B. Obligations of the Agent - Articles 1884 - 1909 RULE: Yes.
RULE: Yes. PNB is guilty of neglect in collecting from Bureau of Public Works,
G.R. No. L-20567 July 30, 1965
PHILIPPINE NATIONAL BANK, petitioner,
vs.
MANILA SURETY and FIDELITY CO., INC. and THE COURT OF APPEALS
(Second Division), respondents.
FACTS:
The Philippine National Bank had opened a letter of credit and advanced thereon
$120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount,
2,000 tons worth P279,000.00 were released and delivered to Adams & Taguba
Corporation (known as ATACO) under a trust receipt guaranteed by Manila Surety &
Fidelity Co. up to the amount of P75,000.00.
To pay for the asphalt, ATACO constituted the PHILIPPINE NATIONAL BANK its
assignee and attorney-in-fact to receive and collect from the Bureau of Public
Works the amount aforesaid out of funds payable to ATACO. The assignment
stipulated that the power of attorney in favor of PNB shall also remain irrevocable
until total indebtedness to the said Bank have been fully liquidated.
The Bank regularly collected. Thereafter, for unexplained reasons, the Bank ceased
to collect, until in 1952 its investigators found that more moneys were payable to
ATACO from the Public Works office. Its demands on the ATACO and the Surety
having been refused, PNB sued both in the Court of First Instance of Manila.
RTC ordered defendants, ATACO and Manila Surety & Fidelity Co., Inc., to pay
Philippines National Bank, the sum.
CA found the Bank to have been negligent in having stopped collecting from the
Bureau of Public Works the moneys falling due in favor of the principal debtor,
ATACO before the debt was fully collected, thereby allowing such funds to be taken
and exhausted by other creditors to the prejudice of the surety, and held that the
Bank's negligence resulted in exoneration of respondent Manila Surety & Fidelity
Company.
ISSUE: WON PNB is answerable for negligence in failing to collect the sums
due to its debtor (ATACO) from the latter's debtor (Bureau of Public Works)
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
contrary to its duty as holder of an exclusive and irrevocable power of
attorney to make such collections, since an agent is required to act with the
care of a good father of a family (Civ. Code, Art. 1887) and becomes liable for
the damages which the principal may suffer through his non-performance
(Civ. Code, Art. 1884).
It must not be forgotten that the Bank's power to collect was expressly
made irrevocable, so that the Bureau of Public Works could very well refuse to make
payments to the principal debtor itself, and a fortiori reject any demands by the
surety. PNB's negligence exonerated the surety.
________________
G.R. No. L-5142 February 26, 1954
CONSOLACION L. RAMOS, administratrix-appellant,
vs.
BENIGNO A. CAOIBES, attorney-in-fact-appellee.
FACTS:
Concepcion Ramos Dipusoy executed before a notary public two documents which
have been marked as Annex "A" and Annex "B".
Annex "A" is a power of attorney which reads as follows:
That I, Concepcion Ramos Dipusoy, xxx constituted and appointed, and
by these presents do make, constitute and appoint Mr. Benigno A.
Caoibes, xxx to collect any amount due me from the Philippine War
Damage Commission, regarding my claim filed for my properties that
were lost during the last war in Balayan, Batangas, to cash checks,
warrants and to sign receipts, vouchers, documents which shall be
necessary to the said purpose.
That I am giving and granting unto my said attorney-in-fact Benigno A.
Caoibes, full and absolute power and authority to do and perform all any
every act or thing whatsoever to be done necessary in and about the
premises, as fully to all intents and purposes as I might or could myself do if
I were personally present, and hereby confirming and ratifying all that my
said attorney-in-fact shall lawfully do or cause to be done and by virtue of
these presents.
Annex B is an affidavit of the following tenor:
That I, CONCEPCION RAMOS DIPUSOY, xxx say: That in case payment
of any amount or amounts collected from the Philippine War Damage
Commission, my nephew and at the same time attorney-in-fact, shall
give my sister Teopista Vda. de Basa one-half (), of the
corresponding amount and the other half () shall be given to my
nephew and niece Mr. and Mrs. Benigno A. Caoibes.
Annex "A", and under Article 1711 of the old Civil Code (which was in force at the
time of the transaction), the contract of agency is presumed to be gratuitous, unless
the agent is a professional agent. There is no proof that Caoibes was such.
Furthermore, according to Article 1732 of said Code, an agency is terminated,
among other causes, by the death of the principal or of the agent. When Caoibes
made use of the power of attorney, his principal, Concepcion was already dead.

Concepcion Ramos died leaving a will admitted to probate in which she ordered that _______________
the credits due to her be distributed among the children of the deceased Antonino
Ramos, namely, Consolacion, Ramon, Socorro and Cirila.
G.R. No. L-30573 October 29, 1971

One year before she died, Concepcion Ramos filed with the War Damage
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO
Commission a claim. The Commission issued check in the amount of P501.62
VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR,
payable to the deceased Concepcion Ramos. This check was returned to the
IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants,
Commission and substituted by the latter which check No. 564614, on November 10,
vs.
1948, for the same amount, but payable to Benigno A. Caoibes, who had presented
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P.
to said entity Annexes "A" and "B", above mentioned, in order to exchange the first
PURISIMA, intervenor-respondent.
check No. 564614, which he cashed for himself.

Annexes "A" and "B" were presented to the Commission by Caoibes after the death
of Concepcion. The administratrix, Consolacion L. Ramos, discovered the collection
made by Caoibes when she saw the note "previous payment" which appeared in the
account sent to her by the Commission. She filed a motion with the court asking that
Caoibes be ordered to deposit the sum of P501.62 with the clerk of court. Caoibes
answered the motion admitting that after the death of Concepcion, he presented
Annexes "A" and "B" to the Commission and received in cash the sum of P501.62,
amount of the second check, above mentioned. He contended that, by virtue of
Annex "A", and Annex "B", he had the right to retain, for himself, half of the sum of
P501.62.
FACTS:
Vicente Domingo granted to Gregorio Domingo, a real estate broker, the exclusive
agency to sell his Lot No. 883, Piedad Estate in a document. According to the
document, said lot must be sold at P2 per sqm. Accordingly,
Gregorio is entitled to 5% commission on the total price if the property is sold by
Vicente or by anyone else during the 30-day duration of the agency or by Vicente
within 3 months from the termination of the agency to a purchaser to whom it was
submitted by Gregorio during the effectivity of the agency with notice to Vicente.

Subsequently, Gregorio authorized Teofilo Purisima to look for a buyer without

RTC ordered Caoibes to deposit the said amount to the administratrix and the other
parties in this intestate proceedings.
ISSUE: Whether or not Caiobes is entitled to retain the aforesaid amount?
RULE: NO. Caiobes is not entitled to retain said amount despite existence of Annex
"A", and Annex "B". Annex A is only a power of attorney. Caoibes, as agent, had
the obligation to deliver the amount collected by virtue of said power to his
principal, Concepcion, or, after her death, to the administratrix of her estate,
Consolacion. There is absolutely no cession of rights made in favor of Caoibes in
notifying Vicente. Gregorio promised Teofilo of the 5% commission. Teofilo then
introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar submitted a
written offer which was very much lower than the P2 per sq.m. price. Vicente
directed Gregorio to tell Oscar to raise his offer. After several conferences between
the parties, Oscar raised his offer to P1.20 per sq. m. or P109k in total to which
Vicente agreed to said offer.

Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
Upon Vicente's demand, Oscar issued a P1,000 check to him as earnest money.
Subsequently, Vicente asked for an additional P1,000 as earnest money, which
Oscar promised to deliver to Vicente.
Oscar gave Gregorio P1,000 as a gift or propina for succeeding in persuading
Vicente to sell his lot at P1.20 per sq.m. Gregorio did not disclose said gift or
propina to Vicente. Oscar did not pay Vicente the additional P1,000 asked from him
as earnest money. Gregorio did not see Oscar for several weeks thus sensing that
something fishy might be going on. He went to Vicentes house where he read a
portion of the agreement to the effect that Vicente was still willing to pay him 5% of
the commission. Gregorio went to the Registry of Deeds of QC where he
discovered that a DOS was executed by Amparo Gregorio, Oscars wife, over their
house and lot in favor of Vicente. After discovering that Vicente sold his lot to
Oscars wife, Gregorio demanded in writing the payment of his commission.
Gregorio also conferred with Oscar who told him that Vicente went to him and
asked him to eliminate Gregorio in the transaction and that he would sell his
property to him for P104K. In his reply, Vicente stated that Gregorio is not entitled to
the 5% commission because he sold the property not to Gregorio's buyer (Oscar de
Leon) but to another buyer (Amparo Diaz) who is the wife of Oscar de Leon.
CA said that the exclusive agency contract, is genuine; that Amparo Diaz, the
vendee, being the wife of Oscar de Leon the sale by Vicente of his property is
practically a sale to Oscar de Leon since husband and wife have common or
identical interests
ISSUE: Does Gregorios act of accepting the gift or propina from Oscar constitute
fraud which would cause the forfeiture of his 5%commission?
RULING:
YES. Gregorio Domingo as the broker received a gift or propina from the prospective
buyer Oscar de Leon, without the knowledge and consent of the principal, Vicente.
The duties and liabilities of a broker to his employer are essentially those which an
agent owes to his principal. Consequently, the decisive legal provisions are in found
Articles 1891 and 1909 of the New Civil Code.
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
received by virtue of the agency, even though it may not be owing
to the principal.
Every stipulation exempting the agent from the obligation to
render an account shall be void.
Art. 1909. The agent is responsible not only for fraud but also for
negligence, which shall be judged with more less rigor by the
courts, according to whether the agency was or was not for a
compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code
which provides that:
Art. 1720. Every agent is bound to give an account of his
transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has
received is not due to the principal.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty
that is required to an agent condemning as void any stipulation exempting the
agent from the duty and liability imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of
the old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for
negligence, which shall be judged with more or less severity by
the courts, according to whether the agency was gratuitous or for
a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty, candor
and fairness on the part of the agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon the agent the absolute obligation to
make a full disclosure or complete account to his principal of all his transactions and
other material facts relevant to the agency, so much so that the law as amended
does not countenance any stipulation exempting the agent from such an obligation
and considers such an exemption as void. The duty of an agent is likened to that of a
trustee. This is not a technical or arbitrary rule but a rule founded on the highest and
truest principle of morality as well as of the strictest justice.
Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or *Domingo vs Domingo*
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
G.R. No. L-12743 August 25, 1917
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 THE UNITED STATES, plaintiff-appellee,
to prevent the possibility of any wrong, not to remedy or repair an actual damage. By vs.
taking such profit or bonus or gift or propina from the vendee, the agent thereby DOMINGO REYES, defendant-appellant.
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.
FACTS:
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a
gift or propina in the amount of One Thousand Pesos (P1,000.00) from the R. B. Blackman is a surveyor in the Province of Pangasinan where Domingo Reyes
prospective buyer Oscar de Leon, without the knowledge and consent of his also lives. Blackman employed Reyes to collect certain amounts due from twelve
principal, herein petitioner-appellant Vicente Domingo. His acceptance of said individuals for Blackman's work in connection with the survey of their lands. The
substantial monetary gift corrupted his duty to serve the interests only of his principal
total amount to be collected by Reyes was P860.
and undermined his loyalty to his principal, who gave him partial advance of Three
Hundred Pesos (P300.00) on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the Reyes only succeeded in collecting P540. He delivered to Blackman P368 and
most advantageous terms desired by his principal, the broker, herein retained the balance of P172. The controversy arose when Blackman and Reyes
defendant-appellee Gregorio Domingo, succeeded in persuading his principal to had a conflict as regards the commission.
accept the counter-offer of the prospective buyer to purchase the property at P1.20
per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round Blackman claims that he agreed to pay Reyes a commission of 10 percent. Reyes,
figure for the lot of 88,477 square meters, which is very much lower the the price of on the other hand, claims that he was to receive a commission of 20 percent.
P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred
Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal. Reyes was charged for the crime of estafa.

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or The trial court, in its decision, states that Reyes was only entitled to a commission
broker acted only as a middleman with the task of merely bringing together the of 10 percent and was bound to collect and remit the amounts to Blackman minus
vendor and vendee, who themselves thereafter will negotiate on the terms and commission.
conditions of the transaction. Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he received from the purchaser
and his principal did not object therto. Herein defendant-appellee Gregorio
Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo
and the buyer Oscar de Leon. He was the broker and agent of said ISSUE: WoN Reyes is an agent of Blackman to be convicted for estafa.
petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of
One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the
prospective buyer; much less did he consent to his agent's accepting such a gift.
HELD:
As a necessary consequence of such breach of trust, defendant-appellee Gregorio
Domingo must forfeit his right to the commission and must return the part of the Yes.
commission he received from his principal.

Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
Under the oral contract, Reyes was an agent who was bound to pay to the principal
all that he had received by virtue of the agency. Moreover, since for all practical
purposes, the agency having been terminated, the agent was under the obligation
to turn over to the principal the amount collected, minus his commission on that
amount.
(Nota Bene: Estafa is a crime whereby the offender is entrusted with private funds
or property. Hence, Reyes was properly charged for estafa due to the nature of his
duty - - an agent of Blackman.)
Villa vs Garcia Bosque
DEVELOPMENT BANK OF THE PHILIPPINES vs. COURT OF APPEALS
FACTS: In May 1987, Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the (DBP). As the principal
mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP MRI Pool.
A loan, in the reduced amount of P300,000.00, was approved by DBP. From the
proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the
MRI premium. On August 15, 1987, Dans accomplished and submitted the "MRI
Application for Insurance" and the "Health Statement for DBP MRI Pool."
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed
this information to the DBP MRI Pool. On September 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.
On October 21, 1987, 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 gratia settlement of P30,000.00, which
the DBP later offered.
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
An action was then instituted against DBP and the insurance pool for "Collection of
Sum of Money with Damages alleging that Dans became insured by the DBP MRI
Pool when DBP, with full knowledge of Dans' age at the time of application, required
him to apply for MRI, and later collected the insurance premium thereon.
ISSUE: What is the liability of DBP?
Under the aforementioned provisions, the MRI coverage shall take effect: (1) when
the application shall be approved by the insurance pool; and (2) when the full
premium is paid during the continued good health of the applicant. These two
conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI
Pool. The pool, however, did not approve the application of Dans. There is also no
showing that it accepted the sum of P1,476.00, which DBP credited to its account
with full knowledge that it was payment for Dan's premium. There was, as a result,
no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable
on a contract that does not exist.
The liability of DBP is another matter.
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 made Dans go through the motion of applying for said
insurance, thereby leading him and his family to believe that they had already
fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. Apparently, DBP had full knowledge that Dan's application was never
going to be approved. The maximum age for MRI acceptance is 60 years as clearly
and specifically provided in Article 1 of the Group Mortgage Redemption Insurance
Policy signed in 1984 by all the insurance companies concerned
.
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such
is not personally liable to the party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party sufficient
notice of his powers."
The 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.
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.
The rule that the agent is liable when he acts without authority is founded upon the
supposition that there has been some wrong or omission on his part either in
misrepresenting, or in affirming, or concealing the authority under which he assumes
to act. Inasmuch as the non-disclosure of the limits of the agency carries with it the
implication that a deception was perpetrated on the unsuspecting client, the
provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into
play.
Article 19 provides: Every person must, in the exercise of his rights and in
the performance of his duties, act with justice give everyone his due and observe
honesty and good faith.
Article 20 provides: Every person who, contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter for the same.
Article 21 provides: Any person, who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
The DBP's liability, however, cannot be for the entire value of the insurance policy.
To assume that were it not for DBP's concealment of the limits of its authority, Dans
would have secured an MRI from another insurance company, and therefore would
have been fully insured by the time he died, is highly speculative. Considering his
advanced age, there is no absolute certainty that Dans could obtain an insurance
coverage from another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI, and on the
twenty-third day from the date of release of his loan.
PHILIPPINE PRODUCTS VS. PRIMATERIA, NOVEMBER 29, 1965
FACTS:
Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur
(Primateria Zurich) was engaged in "Transactions in international trade with
agricultural products, particularly in oils, fats and oil-seeds and related products."
The record shows that: Primateria Zurich, through defendant Alexander B.
Baylin, entered into an agreement with plaintiff Philippine Products Company,
whereby the latter undertook to buy copra in the Philippines for the account of
Primateria Zurich, during "a tentative experimental period of one month from date."
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
The contract was renewed by mutual agreement. During such period,
plaintiff caused the shipment of copra to foreign countries, pursuant to instructions
from defendant Primateria Zurich, thru Primateria (Phil.) Inc. referred to hereafter
as Primateria Philippines acting by defendant Alexander G. Baylin and Jose M.
Crame, officers of said corporation. As a result, the total amount due to the plaintiff
was P33,009.71.
This is an action to recover from defendants, the sum of P33,009.71 with
interest and attorney's fees of P8,000.00.
CFI Manila Trial: it was proven that the amount due from defendant
Primateria Zurich, on account of the various shipments of copra, was P31,009.71,
because it had paid P2,000.00 of the original claim of plaintiff. There is no dispute
about accounting. And there is no question that Alexander G. Baylin and Primateria
Philippines acted as the duly authorized agents of Primateria Zurich in the
Philippines. As far as the record discloses, Baylin acted indiscriminately in these
transactions in the dual capacities of agent of the Zurich firm and executive
vice-president of Primateria Philippines, which also acted as agent of Primateria
Zurich. It is likewise undisputed that Primateria Zurich had no license to transact
business in the Philippines.For failure to file an answer within the reglementary
period, defendant Primateria Zurich was declared in default.
LOWER COURT: defendant Primateria Zurich liable to the plaintiff for the sums of
P31,009.71, with legal interest from the date of the filing of the complaint, and
P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.),
Inc., Alexander G. Baylin, and Jose M. Crame from any and all liability.
PLAINTIFFS APPEAL: that Primateria Zurich is a foreignncorporation within the
meaning of Sections 681 and 69 of the Corporation Law, and since it has transacted
business in the Philippines without the necessary license, as required by said
provisions, its agents here are personally liable for contracts made in its behalf.
Plaintiff also alleges that the appellees as agents of Primateria Zurich are liable to it
under Art. 18972 of the New Civil Code.
ISSUE: WON the agents may be held personally liable on contracts made in the
name of the entity with third persons in the Philippines.- NO
HELD: At any rate, the plaintiff could never recover from both the principal
(Primateria Zurich) and its agents. It has been given judgment against the principal
for the whole amount. It asked for such judgment, and did not appeal from it. It
clearly stated that its appeal concerned the other three defendants.
There is no proof that, as agents, they exceeded the limits of their
authority. In fact, the principal Primateria Zurich who should be the one to
raise the point, never raised it, denied its liability on the ground of excess of
authority. At any rate, article 1897 does not hold that in cases of excess of authority,
both the agent and the principal are liable to the other contracting party.
This view of the cause dispenses with the necessity of deciding the other
issues, namely: whether the agent of a foreign corporation doing business, but not
licensed here is personally liable for contracts made by him in the name of such
corporation. Although, the solution should not be difficult, since it was already held
that such foreign corporation may be sued here (General Corporation vs. Union
Ins., 87 Phil. 509).
Section 68 of the Corporation Law states: "No foreign corporation or
corporation formed, organized, or existing under any laws other than those of the
Philippines shall be permitted to transact business in the Philippines, until after it
shall have obtained a license for that purpose from the Securities and Exchange
Commission .. ." And under Section 69, "any officer or agent of the corporation or
any person transacting business for any foreign corporation not having the license
prescribed shall be punished by imprisonment for etc. ... ."
Art. 1897 CC also states that agent who acts as such is not personally
liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his
powers.
And obviously, liability of the agent is necessarily premised on the inability
to sue the principal or non-liability of such principal. In the absence of express
legislation.
*National Power Corp vs National Merchandising Corp*
*Albert vs University Publishing Co.*
B. 11. NORA S. EUGENIO and ALFREDO Y. EUGENIO, petitioners, vs. HON.
COURT OF APPEALS and PEPSI-COLA BOTTLING COMPANY OF THE
PHILIPPINES, INC., respondents.
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
G.R. No. 103737. December 15, 1994. SECOND DIVISION. REGALADO, J.
FACTS: : Appellants are owners of a store in Marikina, Manila, a once
recognized dealer of soft drinks products by the private respondent. Sometime in
1981, Pepsi Cola Bottlers Company filed a complaint for collection of sum of money
against them for the unremitted sales of soft drinks in the total amount of P
94,651.00 which they failed to settle despite of written and oral demands.
Spouses, on the other hand, claimed that company- oppositor was really the one on
the contrary which owed them money. They produced TPRs ( temporary provisional
receipts ) issued by the private respondents Route manager Jovino Estrada with
total amount of P80,500.00 remitted amount. They also alleged that one of the
receipts, Sales Invoice Nos 85366 indicating an amount of P5,631.00 is falsified for
the signature reflecting of Noras was not really hers. Further, they claimed that if
said figures were to be credited on their account, the difference of P 3,546.02 ought
be returned to them by the private respondent.
The case of private respondent solely depended on the denial made by Route Mgr
Estrada for non-issuance of subject TPRs. Said denial was made before an
inter-office investigation which was more of an ad hoc arrangement. Thereafter,
Estrada disappeared and was not presented in the witness stand.
Trial Court ruled in favor of private respondent. It was however declared a nullity for
non-compliance to the constitutional provision on decisions forms and contents.
Court of Appeals ordered the trial court to reform said order and thereafter affirmed
the subsequent decision released by the latter.
ISSUE: WON the petitioners payment to the sale representative extinguished their
obligation to Pepsi Cola
RULING: YES.
Pepsi Cola failed to prove that Estrada, who is its duly authorized agent
with respect to petitioners, did not receive those amounts from the latter. As
correctly explained by petitioners, in so far as the private respondents customers
are concerned, for as long as they pay their obligations to the sales representative
of the private respondent using the latters official receipt, said payment
extinguishes their obligations.
 Payment shall be made to the person in whose favor the obligation has
been constituted, or his successor-in-interest or any person authorized to receive it.
As far as third persons are concerned, an act is deemed to have been performed
within the scope of the agents authority, if such is within the terms of the power of
attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and his agent. In fact, Atty.
Rosario, private respondents own witness, admitted that it is the responsibility of
the collector to turn over the collection.
Green Valley Poultry & Allied Products, Inc. vs. IAC
FACTS: On Nov. 3, 1969, Squibb and Green Valley entered into a letter agreement
where it is stipulated that:
- Green Vallet is the non-exclusive distributor of the products of Squibb Veterinary
Products
- GV, as distributor, is entitled to 10% discount on Squibb's whole sale price and
catalogue price.
- GV is limited to selling Squibb's products to central and northern Luzon.
- Payment for purchases from Squibb will be due 60 days from the date of invoice.
For goods delivered to GV but unpaid, Squibb filed a collection suit. The RTC ruled
in favor of Squibb which decision was affirmed by the CA. Squibb argues that their
relationship with GV is a mere contract of sale evidenced by the stipulation that GV
was obligated to pay for the goods after the 60-day period. GV counters that their
relationship is that of an agency to sell, thus there's no obligation to turn over the
proceeds or goods if not sold and since it had sold the goods but not been able to
collect from the purchases, the action was premature.
ISSUE: WON the agreement was an agency to sell and if so, relieves GV of liability.
RULING: No. Petition dismissed.
GV is liable for the unpaid products regardless of the type of contract. If it is a
contract of sale, then GV is liable by just merely enforcing the clear words of the
contract. Adopting GV's theory that it is an agency to sell, GV is liable because it
sold on credit without authority from its principal.
We do not have to categorize the contract. Whether viewed as an agency to sell or
as a contract of sale, the liability of Green Valley is indubitable. Adopting Green
Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909
Valley's theory that the contract is an agency to sell, it is liable because it sold on
credit without authority from its principal. The Civil Code has a provision exactly in
point. It reads: Art. 1905. The commission agent cannot, without the express or
implied consent of the principal, sell on credit. Should he do so, the principal may
demand from him payment in cash, but the commission agent shall be entitled to
any interest or benefit, which may result from such sale.
WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court
of Appeals is affirmed with costs against the petitioner
METROPOLITAN BANK & TRUST COMPANY, petitioner,
vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC.,
LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.
Facts: Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants. All these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and
deposited to its Savings Account. More than two weeks after the deposits, Gloria
Castillo went to the Calapan branch several times to ask whether the warrants had
been cleared. She was told to wait. Accordingly, Gomez was meanwhile not
allowed to withdraw from his account. Later, however, "exasperated" over Gloria's
repeated inquiries, Metrobank stated that it finally decided to allow Golden Savings
to withdraw from the proceeds of the warrants. In turn, Golden Savings
subsequently allowed Gomez to make withdrawals from his own account.
Metrobank informed Golden Savings that 32 of the warrants had been dishonored
by the Bureau of Treasury and demanded the refund by Golden Savings of the
amount it had previously withdrawn, to make up the deficit in its account. This
demand was rejected by Golden Savings, which lead Metrobank to file an action
against it before the RTC.
The RTC rendered judgment in favor of Golden Savings, which prompted
Metrobank to file this petition for review on the ground that Until such time as
Metrobank is actually paid, its obligation is that of a mere collecting agent which
cannot be held liable for its failure to collect on the warrants.
Issue: W/N Metrobank was acting as a mere collecting agent for Golden Savings
and thus cannot be held liable? NO.
Held: According to Metrobank, the said conditions clearly show that it was acting
only as a collecting agent for Golden Savings. It is claimed that the said conditions
are in the nature of contractual stipulations and became binding on Golden Savings
when Gloria Castillo, as its Cashier, signed the deposit slips.

In stressing that it was acting only as a collecting agent for Golden Savings,
Metrobank seems to be suggesting that as a mere agent it cannot be liable to the
principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code
clearly provides that

Art. 1909. The agent is responsible not only for fraud, but also for negligence,
which shall be judged 'with more or less rigor by the courts, according to whether the
agency was or was not for a compensation.

The negligence of Metrobank has been sufficiently established. To repeat for

emphasis, it was the clearance given by it that assured Golden Savings it was
already safe to allow Gomez to withdraw the proceeds of the treasury warrants he
had deposited Metrobank misled Golden Savings. There may have been no express
clearance, as Metrobank insists (although this is refuted by Golden Savings) but in
any case that clearance could be implied from its allowing Golden Savings to
withdraw from its account not only once or even twice but three times. The total
withdrawal was in excess of its original balance before the treasury warrants were
deposited, which only added to its belief that the treasury warrants had indeed been
cleared.

Metrobank was indeed negligent in giving Golden Savings the impression that the
treasury warrants had been cleared and that, consequently, it was safe to allow
Gomez to withdraw the proceeds thereof from his account with it. Without such
assurance, Golden Savings would not have allowed the withdrawal.

Business Organization Case Digest - Agency. Obligations of the Agent - Articles 1884 - 1909