Rule: Art. 1891.

Every agent is bound to render an account of his transactions and to deliver to

the principal whatever he may have received by virtue of the agency, even though it may not be
owing to the principal.
Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be
judged with more less rigor by the courts, according to whether the agency was or was not for a
compensation.
Doctrine: An agent who takes a secret profi t in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty
of a breach of his loyalty to the principal and forfeits his right to collect the commission from his
principal, even if the principal does not suffer any injury by reason of such breach of fidelity,or that
he obtained better results or that the agency is a gratuitous one, or that usage or custom allows
it. The fact that the principal may have been benefi ted by the valuable services of the said
agent does not exculpate the agent who has only himself to blame for such a result by reason of
his treachery or perfi dy.
Case: Domingo vs. Domingo | GR. No. L-30573 | October 29, 1971
Facts:
1. Vicente M. Domingo granted Gregorio Domingo the exclusive agency to sell his lot at P2.00
per sq. meter plus a commission of 5% of the total price if the property is sold by Vicente
or anyone else during the 30-day duration of the agency, or if the property is sold by
Vicente within 3months from the termination of the agency to a purchaser to whom it was
submitted by Gregorio during the continuance of the agency with notice to Vicente.
2. Gregorio, in turn, authorized Teofilo P. Purisima (the intervenor) to look for a buyer and
promised to give him 1/2 of his 5% commission.
3. Purisima then introduced Oscar de Leon to Gerogrio as a prosepective buyer.
4. Oscar initially submitted a written offer that was considerably lower than the P2.00 price per
square meter.
5. Vicente asked Gregorio to tell Oscar to raise his offer. Oscar raised his offer to which Vicente
agreed by signing the document which contained the price increase. This document was
marked as Exhibit C.
6. Vicente then demanded Oscar to pay P1,000.00 as earnest money. Oscar issued a check, in
favor of Vicente, for P1,000, where P300 of which was given to Gregorio as an advance
payment of his commission.
5. Through another letter, Oscar confirmed his offer to pay P1.20 for every portion of the lot
that he was going to purchase. Vicente then asked for another P1,000, again, as earnest
money, which Oscar promised to deliver to him.
6. After this, Exhibit C was then amended twice. The first amendment stated that: De Leon
will vacate his house and lot at Denver Street, Quezon City which is part of the purchase
price on Sept. 15, 1956. The second amendment stated that: De Leon will vacate his
house on Dec. 1, 1956, instead of Sept., because his wife was about to give birth. It also
stated that Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957. The second
amendment was marked as Exhibit D.
7. Apparently, Oscar asked Gregorio to persuade Vicente to sell him the lot at a price of P1.20
and promised to pay him P1,000.00. Pursuant to his promise, Oscar gave Gregorio P1,000
as a gift for succeeding in persuading Vicente. However, this cash gift was not disclosed to
Vicente. Also, Oscar did not pay Vicente the additional P1,000 that was supposed to be the
second earnest money Vicente was to receive from him.
8. The deed of sale was not executed. De Leon then informed Gregorio that he was giving up
on the negotiation because he did not receive his money from his brother in the US.
9. Sensing something fishy, Gregorio then went to Vicente and read the portion of the agency
agreement which stated that Vicente was still committed to pay him 5% commission, if the
sale is consummated within three months after the expiration of the 30-day period of the
exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to
a purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente reacted
by tearing to pieces the agreement.
10. Gregorio then proceeded to the office of the ROD of Quezon City and discovered that a
deed of sale was executed by Oscars wife over their house & lot in favor of Vicente, as
Oscars down payment on the purchase price of Vicente's lot.
11. Upon discovering this, Gregorio, in writing, then demanded his commission on the sale
price. Gregorio went to Oscar who told him that Vicente wanted to eliminate him from the
transaction since Gregorio apparently sold the lot not to Oscar but to another, Amparo Diaz
(Oscars wife)
Issue: Does Gregorios failure to disclose to Vicente Oscars payment to him of P1,000.00 as gift
or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per
square meter constitute fraud and thereby cause the forfeiture of his commission on the sale
price?
Held: 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, so much so that the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the
highest and truest principle of morality as well as of the strictest justice.

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal
benefit from the vendee, without revealing the same to his principal, the vendor, is
guilty of a breach of his loyalty to the principal and forfeits his right to collect the
commission from his principal, even if the principal does not suffer any injury by
reason of such breach of fidelity , or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of
any wrong, not to remedy or repair an actual damage. By taking such profit or bonus or gift or
propina from the vendee, the agent thereby assumes a position wholly inconsistent with
that of being an agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not exculpate the agent who has only
himself to blame for such a result by reason of his treachery or perfidy.
As a necessary consequence of such breach of trust, Gregorio Domingo must forfeit his right
to the commission and must return the part of the commission he received from his
principal.

Rule: Art. 1887. In the execution of the agency, the agent shall act in accordance with the
instructions of the principal.
In default thereof, he shall do all that a good father of a family would do, as required by the nature
of the business.

Art. 1884 (1). The agent is bound by his acceptance to carry out the agency, and is liable for the
damages which, through his non-performance, the principal may suffer.
Art. 2080. The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor they cannot be subrogated to the rights, mortgages, and
preference of the latter.
Doctrine: An agent is required to act with the care of a good father of a family and becomes
liable for the damages, which the principal may suffer through his non-performance.
A bank is answerable for negligence in failing to collect the sums due its debtor from the latters
own debtor, contrary to said banks duty as holder of an exclusive and irrevocable power of
attorney to make such collections.
Case: PNB vs Manila Surety & Fidelity Co., Inc. | GR. No. L-20567| July 30, 1965
Facts:
1. PNB extended credit to Edgington Oil Refinery. It advanced $120, 000 to Edgington for 8,000
tons of hot asphalt. Of this amount, 2,000 tons of hot asphalt worth P279,000.00 were
released and delivered to Adams & Taguba Corporation (known as ATACO) under a trust
receipt guaranteed by Manila Surety & Fidelity Co., up to the amount of P75,000.00.
2. To pay for the asphalt, ATACO constituted PNB as its assignee and attorney-in-fact to receive
and collect from the Bureau of Public Works the aforesaid amount out of funds payable to
the assignor. The conditions of the assignment state that the assignment shall remain
irrevocable until the credit accommodation is fully liquidated, and that said power of
attorney shall remain irrevocable until their total indebtedness to PNB has been fully
liquidated.
3. ATACO delivered asphalt to the Bureau of Public Works with the total value of P431,466.52.
Of this amount, PNB was able to regularly collect a total of P106,382.01. However, due to
unexplained reasons, PNB was no longer able to collect until its investigators found that
more money was payable to ATACO from the Bureau, because PNB had allowed another to
collect funds due to ATACO under the same purchase order to a total of P311,230.41.
4. PNB demanded payment from both ATACO and Manila Surety. Both refused. PNB then filed a
case in the CFI of Manila for recovery of balance of P158,563.18 as of February 15, 1950,
plus interests and costs.
5. CFI ruled in favor of PNB ordering defendants to pay P174,462.34, less P8,000 which Manila
Surety Co., Inc. paid from March, 1956 to October, 1956 with interest at the rate of 5% per
annum from February 25, 1956, until fully paid provided that the total amount that should
be paid by defendant Manila Surety Co., Inc., on account of this case shall not exceed
P75,000.00, and to pay the costs.
8. PNB appealed to the CA which ruled that PNB was negligent in stopping its collection of
payment from the Bureau before ATACOs debt was fully collected, thereby allowing funds
to be taken by other creditors to the prejudice of the surety and further held that PNBs
negligence resulted in exoneration of respondent Manila Surety & Fidelity Company.
9. To this, PNB replied that the power of attorney executed in it is favor from ATACO was
merely an additional security; that it was the duty of the surety, not the creditor, to see to
it that the obligor fulfills his obligation; and that PNB, as creditor, has no obligation to the
surety to collect any sum from ATACO, the principal debtor.
Issue: Is PNB negligent in performing its function as an agent-creditor of ATACO in collecting the
sums due to it?

Held: Contrary to PNBs belief, the Court of Appeals did not hold it negligent for failing to collect
from ATACO for its debt from PNB, but for its negligence in collecting the sums due to ATACO (the
debtor) from the Bureau of Public Works, contrary to its duty as holder of an exclusive and
irrevocable power of attorney to make such collections, since an agent is required to act with the
care of a good father of a family and becomes liable for the damages which the principal may
suffer through his non-performance.
Even if the assignment with power of attorney from the principal debtor were considered as mere
additional security still, by allowing the assigned funds to be exhausted without notifying the
surety, the Bank deprived the former of any possibility of recoursing against that security. The
Bank thereby exonerated the surety, pursuant to Article 2080 of the Civil Code.

Ramos vs. Caoibes, 94 Phil. 440

FACTS: Concepcion Ramos appointed Caoibes through a power of attorney to collect an amount due him from the
Philippine War Damage Commission. Half of that amount will then be given to the sister of Concepcion and half to her
niece and nephew as evidenced by an affidavit. Days after Concepcion died, a Check was issued to Caoibes when he
presented the power of attorney and affidavit and later on encashed it for himself. The administratrix discovered the
collection made by Caoibes. The administratrix filed to the court asking Caoibes to deposit the money to the clerk of court.
Caoibes contended that he will deliver half of the amount to the clerk of court and then said that he had the right to retain
half of the money by virtue of the power of attorney and the Affidavit.
ISSUE: Whether Caoibes is correct with her contention that he had the right to retain the money by virtue of the power of
attorney?
RULING: No. Caoibes as an agent had the obligation to deliver the amount collected by virtue of the power of attorney to
his principla, Concepcion or the administratrix since she died. No where in the in power of attorney did it state that the was
a cession of rights made in favour of Caoibes. And the prevailing provision during the time of the transaction stated that a
contract of agency is deemed gratuitous unless the agent is a professional agent and there was no showing that Caoibes was
such. Lastly, an agency is terminated by death of the principal or of the agent. When Caoibes made use of the power of
attorney, the principal was already dead.
Additional: Verbal donation requires the simultaneous delivery of the gift. In the absence of this requisite the donation shall
produce no effect, unless made in writing and accepted in the same form. The alleged donation was made in writing but it has not
been accepted in the same form, and consequently, has no validity.

EUGENIO VS COURT OF APPEALS 239 SCRA 207

FACTS: Nora Eugenio was a dealer of Pepsi Cola. Her husband used to be a route manager of Pepsi Cola. Pepsi Cola filed
a complaint for a sum of money against the Eugenio couple alleging that on several occasions, the couple purchased and
received on credit various products from two of Pepsi Colas plants and they had an outstanding balance on each plant and
that the couple failed to pay despite oral and written demands. In their defense, the couple presented receipts issued to and
received by them from Pepsi Colas route manager, Estrada. The court rendered decision in favour of Pepsi Cola asking the
couple to pay the company.
ISSUE:
RULING: Pepsi Cola failed to prove that Estrada, who is its duly authorized agent with respect to petitioners, did not
receive those amounts from the latter. As correctly explained by petitioners, in so far as the private respondents customers
are concerned, for as long as they pay their obligations to the sales representative of the private respondent using the latters
official receipt, said payment extinguishes their obligations. [Eugenio vs. Court of Appeals, 239 SCRA 207(1994)]
Payment shall be made to the person in whose favor the obligation has been constituted, or his successor-in-interest or any
person authorized to receive it.39 As far as third persons are concerned, an act is deemed to have been performed within the
scope of the agents authority, if such is within the terms of the power of attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to an understanding between the principal and his agent.40 In fact, Atty.
Rosario, private respondents own witness, admitted that it is the responsibility of the collector to turn over the collection.
[Eugenio vs. Court of Appeals, 239 SCRA 207(1994)]

GREEN VALLEY POULTY VS IAC

FACTS: Squibb Corporation appointed Green Valley as a non exclusive distributor of Squibbs products. In their
agreement, it was stipulated that Green Valley will be entitled to a discount, Green Valley will be advised whenever prices
will be changed, that Green Valley is only allowed to distribute only for North and Central Luzon including areas in
Cagayan Valley. Also it is prohibited to transfer stocks to any other parts of the country. Green Valley is to pay their
purchases within sixty days.
Squib then filed a complaint against Green Valley for failure to pay goods delivered to them. The court rendered judgment
in favour of Squibbs however Green Valley contended that their contract with Squibb was a mere agency to sell and Green
Valley never purchased goods from Squibb. Furthermore, the goods received were on consignment only with the obligation
to turn over the proceeds, less commission and to return the goods if not sold. Lastly, Green Valley contended that the
action was premature since it sold the goods but had not been able to collect from the purchasers thereof.
ISSUE: Whether the contract entered into between Squibbs and Green Valley was a contract to sell and not agency to sell?
RULING: It was a contract to sell. Whether viewed as an agency to sell or as a contract of sale, the liability of Green Valley
is indubitable. Even if the courts would adopt Green Valleys theory that it was an agency to sell, Green Valley can still be
held liable because it sold on credit without authority from its principal.
Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he
do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or
benefit, which may result from such sale. [Green Valley Poultry & Allied Products, Inc. vs. Intermediate Appellate Court,
133 SCRA 697(1984)]
NOTE: If the commission agent without the express or implied consent of the principal, sells on credit the principal has two
options: (1) require from the agent, payment in cash, in which case the latter is entitled to any interest or benefit resulting
from the sale on credit; or (2) ratify the sale on credit, in which case, all the benefits will belong to the principal as well as
the risk of collection. [Green Valley Poultry & Allied Products, Inc. vs. Intermediate Appellate Court, 133 SCRA
697(1984)]