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CASE: Areola v CA Q: Can Prudential be held liable even though it itself was defrauded
G.R. No. 95641 September 22, 1994
by its agent?
SANTOS B. AREOLA and LYDIA D. AREOLA, petitioners-appellants, vs. COURT OF A: YES. Malapit's failure to remit the premiums he received cannot
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents- constitute a defense for Prudential. The fact that Prudential itself
appellees. defrauded due to the anomalies that took place in its Baguio branch office,
such as the non-accrual of said premiums to its account, does not free the
Summary: Prudential Life cancelled the policy of Areola for non-payment same from its obligation to Areola. As held in Prudential Bank v CA:
of premiums. Prudential later found out that Areola had been paying A bank is liable for wrongful acts of its officers done in the interests
premiums, but such were not remitted to Prudential by their agent. of the bank or in the course of dealings of the officers in their
Areola then sued for damages. Prudential claims that Areola is not representative capacity but not for acts outside the scope of their
entitled to damages because Prudential offered to/actually reinstated authority. A bank holding out its officers and agent as worthy of
Areola to the policy, since reinstatement is equivalent to fulfillment of confidence will not be permitted to profit by the frauds they may
their obligation under the policy. thus be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for
FACTS: such frauds, even though no benefit may accrue to the bank
Santos Areola was a policy holder with Prudential, covering a period therefrom. Accordingly, a banking corporation is liable to innocent
from Nov. 1984 Nov. 1985. third persons where the representation is made in the course of its
Under the insurance contract, after the payment of premium, business by an agent acting within the general scope of his authority
Prudential would issue a provisional receipt, and then an official even though, in the particular case, the agent is secretly abusing his
receipt demandable if not received within 7 days. authority and attempting to perpetrate a fraud upon his principal or
In June 1985, Prudential unilaterally cancelled his personal accident some other person, for his own ultimate benefit.
insurance policy because Areola failed to pay his premiums. (Areolas
last payment was not issued an official receipt) Insurance contract is a reciprocal contract; relationahip between
A series of letters were exchanged between Prudential and Areola. parties are debtor-creditor
During this time Prudential was looking into Areolas payments. In one A contract of insurance creates reciprocal obligations for both
letter, Prudential said it would hold [Santos] covered under the policy insurer and insured. Reciprocal obligations are those which arise from
until the matter is cleared. the same cause and in which each party is both a debtor and a creditor of
Prudential later found out that Areola had in fact been paying his the other, such that the obligation of one is dependent upon the obligation
premiums but that the same were not remitted by Teofilo Malapit (a of the other. In this case, Prudential promised to give protection to the
branch manager) and that the cancellation was erroneous. Prudential insured against the risk for a consideration in the form of premiums to be
offered to reinstate his policy and extend its lifetime up to the end of paid by the latter.
the year. This offer was contained in a letter dated August 13, 1985. Under reciprocal obligations, the injured party is given the
However, on August 6, Santos Areola had already filed a case for choice between fulfillment of the obligation or rescission of the contract,
damages against Prudential. with damages in either case (Art. 1191).
The lower court ruled against Prudential, but the CA reversed, holding Thus, Prudentials argument, that reinstatement being
that Prudential in cancelling the policy was not motivated by equivalent to fulfillment of its obligation divests Areola of his claim for
negligence, malice and bad faith. The CA also found good faith on damages, is untenable.
Prudentials part when it investigated the matter, apologized to Areola
for the inconvenienced, and even forced Malapit to resign. Q: To what damages is Areola entitled?
Areola appealed, arguing that the proximate cause of the cancellation A: Nominal damages. The nature of damages to be awarded, however,
was Malapits fraudulent acts. Thus, because he was Prudentials agent, would be in the form of nominal damages. Although the erroneous
Malapits acts were not separate and distinct from Prudential. cancellation of the insurance policy constituted a breach of contract,
Prudential insists that there is no cause of action against them since the Prudential, within a reasonable time took steps to rectify the wrong
committed by reinstating Areolas insurance policy.
equitable remedy of reinstatement was granted. Reinstatement, they
Moreover, no actual or substantial damage or injury was
argue, was equivalent to their fulfillment of their obligation.
inflicted on Areola at the time the insurance policy was cancelled.

Nominal damages are "recoverable where a legal right is technically
ISSUE: WON Prudential is liable for damages due to the cancellation of violated and must be vindicated against an invasion that has produced no
the policy. YES actual present loss of any kind, or where there has been a breach of
WON the reinstatement absolved Prudential of liability. NO contract and no substantial injury or actual damages whatsoever have
been or can be shown.
HELD:
Prudential is liable for the acts of its agent because Malapit
acted within the sphere of his authority CASE: Bedia v White
A corporation, such as respondent insurance company, acts solely thru its G.R. No. 94050 November 21, 1991
employees. The latters' acts are considered as its own for which it can be SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED PRODUCERS PHILS. YIELDS,
INC., petitioners, vs. EMILY A. WHITE and HOLMAN T. WHITE, respondents.
held to account. Malapit's fraudulent act of misappropriating the

premiums paid by petitioner-insured is beyond doubt directly imputable Weird kaayo ni na case kay ang private respondents gina-refer to as plaintiffs
to Prudential.
Malapit was the manager of its Baguio branch. It is beyond FACTS:
doubt that he represented its interest and acted in its behalf. His act of
In 1980, Bedia and White entered into a Participation Contract wherein
receiving the premiums collected is well within the province of his
they reserved a booth for the Texas State Fair for 2,250 USD. The booth
authority. Thus, his receipt of said premiums is receipt by Prudential who,
was reserved in favor of Hontiveros & Associated Producers Inc, but
by provision of law, particularly under Article 1910 of the Civil Code, is
with Bedia and White as signatories.
bound by the acts of its agent.

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Allegedly, White gave 500 USD to Bedia as downpayment. But when disarmed themselves and forfeited whatever claims they might have
she flew to Texas with her wares, she discovered that there was no proved against the latter under the contract signed for it by Bedia. It
booth space reserved in her name. should be obvious that having waived these claims against the principal,
The spouses White then sued Bedia and Hontiveros for damages. they cannot now assert them against the agent.
In their joint Answer, Bedia and Hontiveros claimed that White was not
allowed to display her goods because she failed to pay the balance.
In this answer, Bedia claims that she did not sign the contract in her CASE: Prudential Bank v CA & Cruz
own behalf, but as Hontiveros Incs agent. G.R. No. 108957 June 14, 1993
However, the complaint against Hontiveros Inc was later dismissed on PRUDENTIAL BANK, petitioner, vs. THE COURT OF APPEALS, AURORA CRUZ,
motion of White. respondents.
The lower court ruled against Bedia, holding that the Participation
This was the case cited in the Areola case.
Contract was not a representation or in the name of Hontiveros Inc.

Relying on Article 1347, which states that no one may contract in the
name of another without being authorized by the latter, Bedia was FACTS:
deemed to have signed the contract in her personal capacity. In 1986, Aurora Cruz deposited 200k in order to invest in a money
The CA affirmed, finding tht Bedia misrepresented herself as being placement for Central Bank bills. The placement was to mature in 63
authorized to recruit participants for the State Fair and that she could days at 13.75% interest.
give White the booth. For the purpose of buying the bills, exactly 196, 122.88 was withdrawn
Bedia appealed. from Cruzs account. The remaining amount was deemed as prepaid
interest.
This transactions were handled by Susan Quimbo (bank employee)
ISSUE: WON Bedia may be held liable for the damages to White. NO who also issued a Confirmation of Sale as well as a Debit Memo which
WON Bedia is an agent of Hontiveros. YES showed that the amount was applied to the sale.
Meanwhile, the placement matured. Cruz returned to the bank to
HELD: renew her investment. She was issued another set of documents as
Ruling summary: before.
The SC found that Bedia was indeed acting as an agent of Hontiveros Inc. This time, Quimbo asked Cruz to sign a Withdrawal Slip, telling Quimbo
Since White dismissed the claim against the principal (Hontiveros), they that this was a new requirement by the Bank.
could not assert the claim against the agent. When this reinvestment matured, Cruz sought to withdraw the 200k,
but she was told that she had already withdrawn the funds. Further
Circumstances that show Bedia was an agent negotiations with the bank were fruitless. During this time, Susan
Emily Whites letter to the Minister of Trade in this letter, White Quimbo stopped reporting for work. (Alam na)
acknowledged that she was charged 150 USD per sqm by Hontiveros Inc Cruz then filed a complaint for breach of contract and asked for
for the booth. Since Bedia signed the contract, the letter was an reimbursement with interest and damages.
acknowledgment by White that Bedia was merely acting for Hontiveros. Prudential denied liability, insisting that Cruz had withdrawn her
Contract was typewritten in Hontiveros stationery there was no statement. The bank filed a third party complaint against Quimbo (who
allegation that the stationery was illegally used by Bedia was later declared in default). Prudential did not present evidence
Hontiveros did not repudiate Bedias agency - Significantly, against Quimbo.
Hontiveros itself has not repudiated Bedia's agency as it would have if she The lower courts ruled in favor of Cruz.
had really not signed in its name. In the answer it filed with Bedia, it did Prudential appealed, arguing that the lower courts erred in ruling that
not deny Bedias allegation that she was only acting as its agent. it was liable for quasi-delict when the complaint filed against it was for
Hontiveros filed the joint answer with Bedia their answer was filed breach of contract.
through their common counsel, which affirmed Bedias allegation that she
was Hontiveros agent. ISSUE: WON Prudential is liable for damages. YES

Whites should have verified the matter
If the Whites had any doubt about the capacity in which Bedia was acting, HELD:
what they should have done was verify the matter with Hontiveros. They Prudentials defenses debunked
did not. Instead, they simply accepted Bedia's representation that she was Cruz signing of the withdrawal slip there was substantial basis that
an agent of Hontiveros and dealt with her as such. Cruz only signed the slip as part of the banks reinvestment procedure.
Under Article 1910 of the Civil Code, "the principal must She did not receive the money, which was left with Prudential so it could
comply with all the obligations which the agent may have contracted buy additional bills.
within the scope of his authority." Hence, White cannot now hold Bedia Cruz would have withdrawn the amount in rounded off figures the
liable for the acts performed by her for, and imputable to, Hontiveros as SC found that if Cruz did indeed withdraw the money, she would have
her principal. withdrawn it in rounded off figures, and not in the exact amount as the
amount needed to buy the bills (196, 122.98). Prudential was not able to
Hontiveros should be held liable explain this circumstance.
Since it has not been found that Bedia was acting beyond the scope of her Prudential claims that the Debit Memo/Confirmation of Sale were
authority when she entered into the Participation Contract on behalf of fake these documents are not available to the public and are only issued
Hontiveros, it is the latter that should be held answerable for any by their personnel. Granting they were made without the banks
obligation arising from that agreement. authority, Cruz was not obliged to inquire into their authority because
she had a right to presume it (since this transaction had been handled in
Since the complaint against the principal was dismissed, the same the same manner previously).
demand cannot be sustained against the agent
It should be noted that it was the Whites who moved for the dismissal of
the complaint against Hontiveros. This left Bedia as the sole defendant. By
moving to dismiss the complaint against Hontiveros, the Whites virtually

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Q: Did the lower courts find Prudential liable for quasi-delict? rectified without delay. The bank must always act in good faith. The
A: NO. This was a clear attempt by Prudential to hold off the execution of ordinary customer does not feel the need for a lawyer by his side every
the judgment. The assailed rulings clearly reference that Prudentials time he deals with a bank because he is certain that it is not a predator or
liability for damages was based ex contractu and based on breach of a potential adversary
contract.
There is no question that Prudential was made liable for its
failure or refusal to deliver to Cruz the amount she had deposited with it CASE: de Castro v CA
and which she had a right to withdraw upon its maturity. That investment G.R. No. 115838 July 18, 2002
was acknowledged by its own employees, who had the apparent authority CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners,
to do so and so could legally bind it by its acts vis-a-vis Cruz. Whatever vs. COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
might have happened to the investment whether it was lost or stolen
by whoever was not the concern of the depositor. It was the concern of FACTS:
the bank. The spouses de Castro co-owned 4 parcels of land in QC, along with
Corazons siblings.
Prudentials breach: The failure of the bank to deliver the amount to In 1984, the spouses authorized Fransisco Artigo to act as real estate
Cruzpursuant to the Confirmation of Sale constituted its breach of their broker in the sale of the properties for 23m. Artigo was supposed to
contract, for which it should be held liable. get 5% as commission.
Note the spouses had the same contract of agency with about 18 other
Prudential is liable for the acts of its agent; banks have fiduciary agents. These letters stated that the authority to sell was on a 1st come,
relationship with depositors 1st served basis. Constante de Castro signed the letter as owner and
Such liability dates back to the Roman Law maxim, Qui per alium facit per representing co-owners.
seipsum facere videtur. "He who does a thing by an agent is considered as It was Artigo who first found and referred Times Transit Corp, who
doing it himself." Explained the SC:
eventually bought two parcels for 7m. For this transaction, Artigo was
A bank is liable for wrongful acts of its officers done in the interests
given 48k as commission.
of the bank or in the course of dealings of the officers in their
Artigo sued for the balance, claiming he was entitled to 303k.
representative capacity but not for acts outside the scope of their
As defenses, the spouses claim that the two lots were actually sold for
authority
3.6m (180k commission); and that the 48k given was merely out of

pure liberality.
A bank holding out its officers and agent as worthy of confidence
Allegedly, the first negotiations with TTC (in which Artigo took active
will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; part) failed. The subsequent negotiations with TTC (this time brokered
nor will it be permitted to shirk its responsibility for such frauds, by the other agents) succeeded.
even though no benefit may accrue to the bank therefrom. The lower court ruled in favor of Artigo and ordered the spouses to pay
303k. The CA affirmed.
Accordingly, a banking corporation is liable to innocent third On appeal, the de Castros claimed that Artigos complaint was fatally
persons where the representation is made in the course of its defective since it did not implead the other co-owners of the lots.
business by an agent acting within the general scope of his authority
even though, in the particular case, the agent is secretly abusing his ISSUE: WON Artigos complaint is dismissible for failure to
authority and attempting to perpetrate a fraud upon his principal or implead the other co-owners. NO
some other person, for his own ultimate benefit

This principle is applicable especially since banks have a fiduciary HELD:
relationship with the public and their stability depends on the confidence The other co-owners, though not impleaded, may still be
of the people in their honesty and efficiency. Such faith will be eroded held liable under the contract of agency
where banks do not exercise strict care in the selection and supervision of Constante signed the note as owner and as representative of the other co-
its employees, resulting in prejudice to their depositors. owners. Under this note, a contract of agency was clearly constituted
between Constante and Artigo. Whether Constante appointed Artigo as
What about Quimbo? agent, in Constante's individual or representative capacity, or both, the De
Prudential was less than eager to present Quimbo at the trial or even to Castros cannot seek the dismissal of the case for failure to implead the
establish her liability although it made the initial effort which it did not other co-owners as indispensable parties.
pursue to hold her answerable in the third-party complaint. What ever Under Article 1915:
happened to her does not appear in the record. Her absence from the Art. 1915. If two or more persons have appointed an agent for
proceedings feeds the suspicion of her possible misdeed, which the bank a common transaction or undertaking, they shall be solidarily
seems to have studiously ignored by its insistence that the missing money liable to the agent for all the consequences of the agency.
had been actually withdrawn by Cruz. By such insistence, the bank is
absolving not only itself but also, in effect and by extension, the Solidarity under Article 1915 explained
disappeared Quimbo who apparently has much to explain. The rule in this article applies even when the appointments were made by
the principals in separate acts, provided that they are for the same
Prudential is in bad faith transaction. The solidarity arises from the common interest of the
Prudential acted in bad faith in denying Cruz the obligation she was principals, and not from the act of constituting the agency. By virtue
claiming against it. It was obvious that an irregularity had been of this solidarity, the agent can recover from any principal the whole
committed by the bank's personnel, but instead of repairing the injury to compensation and indemnity owing to him by the others. The parties,
Cruz by immediately restoring her money to her, it sought to gloss over however, may, by express agreement, negate this solidary responsibility.
the anomaly in its own operations. The solidarity does not disappear by the mere partition
Bank regulations should not be used for covering up the fault effected by the principals after the accomplishment of the agency.
of bank employees when they blunder or, worse, intentionally cheat him. If the undertaking is one in which several are interested, but
The misdeeds of such employees must be readily acknowledged and only some create the agency, only the latter are solidarily liable, without

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prejudice to the effects of negotiorum gestio with respect to the others. In 1991, Guevara instituted a case for sum of money against Dominion
And if the power granted includes various transactions some of which are for 156k, which amount he claims he advanced to satisfy the claims of
common and others are not, only those interested in each transaction Dominions clients. Dominion filed a counterclaim for unremitted
shall be liable for it. premiums.
The lower court ruled against Dominion, ordering it to pay the amount
Summary of rule in Article 1915: prayed for + costs. The CA affirmed.
When the law expressly provides for solidarity of the obligation, as in the
liability of co-principals in a contract of agency, each obligor may be ISSUE: WON Guevara was Dominions agent. YES, he was a
compelled to pay the entire obligation. The agent may recover the whole
compensation from any one of the co-principals, as in this case.
general agent
WON Guevara has the right to collect the amounts advanced. YES,
Creditor may sue any of the solidary debtors but not under the agency contract
Article 1216 of the Civil Code provides that a creditor may sue any of the
solidary debtors. This article reads: HELD:
Art. 1216. The creditor may proceed against any one of the solidary Guevara was a general agent with powers limited to acts of
debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may
administration
subsequently be directed against the others, so long as the debt has Although the document evidencing the agency was a special power of
not been fully collected. attorney, the terms therein actually show that what was constituted was
Solidarity does not make a solidary obligor an indispensable party in a a general agency. The duties listed in the SPA involved all of Dominions
suit filed by the creditor. businesses, but was limited to acts of administration since the agency was
couched in general terms.
Artigo is entitled to 5% commission A general power permits the agent to do all acts for which the
A contract of agency which is not contrary to law, public order, public law does not require a special power. Thus, the acts enumerated in or
policy, morals or good custom is a valid contract, and constitutes the law similar to those enumerated in the Special Power of Attorney do not
between the parties. The contract of agency entered into by Constante require a special power of attorney.
with Artigo is the law between them and both are bound to comply with A general agent is not allowed to make payments on claims since it is
its terms and conditions in good faith. not an act of administration
The mere fact that "other agents" intervened in the The payment of claims is not an act of administration. The settlement of
consummation of the sale and were paid their respective commissions claims is not included among the acts enumerated in the Special Power of
cannot vary the terms of the contract of agency granting Artigo a 5 Attorney, neither is it of a character similar to the acts enumerated
percent commission based on the selling price. The SC further found that therein. A special power of attorney is required before respondent
5% is fair andreasonable. Guevarra could settle the insurance claims of the insured.

Debunking de Castros other arguments Guevara was authorized to make settlements, but subject to the
Other agents were more instrumental the other agents turned limitations contained in the MOMA
out to be employees of TTC, the buyer Artigo introduced to his principals. According to the MOMA, in which Guevaras authority to pay was
To accept this ground would open floodgates of fraud and deceit by contained, the payment of claims must come from the revolving fund or
enabling the seller to pretend the first offer failed and then renegotiate collection in Guevaras possession.
it for a lesser commission. Having deviated from the instructions of the principal, the
Article 1235 applies There is no estoppel here because Artigo expenses that Guevarra incurred in the settlement of the claims of the
merely received the 48k. He did not accept the said commission. insured may not be reimbursed from Dominion. Article 1918 provides:
Artigos claim is barred by laches Laches cannot be applied to a suit
filed within the prescriptive period. Here, the complaint was instituted If the agent acted in contravention of the principals instructions,
four years after the sale, well within the 10yr period. unless the latter should wish to avail himself of the benefits
The actual price was 3m this was a finding of fact which the SC could derived from the contract; xxx
not review.
However, Guevara can still collect under ObliCon
While the law on agency prohibits respondent Guevarra from obtaining
CASE: Dominion Insurance v CA reimbursement, his right to recover may still be justified under the
G. R. No. 129919. February 6, 2002 general law on obligations and contracts. Article 1236 provides:
DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS,
RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
Whoever pays for another may demand from the debtor what

Summary: Guevara was an agent of Dominion Insurance. He used his he has paid, except that if he paid without the knowledge or
own money to settle claims by their insured. He later sued Dominion for against the will of the debtor, he can recover only insofar as the
reimbursement under their agency agreement. payment has been beneficial to the debtor.

In this case, when the risk insured against occurred, Dominions liability
FACTS:
as insurer arose. This obligation was extinguished when Guevarra paid
Dominion Insurance (then known as First Continental Assurance Co)
the claims and obtained Release of Claim Loss and Subrogation Receipts
executed a Special Power of Attorney wherein it appointed Rodolfo
from the insured who were paid.
Guevara as its agency manager. The SPA listed Guevaras powers.
Thus, to the extent that the obligation of the petitioner has
In 1987, a Memorandum of Management Agreement was executed been extinguished, Guevarra may demand for reimbursement from his
wherein Guevara was given authority to settle and dispose all motor principal. To rule otherwise would result in Dominions unjust
car claims in the amount of 5k as well as TPPI claims. enrichment.
However, the MOMA states that payment for the settlement of these Thus, the SC ruled that Guevara is entitled to reimbursement,
claims shall come from the revolving fund or collection in his but less the amount in Guevaras revolving fund/collection.
possession.

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