JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY.

COCHINGYAN |1

NATURE AND OBJECT OF AGENCY

RALLOS V. FELIX (1978)
Elements of Agency
FACTS:
Concepcion and Gerundia Rallos were sisters and co-owners of a parcel
of land located in Cebu.
21 April 1954 The sisters executed a special power of attorney to their
brother, Simeon Rallos, authorizing him to sell the piece of land.
3 March 1955 Concepcion Rallos died. Thereafter, on 12 September,
Simeon sold the undivided shares of his sisters to Felix Go & Sons
Realty Corporation.
Ramon Rallos, administrator of the Intestate of Concepcion Rallos, filed
a complaint to have the sale declared unenforceable and to recover the
disposed share.
While the case was pending, both Simon and Gerundia did and were
substituted by their respective administrators.
The trial court declared the deed of sale null and void insofar as the
share of Concepcion. The CA sustained the sale in favor of the
corporation
ISSUE: Whether the sale of the undivided share of Concepcion in the said land
was valid although it was executed by the agent after the death of the principal
INVALID
HELD:
The Civil Code provides that 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. A
contract entered into in the name of another by one who has no authority or the
legal representation or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting party.
Agency is basically personal representative, and derivative in nature. Art 1919
of the Civil Code provides that the general rule that death of the principal or agent
extinguishes the agency. The rationale is found in the juridical basis of agency
which is representation.
Art 1930 and 1931 of the Civil Code provides the exceptions:
ART. 1930. The agency shall remain in full force and effect even after the
death of the principal, if it has been constituted in the common interest of
the latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of
the principal or of any other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third persons who may have
contracted with him in good faith.
Under Art. 1931, an act done by the agent after the death of his principal is valid
and effective only under two conditions:
(1) that the agent acted without knowledge of the death of the principal and
(2) that the third person who contracted with the agent himself acted in good faith.
Good faith here means that the third person was not aware of the death of the
principal at the time he contracted with said agent. These two requisites must
concur the absence of one will render the act of the agent invalid and
unenforceable. However, in this case, it has been established that Simeon knew
the death of his principle, thus, the sale is invalid and unenforceable.

The given principle created and accepted the relationship of agency, where the
principal or mandante authorizes the agent or mandatario, to act act for and in
his behalf in transactions with third persons.
The essential elements of agency are:
1. there is consent, express or implied of the parties to establish the
relationship;
2. the object is the execution of a juridical act in relation to a third person;
3. the agents acts as a representative and not for himself, and
4. the agent acts within the scope of his authority.

ORIENT AIR SERVICES V. CA (1991)
Essential Characteristic of Agency: Consensual
FACTS:
American Air and Orient Air entered into a General Sales Agency
Agreement whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air
passenger transportation.
Pertinent provisions of the agreement:
5. (b) Overriding commissionIn addition to the above commission
American will pay Orient Air Services an overriding commission of
3% of the tariff fares and
charges for all sales of transportation over American's service by
Orient Air Service or its sub-agents.
13. Termination
American may terminate the Agreement on two days' notice in the
event Orient Air Services is unable to transfer to the United States
the funds payable by Orient Air Services to American under this
Agreement. Either party may terminate the Agreement without cause
by giving the other 30 days' notice by letter, telegram or cable.
4. Remittances: Orient Air Services shall remit in United States
dollars to American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled hereunder...
All monies collected by Orient Air Services for transportation sold
hereunder on American's ticket stock less applicable commissions to
which Orient Air Services is entitled hereunder, are the property of
American and shall be held in trust by Orient Air Services until
satisfactorily accounted for to American.
11 May 1981 it was alleged that Orient Air failed to promptly remit the
net proceeds of sales for the months of January to March 1981 in the
amount of US 254,000. American Air undertook the collection of the
proceeds of tickets sold and terminated their agreement.
Orient Air counterclaimed that American Air still owed them a balance in
unpaid overriding commission. The trial court rendered a decision in favor
of Orient Air:
1. Dismissing the Complaint
2. Holding the Termination Illegal and Improper
3. Ordering American Air to reinstate Orient Air
4. Ordering American Air to pay the overriding commission
CA affirmed with modifications.
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |2
ISSUE/ RULING:
W/N Orient Air is entitled to the Orient Air is entitled to the 3% overriding
commission covering the total revenue of American Air. YES
Yes, the agreement, when interpreted as a whole, entitles Orient Air to the 3%
overriding commission based on the total revenue of American Air. As the
designated exclusive General Sales Agent of American Air, Orient Air was
responsible for the promotion and marketing of American Air's services for air
passenger transportation, and the solicitation of sales therefor.
In return for such efforts and services, Orient Air was to be paid commissions of
two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares
and charges from sales by Orient Air when made on American Air ticket stock; and
second, an overriding commission of 3% of tariff fares and charges for all sales of
passenger transportation over American Air services. The latter type of
commissions would accrue for sales of American Air services made not on its ticket
stock but on the ticket stock of other air carriers sold by such carriers or other
authorized ticketing facilities or travel agents.
WHETHER THE RULING OF THE TRIAL COURT AND COURT OF APPEALS,
COMPELLING AMERICAN AIR TO REINSTATE ORIENT AIR AS A GENERAL
SALES AGENT, WAS PROPER NO
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." Thus, the SC set aside the portion of the ruling of the
respondent appellate court reinstating Orient Air as general sales agent of
American Air.
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TAN V. GULLAS (2002)
Agency Distinguished from Brokerage
FACTS:
Souses Eduardo and Norma Gullas were the registered owners of a
piece of land in Cebu.
They executed a Special Power of Attorney authorizing Manuel Tan, a
licensed real estate broker, and his associates Gregg M. Tecson and
Alexander Saldaa, to negotiate for the sale of the land at P550/sqm, at a
commission of 3% of the gross price. The power of attorney was non-
exclusive and effective for one month from June 29, 1992.
Tan contacted the Sisters of Mary of Banneaux, Inc., a religious
organization interested in acquiring a property. The Sisters, who had
already seen and inspected the land, found the same suitable for their
purpose and expressed their desire to buy it. However, they requested
that the selling price be reduced from P550/sqm to P530/sqm.
Spouses Gullas agreed to sell the property to the Sisters of Mary for
P200/sqm.
Petitioners Tan, Tecson and Saldaa went to see Respondent Spouses
who refused to pay the brokers fee and alleged that another group of
agents was responsible for the sale of land to the Sisters of Mary.
Petitioners filed a complaint against the defendants for recovery of their
brokers fee. They alleged that they were the efficient procuring cause
in bringing about the sale of the land, but that their efforts in
consummating the sale were frustrated by the respondents who, in
evident bad faith, malice and in order to evade payment of brokers fee,
dealt directly with the buyer whom petitioners introduced to them.
Respondents countered that it was another broker, Roberto Pacana,
who introduced the property to the Sisters of Mary.
The lower court ruled in favor of Petitioners. The CA reversed the
decision of the lower courts and dismissed the complaint.
no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him. x x x a broker is one
whose occupation is to bring the parties together, in matters of trade,
commerce or navigation." The petitioners were responsible for the
introduction of the representatives of the Sisters of Mary to respondent.
As correctly observed by the trial court, the argument of the private
respondents that Pacana was the one entitled to the stipulated 3%
commission is untenable, considering that it was the petitioners who
were responsible for the introduction of the representatives of the Sisters
of Mary to private respondent Eduardo Gullas.
Private respondents failed to prove their contention that Pacana began
negotiations with private respondent Norma Gullas way ahead of
petitioners. They failed to present witnesses to substantiate this claim.
There was no dispute as to the role that petitioners played in the transaction.
"An agent receives a commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made."
Clearly, therefore, petitioners, as brokers, should be entitled to the commission
whether or not the sale of the property subject matter of the contract was concluded
through their efforts. Thus, Petitioners are entitled to the 3% brokerage commission
based on the actual purchase price which the land was sold for P200/sqm.

ISSUES:
1. Whether or not the petitioners are entitled to the brokerage 3%
commission.
2. An agent distinguished from a broker.

HELD:

The records show that petitioner Tan is a licensed real estate broker, and
other petitioners his associates.

"Broker" as "one who is engaged, for others, on a commission,

negotiating contracts relative to property with the custody of which he has
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MACONDRAY & CO V. SELLNER (1916)
Agency Distinguished from Brokerage
FACTS:
George Sellner, a real estate broker, sold a parcel of land to Macondray
& Co., Inc. for P17,175. The agreement to purchase was conditioned on
the delivery of a Torrens Title. In the meantime the land was flooded by
high tides, and the plaintiff company became highly dissatisfied with its
purchase because the land was unsuited for use of coal-yard and
Company requested Sellner to find another purchaser.
Sellner found Anthonio Barreto, a purchaser, who was willing to pay
P18,892.50 for the land.
Macondray advised Sellner that he must consummate the sale and
collect the purchase money without delay upon Barettos return to
Manila. Young, who was the general manager of the company, notified
defendant that unless the purchase price was paid before five o'clock of
2 September 1912, same afternoon the deal would be off.
ISSUE: Whether the company had the right to terminate the negotiations at the
time indicated by its manager and direct its real estate not make the sale of Barretto
after the hour indicated NO
HELD:
The court held that the company had no cause of action for monetary damages
against real estate agent. The court does not mean to question the general doctrine
as to the power of the principal to revoke the authority of his agent at will, in the
absence of a contract fixing the duration of the agency, subject to some exceptions.
The real estate broker has the right to be protected against arbitrary revocation
of his agency, without remuneration for services rendered in finding a suitable
purchaser prior to the revocation. When success was practically certain and
immediate, it would be the height of injustice to permit the principal then to
withdraw the authority and terminate the agency as against an express provision
of the contract (in this case, the time fixed by the manager) and reap the benefit of
the agent's labors, without being liable to him for his commissions.
In this case, the plaintiff company could not lawfully terminate the negotiations at
the time it attempted to do so and thereafter decline to convey the land to Barretto,
who had accepted an offer of sale made to him by the plaintiff's duly authorized
agent, subject only to an examination of the documents of title, and stood ready to
pay the purchase price upon the delivery of the duly executed deed of conveyance
and other necessary documents of title.
In conclusion, the court held that the plaintiff company's letter of September 2,
1912 demanding payment before five o'clock of the afternoon of that day, under
penalty of the cancellation of its agreement to sell, was an arbitrary unreasonable
attempt to deny to the purchaser the reasonable opportunity to inspect the
documents of title, to which he was entitled by virtue of the express agreement of
the plaintiff company's agent before any attempt was made to revoke his agency.
It follows that Barretto's right to enforce the agreement to sell was in no wise
affected by the attempt of the plaintiff company to "cancel" the agreement; and that
the plaintiff company suffered no damage by the consummation of the agreement
by the acceptance of the stipulated purchase price by the defendant real estate
agent.

The court further ruled that at the time fixed by the manager of the plaintiff
company for the termination of the negotiations, the defendant real estate agent
had already earned the commissions agreed upon, and could not be deprived
thereof by the arbitrary action of the plaintiff company in declining to execute the
contract of sale for some reason personal to itself.

The business of a real estate broker or agent, generally, is only to find a purchaser,
and the settled rule as stated by the courts is that, in the absence of an express
contract between the broker and his principal, the implication generally is that the
broker becomes entitled to the usual commissions whenever he brings to his
principal a party who is able and willing to take the property and enter into a valid
contract upon the terms then named by the principal, although the particulars may
be arranged and the matter negotiated and completed between the principal and
the purchaser directly. Lunney v. Healey
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GUARDEX V. NLRC (1990) to do with the sale of the fire truck, and is not therefore entitled to any commission
Agency distinguished from Brokerage at all.

FACTS: Even if Orbeta is considered to have been Escandors agent, even if Orbeta is
Marcelina Escandor engaged under the name of Guardex Enterprises, considered to have been Escandors agent for the time he was supposed to "follow
manufactures and sells fire-fighting equipment and the building and up" the offer to sell, such agency would have been deemed revoked upon the
fabrication of fire trucks. resumption of direct negotiations between Escandor and Rubberworld, Orbeta
Jumbee Orbeta, a freelance salesman, and Escandor entered into an having in the meantime abandoned all efforts (if indeed any were exerted) to
agreement where Orbeta was to look after the pending proposal to tell a secure the deal in Escandors behalf.
firetruck to Rubberworld in exchange for P250 representation expenses.
Orbeta then sold to other individuals some of Escandors fire
extinguishers and then dropped out of sight.
Seven months after, Escandor was able to conclude the contract with
Rubberworld and at his point, Orbeta suddenly appeared and asked for
his commission. Escandor refured saying that he had nothing to do with
the offer, negotiation and consummation of the sale.
Orbeta filed a complaint against Escandor with the Ministry of Labor,
where the Labor Arbiter rendered judgment in his favor, which was also
affirmed by the NLRC.

ISSUE: Whether an implied agency had been created between Escandor and
Orbeta NO

HELD:

Escandor denies that she had ever given Orbeta any verbal authority to offer a
fire truck to Rubberworld. All that she consented to was for Orbeta to "follow
up" that pending offer. In truth, it does not even appear that on the strength of
this "arrangement" vague as it was Orbeta undertook the promised follow-
up at all. Furthermore, it seems fairly evident that the "representation allowance"
of P250 was meant to cover the expenses for the "follow-up" offered by Orbeta
an ambiguous fact which does not of itself suggest the creation of an agency and
is not at all inconsistent with the theory of its absence in this case.

Even a finding that under these circumstances, an agency had indeed been
constituted will not save the day for Orbeta, because nothing in the record tends
to prove that he succeeded in carrying out its terms or even as much as
attempted to do so.

The terms of Escandors letter of August 14, 1978 assuming that it was indeed
an "authority to sell," as Orbeta insists are to the effect that entitlement to the
P15,000 commission is contingent on the purchase by a customer of a fire
truck, the implicit condition being that the agent would earn the commission
if he was instrumental in bringing the sale about. Orbeta certainly had nothing
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MANOTOK BROTHERS INC V. CA
Doctrine of Efficient Procuring Cause
FACTS:
Manotok Brothers Inc. is the owner of a parcel of land and building
which were formerly leased by the City of Manila and used by the Claro
M. Recto High School at M.F. Jhocson Street, Sampaloc Manila.
By means of a letter, Petitioner authorized Private Respondent Salvador
Saligumba to negotiate with the City of Manila the sale of the property
for not less than P425,000 where he will be paid by the petitioner a 5%
commission in the event the sale is consummated and paid.
2 extensions were made regarding the authorization and a final letter was
signed authorizing Saligumba to finalize and consummate the sale of the
property for not less than P410,000.
Ordinance No. 6603 was passed 183 days after the last letter of
authorization, appropriating the sum of P410,816 for the purchase of the
property which respondent was authorized to see.
On 14 January 1969, the deed of sale was signed and the purchase price
was fully satisfied thereafter. However, Saligumba never received any
commission due to the refusal of petitioner to pay because petitioner does
not recognize his role as agent in transaction.
Saligumba filed a complaint against petitioner alleging that he had
successfully negotiated the sale of the property, that it was because of
his efforts that the Municipal Board of Manila passed Ordinance No. 6603
which appropriated the sum for the payment of the property subject of the
sale.
The trial court rendered judgement in favor of respondent, sentencing
petitioner to pay respondent of his commission fees and attorneys fees.
CA affirmed. MR denied.
agent, despite the expiration of his authority, when a sale was finally
consummated.
While in Prats vs. Court of Appeals, the agent was not even the
efficient procuring cause in bringing about the sale, unlike in the case
at bar, it was still held therein that the agent was entitled to compensation.
In the case at bar, private respondent 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.
When there is a close, proximate and causal connection between
the agent's efforts and labor and the principal's sale of his property,
the agent is entitled to a commission.
The Supreme Court agree with respondent Court that the City of Manila
ultimately became the purchaser of petitioner's property mainly through
the efforts of private respondent. Without discounting the fact that
when Municipal Ordinance No. 6603 was signed by the City Mayor on
May 17, 1968, private respondent's authority had already expired, it is to
be noted that the ordinance was approved on April 26, 1968 when
private respondent's authorization was still in force. Moreover, the
approval by the City Mayor came only three days after the expiration of
private respondent's authority. It is also worth emphasizing that from the
records, the only party given a written authority by petitioner to negotiate
the sale from July 5, 1966 to May 14, 1968 was private respondent.

ISSUE: Whether or not private respondent is entitled to the five percent (5%)
agent's commission

HELD:
At first sight, it would seem that private respondent is not entitled to any
commission as he was not successful in consummating the sale between
the parties, for the sole reason that when the Deed of Sale was finally
executed, his extended authority had already expired. By this alone,
one might be misled to believe that this case squarely falls within the
ambit of the established principle that a broker or agent is not entitled to
any commission until he has successfully done the job given to him.
The case would reveal that it falls within the exception in the case of
Prats vs. Court of Appeals, where the Court ruled in favor of claimant-

INLAND REALTY V. CA
Doctrine of Efficient Procuring Cause
FACTS:
Gregorio Araneta Inc., through Assistant General Manager Eduque
granted to plaintiffs Inland Realty Investment Service, Inc and Roman
M. De Los Reyes a 30-day authority to sell its 9,800 shares of stock in
Architects Bldg, Inc. for P1,000 per share payable in 5 years.
Inland Realty sent a proposal to Stanford Systems which counter
proposed that 9,800 shares offered at P1,000 per share payable in 5
years at 12% interest until fully paid.
Araneta Inc, thru its Assistant General Manager J. Armando Eduque,
replied that the price offered by Stanford was too low and suggested
that plaintiffs see if the price and terms of payment can be improved upon
by Stanford.
Note that the authority to seek was extended for about three times.
o Oct. 2, 1975, for 30 days; Oct. 28, 1975 for 30 days; and lastly,
Dec. 2, 1975 for 30 days from said date
On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock [in]
Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for P13,500,000.00
On September 8, 1977, plaintiffs demanded formally from defendants,
through a letter of demand, for payment of their 5% broker's commission
at P13,500,000.00 or a total amount of P675,000.00 x x x which was
declined by defendants on the ground that the claim has no factual or
legal basis.
Trial court dismissed petitioners' complaint for collection of unpaid
broker's commission
After petitioners authority to sell expired 30 days from Dec. 2, 1975, or
on January 1, 1976, the sales transaction was abandoned and
petitioners were no longer privy to the consummation and
documentation thereof
CA: Trial Court decision affirmed
Petitioners' agency contract and authority to sell expired on January
1,1976
Consummation of the sale to Stanford on July 8, 1977 or more than 1
year and 5 months after petitioners' agency contract and authority to sell
expired
ISSUE: Whether Inland Realty and De Los Reyes is entitled to their brokers
commission despite the expiration of the contract of agencyNO
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |7
HELD:
Petitioners are not automatically entitled to the brokers commissions merely upon
securing for and introducing to Araneta, Inc. the buyer Stanford.
Petitioners resorted to a campaign for an automatic and blanket entitlement to
brokerage commission upon doing nothing but submitting to private respondent
Araneta, Inc., the name of Stanford as prospective buyer. Petitioners did not
succeed in outrightly selling said shares under the predetermined terms and
conditions set out by Araneta, Inc. They were also unable to dissuade Stanford
from haggling for the price of P1,000.00 per share with the balance of 50% of the
total purchase price payable in five (5) years.
When petitioners' authority to sell was subsisting, petitioners had nothing to show
that they actively served their principal's interests, pursued to sell the shares in
accordance with their principal's terms and conditions, and performed substantial
acts that proximately and causatively led to the consummation of the sale to
Stanford.
The lapse of more than 1 year and 5 months between the expiration of
petitioners' authority to sell and the consummation of the sale to Stanford,
to be a significant index of petitioners' non-participation in the really critical
events leading to the consummation of said sale, i.e., the negotiations on the
asking price, the finalization of the terms and conditions of the sale, the
drafting of the deed of sale, the processing of pertinent documents, and the
delivery of the shares of stock to Stanford.
In the context of the utter lack of evidence of petitioners' involvement in the
negotiations between Araneta, Inc. and Stanford during that period and in the
subsequent processing of the documents pertinent to said sale, it becomes
undeniable that the CA was correct in affirming the trial court's dismissal of
petitioners' claim for unpaid brokerage commission.
Petitioners were not the efficient procuring cause in bringing about the sale in
question on July 8, 1977 and are not entitled to the stipulated broker's commission
of 5% on the total price.

MEDRANO V. CA (2005)
Doctrine of Efficient Procuring Cause
FACTS:
Medrano, the Vice-Chairman of Ibaan Rural Bank, asked Mrs. Flor to
look for a buyer of a foreclosed asset of the bank, 17-hectare mango
plantation priced at P2,200,000.
Mr. Lee, a business man, and Mrs. Borbon, a real estate broker, met
through a previous transaction regarding an 8-hectar property in
Batangas planted with atis trees. Lee expressed that he preferred a land
with mango trees.
Mrs. Borbon related the same to her business associates where Lee
advised that her cousin-in-law had a mango plantation for sale. Borbon
told Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property, which Medrano executed in favor of
Borbon and Antonio and Flor and Karasig, with a commission of 5% of
the total purchase price agreed upon.
An ocular inspection was arranged twice but never materialized because
of inclement weather and availability of a car. However, Lee was able to
see the property and later informed Antonio, after several follow-ups, that
he already purchased the property and had made a down payment. Lee
asked Antonio if they had already received their commission but the latter
answered in the negative.
The sale of the property was consummated, the respondents asked from
the petitioners their commission, or 5% of the purchase price. The
petitioners refused to pay and offered a measly sum of P5,000.00 each.
Hence, the petition.
ISSUE:
1. Whether or not the letter of authority is binding and enforceable against
the defendant Bank only or both defendants YES
2. Whether or not the plaintiffs are entitled to any commission for the sale of
the subject property YES
HELD:
Procuring cause is meant to be the proximate cause. The term procuring
cause, in describing a brokers activity, refers to a cause originating a
series of events which, without break in their continuity, result in
accomplishment of prime objective of the employment of the broker
producing a purchaser ready, willing and able to buy real estate on the
owners terms.
A broker will be regarded as the procuring cause of a sale, so as to be
entitled to commission, if his efforts are the foundation on which the
negotiations resulting in a sale are begun. The broker must be the efficient
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |8
agent or the procuring cause of the sale. The means employed by him
and his efforts must result in the sale. He must find the purchaser, and
the sale must proceed from his efforts acting as broker.
In this case, record shows that the respondents were instrumental in the
sale of the property to Lee. Without their intervention, no sale could have
been consummated. They were the ones who set the sale of the subject
land in motion. Significantly, too, Ms. Teresa Ganzon testified that there
were no other persons other than the respondents who inquired from her
about the sale of the property to Lee. It can thus be readily inferred that
the respondents were the only ones who knew about the property for sale
and were responsible in leading a buyer to its consummation. When
there is a close, proximate and causal connection between the
brokers efforts and the principals sale of his property, the broker is
entitled to a commission.
The petitioners insist that the respondents are not entitled to any
commission since they did not actually perform any acts of negotiation as
required in the letter-authority. They refuse to pay the commission since
according to them, the respondents participation in the transaction was
not apparent, if not nil. The respondents did not even look at the property
themselves; did not introduce the buyer to the seller; did not hold any
conferences with the buyer, nor take part in concluding the sale. For the
non-compliance of this obligation to negotiate, the petitioners argue, the
respondents are not entitled to any commission.
It was not the intention of Medrano to expect the respondents to do just
that (to negotiate) when he issued the letter of authority. The clear
intention is to reward the respondents for procuring a buyer for the
property. Before negotiating a sale, a broker must first and foremost
bring in a prospective buyer. It has been held that a broker earns his
pay merely by bringing the buyer and the seller together, even if no sale
is eventually made.
The essential feature of a brokers conventional employment is
merely to procure a purchaser for a property ready, able, and willing
to buy at the price and on the terms mutually agreed upon by the
owner and the purchaser.
Whether or not they participated in the negotiations of the sale is of no
moment. Armed with an authority to procure a purchaser and with a
license to act as broker, we see no reason why the respondents cannot
recover compensation for their efforts when, in fact, they are the procuring
cause of the sale.
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LIM V. CA Consequently, when the agent signs her signature on any face of the
How agency may be constituted receipt showing that she receives the jewelry for her to sell on
commission, she is bound to the obligation of an agent.
FACTS:
On 8 October 1987, Rosa Lim who had came from Cebu, received in
trust from Suarez two pieces of jewelry: one (1) 3.35 carat diamond ring
worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold
on commission basis. This was reflected in a receipt. The transaction
took place at the Sir Williams Apartelle in Timog Avenue, Quezon City,
where Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky Suarez,
but failed to return the diamond ring or to turn over the proceeds thereof
if sold
Despite repeated oral and written demands, Rosa failed to return the ring.
Rosa alleged that she had returned both the ring and the bracelet and
thus no longer had any liability to Mrs. Suarez.
Vicky Suarez filed a complaint for estafa for which Lim stands convicted.

ISSUE: Whether the real transaction between Rosa Lim and Vicky Suarez was a
Contract of Agency to sell on commission as set out in the receipt or a sale on
credit? Contract of Agency to Sell on Commission

HELD:
While Rosa Lims signature indeed appears on the upper portion of the
receipt immediately below the description of the items taken, this fact
does not have the effect of altering the terms of the transaction from a
contract of agency to sell on commission basis to a contract of sale.
There are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity
of the contract; the second is when it is required to make the contract
effective as against the third parties such as those mentioned in Articles
1357 and 1358; and the third is when the form is required for the purppose
of proving the existence of the contract, such as those provided in the
Statute of Frauds in Article 1403. A contract of agency to sell on
commission basis does not belong to any of these three categories,
hence, it is valid and enforceable in whatever form it may be entered
into.
Furthermore, there is only one type of legal instrument where the law
strictly prescribes the location of the signature of the parties thereto
notarial wills.
In the case before us, the parties did not execute a notarial will but a
simple contract of agency to sell on commission basis, thus making the
position of petitioners signature thereto immaterial.

BORDADOR V. LUZ
How agency may be constituted
FACTS:
Jose and Lydia Borador are engaged in business of purchase and sale
of jewelry and Brigida Luz was their regular customer.
From April 12 to September 4, 1987, the brother of Brigida, Narciso
Deganos, received several pieces of gold jewelry from petitioners
amount to P382,816.
o 17 receipts:
11 Evelyn Aquino, niece of Deganos
6 Brigida Luz
Deganos was to sell the items at a profit and remit the proceeds and
return the unsold items to petitioners. Deganos remitted only the sum of
P53,207.00. He neither paid the balance of the sales proceeds, nor did
he return any unsold item to petitioners.
By January 1990, the total of his unpaid account to petitioners, including
interest, reached the sum of P725,463.98.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in
the case, appeared as a witness for Deganos and togetherher husband
and Deganos, signed a compromise agreement with petitioners. In that
compromise agreement, Deganos obligated himself to pay
petitioners, on installment basis, the balance of his account plus interest
thereon. However, he failed to comply with his aforestated undertakings.
Petitioners instituted a civil case against Deganos and Brigida D. Luz for
recovery of a sum of money and damages, with an application for
preliminary attachment. Ernesto Luz was impleaded therein as the
spouse of Brigida. Four years later, or on March 29, 1994, Deganos and
Brigida D. Luz were charged with estafa.
During the trial of the civil case, petitioners claimed that Deganos acted
as the agent of Brigida D. Luz when he received the subject items of
jewelry and, because he failed to pay for the same, Brigida, as principal,
and her spouse are solidarily liable with him therefor.
Deganos asserted that it was he alone who was involved in the
transaction with the petitioners; that he neither acted as agent for nor
was he authorized to act as an agent by Brigida D. Luz,
notwithstanding the fact that six of the receipts indicated that the items
were received by him for the latter. He further claimed that he never
delivered any of the items he received from petitioners to Brigida.
The trial court also found that it was petitioner Lydia Bordador who
indicated in the receipts that the items were received by Deganos for
Evelyn Aquino and Brigida D. Luz. Said court was persuaded that Brigida
D. Luz was behind Deganos, but because there was no memorandum to
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |10
this effect, the agreement between the parties was unenforceable under
the Statute of Frauds.
Absent the required memorandum or any written document connecting
the respondent Luz spouses with the subject receipts, or authorizing
Deganos to act on their behalf, the alleged agreement between
petitioners and Brigida D. Luz was unenforceable. CA Affirmed.
ISSUE: Whether the spouses are liable to petitiones for the latters claim for money
and damages. NO
Despite the fact that the evidence does not show that they signed any of
the subject receipts or authorized Deganos to receive the items of jewelry
on their behalf
HELD:
The evidence does not support the theory of petitioners that Deganos was
an agent of Brigida D. Luz and that the latter should consequently be held
solidarily liable with Deganos in his obligation to petitioners. While the
quoted statement in the findings of fact of the assailed appellate decision
mentioned that Deganos ostensibly acted as an agent of Brigida, the
actual conclusion and ruling of the Court of Appeals categorically stated
that, Brigida Luz never authorized her brother Deganos to act for and
in her behalf in any transaction with Petitioners. It is clear, therefore, that
even assuming arguendo that Deganos acted as an agent of Brigida,
the latter never authorized him to act on her behalf with regard to
the transactions subject of this case.
The basis for agency is representation. Here, there is no showing that
Brigida consented to the acts of Deganos or authorized him to act on her
behalf, much less with respect to the particular transactions involved.
Petitioners attempt to foist liability on respondent spouses through the
supposed agency relation with Deganos is groundless and ill-advised.
It was grossly negligent of petitioners to entrust to Deganos not once or
twice but at least 6 occasions several pieces of jewelry of substantial
value without requiring a written authorization from his alleged principal.
Neither an express or an implied agency was proven to have existed
between Deganos and Luz. Petitioners cannot seek relief from the effects
of their negligence by conjuring a supposed agency.
The records show that neither an express nor an implied agency was
proven to have existed between Deganos and Brigida D. Luz. Evidently,
petitioners, who were negligent in their transactions with Deganos, cannot
seek relief from the effects of their negligence by conjuring a supposed
agency relation between the two respondents where no evidence
supports such claim.

SALVADOR V. RABAJA
Agency is not presumed to exist
FACTS:
Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were
looking for a buyer for the latters parcel of land situated in Mandaluyong City.
Petitioner Herminia Salvador (Herminia) personally introduced Gonzales (the
sellers agent) to them as the administrator of the said property.
On July, 3, 1998, Spouses Rabaja made an initial payment of P48,000.00 to
Gonzales in the presence of Herminia. Gonzales then presented the SPA,
executed by Rolando Salvador (Rolando). On the same day, the parties executed
the Contract to Sell which stipulated that for a consideration of P5,000,000.00,
Spouses Salvador sold, transferred and conveyed in favor of Spouses Rabaja the
subject property. Spouses Rabaja made several payments totalling P950,000.00,
which were received by Gonzales pursuant to the SPA provided earlier as
evidenced by the check vouchers signed by Gonzales and the improvised receipts
signed by Herminia.
Later however, Spouses Salvador complained to Spouses Rabaja that they did not
receive any payment from Gonzales. This prompted Spouses Rabaja to suspend
further payment of the purchase price; and as a consequence, they received a
notice to vacate the subject property from Spouses Salvador for non-payment of
rentals.
Thereafter, Spouses Salvador instituted an action for ejectment against Spouses
Rabaja. In turn, Spouses Rabaja filed an action for rescission of contract against
Spouses Salvador and Gonzales.
The MTC ruled in favor of Spouses Salvador finding that valid grounds existed for
the eviction of Spouses Rabaja from the subject property and ordering them to pay
back rentals. Spouses Rabaja appealed to the RTC which reversed the MTC. The
RTC found that no lease agreement existed between the parties.
Thereafter, Spouses Salvador filed an appeal with the CA and the CA ruled in favor
of Spouses Salvador and reinstated the MTC ruling ejecting Spouses Rabaja. Not
having been appealed, the CA decision became final and executory.
Meanwhile, the rescission case filed by Spouses Rabaja against Spouses
Salvador and Gonzales was also raffled to the same RTC branch. In their
complaint, Spouses Rabaja demanded the rescission of the contract to sell praying
that the amount of P950,000.00 they previously paid to Spouses Salvador be
returned to them.
Spouses Salvador filed their answer with counterclaim and cross-claim contending
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |11
that there was no meeting of the minds between the parties and that the SPA in
favor of Gonzales was falsified. They further averred that they did not receive any
payment from Spouses Rabaja through Gonzales. In her defense, Gonzales filed
her answer stating that the SPA was not falsified and that the payments of Spouses
Rabaja amounting to P950,000.00 were all handed over to Spouses Salvador.
The case was reraffled to RTC-Br. 214 and a decision was rendered in favor of
Spouses Rabaja. It held that the signature of Spouses Salvador affixed in the
contract to sell appeared to be authentic. It also held that the contract, although
denominated as contract to sell, was actually a contract of sale because Spouses
Salvador, as vendors, did not reserve their title to the property until the vendees
had fully paid the purchase price. Since the contract entered into was a reciprocal
contract, it could be validly rescinded by Spouses Rabaja, and in the process, they
could recover the amount of P950,000.00 jointly and severally from Spouses
Salvador and Gonzales. The RTC stated that Gonzales was undoubtedly the
attorney-in-fact of Spouses Salvador absent any taint of irregularity. Spouses
Rabaja could not be faulted in dealing with Gonzales who was duly equipped with
the SPA from Spouses Salvador.
Gonzales filed a motion for partial reconsideration, but it was denied by the RTC-
Br. 114. Undaunted, Spouses Salvador and Gonzales filed an appeal before the
CA.
The CA then affirmed the decision of the RTC-Br. 114 with modifications. It ruled
that the contract to sell was indeed a contract of sale and that Gonzales was
armed with an SPA and was, in fact, introduced to Spouses Rabaja by Spouses
Salvador as the administrator of the property. Spouses Rabaja could not be
blamed if they had transacted with Gonzales.
The CA, however, ruled that Gonzales was not solidarily liable with Spouses
Salvador. The agent must expressly bind himself or exceed the limit of his authority
in order to be solidarily liable. It was not shown that Gonzales as agent of Spouses
Salvador exceeded her authority or expressly bound herself to be solidarily liable.
ISSUE: W/N Gonzales can validly receive payments from Spouses Rabaja. YES
HELD:
The Court agrees with the courts below in finding that the contract entered into by
the parties was essentially a contract of sale which could be validly rescinded.
Spouses Salvador insist that they did not receive the payments made by Spouses
Rabaja from Gonzales which totalled P950,000.00 and that Gonzales was not their
duly authorized agent. These contentions, however, must fail in light of the
applicable provisions of the New Civil Code which state:
 JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |12

Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms
of the power of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the principal and the
agent.
xxxx
Art. 1902. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions
as regards the agency. Private or secret orders and instructions of the principal do
not prejudice third persons who have relied upon the power of attorney or
instructions shown them.
xxxx
Art. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
Persons dealing with an agent must ascertain not only the fact of agency, but also
the nature and extent of the agents authority. A third person with whom the agent
wishes to contract on behalf of the principal may require the presentation of the
power of attorney, or the instructions as regards the agency. The basis for agency
is representation and a person dealing with an agent is put upon inquiry and must
discover on his own peril the authority of the agent.
as the administrator of the subject property. By their own ostensible acts, Spouses
Salvador made third persons believe that Gonzales was duly authorized to
administer, negotiate and sell the subject property. This fact was even affirmed by
Spouses Salvador themselves in their petition where they stated that they had
authorized Gonzales to look for a buyer of their property. It is already too late in the
day for Spouses Salvador to retract the representation to unjustifiably escape their
principal obligation.
As correctly held by the CA and the RTC, considering that there was a valid SPA,
then Spouses Rabaja properly made payments to Gonzales, as agent of Spouses
Salvador; and it was as if they paid to Spouses Salvador. It is of no moment, insofar
as Spouses Rabaja are concerned, whether or not the payments were actually
remitted to Spouses Salvador. Any internal matter, arrangement, grievance or
strife between the principal and the agent is theirs alone and should not affect third
persons. If Spouses Salvador did not receive the payments or they wish to
specifically revoke the SPA, then their recourse is to institute a separate action
against Gonzales.

According to Article 1990 of the New Civil Code, insofar as third persons are
concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power of attorney, as written.
In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they
transacted with her principal. And when Gonzales presented the SPA to Spouses
Rabaja, the latter had no reason not to rely on it.

The law mandates an agent to act within the scope of his authority which what
appears in the written terms of the power of attorney granted upon him. The Court
holds that, indeed, Gonzales acted within the scope of her authority. The SPA
precisely stated that she could administer the property, negotiate the sale and
collect any document and all payments related to the subject property. As the agent
acted within the scope of his authority, the principal must comply with all the
obligations. As correctly held by the CA, considering that it was not shown that
Gonzales exceeded her authority or that she expressly bound herself to be liable,
then she could not be considered personally and solidarily liable with the principal,
Spouses Salvador.

Perhaps the most significant point which defeats the petition would be the fact that
it was Herminia herself who personally introduced Gonzalez to Spouses Rabaja
 JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |13

COUNTRY BAKERS V. KEPPEL

Agency by estoppel with respect to third parties
FACTS:
Unimarine Shipping Lines, Inc. (Unimarine) is a corporation engaged in
the shipping industry. Unimarine contracted the services of Keppel Cebu
Shipyard for dry-docking and ship repair works on its vessel, the MV
Pacific Fortune.
Cebu Shipyard issued a bill to Unimarine in consideration for its services.
They negotiated to a reduction to P3.85M and terms of this agreement
were embodied in Cebu Shipyards letter to the President/GM of
Unimarine. In compliance with the agreement, Unimarine secured from
Country Bankers Insurance Corp. (CBIC), through its agent, Bethoven
Quinain (Quinain), a Surety Bond of P3M. The expiration of the Surety
Bond was extended through an Endorsement attached to the Surety
Bond.
Cebu Shipyard sent Unimarine letters, demanding it to settle its account.
Due to Unimarines nonpayment, Cebu Shipyard asked the surety CBIC
to fulfill their obligations as sureties. However, CBIC alleged that the
Surety Bond was issued by its agent, Quinain, in excess of his authority.
ISSUE:
W/N the provisions of Article 1911 of the Civil Code is applicable in the present
case to hold petitioner liable for the acts done by its agent in excess of authority.
YES
Article 1911, on the other hand, is based on the principle of estoppel, which is
necessary for the protection of third persons. It states that the principal is solidarily
liable with the agent even when the latter has exceeded his authority, if the
principal allowed him to act as though he had full powers.
However, for an agency by estoppel to exist, the following must be established:
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.
An agency by estoppel, which is similar to the doctrine of apparent authority,
requires proof of reliance upon the representations, and that, in turn, needs proof
that the representations predated the action taken in reliance.
This Court cannot agree with the Court of Appeals pronouncement of negligence
on CBICs part. CBIC not only clearly stated the limits of its agents powers in their
contracts, it even stamped its surety bonds with the restrictions, in order to alert
the concerned parties. Moreover, its company procedures, such as reporting
requirements, show that it has designed a system to monitor the insurance
contracts issued by its agents. CBIC cannot be faulted for Quinains deliberate
failure to notify it of his transactions with Unimarine. In fact, CBIC did not even
receive the premiums paid by Unimarine to Quinain.

HELD:

CBIC is liable for the surety bond. CBIC could not be allowed to disclaim liability
because Quinains actions were within the terms of the special power of attorney
given to him. Our law mandates an agent to act within the scope of his authority.
The scope of an agents authority is what appears in the written terms of the power
of attorney granted upon him.

Under Articles 1898 and 1910, an agents act, even if done beyond the scope of
his authority, may bind the principal if he ratifies them, whether expressly or tacitly.
It must be stressed though that only the principal, and not the agent, can ratify the
unauthorized acts, which the principal must have knowledge of.

Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that
it was unaware of the existence of Surety Bond and Endorsement. There were no
allegations either that CBIC should have been put on alert with regard to Quinains
business transactions done on its behalf. It is clear, and undisputed therefore, that
there can be no ratification in this case, whether express or implied.

REPUBLIC V. BANEZ
Agency by estoppel with respect to third parties
FACTS:
- Respondents Banez, Valera, and Hojilla offered for sale a parcel of land
in Barangay Calaba to Cellophil Resources (CRC
- They executed a Letter Agreement, irrevocably giving the CRC to option
to purchase the property which CRC accepted
- Provisions of the Letter Agreement:
- Co-owners shall take all steps to cause the CRC Portion to be
brought under the operation of R.A. No. 496
- To cause the issuance in their name of the original certificate of
title
- All to be accomplished within a reasonable time from date hereof
- Co-owners confirm permission to CRCs entry, construction of
improvements, occupancy of the property
- An absolute deed of sale shall be executed in favor of CRC
- The same shall be delivered together with the original cert of title
upon payment of purchase price
- Payment shall only be made by CRC upon presentation of
certificate/s and clearance/s
- CRC paid cash advances to co-owners (217,000 out of purchase price of
400,000)
- CRC constructed staff houses and introduced improvements
- Co-owners went abroad so they executed a Special Power of Atty (SPA)
in favor of Hojilla
- Hojilla was authorized to do the ff:
- Take all steps to cause the lot to be brought under the operation
of R.A. 496 and to cause the issuance of the original certificate
of title in favor of CRC
- Do all and things to execute all papers and docs of whatever
nature or kind required for the accomplishment of such purpose
- CRC stopped its operation company was turned over to the Asset
Privitazion Trust (APT) which is now the Privatization and
Management Office (PMO) represented by the Republic of the PH
- Subsequently, respondents did the ff:
- Declared the property as Banez property again
rd
- Rented out to 3 parties the houses CRC constructed
- Ordered their guards to prohibit petitioner from entering the
compound
- Petitioner filed a complaint for specific performance, recovery of
possession, and damages
- Petitioner alleged that respondents were unjustified in dispossessing
petitioners and that they violated their undertaking in their agreement to
permit entry
JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |14
- Petitioner also claimed that repeated demands have been made to
respondents to vacate and turnover the property as seen by letters they
sent
- Hojilla filed a Motion to Dismiss which the RTC granted
- RTC ruling:
- Letters petitioners sent to respondents were not demands for
respondents to comply with their obligation to deliver title
- Because they were not demands, the action of petitioners were
barred by the Statute of Limitations
- Since the written contract was executed on Dec 17, 1981, the
complaint was only filed 18 years after
- CA ruling
- Affirming the RTC ruling
- Letters were not demand letters but simply called the attention
to Hojilla to return the properties
- Hojilla was only an atty-in-fact authorized to register the
properties so it was not binding upon respondents
ISSUE: Whether the complaint for specific performance was filed beyond the
prescriptive period
HELD: No, it wasnt. Action has not prescribed.
- While there is a 10 year limitation upon which to file an action based on a
written contract, said 10 years have not expired.
- There was demand on the part of petitioners which duly interrupted the
prescriptive period, setting anew the countdown.
- Prescriptive period is interrupted when there is extrajudicial demand by
the creditors and when there is any written acknowledgment of the debt
by the debtor.
- First: Hojillas letter dated August 15, 1984:
- Hojilla updated petitioner of the status of the subject propertys
title which serves as an acknowledgment of respondents
commitment under the contract =
- written acknowledgment of the debt or obligation of
respondents. This sets anew the prescriptive period.
- Second: Petitioners letter dated May 29 1991 and October 24 1991:
- the letters were clearly demands. In view of the foregoing,
demand is hereby made upon you to return the properties and
unlock the gates, AND Demand is hereby made upon you to
discontinue such unauthorized acts and vacate the premises.
- Third: Petitioners letter to Hojilla dated July 6 1999
- Petitioner demanded Hojilla to produce the title of the subject
property
- The SPA executed in favor of Hojilla CANNOT be construed to just mean
that Hojilla was authorized solely to register the subject property
 JLYRREVERRE | BLOCK B2020 | AGENCY | ATTY. COCHINGYAN |15

- The strict construction will render the obligatory force of the

contract ineffective
- Construction is NOT a tool to prejudice or commit fraud or to
obstruct, but to attain justice
- To construct otherwise would be to defeat the juridical tie of the
Contract the vinculum juris of the parties
- It would be an absurd interpretation to say that no one was
authorized to represent respondents in the Contract
- The present case is a case of an express agency where the agent, Hojilla,
binds himself to represent another
- Because there is an express agency, Hojillas acts bind the respondents
- They are considered representations and guarantees of the
principal
- This is the very heart of agency by promissory estoppel
- Hojilla continuously represented himself as the duly authorized agent of
respondents, authorized NOT just to register the property but also
represent the respondents in their obligations in the contract
- This can be seen throughout the parties interactions
- Hojillas letter
- Hojillas assurances that petitioners obligation to pay will arise
only upon presentation of title
- Respondents are estopped by the acts and representations of their agent
- A party may not go back on his own acts and representations to the
prejudice of the party who relied upon them
- Even assuming that Hojilla exceeded his authority, the respondents are
still solitarily liable because they allowed Hojilla to act as those he had full
powers by impliedly ratifying his actions through omission
- This is the import of the principle of agency by estoppel or
the doctrine of apparent authority
- AGENCY BY ESTOPPEL / APPARENT AUTHORITY
- The principal is bound by the acts of his agent with the apparent
authority which he knowingly permits the agent to assume, or
which he holds the agent out to the public as possessing