1. BA Finance vs. CA GR No.
82040 (201 SCRA 157)27 August 1991
FACTS:
Private respondents Manuel Cuady and Lilia Cuady acquired from
Supercars, Inc. a credit of P39,574.80, which covered the cost of a unit of four-door
sedan, Ford Escort 1300 on July 15, 1977. A promissory note was executed by
private respondents in favor of Supercars, Inc., obligating themselves to pay the
latter or order the sum of P39,574.80, inclusive of interest at 14% per annum,
payable on monthly installments of P1,098.00 starting August 16, 1977, and on the
16th day of the next 35 months from September 16, 1977 until full payment thereof.
It was also stipulated that a penalty of P10.00 for every month of late installment will
be paid. To incur no delays in payment and secure compliance of the obligation,
said spouses constituted a chattel mortgage.
On July 25, 1977, the promissory note, together with the chattel mortgage
were assigned to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15
to the B.A. Finance Corporation, thus leaving an unpaid balance of P2,344.65 as of
July 18, 1980. In addition thereto, the Cuadys owe B.A. Finance Corporation
P460.00 representing penalties or surcharges for tardy monthly installments.
When the Cuadys failed to renew insurance coverage of said motor vehicle,
the B.A. Finance Corporation, as the assignee of the mortgage, obtained the
renewal of its insurance coverage for the year 1980 with Zenith Insurance
Corporation. Under the terms and conditions of the said insurance coverage, any
loss under the policy shall be payable to the B.A. Finance Corporation. On April 18,
1980, the motor vehicle met an accident and was badly damaged. It was reported
to the B.A. Finance Corporation and to the insurer, Zenith Insurance Corporation.
The Cuadys asked the B.A. Finance Corporation to consider the same as a
total loss, and to claim from the insurer the face value of the car insurance policy
and apply the same to the payment of their remaining account and give them the
surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A.
Finance Corporation prevailed upon the former to just have the car repaired. Not
long thereafter, however, the car bogged down.
The Cuadys wrote B.A. Finance Corporation requesting the latter to pursue
their prior instruction of enforcing the total loss provision in the insurance coverage.
When B.A. Finance Corporation did not respond favorably to their request, the
Cuadys stopped paying their monthly installments on the promissory note .
ISSUE: WON B.A. Finance Corporation is bound by its acceptance to carry
out the agency, and is liable for damages which, through its non-performance,
the principal may suffer?
RULING:
Yes. B.A. Finance Corporation is bound by its acceptance to carry out the
agency, and is liable for damages which, through its non-performance, the Cuadys,
the principal may suffer. B.A. Finance Corporation was subrogated to the rights and
obligations of Supercars, Inc. when the Supercars assigned the promissory note,
together with the chattel mortgage constituted on the motor vehicle in question in
favor of B.A.. Consequently, B.A. Finance Corporation is bound by the terms and
conditions of the chattel mortgage executed between the Cuadys and Supercars,
Inc.
Under the deed of chattel mortgage, B.A. Finance was constituted attorney-
in-fact with full power and authority to file, follow-up, prosecute, compromise or settle
insurance claims; to sign execute and deliver the corresponding papers, receipts
and documents to the Insurance Company as may be necessary to prove the claim,
and to collect from the latter the proceeds of insurance to the extent of its interests,
in the event that the mortgaged car suffers any loss or damage.
In granting B.A. Finance Corporation said powers and prerogatives, the
Cuady spouses created in the former's favor an agency. When the finance company
executes a mortgage contract that contains a provision that in the event of accident
or loss, it shall make a proper claim against the insurance company, was in effect
an agency relation, and that under Article 1884, the finance company was bound by
its acceptance to carry out the agency, and in spite of the instructions of the
borrowers to make such claims instead insisted on having the vehicle repaired but
eventually resulting in loss of the insurance coverage, the finance company had
breached its duty of diligence, and must assume the damages suffered by the
borrowers, and consequently can no longer collect on the balance of the mortgage
loan secured thereby.
1
 2. Sazon vs. Vasquez-Menancio | GR No. 192085 (666 SCRA 707) 22
February 2012 |Justice Sereno
FACTS:
Respondent Letecia Vasquez-Menancio, a US resident, entrusted the
management, care and preservation of several of her nine (9) properties to petitioner
Caridad Sazon.
Letecia claimed that the said lots were all productive, and all the fruits and income
accruing therefrom were apparently received by Caridad. In contrast, Caridad
alleged that several of the properties do not produce any fruit nor generate any
income. She claimed that any supposed income derived therefrom was not even
sufficient to answer for all the expenses incurred to maintain them.
Letecia further averred that despite repeated demands, Caridad failed to render a
proper accounting and to remit the owner‘s share of the profits. Thus, sometime in
October 1997, she filed a complaint against Carida praying that the lower court will
order her to render an accounting and remit all the fruits and income the latter
received from the properties as administrator.
In her defense, Caridad averred that she can turn over the possession of certain 3
lots because they were allegedly subject of valid lease agreements. It appeared that
when the petitioner entered into these agreements, she acted within her authority as
Letecia‘s agent.
In its decision, the RTC ruled in favour of Letecia, and the same was affirmed by the
CA.
ISSUE: Whether or not the agent fulfilled her obligation in rendering the
accounting of properties?
Holding and Ratio:
Yes. Petitioner insisted, however, that Article 1891 of the Civil Code
contains a few of the obligations owed by an agent to his principal, viz:
Art. 1891. Every agent is bound to render an account of his transactions and to
deliver to the principal whatever he may have received by virtue of the agency, even
though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall
be void.
It is evident that the reason behind the failure of petitioner to render an
accounting to respondent is immaterial. What is important is that the former fulfill her
duty to render an account of the relevant transactions she entered into as
respondent‘s agent.
Petitioner claims that in the course of her administration of the properties,
the letters she sent to respondent should be considered as a fulfillment of her
obligation, as respondent‘s agent, to render an accounting of her administration.
Both the RTC and the CA found these letters insufficient. We agree. Petitioner was
the administrator of respondent‘s properties for 18 years or from 1979 to 1997, and
four letters within 18 years can hardly be considered as sufficient to keep the
principal informed and updated of the condition and status of the latter‘s properties.
3. Hernandez vs. Hernandez | GR 158576 645 SCRA 24 | 9 March 2011
FACTS
On 11 November 1993, the owners of the Hernandez property, which includes
petitioner Cornelia Hernandez, executed a letter indicating: (1) respondent Cecilio
Hernandez as the representative of the owners of the land; and (2) the
compensation he gets in doing such job. Such property was subject of an
expropriation case for a DPWH project. During the course of the expropriation
proceedings, an Order was issued by the RTC, Cecilio was appointed as one of the
commissioners in the expropriation case. On 18 October 1996, Cornelia, and her
other co-owners who were also signatories of the 11 November 1993 letter,
executed an irrevocable Special Power of Attorney (SPA) appointing Cecilio
Hernandez as their "true and lawful attorney" with respect to the expropriation of the
subject property. There was no mention of the compensation scheme for Cecilio, the
attorney-in-fact. The just compensation for the condemned properties was fixed
subsequently, with Cornelias share amounting to P7,321,500.00the amount a pro-
indiviso owner is to receive. At this point, Cecilios SPA was revoked by Cornelia. On
7 February 2000, however, Cornelia received from Cecilio a check amounting to
P1,123,000.00. The check was accompanied by a Receipt and Quitclaim document
in favor of Cecilio. In essence it states that: (1) the amount received will be the share
of Cornelia in the just compensation paid by the government in the expropriated
property; (2) in consideration of the payment, it will release and forever discharge
Cecilio from any action, damages, claims or demands; and (3) Cornelia will not
institute any action and will not pursue her complaint or opposition to the release to
Cecilio or his heirs or assigns.
In a Letter dated 22 June 2000 after she learned of her true share in the expropriation
proceedings Cornelia demanded the accounting of the proceeds.The letter was left
unanswered. She then decided to have the courts settle the issue.A Complaint for
the Annulment of Quitclaim and Recovery of Sum of Money and Damages was filed
before the RTC. Cecilio was declared in default, but this was reversed by the CA.
2
ISSUE Whether or not the agent exceeded the scope of her authority?
Holding and Ratio Decidendi
A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. In determining whether consent is vitiated by any of
the circumstances mentioned, courts are given a wide latitude in weighing the facts
or circumstances in a given case and in deciding in their favor what they believe to
have actually occurred, considering the age, physical infirmity, intelligence,
relationship, and the conduct of the parties at the time of the making of the contract
and subsequent thereto. Here, the service contract of 11 November 1993
(appointing Cecilio as representative), as well as the quitclaim and receipt, are
voidable the first due to mistake, the second due to fraud. First, the service contract
gave Cecilio compensation based on "1998 skyrocketing" prices that essentially will
give Cecilio 83.07% of the just compensation due Cornelia as the co-owner of the
land. No evidence on record would show that Cornelia agreed, by way of the 11
November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale of her land.
Second, quitclaims are also contracts and can be voided if there was fraud or
intimidation that leads to lack of consent. The facts show that a simple accounting
of the proceeds of the just compensation will be enough to satisfy the curiosity of
Cornelia. However, Cecilio did not disclose the truth and instead of coming up with
the request of his aunt, he made a contract intended to bar Cornelia from recovering
any further sum of money from the sale of her property. Moreover, when Cecilio
accepted the position as commissioner, he created a barrier that prevented his
performance of his duties under the SPA. Cecilio could not have been a hearing
officer and a defendant at the same time. Indeed, Cecilio foisted fraud on both the
Court and the Hernandez’s when, after his appointment as commissioner, he
accepted the appointment by the Hernandez to "represent" and "sue for" them.
4. BRITISH AIRWAYS VS. CA, GR No. 121824 (285 SCRA 450), 29
JANUARY 1998
FACTS:
On April 16, 1989, Gop Mahtani, private respondent, had decided to visit his
relatives in Bombay, India. He obtained the services of Mr. Gumar to arrange his
travel plans. A ticket from British Airways (BA) was purchased. Since BA had no
direct flights from Manila to Bombay, Gop Mahtani took a flight to Hong Kong via
PAL, and upon arriving in Hong Kong he took a connecting flight to Bombay on board
BA. Before departure, Mahtani checked in at PAL counter his two pieces of luggage
containing his clothing and personal effects, confident that upon reaching Hong
Kong, the same would be transferred to the BA f light bound for Bombay. Upon
arrival in Bombay, Mahtani discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the same might have been
diverted to London. After waiting patiently for 1 week, BA finally advised him to file
a claim by accomplishing the "Property Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages
and attorney's feesagainst BA and Mr.Gumar before the RTC. He alleged that the
reason for the non-transfer of the luggage was due to the PAL’s late arrival in Hong
Kong, thus leaving hardly for the proper transfer of his luggage to BA aircraft bound
for Bombay. The RTC rendered its decision in favor of Mahtani. BA is ordered to pay
Mahtani P7,000 for the value of the 2 suitcases of $400 and for the value of the
contents of the luggage P50,000 and for moral and exemplary damages and 20%
for attorney’s fees and cost of the action. This decision was affirmed by CA.
ISSUE: WON British Airways is liable for the negligence of it agent, PAL?
RULING:
Yes. The SC ruled in the affirmative.
Settled is the rule that an agent is also responsible for the negligence in the
performance of its function (Art. 1909 of the Civil Code) and is liable for the damages
which the principal may suffer by reason of its negligent act (Art. 1884 of the Civil
Code).
BA is liable for the negligence of its agent, PAL. The court observed that the
contract of air transportation was exclusively between the Mahtani and BA, the latter
merely endorsing the Manila to Hong Kong connecting flight to Bombay with the
PAL, acts as it agent. It is undeniable that in transporting Mahtani from Manila to
Hong Kong by PAL acted as BA’s agent. BA and PAL moreover, are members of
International Air Transport Association (IATA), wherein member airlines are
regarded as agents of each other in the issuance of tickets and other matters
pertaining to their relationship. The contractual relationship between BA and PAL is
one of agency.
3
 5. 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: 1 st, 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 2nd, 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.
6. ESCUETA VS LIM. G.R. No. 137162 January 24, 2007.
FACTS:
This case involves 10 lots owned by Ignacio Rubio and the Heirs of Baloloy
allegedly sold by Virginia Rubio Lim to Rufina Lim. Rufina avers that she paid Ᵽ102,
169.86 and Ᵽ450, 000 respectively to Rubio and the heirs of Baloloy as partial
payment for these lots with the understanding that the Certificate of Title will be
delivered to her upon payment of the balance.
However both Rubio and the heirs refused her payment and did not deliver
the Certificate of Title. Thus, Rufina was constrained to file an action which originally
sought to remove cloud or quiet title to real property with a prayer for the issuance
of Preliminary Injunction and a hold-departure order against Rubio which was later
amended to include Specific Performance and Damages.
Corazon Escueta was impleaded for allegedly purchasing the same lots in
spite of her knowledge that the same were already sold and for executing a
simulated Deed of Sale which raised doubts and cloud over Rufina’s title. The heirs
of Baloloy and Rubio denied the allegations and claimed among others, that Virginia
Lim was never authorized to sell the lots as it was in fact Patricia Lllamas, Rubio’s
daughter, who had this authority.
The Baloloy’s and Rubio failed to appear at the pre-trial and were declared
in default. Their motion to lift the order of default having been denied, they appealed
to the Court of Appeals which was likewise denied. Hence this petition.
ISSUE: Whether or not Rubio is bound by the contract of sale considering that
he did not authorize Virginia to transact on his behalf?
4
RULING:
Yes, Rubio is bound by the Contract of Sale. The Court cited Art. 1892 which
provides that “an agent may appoint a substitute if the principal has not prohibited
him from doing so, but he shall be responsible for the acts of the substitute when he
has not given the power to appoint one”Applying this provision to the special power
of attorney executed by Ignacio
Rubio in favor of Patricia Llamas, it is clear that she is not prohibited from
appointing a substitute. By authorizing Virginia Lim to sell the subject properties
Patricia merely acted within the limits of her authority. However, she will be held
responsible for the act of the sub-agent, among which is precisely the sale in favor
of the Rufina.
Virginia Serona vs Court of Appeals.G.R. No. 130423. November 18, 2002.
7. MUNICIPAL COUNCIL OF ILOILO VS EVANGELISTA
FACTS:
In a previous case, Tan Ong Tze sought to recover the value of a strip of
land belonging to her which was taken by the municipality to widen a public street.
The judgment entitled her to Ᵽ42, 966.40. When the judgment became final and
executory, Atty. Jose Evangelista as counsel for the Intestate Estate of Atty. Jose
Ma. Arroyo, filed a claim for payment of fees for professional services that he and
Atty. Arroyo rendered in the said case.
At the hearing, several other claimants appeared, including Atty. Antero Soriano
who claimed that Tan Boon Tiong- one of Tan Ong Tze’s attorney-in-fact assigned
the amount to him and that he in turn assigned this amount to Mauricio Cruz & Co.
Inc. The Court ordered that the atty.’s lien in the amount of 15% of the judgment be
recorded in favor of Jose Evangelista and directed the municipality to file an
interpleader against the claiming parties PNB, Antero Soriano, Jose Ma. Arroyo
represented by Jose Evangelista. The CFI declared the deed of assignment of the
credit valid and binding.
As such the municipal treasurer with the approval of the auditor of the provincial
treasurer of Iloilo and of the Executive Bureau, paid the late Antero Soriano the
amount of P6,000 in part payment of the judgment. The municipal treasurer of Iloilo
deposited a total of 12,000 with the Clerk of Court of the CFI of Iloilo. Consequently
the judgment for Ᵽ42,966.40 was reduced to Ᵽ30,966.40. Hence this petition.
ISSUE: Whether or not the assignment by Tan Boon Tiong as attorney in fact
of Tan Ong Tze to Atty. Antero Soriano of all her interests was valid?
RULING:
Yes, the Court held that the Deed of Assignment in favor of Antero Soriano
was valid as Tan Boon Tiong was authorized to employ and contract for the services
of lawyers upon such condition as he may deem convenient to defend Tan Ong
Tze’s interest and as such was impliedly empowered to pay the lawyer’s fees for
services rendered in the interest of the principal.
Likewise with regard to the failure of the other attorney-in-fact Tan Montano to
consent to the Deed of Assignment, Tan Boon Tiong being authorized to pay in the
name of the principal-the very fact that different letters of attorney were given to each
of these representatives show that it was not the principal’s intention that they should
act jointly in order to make their acts valid.
8. UY vs. COURT OF APPEALS, G.R. No. 120465, 314 SCRA 69, 09
September 1999
FACTS:
Petitioners William Uy and Rodel Roxas are agents to authorized to sell
eight (8) parcels of land by the owners. By virtue of such authority, petitioners offered
to sell the lands, located at Benguet to respondent National Housing Authority (NHA)
to be utilized and developed as housing project.
NHA passed a resolution approving the acquisition of said lands with an
area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands.
However, only five (5) were paid for by NHA because of the report it received from
the Land Geosciences Bureau of the DENR that the remaining area is located at an
active landslide area and therefore, not suitable for development into a housing
project.
The NHA issued two (2) resolutions cancelling the sale over the three (3)
parcels of land and subsequently offered the amount of P1.255 million to the
landowners as daos perjuicious.
Petitioners filed before Regional Trial Court (RTC) a Complaint for Damages
against NHA and its General Manager Robert Balao. After trial, the RTC rendered a
decision declaring the cancellation of the contract to be justified and awarded
damages to plaintiffs in the sum of P1.255 million, the same amount initially offered
by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of
the RTC and entered new one dismissing the complaint. It held that since there was
justifiable basis cancelling the sale, it saw no reason for the award of damages.
5
ISSUE: Were the petitioners the real parties in interest?
RULING:
No, petitioners are not parties to the contract of sale between their principals
and NHA. They are mere agents of the owners of the land subject sale of the sale.
As agents, they only render some service or do something in representation or on
behalf of their principals. The rendering of such service did not make them parties
to the contracts of sale executed in behalf of the latter. Since a contract may be
violated only by the parties thereto as against each other, the real parties-in-interest,
either as plaintiff or defendant, in an action upon that contract must, generally, either
be parties to said contract.
9. ANGELES vs. PNR, G.R. No. 150128, 500 SCRA 444, 31 August 2006
FACTS:
On May 5, 1980, respondent Philippine National Railways (PNR) informed
a certain Gaudencio Romualdez that it has accepted the latters to buy, on an AS IS
WHERE IS basis, the PNRs scrap/unserviceable rails located in Del Carmen and
Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the
total amount of P96,600.00 Romualdez authorized Lizette R. Wijanco-Angeles, the
wife of petitioner Laureano Angeles to be his representative in the withdrawal of the
scrap/unserviceable rails. The PNR granted said request and allowed Lizette to
withdraw scrap/unserviceable rail in Murcia, Capas and San Miguel, Tarlac instead
in Pampanga. However, the PNR subsequently suspended the withdrawal in view
of what it considered as documentary discrepancies coupled by reported pilferages
of over P500,000.00 worth of PNR scrap properties in Tarlac.
Consequently, the spouses Angeles demanded the refund of the amount of
P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt
duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been
withdrawn which, at P2,100 per metric ton, were worth of P114,781.80, an amount
that exceed the claim for refund.
On August 10, 1988, the spouses Angeles file suit against PNR and its
corporate secretary, Rodolfo Flores, among others, for specific performance and
damages before RTC of Quezon City, and praying that PNR be directed to deliver
46 metric tons of scrap/unserviceable rails and to pay them damages and attorney’s
fees. Meanwhile, Lizette passed away and was substituted by her heirs, among
whom is her husband, herein petitioner Laureano Angeles.
On April 16, 1996, the trial court, on the postulate that the spouses Angeles
are not the real parties-in-interest, rendered judgment dismissing their complaint for
lack of cause of action. As held by the court, Lizette was merely a representative of
Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not
an assignee to the latter’s rights with respect to the award. Upon appeal, the CA
affirmed the trial court’s decision.
ISSUE: Whether or not the petitioner merely an agent or assignee of the rights
of Romualdez’ interest in the scrap rails awarded?
RULING:
Lizette was not an assignee, but merely an agent whose authority was
limited to the withdrawal of the scrap rails, hence, without personality to sue.
Where agency exists, the third party’s (PNR) liability on a contract is to the
principal and not to the agent and the relationship of the third party to the principal
is the same as that in a contract in which there is no agent. Normally, the agent has
neither rights nor liabilities as against the third party. He cannot thus sue and be
sued on the contract. Since a contract may be violated only by the parties thereto as
against each other, the real party-in-interest, either as plaintiff or defendant in an
action upon that contract must, generally, be a contracting party.
10. NATIONAL POWER CORPORATION vs. NAMERCO, G.R. Nos. L-33819
& L-33897 117 SCRA 789, 23 October 1982
FACTS:
On October 17, 1956, plaintiff National Power Corporation (NPC) and
defendant National Merchandising Corporation (NAMERCO), as the representative
of the International Commodities Corporation, executed a contract for the purchase
by the NPC from the New York firm of four thousand long tons of crude sulfur with a
stipulation for liquidated damages in case of breach.
Defendant-appellant Domestic Insurance Company executed a
performance bond in favor of NPC to guarantee the seller’s obligation. In entering
into another contract, NAMERCO, however, did not disclose to NPC that
NAMERCO’s principal, in a cables instruction, stated that the sale was subject to
availability of steamer, and contrary to its principal’s instruction, NAMERCO agreed
that non-availability of a steamer was not a justification for non-payment of liquidated
damages.
The New York supplier was not able to deliver the sulfur due to its inability
to secure shipping space. Consequently, the Government Corporate Counsel
6
rescinded the contract of sale due to the supplier’s non-performance of its
obligations, and demanded payment of liquidated damages from both NAMERCO
and the surety. Thereafter, NPC sued for recovery of the stipulated liquidated
damages. After trial, the Court of First Instance rendered judgment ordering the
defendants-appellants to pay solidarity to the NPC reduced liquidated damages with
interest.
ISSUE: Whether NAMERCO exceeded its authority?
RULING:
Yes, NAMERCO exceeded their authority. Article 1897 implies that the
agent who acts in excess of his authority is personally liable to the party with whom
he contracted. And that the rule is complimented by Article 1898 of the Civil Code
which provides that “if the agent contracts, in the name of the principal, exceeding
the scope of his authority, and the principal does not ratify the contract, it shall be
void if the party with whom the agent contracted is aware of the limits of the powers
granted by the principal. NAMERCO never disclosed to the NPC the cabled or
written instructions of its principal. For that reason and because NAMERCO
exceeded the limits of its authority, it virtually acted in its own name and not as agent
and it is, therefore, bound by the contract of sale which, however, it not enforceable
against its principal. If, as contemplated in Articles 1897 and 1898, NAMERCO is
bound under the contract of sale, then it follows that it is bound by the stipulation for
liquidated damages in the contract.
11. DEVELOPMENT BANK OF THE PHILIPPINES, petitioner
vs. Court of Appeals and the ESTATE OF THE LATE JUAN B. DANS,
represented by CANDIDA G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
FACTS:
Juan B. Dans, 76 years of age, together with his family, applied for a loan
worth Php 500, 000 at the Development Bank of the Philipppines on May 1987. The
loan was approved by the bank dated August 4, 1987 but in the reduced amount of
Php 300, 000. Mr. Dans was advised by DBP to obtain a mortgage redemption
insurance at DBP MRI pool. DBP deducted the amount to be paid for MRI Premium
that is worth Php 1476.00. The insurance of Mr. Dans, less the DBP service fee of
10%, was credited by DBP to the savings account of DBP MRI-Pool. Accordingly,
the DBP MRI Pool was advised of the credit.
On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified
DBP was not eligible for the coverage of insurance for he was beyond the maximum
age of 60. The wife, Candida, filed a complaint to the Regional Trial Court Branch I
Basilan against DBP and DBP MRI pool for ‘Collection of Sum of Money with
Damages’. Prior to that, DBP offered the administratrix (Mrs. Dans) a refund of the
MRI payment but she refused for insisting that the family of the deceased must
receive the amount equivalent of the loan. DBP also offered and ex gratia for
settlement worth Php 30, 000. Mrs. Dans refused to take the offer. The decision of
the RTC rendered in favor of the family of the deceased and against DBP. However,
DBP appealed to the court.
ISSUE: Whether or not the DBP MRI Pool should be held liable on the ground
that the contract was already perfected?
RULING:
No. DBP MRI Pool is not liable. Though the power to approve the insurance
is lodged to the pool, the DBP MRI Pool did not approve the application of the
deceased. There was no perfected contract between the insurance pool and Mr.
Dans.
DBP was wearing two legal hats: as a lender and insurance agent. As an
insurance agent, DBP made believed that the family already fulfilled the
requirements for the said insurance although DBP had a full knowledge that the
application would never be approved. DBP acted beyond the scope of its authority
for accepting applications for MRI. If the third person who contracted is unaware of
the authority conferred by the principal on the agent and he has been deceived, the
latter is liable for damages. The limits of the agency carries with it the implication
that a deception was perpetrated—Articles 19-21 come into play.
However, DBP is not entitled to compensate the family of the deceased with
the entire value of the insurance policy. Speculative damages are too remote to be
included in the cost of damages. Mr. Dans is entitled only to moral damages. Such
damages do not need a proof of pecuniary loss for assessment. The court granted
only moral damages (Php 50, 000) plus attorney fees’s (Php 10, 000) and the
reimbursement of the MRI fees with legal interest from the date of the filing of the
complaint until fully paid.
7
 12. NORA S. EUGENIO and ALFREDO Y. EUGENIO,
vs.HON. COURT OF APPEALS and PEPSI-COLA BOTTLING
COMPANY OF THE PHILIPPINES, INC., G.R. No. 103737 December 15,
1994
FACTS:
Nora Eugenio was a dealer of Pepsi. She had one store in Marikina but had
a regular charge account in Q.C. And Muntinlupa. Her husband Alfredo used to be
a route manager for Pepsi in its Q.C. Plant. Pepsi filed a complaint for a sum of
money against Eugenio spouses. since according to them the spouses (1) had an
outstanding balance since it purchased and received on credit various products from
both its Q.C. and Muntinlupa plant and (2) had an unpaid obligation for the loaned
“empties” from Pepsi. They contend that the total outstanding account was
P94,651.xx. Eugenio's in their defense presented four Trade Provisional Receipts
(TPR) allegedly issued to and received by them from Pepsi's Route Manager (Malate
Warehouse) Jovencio Estrada showing that they paid a total sum of P80,500.xx.
They also claim that the signature of Nora Eugenio in a Sales Invoice (85366) for
the amount of P5,631.xx which was included in the computation of their debt was
falsified. Therefore, without these errors, petitioner contend that (1) they do not have
any outstanding debt, and (2) it is Pepsi who owes them P3,546.02. RTC found in
favor of Pepsi. CA affirmed the decision.
ISSUE: W/N the amounts in the TPR should be credited in favor of the
spouses.?
RULING:
CA decision is annulled and set-aside. Pepsi is ordered to pay Eugenio.
Background: Eugenio submitted the TPR's to Atty. Rosario (Pepsi's lawyer).
Thereafter, Rosario ordered Daniel Azurin (asst.personnel manager) to conduct an
investigation to verify the claim of the petitioners. According to Azurin, Estrada
denied that he issued and signed the TPR's. Azurin testified to this in Court
(However, Estrada never did. He failed to appear and was never found.
Therefore, his testimony- as told by Azurin- is barred by the Hearsay
Evidence Rule). Furthermore, the “investigation” conducted was really more of an
interview without any safeguards and did not give Eugenio opportunity to object or
cross-examine Estrada. The other points of Estrada (and Pepsi) were all invalid
since Estrada was nowhere to be found and Pepsi failed to comply with the pertinent
rules for the admission of the evidence by which it sought to prove its contentions.
Pepsi therefore was unable to rebut the aforestated presumptions in favor
of valid payment by petitioners, In relation to Agency: Assuming in this case that
Pepsi never received the amounts reflected in the TPR's, Pepsi still failed to prove
that Estrada (its duly authorized agent) did not receive the amounts. In so far as
Eugenio is concerned, their obligation is extinguished when they paid Estrada using
Pepsi's official receipt.
The substantive law is that 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. *TPR: Trade Provisional Receipts are bound and given in
booklets to the company sales representatives, under proper acknowledgement by
them and with a record of the distribution thereof. After every transaction, when a
collection is made the customer is given by the sales representative a copy of the
TPR, that is, the triplicate copy or customer's copy, properly filled up to reflect the
completed transactions. All unused TPR's,as well as the collections made, are
turned over by the sales representative to the appropriate company officer.
13. Yu Eng Cho vs. PANAM | G.R. No. 123560 (328 SCRA 717) | 27 March
2000
FACTS:
Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles
Marketing. In connection with [this] business, he travels from time to time to
Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets
from defendant Claudia Tagunicar who represented herself to be an agent of
defendant Tourist World Services, Inc. (TWSI). After calling up Canilao of TWSI,
defendant Tagunicar told plaintiffs that their flight is now confirmed all the way.
Thereafter, she attached the confirmation stickers on the plane tickets. A few days
before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office
to verify the status of the flight. According to said Adrian Yu, personnel of defendant
Pan Am told him over the phone that plaintiffs' booking[s] are confirmed.
Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation
of their flight to San Francisco. Said office, however, informed them that their names
are not in the manifest. Since plaintiffs were supposed to leave on the 29th of July,
1978, and could not remain in Japan for more than 72 hours, they were constrained
to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This
is the only option left to them because Northwest Airlines was then on strike, hence,
there was no chance for the plaintiffs to obtain airline seats to the United States
within 72 hours. Plaintiffs paid for these tickets.
Upon their return to Manila, a complaint for damages was filed by petitioners
against private respondents Pan American World Airways, Inc. (Pan Am), Tourist
World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar
(Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel
accommodations when petitioners were compelled to stay in Hongkong and then in
Tokyo by reason of the non-confirmation of their booking with Pan-Am.
8
 The trial court held that the defendants jointly and severally liable, except
defendant Julieta Canilao. On appeal, the CA held private respondent Tagunicar
solely liable therefor, and absolving respondents Pan Am and TWSI from any and
all liability,
Petitioners still asserted that Tagunicar is a sub-agent of TWSI while TWSI
is a duly authorized ticketing agent of Pan Am. Proceeding from this premise, they
contend that TWSI and Pan Am should be held liable as principals for the acts of
Tagunicar. Petitioners stubbornly insist that the existence of the agency relationship
has been established by the judicial admissions allegedly made by respondents
herein, to wit: (1) the admission made by Pan Am in its Answer that TWSI is its
authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted
that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao
that TWSI received commissions from ticket sales made by Tagunicar.
ISSUE: WON TWSI and Pan Am be held liable as principals?
RULING:
No, TWSI and Pan Am should not be held liable for the acts of Tagunicar
who represented herself as their agent.
It is a settled rule that persons dealing with an assumed agent are bound at
their peril, if they would hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to establish it.
In the case at bar, petitioners rely on the affidavit of respondent Tagunicar
where she stated that she is an authorized agent of TWSI. This purported admission
of respondent Tagunicar cannot be used by petitioners to prove their agency
relationship. At any rate, even if such affidavit is to be given any probative value, the
existence of the agency relationship cannot be established on its sole basis. The
declarations of the agent alone are generally insufficient to establish the fact or
extent of his authority.
In addition, as between the negative allegation of respondents Canilao and
Tagunicar that neither is an agent nor principal of the other, and the affirmative
allegation of petitioners that an agency relationship exists, it is the latter who have
the burden of evidence to prove their allegation, 19 failing in which, their claim must
necessarily fail.
We stress that respondent Tagunicar categorically denied in open court that
she is a duly authorized agent of TWSI, and declared that she is an independent
travel agent. We have consistently ruled that in case of conflict between statements
in the affidavit and testimonial declarations, the latter command greater weight.
The documents presented by the petitioner cannot justify the decision that
Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary,
Tagunicar testified that when she pays TWSI, she already deducts in advance her
commission and merely gives the net amount to TWSI. From all sides of the legal
prism, the transaction is simply a contract of sale wherein Tagunicar buys airline
tickets from TWSI and then sells it at a premium to her clients.
14. Manila Memorial Park Cemetery, Inc. vs. Linsangan | GR No. 151319
443 SCRA 377 | 2 November 2004
FACTS:
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State
at the Holy Cross Memorial Park owned by petitioner (MMPCI). According to
Baluyot, a former owner of a memorial lot under Contract No. 25012 was no longer
interested in acquiring the lot and had opted to sell his rights subject to
reimbursement of the amounts he already paid. The contract was for P95,000.00.
Baluyot reassured Atty. Linsangan that once reimbursement is made to the former
buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave
Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer
and to complete the down payment to MMPCI. Baluyot issued handwritten and
typewritten receipts for these payments. Baluyot verbally advised Atty. Linsangan
that Contract No. 28660 was cancelled for reasons the latter could not explain, and
presented to him another proposal for the purchase of an equivalent property.
He refused the new proposal and insisted that Baluyot and MMPCI honor
their undertaking. For the alleged failure of MMPCI and Baluyot to conform to their
agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Damages
against the former. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract because of non-payment of
arrearages. MMPCI stated that Baluyot was not an agent but an independent
contractor, and as such was not authorized to represent MMPCI or to use its name
except as to the extent expressly stated in the Agency Manager Agreement.
ISSUE/S: Whether or not a contract of agency exists between Baluyot and
MMPCI?
RULING:
NO. The acts of an agent beyond the scope of his authority do not bind the
principal, unless he ratifies them, expressly or impliedly. Only the principal can ratify;
the agent cannot ratify his own unauthorized acts.
Moreover, the principal must have knowledge of the acts he is to ratify. No
ratification can be implied in the instant case. Atty. Linsangan failed to show that
9
MMPCI had knowledge of the arrangement. As far as MMPCI is concerned, the Art. 1905. The commission agent cannot, without the express or implied
contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty. consent of the principal, sell on credit. Should he do so, the principal may demand
Linsangan and MMPCI's authorized officer. Likewise, this Court does not find favor from him payment in cash, but the commission agent shall be entitled to any interest
in the Court of Appeals' findings that "the authority of defendant Baluyot may not or benefit, which may result from such sale.
have been expressly conferred upon her; however, the same may have been
derived impliedly by habit or custom which may have been an accepted practice in
their company in a long period of time." A perusal of the records of the case fails to
show any indication that there was such a habit or custom in MMPCI that allows its
agents to enter into agreements for lower prices of its interment spaces, nor to
assume a portion of the purchase price of the interment spaces sold at such lower
price. No evidence was ever presented to this effect.
15. Green Valley vs. IAC | GR No. L-49395 133 SCRA 697 | 26 December
1984 | Justice Abad Santos
FACTS:
E.R. Squibb and Sons Phil. Corp. appointed petitioner Green Valley Poultry
and Alliend Products Inc. as a non-exclusive distributor for Squibb Veterinary
Products. However, Green Valley defaulted in the payment of goods delivered by
Squibbs. This prompted the latter to file a collection suit. The lower court ruled in
favour of Squibbs, which was affirmed by the Court of Appeals.
Green Valley claimed that the contract with Squibb was a mere agency to
sell; that it never purchased goods from Squibb; that the goods received were on
consignment only with the obligation to turn over the proceeds, less its commission,
or to return the goods ff not sold, and since it had sold the goods but had not been
able to collect from the purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract was one of sale so
that Green Valley was obligated to pay for the goods received upon the expiration
of the 60-day credit period. Both lower courts ruled that there was a contract of sale.
ISSUE/S: Should Green Valley be held liable for selling on credit? Does the
distinction whether the contract was that of sale or contract to sell material to
its liability?
RULING:
Yes, Green Valley is liable. The Supreme Court held that whether viewed
as an agency to sell or as a contract of sale, the liability of Green Valley is
indubitable. Adopting Green 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:

10