ESTABLISHING AGENCY

Air France v CA, Jose Gana (ABBY)

Dec. 29, 1983
Melencio Herrera
FACTS: The Ganas purchased from Air France
through Imperial Travels, a duly authorized
agent,
9
open
dated
tickets
for
a
Manila/Osaka/Tokyo/Manila.
The expiry date
was May 8, 1970. Jose Gana sought the
assistance of Teresita Manucdoc, a secretary of
the company where Jose Gana worked, to
procure the extension of the validity of their
tickets. Manucdoc talked with Lee Ella,
Manager of the Philippine Travel Bureau. She
was told that they would have to pay fare
differentials and that the extension is
impossible. The GANAS scheduled their
departure for May 7 and on May 6, Teresita
again asked for Lee Ellas help in the
revalidation. She was told that it would only be
valid until May 8 and no longer valid for the
rest of the trip after that. However, Ella
attached revalidation stickers on the tickets
(revalidated by the Philippine Travel Bureau),
without informing Air France. The Ganas
departed and but the airlines refused to honor
their tickets at the start of the Osaka/Tokyo leg.
The GANAS had to purchase new tickets at
readjusted rates and arrived at Manila on
different dates. TC-Air France. CA- Ganas. SCAir France
ISSUES:
1. WON Ella acted beyond his powers as
travel agent? YES
2. WON notice to Manucdoc is notice to the
Ganas? YES
HELD: The GANAS cannot defend by
contending lack of knowledge of those rules
since the evidence bears out that Teresita, who
handled travel arrangements for the GANAS,
was duly informed by travel agent Ella of the
advice of Reno, the Office Manager of Air
France, that the tickets in question could not be
extended beyond the period of their validity
without paying the fare differentials and
additional travel taxes brought about by the
increased fare rate and travel taxes.
To all legal intents and purposes, Teresita was
the agent of the Ganas and notice to her of the
rejection of the request for extension of the
validity of the tickets was notice to Gana as her
principal.
The circumstances that AIR FRANCE personnel
at the ticket counter in the airport allowed the
GANAS to leave is not tantamount to an
implied ratification of travel agent Ella's

irregular actuations. The validating stickers

that Ella affixed on his own merely reflect the
status of reservations on the specified flight
and could not legally serve to extend the
validity of a ticket or revive an expired one.
The conclusion is inevitable that the GANAS
brought upon themselves the predicament they
were in for having insisted on using tickets that
were due to expire in an effort, perhaps, to
beat the deadline and in the thought that by
commencing the trip the day before the expiry
date, they could complete the trip even
thereafter. It should be recalled that AIR
FRANCE was even unaware of the validating
SAS and JAL. stickers that Ella had affixed
spuriously. Consequently, Japan Air Lines and
AIR FRANCE merely acted within their
contractual rights when they dishonored the
tickets on the remaining segments of the trip
and when AIR FRANCE demanded payment of
the adjusted fare rates and travel taxes for the
Tokyo/Manila flight.

Rodriguez vs. Court of Appeals (MAI)

August 29, 1969
Castro, J.
FACTS: On December 31, 1958, by virtue of a
document denominated "Kasunduan" written in
the vernacular and ratified before Notary Public
Lazaro C. Ison of that locality, Nieves Cruz,
authorized the spouses Atanacio Valenzuela,
and Maximina Victorio and Liberate Santos to
sell a certain parcel of land of about 44,634
square meters belonging to her.
Nieves Cruz and her children, however,
collected from the agents, either thru Maximina
Victorio or thru Salud G. de Leon, daughter of
Liberate Santos, various sums of money during
the period from July 3, 1959 up to September
3, 1961, all of which were duly receipted for by
Nieves Cruz and/or her children and in which
receipts it is expressly stated that said
amounts were "bilang karagdagan sa ipinagbili
naming lupa sa kanila (additional payments
for the land we sold to them).
Nieves Cruz then sold the property in question
to Barbara Lombos Rodriguez, her "balae"
because the latter's son was married to her
daughter, for the sum of P77,216.00.
Nieves Cruz subsequently sought to rescind the
contract of sale with the private respondents.
ISSUE: Whether or not the agreement is
enforceable or can be proved under the law

HELD: YES. The fact that Atanacio Valenzuela,

et al. were agents of Nieves Cruz under the
agency agreement of December 31, 1958 is
not material, for if it is true that Nieves Cruz
did agree to sell to her agents the real estate
subject of the agency, her consent to the
agreement took the transaction out of the
prohibition contained in article 1491(2) of the
Civil Code. Neither are articles 1874 and
1878(5) and (12) of the Civil Code
relevant, for they refer to sales made by
an agent for a principal and not to sales
made by the owner personally to another,
whether that other be acting personally
or through a representative. Thus, the
agreement is valid.
The parties to the agency agreement
subsequently entered into a new and different
contract by which the landowner, Nieves Cruz,
verbally agreed to sell her interest in the
litigated real estate to Atanacio Valenzuela, et
al. and this was established by certain
facts, such as: [1] Salud de Leon testified that
it was she who had the oral agreement with
Nieves Cruz for the purchase by Atanacio
Valenzuela, et al. of the litigated property and,
as found by the respondent Court, Salud de
Leon was the representative of Atanacio
Valenzuela, et al., not of Nieves Cruz; [2] Cruzs
acceptance of the sums of money given by the
private respondents and her subsequent
issuance of receipts for these sums; [3] the
sale was established and recognized in the
land registration proceedings where the
certificates of title bear the annotation of the
aforesaid right of Atanacio Valenzuela, et al.
Pertinent provisions:
Art. 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through the
mediation of another:
xxx
(2) Agents, the property whose administration
or sale may have been entrusted to them,
unless the consent of the principal has been
given;
Art. 1874. When a sale of a piece of land or
any interest therein is through an agent, the
authority of the latter shall be in writing;
otherwise, the sale shall be void.

FACTS: Queano applied with Naguiat a loan of

P200,000 which was eventually granted.
Naguiat indorsed two checks to Queano
amounting to P95,000 each. To secure the loan,
Queano executed a Deed of Real Estate
Mortgage and surrendered to Naguiat her
duplicates of titles covering the mortgage. The
mortgage was notarized and a promissory note
for P200,000 with interest of 12% per annum
was given by Queano. She also issued a
Security Bank check payable to Naguiat. Upon
presentment of the check, the Security Bank
check was dishonored for insufficiency of
funds. A month after, Queano received a letter
from Naguiat demanding settlement of the
loan. Queano and a certain Reubenfeldt (who
was alleged to be Naguiats agent) met with
Naguiat to manifest that Queano did not
receive the proceeds of the loan as the checks
were retained by Reubenfeldt. Naguiat applied
for extrajudicial foreclosure of the mortgage
but the same was declared null and void. On
appeal, the CA affirmed the decision of the trial
court. Among the issues raised by Naguiat is
the admissibility of the representations of
Reubendfeldt insisting that she was not her
agent.
ISSUE: WON Reubenfeldt was Naguiats agent.
HELD: YES. Evidence showed that Naguiat
instructed Reubenfeldt to withhold the checks
pending the delivery of additional collateral by
Queano. He served as agent of Naguiat on the
loan application of Queanos friend as to whom
Queano came to know of Naguiat. Furthermore,
she also drew a check for the sum of P220,000
payable to Naguiat to cover for Queanos
liability.
As a consequence of the interaction between
Naguiat
and Reubenfeldt,
Queano was
impressed that she was Nagiats agent and
Naguiat did not do anything to correct that.
The rule states that one who clothes another
with apparent authority as his agent and holds
him out in the public as such cannot be
permitted to deny the authority of such person
to act as his agent, to the prejudice of third
parties dealing in good faith. The CA correctly
used the rule on agency by estoppel.
Judgment affirmed.

Naguiat v. CA (TOFF)
2003
Tinga, J.

Woodchild Holdings v. Roxas Electric

(MARK)
Facts:

The respondent Roxas Electric and

Construction
Company,
Inc.
(RECCI),

formerly
the
Roxas
Electric
and
Construction Company, was the owner of
two parcels of land. On May 17, 1991, the
respondents Board of Directors approved a
resolution authorizing the corporation,
through its president, Roberto B. Roxas, to
sell the lots at a price, and under such
terms and conditions, which he deemed
most reasonable and advantageous to the
corporation. He was likewise authorized to
execute, sign, and deliver the pertinent
sales documents and receive the proceeds
of the sale for and on behalf of the
company.
Petitioner WHI bought one of the lots and a
portion of the other. It was stipulated in
the Deed of Sale that the vendor agrees, in
the event that the right of way is
insufficient for the vendees use (ex entry
of a 45-foot container), to sell additional
square meters from its current adjacent
property.
WHI constructed a warehouse. Said
warehouse was leased by Ponderosa
Leather Goods Company subject to a
monthly rental of 300,000 php. In the
meantime, WHI complained to Roberto
Roxas that the vehicles of RECCI were
parked on a portion of the property over
which WHI had been granted a right of way.
Roxas promised to look into the matter. Dy
and Roxas discussed the need of WHI to
buy a 500-square-meter portion of the
other but Roxas died soon thereafter.
The WHI demanded that the RECCI sell a
portion of the other lot for its beneficial use
otherwise the appropriate action would be
filed against it. RECCI rejected the demand
of WHI. On June 17, 1992, the WHI filed a
complaint against the RECCI with the
Regional Trial Court of Makati, for specific
performance and damages.

ISSUE: WON Roxas Electric is bound by the

provisions of the deed of absolute sale granting
to the WHI beneficial use and a right of way
over a portion of the other lot.
Held: No.

Generally, the acts of the corporate officers

within the scope of their authority are
binding on the corporation.
However,
under Article 1910 1of the New Civil Code,
acts done by such officers beyond the
1

Art. 1910. The principal must comply with all

the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.

scope of their authority cannot bind the

corporation unless it has ratified such acts
expressly or tacitly, or is estopped from
denying them. Evidently, Roxas was not
specifically authorized under the said
resolution to grant a right of way agree to
sell to the petitioner a portion thereof.
Neither may such authority be implied
from the authority granted to Roxas to sell
on such terms and conditions which he
deems
most
reasonable
and
advantageous.
Under paragraph 12,
Article 1878 of the New Civil Code, a
special power of attorney is required to
convey real rights over immovable
property. Article 1358 of the New Civil Code
requires that contracts which have for their
object the creation of real rights over
immovable property must appear in a
public document. The petitioner cannot
feign ignorance of the need for Roxas to
have been specifically authorized in writing
by the Board of Directors to be able to
validly grant a right of way and agree to
sell a portion of the adjacent lot. The rule
is that if the act of the agent is one which
requires authority in writing, those dealing
with him are charged with notice of that
fact.
For the principle of apparent authority to
apply, the petitioner was burdened to
prove the following: (a) the acts of the
respondent justifying belief in the agency
by the petitioner; (b) knowledge thereof by
the respondent which is sought to be held;
and, (c) reliance thereon by the petitioner
consistent
with
ordinary
care
and
prudence. In this case, there is no evidence
on record of specific acts made by the
respondent showing or indicating that it
had full knowledge of any representations
made by Roxas to the petitioner that the
respondent had authorized him to grant to
the respondent an option to buy a portion
of the other lot or to create a burden or lien
thereon, or that the respondent allowed
him to do so.

THE AGENT
Danon v. Brimo (MARK)
Sept. 12, 1921
J. Johnson
FACTS:

Defendant Antonio A. Brimo, in a

conversation with the plaintiff Julio Danon,
informed the latter that he (Brimo) desired
to sell his factory, the Holland American Oil
Co., for the sum of P1,200,000. He agreed
and promised to pay to the plaintiff a
commission of 5 per cent provided the
latter finds a buyer that will buy said
factory for the said amount.
No definite period of time was fixed within
which the plaintiff should effect the sale.
There was likewise another broker (Sellner)
who was negotiating the sale of said
property.
Sellner, the other broker referred to, had
found a purchaser who ultimately bought
the factory for P1,300,000. For that reason
Mr. Prieto, the would be purchaser found by
the plaintiff, never came to see Mr. Brimo
to perfect the proposed negotiation.
Danon filed an action to recover the sum of
P60,000, alleged to be the value of
services rendered by him, as broker, to the
defendant.

ISSUES WON Danon is entitled

commission agreed upon. NO.

to

the

RATIONALE
Plaintiff
is
not
entitled
to
the
commission.The most that can be said as
to what the plaintiff had accomplished is,
that he had found a person who might
have bought the defendant's factory if the
defendant had not sold it to someone else.
The evidence does not show that the Santa
Ana Oil Mill had definitely decided to buy
the property in question at the fixed price
of P1,200,000. The board of directors of
said corporation had not resolved to
purchase said property; and even if its
president could legally make the purchase
without previous formal authorization of
the board of directors, yet said president
does not pretend that he had definitely and
formally agreed to buy the factory in
question on behalf of his corporation at the
price stated.
It is undisputed that plaintiffs services did
not any way contribute towards bringing
about the sale of the factory in question.
He was not "the efficient agent or the
procuring cause of the sale."

Sibbald vs Betlehem Iron Co

o The duty assumed by the broker is
to bring the minds of the buyer and
seller to an agreement for a sale,
and the price and terms on which it
is to be made, and until that is

done his right to commissions does

not accrue.
It follows, as a necessary deduction
from the established rule, that a
broker
is
never
entitled
to
commissions
for
unsuccessful
efforts. The risk of a failure is
wholly his. The reward comes only
with his success. The broker may
devote his time and labor, and
expend his money with ever so
much of devotion to the interest of
his employer, and yet if he fails, if
without effecting an agreement or
accomplishing
a
bargain,
he
abandons
the effort, or his
authority is fairly and in good faith
terminated, he gains no right to
commissions. He loses the labor
and effort which was staked upon
success. And in such event it
matters not that after his failure,
and the termination of his agency,
what he has done proves of use
and benefit to the principal.
The rule however must be taken
with one important and necessary
limitation. If the efforts of the
broker are rendered a failure by the
fault
of
the
employer;
if
capriciously he changes his mind
after the purchaser, ready and
willing, and consenting to the
prescribed terms, is produced; or if
the latter declines to complete the
contract because of some defect of
title in the ownership of the seller,
some unremoved incumbrance,
some defect which is the fault of
the latter, then the broker does not
lose his commissions. And that
upon the familiar principle that no
one can avail himself of the
nonperformance of a condition
precedent,
who
has
himself
occasioned its nonperformance.
This limitation is not an exception
to the general rule affecting the
broker's right for it goes on the
ground that the broker has done
his duty, that he has brought buyer
and seller to an agreement, but
that
the
contract
is
not
consummated and fails though the
after-fault of the seller.
NO STIPULATED PERIOD. Where no
time for the continuance of the
contract is fixed by its terms either
party is at liberty to terminate it at
will, subject only to the ordinary
requirements of good faith. Usually

the broker is entitled to a fair and

reasonable opportunity to perform
his obligation, subject of course to
the right of the seller to sell
independently. But having been
granted him, the right of the
principal to terminate his authority
is absolute and unrestricted, except
only that he may not do it in bad
faith, and as a mere device to
escape the payment of the broker's
commissions.
Although Danon could probably have
effected the sale of the defendant's factory
had not the defendant sold it to someone
else, he is not entitled to the commissions
agreed upon because he had no
intervention whatever the sale in question.
It must be borne in mind that no definite
period was fixed by the defendant within
which the plaintiff might effect the sale of
its factory. Nor was the plaintiff given by
the defendant the exclusive agency of such
sale. Therefore, the plaintiff cannot
complain of the defendant's conduct in
selling the property through another agent
before the plaintiff's efforts were crowned
with success. "One who has employed a
broker can himself sell the property to a
purchaser whom he has procured, without
any aid from the broker."

Infante v. Cunanan, Mijares, CA (ABBY)

Aug. 31, 1953
J. Bautista Angelo
Facts:

Consejo Infante owned 2 parcels of land

with a house in Taft Manila. Infante
contracted the services of Cunanan and
Mijares to look for a buyer. The selling price
was for P30,000, buyer must assume
mortgage on the property; 5% commission
on selling price.

Cunanan and Mijares found a buyer, Pio S.

Noche and introduced him to Infante. She
informed them that she was no longer
interested in selling the property and
succeeded in making them sign a
document stating therein that the written
authority she had given them was already
can-celled.

It turns out that Infante dealt with Noche

directly and sold the property for P31,000.
The respondents found out and instituted
an action for recovery of the commission
when she refused to give the respondents
anything.

Infante said she procured their services but

only for P1,200, only on condition that they
buy her a property somewhere in Taft
Avenue to where she might transfer after
selling her property. Defendant avers that
while plaintiffs took steps to sell her
property as agreed upon, they sold the
property at Taft Avenue to another party
and because of this failure it was agreed
that the authority she had given them be
cancelled
Respondents claim that while they agreed
to cancel the written authority given to
them, they did so merely upon the verbal
assurance given by petitioner that, should
the property be sold to their own buyer, Pio
S. Noche, they would be given the
commission agreed upon. True, this verbal
assurance does not appear in the written
cancellation, Exhibit 1, and, on the other
hand, it is disputed by petitioner, but
respondents were allowed to present oral
evidence to prove it, and this is now
assigned as error in this petition for review.
LC found for the Cunanan and Mijares
ordering Infante to pay them P2,500 w/
legal interest.
CA affirmed LC

Issue: WoN Infante was liable to pay Cunanan

and Mijares commission despite the written
cancellation of authority signed by the
respondents.
Held: Yes. Petition denied

There is enough justification for the

conclusion reached by the lower court as
well as by the Court of Appeals to the
effect that respondents are entitled to the
commission originally agreed upon. It is a
fact found by the Court of Appeals that
after petitioner had given the written
authority to respondents to sell her land for
the sum of P30,000, respondents found a
buyer in the person of one Pio S. Noche
who was willing to buy the property under
the terms agreed upon, and this matter
was immediately brought to the knowledge
of petitioner. But the latter, perhaps by way
of strategem, advised respondents that she
was no longer interested in the deal and
was able to prevail upon them to sign a
document agreeing to the cancellation of
the written authority.

That petitioner had changed her mind even

if respondents had found a buyer who was
willing to close the deal, is a matter that
would not give rise to a legal consequence
if respondents agree to call off the
transaction in deference to the request of
the petitioner. But the situation varies if

one of the parties takes advantage of the

benevolence of the other and acts in a
manner that would promote his own selfish
interest. This act is unfair as would amount
to bad faith. This act cannot be sanctioned
without ac-cording to the party prejudiced
the reward which is due him. This is the
situation in which respondents were placed
by petitioner. Petitioner took advantage of
the services rendered by respondents, but
believing that she could evade payment of
their commission, she made use of a ruse
by inducing them to sign the deed of
cancellation Exhibit 1. This act of
subversion cannot be sanctioned and
cannot serve as basis for petitioner to
escape payment of the commission agreed
upon.

Pratts v. CA (ROG)
1978
Facts: This complaint for sum of money filed
by Prats, doing business under name of
Philippine Real Estate Exchange, against
Doronila and PNB.
Doronila was registered owner of 300hectares
of land. He wrote to SSS Chair offering his
property to SSS at P4 per square meter (per
sqm). There were several counter offers made
as to the price. Doronilla requested certification
from Board of Realtor regarding the actual
prices of his real estate raw-land properties.
The Board replied that the fair market value of
raw land is P3-P3.50 per sqm. Current prices
before reaching Doronilla's property range from
6-7 per sqm.
Doronilla granted an exclusive option and
authority to Prats to sell former's property.
Commission will be 10% based on P2.10 per
sqm or at any price finally agreed upon.
Doronilla asked SSS to return all papers related
to his property in view of the exclusive option
granted to Prats.
SSS asked for a meeting with Doronilla but
latter asked that SSS meet with Philippine Real
Estate Exchange instead because Doronilla had
given exclusive option to it. Prats gave notice
to Doronilla that SSS had agreed to purchase
the land. The latter replied that he had not
received any written offer from SSS during the
60day period of the exclusive authority nor
during its extension.
Doronilla wrote to SSS renewing his offer to sell
revising his original offer of P4 per sqm to
P3.25. SSS passed a resolution NO. 636 making

a counter offer of Php3.25 per sq m subject to

an appraisal of the property and to submit a
report thereon. After a favorable appraisal
report of the Toples & Harding SSS passed Res
no. 738 approving purchase of the land for
Php3.25 or for total of P9.7m. Deed of Sale was
executed. Doronilla received the full purchase
price. Prats then demanded payment of his
professional fee.
TC: ordered Doronilla to pay
CA: reversed.
Issue: WON Prats was not the efficient
procuring cause in bringing about the sale of
Doronila's land to SSS? YES
Held:
1. Doronilla's offer to sell land to SSS was
formally accepted only on June 1968 after
the exclusive authority in favor of Prats
had expired.
The CA's factual finding that Prats not the
efficient procuring cause in bringing about the
sale are final.
Prats was not categorical that it was through
his efforts that the meeting between SSS
Administrator Teodoro and Doronilla took place.
He refers to a phone call he made a few days
before May 29, 1968 but in the conversation he
had with Mr. Teodoro, the latter requested him
NOT to be present in the meeting. It is manifest
that SSS officials never wanted to be in any
way guided by, or mediated by Prats relative to
the negotiation for purchase of property. The
meeting was done independently and not by
virtue of Prat's efforts.
2. In equity, court notes that Prats had
diligently taken steps to bring back
together Doronilla and SSS and therefore
grants him 100k by way of compensation
for his efforts and assistance in the
transaction. .
Among others: He wrote to the Office of
Presidential Housing Commission offering the
land and wrote a follow up letter which was
answered by Commission suggesting that
property be offered directly to SSS.
Sale was perfected only at the price offered by
Doronila when he alone was dealing exclusively
with buyer long before Prats came along but
Prats efforts were instrumental in bringing
them together again and finally consummating
the sale although sale finalized after expiration
of Prats' extended exclusive authority.

Manotok Brothers v. CA (MARK)

April 7, 1993
J. Campos, Jr.
**Um Mark, I dont recall assigning this to
you. Sorry!
FACTS:
Petitoner Manotok Brothers Inc was the
owner of a certain parcel of land and
building which were formerly leased by the
city of Manila and used by Claro M. Recto
High School. By means of lettter dated July
5, 1966, petitioner authorized respondent
Salvador Saligumba to negotiate with the
city of Manila the sale of aforementioned
property. In the same writing petitoner
agreed to pay respondent 5% commisssion
in the event the sale is consummated.
Petitoner exended respondents authority
to sell several times. Within the extended
period, the city of Manila passed Ordinace
No. 6603 appropriating the sum of
P410,816 for the prurchase of Manotok
Brothers property. Said ordinance however
was signed by the mayor only on May 17,
1968, three days after the lapse of
respondents extended authority.
Sale was consummated. Notwithstanding
the realization of the sale, Saligumba never
received any commission. Consequently,
he filed a complaint against petioner.
ISSUES WON Saligumba is entitled to the 5%
agents commission. YES.
RATIONALE
In Prats vs CA, the SC awarded a sum of
money to agent-claimant in view of his
assistance and efforts in the transaction,
although he was not the efficient procuring
cause in bringing about the sale and
notwithsatnding the expiration of his
authority. In the case at bar, respondent
Saligumba is the efficient procuring cause
for without his efforts the municipality
would not have anything to pass and the
Mayor would not have anything to approve.
It is clear therefore from the foregoing
authority that respondent is entitled to the
commission.
Distinguished from Danon vs Brimo: The
case of Danon is not in point. In that case,
claimant-agent fully comprehended the
possibility that he may not realize the
agents commission as he was informed
that another agent was also negotiating
the sale and thus, compensation will
pertain to the one who finds a purchaser
and eventually effects the sale.

Domingo v Domingo (JANCES)

Oct. 29, 1971
J. Makasiar
Facts: Vicente Domingo executed an exclusive
contract of agency with Gregorio Domingo. The
contract was to last for 30 days. It was stated
that Vicente authorized Gregorio to sell his lot
with a commission of 5% on the total price.
Gregorio would still be entitled to the
commission if Vicente or anyone else sold the
property within the 30 day period or if the
property is sold by Vicente within 3 months
from the termination of the agency to a
purchaser previously submitted by Gregorio
during the continuance of the agency.
Gregorio authorized Purisima to look for a
buyer, promising of the 5% commission.
Gregorio then submitted that Oscar de Leon
wanted to buy the property. The latter paid
P1000 earnest money to Vicente and gave
P1000 as gift to Gregorio. Gregorio did not
inform Vicente of this P1000 propina/gift.
However, Vicente persuaded Oscar to buy the
property from him directly at P104,000 (as
opposed to the P109,000 previously agreed
upon). Gregorio found out that the property
was sold the Amparo Diaz, wife of Oscar de
Leon. He then demanded the 5% commission
from Vicente.
TC: Vicente should pay Gregorio and Purisima.
CA affirmed. Amparo Diaz being the wife of
Oscar de Leon, the sale by Vicente of his
property is practically a sale to Oscar since
husband and wife have common interests.
Vicente having died, his heirs appealed.
Issue: WON the failure on the part of Gregorio
to disclose to Vicente the payment to him by
Oscar of the P1000 gift constitutes fraud as to
cause forfeiture of his commission. [YES]
HELD: The duties and liabilities of a broker to
his employer are those which an agent owes to
his principal. Art 1891 provides that an agent is
bound to render an acct of his transactions and
to deliver to the principal whatever he may
have received by virtue of the agency, even
though it may not be owing to the principal. Art
1909 provides that an agent is responsible not
only for fraud but also for negligence.
Hence, an agent who takes a secret profit in
the nature of a bonus, gratuity or personal
benefit from 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.

Held: Found Not Guilty on the Estafa charge

but sentenced to pay the civil liability of the
value of the unreturned jewelry.

Art 1891 will not apply if the agent acted only

as a middleman with the task of merely
bringing together the vendor and the vendee,
who themselves will negotiate on the terms
and conditions of the transaction. In this case
however, Gregorio was not merely a
middleman of Vicente and Oscar. He was the
broker of Vicente ONLY.

In the case at bar, the appointment of Labrador

as petitioners sub-agent was not expressly
prohibited by Quilatan, as the acknowledgment
receipt, does not contain any such limitation.
Neither does it appear that petitioner was
verbally forbidden by Quilatan from passing on
the jewelry to another person before the
acknowledgment receipt was executed or at
any other time. Thus, it cannot be said that
petitioners act of entrusting the jewelry to
Labrador is characterized by abuse of
confidence because such an act was not
proscribed and is, in fact, legally sanctioned.

Serona v. CA (ABBY)
2002
J. Ynares-Santiago
Facts:
Leonida Quilatan delivered pieces of jewelry to
petitioner Virgie Serona to be sold on
commission basis. By oral agreement of the
parties, Serona shall remit payment or return
the pieces of jewelry if not sold to Quilatan,
both within 30 days from receipt of the items.
Serona had earlier entrusted the jewelry to one
Marichu Labrador for the latter to sell on
commission basis. Petitioner was not able to
collect payment from Labrador, which caused
her to likewise fail to pay her obligation to
Quilatan.
Quilatan sent a demand letter to Serona but
she failed to pay the principal. Labrador says
that she sold some of the jewelry to a 3 rd
person who did not pay her.
Serano is charged with estafa and is now
appealing to have the decision of the TC
reversed.
Issue: WoN Serona is liable for the acts of her
sub-agent Labrador

Petitioner did not ipso facto commit the crime

of
estafa
through
conversion
or
misappropriation by delivering the jewelry to a
sub-agent for sale on commission basis. We are
unable to agree with the lower courts
conclusion that this fact alone is sufficient
ground for holding that petitioner disposed of
the jewelry "as if it were hers, thereby
committing conversion and a clear breach of
trust."
The law on agency in our jurisdiction allows the
appointment by an agent of a substitute or
sub-agent in the absence of an express
agreement to the contrary between the agent
and the principal.

In the case at bar, it was established that the

inability of petitioner as agent to comply with
her duty to return either the pieces of jewelry
or the proceeds of its sale to her principal
Quilatan was due, in turn, to the failure of
Labrador to abide by her agreement with
petitioner. Notably, Labrador testified that she
obligated herself to sell the jewelry in behalf of
petitioner also on commission basis or to return
the same if not sold. In other words, the pieces
of jewelry were given by petitioner to Labrador
to achieve the very same end for which they
were delivered to her in the first place.
Consequently, there is no conversion since the
pieces of jewelry were not devoted to a
purpose or use different from that agreed
upon.
Similarly, it cannot be said that petitioner
misappropriated the jewelry or delivered them
to Labrador "without right." Aside from the fact
that no condition or limitation was imposed on
the mode or manner by which petitioner was to
effect the sale, it is also consistent with usual
practice for the seller to necessarily part with

the valuables in order to find a buyer and allow

inspection of the items for sale.
The agents to whom personal property was
entrusted for sale, conclusively proves the
inability to return the same is solely due to
malfeasance of a subagent to whom the first
agent had actually entrusted the property in
good faith, and for the same purpose for which
it was received; there being no prohibition to
do so and the chattel being delivered to the
subagent before the owner demands its return
or before such return becomes due, we hold
that the first agent can not be held guilty of
estafa
by
either
misappropriation
or
conversion. The abuse of confidence that is
characteristic of this offense is missing under
the circumstances.
An agent who is not prohibited from appointing
a sub-agent but does so without express
authority is responsible for the acts of the subagent. Considering that the civil action for the
recovery of civil liability arising from the
offense is deemed instituted with the criminal
action, petitioner is liable to pay complainant
Quilatan the value of the unpaid pieces of
jewelry.

Board of Liquidators v. Kalaw:

Settled jurisprudence has it that where similar
acts have been approved by the directors as a
matter of general practice, custom, and policy,
the general manager may bind the company
without formal authorization of the board of
directors. In varying language, existence of
such authority is established, by proof of the
course of business, the usages and practices of
the company and by the knowledge which the
board of directors has, or must be presumed to
have, of acts and doings of its subordinates in
and about the affairs of the corporation. So
also, authority to act for and bind a corporation
may be presumed from acts of recognition in
other instances where the power was in fact
exercised. Thus, when, in the usual course
of business of a corporation, an officer
has been allowed in his official capacity to
manage its affairs, his authority to
represent the corporation may be implied
from the manner in which he has been
permitted by the directors to manage its
business.
Notwithstanding the putative authority of the
manager to bind the bank in the Deed of Sale,
the bank has failed to file an answer to the
petition below within the reglementary period.
Thus, the bank is estopped from questioning

the authority of the bank manager to enter into

the contract of sale. If a corporation knowingly
permits one of its officers or any other agent to
act within the scope of an apparent authority, it
holds the agent out to the public as possessing
the power to do those acts; thus, the
corporation will, as against anyone who has in
good faith dealt with it through such agent, be
estopped from denying the agent's authority.
Unquestionably, petitioner has authorized
Tena to enter into the Deed of Sale.
Accordingly, it has a clear legal duty to
issue the board resolution sought by
respondent's.

San Juan
(JANCES)

Structural

and

Steel

CA

Facts: San Juan Structural and Steel Fabricators

Inc. entered into an agreement with Motorich
Sales Corporation for the transfer of the latters
parcel of land to the former. Nenita Gruenberg,
Motorichs treasurer, was the one who entered
the agreement for Motorich. She was, however,
not authorized by the board of directors. There
is also no evidence that she represented that
she was authorized. San Juan Structural and
Steel made a downpayment of P100,000.
However, the transfer did not push through
despite repeated demands made by San Juan
Structural and Steel.
Ruling:
RTC dismissed.
CA dismissed. Nenita to refund the down
payment of 100,000 given by San Juan
Structural and Steel.
Issue: WON sale is valid [NO]
HELD: Motorich cannot be bound by the
contract because it never authorized the sale.
The general principles of agency govern the
relation between the corporation and its
officers or agents, subject to the article of
incorporation, bylaws, or relevant provisions of
law. Consequently, Selling is foreign to a
corporate treasurers function. Neither is real
estate sale shown to be a normal business
activity of Motorich since its primary purpose
is marketing, distribution, export and import in
relation to a general merchandising business.
Moreover, Art 1874 states that a sale of a piece
of land through an agent must be in writing.
Nenita was not authorized. Neither is there any
proof that Motorich ratified, expressly or
impliedly, the contract.

British Airways vs. Court of Appeals (Mai)

January 29, 1998
Romero, J.
Facts: On April 16, 1989, Mahtani decided to
visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his
travel plans. The latter, in turn, purchased a
ticket from British Airways. Since British
Airways had no direct flights from Manila to
Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in
Hongkong he had to take a connecting flight to
Bombay on board British Airways.
Prior to his departure, Mahtani checked in at
the PAL counter in Manila his two pieces of
luggage containing his clothing and personal
effects,
confident
that
upon
reaching
Hongkong, the same would be transferred to
the British Airways flight bound for Bombay.
Unfortunately, when Mahtani arrived in
Bombay he discovered that his luggage was
missing and that upon inquiry from the British
Airways representatives, he was told that the
same might have been diverted to London.
After patiently waiting for his luggage for one
week, British Airways finally advised him to file
a claim by accomplishing the Property
Irregularity Report.
Mahtani subsequently filed a complaint for
damages and attorneys fees against British
Airways and Mr. Gumar. British Airways, in turn,
filed a third-party complaint against PAL. The
trial court ruled in favor of Mahtani and
dismissed the third-party complaint against
PAL. The Court of Appeals affirmed the
decision, stating that British Airways had no
cause of action against PAL.
Issue: Whether or not the dismissal of the thirdparty complaint against PAL was valid
Held: NO. The contract of air transportation
was exclusively between Mahtani and British
Airways, the latter merely endorsing the Manila
to Hongkong leg of the formers journey to PAL,
as its subcontractor or agent. In fact, the
fourth paragraph of the Conditions of
Contracts of the ticket issued by British
Airways to Mahtani confirms that the contract
was one of continuous air transportation from
Manila to Bombay.
Well-settled is the rule that an agent is
also responsible for any negligence in the

performance of its function and is liable for

damages which the principal may suffer by
reason of its negligent act. Hence, the Court of
Appeals erred when it opined that British
Airways, being the principal, had no cause of
action against PAL, its agent or sub-contractor.
Also, it is worth mentioning that both British
Airways and PAL are members of the
International Air Transport Association (IATA),
wherein member airlines are regarded as
agents of each other in the issuance of the
tickets and other matters pertaining to their
relationship. Therefore, in the instant case, the
contractual
relationship
between
British
Airways and PAL is one of agency, the former
being the principal, since it was the one which
issued the confirmed ticket, and the latter the
agent.
A carrier like PAL, acting as an agent of another
carrier, is also liable for its own negligent acts
or omission in the performance of its duties.
Accordingly, to deny British Airways the
procedural remedy of filing a third-party
complaint against PAL for the purpose of
ultimately determining who was primarily at
fault as between them, is without legal basis.

Severino v. Severino, supra

Barton vs. Leyte Asphalt & Mineral Oil Co.
(ANJ S.)
(Note: The case has too many facts irrelevant
to our topic. I decided not to include in the
digest the facts that are irrelevant so as not to
confuse us. Thanks.)
Facts:
James D. Barton, an American citizen residing
in the City of Manila, was given by Leyte
Asphalt & Mineral Oil Co. the sole and
exclusive sales agency for the sale of their
bituminous limestone and other asphalt
products in the countries of Australia, New
Zealand, Tasmania, Saigon, India, Sumatra,
Java, China and Hong Kong until May 1, 1922,
and until May 1, 1921 in Siam and the Straits
Settlements of US. It was also stipulated in
the letter of authority that should the sales of
Barton in the US reach 5,000 tons on or
before May 1, 1921, he would be awarded
the sole rights for the said territory for an
additional 1 year and should his sales in the
second year reach or exceed 10,000 tons, he
would be given the option to renew the
agreement for the said territory on the same
terms for an additional 2 years. Further, it
was stated that should his sales equal or
exceed 10,000 in the year ending October 1,

1921, or 20,000 tons by May 1,1922, then

the contract will automatically be continued
for an additional of 3 years.
Very soon after the contract became
effective, Barton requested the company to
give him a similar selling agency for Japan. To
this request, the company through its
president, Anderson, replied that at that
moment, they do not feel like giving him the
same authority until he can make some large
sized sales there, because some other people
have given the company assurances that
they can handle the Japanese sales,
therefore, the company have decided to
leave the agency for that company open for
a time.
Meanwhile, Barton embarked for San
Francisco and upon arriving at that port, he
entered into an agreement with Ludvigsen &
McCurdy, whereby the said firm was
constituted a subagent and given the sole
selling rights for the bituminous limestone
products of the company for a period of 1
year.
Upon an earlier voyage during the same year
to Australia, Barton had already made an
agreement with Frank B. Smith of Sydney,
whereby the latter was to act as the
plaintiffs sales agent for limestone
products of the company. Later, the same
agreement was extended for a period of one
year.
In Tokio, Japan, Barton came in contact with
H. Hiwatari. In a letter, Hiwatari speaks of
himself as if he had been appointed
exclusive sales agent for Barton in Japan,
but no document expressly appointing him
such is in evidence.
Barton then received a letter from Ludvigsen
& McCurdy that it might enter an order for
6,000 tons of bituminous limestone. In turn,
Barton informed the company to be prepared
to ship the products. Anderson, however,
informed him that the company, with its
current facilities, wouldnt be able to handle
big contracts.
Barton expressed surprise at this and told
Anderson that he had not only that particular
order from San Francisco but other orders for
large quantities to be shipped to Australia
and Shanghai.
Subsequently, Barton informed the company
at different dates to prepare shipments to US
and Australia, and later on, to Japan.
It will be noted that in connection with the
letters (totaling to 4) sent by Barton to the
company informing the latter to prepare
shipments, no mention was made of the
names of the persons, or firms, for whom the
shipments were really intended. The obvious

explanation that occurs in connection with

this is that the plaintiff did not care to reveal
the fact that the orders originated from
his own subagents in San Francisco and
Sydney.
The company, in its reply to one of Bartons
letter, stated that no orders can be
entertained unless cash has been actually
deposited with either the International
Banking Corporation or the Chartered Bank
of India, Australia, and China, at Cebu.
To this, Barton, in turn, replied questioning
the right of the company to insist upon cash
deposit in Cebu prior to the filling of the
orders. In conclusion, Barton gave some
more orders for shipment to Australia in the
quantities of 5,000 tons, and 10,000, and
stated that he would arrange for deposits to
be made on these additional shipments if the
company will signify its ability to fulfill the
orders. Again, no name was mentioned as
the purchaser, or purchasers, of these
intended consignments.
Barton then instituted in the CFI of Manila, an
action to recover from Leyte Asphalt &
Mineral Oil Co., Ltd., as damages for breach
of contract, the sum of $318,563.30 and to
secure a judicial pronouncement to the effect
that the plaintiff be entitled to an extension
of the terms of the sales agencies specified
in the contract.
The Trial Court absolved the company from 4
of the 6 causes of action set forth in the
complaint. For the two remaining causes of
action, the court adjudged the company
liable to pay Barton the sum of $202,500
(equivalent to 405,000php) as damages.
From this judgment, the company appealed.

Issue: WON the company is liable to pay

Barton damages for breach of contract.
Held/Ratio: No.

The original contract by which the

plaintiff was appointed sales agent for a
limited period of time in Australia and the US
contemplated that he should find reliable and
solvent buyers who should be prepared to
obligate themselves to take the quantity of
bituminous limestone contracted for upon
terms consistent with the contract. These
conditions were not met by the taking
of these orders from Bartons own
subagents, which was as if the plaintiff
had bought for himself the commodity
which he was authorized to sell to
others.

Article 267 of the Code of Commerce

declares that no agent shall purchase for
himself or for another that which he has
ordered to sell. The law has placed its ban

upon a brokers purchasing from his

principal unless the latter with full
knowledge
of
all
the
facts
and
circumstances
acquiesces
in
such
course; and even then the brokers
action must be characterized by utmost
good faith.

A sale made by a broker to himself

without the consent of the principal is
ineffectual whether the broker has been
guilty of fraudulent conduct or not.
Dispositive: Judgment Reversed.

Araneta v. del Paterno (MAI)

August 22, 1952
Tuason, J.
FACTS: Paz Tuason de Paterno is the registered
owner of a parcel of land, which was
subdivided into lots. Most of these lots were
occupied by lessees who had contracts of lease
that would expire at a certain time, and carried
a stipulation giving the lessees a right of first
refusal in case the lots were to be sold.
In 1940 and 1941, Paz Tuason obtained from
Jose Vidal several loans, and constituted a
mortgage on the property to secure the debt.
In 1943, she obtained additional loans upon the
same security.
She decided to sell the whole property to
Gregorio Araneta, Inc. The day after the
agreement was signed, Paz Tuason offered to
Vidal a check in full settlement of her mortgage
obligation but Vidal refused to accept it or
cancel the mortgage.
Gregorio Araneta instituted the case to compel
Paz Tuason to deliver to the former a clear title
of the lots.
One of the objections made against the sale is
that Jose Araneta, president of Gregorio
Araneta Inc., was also the agent of Paz Tuason.
ISSUE: Whether or not Gregorio Araneta was
the agent of Paz Tuason
HELD: NO. Article 1459 of the Spanish Civil
Code provides: The following persons cannot
take by purchase, even at a public or judicial
auction, either in person or through mediation
of another:
2. An agent, any property of which the
management or sale may have been entrusted
to him;
However, in the opinion of Manresa, an agent
(in the sense of Article 1459) is one who
accepts anothers representation to perform in

his name certain acts of more or less

transcendency. The ban of paragraph 2 of
Article 1459 connotes the idea of trust and
confidence. To come under this prohibition, the
agent must be in a fiduciary relation with his
principal.
Tested by this standard, Jose Araneta was not
an agent within the meaning of Article 1459.
He was nothing more than a go-between or
middleman between Paz Tuason and Gregorio
Araneta, Inc. to bring them together to make
the contract themselves. Jose Araneta was not
authorized to make a binding contract for Paz
Tuason. He had no power or discretion, which
he could abuse to his advantage and to the
owners prejudice.

DBP v. CA (EVA)
1994
Quaison, J.
Facts:

Juan B. Dans, together with his wife

Candida, his son and daughter-in-law,
applied for a loan of P500K with DBP
Basilan. As the principal mortgagor, Dans,
then 76 years of age, was advised by DBP
to obtain a mortgage redemption insurance
(MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool).

The MRI premium was deducted by DBP

from the approved loan of P300K and
credited this [less 10% service fee] to the
MRI Pool Account on Aug. 20, 1987. Dans
was also made to accomplish and submit
the "MRI Application for Insurance" and the
"Health Statement for DBP MRI Pool."

On Sept. 3, 1987 Dans died of cardiac

arrest. On Sept. 23, 1987 the DBP MRI Pool
notified DBP that Dans was not eligible for
MRI coverage, being over the acceptance
age limit of 60 years at the time of
application.

DBP apprised Candida Dans of the

disapproval of her late husband's MRI
application. The DBP offered to refund the
premium of P1,476.00 which the deceased
had paid, but Candida Dans refused to
accept the same, demanding payment of
the face value of the MRI or an amount
equivalent to the loan. She, likewise,
refused to accept an ex gratia2 settlement
of P30K, which the DBP later offered.

Respondent Estate, through Candida Dans

as administratrix, filed a complaint for

(Latin) as a favor

Collection of Sum of Money with Damages

against DBP and DBP MRI Pool
TC rendered a decision in favor of the
Estate and against DBP. The DBP MRI Pool,
however, was absolved from liability, after
the trial court found no privity of contract
between it and the deceased. The trial
court declared DBP in estoppel for having
led Dans into applying for MRI and actually
collecting the premium and the service fee,
despite knowledge of his age ineligibility.
CA affirmed TC decision in toto.

ISSUE: WON DBP should be held liable?

HELD. YES, but for a reduced amount.

In dealing with Dans, DBP was wearing two

legal hats: the first as a lender, and the
second as an insurance agent.

As an insurance agent, DBP is not

authorized to accept applications for MRI
when its clients are more than 60 years of
age. Knowing all the while that Dans was
ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of
its authority when it accepted Dan's
application for MRI by collecting the
insurance premium, and deducting its
agent's commission and service fee. Art.
1897 applies.

The liability of an agent who exceeds the

scope of his authority depends upon
whether the third person is aware of the
limits of the agent's powers. There is no
showing that Dans knew of the limitation
on DBP's authority to solicit applications for
MRI.

If the third person dealing with an agent is

unaware of the limits of the authority
conferred by the principal on the agent and
he (third person) has been deceived by the
non-disclosure thereof by the agent, then
the latter is liable for damages to him.