Agency Cases Reviewer

AGENCY // Prof. D.
Sanchez // Block B 2015

Rallos v. Felix Go Chan SUMMARY: This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of Concepcion went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, and nullified the sale with respect to the pro indiviso share of Concepcion is concerned, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint. SC reversed CA ruling and reinstate that of the trial court. The agency was extinguished by operation of law by the death of the principal and this case does not fall under the exceptions. DOCTRINE: General Rule: Agency is extinguished by the death of the principal Exception: ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. 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. Requisites: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable. SUMMARY: American Air and Orient Air entered into a General Sales Agency Agreement whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. American Air sued Orient Air for having allegedly reneged on its obligations under the Agreement by failing to promptly remit the net profits of sales for several months. The trial court ruled in favor of Orient Air which CA affirmed. Both CFI and IAC ordered American Air to reinstate Orient Air as its general sales agent for passenger transportation in the Philippines. DOCTRINE: In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. SUMMARY: Uy and Roxas are agents authorized by the owner to sell 8 parcels of land. They contracted with National Housing Authority for the latter to buy the lands. NHA cancelled the sale of 3 out of 8 lands because of a government report declaring the 3 lands unsuitable for housing projects. Uy and Roxas then filed suit for damages against NHA. RTC ruled in favor of NHA, but awarded damages in favor of Uy and Roxas. CA dismissed the case since Uy and Roxas were not the real parties-in-interest. SC affirmed CA. DOCTRINE: Section 372 (2) of the Restatement of the Law on Agency (Second) states: 1
Orient Air Services v. CA
Uy v. CA
AGENCY // Prof. D. Sanchez // Block B 2015

(2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entilted to a portion of the proceeds as compensation for making it or because he is liable for its breach. SUMMARY: Flores, representing himself as agent of Camps ordered certain goods amounting to P351.50 from Macke, Chandler and Co. He received the said goods at the place of business, Washington Caf. There was an unpaid balance of P177.50. Camps asserted that facts are not sufficient to establish the fact that he received the goods for which payment is demanded. Testimony and Evidence of a written contract signed by Flores as managing agent was presented in court. DOCTRINE: One who clothes another apparent authority as his agent, and holds him out to the public as such, can not 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: (1) subsec. 1, sec. 333, Act no. 190"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 can not, 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. SUMMARY: Aurora F. Cruz, with her sister as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential Bank. The transaction was evidenced by a Confirmation of Sale delivered to Cruz, together with a Debit Memo in the amount withdrawn and applied to the confirmed sale. These documents were issued by Susan Quimbo, an employee of the bank. Upon maturity of the placement, Cruz returned to the bank to renew her investment. Quimbo, who again attended to her, prepared a Credit Memo crediting the amount of P200,000.00 in Cruz's savings account passbook. She also prepared a Debit Memo for the amount of P196,122.88 to cover the re-investment of P200,000.00 minus the prepaid interest of P3,877.02. Cruz was asked to sign a Withdrawal Slip for P196,122.98, representing the amount to be re-invested after deduction of the prepaid interest. Quimbo explained this was a new requirement of the bank. Several days later, Cruz received another Confirmation of Sale and a copy of the Debit Memo. Cruz returned to the bank and sought to withdraw her P200,000.00She was informed that the investment appeared to have been already withdrawn by her. There was no copy on file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo. Quimbo herself was not available for questioning. DOCTRINE: The liability of the principal for the acts of the agent is not even debatable. Qui per alium facit per seipsum facere videtur. "He who does a thing by an agent is considered as doing it himself." This is affirmed in the Civil Code through Articles 1910 and 1911. The agent's apparent representation yields to the principal's true representation and the contract is considered 2
Macke v. Camps
Prudential Bank v. CA

as entered into between the principal and the third person. A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority. SUMMARY: EC, a corporation, owned 90% of the stocks of Belgian corporation ESAC. During the Marcos regime, ESAC became concerned about the political situation of the Philippines so it instructed EC to dispose of 8 parcels of land. EC sought the services of a broker Marquez who found the buyers Litonjua. Negotiations were made via telex, from the Marquezs offer to the buyers to the buyer and sellers counter-proposal. The buyers eventually accepted the counter-proposal so the broker communicated this acceptance to an officer of EC who informed an officer of ESAC. The buyers deposited the purchase price in a bank and drafted an escrow agreement. However, when the political scene in the Philippines improved, ESAC decided to cancel the sale. Because of this, the Litonjuas demanded payment of damages. ESAC refused, hence, the suit by the Litonjuas. The primary issue in this case is the authority of the broker, the officer of EC and the officer of ESAC to bind the owner of the property, ESAC. If they didnt have authority, then the Litonjuas have to bear their own damages because of their negligent reliance on the representation of the officers. If it is proven that they acted with authority, ESAC will be liable for its cancellation of the sale. The SC ruled that said people did not have the authority to bind ESAC, absent any written authority or resolution by its ESACs Board of directors through which, the corporation acts. DOCTRINE: While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors authorized by a board resolution. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation by a purported agent without written authority from the corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority. By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them An agency may be expressed or implied from the act 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. Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Agency may be oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is necessary. 3
Litonjua, Jr. v. Eternit Corp.

Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. The settled rule is that, persons dealing with an assumed agent are bound at their peril, and 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 prove it. SUMMARY: Lizette was assigned as representative in the withdrawal of the scrap/unserviceable rails awarded to Romualdez. PNR suspended the withdrawal. Lizette and Angeles sued for specific performance. TC and CA dismissed as Lizette was only an agent w/o right to sue on behalf of Romualdez, the one who contracted with PNR. DOCTRINE: The words principal and agent, are not the only terms used to designate the parties in an agency relation. The agent may also be called an attorney, proxy, delegate or, as here, representative. In the absence of statute, no form or method of execution is required for a valid power of attorney; it may be in any form clearly showing on its face the agents authority. SUMMARY: Gregorio, through a letter (private document), requested her sister Nicolasa to sell one of the 3 parcels of land he owned, because he needed money. Nicolasa sold one to Rabot for P500 and the deed of conveyance was executed and delivered. A year later, Gregorio sued to recover the land from Rabot. The SC held that the letter complied sufficiently with the Civil Code and the Code of Civil Procedure as regards the form of authority. Thus, he is bound by the actions of Nicolasa. DOCTRINE: Inasmuch as it is an established doctrine that a private document is competent to create, transmit, modify, or extinguish a right in real property, it follows that a power of attorney to convey such property, even though in the form of a private document, will operate with effect. SUMMARY: City-Lite filed a case for specific performance and damages because FP holdings refused to convey the TCT of the Violago property. FP Holdings said that the agreement entered into with Roy was not valid because the latter had no authority to conclude the sale, being a mere contact person of the company and because Art. 1874 of the Civil Code provides that When the 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. DOCTRINE: Article 1874 provides: When the sale of a piece of land or any interest therein is through an agent, 4
Angeles v. Philippine National Railways
Jimenez v. Rabot
City-Lite v. CA

Cosmic Lumber v. CA the authority of the latter shall be in writing, otherwise the sale shall be void. SUMMARY: Petitioner executed a special power of attorney appointing Paz Villamil-Real as attorney in fact in order to initiate, institute and file any court action for the ejectment of third persons and/or squatters. However, she entered into a compromise agreement with one of the illegal settlers and sold a portion of the sale without the knowledge of petitioner. DOCTRINE: 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. SUMMARY: San Juan Structural entered an agreement with Motorich, through its treasurer, Nenita Gruenberg, for the transfer to San Juan of a parcel of land. An earnest money was paid but come the date of the payment of the balance, Motorich refused to push through with the agreement. San Juan, then, filed a complaint against Motorich to compel it to comply with the agreement. Mototrich, in its defense argued that they are not bound by the contract for Nenita was not an authorized agent. San Juan argues that the Gruenberg spouses are the 99.87% owner of Motorich thus, piercing the corporate veil, their actions would bind Motorich. SC ruled that Nenita was not an authorized agent thus her acts do not bind Motorich. DOCTRINE: 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. As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exceed their authority, their actions "cannot bind the corporation, unless it has ratified such acts or is estopped from disclaiming them." SUMMARY: Daluyong owns a parcel of land in Tagum, Davao which was being leased to several lessees. He sent his son Renato to collect the rentals from the land. One of the lessees is Lydia Delos Reyes. Lydia, thinking that Renato was an authorized agent of Daluyong, subsequently entered into an oral contract of sale with Renato for 300 sqm of Daluyongs land for which she paid the full purchase price of P90,000. She used the lot to build a two-storey building. When Daluyong discovered of the building, he filed an action for recovery of the said land. TC ordered Daluyong to execute a deed of conveyance to Lydia. CA reversed and asked Lydia to vacate. SC affirmed CA saying that Renato was not an authorized agent of Daluyong hence there was no valid contract of sale. DOCTRINE: Art. 1874 of the CC points out that when the 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. SUMMARY: Cruz, Jr, a member of the board of directors of Dieselman, authorized Noble to sell a lot owned by the company even if he did not have any authority to sell the property. Noble then authorized Polintan to sell the property. Polintan was able to sell it to AF Realty which paid P300,000 earnest money. The earnest money was initially accepted by Cruz, Sr., the president of Dieselman but the company later rejected the sale. AF Realy filed a case for specific performance to enforce the contract of sale. Meanwhile, Dieselman sold the lot to Midas. The TC ruled in favor of AF Realty. The CA reversed, saying that there was no perfected contract of sale since Cruz, Jr. and Polintan did not have any authority to sell the property. The SC affirmed the CA decision. DOCTRINE: Sale of land through an agent without any written authority is void. The law on agency under the 5
San Juan Structural Steel v. CA
Delos Reyes v. CA
AF Realty v. Dieselman Freight

Civil Code takes precedence. In Yu Ka Sin Trading v. CA, it was held that Since a corporation... can act only through its officers and agents, all acts within the powers of said corporation may be performed by agents of its selection... the same general principles of law which govern the relations of agency for a natural person govern the officer or agent of a corporation... and agents when once appointed, or members acting in their stead, are subject to the same rules, liabilities, and incapacities as are agents of individuals and private persons. When a sale 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. 1874, NCC). Void contracts cannot be ratified (Art. 1409, NCC). SUMMARY: Plaintiff sold a Matthews plant to the defendant through the efforts of Montelibano. The defendant paid the purchase price to Montelibano without the knowledge of the plaintiff. The latter filed an action for the payment of the plant. The SC held that Montelibano was not authorized to receive the payment and that the defendant made the payment to him at his own risk. DOCTRINE: 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 the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. SUMMARY: An independent travel agent sold plane tickets to petitioners. However, petitioners were not able to get to their final destination as it turned out that the last leg of their trip was unconfirmed, contrary to the representations made by the travel agent. The Court found no agency relationship among the travel agent, the travel agency and the airline. DOCTRINE: The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. It is a settled rule that persons dealing with an assumed 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. SUMMARY: A travel agency closed down which was started by Tourist World Service and Lina Sevilla. TW claims that Sevilla was connected with a rival firm and since the business was losing anyway closed it down. Sevilla avers that TW cannot on its own just close the agency because it is a joint venture and she must have damages paid to her as recompense. 6
Keeler Electric Co. v. Rodriguez
Yu Eng Cho. v. Pan American
Sevilla v. CA

DOCTRINE: The agency to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. SUMMARY: SISON brought his car to SHELL and Gasoline Service Station for washing greasing, and spraying. Said car was insured against loss or damage by FIREMENS INSURANCE and NEW JERSEY INSURANCE. The car fell from the hydraulic lift resulting in damages. SISON brought the matter to the insurers, which paid for the cost of the cars repair. Subsequently, SISON assigned his right to recover damages to FIREMENS and NEW JERSEY. The complaint for recovery of sum of money was dismissed by CFI. The Court of Appeals, however, adjudged SHELL to be liable because of the act of the gas stations operator. This operator was found to be SHELLs agent. The Supreme Court found SHELL liable because of the negligent act of its agent. DOCTRINE: As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable. SUMMARY: Dela Cruz was employed as a security guard with Northern Theatrical. While on duty, Dela Cruz was attacked by a gatecrasher who took out a bolo and attacked him. In self-defense, Dela Cruz shot the gatecrasher. Dela Cruz was charged with homicide of the gatecrasher, but was acquitted. This is a complaint to recover the legal fees he spent in his criminal case, from Northern Theatrical. The CFI dismissed, and SC upheld. DOCTRINE: The relationship between employer and employee is not that of principal and agent when such employee was not employed to represent the employer in its dealings with third parties, and is merely assigned to perform certain duties or tasks. SUMMARY: Motion for reconsideration of the decision of the SC which declared the management contract between Nielson and Lepanto a contract for lease of services. Lepanto contends that it is a contract of agency, hence its decision to terminate it at will is valid pursuant to its right granted by Art. 1733 of the OCC. The SC maintained its position that the management contract is one of agency. DOCTRINE: Agency is distinguished from lease of work/services in that the basis of former is REPRESENTATION, while in the latter, the basis is EMPLOYMENT. The lessor of services does not represent his employer, while the agent represents his principal. Also, agency is a preparatory contract, as agency does not stop with the agency because the purpose is to enter into other contracts. The most characteristic feature of an agency relationship is the agents power to bring about business relations between his principal and third persons. The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts. SUMMARY: Quiroga and J. Parsons, who subsequently transferred his rights to Parsons Hardware, entered into a contract wherein Parsons became the exclusive distributor of Quiroga beds. The interpretation of the contract entered into by the parties is the subject-matter of the present case. DOCTRINE: The contract is one of sale. The essence of the contract was for Quiroga to supply Parsons Hardware with the beds that it would order upon payment of the price stipulated. 7
Shell v. Firemens Insurance Co.
Dela Cruz v. Northern Theatrical Enterprises
Nielson & Co. v. Lepanto Consolidated
Quiroga v. Parsons Hardware

There was the obligation on the part of Quiroga to supply the beds, and, on the part of Parsons Hardware, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. SUMMARY: Arco filed a complaint seeking reimbursement for alleged overpayments it made to Gonzalo (agent of Starr Piano in USA) for the sale of sound reproducing equipment. SC held that the contract entered into between the parties was one of purchase and sale and not one of agency. As such, Gonzalo as vendor is not bound to reimburse Arco as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor DOCTRINE: Whatever unforeseen events might have taken place unfavorable to Gonzalo, Arco might still legally hold Gonzalo to the prices fixed. This is incompatible with the pretended relation of agency between the parties. In agency, the agent is exempted from all liability in the discharge of his commission provided that he acts in accordance with the instructions received from his principal (Sec. 254, Code of Commerce). Principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (Art. 1729) While the letters state that Gonzalo was to receive 10% commission, this does not necessarily make Gonzalo an agent of Arco. Said provision is only an additional price which Arco bound itself to pay and is not incompatible with the contract of purchase and sale. To hold Gonzalo as an agent of Arco is incompatible with the admitted fact that Gonzalo is the exclusive agent of Starr. It is out of the ordinary for one to be agent of both the vendor and purchaser. Lim v. People SUMMARY: An agreement is reached whereby Lim would sell Ayrosos tobacco, and the proceeds will be given to her (Ayroso) upon sale. Only P240 of the total value of P799.50 was remitted. Ayroso sues for estafa. Lim: the agreement is not of agency but a sale, hence there can be no estafa. SC: agreement is of agency- Lim guilty as charged. DOCTRINE: The determination of whether an agreement is of a sale or of an agency to sell is a question of fact. SUMMARY: PCC was taxed from the sale of sugar. They alleged that there was double taxation because Victorias Milling, for whom they sold the sugar, was already taxed in its capacity as manufacturer and owner of the sugar. The court said that the 2nd tax was for industry or occupation. There was no double taxation, and it ruled that PCC acted as commission merchant, and as broker in its different ways of selling the sugar. DOCTRINE: A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or vendors, but also with the property which is the subject matter of the transaction. 8
Gonzalo Puyat & Sons v. Acro Amusement Co.
Pacific Commercial v. Yatco

The broker, unlike the commission merchant, has no relation with the thing he sells or buys. He is merely an intermediary between the purchaser and the vendor. He acquires neither the possession nor the custody of the things sold. His only office is to bring together the parties to the transaction. SUMMARY: CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty against Ker & Co. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. CTA ruled that that Ker & Co is liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code. DOCTRINE: The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made. SUMMARY: Hanh claims to be the exclusive dealer of BMW in the Philippines so it protested when an exclusive dealership agreement was granted to CMC. Hanh filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. BMW filed a motion to dismiss claiming that Hanh was not its agent but is only a broker. Also,BMW also allege lack of jurisdiction of the RTC claiming to be a foreign corporation not doing business in the Philippines. RTC deferred ruling over the motion to dismiss. CA held that RTC has no jurisdiction and that Hanh is a mere broker and not an agent. SC ruled that Hanh is an agent and reversed CA ruling and remanded the case to the trial court for further proceedings. DOCTRINE: An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. SUMMARY: PAGCOR launched its Foreign Highroller Marketing Program. The Program aims to invite patrons from foreign countries to play at the dollar pit of designated PAGCOR-operated casinos under specified terms and conditions and in accordance with industry practice. The Korean-based ABS Corporation was one of the international groups that availed of the Program. In a letter-agreement (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at five designated gaming tables at the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila. Petitioner Yu Kwan Byung, a Korean national, alleges that he came to the Philippines 4 times to play for high stakes at the Casino Filipino. In the course of the games, he was able to accumulate gambling chips worth $2.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCORs employees or agents, PAGCOR refused to redeem them. Petitioner brought this action against PAGCOR seeking redemption of gambling chips valued at $2.1 million. DOCTRINE: Implied agency is derived from the acts of the principal, from his silence or lack of action, or his 9
Ker v. Lingad
Hahn v. CA
Yun Kwan Byung v. PAGCOR

failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts. On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, authority to represent another. The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it. SUMMARY: Teresita Nacianceno arranged for the sale of national flags by the United Flag Industry to the Department of Education and Culture. Pursuant to this, a contract was drawn up between Nacianceno and Siasat (UFI manager), formalizing an agreement for her to represent United Flag Industry to deal with any entity or organization, private or government in connection with the marketing of our products-flags and all its accessories. After the first delivery of flags, the agency was revoked and Siasat refused to pay commission for the second half of the delivery. Nacianceno filed a claim for the commission, but Siasat alleged that Naciancenos authority does not cover the transaction with the Department, and that that latter had no part in the second half of orders. TC and IAC rule in favor of Nacianceno. SC affirms with modifications (not so material). DOCTRINE: There are several kinds of agents: 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. 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. A special agent is one authorized to do some particular act or to act upon some particular occasion. He acts usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. SUMMARY: Guevarra instituted a civil case for the recovery of a sum of money against Dominion Insurance. He sought to recover sums he had advanced in his capacity as manager. Dominion denied any liability to Guevarra. RTC ruled that Dominion was to pay Guevarra. CA affirmed. SC also ruled that Dominion should pay Guevarra, but not under the law on agency, but the law on obligations and contracts. This is because Guevarra deviated from the instructions of Dominion under which he would have had authority to settler the latters claims, i.e. to 10
Siasat v. IAC
Dominion Insurance v. CA

pay through the revolving fund. Nevertheless, recovery may be made under Art. 1236. DOCTRINE: When a special power of attorney is required for the agent to do a certain act, the agent, in the performance of such act, must comply with the specifications embodied in the special power of attorney giving him authority to do such. For example, here, a special power of attorney was needed for Guevarra to settle the claims of Dominions clients. And for this purpose, there was a memorandum. However, the memorandum stated that Guevarra was to settle the claims using the money in a revolving fund. Guevarra did not comply with this, so e expenses Guevarra incurred in the settlement of the claims of the insured my not be reimbursed from Dominion, at least under the law of agency. SUMMARY: 6 brothers and sisters of Maximo Sta Maria granted him a special power of attorney to mortgage a16 hectare parcel of land in Bataan jointly owned by all of them. In addition, Valeriana Sta. Maria, Maximos sister, granted him authority to borrow money. Maximo obtained 2 sugar crop loans from PNB secured by the jointly owned by them. PNB sued Maximo, his siblings and Associated Insurance and Surety Company for collection of the unpaid balance on sugar crop loans. RTC held them jointly and severally liable to PNB. The siblings appealed. DOCTRINE: A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other obligations contracted by the grantee, in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning such other obligations contracted by the grantee. The authority granted by 6 siblings (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone, with Valeriana who authorized him to borrow money, must answer for said loans and the other siblings only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. They cannot be held personally liable for the payment of such obligations, as erroneously held by the trial court. SUMMARY: Jean M. Poizat is the agent of his wife, Gabriela Andrea de Coster y Roxas. With Poizat's consent and permission as husband, Poizat, acting for his wife as agent, made to BPI a promissory note for P292,000. To secure it, the defendants Jean M. Poizat and J. M. Poizat and Co. executed a chattel mortgage to BPI. For the same purpose of securing the loan, Poizat acknowledged and delivered to BPI a mortgage on certain real property in the City of Manila. The real property was subject to a prior mortgage in favor of La Orden de Dominicos (Dominican Friars), who was impleaded as a defendant in this case. Since the note had long become due and owing, BPI brought action against De Coster in the CFI of the City of Manila. BPI prays for an order of the court to direct the sheriff of the City of Manila to take immediate possession of the property and sell the same. La Orden de Dominicos was impleaded as an additional defendant, who had a claim in its own right against de Coster. 11
PNB v. Sta. Maria
BPI v. De Coster

The CFI determined that BPI should have judgment as prayed for in its complaint, and also that the Dominican Fathers should have judgment for the amount of their claim, and that the property should be sold and the proceeds applied to satisfy the respective judgments. Gabriela Andrea de Coster y Roxas filed a motion where she stated that under the power of attorney, the Poizat had no authority for and on behalf of her to execute a joint and several note or to make her liable as an accommodation maker DOCTRINE: It will be noted that there is no provision in either of them which authorizes or empowers him to sign anything or to do anything which would make his wife liable as a surety for a preexisting debt. It is fundamental rule of construction 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 that all other powers and duties are excluded. SUMMARY: Principals Salas executed a power of attorney conferring authority to Agent Yulo to obtain xxx a loan in any amount which our said brother-in-law may deem necessary. The loan was secured by a real estate mortgage. Upon receipt of the loaned amount from the creditor Hodges, the agent applied almost half of the amount received as payment for his personal debt to the same creditor. Hence, the principals Salas received only a part of the loaned amount. When the principals Salas defaulted, creditor Hodges filed an action for foreclosure of the real estate mortgage. Creditor Hodges insists that the principals Salas should be liable for the entire amount of the loan. One of the issues discussed by the SC is the extent of the liability of the principals Salas given that they didnt receive the entire amount of the loan. In resolving the issue, the SC looked into the interpretation of the authority conferred to the agent through the power of attorney. It ruled that the principals are only liable for the amount which they received, including the interest thereon and the attorneys fees. DOCTRINE: If the terms of the power of attorney to obtain a loan are limited and the agent is authorized only to borrow any amount of money which he deemed necessary, the principals can only be held liable for the amount they actually received from their agent. With respect to a power of attorney of special character, it cannot be interpreted as authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals. If the agent applied part of the funds to pay his personal obligations, he exceeds his authority. (Art. 1714, CC) In a case where there was a power of attorney to borrow any amount of money, the agent exceeded his SUMMARY: Plaintiff owned 800 shares of the capital stock of the Phil. Sugar Estates Devt Co. which were purchased by defendant through a broker who dealt with plaintiffs agent, who was acting gratuitously as agent for the plaintiff not only under a written power special in terms to collect money but also as general agent managing all her business under a parol employment. Such sale was not known to plaintiff, hence the complaint 12
Hodges v. Salas
Strong v. Gutierrez Rupide

to recover said shares. In an interview, plaintiff told Jones not to part with the stock until I got their face value. The SC held that plaintiffs agent had no authority to sell the shares and that, as principal, she is not bound by the sale. DOCTRINE: Art. 1713, CC: An agency stated in general terms only includes acts of administration. In order to compromise, alienate, mortgage, or to execute any other act of strict ownership, an express mandate is required. Such mandate may be oral or written, may stand by itself or may be included in the general power, the one vital thing being that the right to sell shall be express or shall be a necessary ingredient of the power that is expressed. While the statement cannot operate as a grant of power, the words have their effect as evidence of a preexisting power understood between the parties, to which they plainly refer. However, when taken in connection with other facts of the case, they do not sufficiently define the power or reveal the terms of the preexisting power: it could be general or special, or express or merely assumed by plaintiff and Jones to follow as a matter of course, from his general power of administration. But this assumption is prohibited by Art. 1713. The acts of an agent beyond his limited powers are null. 3 qualifications whereby the principal is held bound: 1. Where his acts have contributed to deceive a 3 rd person in good faith; 2. Where the limitations upon the power created by him could not have been known by a 3 rd person; Where he has placed in the hands of the agent instruments signed by him in blank. SUMMARY: The agent, whose power of atty was not registered, sold a parcel of land that the principal acquired after the power of atty was executed. The heirs of the Principal are assailing the validity of the sale and extent of the power of the agent to sell such land. SC ruled that the agent was authorized to sell the land. DOCTRINE: The power is general and authorizes Gabino to sell any kind of realty belonging (pertenezcan) to the principal. The use of the 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 the execution of the power, but also such as the might afterwards have during the time it was in force. A power of attorney not recorded in the 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 that any act performed by the agent by virtue of said with respect to the land is ineffective against a third person who, in good faith, may have acquired a right thereto, it does, however, bind the principal to acknowledge the acts performed by his attorney-in-fact regarding said property. SUMMARY: Chua Bok and Herminigilda Herrera, through her alleged attorney-in-fact Vicenta de Reynes executed a new Contract of Lease. This new contract of lease had a stipulation stating that the Party of the Second Part is given an option to buy the said leased premises if he is qualified and when the Party of the First Part decides to sell the same and that the Party of the second Part is also given the option to renew the Contract 13
Katigbak v. Tai Hung Co.
Chua v. IAC

of Lease upon terms and conditions to be agreed by both parties. This contract was valid for 5 years. DOCTRINE: The lease contract involves the lease of real property for a period of more than one year. The contract was entered into by the agent of the lessor and not the lessor herself. In such a case, the law requires that the agent be armed with a special power of attorney to lease the premises. This is apparent in Article 1878 of the Civil Code. Since Herrera allowed the petitioners to occupy the leased premises after the expiration of the lease contract and under Article 1670 of the Civil Code, a tacit renewal of the lease is deemed to have taken place. However, as held in Dizon vs. Magsaysay, a tacit renewal is limited only to the terms of the contract which are germane to the lessee's right of continued enjoyment of the property and does not extend to alien matters, like the option to buy the leased premises. SUMMARY: Foreclosure proceedings were commenced against Dugo and Gonzales for failing to settle their obligations, secured by a mortgage. A compromise agreement was executed, but Dugo did not sign. Subsequently, a "Tri-Party Agreement" was executed, reiterating the stipulations in the compromise agreement, as well as providing for another person to pay. The obligations, however, were not settled. The mortgage was foreclosed. When Dugo assailed the validity of the compromise agreement against him, the CFI and the SC dismissed his claim. He was held to have ratified the compromise agreement in the subsequent "Tri-Party Agreement." DOCTRINE: While a special power of attorney is required to compromise an interest of another [Article 1878(3)], compromise agreement is a contract. As such, it is governed by the rules on contract. Under Article 1403(1), a contract "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" is unenforceable, but it susceptible to ratification. SUMMARY: The lawyers of the plaintiffs and the defendant corporation entered into a Compromise Agreement to settle the price of the lands in dispute. The agreement was approved by the trial court. Before the result of the agreement came into effect, the corporation informed its lawyer that the Board does not wish to enter into a compromise. The plaintiffs moved for the execution of the agreement. The court ruled that the agreement is not binding to the corp for lack of authority of the lawyers who signed in behalf of the corp. DOCTRINE: Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment. As a general rule, an officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation, except to the extent that such power is given to him (by the Board of Directors) either expressly or by reasonable implication from the circumstances. SUMMARY: U.E. Foerster was formerly a salesman of the petitioner drug company. He also acted as a collector for the company. He was instructed by petitioner to deposit the amount to the companys account at the Iloilo branch of the Chartered Bank of India, Australia, and China. However, he deposited it in his personal account with the Iloilo branch of the Philippine National Bank instead of the companys account in the Chartered Bank. DOCTRINE: Any person taking checks made payable to a corporation, which can act only by agents does so at 14
Dungo v. Lopena
Vicente v. Geraldez
Insular Drug Co. v. National Bank

Austria v. CA his peril, and must abide by the consequences if the agent who indorses the same is without authority. SUMMARY: Abad received a pendant with diamonds from Austria to be sold on commission basis or to be returned on demand (consignment of goods for sale). The pendant was taken from Abad when she fell victim to a robbery. Austria sued for the return of the pendant or its value. Abads defense was one for fortuitous event. The CFI found in favor of Austria. The CA reversed. The SC affirmed saying that the fact of robbery was established and Abad is not guilty of negligence. DOCTRINE: The emphasis of Art. 1174 is on the EVENTS, and not on the agents or factors responsible for them. To avail of the exemption, it is not necessary that the persons responsible for the occurrence should be found or punished. It would only be sufficient that the unforeseeable event (robbery) did take place without any concurrent fault on the debtors part which can be proven by preponderance. To require prior conviction of the culprits would be to demand proof beyond reasonable doubt in a civil case. In order to completely exonerate the debtor for reason of a fortuitous event, such debtor must, in addition to the casus itself, be free of any concurrent or contributory negligence. This is apparent in the language of Art. 1170. SUMMARY: PNB extended a credit to ATACO which was secured by Manila Surety. As additional security to the loan, ATACO constituted PNB as its assignee and attorney-in-fact to collect from the Bureau of Public Works the amount receivables by ATACO. PNB collected from the Bureau for some time but eventually stopped in its collection. PNB found that there was still balance on the debt of ATACO, so the former demanded from ATACO and Manila Surety its payment. TC ordered ATACO and Manila Surety to pay. Upon appeal by Manila Surety, CA released it from its obligation. SC affirmed CA and ruled in favor of Manila Surety. DOCTRINE: An agent is required to act with the care of a good father of a family (Civ. Code, Art. 1887) and becomes liable for the damages which the principal may suffer through his non-performance (Civ. Code, Art. 1884) Domingo v. Domingo SUMMARY: Vicente authorized Gregorio to sell his land for P2 per square meter. A buyer (Oscar de Leon) gifted Gregorio P1,000 to sell to him at a lower price. Gregorio accepted the gift without knowledge of his principal and convinced his principal to sell at only P1.20 per sq. meter. SC: Gregorio forfeits his right to the commission. DOCTRINE: The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency. An agent who takes a secret profit in the nature of a bonus from the vendee, without revealing the same to his principal, is guilty of a breach of his loyalty 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. SUMMARY: Guillermo is the administrator of Melecios property. Melecio died. Guillermo continued to be in possession of Melecios property. Cadastral proceedings took place that ended with Guillermo obtaining legal 15
PNB v. Manila Surety
Severino v. Severino

title to the said property. The Administratrix of Melecios property now goes to court asking that the said land be reverted back to Melecios estate. TC ordered Guillermo to give the land back to Melecios estate. SC affirmed TC. DOCTRINE: The relations of an agent to his principal are fiduciary. Its is an elementary rule that in regard to property forming the subject-matter of the agency, the agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principle of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. SUMMARY: A contract was entered into between Squibb and Green Valley, the latter being awarded nonexclusive distributorship. When Green Valley failed to pay for products bought, Squibb filed a collection case. Green Valley avers that the agreement was an agency, since the goods were by consignment, and hence the action was premature since it has yet to collect from the purchasers. Squibb on the other hand says that it is a contract of sale, and hence the 60-day period in the agreement should be followed. RTC and CA upheld Squibb. SC said that there is no need to categorize the agreement, as Green Valley was liable under both types of contracts, particulary under agency because he sold the items on credit without consent from principal. DOCTRINE: If it is an agency to sell, then it is liable because it sold on credit without authority from the principal, as provided under Art 1905 of the New Civil Code. SUMMARY: Vda. De Tan Toco filed a case against the Municipality of Iloilo to recover the value of a strip of land taken by the Municipality. Tan Ong Sze won and the decision became final and executory. Atty. Soriano was counsel for Vda. De Tan Toco in other cases. Tan Boon Tiong, the attorney-in-fact of Vda. De Tan Toco, assigned the amount of the judgment in the recovery case to Atty. Soriano. Atty. Soriano assigned this to Mauricio Cruz & Co. Inc. Atty. Soriano died. Mauricio Cruz & Co., Inc. was claiming the amount of the judgment in the recovery case, saying that it was in consideration for the professional services of the late Atty. Soriano. The lower court ruled that minus the attorneys lien, the amount of the judgment in the recovery case will be given to Mauricio Cruz & Co., Inc. Vda. De Tan Taco contends that the assignment to Atty. Soriano was only to help her collect the judgment faster, and that such assignment was not in consideration of the lawyers professional fees. The SC upheld the validity of the assignment. DOCTRINE: An agent of attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latters interest, is impliedly empowered to pay lawyers fees for services rendered in the interest of the principal, and may satisfy them by an assignment of a judgment rendered in favor of the principal. When a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principals intention. 16
Green Valley Poultry v. IAC

Del Rosario v. La Badenia SUMMARY: La Badenia began a selling campaign for its products. Celestino Aragon was appointed the general agent of the company to some of the provinces in Luzon. As general agent, he established a depot at Legaspi with Teofila del Rosario de Costa, who was nominally in charge of the depot, and her husband Bernardino Costa, who appeared to have been the actual manager. From the arrangement between Aragon and the Spouses Costa, the business in Legaspi seemed to have been in charge of the spouses over which Aragon, as general agent, kept close supervision. In the final settlement of accounts, Aragon acknowledged that the Spouses had, in their favor, a balance of P1,795.25, However, La Badenia refused to pay the balance, saying that they had been improperly allowed a credit which represented unpaid accounts due the business in Legaspi for some items sold by it. The lower court ruled that no the Spouses Costa were not agents, considering that the goods sold to the delinquent debtors, whose unpaid accounts form the basis of the claim, had already been paid by the said spouses. The SC reversed, saying that the spouses were, in fact, agents, and thus should be paid the balance owed to it by La Badenia. DOCTRINE: An agent may lawfully appoint a substitute if the principal has not prohibited him from doing such. The principal shall be bound by the acts of the sub-agent if it is shown that the agent who appointed such subagent did not act in excess of his authority in doing so. SUMMARY: International Film (lessor) and Lyric Film (lessee) entered into a lease contract for the showing of the film Monte Carlo Madness. Upon expiration of the contract, Gabelman, an agent of International Film, requested that the film be kept in Lyric Films vault since International Film had no vault of its own. Gabelman assumed responsibility for the film. The vault burned down. The Court held that Lyric Film was not liable to International Film for the destruction by fire of the film. DOCTRINE: As a mere submandatory or subagent, Lyric Film was not obliged to fulfill more than the contents of the mandate and to answer for damages caused to the principal by his failure to do so The fact that the film was not insured against fire does not constitute fraud or negligence on the part of Lyric Film. As a subagent, it received no such instruction from its principal and the insurance film does not form a part of the obligation imposed upon it by law. SUMMARY: Mauro was the attorney in fact of his sister and aunt. On his transactions with PNB he initially acquired loans and secured it with the property of the two. When the loans matured, he issued promissory notes novating the mortgage in his own name. PNB now wants to hold the aunt liable for the debts incurred by the nephew since he was her agent. The court held that 1. he signed the debts in his capacity, 2. there was no showing that they were contracted for his principal, 3. the mortgage was novated, hence could no longer be binding on the aunt. DOCTRINE: When an agent negotiates a loan in his personal capacity and executes a promissory note under his own signature, without express authority from his principal, giving as security therefore real estate belonging to the letter, also in his own name and not in the name and representation of the said principal, the obligation do constructed by him is personal and does not bind his aforesaid principal. SUMMARY: PPC file a case for delivery of money against Primateria Zurich, and its agents Primateria Philippines, 17
International Films v. Lyric Film
PNB v. Agueldo
Philippine Products v.

Primateria Baylin, and Crame. Lower court ordered Primateria Zurich to pay the amount claimed and dismissed the case as to the 3 agents. PPC appeal claiming that since Primateria Zurich is a foreign corporation not licensed in the Phils., then its agents must be personally liable. SC held that PPC cannot recover both from principal and agent. Principal Primateria Zurich has already been ordered to pay and this was not appealed. DOCTRINE: A plaintiff could not recover from both the principal and its agents. In case of foreign corporation not licensed in the Philippines where agents can be held personally liable, the liability of the agent is necessarily premised on the inability to sue the principal or non-liability of such principal. Instances where agents can be held personally liable (own note) 1. The principal is a foreign corporation which is not licensed to transact business in the Philippines 2. Agent expressly binds himself 3. Agent exceeds the limits of his authority SUMMARY: The National Power Corporation and National Merchandising Corporation (Namerco), as the representative of the International Commodities Corporation (New York City), executed in Manila a contract for the purchase by the NPC from the New York firm of four thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant. It was stipulated in the contract of sale that the seller would deliver the sulfur at Iligan City within 60 days from notice of the establishment in its favor of a letter of credit and that failure to effect delivery would subject the seller and its surety to the payment of liquidated damages. The New York supplier was not able to deliver the sulfur within the stipulated period due to its inability to secure shipping space. Hence, NPC filed this action for the recovery of liquidated damages. DOCTRINE: 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. SUMMARY: La Compaa Naviera Inc. (LCN) was a new corporation established for the business of marine shipping. Welch, Fairchild & Co (WFC), another corporation, was a stockholder of LCN. LCN applied to the Philippine National Bank (PNB) for a loan of $125,000 to purchase a vessel called Benito Juarez which was in the United States. WCF acted as an agent for LCN for purposes of arranging the sale and transfer of the vessel. The arrangement was for PNB to furnish money in exchange for the delivery by WCF/LCN of the insurance policies taken out on the vessel. A problem arose in the arrangements and so WCF in Manila, wrote a letter on August 8, 1918, to PNB requesting for the money to be paid with the promise of delivering the insurance policies at a later time. PNB agreed and gave money, but WCF and LCN never gave the insurance policies to PNB. On the way to the Phils., the ship sank. WCF collected the insurance proceeds, and applied the money to LCNs loans to it (LCNs loans to WCF, consisting of expenses for arranging for the sale/ transfer/ repairs of the vessel). LCNs loan was left unpaid and it became insolvent, so PNB went after the insurance proceeds collected by WCF. WCF refused since it already considered the insurance proceeds as payment for LCNs loans to it, and it also alleged that as an agent, it could not be personally liable for the contract between their principal (LCN) and the third person (PNB). 18
NPC v. National Merchandising
National Bank v. Welch Fairchild

SC agreed with their argument but said that it does not apply here. WCF is liable to PNB because it interfered with the performance of the principals contractual obligations. DOCTRINE: 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 [an action cannot be maintained directly against the agent (art. 1725, Civ. Code)], it is manifest upon the simplest principles of jurisprudence that one who has intervened in the making of a contract as an 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. SUMMARY: Vargas, husband of Dolores Orozco, executed a Power of Attorney in favor of Enrique Grupe, authorizing the latter: (1) to dispose of all his property, particularly, a house and lot; and (2) to mortgage the house for the purpose of securing the payment of any amount advanced to Dolores. Grupe and Orozco obtained a loan from Gonzalo Tuason. The instrument evidencing the debt was duly recorded in the Registry of Property, and it appears therefrom that Grupe, as attorney in fact for Vargas, received from Tuason a loan of P2,200 and delivered the same to the Orozco; and that to secure its payment, he mortgaged the property of Vargas with Orozcos consent. But Orozco denies having received the loan. DOCTRINE: A debt this 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. (Art. 1727) 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 only a further security in favor of the creditor. The law does not provide that the agent cannot bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. (Art. 1725) SUMMARY: PAL issued a roundtrip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila to Cervantes which provided for an expiry date until March 27 1990. He used the ticket 4 days before the expiry date. Pal agents also confirmed the April 2 flight to Manila but when he was bound to return he was not allowed to board. The PAL personnel concerned marked his ticket: " NOT ACCEPTED DUE EXPIRATION OF VALIDITY." He filed a complaint for damages which was denied by the RTC, CA. SC affirmed DOCTRINE Both employees of PAL had no authority to extend the period of validity. Cervantes knew this from the very start when he called up the Legal Department of appellee in the Philippines before he left for the United States of America. He had first hand knowledge that the ticket in question would expire on March 27and that to secure an extension, he would have to file a written request for extension at the PAL's office in the Philippines Despite this knowledge, he persisted to use the ticket in question. Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according to the Court ofAppeals, acted without authority when they confirmed the flights of the petitioner. Under Article 1989 the acts an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person knows that the agent was 19
Tuason v. Orozco
Cervantes v. CA

acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person is 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. SUMMARY: Smith, Bell and Vicente Sotelo Matti entered int ocontracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel tanks, two expellers, and two electric motors. Smith, Bell sued Sotelo based on four separate causes of action, alleging, among other facts, that it 1) immediately notified Sotelo of 2) the arrival of the goods, and asked instructions from him as to the delivery thereof, and that 3) the Sotelo refused to receive any of them and to pay their price, and that 4) the expellers and the motors were in good condition. Sotelo, and the intervenor, Manila Oil, denied such allegations. Furthermore, they allege as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor. As a counterclaim or set-off, they also allege that, as a consequence of Smith, Bell's delay in making delivery of the goods, which the Manila Oil intended to use in the manufacture of coconut oil, Manila Oil suffered damages on account of the expellers and the motors not having arrived in due time. DOCTRINE: When an agent acts in his own name, the principal shall have no right of action against he persons with whom the agent contracted. SUMMARY: The principal Gallardo executed a special power of attorney in favor of agent Aquino authorizing him to obtain loans and to mortgage. However, the principal later discovered that the properties were mortgaged for the agents personal loans and that the agent ran away and was nowhere to be found. So the principal filed a case to annul the mortgage executed by his agent. Meanwhile, the creditor sought to foreclose the properties of the principal. The principal Gallardo insists that his properties should not be answerable for the loan obtained by the agent because while the body of the documents described Aquino as an agent, the agents signature was written on top of a line that says mortgagor. According to the principal, this shows that the agent executed the mortgage in his personal capacity, and not in representative capacity. The SC agree upheld this argument, saying that the agent acted in his personal capacity. Hence, the principals properties should not be answerable for the loans. DOCTRINE: It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal. 20
Smith Bell v. Sotelo
Rural Bank of Bombon v. CA

Diway: In other words, the agent must sign the document in his capacity as agent. He must sign on a line under which it says In behalf of [principals name], or something to that effect. If he signs on a line under which it says mortgagor or something else without mentioning that he is acting on behalf of someone, then he is acting on his own capacity. It is not enough that the body describes the person signing the document as an agent of a certain person. That he is an agent must be under the line on which he signs. SUMMARY: Plaintiffs, defendants parents, sought to recover from the defendant, certain properties, alleging that the latter acquired said properties in his capacity as plaintiffs administrator with their money and for their benefit. The SC held plaintiffs are entitled to said properties except for Casco No. 2545. DOCTRINE: The question is not in whose favor the document of sale of the launch is executed nor in whose name the same was registered, but with whose money was said launch bought. Rule in Art. 1717, Old CC: 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. 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. In the case of this exception, the agents apparent representation yields to the principals true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the 3rd person; and, consequently, if the obligations belong to the former to, to him alone must also belong the rights arising from the contract. The money with which the launch was bought having come from the plaintiff, the exception is applicable to this case. SUMMARY: The Commission Agent contracted with NFA without disclosing he was acting merely as an agent of SSG. The contract involved the use of SSGs vessel to transport goods of NFA. SSG sued NFA and the agent when NFA paid the agent despite demands from SSG that payment be sent to it directly. DOCTRINE: When things belonging to the principal, in this case, SSG, 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. SUMMARY: Lincallo and Jimena were co-owners of mining claims. Lincallo bound himself to give to Jimena 50% of the proceeds from the claims in exchange for Jimena providing capital. However, Lincallo entered into several contracts wherein he did not disclose to the other contracting parties that he had a co-owner. He also failed to forward to Jimena his rightful share in the proceeds. DOCTRINE: Under Article 1883, the principal may sue the person with whom the agent dealt with in the agents own name when the transaction involves things belonging to the principal. SUMMARY: Authorized to obtain a loan and execute a mortgage by her mother (Cayetano), Tabing borrowed from Far East Bank. In the real estate mortgage, however, Tabing and her husband signed in their individual capacities. The mortgage was eventually foreclosed for failure to pay. After more than 5 years, Spouses Cayetano assailed the foreclosure. The RTC and the CA ruled in their favor, holding that Cayetano was not bound by the mortgage, since Tabing signed in her individual capacity. The SC affirmed their ruling on this matter, but ordered that the complaint be dismissed on the ground that the action is already barred by laches. 21
Sy-Juco v. Sy-Juco
National Food Authority v. IAC
Gold Star Mining v. Lim Jimenez
Far East Bank v. Sps. Cayetano

DOCTRINE: It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only [Philippine Sugar Estates v. Poizat] SUMMARY: Defendant SELLNER, a real estate broker, sold a parcel of land for the price of 17, 175 to MACONDRAY, plaintiff company. The land was flooded by high tides. As a result of this event, MACONDRAY became dissatisfied with the land as it could no longer serve its purpose as a coal-yard. MACONDRAY ordered SELLNER to find another purchaser. At that time it was agreed that the land would be sold for 17, 175 and that SELLNER was to have as his commission for securing a purchaser anything over that amount which he could get. SELLNER found BARRETTO, who was willing to buy the land for 18, 892.50. MACONDRAY prepared a deed of conveyance which it subsequently gave to SELLNER. Also, the Torrens certificate was given to SELLNER. BARRETTO would only give the purchase price to SELLNER after examining the deed of conveyance and the Torrens certificate. MACONDRAY informed SELLNER that unless the purchase price was paid before 5pm of September 2 (Monday), the deal would be off. SELLNER received the check on Wednesday morning. MACONDRAY refused to accept the check and filed the present action, claiming that the sale had been cancelled upon the failure of SELLNER to turn over the purchase price on the afternoon of Monday. The Supreme Court held that MACONDRAY could not rescind the agreement on the sole ground that the price was not paid at the designated hour in the letter. Also, the Court held that MACONDRAY was liable to SELLNER for the amount of the commission which it agreed to pay should he find a purchaser for the land. DOCTRINE: The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the absence of an express contract between the 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 the matter negotiated and completed between the principal and the purchaser directly. A sale of real property entitling a broker to his commissions, was an agreement by the vendor for a certain valuable consideration then or thereafter to be paid, and was complete without conveyance, although the legal title remained in the vendor. The act of the agent in finding a purchaser required time and labor for its completion, and prior to its revocation, the agent had placed the matter in the position that success was practically certain and immediate, and it would be the height of injustice to permit the principal then to withdraw the authority and terminate the agency as against an express provision of the contract, and perchance reap the benefit of the agents labors, without being liable to him for his commissions. This would be to make the contract an unconscionable one, and would offer a premium for fraud by enabling one of the parties to take advantage of his own wrong and secure the labor of the other without remuneration. SUMMARY: Brimo contracted the services of Danon to look for a purchaser of its factor. Danon was able to find a purchaser but Brimo did not proceed with the sale and sold it to another buyer. Danon filed the present suit to 22
Macondray v. Sellner
Danon v. Brim & Co.

recover the reasonable value of the services he rendered. DOCTRINE: 1. A broker is never entitled to commissions for unsuccessful efforts 2. It is a principle that one who has employed a broker can himself sell the property to a purchaser whom he has procured, without any aid from the broker 3. Exception 1: When the seller himself has prevented the sale from consummating. 4. Exception 2: The seller terminated the services of the broker so that he may deal with the person found by the broker himself. SUMMARY: Prats & Company, through its manager Brimo, authorized Mencarini and Rocha to negotiate the sale of the companys building and lot. Rocha was able to secure an offer from Madrigal. Brimo gave a written authority to Rocha to close the sale in the companys behalf provided, among other conditions, that the balance of the purchase price be secured by bank credits. However, the sale failed to materialize. Madrigal wanted to secure the payment with a mortgage on the property but Brimo insisted on the bank credits as security. Rocha now claims his brokers commission, arguing that he secured an oral approval from Brimo that he could strike out the security clause in the written authority. Brimo denies such allegation. The CFI dismissed the complaint. The SC affirmed. Rocha is not entitled to the commission since the sale was not perfected. DOCTRINE: There is no doubt that if The Document, the authorization, correctly states the terms of the proposed sale, Rocha cannot recover. Rocha never succeeded in bringing the minds of the buyer and seller to agreement. In all cases, under all and varying forms of expression, the fundamental and correct doctrine is, that 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. Until that is one, his right to commission does not accrue. It may be conceded that if it were clearly established that Prats & Company (through Brimo) waived the condition that the deferred payments of the purchase price were to be secured by bank credits, plaintiff would be entitled to a recovery. But the oral evidence presented by Rocha is not sufficient to vary the terms written in The Document. SUMMARY: Araneta authorized Inland as its broker in the sale of 9800 shares of stock of Architect Bldg for P1500 per share. Inland informed Araneta of Standfords offer to buy the shares of stocks for P1000. Araneta asked Inland to negotiate for a better price but the agency expired without the sale being consummated. The sale was consummated 1 year and 5 months after the expiration of the agency for P13.5M (more than P1000/share). Now, Inland is claiming from Araneta its commission. Araneta refused on the ground that Inland abandoned the transaction immediately after its agency expired and that it has no participation in the haggling, the consummation of the sale and preparation of documents. TC ruled in favor of Araneta. CA took notice of the lapse of time from expiration of agency to consummation of sale thus ruling for Araneta. SC affirmed CA ruling. DOCTRINE: When the acts of the broker were not the efficient procuring cause in bringing about the sale, he is 23
Rocha v. Prats
Inland Realty v. CA

not entitled to the commission. The period from the expiration of the agency to the consummation of the sale (which is in this case 1 year and 5 months) may be viewed as an evidence of the lack of the agents involvement in the negotiation between the buyer and the seller. SUMMARY: Cunanan and Mijares (the two) were authorized by Infante to find a buyer for her property. Infante would pay them 5% commission. The two eventually found a buyer, Pio Noche. Infante then said that she was no longer interested to push through w the sale and made the two execute a deed of cancellation of authority to find a buyer. Later on, Infante sold the property to Pio Noche. Cunanan and Mijares now demand payment of their commission. LC, CA and SC all ruled that Infante should pay Cunanan and Mijares. DOCTRINE: If the principal changes his mind on selling a certain property after the agent has found a buyer for it, the principal would not be forced to sell his property or give the agent hidscommission. But if the principal cancels the sale in bad faith (in the case at bar because he wanted to get rid of the agents commission), then the principal wouldnt by allowed to escape payment of the commission agreed upon. SUMMARY: This is a petition for certiorari to review the decision of CA, dismissing Prats case for recovery of sum of money. Doronilla was ordered in the RTC to pay Prats P1.380M based on an alleged exclusive option and authority to negotiate the sale of Doronillas property. CA reversed. SC said that there was no evidence that shows that Prats was the efficient procuring cause in bringing about the sale, hence he is not entitled to the commission which was awared by the RTC. However, he was awarded an amount in the interest of equity. DOCTRINE: The principal has the obligation to pay commissions to his agent, subject to the limitations of the stipulations in the agency. Based on equity, however, in this case, it is but proper to give compensation to the efforts of the agent which helped further the principals interest. SUMMARY: DBP was able to sell its properties through the unsolicited help of Uniland in acting as broker. When the sale was consummated, Uniland demanded for its brokers fees. DBP denied its claim so Uniland filed a case. The Court held that there was no agency relationship in this case that will entitle Uniland to brokers fees but awarded P100,000 based purely on equity considerations. DOCTRINE: When a sale is eventually consummated between parties introduced by a middleman who, in the first place, had no authority, express or implied, from the seller to broker the transaction, the interloper is not entitled to a commission from a contract of agency, but the Court may grant it a sum for equity considerations. SUMMARY: Vicente authorized Gregorio to sell his land for P2 per square meter. A buyer (Oscar de Leon) gifted Gregorio P1,000 to sell to him at a lower price. Gregorio accepted the gift without knowledge of his principal and convinced his principal to sell at only P1.20 per sq. meter. SC: Obligation of principal to pay commissions is extinguished. DOCTRINE: The obligation of the principal to pay commissions to the agent is extinguished when the agent is unfaithful. When the agent was already paid by the principal while ignorant of the fact that the former has been unfaithful, the principal may recover back the commission. The principal is not liable to pay commissions to a sub-agent, as when the sub-agency contract was with the 24
Infante v. Cunanan
Prats v. CA
Uniland Resources v. DBP
Domingo v. Domingo (supra)

Gonzalez v. Haberes agent alone and not with the principal, who was not even aware of such sub-agency. SUMMARY: The SC ruled that Gomez, husband of Gonzalez, is guilty of misrepresentation in the contract of sale with Haberer. However, it also held Gonzalez liable because Gomez acted as her agent in the transaction. DOCTRINE: It is sufficient to say that the latter in negotiating for the sale of the land acted as the agent and representative of the other plaintiff, his wife; having accepted the benefit of the representations of her agent she cannot, of course, escape liability for them. SUMMARY: Vargas, husband of Dolores Orozco, executed a Power of Attorney in favor of Enrique Grupe, authorizing the latter: (1) to dispose of all his property, particularly, a house and lot; and (2) to mortgage the house for the purpose of securing the payment of any amount advanced to Dolores. Grupe and Orozco obtained a loan from Gonzalo Tuason. The instrument evidencing the debt was duly recorded in the Registry of Property, and it appears therefrom that Grupe, as attorney in fact for Vargas, received from Tuason a loan of P2,200 and delivered the same to the Orozco; and that to secure its payment, he mortgaged the property of Vargas with Orozcos consent. But Orozco denies having received the loan. DOCTRINE: A debt this 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. (Art. 1727) 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 only a further security in favor of the creditor. The law does not provide that the agent cannot bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. (Art. 1725) SUMMARY: Jose Santa Marina (principal) was then the owner and proprietor of La Insular Cigar and Cigarette Factory, which was in the business of buying leaf tobacco and other materials. Antonio Barretto (agent) was an agent of the said business. According to Barretto, in violation of their contract, he was dismissed by Santa Marina without justifiable cause, and is now claiming damages and his unpaid salary. Santa Marina, on the other hand, claimed that he revoked the power conferred upon Barretto for just cause. Therefore, he claims that it was within his power to appoint another agent to replace Barretto. The SC agreed with Santa Marina, though it ordered him to pay Barretto the unpaid portion of his salary. The SC also denied Barrettos claim for damages. DOCTRINE: The time during which the agent may hold his position is indefinite or undetermined, when no period has been fixed in his commission and so long as the confidence reposed in him by the principal exists; but as soon as this confidence disappears the principal has a right to revoke the power he conferred upon the agent, especially when the latter has resigned his position for good reasons. From the mere fact that the principal no longer had confidence in the agent, he is entitled to withdraw it and to revoke the power he conferred upon the latter, even before the expiration of the period of the engagement or of the agreement made between them. SUMMARY: Sps. Diolosa, owners of Villa Alegre Subdivision, entered into an agreement with Baterna, constituting him as their exclusive sales agents until all the properties in the subdivision has been disposed of. Subsequently, the Sps. Diolosa terminated the agreement for the reason that they wanted to reserve the 25
Tuason v. Orosco (supra)
Barreto v. Sta. Marina
Dialosa v. CA

remaining lots for their grandchildren. The Court held that the intention of the Sps. Diolosa cannot prevail over the clear terms of the agreement. The Sps. Diolosa were held liable for damages for breach of contract. DOCTRINE: The agency agreement is a valid contract. It may be rescinded only on grounds specified in Art 1381 and 1382 of the Civil Code. ART. 1381. The following contracts are rescissible: (1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission. ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. SUMMARY: New Manila got assigned as the agent of the contractor to collect the sums payable to the latter in satisfaction of the debt of the contractor incurred for materials used in the construction of two school houses made in the order of the Republic. Despite said assignment, the sums were still paid to the contractor and the debt to New Manila was left unpaid. New Manila then seeks to collect said sums from respondent Republic. The court however said that the remedy of New Manila was not to collect the sum of money from the Republic but to intervene in the case of the contractor vs. republic as its now in the position of an unpaid supplier based on Public Act 3688. DOCTRINE: Under the facts alleged in the complaint, the powers of attorney in question made plaintiff the contractor's agent in the collection of whatever amounts may be due the contractor from the defendant. And since it is also alleged that, after the execution of the powers of attorney, the contractor (principal) demanded and collected from defendant the money the collection of which he entrusted to plaintiff, the agency apparently has already been revoked. (Articles 1920 and 1924, new Civil Code.) But even supposing that agency is irrevocable, still their alleged irrevocability cannot affect defendant who is not a party thereto. They are obligatory only on the principal who executed the agency. SUMMARY: Plaintiff Dy Buncio and Co. Inc. is the judgment creditor of Ong Guan Can. It seeks to enforce the judgment against the rice-mill and camarin owned by Ong Guan Can. Defendants Juan Tong and Pua Giok Eng objected to the execution, claiming that Juan Tong is already the owner of the said property by virtue of a deed 26
New Manila v. Republic
Dy Buncio v. Ong Guan

of sale executed in their favor by Ong Guan Can Jr. as agent of Ong Guan Can. DOCTRINE: The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent. SUMMARY: Narciso Manzano gave his son Angel a general power of attorney. He also subsequently gave a power of attorney of his wife. Pursuant to this GPA, Angel sold Narcisos interest on half of the San Nicolas steamer to Juan Garcia. Angel also executed a contract acquiring a 12k loan from Garcia secured by a mortgage. Narciso died. Garcia claimed the money, but the heirs of Narciso deny the legal efficacy of the mortgage, and as counter-claim, question Angels authority to sell the interest in the boat to Juan Garcia. They claim that the authority had been revoked, and that if it werent, the authority given did not cover the power to sell the boat. TC ruled that Angels authority was not revoked and that the GPA included the power to sell the boat. SC agreed. DOCTRINE: Article 1735 of the Civil code is as follows: 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. In order to prove revocation, it is necessary to establish that the first agent had knowledge of the contracting of the second agent. SUMMARY: Yangco informed Rallos that Collantes was his agent so Rallos transacted with Collantes, acting as agent, regarding the business of buying and selling of leaf tobacco and other native product. Apparently, prior to the last delivery of tobacco, Yangco had already terminated his agency relation with Collantes, unknown to Rallos. No notice of any kind was given by Yangco to Rallos of the termination of the agency relationship. Yangco refused to pay the sum demanded by Rallos upon the ground that at the time said tobacco was received and sold by Collantes he was acting personally and not as his agent. SC held that Yangco was liable. DOCTRINE: Having given special notice regarding the appointment of an agent to third persons, it was then the duty of the principal to give due and timely notice to such third persons regarding the termination of the agency. Failing to do so, principal will be held liable to third parties for whatever goods may have been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of such relationship. SUMMARY: La Compania General de Tabaccos de Filipinas commenced an action against Diaba in the CFI of Leyte for the recovery of the sum of P442, for the payment of goods sold and delivered through General de Tabaccos' agent (Guitierrez) to the latter. Diaba admits that he had purchased from the agent Gutierrez goods, wares, and merchandise, amounting to the sum of P692, but that he had sold to the same agent abaca and other effects, leaving a balance due him (Diaba) of P616.80.1aw The company argues that it is not bound by the transactions entered into by said agent, namely the buying of 27
Garcia v. De Manzano
Rallos v. Yangco
Compania General de Tobacos v. Diaba

Abaca from Diaba, because it had suspended its agent Gutierrez; and that Gutierrez had no further authority to represent the company. DOCTRINE: [Rephrased] For a suspension of an agent's authority to be binding against the third person with whom such agent contracted, such suspension of authority must be made known to the third person. Otherwise, the third person has a perfect right to believe, until otherwise informed, that the agent of the company was still representing the company in said transactions. SUMMARY: The debtor del Rosario mortgaged a parcel of land to his creditor Abad and made him an agent. The SPOA provides that the agency is coupled with an interest and thus irrevocable, without specifying in what such interest consists of. When the principal del Rosario died, the agent Abad sold the land to his son. The heirs of the principal brought this suit asking for reconveyance of the land. The SC first characterized the nature of the agency by looking at the SPOA between the parties and said that while the SPOA explicitly states that the agency is coupled with an interest, such statement is not sufficient to clothe the agency with interest. In what such interest consists must be stated. Hence, the agency in this case cannot be said to be one coupled with an interest and thus, terminated upon the principals death. The agency having terminated before the agents disposition of the land, the sale made to the buyer is invalid. Even assuming that the agency is one with interest, the power of attorney executed a year after the issuance of the homestead patent is in violation of the prohibition against alienation of land acquired by homestead for a period of 5 years. DOCTRINE: A mere statement in the power of attorney that the agency is coupled with an interest is not enough to make it one coupled with an interest and hence irrevocable even after the death of the principal. In what does such interest consist must be stated in the power of attorney. The fact that the principal had mortgaged something to the agent on the same day that the SPOA was executed is not such an interest as could render an agency irrevocable. SUMMARY: Claparols was running a nail factory, and due to losses, he was compelled to look for a financier, and was introduced to Coleongco. Claparols, pursuant to the contract they executed wherein Coleongco was to finance the importation of nail wire, executed a special power of attorney in favor of the latter to open and negotiate letters of credit, to sign contracts, etc. Thereafter, Coleongco became the assistant manager of the factory and took over its business transactions. Claparols was then surprised when he was served an alias writ of execution to enforce a judgment obtained against him by PNB (with which Claparols had loans and mortgage contracts). He eventually learned that this was caused by the derogatory information obtained by PNB from Coleongco thru letters. Claparols also learned Coleongcos plans of acquiring the factory without the formers knowledge. Because of the Coleongcos disloyalty, Claparols revoked the power of attorney. Coleongco filed a suit against Claparols charging breach of contract. The CFI and SC ruled in favor of Claparols. DOCTRINE: A power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure, but coupled with interest or not, the authority certainly can be revoked for a just 28
Del Rosario v. Abad
Caleongco v. Claparols

cause, such as when the attorney-in-fact betrays the interest of the principal. The irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence or betrayal of trust by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. SUMMARY: The agent managed the principals properties and presented to the principal afinal account of his administration. Misunderstanding between them incurred as to the alleged debt of the principal to the agent. The agent sued his principal, won the case, and acquired the right to usufruct of the principals real property. The principals right of redemption of such right to usufruct was sold by the principal to a 3 rd person and later bought back by said principal. A creditor of the principal levied on such right of redemption and after acquiring such right, such creditor sold it to the agent. Principal argues that such sale of the creditor to the agent is not valid as the agency is still in force. DOCTRINE: 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. SUMMARY: Labitoria mortgaged her property for her indebtedness to PNB. The mortgage authorized PNB to sell the property in case of failure to comply with the obligation. She died. An administrator for her estate was appointed. PNB sought to foreclose the mortgage. The lower court denied. The SC ruled that the power to foreclose subsisted but must be temporarily suspended until the settlement of the estate of the deceased. DOCTRINE: The power of sale, which is couple with an interest, survives the death of the grantor. SUMMARY: The principal CONCEPCION RAMOS DIPUSOY executed before a notary public two documents, appointing BENIGNO RAMOS her true and lawful attorney-in-fact to collect any amount due from the Philippine War Damage Commission. The second document stated that one-half of the amount to be collected shall be given to BENIGNO CAOIBES. One year before the principal died, the principal filed a claim with the Commission. It was granted several days after the death of the principal. BENIGNO presented the two public documents which authorized him to collect and which entitled him to one-half of the amount. This was all done AFTER the death of the principal. The administratrix of the estate of the principal filed a motion praying that BENIGNO be ordered to return the full amount of the check. BENIGNO said that he should only return one-half of the amount, by virtue of the second document. The Supreme Court held that BENIGNO should return the full amount. DOCTRINE: Under Article 1711 of the old Civil Code (which was in force at the time of the transaction), the contract of agency is presumed to be gratuitous, unless the agent is a professional agent. There is no proof that Caoibes was such. Furthermore, according to Article 1732 of said Code, an agency is terminated, among other causes, by the death of the principal or of the agent. When Caoibes made use of the power of attorney, his principal, Concepcion was already dead. SUMMARY: Luy Kim Guan is the attorney-in-fact of the deceased Luis Herrera, father of the petitioner Natividad Herrera. According to petitioner Natividad Herrera, Luis Herrera died in the latter part of 1931 or the early part of 1932, based on the letter of Candi. However, Luy Kim Guan (as attorney-in-fact of Luis Herrera) sold his 29
Valera v. Velasco
Pasno v. Ravina
Ramon v. Caoibes
Herrerra v. Luy Kim Guan

properties in 1937 and 1939 (after the alleged death of Herrera). DOCTRINE: The death of the principal does not render the act of an agent unenforceable, where the latter had no knowledge of such extinguishment of the agency. SUMMARY: This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of Concepcion went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, and nullified the sale with respect to the pro indiviso share of Concepcion is concerned, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint. SC reversed CA ruling and reinstate that of the trial court. The agency was extinguished by operation of law by the death of the principal and this case does not fall under the exceptions. DOCTRINE: General Rule: Agency is extinguished by the death of the principal Exceptions: ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. 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. Requisites: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable.
Rallos v. Felix Go Chan (supra)
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Danon v. Brim & Co.

AGENCY // Prof. D. Sanchez // Block B 2015

AGENCY // Prof. D. Sanchez // Block B 2015

Uniland Resources v. DBP

Domingo v. Domingo (supra)

AGENCY // Prof. D. Sanchez // Block B 2015

Tuason v. Orosco (supra)

Barreto v. Sta. Marina

AGENCY // Prof. D. Sanchez // Block B 2015

New Manila v. Republic

Dy Buncio v. Ong Guan

AGENCY // Prof. D. Sanchez // Block B 2015