B.

FORMALITIES OF AGENCY
1. CONSTITUTION OF AGENCY
Rallos vs. Yangco|G.R. No. L-6906| September 27, 1911| Justice Moreland|
FACTS:
Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907 offering a consignment agreement. In
such letter, Yangco made known that he conferred upon Florentino Collantes a public power of attorney notarized by
Mr.Perfecto Salas Rodriguez dated November 16, 1907 to perform in his name and on his behalf all acts necessary for
carrying out his plans.
Accepting this invitation, the plaintiffs proceeded to do a considerable business with the defendant through the
said Collantes, as his factor, sending to him as agent for the defendant a good deal of produce to be sold on commission.
Later, and in the month of February, 1909, the plaintiffs sent to the said Collantes, as agent for the defendant, 218
bundles of tobacco in the leaf to be sold on commission, as had been other produce previously. The said Collantes
received said tobacco and sold it for the sum of P1,744. The charges for such sale were P206.96. leaving in the hands
of said Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum was apparently, converted to his own use
by said agent.
It appears, however, that prior to the sending of said tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his factor. This fact was not known to the plaintiffs; and it is
conceded in the case that no notice of any kind was given by the defendant to the plaintiffs of the termination of the
relations between the defendant and his agent. The defendant refused to pay the said sum upon demand of the plaintiffs,
placing such refusal upon the ground that at the time the said tobacco was received and sold by Collantes he was acting
personally and not as agent of the defendant. This action was brought to recover said sum.
ISSUE:Whether or not the revocation of power of attorney is valid against clients whom the agent is specified to deal
with?
HOLDING and RATIO:
NO.
Having advertised the fact that Collantes was his agent and having given them a special invitation to deal with
such agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and
timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have been in
good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of such
relationship.
Where principal had expressly revoked the agent’s power to handle business, but such revocation was not
conveyed to a long standing client to whom the agent had been specifically endorsed in the past by the principal, the
revocation was not deemed effective as to such client and the contracts entered into by the agent in the name of the
principal after the revocation would still be valid and binding against his principal.

LIM vs. COURT OF APPEALS and PEOPLE G.R. No. 102784 February 28, 1996

Facts:
On October 8, 1987, Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following
two pieces of jewelry; one 3.35 carat diamond ring worth P169K and one bracelet worth P170K, to be sold on
commission basis. The agreement was reflected in a receipt.

On December 15, 1987, Lim returned the bracelet to Suarez, but failed to return the diamond ring or to turn over the
proceeds thereof if sold. As a result, private complainant, aside from making verbal demands, wrote a demand letter to
petitioner asking for the return of said ring or the proceeds of the sale thereof.

Lim’s contention: She was not an agent of Suarez. In fact, she was a prospective buyer of the pieces of jewelry. She
told Mrs. Suarez that she would consider buying the pieces of jewelry for her own use and that she would inform the
private complainant of such decision before she goes back to Cebu. She cannot be liable for estafa since she never
received the jewelries in trust or on commission basis from Vicky Suarez. The real agreement between her and the
private respondent was a sale on credit with Mrs. Suarez as the owner-seller and petitioner as the buyer, as indicated
by the bet that petitioner did not sign on the blank space provided for the signature of the person receiving the jewelry
but at the upper portion thereof immediately below the description of the items taken.

1
Issue: WON the real transaction between Lim and Suarez was that of sale or that of contract of agency to sell?
Contract of Agency.

Held:

Receipt contains the following provisions:

XXX I received from Vicky Suarez the following jewelries XXX
XXX if I could not sell, I shall return all the jewelry within the period mentioned above; if I would be able to sell, I shall
immediately deliver and account the whole proceeds of sale thereof to the owner of the jewelries at his/her residence
XXX

Materiality of the location of Lim’s signature:

Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately below the description of the items
taken. This does not have the effect of altering the terms of the transaction from a contract of agency to sell on
commission basis to a contract of sale. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.

There are some provisions of the law which require certain formalities for particular contracts. It is required for for the
validity of the contract; to make the contract effective as against third parties and; for the purpose of proving the existence
of the contract. A contract of agency to sell on commission basis does not belong to any of these three categories,
hence it is valid and enforceable in whatever form it may be entered into. FYI: There is only one type of legal instrument
where the law strictly prescribes the location of the signature – which is in notarial wills found in Article 805 NCC.

In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission
basis, thus making the position of petitioner’s signature thereto immaterial.

Contention of Lim that Suarez authorized Nadera to receive the ring:

Suarez testified that Aurelia Nadera is highly indebted to her, so if she gave authority for Nadera to get possession of it
she will be exposing herself to a high risk.

CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and AURORA QUEAÑO, respondents.
G.R. No. 118375 October 3, 2003

Facts: Queaño applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat granted. Naguiat indorsed
to Queaño Associated Bank Check for the amount P95,000.00, which was earlier issued to Naguiat by the Corporate
Resources Financing Corporation. She also issued her own Filmanbank Check, to the order of Queaño, and for the
amount of P95,000.00. The proceeds of these checks were to constitute the loan granted by Naguiat to Queaño. To
secure the loan, Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and surrendered to the latter
the owner’s duplicates of the titles covering the mortgaged properties. Queaño issued to Naguiat a promissory note for
the amount of P200,000.00, with interest at 12% per annum. Queaño also issued a Security Bank and Trust Company
check, postdated for the amount of P200,000.00 and payable to the order of Naguiat.

Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds. Queaño
received a letter from Naguiat’s lawyer, demanding settlement of the loan. Queaño and one Ruby Ruebenfeldt
(Ruebenfeldt) met with Naguiat. At the meeting, Queaño told Naguiat that she did not receive the proceeds of the loan,
adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent. Naguiat applied for the
extrajudicial foreclosure of the mortgage. Before the scheduled sale, Queaño filed annulment of the mortgage deed.

Issues: (1) Whether or not petitioner can foreclose the mortgage properties.
(2) Agency by estoppel between petitioner and Ruebenfeldt.

Rulings: (1) Absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually
encashed or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the
Civil Code provides that the delivery of bills of exchange and mercantile documents such as checks shall produce the
effect of payment only when they have been cashed. It is only after the checks have produced the effect of payment
that the contract of loan may be deemed perfected. A loan contract is a real contract, not consensual, and, as such, is
perfected only upon the delivery of the object of the contract. In this case, the objects of the contract are the loan
2
proceeds which Queaño would enjoy only upon the encashment of the checks signed or indorsed by Naguiat. Since
Naguiat presented no such proof, it follows that the checks were not encashed or credited to Queaño’s account. No
compelling reason to disturb the finding of the courts a quo that the lender did not remit and the borrower did not receive
the proceeds of the loan. That being the case, it follows that the mortgage which is supposed to secure the loan is null
and void.

(2) The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. Naguiat
instructed Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to Queaño, pending delivery by the
latter of additional collateral. It was also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat.

There is an existence of an "agency by estoppels citing Article 1873 of the Civil Code. Apparently, it considered that at
the very least, as a consequence of the interaction between Naguiat and Ruebenfeldt, Queaño got the impression that
Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct Queaño’s impression. In that situation, the rule
is clear. One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot
be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing
with such person in good faith, and in the honest belief that he is what he appears to be.

YUN KWAN BYUNG vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION

G.R. No. 163553 December 11, 2009

FACTS
PAGCOR launched its Foreign Highroller Marketing Program. The Program aims to invite patrons from foreign countries
to play at the dollar pit of designated PAGCOR-operated casinos under specified terms and conditions and in
accordance with industry practice. Petitioner, a Korean national, alleges that he came to the Philippines four times to
play for high stakes at the Casino Filipino; that in the course of the games, he was able to accumulate gambling chips
worth US$2.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCORs
employees or agents, PAGCOR refused to redeem them.

PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket player who played
in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR alleges that it provided ABS
Corporation with distinct junket chips. ABS Corporation distributed these chips to its junket players. At the end of each
playing period, the junket players would surrender the chips to ABS Corporation. Only ABS Corporation would make an
accounting of these chips to PAGCORs casino treasury.
ISSUE
Whether the CA erred in holding that PAGCOR is not liable to petitioner, disregarding the doctrine of implied agency, or
agency by estoppels
RULING
Petitioner alleges that there is an implied agency. Alternatively, petitioner claims that even assuming that no actual
agency existed between PAGCOR and ABS Corporation, there is still an agency by estoppel based on the acts and
conduct of PAGCOR showing apparent authority in favor of ABS Corporation. Petitioners argument is clearly misplaced.
The basis for agency is representation, that is, the agent acts for and on behalf of the principal on matters within the
scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. On
the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or
actions, while on the part of the agent, there must be an intention to accept the appointment and act on it. Absent such
mutual intent, there is generally no agency.

There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS
Corporation. PAGCORs actions did not mislead the public into believing that an agency can be implied from the
arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in
any capacity. The Junket Agreement was merely a contract of lease of facilities and services.

3
PURITA PAHUD VS. CA, G.R. NO. 160346, AUGUST 25, 2009
FACTS:
Spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-square meter parcel of land situated
in Barangay Anos, Los Baños, Laguna and covered by Original Certificate of Title . Agatona Genil and Pedro San
Agustin died , left with children: respondents, Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and
Virgilio.
Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares conveying in favor of
petitioners their respective shares . Eufemia also signed the deed on behalf of her four (4) other co-heirs, Only Isabelita
has the Power of attorney while the other three (3) co-heirs has no written consent authorizing such sale. It was not
notarized.
The Pahuds paid the accounts into the Los Baños Rural Bank where the property was mortgaged. The bank
issued a release of mortgage and turned over the ownership Pahuds, the Pahuds made more payments to Eufemia and
her siblings. When Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate the transfer of the
title to the Pahuds, Virgilio refused to sign it.
Virgilio's co-heirs filed a complaint for judicial partition of the subject property before the RTC of Calamba,
Laguna.In the course of the proceedings for judicial partition, a Compromise Agreement was signed with seven (7) of
the co-heirs agreeing to sell their undivided shares to Virgilio .. The compromise agreement was, however, not approved
by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6) co-heirs, refused to sign the
agreement because he knew of the previous sale made to the Pahuds.
Eufemia acknowledged having received the payments from Virgilio. Virgilio then sold the entire property to
spouses Isagani Belarmino and Leticia Ocampo (Belarminos) . The Belarminos immediately constructed a building on
the subject property.
Alarmed by the ongoing construction on the lot they purchased, the Pahuds immediately confronted Eufemia
who confirmed to them that Virgilio had sold the property to the Belarminos. Then the Pahuds filed a complaint in
intervention in the pending case for judicial partition.

ISSUE: Whether or not the sale of the subject property by Eufemia and co-heirs are valid?
RULING:
The sale made by Eufemia, Isabelita and her two brothers to the Pahuds should be valid only with respect to
the authorized share of Eufemia While the sale with respect to the other portion of the lot representing the shares of
Zenaida, Milagros, and Minerva, is void because Eufemia could not dispose of the interest of her co-heirs in the said lot
absent any written authority from the latter, as required by law.

4
2. FORMAL REQUIREMENTS OF AGENCY

 GENERAL POWER OF ATTORNEY

 SPECIAL POWER OF ATTORNEY
Veloso vs CA│G.R. No. 102737 (260 SCRA 593) │August 21, 1996│ Justice Torres Jr.
FACTS:
Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an
area of one hundred seventy seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued
by the Registry of Deeds of Manila. The title was registered in the name of Francisco A. Veloso, single, on October 4,
1957. The said title was subsequently canceled and a new one, Transfer Certificate of Title No. 180685, was issued in
the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988.
On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property
with damages and preliminary injunction and/or restraining order. The complaint, docketed as Civil Case No. 8845926,
was raffled to the Regional Trial Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of
the subject property and he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession
of the title but when his wife, Irma, left for abroad, he found out that his copy was missing. He then verified with the
Registry of Deeds of Manila and there he discovered that his title was already canceled in favor of defendant Aglaloma
Escario. The transfer of property was supported by a General Power of Attorney dated November 29, 1985 and Deed
of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the petitioner and appearing as his
attorneyinfact, and defendant Aglaloma Escario.
Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was
falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in
the execution of the power of attorney. He vehemently denied having met or transacted with the defendant. Thus, he
contended that the sale of the property, and the subsequent transfer thereof, were null and void. Petitioner Veloso,
therefore, prayed that a temporary restraining order be issued to prevent the transfer of the subject property; that the
General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and
the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge
of the alleged irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in
form and substance and was duly notarized. She contended that plaintiff (herein petitioner), had no cause of action
against her. In seeking for the declaration of nullity of the documents, the real party in interest was Irma Veloso, the wife
of the plaintiff. She should have been impleaded in the case. In fact, Plaintiffs cause of action should have been against
his wife, Irma.
HOME INSURANCE CO. VS. USL, GR L-25593, 15 NOVEMBER 1967
FACTS:
Sometime in 1964, SS "Pioneer Moon" arrived in Manila and discharged unto the custody of the Bureau of
Customs, as arrastre operator, two hundred (200) cartons of carbonized adding machine rolls consigned to Burroughs,
Limited. When the cargo was delivered to the consignee, however, several cartons were damaged.
The consignee claimed the P2,605.64 worth of damage from the Bureau of Customs, the United Lines Company
owner of the vessel, and the Home Insurance Company which had insured the cargo. The latter paid the claim and
demanded reimbursement from either arrastre operator or the carrier.
When both rejected the claim, the Home Insurance Company filed an action against the Republic of the Philippines, the
Bureau of Customs and the United States Lines, in the alternative, for the recovery of P2,605.64, with interest plus
costs.
On the date set for pre-trial, only the counsel for the plaintiff appeared, who upon being asked for written
authority to compromise, assured the court that though he had no written authority, he had such authority verbally given
by the plaintiff. On the same day, the court dismissed the case for failure of the plaintiff to appear at the pre-trial
conference.
ISSUE: Whether or not the lower court correctly dismiss the case for failure of the plaintiff to appear at the pre-trial
conference who allegedly gave his attorney a verbal authority to compromise?
RULING:
YES. The lower court was correct in dismissing the case. True, said counsel asserted that he had verbal
authority to compromise the case. The Rules, however, require, for attorneys to compromise the litigation of their clients,
a ―special authority‖ (Section 23, Rule 138, Rules of Court).
5
 And while the same does not state that the special authority be in writing, the court has every reason to expect,
that, if not in writing, the same be duly established by evidence other than the self-serving assertion of counsel himself
that such authority was verbally given to him.
For, authority to compromise cannot lightly be presumed. And if, with good reason, the judge is not satisfied
that said authority exists, as in this case, dismissal of the suit for non-appearance of plaintiff in pre-trial is sanctioned by
the Rules. The dismissal should therefore be sustained in toto, with respect to all the defendants.
ESTATE OF LIANO OLAGUER VS. ONGJOCO, GR NO. 173312 26 AUGUST 2008
FACTS:
The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda
O. Montayre are the legitimate children of the spouses Lino Olaguer and defendant Olivia P. Olaguer. Lino Olaguer died
on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in the then Court of First Instance of
Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to the will. Later, defendant Eduardo
Olaguer was appointed as coadministrator. On October 15, 1959 defendant Olivia P. Olaguer got married to defendant
Jose A. Olaguer before the then Justice of the Peace of Sto. Domingo (Libog) Albay. On January 24, 1965 they were
married in church.
In the order of the probate court dated April 4, 1961, some properties of the estate were authorized to be sold
to pay obligations of the estate.
Relying upon the order, but without prior notice or permission from the Probate Court, defendants Olivia P. Olaguer and
Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer 10 parcels of land. The sale to was approved by the
Probate Court on November 12, 1965.
On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney in favor of defendant Jose
A. Olaguer, authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" of 6 properties.
On the same date, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer
authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" the 9 properties.
By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao
Olaguer mortgaged Lots 7589, 7593 and 7396 to defendant PNB as security for a loan of 10,000 Pesos. The mortgage
was foreclosed by the PNB on June 13, 1973 and the properties mortgage were sold at public auction to PNB. On
December 10, 1990, the PNB transferred the properties to the Republic of the Philippines pursuant to Exec. Order No.
407 dated June 14, 1990 for agrarian reform purposes.
On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer,
authorizing the latter to exercise general control and supervision over all of his business and properties, and among
others, to sell or mortgage any of his properties.
On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 the 10 parcels of land he bought from
Olivia P. Olaguer and Eduardo Olaguer.
On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable consideration 2
parcels of land which have a total area of 2.5 hectares.
On June 5, 1968, Estanislao Olaguer sold another 2 lots to Jose A. Olaguer for 1 Peso and other valuable
consideration.
On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to his son Virgilio
Olaguer for 1 Peso and other valuable consideration.
On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000
Pesos.
On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer authorizing
the latter to exercise general control and supervision over all of his business and properties and among others, to sell
or mortgage the same.
Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February 12,
1980, plaintiff Ma. Linda Olaguer Montayre was appointed administrator by the Probate Court.
The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who died
April 6, 1925. His second wife was Gloria Buenaventura who died on July 2, 1937. The third wife was the defendant
Olivia P. Olaguer.
Jose Olaguer acting upon the general power of attorney sold 8 parcels of land to Emilio Ongjoco.
6
 On 28 January 1980, the Estate of Lino Olaguer filed an action for the Annulment of Sales of Real Property
and/or Cancellation of Titles in the then Court of First Instance of Albay. The plaintiffs therein alleged that the sales of
the following properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or
fictitious, the plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued to Jose Olaguer, Virgilio
Olaguer, Cipriano Duran and the PNB be annulled.
ISSUE: Whether General Power of Attorney was sufficient to effect the sale of the subject properties?
RULING:
Yes, the general power of attorney was sufficient The Supreme Court held that while the law requires a special
power of attorney, the general power of attorney was sufficient in this case, as Jose A. Olaguer was expressly
empowered to sell any of Virgilio's properties; and to sign, execute, acknowledge and deliver any agreement therefor.
As regards Lots Nos. 76D, 76E, 76F and 76G, Ongjoco was able to present a general power of attorney that
was executed by Virgilio Olaguer. While the law requires a special power of attorney, the general power of attorney was
sufficient in this case, as Jose A. Olaguer was expressly empowered to sell any of Virgilio'sproperties; and to sign,
execute, acknowledge and deliver any agreement therefor.Even if a document is designated as a general power of
attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically
authorizing the performance of the act.
The special power of attorney can be included in the general power when the act or transaction for which the
special power is required is specified therein.
On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly notarized. As such,
the same is considered a public document and it has in its favor the presumption of authenticity and due execution,
which can only be contradicted by clear and convincing evidence.
According to the provisions of Article 1874of the Civil Code on Agency, when the sale of a piece of land or any
interest therein is made through an agent, the authority of the latter shall be in writing. Absent this requirement, the sale
shall be void. Also, under Article 1878,a special power of attorney is necessary in order for an agent to enter into a
contract by which the ownership of an immovable property is transmitted or acquired, either gratuitously or for a valuable
consideration.
CITY-LITE REALTY CORPORATION, vs. COURT OF APPEALS and F.P. HOLDINGS & REALTY CORP., et al.G.R.
No. 138639. February 10, 2000
FACTS:
Private Respondent F.P. Holdings and Realty Corporation (F.P. Holdings), formerly the Sparta Holdings Inc,
was the registered owner of a parcel of land situated along E. Rodriguez Avenue, Quezon City also known as the
“Violago Property” or the “San Lorenzo Ruiz Commercial Center,” with an area of 71,754 sqm.
The property was offered for sale to the general public through the circulation of a sales brochure containing
the description of the property and the asking price of P6,250/sqm with terms of payment negotiable. In addition, broker’s
commission was 2% of selling price, net of withholding taxes and other charges. Contact person was Meldin Al G. Roy,
Metro Drug Inc.
The front portion consisting of 9,192 sqm is the subject of this litigation
Al G. Roy sent a sales brochure, together with the location plan and copy of the TCT to Atty. Gelacio Mamaril, a
practicing lawyer and a licensed real estate broker. Mamaril passed in turn passed on these documents to Antonio Teng,
Executive Vice President, and Atty Victor Villanueva, Legal Counsel of City-Lite
City-Lite conveyed its interest to purchase a portion or one-half (1/2) of the front lot of the “Violago Property”
Apparently, Roy subsequently informed City-Lite’s representative that it would take time to subdivide the lot and F.P.
HOLDINGS was not receptive to the purchase of only half of the front lot
Atty. Mamaril wrote Metro Drug (Al G. Roy) expressing City-Lite’s desire to buy the entire front lot of the subject
property instead of only half thereof provided the asking price of P6,250/sqm was reduced and that payment be in
installment for a certain period
The parties reached an agreement and Roy agreed to sell the property to City-Lite provided only the latter
submit its acceptance in writing to the terms and conditions of the sale
For some reason or another and despite demand, F.P. HOLDINGS refused to execute the corresponding deed
of sale in favor of City-Lite of the front lot of the property

7
 Trial court ruled in favor of City-Lite ordering F.P. HOLDINGS to execute a deed of sale of the property in favor
of the former for the total consideration of P55,056,250 payable as follows: P15 M as downpayment to be payable
immediately upon execution of the deed of sale and the balance within 6 months from downpayment without interest
CA reversed TC’s decision
ISSUE: W/N there was a perfected contract of sale between City-Lite and respondent F.P. HOLDINGS because of a
lack of definite agreement on the manner of paying the purchase price and that Metro Drug and Meldin Al G. Roy were
not authorized to sell the property to City-Lite, and that the authority of Roy was only limited to that of mere liaison or
contact person?
RULING:
No, Roy is a mere contact person.
Art. 1874 of NCC: “When the sale of a piece of land or any interest therein is through an agent, the authority of
the latter shall be in writing, otherwise, the sale shall be void.”
The absence of authority to sell can be determined from the written memorandum issued by respondent F.P.
HOLDINGS President requesting Metro Drug’s assistance in finding buyers for the property
The Memorandum indicates that Meldin G. Roy and/or Metro Drug was only to assist F.P. Holdings in looking
for buyers and referring to them possible prospects whom they were supposed to endorse to F.P. Holdings.
But the final evaluation, appraisal and acceptance of the transaction could be made only by F.P. Holdings. In
other words, Roy and/or Metro Drug was only a contact person with no authority to conclude a sale of the property
Roy and/or Metro Drug was a mere broker and Roy/s only job was to bring parties the parties together for a
possible transaction
The Supreme Court ruled that due to the lack of a written authority to sell the “Violago Property” on the part of
Roy and/or Metro Drug, the sale should be as it is declared null and void

Pineda vs. Court of Appeals, G.R. No. 105562, 226 SCRA 754, 27 September 1993
FACTS:
Prime Marine Services, Inc. (PMSI) obtained a group insurance policy for its sailors. During the effectivity of the
policy, six covered employees of the PMSI perished at sea when their vessel sunk somewhere in Morocco. Petitioners
sought to claim death benefits due to them and asked for assistance with the President and General Manager of PMSI,
Captain Roberto Nuval. They were made to execute, with the exception of the spouses, Alarcon, special powers of
attorney authorizing Captain Nuval to “follow up, ask, demand, collect and receive” for their benefit indemnities of sums
money due to them.
Petitioners were able to receive their respect death benefits. Unknown to them, however, the PMSI, in its
capacity as employer and policyholder of the life insurance of its deceased workers, filed with the Insular Life
(respondent) formal claims for and in behalf of the beneficiaries, through Captain Nuval. Insular issued checks payable
to the order of the petitioners. These checks were released to the treasurer of PMSI, and upon instructions by Captain
Nuval, it was deposited in his personal account.
Petitioners learned that they were entitled, as beneficiaries, to life insurance benefits under a group policy but
when they sought to recover these benefits, their claims was denied on the ground that the liability to petitioners was
already extinguished upon delivery to and receipt by PMSI.
ISSUE: Whether or not Insular Life acted with negligence?
RULING:
Yes. The practice in group insurance business, which is consistent with the jurisprudence thereon in the State
of California from whose laws our Insurance Code has been mainly patterned, is that the employer-policyholder who
takes out the insurance for its officers and employees, is the agent of the insurer who has authority to collect the
proceeds from the insurer. In this case, the insurer, through the negligence of its agent, allowed a purported attorney-
in-fact whose instrument does not clearly show such power to collect the proceeds, it was liable therefore under the
doctrine that the principal is bound by the misconduct of its agent.

8
COSMIC LUMBER CORPORATION vs. CA and PEREZ, G.R. No. 114311 November 29, 1996
FACTS:
Cosmic Lumber Corporation through its General Manager executed on 28 January1985 a Special Power of
Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact among others to initiate, institute and file any court action
for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and
37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take
material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any
stipulation of facts and or compromise agreement so far as it shall protect the rights and interest of the corporation in
the aforementioned lots.
On 11 March 1985, Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443.
On November 25, 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez and on
November 27, 1985 the "Compromise Agreement" was approved by the trial court and judgment was rendered in
accordance the terms.
Although the decision became final and executor, it was not executed within the 5-year period from date of its finality
allegedly due to the failure of petitioner to produce the owner's duplicate copy of Title No. 37649 needed to segregate
from Lot No. 443 which is the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under
the compromise agreement. Thus on January 25, 1993 respondent filed a complaint to revive the judgment, docketed
as CivilCase No. D-10459 Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival
of judgment was served upon it that it came to know of the compromise agreement entered into between Paz G. Villamil-
Estrada and respondent Isidro Perez upon which the trial court based its decision of 26 July 1993 in Civil Case No. D-
7750. Forthwith, upon learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise agreement was void.

ISSUE:Whether Villamil-Estrada exceeded her authority as specified in the SPA?

RULING:
The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary. The
alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner more so when the
land was being sold for a price of P80.00per square meter, much less than its assessed value of P250.00 per square
meter, which was not even received by the corporation.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be
in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real
estate must be conferred in writing and must give him specific authority. A special power of attorney is necessary to
enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a
valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general
terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act
mentioned. For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express
the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so
used conveys such power, no such construction shall be given the document. It is therefore clear that by selling to
respondent Perez a portion of petitioner's land through a compromise agreement,Villamil-Estrada acted without or in
obvious authority. The saleIp so jureis consequently void. So is the compromise agreement. This being the case, the
judgment based thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving
petitioner's motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the
jurisdiction of the trial court to render its decision based on the compromise agreement.
InAlviar v Court of First Instance of La Union,the Court held --“As the judgment inquestion is null and voidab
initio, it is evident that the court acquired no jurisdiction to render it, much less to order the execution thereof . . .”

Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his ownexclusive benefit,
he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency. Indeed,
the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be
permitted to pervert his authority to his own personal advantage, and his act in secret hostility to the interests of his
principal transcends the power afforded him. WHEREFORE, the petition is GRANTED.