1

RALLOS v FELIX GO CHAN & REALTY COPR., Munoz-Palma

Plaintiff: Ramon Rallos
Defendant: Felix Go Chan & Sons Realty Corporation
Facts
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land known as Lot
No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu.
They executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to
sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia
to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a complaint praying (1)
that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be unenforceable, and said share
be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty
Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate of
Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment
of costs of suit.

CFI: *Plaintiffs Complaint+
Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate of Concepcion in the
proportion of share each pro-indiviso and the payment of attorneys fees and cost of litigation

[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during pendency of case)]
Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay defendant the price
of the share of the land (P5,343.45) plus attorneys fees

[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of the Estate of Gerundia]
Dismissed without prejudice to filing either a complaint against the regular administrator of the Estate of
Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter

CA: CFI Decision reversed, upheld the sale of Concepcions share.
MR: denied.
Issues:
1) WON sale was valid although it was executed after the death of the principal, Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the authority of the agent
3) WON agents knowledge of the principals death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of death in the title (thus
there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated parallel to that of an
innocent purchaser for a value of a land.
Held/Ratio:

(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art 1317 and 1403 )- one party, caged the principal
(mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third
persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal

Essential Elements:
(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.

2

Extinguishment
o Generally: among others , By the death, civil interdiction, insanity or insolvency of the principal or of the
agent
- death of the principal effects instantaneous and absolute revocation of the authority of the agent
o Exceptions:
(Art. 1930) 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) agent acted without knowledge of the pricipals death and that the third person was in good
faith (both these reqs should be present)
IN THE CASE AT BAR:
1) Sale was void.
No one may contract in the name of another without being authorized by the latter, or unless he has by
law a right to represent him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon Concolacions death
2) The sale did not fall under the exceptions to the general rule that death ipso jure extinguishes the
authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his pleadings) of principal Concepcions death
For Art 1931 to apply, both requirements must be present

3) Yes, agents knowledge of principals death is material.
Respondent asserts that: there is no provision in the Code which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with respect to third persons who may have contracted with
him in good faith and without knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general rule enunciated in Article 1919 that the
death of the principal extinguishes the agency. Article 1931, being an exception to the general rule, is to be strictly
construed.

4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or others of the death of
the principal.
If revocation was by the act of the principal: a general power which does not specify the persons to
whom represents' on should be made, it is the general opinion that all acts, executed with third persons who
contracted in good faith, Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by operation of law, is
instantaneous without the need for notification to the parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no room for an interpretation
contrary to its tenor, should apply, the law provides that death of the principal ipso jure extinguishes the authority
of the agent to sell rendering the sale to a third person in good faith unenforceable unless at the agent had no
knowledge of the principals death at that time (exception under Art. 1931)
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES v. COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED
G.R. No. 76933 May 29, 1991
PADILLA, J.:
Facts:
American Airlines, Inc. (American Air), an air carrier offering passenger and air cargo transportation in the
Philippines, and Orient Air Services and Hotel Representatives (Orient Air), entered into a General Sales Agency
Agreement (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. In the agreement, Orient Air shall remit in United States
dollars to American the ticket stock or exchange orders, less commissions to which Orient Air Services is entitled,
not less frequently than semi-monthly. On the other hand, American will pay Orient Air Services commission on
transportation sold by Orient Air Services or its sub-agents. Thereafter, American alleged that Orient Air had
reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the
months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection
of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in accordance with
paragraph 13 which authorize the termination of the thereof in case Orient Air is unable to transfer to the United
States the funds payable by Orient Air Services to American. American Air instituted suit against Orient Air with the
Court of First Instance of Manila for Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order averring the aforesaid basis for the termination of the Agreement as well as
therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were
available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff."
3

Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged
unremitted amounts, contending that after application thereof to the commissions due it under the Agreement,
plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended
that the actions taken by American Air in the course of terminating the Agreement as well as the termination itself
were untenable. The trial court ruled in its favor which decision was affirmed with modification by Court of Appeals.
It held the termination made by the latter as affecting the GSA agreement illegal and improper and ordered the
plaintiff to reinstate defendant as its general sales agent for passenger transportation in the Philippines in
accordance with said GSA agreement.
Issue:Whether the Court of Appeals erred in ordering the reinstatement of the defendant as its general sales agent
for passenger transportation in the Philippines in accordance with said GSA Agreement
Held: Yes. By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to
extend its personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law
as a contract whereby "a person binds himself to render some service or to do something in representation or on
behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . 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.
The Agreement itself between the parties states that "either party may terminate the Agreement without cause by
giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, set aside the
portion of the ruling of the respondent appellate court reinstating Orient Air as general sales agent of American Air.

UY VCOURT OF APPEALS
G.R. No. 120465, 09 September 1999
WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON.ROBERT BALAO and NATIONAL HOUSING
AUTHORITY, respondents.
FACTS:
Petitioners Uy and Roxas are agents authorized to sell eight parcels of land bythe owners thereof. By virtue of such
authority, petitioners offered to sell thelands located in Benguet to respondent NHA to be utilized and developed as
ahousing project. On February 14, 1989, the NHA Board approved theacquisition of said lands, at the cost of
P23.87M, pursuant to which the partiesexecuted a series of Deeds of Absolute Sale covering the subject lands. Of
theeight parcels, however, only five were paid for by the NHA because of thereport it received from the Land
Geosciences Bureau of the DENR that theremaining area is located at an active landslide area and therefore, not
suitablefor development into a housing project.In 1991, the NHA cancelled the sale of the 3 parcels of land and
subsequentlyoffered the amount of P1.225 million to the landowners as daos perjuicios. On9 March 1992,
petitioners filed before the QC RTC a Complaint for Damages.The RTC rendered a decision declaring the cancellation
of the contract to bejustified. The trial court nevertheless awarded damages to plaintiffs in the sameamount offered
by NHA to petitioners as damages. Upon appeal by petitioners,the CA held that since there was "sufficient
justifiable basis" in cancelling thesale, "it saw no reason" for the award of damages. Hence, this petition.
ISSUES:
(1) Was there a legal basis for the rescission of the sale of the 3 parcels of land?And granting arguendo that NHA has
legal basis to rescind, does the petitionerhave the right to claim for damages?(2) [Irrelevant] Were the petitioners
allowed to lodge a complaint as agents?
HELD:
(1) There was no rescission per se. What is involved is a
cancellation basedon the negation of the cause of the contract.(2) [Irrelevant] No. Petitioners are not parties, heirs,
assignees, or beneficiariesof a stipulation pour autrui under the contracts of sale, they do not, undersubstantive
law, possess the right they seek to enforce.
RATIO:
(1) Petitioners confuse the cancellation of the contract by the NHA as arescission of the contract under Art. 1191.
The right of rescission or, moreaccurately, resolution, is predicated on a breach of faith by the other party.NHA did
not have the right to rescind for the other parties to the contract, thevendors, did not commit any breach of their
obligation. The cancellation wasbased on the negation of the cause arising from the realization that the lands,which
were the object of the sale, were not suitable for housing. Cause, whichis the essential reason for the contract,
should be distinguished from motive,which is the particular reason of a party which does not affect the other
party.In a contract of sale of a piece of land, such as in this case, the cause of thevendor (petitioners' principals) in
entering into the contract is to obtain theprice. For the vendee, NHA, it is the acquisition of the land. The motive of
theNHA, on the other hand, is to use said lands for housing.Ordinarily, a party's motives for entering into the
contract do not affect thecontract. However,
when the motive predetermines the cause, the motivemay be regarded as the cause
. In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the
lands not suitable for housing.
In other words, the quality of the land was an impliedcondition for the NHA to enter into the contract.
On
NHAs part
, therefore,the motive was the cause for its being a party to the sale. The findings of theLand Geosciences Bureau
were sufficient for the cancellation of the saleNHA was justified in canceling the contract. The realization of the
mistake asregards the quality of the land resulted in the negation of the motive/causethus rendering the contract
inexistent. Article 1318 of the Civil Codeenumerates the essential requisites of a contract: (1) Consent of the parties;
(2)Subject matter; and (3) Cause of the obligation which is established. Therefore,assuming that petitioners are
parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages.
B. H. MACKE ET AL V JOSE CAMPS
4


FACTS:
* B. H. Macke and W.H. Chandler, partners doing business under thee firm name of Macke, Chandler And
Company, allege that during the months of February and March 1905, they sold to Jose Camps and delivered at his
place of business, known as the :Washington Caf, various bills of goods amounting to P351.50; that Camps has
only paid on account of said goods the sum of P174; that there is still due them on account of said goods the sum of
P177.50
* Plaintiffs made demand for the payment from defendant and that the latter failed and refused to pay
the said balance or any part of it
* Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented himself
to be the agent of Jose Camps, he shipped the said goods to the defendant at the Washington Caf; that Flores
(agent) later acknowledged the receipt of the said goods and made various payments thereon amounting in all to
P174; that believes that Flores is still the agent of Camps; and that when he went to the Washington Caf for the
purpose of collecting his bill he found Flores, in the absence of Camps, apparently in charge of the business and
claiming to be the business manager of Camps, said business being that of a hotel with a bar and restaurant
annexed.
* A written contract was introduced as evidence, from which it appears that one Galmes, the former of
Washington Caf subrented the building wherein the business was conducted, to Camps for 1 year for the
purpose of carrying on that business, Camps obligating himself not to sublet or subrent the building or the business
without the consent of the said Galmes. *This contract was signed by Camps and the name of Ricardo Flores as
a witness and attached thereon is an inventory of the furniture and fittings which also is signed by Camps with the
word sublessee below the name, and at the foot of this inventory the word received followed by the name
Ricardo Flores with the words managing agent immediately following his name.
ISSUE: W/N Ricardol Flores was the agent of Camps
Ruling: Yes
Evidence is sufficient to sustain a finding that Flores is the agent of Camps in the management of the bar
of the Washington Caf with authority to bind Camps, his principal, for the payment of the goods
The contract sufficiently establishes the fact that Camps was the owner of the business and of the bar,
and the title of managing agent attached to the signature of Flores which appears on that contract, together with
the fact that at the time the purchases were made, Flores was apparently in charge of the business performing the
duties usually intrusted to a managing agent leave little room for doubt that he was there as the authorized agent
of Camps.
Agency by Estoppel --- One who clothes another with 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 persons dealing with such person in good faith and in the honest belief that he is what he appears
to be.
Estopple---- 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 of such declaration, act, or omission be permitted to falsify; and unless the contrary appears, the
authority of the agent must be presumed to include all the necessary and usual means of carrying his agency into
effect.

PRUDENTIAL BANK VS CA
The liability of the principal for the acts of the agent is not even debatable. Law and jurisprudence are clearly and
absolutely against the petitioner.
Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself." This rule is affirmed by the Civil Code thus:
Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope
of his authority.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to act as though he had full powers.
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the
agent. The agent's apparent representation yields to the principal's true representation and the contract is
considered as entered into between the principal and the third person. 18
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. (9 c.q.s. p. 417) A bank
holding out its officers and agent as worthy of confidence will not be permitted to profit by the frauds they may
thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its
responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)
Application of these principles in especially necessary because banks have a fiduciary relationship with the public
and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded
where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to
their depositors.
It would appear from the facts established in the case before us that the petitioner was less than eager to present
Quimbo at the trial or even to establish her liability although it made the initial effort which it did not pursue
to hold her answerable in the third-party complaint. What ever happened to her does not appear in the record. Her
absence from the proceedings feeds the suspicion of her possible misdeed, which the bank seems to have
studiously ignored by its insistence that the missing money had been actually withdrawn by Cruz. By such
5

insistence, the bank is absolving not only itself but also, in effect and by extension, the disappeared Quimbo who
apparently has much to explain.

We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the obligation she was
claiming against it. It was obvious that an irregularity had been committed by the bank's personnel, but instead of
repairing the injury to Cruz by immediately restoring her money to her, it sought to gloss over the anomaly in its
own operations.
Eduardo Litonjua, Jr. and Antonio Litonjua v. Eternit Corp. (now Eterton Multi-Resources Corp.),
Eteroutremer, S.A. and Far East Bank & Trust Co.
G.R. No. 144805 June 8, 2006
Callejo, Sr.

FACTS:
Eternit Corp. is engaged in the manufacture of roofing materials and pipe products. Its manufacturing
operations were conducted on 8 parcels of land located in Mandaluyong City, covered by TCTs with Far East Bank &
Trust Company, as trustee. 90% of the shares of stocks of Eternit Corp. were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and registered under the laws of Belgium. Jack Glanville, an Australian
citizen, was the General Manager and President of Eternit Corp., while Claude Frederick Delsaux was the Regional
Director for Asia of ESAC.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and
wanted to stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member
of Eternit Corp.s Board of Directors, to dispose of the eight parcels of land. Adams engaged the services of
realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers.
Marquez offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua & Company, Inc. Marquez declared that he was authorized to sell the properties for P27,000,000.00 and
that the terms of the sale were subject to negotiation.
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and
his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez
apprised Glanville of the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the latter did not
respond. Glanville telexed Delsaux in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua
siblings. Delsaux sent a telex to Glanville stating that, based on the Belgian/Swiss decision, the final offer was
US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville, and confirmed
that the Litonjua siblings had accepted the counter-proposal of Delsaux. He also stated that the Litonjua siblings
would confirm full payment within 90 days after execution and preparation of all documents of sale, together with
the necessary governmental clearances.
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust
Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.
With the assumption of Corazon Aquino as President of RP, the political situation in the Philippines had
improved. Marquez received a telephone call from Glanville, advising that the sale would no longer proceed.
Glanville followed it up with a letter, confirming that he had been instructed by his principal to inform Marquez that
the decision has been taken at a Board Meeting not to sell the properties on which Eternit Corp. is situated.
When apprised of this development, the Litonjuas, through counsel, wrote Eternit Corp., demanding
payment for damages they had suffered on account of the aborted sale. EC, however, rejected their demand.

ISSUE: WON Marquez, Glanville, and Delsaux were authorized by respondent Eternit Corp. to act as its agents
relative to the sale of the properties of Eternit Corp., and if so, what are the boundaries of their authority as agents

HELD: No.
A corporation is a juridical person separate and distinct from its members or stockholders and is not
affected by the personal rights, obligations and transactions of the latter. It may act only through its board of
directors or, when authorized either by its by-laws or by its board resolution, through its officers or agents in the
normal course of business. The general principles of agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law.
The property of a corporation is not the property of the stockholders or members, and as such, may not
be sold without express authority from the board of directors. Physical acts, like the offering of the properties of the
corporation for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the
execution of the deed of sale covering such property, can be performed by the corporation only by officers or
agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of directors. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs
of the corporation, but not in the course of, or connected with, the performance of authorized duties of such
director, are not binding on the corporation.
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 through its officers and agents as authorized by a board resolution or by its
by-laws.30 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 person
purporting to be an agent thereof but without written authority from the corporation is null and void.
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
6

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.
The Litonjuas failed to adduce in evidence any resolution of the Board of Directors of Eternit Corp.
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the 8
parcels of land owned by Eternit Corp. including the improvements thereon. The bare fact that Delsaux may have
been authorized to sell to Ruperto Tan the shares of stock of respondent ESAC cannot be used as basis for Litonjuas
claim that he had likewise been authorized by Eternit Corp. to sell the parcels of land.
While Glanville was the President and General Manager of Eternit Corp., and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly authorized
agents of Eternit Corp.; a board resolution evincing the grant of such authority is needed to bind Eternit Corp. to any
agreement regarding the sale of the subject properties. Such board resolution is not a mere formality but is a
condition sine qua non to bind Eternit Corp.
Requisites of an agency by estoppels: (1) the principal manifested a representation of the agents authority or
knowingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed his position to his detriment.
PHILIPPINE REALTY AND HOLDINGS CORPORATION (PRHC)
vs. LEY CONSTRUCTION AND DEVELOPMENT (LCDC) CORPORATION
G. R. No. 165548 & G. R. No. 167879 (13 June 2011)
FACTS Project contractor LCDC and project owner PRHC (with Engr. Dennis Abcede as its project construction
manager, and Joselito Santos, its general manager and vice-president for operations) entered into several
construction projects, including the Tektite Building.
LCDC president, Manuel Ley, met with Abcede to discuss the unanticipated delay in construction due to sudden,
unexpected hike in the prices of cement and other construction materials. Abcede asked LCDC to advance the
amount necessary to complete construction. Ley acceded on condition that PRHC would allow escalation of contract
price and disregard the prohibition contained in the agreements. The PRHC board of directors turned down the
request, but it gave no notice to LCDC of said denial. Instead, Abcede signed a letter and sent it to LCDC, asking for
its conformity, to the effect that should it infuse P36M into the project, a contract price escalation for the same
amount would be granted in LCDCs favor. However, the letter-agreement revealed no signature above PRHCs
name. Notwithstanding the absence of said signature, LCDC proceeded with the construction of Tektite Building. It
infused amounts totalling P38.2M, and religiously submitted to PRHC monthly reports on the same. But PRHC never
replied to any of these monthly reports.
When Ley inquired from Abcede and Santos why its requests for extension of time were not granted in full, the two
assured him that LCDC would not be penalized with damages because the fact that it was working hard on the
Tektite Building project was known to PRHC. However, when 96.43% of Tektite Building had been completed and
LCDC requested the release of the P36M escalation price, PRHC did not reply. After the construction of the building
was completed, it conveyed its decision to set off, in the form of liquidated damages, its claim to the supposed
LCDCs liability.

LCDCs alleged liability included the corrective works to redo or repair the defective waterproofing in one of the
projects. LCDC denied the same by alleging that PRHC, as the principal, forced LCDC, as the agent, into hiring
Vulchem Corp., as sub-agent or substitute, for the waterproofing works. It argued that under Art. 1892 of the Civil
Code , an agent is responsible for the acts of the substitute if he was given the power to appoint a substitute.
Conversely, if it is the principal and not the agent who appointed the substitute, the agent bears no responsibility
for the acts of the sub-agent.

LCDC filed a Complaint before the RTC in Makati City which ruled in its favor. PRHC filed a Notice of Appeal. The
Court of Appeals (CA) reversed RTCs amended Decision.
ISSUES (related to Business Organization I, particularly on the topic of Agency)
1. Whether or not the signed letter of Abcede, without the signature above PRHCs name, could bind PRHC to the
escalation agreement with LCDC.
2. Whether or not LCDC correctly applied Article 1892 on the principles of agency to the case at bar.
HELD 1. SC ruled that the signature of Abcede, as PRHC construction manager, on the letter-agreement (contract) is
sufficient to bind PRHC because it indicated authority to make such representation on behalf of PRHC. SC further
agreed with LCDC that the actions of Abcede and Santos, assuming they were beyond the authority given to them
by PRHC which they were representing, still bound PRHC under the doctrine of apparent authority . Thus, the lack of
authority on their part should not be used to prejudice it, considering that the two were clothed with apparent
authority to execute such agreements.
2. SC ruled that LCDCs reliance on Art. 1892 was misplaced. The principles of agency could not to be applied to this
case, since the legal relationship between PRHC and LCDC was not one of agency, but was rather that between the
owner of the project and an independent contractor under a contract of service. Thus, it is the agreement between
the parties and not the Civil Code provisions on agency that should be applied to resolve this issue.
SC set aside CAs decision and ruled to set off the respective liabilities of the parties against each other, and PRHC
was directed to pay LCDC the net amount due.






7


Laureano T. Angeles vs. Philippine National Railways (PNR) and Rodolfo Flores,August 31, 2006 G.R. No. 150128
Facts:
Respondent Philippine National Railways (PNR) informed a certain GaudencioRomualdez(Romualdez, hereinafter)
that it has accepted the latters offer to buythe PNRsscrap/unserviceable rails located in Del Carmen and Lubao,
Pampanga at P1,300.00 andP2,100.00 per metric ton, respectively, for the total amount of P96,600.00. Romualdez
paid thepurchase price and addressed a letter to Atty. CiprianoDizon, PNRs Acting Purchasing Agent.The letter
authorized LIZETTE R. WIJANCOto be his (Romualdez) lawful representative in thewithdrawal of the
scrap/unserviceable rails awarded to him. Furthermore, the original copy of the award which indicates the waiver of
rights, interest and participation in favor of Lizetter R.Wijanco was also given.The Lizette R. Wijanco was petitioner's
now deceased wife. That very same day, Lizetterequested the PNR to transfer the location of withdrawal for the
reason that thescrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for
hauling.The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable railsin Murcia, Capas
and San Miguel, Tarlac instead. However, PNR subsequently suspended thewithdrawal in view of what it considered
as documentary discrepancies coupled by reportedpilferages of over P500,000.00 worth of PNR scrap properties in
Tarlac.Consequently, thespouses Angeles demanded the refund of the amount of P96,000.00. The PNR,
however,refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of
unserviceable rails had already been withdrawn. The spouses Angeles filed suit against thePNR for specific
performance and damages before the Regional Trial Court. Lizette W. Angelespassed away and was substituted by
her heirs, among whom is her husband, herein petitioner Laureno T. Angeles.The trial court, on the postulate that
the spouses Angeles are not the real parties-in-interest,rendered judgment dismissing their complaint for lack of
cause of action. As held by the court,Lizette was merely a representative of Romualdez in the withdrawal of scrap or
unserviceablerails awarded to him and not an assignee to the latter's rights with respect to the award.Petitioner
appealed with the Court of Appeals which dismissed the appeal and affirmed that of the trial court.
Issue:Whether or not the CA erred in affirming the trial court's holding that petitioner and his spouse,as plaintiffsa
quo, had no cause of action as they were not the real parties-in-interest in thiscase.
Held: No.The CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee,but merely an
agent whose authority was limited to the withdrawal of the scrap rails, hence,without personality to sue.Where
agency exists, the third party's (in this case, PNR's) liability ona contract is to the principal and not to the agent and
the relationship of the third party to theprincipal is the same as that in a contract in which there is no agent.
Normally, the agent hasneither rights nor liabilities as against the third party. He cannot thus sue or be sued on
thecontract. Since a contract may be violated only by the parties thereto as against each other, thereal party-in-
interest, either as plaintiff or defendant in an action upon that contract must,generally, be a contracting party.The
legal situation is, however, different where an agent is constituted as an assignee. In such acase, the agent may, in
his own behalf, sue on a contract made for his principal, as an assigneeof such contract. The rulerequiring every
action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and
also recognizesthat when one hasa right assigned to him, he is then the real party-in-interest and may maintain an
action uponsuch claim or right.
WHEREFORE, the petition isDENIEDand the assailed decision of the CA is
AFFIRMED
.Costsagainst the petitioner.
26 / Jimenez v Rabot, 38 Phil 378 (1918)
Part II / Essential Elements of a Contract of Agency; Form
Nature of the Action:
Appeal from judgment of the CFI of Pangasinan
Street, J.
Facts:
1. This action was instituted by Gregorio Jimenez to recover from the defendant, Pedro Rabot, a parcel of land.
theparcel of land together with two other parcels originally belonged to plaintiff Jimenez. While Gregorio was
staying atVigan in 1911, the subject property was confided by him to the care of his elder sister Nicolasa Jimenez.2.
On February 7, 1911, he wrote his sister a letter from Vigan informing her that he was pressed for money
andrequested her to sell one of his parcels of land. This letter contains no description as to which land is to be sold
other
than the indicated words one of my parcels of land. Acting upon this letter, Nicolasa approached defendant Rabot
and the latter agreed to buy the parcel.3. A year later, Jimenez demanded that his sister return the subject parcel to
him. Nicolasa refused. Gregorio, together with his other siblings, then filed action for the recovery of their land. The
action was decided in favor of the plaintiffs.4. Meanwhile, Nicolasa executed and delivered to defendant Rabot a
deed purporting to convey to him the subjectparcel of land. Defendant went into possession and the property was
found in his hands at the time when the final judgment was entered in favor of plaintiffs.
Issue:Whether the authority confer
red on Nicolasa by Gregorios letter sufficient to enable her to bind her brother
Ruling: YES.
The principle embodied xxx is not, in our opinion, applicable to the present case, which relates to the sufficiencyof
the authorization, not to the sufficiency of the contract or conveyance.There is ample authority to the effect that a
person may by a
general power of attorney authorize an agent to sell all the land
possessed by the principal, or all that he possesses in a particular city, county or state.In present case, the agent
was given the power to sell either of the parcels of land belonging to the plaintiff. We can see noreason why the
performance of an act within the scope of this authority should not bind the plaintiff to the same extent as if he
had given the agent authority to sell any or all and she had conveyed only one.
8

Judgment reversed

CITY LITE v CA10 February 2000Bellosillo, ponente petition for review on
certiorariof a Court of Appeals decision
SHORT VERSION:
Only when the agent has written authority to sell realty can the sale be valid.
FACTS:
FP Holdings and Realty Corp (respondent) was the registered owner of a 71754 sq m-parcel of
land along E Rodriguez Ave, QC known as the Violago
Property or the San Lorenzo RuizCommercial Center.
It was offered for sale to the general public through a sales brochure:
A parcel of land including buildings and other improvements thereon located along E.Rodriguez Avenue, Quezon
City, with a total lot area of 71,754 square meters - 9,192square meters in front, 23,332 square meters in the
middle, and 39,230 square meters at the back. But the total area for sale excludes 5,000 square meters covering the
existingchapel and adjoining areas which will be donated to the Archdiocese of Manila thusreducing the total
saleable area to 66,754 square meters. Asking pricewas P6,250.00/square meter with terms of payment negotiable.
Broker's commission was 2.0% of selling price, net of withholding taxes and other charges. As advertised, contact
person was Meldin Al G. Roy, Metro Drug Inc., with address at 5/F Metro House, 345 Sen.Gil Puyat Avenue, Makati
City
The 9192 sq m- front portion was the subject of litigation.
Meldin Roy (respondent) sent a sales brochure, location plane and copy of the TCT to AttyGelacio Mamaril, a lawyer
and licensed real estate broker. Mamaril passed on the documents toCity-
Lites Executive VP Antonio Teng and Legal Counsel Atty Victor Villanueva.\
City-Lite conveyed its interest to purchase of the front portion in a letter send toMetro Drug (Attn: Meldin Roy).
Roy also informed City-
Lites representative that it would take time to subdivide the lot and FP Holdings wasnt receptive to a purchase.\
Atty Mamaril sent a letter to Metro Drug expressing City-
Lites desire to buy the entire
front lot so long as the P6250/sq m asking price was reduced and that payment be madein installments.
Roy made a counter offer in another letter:
1. The price shallbeP6,250.00/square meter or a total of P57,450,000.00; 2. The above purchase priceshall be paid
to the owner as follows: (a) P15.0 Million downpayment; (b) balancepayable within six (6) months from date of
downpayment without interest.
City-Lite and Mamaril met with Roy to consummate the transaction; Roy agreed to sell theproperty provided City-
Lite submit its acceptance in writing to the terms and conditions in Roys
letter. Later that afternoon Mamaril and Teng conveyed their formal acceptance of the terms.
However, FP Holdings refused to execute the corresponding deed of sale and registered anadverse claim to the title
of the property with the Register of Deeds of QC, annotated in thememorandum of encumbrance in the TCT.\
FP Holdings filed a petition for the cancellation of the adverse claim against City-Lite with theRTC QC; City-Lite
caused the annotation of the first notice of
lis pendens
which was recorded inthe title of the property.
RTC dismissed FP Holdings petition; FP Holdings caused a resurvey
and segregation of the property, asking and was granted separate titles from the RD QC.
City-Lite instituted a complaint against FP Holdings for specific performance and damages andcaused the
annotation of the second notice of
lis pendens
The property was transferred to Viewmaster Construction Co (respondent) for which aTCT was issued; the
lis pendens
was carried over to the new title.
The RTC rendered a decision in favor of City-Lite ordering FP Holdings to execute a deedof sale of the p
roperty and ordering the RD QC to cancel Viewmasters TCT.

o
9


The CA reversed an set aside the RTC judgment.
ISSUE:was there a contract of sale perfected between City-Lite and FP Holdings through its agent Meldin Roy of
Metro Drug?
REASONING: Art. 1874 of the Civil Code provided:
"When the sale of a piece of land or any interesttherein is through an agent, the authority of the latter shall be in
writing;otherwise, the sale shall be void.
"Roy was FP Holdings authorized agent to sell the property, but the
NCC required that the authority be in writing.The absence of authority to sell could be determined from the written
memo issued by FP
Holdings president requesting Metro Drugs assistance in finding buyers. The memo stated:
We will appreciate Metro Drug's assistance in referring to us buyers for theproperty. Please proceed to hold
preliminary negotiations with interestedbuyers and endorse formal offers to us for our final evaluation and
appraisal.
This meant that Roy and/or Metro Drug were only to assist FP Holdings, and FPHoldings were the only ones who
could make the final evaluation, appraisal andacceptance of any transaction.
Roy and/or Metro Drug were only a contact person with no authority to conclude a saleof the property.
Consequently, the sale should be null and void, and not produce anylegal effect to transfer the property from FP
Holdings to any interested party.
RULING:
appealed decision affirmed
SAN JUAN STRUCTURAL STEEL V CA
296 SCRA 631 Business Organization Corporation Law Piercing the Veil of Corporate Fiction
In 1989, San Juan Structural and Steel Fabricators, Inc. (San Juan) alleged that it entered into a contract of sale with
Motorich Sales Corporation (Motorich) through the latters treasurer, Nenita Gruenberg. The subject of the sale was
a parcel of land owned by Motorich. San Juan advanced P100k to Nenita as earnest money.
On the day agreed upon on which Nenita was supposed to deliver the title of the land to Motorich, Nenita did not
show up. Nenita and Motorich did not heed the subsequent demand of San Juan to comply with the contract
henceSan Juan sued Motorich. Motorich, in its defense, argued that it is not bound by the acts of its treasurer,
Nenita, since her act in contracting with San Juanwas not authorized by the corporate board.
San Juan raised the issue that Nenita was actually the wife of the President of Motorich; that Nenita and her
husband owns 98% of the corporations capital stocks; that as such, it is a close corporation and that makes Nenita
and the President as principal stockholders who do not need any authorization from the corporate board; that in
this case, the corporate veil may be properly pierced.
ISSUE: Whether or not San Juan is correct.
HELD: No. Motorich is right in invoking that it is not bound by the acts of Nenita because her act in entering into a
contract with San Juan was not authorized by the board of directors of Motorich. Nenita is however ordered to
return the P100k.
There is no merit in the contention that the corporate veil should be pierced even though it is true that Nenita and
her husband own 98% of the capital stocks of Motorich. The corporate veil can only be pierced if the corporate
fiction is merely used by the incorporators to shield themselves against liability for fraud, illegality or inequity
committed on third persons. It is incumbent upon San Juan to prove that Nenita or her husband is merely using
Motorich to defraud San Juan. In this case however, San Juan utterly failed to establish that Motorich was formed,
or that it is operated, for the purpose of shielding any alleged fraudulent or illegal activities of its officers or
stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the expense of third persons
like San Juan.

AF REALTY v DIESELMAN
In 1988, Manuel Cruz, Jr., a board member of Dieselman Freight Services, Co. (DFS) authorized Cristeta Polintan to
sell a 2,094 sq. m. parcel of land owned by DFS. Polintan in turn authorized Felicisima Noble to sell the same lot.
Noble then offered AF Realty & Development, Co., represented by Zenaida Ranullo, the land at the rate of
P2,500.00 per sq. m. AF Realty accepted the offer and issued a P300,000 check as downpayment.
However, it appeared that DFS did not authorize Cruz, Jr. to sell the said land. Nevertheless, Manuel Cruz, Sr.
(father) and president of DFS, accepted the check but modified the offer. He increased the selling price to P4,000.00
per sq. m. AF Realty, in its response, did not exactly agree nor disagree with the counter-offer but only said it is
willing to pay the balance (but was not clear at what rate). Eventually, DFS sold the property to someone else.
Now AF Realty is suing DFS for specific performance. It claims that DFS ratified the contract when it accepted the
check and made a counter-offer.
ISSUE: Whether or not the sale made through an agent was ratified.
HELD: No. There was no valid agency created. The Board of Directors of DFS never authorized Cruz, Jr. to sell the
land. Hence, the agreement between Cruz, Jr. and Polintan, as well as the subsequent agreement between Polintan
and Noble, never bound the corporation. Therefore the sale transacted by Noble purportedly on behalf of Polintan
and ultimately purportedly on behalf of DFS is void.
Being a void sale, it cannot be ratified even if Cruz, Sr. accepted the check and made a counter-offer. (Cruz, Sr.
returned the check anyway). Under Article 1409 of the Civil Code, void transactions can never be ratified because
they were void from the very beginning.

83. Harry E. Keeler Electric Co. vs. Rodriguez
November 11,1922, Johns, J.***This case involves an action for the payment of purchase price by plaintiff Keeler
Electric against defendant Rodriguez
Legal Doctrine:
10

Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at
theirperil, 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 caseeither is controverted, the burden of proof is upon them to establish it.
Facts
Plaintiff is Harry E. Keeler Electric Co., a domestic corporation based in Manila engaged in the electrical business,
and amongother things in the sale of what is known as the "Matthews" electric plant.
Defendant is Domingo Rodriguez a resident of Talisay, Occidental Negros Montelibano, a resident of Iloilo, went to
Keeler Electric and made arrangement with the latter wherein:\ He claimed that he could find purchaser for the
Keeler Electric told Montelibano that for any plant that he could sell or any customer that he could find
he would bepaid a commission of 10% for his services, if the sale was consummated.
Through Montelibanos efforts, Keeler was able to sell to Rodriguez
one of the "Matthews" plants

Rodriguez paid Montelibano (the purchase price of P2,513.55), after the installation of the plant and without the
knowledge ofKeeler Electric,

Keeler Electric filed an action against Rodriguez for the payment of the purchase price.

Rodriguez: Claimed that he already paid the price of the plant. In addition, he alleged that:
o
Montelibano sold and delivered the plant to him, and "was the one who ordered the installation of that electrical
plant"
o
There were evidences: a statement and receipt which Montelibano signed to whom he paid the money.
o
He paid Montelibano because the latter was the one who sold, delivered, and installed the electrical plant, and
hepresented to him the account, and assured him that he was duly authorized to collect the value of the electrical
plant
o
The receipt had the following contents:STATEMENT Folio No. 2494Mr. DOMINGO RODRIGUEZ,
Iloilo, Iloilo, P.I.
In account withHARRY E. KEELER ELECTRIC COMPANY, INC.221 Calle Echaque, Quiapo, Manila, P.I.MANILA, P.I.,
August 18, 1920
.The answer alleges and the receipt shows upon its face that the plaintiff sold the plant to thedefendant, and that
he bought it from the plaintiff. The receipt is signed as follows:
Received payment
HARRY E. KEELER ELECTRIC CO. Inc.,Recibi(Sgd.) A. C. MONTELIBANO.
Cenar was sent by Keeler Electric to install the plant in Rodriguezs premises in Iloilo
He brought with him a statement of account for Rodriguez but the latter said that he would pay in Manila.

***Lower Court: In favor of Rodriguez. It held that:
o
Keeler Electric had held out Montelibano to Rodriguez as an agent authorized to collect
o
Payment to Montelibano would discharge the debt of Rodriguez
11

o
The bill was given to Montelibano for collection purposes

Keeler Electric appealed. It alleged that:
o
Montelibano had no authority to receive the money.
o
His services were confined to the finding of purchasers for the "Matthews" plant
o
Montelibano was not an electrician, could not install the plant and did not know anything about its mechanism.
Issues:
1. WON Keeler Electric authorized Montelibano to receive or receipt for money in its behalf2. WON Rodriguez had a
right to assume by any act or deed of Keeler Electric that Montelibano was authorized to receive themoney
Held/Ratio:

1. NO, Montelibano was not authorized.
The plant was sold by Keeler Electric to Rodriguez and was consigned to Iloilo whereit was installed by Cenar, acting
for, and representing, Keeler Electric, whose expense for the trip is included in, and made apart of, the bill which
was receipted by Monteliban







Sevilla vs. CA
FACTS:
A contract by and between Noguera and Tourist World Service (TWS), represented by Canilao, wherein TWSleased
the premises belonging to Noguera as branch office of TWS. When the branch office was opened, it was runby
appellant Sevilla payable to TWS by any airline for any fare brought in on the efforts of Mrs. Sevilla, 4% was togo to
Sevilla and 3% was to be withheld by the TWS.Later, TWS was informed that Sevilla was connected with rival firm,
and since the branch office was losing, TWS considered closing down its office.On January 3, 1962, the contract with
appellee for the use of the branch office premises was terminatedand while the effectivity thereof was January 31,
1962, the appellees no longer used it. Because of this, Canilao, thesecretary of TWS, went over to the branch office,
and finding the premises locked, he padlocked the premises.When neither appellant Sevilla nor any of his
employees could enter, a complaint was filed by the appellantsagainst the appellees. TWS insisted that Sevilla was a
mere employee, being the branch manager of its branch office and thatshe had no say on the lease executed with
the private respondent, Noguera.
ISSUE:
W/N ER-EE relationship exists between Sevilla and TWS
HELD:
The records show that petitioner, Sevilla, was not subject to control by the private respondent TWS. In thefirst
place, under the contract of lease, she had bound herself in solidum as and for rental payments, anarrangement
that would belie claims of a master-servant relationship. That does not make her an employee of TWS,since a true
employee cannot be made to part with his own money in pursuance of his employers business, orotherwise,
assume any liability thereof.In the second place, when the branch office was opened, the same was run by the
appellant Sevilla payableto TWS by any airline for any fare brought in on the effort of Sevilla. Thus, it cannot be said
that Sevilla was underthe control of TWS. Sevilla in pursuing the business, relied on her own capabilities.It is further
admitted that Sevilla was not in the companys payroll. For her efforts, she retained 4% incommissions from airline
bookings, the remaining 3% going to TWS. Unlike an employee, who earns a fixed salary,she earned compensation
in fluctuating amount depending on her booking successes. The fact that Sevilla had been designated branch
manager does not make her a TWS employee. Itappears that Sevilla is a bona fide travel agent herself, and she
acquired an interest in the business entrusted toher. She also had assumed personal obligation for the operation
thereof, holding herself solidary liable for thepayment of rentals.Wherefore, TWS and Canilao are jointly and
severally liable to indemnify the petitioner, Sevilla


12

AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
Page 1
SEVILLA VS. COURT OF APPEALS
Facts: Tourist World Services, Inc. (TWS) leased the premisesbelonging to Segundina Noguera to be used as a
branch office. Sevillaheld herself solidarily liable with TWS for the payment of the rent.When the branch office was
opened, it was run by Sevilla payable toTWS by any airline for any fare brought in through the efforts of Sevilla,4%
would go to Sevilla and 3% was to be withheld by TWS.When TWS was informed that Sevilla was connected with a
rival firm,Philippine Travel Bureau, and since the branch was losing, TWSconsidered closing down its office. The
contract of lease wasterminated. Canilao, the corporate secretary of TWS, went over to thebranch and padlocked
the premises to protect the interests of TWS.Sevilla and her employees could not enter.Sevilla filed for mandatory
preliminary injunction which the trial court dismissed without prejudice.Sevilla filed an appeal, and one of her
claims was that the trial court
erred in holding that Sevillas arrangement
with TWS was a mereemployer-employee relation and not a joint business venture. Shesupports this claim by
declaring that she was signatory to the leasecontract and was
solidarily liable with TWS for the prompt payment
of the rent, that she did not receive any salary from TWS and that sheearned commissions for her own passengers,
her own bookings andher own business obtained from airline companies (She shared the 7%commission she got
from the airline companies with TWS).The CA affirmed the decision of the trial court.ISSUE relevant to our topic:
What was the nature of the relationbetween Sevilla and TWS?Held: PRINCIPAL-AGENT relationship.


It was not an employer-employee relation. Sevillawas not subject to control by TWS either as to theresult or as to
the means used. Her binding herself to be solidarily liable with TWS belies the claimsof a master-servant
relationship. Furthermore,
Sevilla was not in the companys payroll.



It was not a joint venture. A joint venture,including a partnership, presupposes generally aof standing between the
joint co-venturers orpartners, in which each party has an equalproprietary interest in the capital or
propertycontributed and where each party exercises equalrights in the conduct of the business.
16
furthermore, the parties did not hold themselvesout as partners, and the building itself wasembellished with the
electric sign "Tourist WorldService, Inc. in lieu of a distinct partnership name.


It is a principal-agent relationship. Sevillasolicited airline fares, but she did so for and onbehalf of her principal,
Tourist World Service, Inc.As compensation, she received 4% of theproceeds in the concept of commissions. And
aswe said, Sevilla herself pre-assumed herprincipal's authority as owner of the businessundertaking. But unlike
simple grants of a powerof attorney, the agency that in this case cannot berevoked at will because it is one coupled
with aninterest, the agency having been created formutual interest of the agent and the principal. It appears that
Lina Sevilla is a
bona fide
travelagent herself, and as such, she had acquired aninterest in the business entrusted to her.Moreover, she had
assumed a personal obligationfor the operation thereof, holding herself solidarily liable for the payment of rentals.
Shecontinued the business, using her own name, afterTourist World had stopped further operations.Her interest,
obviously, is not to the commissionsshe earned as a result of her businesstransactions, but one that extends to the
verysubject matter of the power of management delegated to her. It is an agency that cannot berevoked at the
pleasure of the principal.Accordingly, the revocation complained of shouldentitle the petitioner, Lina Sevilla, to
damages.EXTRA: The Court is convinced that there is some malevolent design toput Sevilla in a bad light. There was
no proof that the branch was losing
and the padlocking was done 6 months after (rebuttal to the interest of the company argument of TWS).

SHELL COMPANY OF THE PHI
LIPPINES, LTD. V. FIREMENS
INSURANCE CO. OF NEWARK
J. Padilla (1957)
FACTS:
o

13

A car belonging to Salvador SISON was brought to a gasoline andservice station somewhere in Manila, owned by the
SHELL Companyof the Philippine Islands, Limited, but operated by Porfirio DE LAFUENTE, for the purpose of having
said car washed and greased fora consideration of P8.00
o

Said car was insured against loss or damage by Firemen's InsuranceCompany of Newark, New Jersey, and
Commercial CasualtyInsurance Company jointly for the sum of P10,000
o

The job of washing and greasing was undertaken by DE LA FUENTEthrough his two employees

a greaseman and a helper/washer. Toperform the job, the car was carefully and centrally placed on theplatform of a
hydraulic lifter before raising up said platform to aheight of about 5 feet and then the servicing job was started
o

After more than one hour of washing and greasing, the job wasabout to be completed except for an ungreased
portion underneaththe vehicle which could not be reached by the greaseman. So, thelifter was lowered a little by
the greaseman and while doing so, thecar for unknown reason accidentally fell and suffered substantialdamage
o

SISON forthwith brought the matter to his insurers attention. The
insurance companies after due inspection paid the sum of P1,651.38
for the damaged cars repair. SISON, for his part
made assignmentsof his rights to recover damages in favor of the Firemen's InsuranceCompany and the Commercial
Casualty Insurance Company

hence,the instant case for the recovery of the total amount of the damagefrom SHELL and DE LA FUENTE on the
ground of negligence
o

CFI dismissed the complaint. Insurance Companies appealed. The
Court of Appeals reversed the CFIs judgment and sentenced SHELL
and DE LA FUENTE to pay the amount sought to be recovered, pluslegal interest and costs
o

The CA ruled that DE LA FUENTE is SHELLs agent; hence, asprincipal, it is liable for his agents breach of undertaking

o

SHELL now comes to the SC on appeal questioning the aforesaid CA
decision, raising the following
ISSUE:
WON DE LA FUENTE is really SHELLs agent? Isnt he more of an
independent contractor?HELD:
DE LA FUENTE is SHELLs agent. The operator of a gasoline
station is an agent of the oil company. He cannot be considered as an
independent contractor by reason of SHELLs extensive control and
supervision over his tasks. The assailed CA decision is affirmed.RATIO:
o

DE LA FUENTE owed his position to SHELL which could remove himor terminate his services at any time. He merely
undertook to
14

exclusively sell SHELLs products at the station he operates. For this
purpose, he was placed in possession of all the equipments needed
to operate it, including the hydraulic lifter from which SISONs
automobile fell
o

But it must be noted that these equipments were delivered to DE LAFUENTE merely on loan basis. SHELL still took
charge of its care andmaintenance. It supervised DE LA FUENTE and conducted periodicinspection of the gasoline
and service station
o

Moreover, SHELL did not leave the fixing of price for gasoline to DELA FUENTE; on the other hand, SHELL had
complete control thereof;and it had supervision over DE LA FUENTE in the operation of thestation and in the sale of
its products therein
o

In fine, the gasoline and service station really belonged to SHELL. It bore its tradename and the operator DE LA
FUENTE merely sold theproducts of SHELL there
o

Considering the abovelisted, in no wise can it be said that DE LAFUENTE is an independent contractor of SHELL. The
extensive

DATE: August 31, 1954
PETITIONER: Doming de la Cruz
RESPONDENT: Northern Theatrical Enterprises Inc., et. al.

FACTS:
In 1941 the Northern Theatrical Enterprises Inc. operated a movie house in Laoag, Ilocos Norte and employed a
certain Domingo de la Cruz as a special guard assigned at the main entrance. In the afternoon of July 4, 1941,
Benjamin Martin (gate crasher) wanted to enter the movie house without a ticket but refused by De la Cruz. The
former (Martin) attacked De la Cruz with a bolo. De la Cruz defended himself until he was cornered to save his life
he shot Martin, which caused Martins death. He was charged of homicide (Criminal Case No. 8449) of the Court of
First Instance of Ilocos Norte, but was granted a motion to dismiss on January 1943.
However, on July 8, 1947, he was again accused of homicide and was acquitted of the charge. In both cases De la
Cruz employed a lawyer to defend himself. He demanded from Northern Theatrical Enterprises and to its three
board members to recover reimbursement for Atty. Conrado Rubios fees as well as moral damages, a total of Php
15,000.00. Northern asked for the dismissal of the complaint. The CFI after rejecting the theory of De la Cruz that he
was an agent and such was entitled to reimbursement of expenses incurred in connection with the agency.
ISSUE:
Whether the relationship was that of principal and agent?
Whether or not De la Cruz is entitled for reimbursement?

HELD:
NO. The Supreme Court held that the plaintiff was a mere employee hired to perform a specific task or duty.
NO. In terms of his reimbursement, an employee who in the line of duty may recover damages against his
employer. However, the damages incurred consisting of the payment of lawyers fee did not flow directly from the
performance of his duties.
Quiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an agent of the
former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in
the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga within 6 months
upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
15

beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the
dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds
by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action
are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question,
therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the contract in question,
what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in
the manner stipulated. Payment was to be made at the end of sixty days, or before, at the plaintiffs request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt
payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on
the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features
exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell
it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed,
without any other consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the only one expressly imposed by the contract, the
effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under
other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was
one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.

PACIFIC COMMERCIAL COMPANY,
plaintiff-appellant,
vs.
ALFREDO L. YATCO, defendant-appellee.
FACTS:
Pacific Commercial Company was engaged in a business as a merchant sold in the Philippines, for the account of
Victorias Milling Cos refined sugar. The sales of sugar was made by Pacific in 2 ways. Upon finding of purchasers of
sugar and having received purchase orders therefrom, the orders were transmitted to Victorias Milling Co., with
the instruction to ship the orders Ex-ship or Ex-warehouse. If it was ordered from ex-warehouse, goods should be
delivered to the warehouse of Pacific before delivery to the purchaser. If it was from ex-ship, it should be directly
delivered to the purchaser. Pacific would hand over the bill of lading to the purchaser and to collect the price. Cost
of the sugar was different if ex-ship from ex-warehouse, wherein the latter was cheaper. However, Pacific passed
off the goods at a price of ex-ship but but claimed as ex-warehouse. A demand for a return of the amount collected
by way of tax on the sale of sugar to be delivered ex-ship.
ISSUE:
Whether or not Pacific served as a mere merchant broker?
HELD:
YES. Unlike the commission merchant, commission broker has no relation with the things he sells or buys. He is
merely an intermediary between the purchaser and the vendor. He accrues neither the possession nor the custody
of the things sold. His only office is to bring together the parties to the transactions. Pacific never possessed the
sugar at anytime.
KER & CO., LTD. vs. LINGAD
G.R. No. L-20871 April 30, 1971
Facts:
CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty
against Ker & Co. There was a request on the part of petitioner for the cancellation of such assessment, which
request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. CTA ruled that that
Ker & Co is liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code.
Ker & Co signed a contract with the United States Rubber International, the former being referred to as the
Distributor and the latter specifically designated as the Company. The shipments would cover products for
consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except *the+ province of Davao.
Ker & Co, as Distributor, was precluded from disposing such products elsewhere than in the above places unless
written consent would first be obtained from the Company. It was required to exert every effort to have the
shipment of the products in the maximum quantity and to promote in every way the sale thereof. The prices,
discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion
of the Company.
Issue:
WON the relationship Ker & Co and US Rubber was that of a vendor-vendee or principal-broker? PRINCIPAL-
BROKER, hence liable under Section 194 (t) of the NIRC.
Held:
The relationship between them is one of brokerage or agency. That the petitioner Ker & Co., Ltd. is, by contractual
stipulation, an agent of U.S. Rubber International is borne out by the facts that:
1. petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated
16

limits, unless excepted by the contract or by the Rubber Company;
2. it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter
company
3. every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales
made by petitioner are subject to approval by the company
4. on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the
month
5. the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber
company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss
6. upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which
may be checked by an authorized representative of the former
7. upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for
the account of the rubber company until their disposition is provided for by the latter.
CONTROLLING TEST (cited CIR vs. Constantino):
Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to
customers, the price and terms of which were subject to the companys control, the relationship between the
company and the dealer is one of agency.
Sale vs. Agency
a. In sale, the essence is the transfer of title or agreement to transfer it for a price paid or promised. In agency, the
essence is the delivery to an agent.
b. In sale, the transfer puts the transferee in the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale. In agency, the transfer does not make the property as the agents own, but that of
principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive
the proceeds less the agents commission upon sales made.
Besides, The control by the United States Rubber International over the goods in question is pervasive.

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKEAKTIENGESELLSCHAFT (BMW),
respondents. January 22, 1997Mendoza, J.Facts:1.Alfred Hahn is a Filipino citizen doing business under the name
and style "Hahn-Manila."2.Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign
corporationexisting under the laws of the former Federal Republic of Germany, with principal office atMunich,
Germany.3.In 1963, Hahn executed in favor of BMW a Deed of Assignment with Special Power of Attorney which
essentially, makes Hahn as the exclusive dealer of BMW in the Philippines.Moreover, it stated there that Hahn and
BMW shall continue business relations as has beenusual in the past without a formal contract."4.In 1993, BMW
and Columbia Motors Corp (CMC) had a meeting which would grant CMCexclusive dealership of BMW cars.5.Hahn
was informed later that BMW was dissatisfied with how it carrying its business.However, BMW expressed
willingness to continue business relations with the petitioner onthe basis of a "standard BMW importer" contract,
otherwise, it said, if this was notacceptable to petitioner, BMW would have no alternative but to terminate
petitioner'sexclusive dealership effective June 30, 1993.6.Hahn protested alleging that such termination is a breach
of the Deed of Assignment. Hahninsisted that as long as the assignment of its trademark and device subsisted, he
remainedBMW's exclusive dealer in the Philippines because the assignment was made inconsideration of the
exclusive dealership.7.BMW, however, went on to terminate its dealership with Hahn.8.Hahn filed a complaint for
specific performance and damages in the RTC. RTC issued a writpreliminary injunction.9.BMW appealed to the CA.
CA reversed on the ground that Hahn is not an agent of BMW andthat BMW is not doing business in the Phils. By
virtue of the latter, the writ of preliminaryinjunction should not have been issued since RTC did not have jurisdiction
over it.Issues1.W/N Hahn is agent or a distributor (or broker) in the Philippines of BMW.

He is an agent.2.W/N BMW is doing business here in the Philippines.

YESHeld/Ratio:1.There is nothing to support the appellate court's finding that Hahn solicited orders alone andfor
his own account and without "interference from, let alone direction of, BMW. To thecontrary, Hahn claimed he took
orders for BMW cars and transmitted them to BMW.
Uponreceipt of the orders, BMW fixed the down payment and pricing charges, notifiedHahn of the scheduled
production month for the orders, and reconfirmed theorders by signing and returning to Hahn the acceptance
sheets. Payment wasmade by the buyer directly to BMW. Title to cars purchased passed directly to thebuyer and
Hahn never paid for the purchase price of BMW cars sold in thePhilippines. Hahn was credited with a commission
equal to 14% of the purchaseprice upon the invoicing of a vehicle order by BMW.
Upon confirmation in writing thatthe vehicles had been registered in the Philippines and serviced by him, Hahn
received anadditional 3% of the full purchase price. Hahn performed after-sale services, including,warranty services,
for which he received reimbursement from BMW. All orders were oninvoices and forms of BMW.