Narciso gave a general power of attorney
to his son, Angel L. Manzano on the 9th of
February, 1910, and on the 25th of March a
second general power-of-attorney to his wife,
Josefa Samson.
• Angel, acting under his GPA sold Narciso’s
half interest to the steamer San Nicolas, and
mortgaged 3 parcels of land in Antimonan to
Juan Garcia.
• Upon Narciso’s death, Josefa was named
administratrix to Narciso’s properties.
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• Garcia brought action against Narciso’s
Estate to foreclose the mortgage.
ISSUES [as raised in Josefa’s counterclaim]
1. WON the power of attorney of Josefa revoked
that of Angel?
2. WON Angel’s GPA authorize her to sell the boat ?
HELD/RATIO:
1. NO
• Art. 1735 [now 1923a] provides: The
appointment of a new agent for the same
business produces a revocation of the previous
agency from the day on which notice was
given to the former agent, excepting the
provisions of the next preceding article.
• There is no proof in the record that the first
agent, the son, knew of the power-of-attorney
to his mother.
• It was necessary for the defendants to
prove that the son had notice of the second
power-of-attorney. As they have not done so,
and it must be considered that Angel L.
Manzano was acting under a valid power-of-
attorney from his father which had not been
legally revoked on the date of the sale of the
half interest in the steamer to the Garcia.
2. YES.
• The power-of-attorney does not expressly
state that the agent may sell the boat, but a
power so full and complete authoring the sale
of real property, must necessarily carry with it
the right to sell a half interest in a small boat.
The record further shows the sale was
necessary in order to get money or a credit
without which it would be impossible to
continue the business which was being
conducted in the name of Narciso L. Manzano
and for his benefit.
Santana-Cruz v. CA, 361 SCRA 520 - JESSA
Facts:
• Juanson-Cuizon, representing private
respondents (the heirs of the late Valeriana
Marilao), filed against petitioner and
Concepcion, a Complaint for
Revival/Execution of Judgment After Lapse
of Five Years
• RTC:in favor of the plaintiffs and against
the defendants Francisco Santana and the
Heirs of Catalina Reyes, ordering the latter
to reconvey in favor of the plaintiffs, as
Heirs of Valeriana Marilao
• CA: affirmed in toto
• petitioner filed an Omnibus Motion, praying
that the Complaint be dismissed on the
ground that it failed to state a cause of
action, that it was barred by the statute of
limitations, and that it be expunged
from the records of the case for
118
having been filed by a person not
authorized to practice law
• RTC: denied  modified: Register of Deeds
is ordered to cancel the Transfer Certificate
of Title and all the resultant titles derived
therein and in lieu thereof, the
corresponding new transfer certificates of
title be issued in the name of the
petitioners
• petitioner filed a Petition for Certiorari and
Prohibition with a Prayer for the Issuance of
a Temporary Restraining Order with the
Court of Appeals alleging that the court a
quo acted with grave abuse of discretion
• CA: granted petition  subsequently
reversed and set aside RTC’s orders
• Atty. Julian S. Yap who filed his appearance
as counsel for private respondents, also
filed a Motion for Reconsideration, which,
among others, stated that private
respondents, some of whom have died and
are succeeded by their heirs, had revoked
the authority of their Attorney-in-Fact,
Patrocinia J. Cuizon, to represent them
• CA received another Motion for
Reconsideration filed by the counsel of
record, Atty. Raul A. Mora, for private
respondents
• petitioner filed her Opposition stating
among others, that she received two (2)
motions for reconsideration of private
respondents filed by different counsels,
and that she was bound to treat Atty. Raul
A. Mora as private respondents' counsel of
record as she had not received any notice
of proper substitution of private
respondents' counsel
• CA: denied the motion for reconsideration
filed by Atty Mora  subsequently granted
Issues:
1. WON Atty Mora may be substituted by Atty.
Julian S. Yap merely from the filing of a formal
appearance by the latter
2. WON CA erred in granting the motion for
reconsideration of Atty Mora
Held:
1. The private respondents filed with the CA 2
separate motions for reconsideration through 2
counsels, namely, Atty. Raul A. Mora and Atty.
Julian S. Yap. The motion for reconsideration filed
by Atty. Yap stated, among others, that due to acts
inimical to their interests, the private respondents
had revoked the authority of Attorney-in-Fact
Patrocinia Juanson-Cuizon to represent them and
through their newly designated Attorneys-in-Fact
decided to take over from her the conduct of the
instant case and to retain Atty. Julian S. Yap as
their counsel considering that Atty. Raul A. Mora
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was the personal counsel of Patrocinia Juanson-
Cuizon.CA stated that "there is no showing that all
the private respondents have revoked the
authority granted to Patrocinia Juanson-Cuizon." Be
that as it may, a revocation of authority of
Patrocinia Juanson-Cuizon as Attorney-in-Fact of
private respondents heirs of Valeriana Marilao, who
are recognized as the real parties in interest in this
case, should not affect Atty. Raul A. Mora, who
remains counsel of record of private
respondents absent a valid substitution of
counsel. Atty. Raul A. Mora may not be
presumed substituted by Atty. Julian S. Yap
merely from the filing of a formal appearance
by the latter. No substitution of counsel of
record is allowed unless the following
essential requisites of a valid substitution of
counsel concur: (1) there must be a written
request for substitution; (2) it must be filed
with the written consent of the client; (3) it
must be with the written consent of the
attorney to be substituted; and (4) in case
the consent of the attorney to be substituted
cannot be obtained, there must be at least a
proof of notice that the motion for
substitution was served on him in the
manner prescribed by the Rules of Court.
In the Supplemental Motion for Reconsideration
filed by Atty. Raul A. Mora with the Court of
Appeals, he stated that the heirs of Valeriana
Marilao never dismissed him nor replaced him as
their counsel, thus, the appearance of Atty. Julian
S. Yap was improper. In petitioner's Opposition,
she stated that she received 2 motions for
reconsideration from private respondents filed by
different counsels, and was bound to treat Atty.
Raul A. Mora as private respondents' counsel of
record as she had not received any notice of
proper substitution of private respondents' counsel.
In the absence of compliance with the
essential requirements for valid substitution
of the counsel of record, Atty. Mora, the
court can safely presume that he is
responsible for the conduct of the case. The
rule is intended to ensure the orderly disposition of
cases.
2. NO. CA did not err in acting on the motion for
reconsideration of private respondents, which was
seasonably filed through their counsel of record,
Atty. Raul A. Mora and received by the Court. In
fact, the respondent court should have acted only
on the said motion for reconsideration. The
inadvertence on the part of the respondent court
and the delay in sewing the original copy of said
motion for reconsideration in the rollo of the case
should not prejudice the legal interest of private
respondents who were under the proper
representation and charge of their counsel of
record, Atty. Raul A. Mora. To set things straight,
inasmuch as Atty. Yap had no authority to
119
represent private respondents, absent a valid
substitution of their counsel, the motion for
reconsideration filed by him is deemed a
mere scrap of paper.
C. Artciles 1924, 1925 - REX
Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the
agent, dealing directly with third persons. (n)
Art. 1925. When two or more principals have
granted a power of attorney for a common
transaction, any one of them may revoke the same
without the consent of the others
CMS Logging v. CA (TOPE)
1992
J. Nocon
Facts:
• Petitioner CMS is a forest concessionaire
engaged in the logging business, while private
respondent DRACOR is engaged in the
business of exporting and selling logs and
lumber. On August 28, 1957, CMS and DRACOR
entered into a contract of agency whereby the
former appointed the latter as its exclusive
export and sales agent for all logs that the
former may produce, for a period of five (5)
years.
• One of the provisions indicated that DRACOR
was to handle all negotiations.
• 6 months before the CoAgency was about to
expire CMS’ president went to Tokyo and found
out that DRACOR sold CMS logs through Shinko
Trading and earned a commission of $1 per
1000 bd. Ft. of logs.
• CMS claimed that this commission paid to
Shinko was in violation of the agreement and
that it (CMS) is entitled to this amount as part
of the proceeds of the sale of the logs. CMS
contended that since DRACOR had been paid
the 5% commission under the agreement, it is
no longer entitled to the additional commission
paid to Shinko as this tantamount to DRACOR
receiving double compensation for the services
it rendered.
• CMS later shipped and sold directly to Japanes
buyers without the help of DRACOR.
• DRACOR counterclaims for the commissions on
these transactions.
• CA found no evidence that Shinko collected the
commissions
Issue:
1. WoN Shinko received the commissions
2. WoN DRACOR is entitled to the commissions on
the Direct Sales of CMS to Japanese buyers
Held:
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1. Petition unmeritorious, no evidence. The
finding of fact was only based on a summary
from CMS itself.
Moreover, even if it was shown that Shinko did in
fact receive the commissions in question, CMS is
not entitled thereto since these were apparently
paid by the buyers to Shinko for arranging the sale.
This is therefore not part of the gross sales of
CMS's logs.
2. No. We find merit in CMS's contention that
the appellate court erred in holding that
DRACOR was entitled to its commission from
the sales made by CMS to Japanese firms.
The principal may revoke a contract of agency at
will, and such revocation may be express, or
implied, and may be availed of even if the period
fixed in the contract of agency as not yet expired.
As the principal has this absolute right to revoke
the agency, the agent can not object thereto;
neither may he claim damages arising from such
revocation, unless it is shown that such was done
in order to evade the payment of agent's
commission.
In the case at bar, CMS appointed DRACOR as its
agent for the sale of its logs to Japanese firms. Yet,
during the existence of the contract of agency,
DRACOR admitted that CMS sold its logs directly to
several Japanese firms. This act constituted an
implied revocation of the contract of agency under
Article 1924 of the Civil Code, which provides:
Art. 1924 The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly
with third persons.
Since the contract of agency was revoked by CMS
when it sold its logs to Japanese firms without the
intervention of DRACOR, the latter is no longer
entitled to its commission from the proceeds of
such sale and is not entitled to retain whatever
moneys it may have received as its commission for
said transactions. Neither would DRACOR be
entitled to collect damages from CMS, since
damages are generally not awarded to the agent
for the revocation of the agency, and the case at
bar is not one falling under the exception
mentioned, which is to evade the payment of the
agent's commission.
D. Article 1926 - MARK
Art. 1926. A general power of attorney is revoked
by a special one granted to another agent, as
regards the special matter involved in the latter.
Dy Buncio & Co., Inc. v Ong Guan Can (GEN)
Oct. 2, 1934
Hull, J.
120
FACTS: Ong Guan Can, Jr. executed on behalf of
the Ong Guan Can, the deed covering the sale of a
rice-mill and camarin, in favor of buyers who relied
upon a 1928 power of attorney attached to the
deed, but which turned out was “not a general
power of attorney but a limited one and [did] not
give the express power to alienate the properties
in question.”
The creditors of Ong Guan Can sought to have the
sale declared void. But the buyers, defendants Juan
Tong and Pua Giok Eng claimed that they were the
owners and lessees of the property.
Defendants claimed that the defect in the son’s
authority to sell on behalf of the father was cured
by an earlier 1920 “general power of attorney
given to the same agent [son]” by the father.
The CFI of Capiz held that the deed was invalid and
that the property was subject to the execution
which has been levied on the properties by the
judgment creditor of the owner.
ISSUE: WON the deed of sale was invalid
HELD: YES. The sale is void. The making and
accepting of a new power of attorney, whether it
enlarges or decreases the power of the agent
under a prior power of attorney, must be held to
supplant and revoke the latter when the two are
inconsistent. If the new appointment with limited
powers does not revoke the general power of
attorney, the execution of the second power of
attorney would be a mere futile gesture.
Since the title of Ong Guan Can has not been
divested by deed of sale, his properties are subject
to attachment and execution.
Garcia v. de Manzano, 39 Phil 577 - MAI
E. Article 1927 - ROG
Art. 1927. An agency cannot be revoked if a
bilateral contract depends upon it, or if it is the
means of fulfilling 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.
New Manila Lumber Co. v. Republic - TOFF
Bacaling v. Muya, 380 SCRA 714 - REG
National Sugar Trading v. PNB, 396 SCRA 528
- EARLA
Sevilla, supra
Del Rosario v. Abad, 104 Phil 648 - ABBY
1958; Padilla
Facts:
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• Plaintiffs are the children and heirs of Tiburcio
del Rosario. Del Rosario was a grantee of a
homestead patent in Nueva Ecija. The
Certificate was issue Feb 11, 1937. He obtained
a loan from Primitivo Abad Feb 24, 1937
(remember the 5 yr prohibition from
encumbrance rule) for P2000 at 12% pa
payable Dec 1941.
• The security for the payment was the
improvement on the parcel of land. An
irrevocable special power of attorney was also
executed authorizing Abad to sell and convey
the parcel of land.
• December 1945 Tiburcio died leaving the
mortgage debt unpaid. Later, Primitivo sold
the land to his son Teodorico Abad for P1. Title
now registered in Teodorico’s name.
• Del Rosario heirs filed suit for recovery and
possession of the land.
Issue:
1. WoN Power of Attorney created an agency
coupled with an interest
2. WoN the land was sold validly
Held: No. The power of attorney executed by the
homesteader in favor of Abad did not create an
agency nor did it clothe the agency with
irrevocable character. A mere statement in the
power of attorney that it is coupled with an interest
is not enough. In what does such interest consist
must be stated in the power of attorney. The
mortgage has nothing to do with the power of
attorney and may be foreclosed by the mortgagee
upon the failure of the mortgagor to comply with
his obligation. As the agency was not coupled with
an interest, it was terminated upon the death of
the principal, and the agent could no longer validly
convey the land. Hence, the sale was null and void.
Granting that the PoA in question was valid it
would subject the land to an encumbrance.
(executed within 5 yrs after issuance of the patent,
the same is null and void.)
Macondray, supra
Coleongco v. Claparols, 10 SCRA 577 - JANCES
F1. Articles 1928, 1929 – ALAIN
Art. 1928. The agent may withdraw from the
agency by giving due notice to the principal. If the
latter should suffer any damage by reason of the
withdrawal, the agent must indemnify him
therefor, unless the agent should base his
withdrawal upon the impossibility of continuing the
performance of the agency without grave
detriment to himself. (1736a)
Art. 1929. The agent, even if he should withdraw
from the agency for a valid reason, must continue
to act until the principal has had reasonable
121
opportunity to take the necessary steps to meet
the situation.
Right of the agent to withdraw:
Just as the principal may revoke generally the
agency at will, the agent may likewise renounce or
withdraw from the agency at any time, without the
consent of the principal, even in violation of the
latter’s contractual rights; subject to liability for
breach of contract or for tort.
1. Without just cause – The reason for the
indemnity imposed by law is that the agent
fails in his obligation and as such, he answers
for losses and damages occasioned by the non-
fulfillment.
2. With just cause – If the agent withdraws from
the agency for a valid reason, as when the
withdrawal is based on the impossibility of
continuing with the agency without grave
detriment to himself, or is due to a fortuitous
event, the agent cannot be held liable.
Obligation of agent to continue to act after
withdrawal:
The purpose of the law is to prevent damage or
prejudice to the principal. The law reconciles the
interests of the agent with those of the principal,
and if permits the withdrawal of the agent, it is on
the condition that no damage results to the
principal, and if the agent desires to be relieved of
the obligation of making reparation when he
withdraws for a just cause, he must continue to act
so that no injury may be caused to the principal.
F2. Articles 1930, 1931, 1932 – EVA
Dela Pena v. Hidalgo (ANGELA)
(This case is supra and rather complicated so I’ll
just include the relevant details)
The CASE was instituted by the heirs of Jose Gomiz
y Dela Peña to recover sums of money from
Federico Hidalgo which he allegedly owes the
estate of Jose representing unremitted accounts
during the administration of Federico of the
properties of Jose Gomiz y Dela Peña.
FACTS
• In 1887, Federico Hidalgo took charge of
administration of Jose Gomiz y Dela Peña’s
properties by virtue of a power of attorney
executed by the latter in favor of 4 agents
(Federico included) before he embarked for
Spain.
• After several years of agency, Federico
Hidalgo wrote to Jose Gomiz requesting him to
designate a person to substitute him in the
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position because one of those appointed in the
power of attorney had died and the others did
not wish to take charge of the administration of
Gomiz’ properties.
• Gomiz did not answer Federico’s letters nor
did he approve or object to Federico’s accounts
nor did he appoint or designate another person
to substitute Federico.
• In 1894, Federico was obliged to embark
for Spain for health reasons. On preparing for
his departure, he rendered the accounts of the
administration.
• Federico also informed Gomiz of his
intended departure from the Philippines and of
his turning over the administration to his
cousin Antonio Hidalgo, upon whom he
conferred a GPA. But because he deemed such
GPA to be insufficient, he also asked Gomiz to
send a new SPA in favor or Antonio.
• When Antonio died, Francisco Hidalgo took
Antonio’s place.
• Gomiz died without having said anything
regarding the substitution of agents
ISSUE: WON there was valid renunciation of the
agency.
HELD: YES.
• Under the circumstances of the case, it is
reasonable to conclude that the agency was
duly terminated.
• Although Federico did not use the words
“renouncing the agency”, such words were
undoubtedly understood and accepted by the
principal because if the lapse of nearly 9 years
up to time of principal’s death, he never
interrogated the renouncing agent and
disapproved what he had done nor the power
conferred to the substituting agent.
• The agent who was obliged to leave his
charge for a legitimate cause and who duly
informed his principal, is released and freed
from the results and the consequences of the
substitute agent it was with the consent, even
tacit of the principal.
• The agent is not required to sacrifice his
health, life, and his own interests, if it is shown
that it was impossible for him to continue the
discharge of his duties.
Rallos v. Felix Go Chan, supra
Blondeau v. Nano (BAMBI)
Facts:
• An action was brought in the Court of First
Instance of Manila to foreclose a mortgage
alleged to have been made by the defendants
Agustin Nano and Jose Vallejo to the plaintiff
Angela Blondeau, bearing date November 5,
1931, to secure the payment of the sum of
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P12,000, and covering property situated on
Calle Georgia, Manila.
• Nano, purporting to represent both defendants,
after filing an answer, was found in contempt
of court. The other defendant Vallejo’s defense
was that his signature to the mortgage was a
forgery. Following the trial, judgment was
rendered against Nano but not against Vallejo.
• Hence, this appeal.
Issue: WoN there was a valid mortgage
contract executed in favor of Blondeau. YES.
• The purported signature of the defendant
Vallejo to the mortgage was not a forgery.
• It needs to be recalled that the mortgage was
executed in the home of the plaintiffs, and that
of those present, the principal plaintiff Angela
Blondeau and her husband Fernando de la
Cantera, together with the instrumental
witness Pedro Jimenez Zoboli, identified Vallejo
as the person who signed the document.
• Upon its face, the mortgage appears to be
regular and to have been duly executed and
accepted by Vallejo on November 5, 1931.
• Moreover, Agustin Nano had possession of Jose
Vallejo's title papers. Without those title papers
handed over to Nano with the acquiescence of
Vallejo, a fraud could not have been
perpetrated. When Fernando de la Cantera, a
lawyer and the husband of Blondeau, the
principal plaintiff, searched the registration
records, he found them in due form, including
the power of attorney of Vallejo, in favor of
Nano.
• If this had not been so and if thereafter the
proper notation of the encumbrance could not
have been made, Angela Blondeau would not
have lent P12,000 to the defendant Vallejo.
• The Torrens system is intended for the
registration of title, rather than the muniments
of title. It represents a departure from the
orthodox principles of property law. Under the
common law, if the pretended signature of the
mortgagor is a forgery, the instrument is
invalid for every purpose and will pass on the
title or rights to anyone, unless the spurious
document is ratified and accepted by the
mortgagor.
• The Torrens Act on the contrary permits a
forged transfer, when duly entered in the
registry, to become the root of a valid title in a
bona fide purchaser. The act erects a
safeguard against a forged transfer being
registered, by the requirement that no transfer
shall be registered unless the owner's
certificate was produced along with the
instrument of transfer.
• An executed transfer of registered lands
placed by the registered owner thereof in the
hands of another operates as a representation
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to a third party that the holder of the transfer

is authorized to deal with the lands.
• With respect to the conclusiveness of the
Torrens title and the binding force and effect of
annotations thereon even when through a
forged deed the land passes into the
possession of an innocent purchaser for value,
the basic rule is found in the opinion delivered
by Mr. Chief Justice Arellano in De la Cruz vs.
Fabie which sates that innocent buyers may
still have valid title.
• Court mentions Vargas & Mañalac in their
treatise on the Philippine Land Registration Law
quote with approval the comment of Mr. Powell
in his book on Land Registration, section 213.
The question which the author propounded
was: Why does the law say that the person who
had no title at all and only a forged deed as a
color of title should become the true owner of
the land by merely continuing to occupy and
enjoy the land which in fact does not belong to
him, but which belongs to the victim of the
forgery?
• …Public policy, expediency, and the need of
repose and certainty as to land titles demand
that the bona fide purchaser of a certificate of
title to registered land, who, though he buys on
a forged transfer, succeeds in having the land
registered in his name, should nevertheless
hold an unimpeachable title.
• …In the first place, a forger cannot effectuate
his forgery in the case of registered land by
executing a transfer which can be registered,
unless the owner has allowed him, in some
way, to get possession of the owner's
certificate.
• .The Act has erected in favor of the owner, as a
safeguard, against a forged transfer being
perpetrated against him, the requirement that
no voluntary transfer shall be registered unless
the owner's certificate is produced along with
the instrument of transfer.
• Therefore, if the owner has voluntarily or
carelessly allowed the forger to come into
possession of his owner's certificate he is to be
judged according to the maxim, that when one
of two innocent persons must suffer by the
wrongful act of a third person the loss fall on
him who put it into the power of that third
person to perpetrate the wrong.
• Furthermore, even if the forger stole the
owner's certificate, the owner is up against no
greater hardship than is experienced by one
whose money or negotiable paper payable to
bearer is stolen and transferred by the thief to
an innocent purchaser.
• Plaintiff's mortgage sustained.

Terrado v. CA, 131 SCRA 371 - REX

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