DANON vs. A.

BRIMO (1921)
“Procuring Cause”
NATURE:
Action to recover the sum of P60,000, alleged to be the value of services by the plaintiff as a broker.
QUICK FACTS & HELD:
Danon (Broker) found a purchaser for the factory of his manager (Brimo), who promised 5% commission to
Danon; Another broker found another
purchaser who would buy the factory at a higher price, said factory was sold to this purchaser; As such,
Danon’s client did n
ot perfect the sale withBrimo.
Held:
Danon not the procuring cause. A broker is never entitled to commissions for unsuccessful efforts. The risk of
failure is only his. Thereward comes only with his success. Where no time for the continuance of the contract
is fixed by its terms, either party is at liberty to terminate it atwill, subject only to the ordinary requirements
of good faith.

DETAILED FACTS:
1. Antonio Brimo, informed the Danon, that he (Brimo) desired to sell his factory, the Holland American
Oil Co., for the sum of P1,200,000

2. Brimo agreed and promised to pay to the Danon commission of 5% provided the latter could sell said
factory for that amount

3. No definite period of time was fixed within which the Danon should effect the sale. It seems that
another broker, Sellner, was also negotiating thesale, or trying to find a purchaser for the same
property and that the plaintiff was informed of the fact either by Brimo himself or by someone else;at
least, it is probable that the plaintiff was aware that he was not alone in the field, and his whole
effort was to forestall his competitor by beingthe first to find a purchaser and effect the sale.

4. Immediately after having an interview with Mr. Brimo, Danon went to see Mr. Mauro Prieto, president
of the Santa Ana Oil Mill, a corporation,and offered to sell to him the defendant's property at
P1,200,000. The said corporation was at that time in need of such a factory, and Mr. Prieto,instructed
the manager, Samuel E. Kane, to see Mr. Brimo and ascertain whether he really wanted to sell said
factory, and, if so, to get permissionfrom him to inspect the premises. Mr. Kane inspected the factory
and, presumably, made a favorable report to Mr. Prieto. The latter asked for anappointment with Mr.
Brimo to perfect the negotiation. In the meantime Sellner, the other broker referred to, had found a
purchaser for the sameproperty, who ultimately bought it for P1,300,000. For that reason Mr. Prieto,
the would be purchaser found by the plaintiff, never came to seeMr. Brimo to perfect the proposed
negotiation.

ISSUE: Whether Danon as broker was the “Procuring Cause”of Sale?

NO
Whether Danon is entitled to Compensation -
NOHELD:
The most that can be said as to what the plaintiff had accomplished is, that he had found a person who might
have bought the defendant's factory.The evidence does not show that the Santa Ana Oil Mill
had definitely decided to buy the property at the fixed price of P1,200,000. The plaintiff claims that the reason
why the sale was not consummated was because Mr. Brimo refused to sell.
Defendant agreed and promised to pay him a commission of 5% provided he (the plaintiff) could sellthe
factory at P1,200.000. It is difficult to seehow the plaintiff can recover anything in the premises. The plaintiff's
action is an action to recover "the reasonable value" of services rendered.
It is clear that his "services" did not contribute towards bringing about the sale. He was not "the efficient
agent or the procuring cause of the sale."
The broker must be the efficient agent or the procuring cause of sale
. The means employed by him and his efforts must result in the sale.
The duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and
the price and terms on which it is to bemade, and until that is done his right to commissions does not accrue

It follows, that a broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is
wholly his. The reward comes only with hissuccess. He may have introduced to each other parties who
otherwise would have never met; he may have created impressions, which under laterand more favorable
circumstances naturally lead to and materially assist in the consummation of a sale; he may have planted the
very seed fromwhich others reap the harvest;
but all that gives him no claim
.
The failure therefore and its consequences were the risk of the broker only. This however must be taken
with one important and necessary limitation. If the efforts of the broker are rendered a failure by the fault
of the employer; if capriciously he changes his mind after the purchaser,ready and willing, and consenting
to the prescribed terms, is produced; or if the latter declines to complete the contract because of some
defect of title in the ownership of the seller, some unremoved incumbrance, some defect which is the fault
of the latter, then the broker does not losehis commissions. But this limitation is not even an exception to
the general rule affecting the broker's right for it goes on the ground that the broker has done his duty, that
he has brought buyer and seller to an agreement, but that the contract is not consummated and fails though
the after-fault of the seller.
One other principle applicable: Where no time for the continuance of the contract is fixed by its terms either
party is at liberty to terminate it at will,subject only to the ordinary requirements of good faith. Usually the
broker is entitled to a fair and reasonable opportunity to perform his obligation, subject of course to the right
of the seller to sell independently. But having been granted him, the right of the principal to terminate his
authority is absolute and unrestricted
, except only that he may not do it in bad faith.
Although the present plaintiff could probably have effected the sale, he is not entitled to the commissions
agreed upon because he had nointervention whatever in, and much sale in question. It must be borne
in mind that no definite period was fixed by the defendant within which theplaintiff might effect the sale of its
factory. Nor was the plaintiff given by the defendant the exclusive agency of such sale.

Therefore, the plaintiff cannot complaint of the defendant's conduct in selling the property through another
agent before the plaintiff's efforts were crowned with success."One who has employed a broker can himself
sell the property to a purchaser whom he has procured, without any aid from the broker."

DISPOSITIVE:
For the foregoing reasons the judgment appealed from is hereby revoked and the defendant is hereby
absolved from all liability underthe plaintiff's complaint, with costs in both instances against the plaintiff. So
ordered.

HAHN v. CA
G.R. No. 113074; January 22, 1997
Ponente: J. Mendoza

FACTS:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila". On the
other hand, private respondent (BMW) is a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at Munich, Germany.

On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special
Power of Attorney. Per the agreement, the parties "continue[d] business relations as has been usual in the
past without a formal contract."

But on February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors
Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive
dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same.

On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter,
expressed dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline
in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged
failure to comply with the standards for an exclusive BMW dealer.

Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would
have no alternative but to terminate petitioner's exclusive dealership effective June 30, 1993.

Because of Hahn's insistence on the former business relations, BMW withdrew on March 26, 1993 its offer of
a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993.

On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.

Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and
damages against BMW to compel it to continue the exclusive dealership.

ISSUE:
Whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW

HELD:

Alfred Hahn is an agent of BMW.

 The Supreme Court held that agency is shown when Hahn claimed he took orders for BMW cars and transmits
them to BMW. Then BMW fixes the down payment and pricing charges and will notify Hahn of the scheduled
production month for the orders, and reconfirm the orders by signing and returning to Hahn the acceptance
sheets.

The payment is made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and
Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn
received an additional 3% of the full purchase price. Hahn performed after-sale services, including, warranty
services. for which he received reimbursement from BMW. All orders were on invoices and forms of BMW.

Moreover, the Court distinguished an agent from a broker. The court ruled that 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.

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA,

petitioners, vs.
EDUARDO R. GULLAS and NORMA S. GULLAS,
respondents.
G.R. No. 143978 December 3, 2002
Facts:
Respondents, were the registered owners of a parcel of land, they executed aspecial power of attorney
authorizing petitioners Tan, a licensed real estate broker, and hisassociates Tecson and Saldaña, to negotiate
for the sale of the land, at a commission of 3% of thegross price. Tan contacted the Sisters of Mary of
Banneaux, Inc. (hereafter, Sisters of Mary), areligious organization interested in acquiring a property. The
Sisters, who had already seen andinspected 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. Respondents agreed to sell
the property to the Sisters of Mary. Petitioners went to see respondents who refused to pay the broker’s
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 broker’s fee. They alleged that they
were the efficient procuring cause in bringing about the sale of the, 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 broker’s fee, dealt directly with the buyer whom
petitioners introduced to them.

Issues:
(1) Whether or not the petitioners are entitled to the brokerage commission.(2) An agent distinguished from a
broker.

Rulings:
(1) 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 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 matter s of trade, commerce or navigation." The petitioners were responsible for the introduction
of there presentatives of the Sisters of Mary to respondent.(2) There was no dispute as to the role that
petitioners played in the transaction. "Anagent 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 iseventually 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.

Broker Is Entitled To Compensation If He Is The Procuring Cause

The brokers are entitled to their commission because they were instrumental in the sale of the property.
Without their intervention, no sale could have been consummated. They were the ones who set the sale in
motion, or the procuring cause. A broker is generally defined as one who engaged, for others, on a
commission, negotiating contracts relative to property with the custody of which he has no concern; the
negotiator between other parties, never acting in his own name but in the name of those who employed him;
he is strictly a middleman and for some purposes the agent of both parties. A broker is one whose occupation
is to bring parties together, in matters of trade, commerce or navigation. (Tan vs. Gullas, 393 SCRA 330 (2002);
(Medrano, et al. vs. CA, et al., G.R. No. 150678, February 18, 2005 (Callejo, J)).

Philippine Health-Care Providers, Inc. V. Estrada (2008)

G.R. No. 171052 January 28, 2008

Lessons Applicable: Insurance Broker (Insurance)

Laws Applicable:

FACTS:

 Philippine Health-Care Providers, Inc. (Maxicare) formally appointed Estrada as its General
Agent evidenced by a letter-agreement dated February 16, 1991 granting him a commission equivalent to:
 15 to 18% from individual, family, group accounts
 2.5 to 10% on tailored fit plans
 10% on standard plans of commissionable amount on corporate accounts
 Maxicare had a "franchising system" in dealing with its agents whereby an agent had to first secure
permission from to list a prospective company as client
 MERALCO account was included as corporate accounts applied by Estrada
 Estrada submitted proposals and made representations to the officers of MERALCO regarding the
MAXICARE Plan but MERALCO directly negotiated with MAXICARE from December 1, 1991 to November
30, 1992 and was renewed twice for a term of 3 years each
 March 24, 1992: Estrada through counsel demanded his commission for the MERALCO account and 9 other
accounts but it was denied by MAXICARE because he was not given a go signal to intervene in the
negotiations for the terms and conditions
 RTC: Maxicare liable for breach of contract and ordered it to pay Estrada actual damages in the amount
equivalent to 10% of P20,169,335 representing her commission for Meralco
 CA: Affirms in toto
ISSUE: W/N Estrada should be paid his commission for the Maxicare Plans subscribed by Meralco

HELD: YES. petition is DENIED

 Both courts were one in the conclusion that Maxicare successfully landed the Meralco account for the sale
of healthcare plans only by virtue of Estrada’s involvement and participation in the negotiations
 Maxicare’s contention that Estrada may only claim commissions from membership dues which she has
collected and remitted to Maxicare as expressly provided for in the letter-agreement does not convince
us. It is readily apparent that Maxicare is attempting to evade payment of the commission which rightfully
belongs to Estrada as the broker who brought the parties together.
 The only reason Estrada was not able to participate in the collection and remittance of premium dues to
Maxicare was because she was prevented from doing so by the acts of Maxicare, its officers, and
employees.
 Agent vs. Broker:
 agent
 receives a commission upon the successful conclusion of a sale
 broker
 earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made
 "procuring cause" in describing a broker’s activity
 cause originating a series of events which, without break in their continuity, result in the accomplishment
 efforts must have been the foundation on which the negotiations resulting in a sale began
 Even a cursory reading of the Complaint and all the pleadings filed thereafter before the RTC, CA, and this
Court, readily show that Estrada does not concede, at any point, that her negotiations with Meralco failed -
Counsel's contention is wrong
 Estrada is entitled to 10% of the total amount of premiums paid by Meralco to Maxicare as of May 1996
(including succeeding renewals)
Sanchez vs. Medicard Phil. Inc.
FACTS:

Sometime in 1987 Medicard Inc. appointed petitioner Sanchez as its special corporate agent and they
gave him a commission based on the "cash brought in." In 1988, through petitioner's efforts, Medicard and
Unilab executed a Health Care Program Contract. Unilab paid Medicard P4,148,005.00 representing the
premium for one (1) year. Medicard then handed petitioner 18% of said amount or P746,640.90 representing
his commission. Again, through petitioner's initiative, the agency contract between Medicard and Unilab was
renewed for another year. Prior to the expiration of the renewed contract, Medicard proposed an increase of
the premium which Unilab rejected "for the reason that it was too high,". In a letter dated October 3, 1990,
Unilab confirmed its decision not to renew the health program. Meanwhile, in order not to prejudice its
personnel by the termination of their health insurance, Unilab negotiated with Dr. Montoya and other officers
of Medicard, to discuss new ways in order to continue the insurance coverage. Under the new scheme, Unilab
shall pay Medicard only the amount corresponding to the actual hospitalization expenses incurred by each
personnel plus 15% service fee. Medicard did not give petitioner any commission under the new scheme.
Aggrieved, Petitioner demanded from Medicard payment of P338,000.00 as his commission plus damages, but
the latter refused to heed his demand.

ISSUE:
whether or not the contract of agency has been revoked by Medicard, hence, petitioner is not entitled to a
commission.

HELD:

Yes the Contract of Agency has been revoked, thus the petitioner is not entitled to any commission. It is
dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the sale,
which simply means that the measures employed by him and the efforts he exerted must result in a sale.
Based on the facts, it may be recalled that through petitioner's efforts, Medicard was able to enter into a
Contract with Unilab, two times, However before the expiration of the renewed contract, Unilab rejected the
proposal. Medicard then requested petitioner to reduce his commission should the contract be renewed on its
third year, but he was obstinate. It is clear that since petitioner refused to reduce his commission, Medicard
directly negotiated with Unilab, thus revoking its agency contract with petitioner. Such revocation is
authorized by Article 1924 of the Civil Code which provides: "The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons."

Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to entitle
him to a commission. There is no indication from the records that he exerted any effort in order that Unilab
and Medicard, after the expiration of the Health Care Program Contract, can renew it for the third time. In
fact, his refusal to reduce his commission constrained Medicard to negotiate directly with Unilab. We find no
reason in law or in equity to rule that he is entitled to a commission.

Case Digest - Business Organization / Agency

Infante vs. Cunanan

G.R L- 5180 August 31, 1953

Bautista Angelo, J:

Facts:

Infante was the owner of the land with a house built on it. Cunanan and Mijares were contracted to sell the
property from which they would receive commission. Noche agreed to purchase the lot but Infante informed
C & M about her change of mind to sell the lot and had them sign a document stating that their authority to
sell was already cancelled. Subsequently, Infante sold the lot & house to Noche. Defendants herein demanded
for their commission. RTC ordered Infante to pay commission. CA affirmed.

Issue:

Whether or not petitioner was duty bound to pay commission notwithstanding that authority to sell has been
cancelled.

Ruling:
A principal may withdraw the authority given to an agent at will. But respondents agreed to cancel the
authority given to them upon assurance by petitioner that should property be sold to Noche, they would be
given commission.

That petitioner had changed her mind even if respondents had found a buyer who was willing to close the
deal, is a matter that would give rise to a legal consequence if respondents agree to call off to transaction in
deference to the request of the petitioner. Petitioner took advantage of the services of respondents, but
believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign
the deed of cancellation. This act of subversion cannot be sanctioned and cannot serve as basis for petitioner
to escape payment of the commissions agreed upon.

Genevieve Lim v. Florencio Saban

G.R. No. 163720 December 16, 2004 Tinga, J.
FACTS:

Eduardo Ybañez, owner of a 1,000-square meter lot in Cebu City, entered into an Agreement
andA u t h o r i t y t o N e g o t i a t e a n d S e l l w i t h F l o r e n c i o S a b a n . U n d e r t h e A g e n c y A g r e e m e n t ,
Y b a ñ e z authorized Saban to look for a buyer of the lot for P200,000.00 and to mark up the selling price
toinclude the amounts needed for payment of taxes, transfer of title and other expenses incident tothe sale,
as well as Saban’s commission for the sale.

Through Saban’s efforts, Ybañez and his wife were able to sell the lot to Genevieve Lim and
thespouses Benjamin and Lourdes Lim. The price of the lot as indicated in the Deed of Absolute Sale
isP200,000.00. The vendees agreed to purchase the lot at the price of P600,000.00, inclusive of taxesand
other incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts
of P 1 1 3 , 2 5 7 . 0 0 f o r
p a y m e n t o f t a x e s d u e o n t h e t r a n s a c t i o n a s w e l l a s P 5 0 , 0 0 0 . 0 0 a s b r o k e r ’ s commission.

Saban received checks in payment of his commission but all of them were dishonored u
p o n presentment. Thus, he filed a complaint for collection of sum of money and damages against Ybañezand
Lim. Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission forthe sale since
he concealed the actual selling price of the lot from Ybañez and because he was not alicensed real estate
broker.
ISSUES:
(1) WON Saban is entitled to receive his commission from the sale; (2) if in the affirmative,WON it is Lim who
is liable to pay Saban his sales commission
HELD:
(1) Yes.

The agency was not revoked since Ybañez requested that Lim make stop payment orders for
thechecks payable to Saban only after the consummation of the sale. At that time, Saban had
alreadyperformed his obligation as Ybañez’s agent when, through his (Saban’s) efforts, Ybañez executed
theDeed of Absolute Sale of the lot with Lim and the Spouses Lim.

To deprive Saban of his commission subsequent to the sale which was consummated through
hisefforts would be a breach of his contract of agency with Ybañez which expressly states that Sabanwould be
entitled to any excess in the purchase price after deducting the P200,000.00 due to Ybañezand the transfer
taxes and other incidental expenses of the sale.

Saban’s agency was not one coupled with an interest. an agency is deemed as one coupled with aninterest
where it is established for the mutual benefit of the principal and of the agent, or for the interest
of the principal and of third persons, and it cannot be revoked by the principal so long as theinterest of the
agent or of a third person subsists. In an agency coupled with an interest, the agent’sinterest must be in
the subject matter of the power conferred and not merely an interest in the exercise of the power
because it entitles him to compensation. When an agent’s interest is confinedto earning his agreed
compensation, the agency is not one coupled with an interest, since an
agent’si n t e r e s t i n o b t a i n i n g h i s c o m p e n s a t i o n a s s u c h a g e n t i s a n o r d i n a r y i n c i d e n t o f t h
e a g e n c y relationship. (See Art. 1927)
HELD:
(2) Yes. It is just and proper for Lim to pay Saban the balance of P200,000.00. Furthermore,since Ybañez
received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his askingprice of P200,000.00,
Saban may claim such excess from Ybañez’s estate, if that remedy is stillavailable, in view of the trial court’s
dismissal of Saban’s complaint as against Ybañez, with Saban’sexpress consent, due to the latter’s demise
when the case was still pending
LIM v. SABAN
G.R. No. 163720; December 16, 2004
Ponente: J. Tinga

FACTS:

Under an Agency Agreement, Ybañez authorized Saban to look for a buyer of the lot for Two Hundred
Thousand Pesos (P200,000.00) and to mark up the selling price to include the amounts needed for payment of
taxes, transfer of title and other expenses incident to the sale, as well as Saban's commission for the sale.

Through Saban's efforts, Ybañez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim)
and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as
indicated in the Deed of Absolute Sale is Two Hundred Thousand Pesos (P200,000.00). It appears, however,
that the vendees agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00),
inclusive of taxes and other incidental expenses of the sale.

After the sale, Lim remitted to Saban the amounts of P113,257 for payment of taxes due on the transaction as
well as P50,000.00 as broker's commission. Lim also issued in the name of Saban four postdated checks in the
aggregate amount of P236,743.00.

Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim to
cancel all the checks issued by her in Saban's favor and to "extend another partial payment" for the lot in his
(Ybañez's) favor.

After the four checks in his favor were dishonored upon presentment, Saban filed a complaint for collection of
sum of money and damages against Ybañez and Lim
Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission for the sale since he
concealed the actual selling price of the lot from Ybañez and because he was not a licensed real estate broker.
Ybañez was able to convince Lim to cancel all four checks.
In his Answer, Ybañez claimed that Saban was not entitled to any commission because he concealed the actual
selling price from him and because he was not a licensed real estate broker.

ISSUE: Whether Saban is entitled to receive his commission from the sale

HELD: Yes, Saban is entitled to receive his commission from the sale.

The Supreme Court held that to deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of his contract of agency with Ybañez which expressly
states that Saban would be entitled to any excess in the purchase price after deducting the P200,000.00 due
to Ybañez and the transfer taxes and other incidental expenses of the sale.
Moreover, the Court has already decided in earlier cases that would be in the height of injustice to
permit the principal to terminate the contract of agency to the prejudice of the broker when he had already
reaped the benefits of the broker's efforts.

Prats v. Court of Appeals

Prats v. Court of Appeals G.R. No. L-39822, January 31, 1978, Fernandez, J.

Facts:

In 1968, Antonio Prats, under the name of “ Philippine Real Estate Exchange” instituted against Alfonso
Doronilla and PNB a case to recover a sum of money and damages. Doronilla had for sometime tried to sell his
300 ha land and he had designated several agents for that purpose at one time. He offered the property to the
Social Security System but was unable to consummate the sale. Subsequently he gave a written authority in
writing to Prats to negotiate the sale of the property. Such authorization was published by Prats in the Manila
Times. The parties agreed that Prats will be entitled to 10% commission and if he will be able to sell it over its
price, the excess shall be credited to the latter plus his commission. Thereafter, Prats negotiated the land to
the SSS. SSS invited Doronilla for a conference but the latter declined and instead instructed that the former
should deal with Prats directly. Doronilla had received the full payment from SSS. When Prats demanded from
him his professional fees as real estate broker, Doronilla refused to pay. Doronilla alleged that Prats had no
right to demand the payment not rendered according to their agreement and that the authority extended to
Prats had expired prior to the closing of the sale..

Issue: Whether petitioner was the efficient procuring cause in bringing about the sale of respondent’s land to
the SSS.

Ruling:
The Supreme Court ruled that Prats was not the efficient procuring cause of the sale. It was not categorical
that it was through Prats efforts that meeting with the SSS official to close the sale took place. The court
concluded that the meeting took place independently because the SSS had manifested disinterest in Prats
intervention. However, in equity, the court noted that Prats had diligently taken steps to bring back together
Doronilla and SSS. Prats efforts somehow were instrumental in bringing them together again and finally
consummating the sale although such finalization was after the expiration of Prats extended exclusive
authority. Doronilla was ordered to pay Prats for his efforts and assistance in the transaction

Prats v. CA, 81 SCRA 360

-Offer to sell was accepted after the authority had already expired -Agent was not
t h e p r o c u r i n g c a u s e i n b r i n g i n g a b o u t t h e s a l e ; therefore, not entitled to commission-
H o w e v e r , t h e c o u r t t o o k i n t o c o n s i d e r a t i o n t h a t t h e a g e n t w a s responsible for bringing the
buyer and seller back together (after aprevious failed negotiation) and finally consummating the transaction;it
is therefore entitled to P100,000 based on equity

Uniland Resources v. DBP, 200 SCRA 757

- U n i l a n d w a s a w a r e t h n a t i t h d n o e x p re s s a u t h o r i t y f r o m D B P t o f i n d buyers of its
properties
- I t w a s n e v e r a b l e t o a c q u i r e a c c r e d i t a t i o n t o t r a n s a c t b u s i n e s s o n behalf of DBP
-Implied agency did not exis
T h e c o u r t a l s o g r a n t e d P 1 0 0 , 0 0 0 b a s e d o n e q u i t y s i n c e i t w a s U n i l a n d who informed DBP
of the interested buyer.

Manotoc vs Court of Appeals Digest

Facts:

Ricardo Manotoc Jr. was one of the two principal stockholders of Trans-Insular Management Inc. and the
Manotoc Securities Inc., a stock brokerage house. He was in US for a certain time. He went home
to file a petition with SEC for appointment of a management committee for both businesses. Pending
disposition of the case, the SEC requested the Commissioner of Immigration not to clear Manotoc for
departure, and a memorandum to this effect was issued by the Commissioner. Meanwhile, six clients of
Manotoc Securities Inc. filed separate criminal complaints for estafa against Manotoc. Manotoc posted bail in
all cases. He then filed a motion for permission to leave the country in each trial courts stating as ground
therefor his desire to go to the United States, "relative to his business transactions and opportunities." His
motion was denied. He also wrote the Immigration Commissioner requesting the recall or withdrawal of the
latter's memorandum, but said request was also denied. Thus, he filed a petition for certiorari and mandamus
before the Court of Appeals seeking to annul the judges' orders, as well as the communication-request of the
SEC, denying his leave to travel abroad. The same was denied; hence, he appealed to the SupremeCourt. He
contends that having been admitted to bail as a matter of right, the courts which granted him bail could not
prevent him from exercising his constitutional right to travel.

Issue:

Whether a court has the power to prohibit a person admitted to bail from leaving the Philippines.

Held:
A court has the power to prohibit a person admitted to bail from leaving the Philippines. This is a necessary
consequence of the nature and function of a bail bond. Rule 114, Section 1 of the Rules of Court defines bail as
the security required and given for the release of a person who is in the custody of the law, that he will appear
before any court in which his appearance may be required as stipulated in the bail bond or recognizance.
The condition imposed upon petitioner to make himself available at all times whenever the court requires his
presence operates as a valid restriction on his right to travel. Indeed, if the accused were allowed to leave the
Philippines without sufficient reason, he may be placed beyond the reach of the courts. (Manotoc vs Court of
Appeals, G.R. No. L-62100, May 30, 1986)

UNILAND RESOURCES VS DEVELOPMENT BANK OF THE PHILIPPINES

FACTS:

Marinduque Mining Corporation got hold of a loan from the DBP and mortgaged a warehouse lot and an office
building lot previously mortgaged by MMC to Caltex, and the mortgage in favor of DBP was entered on their
titles as a second mortgage. The account of the Marinduque Mining Corp., with the DBP was later transferred
to the Assets Privatization Trust (APT).

Caltex foreclosed the mortgage due to the nonpayment of MMC. APT on the other hand offered for sale to the
public through DBP its right of redemption on said two lots by public bidding. DBP subsequently retrieved the
account from APT and redeemed said lots from Caltex . A public bidding for the sale of the two lots was held
and the warehouse lot was sold to Charges Realty Corp . The office building lot was later sold by DBP to a
different buyer. After the aforesaid sale, Uniland Resources sent two letters to DBP asking for the payment of
its broker's fee in instrumenting the sale of it’s the warehouse lot to Charges Realty Corp. Uniland filed a case
to recover from DBP the broker's fee.

The Trial Court ordered DBP to pay the brokers’s fee to the petitioner. On appeal, the Court of Appeals
reversed the judgment of the lower court ..

Issue:

Whether or not the petitioner there is a contract of agency between DBP and Uniland in the sale of warehouse
lot.

Held:

No. There is no contract of agency, express or implied. The petitioner was never able to secure the required
accreditation from respondent DBP to transact business on behalf of the latter. It was always made clear to
petitioner that only accredited brokers may look for buyers on behalf of respondent DBP. The contract of
Agency is one founded on mutual consent: the principal agrees to be bound by the acts of the agent and the
latter in turn consents to render service on behalf or in representation of the principal.

DOMINGO v. DOMINGO
G.R. No. L-30573; October 29, 1971
Ponente: J. Makasiar
FACTS:

On June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to
sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square
meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by
anyone else during the 30-day duration of the agency or if the property is sold by Vicente within three months
from the termination of the agency to a purchaser to whom it was submitted by Gregorio during the
continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was
given to Vicente, while the original and another copy were retained by Gregorio.

On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him
one-half of the 5% commission.Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter.
Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio
and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20 and Vicente agreed.

Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money,
after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to
pay for the property at P1.20 per square meter in another letter. Subsequently, Vicente asked for an
additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him.

Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of 1,000.00 for succeeding in
persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure of P109,000.00. This gift
of P1,000.00 was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of
P1,000.00 by way of earnest money.

When the deed of sale was not executed on August 1, 1956 as stipulated nor on August 16, 1956 as extended
by Vicente, Oscar told Gregorio that he did not receive his money from his brother in the United States, for
which reason he was giving up the negotiation including the amount of P 1,000 given as earnest money to
Vicente and the P 1,000 given to Gregorio as propina or gift.

When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and
read a portion to the effect that Vicente was still committed to pay him 5% commission. Vicente grabbed the
original of the document and tore it to pieces.

From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City,
where he discovered a deed of sale executed on September 17, 1956 by Amparo Diaz.

Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his commission on the sale price of P109,000.00.

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, wife of Oscar de Leon

ISSUE:
Whether Gregorio was entitled to receive the 5% commission
HELD:

No, Gregorio is not entitled to receive the 5% commission.

The Supreme Court held that 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.

Hence, by taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar
as his Commission is concerned, as if no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not exculpate the agent who has only himself to
blame for such a result by reason of his treachery or perfidy.

BALTAZAR v. OMBUDSMAN
G.R. No. 136433; December 6, 2006
Ponente: Velasco Jr.

FACTS:

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney-in-Fact
Faustino R. Mercado leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period.
Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven
(7) months of the original lease. Respondent Ernesto Salenga was hired by Eduardo Lapid as fishpond
watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28,
1993 demand letter to Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share
in the harvest.

On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the
last two (2) months of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez
for PhP 20,000.00. This prompted respondent Salenga to file a Complaint before the Provincial Agrarian
Reform Adjudication Board (PARAB).

On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner
Antonio Baltazar, an alleged nephew of Faustino Mercado, through a Complaint-Affidavit against private
respondents before the Office of the Ombudsman.

Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent
Salenga to retain possession of the fishpond, operate it, harvest the produce, and keep the sales under the
safekeeping of other private respondents

Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special
Power of Attorney (SPA) from Faustino Mercado.
ISSUE:
Whether Faustino Mercado can delegate his agency to his nephew Antonio Baltazar

HELD:

No, Faustino Mercado cannot delegate his agency to his nephew Antonio Baltazar.

The Supreme Court held that petitioner's principal, Faustino Mercado, is an agent himself and as such cannot
further delegate his agency to another. Otherwise put, an agent cannot delegate to another the same agency.
The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re-delegated,
while applied primarily in political law to the exercise of legislative power, is a principle of agency. For
another, a re-delegation of the agency would be detrimental to the principal as the second agent has no
privity of contract with the former.
In the instant case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and
principal of Faustino Mercado.

Board of Liquidators v Kalaw (Torts)

BOARD OF LIQUIDATORS V KALAW G.R. No. L-18805 August 14, 1967 THE BOARD OF LIQUIDATORS
representing THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF
MAXIMO M. KALAW, JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO GARCIA, and LEONOR
MOLL, defendants-appellees.

FACTS:

The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental
organization on avowedly for the protection, preservation and development of the coconut industry in the
Philippines. On August 1, 1946, NACOCO's charter was amended [Republic Act 5] to grant that corporation the
express power to buy and sell copra. The charter amendment was enacted to stabilize copra prices, to serve
coconut producers by securing advantageous prices for them, to cut down to a minimum, if not altogether
eliminate, the margin of middlemen, mostly aliens. General manager and board chairman was Maximo M.
Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the Board; defendant Leonor Moll
became director only on December 22, 1947. NACOCO, after the passage of Republic Act 5, embarked on
copra trading activities.

An unhappy chain of events conspired to deter NACOCO from fulfilling the contracts it entered into. Nature
supervened. Four devastating typhoons visited the Philippines in 1947. When it became clear that the
contracts would be unprofitable, Kalaw submitted them to the board for approval. It was not until December
22, 1947 when the membership was completed. Defendant Moll took her oath on that date. A meeting was
then held. Kalaw made a full disclosure of the situation, apprised the board of the impending heavy losses. No
action was first taken on the contracts but not long thereafter, that is, on January 30, 1948, the board met
again with Kalaw, Bocar, Garcia and Moll in attendance. They unanimously approved the contracts
hereinbefore enumerated.
As was to be expected, NACOCO but partially performed the contracts. The buyers threatened damage suits,
some of which were settled. But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the
Court of First Instance of Manila. The cases culminated in an out-of- court amicable settlement when the
Kalaw management was already out.
With particular reference to the Dreyfus claims, NACOCO put up the defenses that:

(1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have license to do business
here; and
(2) failure to deliver was due to force majeure, the typhoons. All the settlements sum up to P1,343,274.52.
In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52 from general
manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro Garcia and Leonor Moll. It
charges Kalaw with negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code); and
defendant board members, including Kalaw, with bad faith and/or breach of trust for having approved the
contracts. By Executive Order 372, dated November 24, 1950, NACOCO, together with other government-
owned corporations, was abolished, and the Board of Liquidators was entrusted with the function of settling
and closing its affairs.

DECISION OF LOWER COURTS:

1. CFI-Manila: dismissed the complaint. Plaintiff was ordered to pay the heirs of Maximo Kalaw the sum of
P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO.

ISSUE:
1. Whether plaintiff Board of Liquidators has lost its legal personality to continue with this suit since the three
year period has elapsed, the Board of Liquidators may not now continue with, and prosecute, the present case
to its conclusion
2. Whether the action is unenforceable against Kalaw
3. whether the case at bar is to be taken out of the general concept of the powers of a general manager, given
the cited provision of the NACOCO by-laws requiring prior directorate approval of NACOCO contracts.
4. Whether damages should be awarded

RULING:
1. No, the provision should be read not as an isolated provision but in conjunction with the whole. So reading,
it will be readily observed that no time limit has been tacked to the existence of the Board of Liquidators and
its function of closing the affairs of the various government owned corporations, including NACOCO.
The President thought it best to do away with the boards of directors of the defunct corporations; at the same
time, however, the President had chosen to see to it that the Board of Liquidators step into the vacuum. And
nowhere in the executive order was there any mention of the lifespan of the Board of Liquidators.
3 methods by which corporation may wind up it its affairs:
1. Voluntary dissolution, "such disposition of its assets as justice requires, and may appoint a receiver to
collect such assets and pay the debts of the corporation;
2. Corporate existence is terminated - "shall nevertheless be continued as a body corporate for three years
after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by
or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property
and to divide its capital stock, but not for the purpose of continuing the business for which it was
established;"
3. corporation, within the three year period just mentioned, "is authorized and empowered to convey all of its
property to trustees for the benefit of members, stockholders, creditors, and others interested
Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution of a corporation ends
its existence so that there must be statutory authority for prolongation of its life even for purposes of
pending litigation
Board of Liquidators escapes from the operation thereof for the reason that "[o]bviously, the complete loss of
plaintiff's corporate existence after the expiration of the period of three (3) years for the settlement of its
affairs is what impelled the President to create a Board of Liquidators, to continue the management of such
matters as may then be pending."
The Board of Liquidators thus became the trustee on behalf of the government. It was an express trust. The
legal interest became vested in the trustee — the Board of Liquidators. The beneficial interest remained with
the sole stockholder — the government. At no time had the government withdrawn the property, or the
authority to continue the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay
the hand of the Board of Liquidators from prosecuting this case to its final conclusion. The provisions of
Section 78 of the Corporation Law — the third method of winding up corporate affairs — find application.

2. Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia survives.

claims that are barred if not filed in the estate settlement proceedings(Rule 87, sec. 5)
> actions that are abated by death are:
(1) claims for funeral expenses and those for the last sickness of the decedent;
(2) judgments for money; and
(3) "all claims for money against the decedent, arising from contract express or implied."

it is not enough that the claim against the deceased party be for money, but it must arise from "contract
express or implied"

actions that survive and may be prosecuted against the executor or administrator (Rule 88, sec. 1)
> 1. actions for damages caused by tortious conduct of a defendant (as in the case at bar) survive the death of
the latter.

actions that survive against a decedent's executors or administrators, and they are:
(1) actions to recover real and personal property from the estate; (2) actions to enforce a lien thereon; and

(3) actions to recover damages for an injury to person or property.

3. The movement of the market requires that sales agreements be entered into, even though the goods are
not yet in the hands of the seller. Known in business parlance as forward sales, it is concededly the practice of
the trade. Above all, NACOCO's limited funds necessitated a quick turnover. Copra contracts then had to be
executed on short notice — at times within twenty-four hours. To be appreciated then is the difficulty of
calling a formal meeting of the board
So pleased was NACOCO's board of directors that, on December 5, 1946, in Kalaw's absence, it voted to grant
him aspecial bonus "in recognition of the signal achievement rendered by him in putting the Corporation's
business on a self-sufficient basis within a few months after assuming office, despite numerous handicaps and
difficulties."
These previous contract it should be stressed, were signed by Kalaw without prior authority from the board.
Existence of such authority is established, by proof of the course of business, the usage and practices of the
company and by theknowledge which the board of directors has, or must be presumed to have, of acts and
doings of its subordinates in and about the affairs of the corporation.
If the by-laws were to be literally followed, the board should give its stamp of prior approval on all corporate
contracts. But that board itself, by its acts and through acquiescence, practically laid aside the by-law
requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts. Bad faith does not simply
connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty thru some motive or interest or ill will; it partakes of the
nature of fraud. Applying this precept to the given facts herein, we find that there was no "dishonest
purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some
motive or interest or ill will" that "partakes of the nature of fraud."

4. No. This is a case of damnum absque injuria. Conjunction of damage and wrong is here absent. There
cannot be an actionable wrong if either one or the other is wanting. Of course, Kalaw could not have been an
insurer of profits. He could not be expected to predict the coming of unpredictable typhoons. And even as
typhoons supervened Kalaw was not remissed in his duty. He exerted efforts to stave off losses. That Kalaw
cannot be tagged with crassa negligentia or as much as simple negligence, would seem to be supported by the
fact that even as the contracts were being questioned in Congress and in the NACOCO board itself, President
Roxas defended the actuations of Kalaw.
It is a well known rule of law that questions of policy of management are left solely to the honest decision of
officers and directors of a corporation, and the court is without authority to substitute its judgment for the
judgment of the board of directors; the board is the business manager of the corporation, and so long as it
acts in good faith its orders are not reviewable by the courts."

Corporate Law Case Digest: San Juan Structural V. CA (1998)

G.R. No. 129459 September 29, 1998

Lessons Applicable: Definition of a Close Corporation (Corporate Law)

FACTS:
 February 14 1989: San Juan Structural and Steel Fabricators, Inc.'s (San Juan) entered into an agreement
with Motorich Sales Corporation (Motorich) for the transfer to it of a parcel of land containing an area of
414 square meters

 San Juan paid the down payment of P100,000, the balance to be paid on or before March 2, 1989

 March 1, 1989: Mr. Andres T. Co, president of San Juan, wrote a letter course through Motorich's broker
requesting for a computation of the balance to be paid

 Linda Aduca, who wrote the computation of the balance

 March 2, 1989: San Juan was ready with the amount corresponding to the balance, covered by Metrobank
Cashier's Check, payable to Motorich

 they were supposed to meet in the office of San Juan but Motorich's treasurer, Nenita Lee Gruenberg, did
not appear

 Motorich refused to execute the Transfer of Rights/Deed of Assignment which is necessary to transfer the
certificate of title

 ACL Development Corp. (ACL) is impleaded as a necessary party since Transfer Certificate of Title No.
(362909) 2876 is still in its name

 JNM Realty & Development Corp. (JNM) is impleaded as a necessary party in view of the fact that it is the
transferor of right in favor of Motorich

 April 6, 1989: ACL and Motorich entered into a Deed of Absolute Sale

 the Registry of Deeds of Quezon City issued a new title in the name of Motorich Sales Corporation,
represented by Nenita Lee Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title No.
3571

 as a result of Nenita Lee Gruenberg and Motorich's bad faith in refusing to execute a formal Transfer of
Rights/Deed of Assignment, San Juan suffered moral and nominal damages of P500,000 and exemplary
damages of P100,000.00 and P100,000 attorneys fees

 San Juan lost the opportunity to construct a residential building in the sum of P100,000.00 Pesos

 CA affirmed RTC for dismissing

 San Juan argues that the veil of corporate fiction of Motorich should be pierced because it is a close
corporation.

 Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or almost all or 99.866% to be
accurate, of the subscribed capital stock" of Motorich, San Juan argues that Gruenberg needed no
authorization from the board to enter into the subject contract.
 being solely owned by the Spouses Gruenberg, the company can treated as a close corporation which can
be bound by the acts of its principal stockholder who needs no specific authority

ISSUE: W/N Motorich is a close corp. which does not need to be bound by its principal SH

HELD: NO. petition is hereby DENIED

 Gruenberg, treasurer of Motorich, and Andres Co signed the contract but that cannot bind Motorich,
because it never authorized or ratified such sale or even the receipt of the earnest money

 A corporation is a juridical person separate and distinct from its stockholders or members

 San Juan failed to prove otherwise

 The document is a hand-written one, not a corporate receipt, and it bears only Nenita Gruenberg's
signature

 GR: acts of corporate officers within the scope of their authority are binding on the corporation. But when
these officers exceed their authority, their actions "cannot bind the corporation, unless it has ratified such
acts or is estopped from disclaiming them.

 statutorily granted privilege of a corporate veil may be used only for legitimate purposes

 utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate
issues; or serve as a mere alter ego or business conduit of a person or an instrumentality, agency or
adjunct of another corporation - none here

Sec. 96. Definition and Applicability of Title. — A close corporation, within the meaning of this Code, is one
whose articles of incorporation provide that: (1) All of the corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty
(20); (2) All of the issued stock of all classes shall be subject to one or more specified restrictions on transfer
permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering
of any of its stock of any class. Notwithstanding the foregoing, a corporation shall be deemed not a close
corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the meaning of this Code. . . . .
 The articles of incorporation of Motorich Sales Corporation does not contain any provision stated in Sec. 96

 mere ownership by a single stockholder or by another corporation of all or capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate personalities

 A narrow distribution of ownership does not, by itself, make a close corporation

 Even if veil is peice it will then be a sale of conjugal property which Nenita alone could not have effected

 Gruenberg did not represent herself as authorized by Respondent Motorich despite the receipt issued by
the former specifically indicating that she was signing on behalf of Motorich
 The amount paid as "earnest money" was not proven to have redounded to the benefit of Motorich

 it was deposited with the account of Aren Commercial c/o Motorich

 Andres Co being a President of San Juan for more than 10 years cannot feign ignorance of the scope of the
authority of a corporate treasurer

 However, Nenita Gruenberg should be ordered to return to petitioner the amount she received as earnest
money, as "no one shall enrich himself at the expense of another.

Transportation Case Digest: British Airways V. CA (1993)

G.R. No. 92288 February 9, 1993

Lessons Applicable: Actionable Document (Transportation)

FACTS:
 February 15, 1981: First International Trading and General Services Co. (First Int'l), a duly licensed domestic
recruitment and placement agency, received a telex message from its principal ROLACO Engineering and
Contracting Services (ROLACO) in Jeddah, Saudi Arabia to recruit Filipino contract workers in its behalf
 Early March 1981: ROLACO paid British Airways, Inc. (BA) Jeddah branch the airfare tickets for 93 contract
workers with specific instruction to transport the workers to Jeddah on or before March 30, 1981
 As soon as BA received a prepaid ticket advice from its Jeddah branch informed First Int'l.
 Thereafter, First Int'l instructed ADB Travel and Tours. Inc. (its travel agent) to book the 93 workers
with BA but it failed
 So First Int'l had to borrow P304,416.00 for the purchase of airline tickets from the other airlines for the 93
workers who must leave immediately since the visas are valid only for 45 days and the Bureau of
Employment Services mandates that contract workers must be sent to the job site within a period of 30
days
 First week of June, 1981: First Int'l was again informed by BA that it had received a prepaid ticket advice
from its Jeddah branch for the transportation of 27 contract workers.
 Immediately, First Int'l instructed its ADB to book the 27 contract workers with the BA but only 16 seats
were confirmed and booked on its June 9, 1981 flight.
 June 9, 1981: only 9 workers were able to board said flight while the remaining 7 workers were rebooked
to:
 June 30, 1981 - again cancelled by British without any prior notice to either First Int'l or the workers
 July 4,1981 - (6 + 7 workers) 13 workers were again cancelled and rebooked to July 7, 1981.
 July 6, 1981: First Int'l paid the travel tax of the workers as required by BA but when the receipt of the tax
payments was submitted, only 12 seats were confirmed for July 7, 1981 flight
 July 7, 1981: Flight was again cancelled without any prior notice
 12 workers were finally able to leave for Jeddah after First Int'l had bought tickets from the other airlines
 As a result of these incidents, First Int'l sent a letter to BA demanding compensation for the damages it had
incurred by the repeated failure to transport its contract workers despite confirmed bookings and payment
of the corresponding travel taxes.
 July 23, 1981: the counsel of First Int'l sent another letter to BA demanding P350,000.00 damages and
unrealized profit or income - denied
 August 8, 1981: First Int'l received a telex message from ROLACO cancelling the hiring of the remaining
recruited workers due to the delay in transporting the workers to Jeddah.
 January 27, 1982: First Int'l filed a complaint for damages against First Int'l
 CA Affirmed RTC: BA to pay First Int'l damages, attorneys fees and costs
ISSUE: W/N BA is not liable because there was no contract of carriage as no ticket was ever issued

HELD: Affirmed. MODIFICATION that the award of actual damages be deleted (reimbursed by ROLACO)
 In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2)
aspects of the same, namely:
 (a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected
by mere consent - applicable in this case
 (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract
for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a
carrier
 Even if a prepaid ticket advice (PTA) is merely an advice from the sponsors that an airline is authorized to
issue a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid
for by the principal of the appellee, and the appellant had accepted such payment
 Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified
the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on
BA
 involvement of the BA in the contract "to carry" was well demonstrated when the it immediately advised
First Int'l
 Acts of BA indeed constitute malice and evident bad faith which had caused damage and besmirched the
reputation and business image fo First Int'l
 Severino vs. Severino
 Facts: Melecio Severino upon his death, left considerable properties. To end litigation among heirs
acompromise was effected where defendant (son of MS) took over the property of deceased and
agreedto pay installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution
of document in 3 equal installments. Enrique Echauz became guarantor. Upon failure to pay the
balance,plaintiff filed and action against the defendant and Echauz. Enchauz contends that he received
nothingfrom affixing his signature in the document and the contract lacked the consideration as to
him.Issue: WON there is a consideration for the guaranty?Held: 1. The guarantor or surety is bound by
the same consideration that makes the contract effectivebetween the principal parties thereto. 2. It is
neither necessary that guarantor or surety should receiveany part of the benefit, if such there be
accruing to his principal.
Metrobank vs. CA
Metropolitan Bank & Trust Company vs. Court of Appeals

G.R. No. 88866 February, 18, 1991

Cruz, J.:

Facts:

Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All
warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its
Savings account in Metrobank branch in Calapan, Mindoro. They were sent for clearance. Meanwhile, Gomez
is not allowed to withdraw from his account, later, however, “exasperated” over Floria repeated inquiries and
also as an accommodation for a “valued” client Metrobank decided to allow Golden Savings to withdraw from
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. The demand was rejected. Metrobank then sued Golden Savings.

Issue:

1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount
withdraws to make up with the deficit as a result of the dishonored treasury warrants.

2. Whether or not treasury warrants are negotiable instruments

Held:

No. Metrobank is 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. Without such assurance, Golden
Savings would not have allowed the withdrawals. Indeed, Golden Savings might even have incurred liability for
its refusal to return the money that all appearances belonged to the depositor, who could therefore withdraw
it anytime and for any reason he saw fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to
its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit.

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were
genuine and in all respects what they purport to be,” in accordance with Sec. 66 of NIL. The simple reason that
NIL is not applicable to non negotiable instruments, treasury warrants.

No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word:
non negotiable.” Moreover, and this is equal significance, it is indicated that they are payable from a particular
fund, to wit, Fund 501. An instrument to be negotiable instrument must contain an unconditional promise or
orders to pay a sum certain in money. As provided by Sec 3 of NIL an unqualified order or promise to pay is
unconditional though coupled with: 1st, an indication of a particular fund out of which reimbursement is to be
made or a particular account to be debited with the amount; or 2 nd, a statement of the transaction which give
rise to the instrument. But an order to promise to pay out of particular fund is not unconditional. The
indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or
promise to pay “not conditional” and the warrants themselves non-negotiable. There should be no question
that the exception on Section 3 of NIL is applicable in the case at bar.
Read full text here: Metrobank vs. CA

DBP v. CA
G.R. No. 109937; March 21, 1994
Ponente: J. Quiason

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 Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor,
Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the
DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on
August 11, 1987. 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 August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to
the savings account of the 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 anex gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the
Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for "Collection of Sum of Money
with Damages." Respondent Estate alleged 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:
Whether DBP exceeded its authority when it approved the application of Dans

HELD:
Yes, DBP exceeded its authority.

The Supreme Court held that 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.