I. OBLIGATIONS AND LIABILITIES OF AGENTS TO
Diligence
THEIR PRINCIPALS
a. Act within scope of authority
Art. 1881. The agent must act within the scope of his
authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency. (1714a)
Art. 1882. The limits of the agent's authority shall not be
considered exceeded should it have been performed in a
manner more advantageous to the principal than that
specified by him.
Art. 1887. In the execution of the agency, the agent shall act
in accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of a
family would do, as required by the nature of the business.
b. Carry out the agency
Art. 1884. The agent is bound by his acceptance to carry out
the agency, and is liable for the damages which, through his
non-performance, the principal may suffer.
He must also finish the business already begun on the death
of the principal, should delay entail any danger
Art. 1928. The agent may withdraw from the agency by giving
due notice to the principal. If the latter should suffer any
damage by reason of the withdrawal, the agent must
indemnify him therefor, unless the agent should base his
withdrawal upon the impossibility of continuing the
performance of the agency without grave detriment to
himself.
Art. 1929. The agent, even if he should withdraw from the
agency for a valid reason, must continue to act until the
principal has had reasonable opportunity to take the
necessary steps to meet the situation.
c. Not to carry out agency
Art. 1888. An agent shall not carry out an agency if its
execution would manifestly result in loss or damage to the
principal.
d. Loyalty
Art. 1889. The agent shall be liable for damages if, there
being a conflict between his interests and those of the
principal, he should prefer his own.
Art. 1890. If the agent has been empowered to borrow
money, he may himself be the lender at the current rate of
interest. If he has been authorized to lend money at interest,
he cannot borrow it without the consent of the principal.
e.
Art. 1885. In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in the
custody and preservation of the goods forwarded to him by
the owner until the latter should appoint an agent or take
charge of the goods.
Art. 1887. In the execution of the agency, the agent shall act
in accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of a
family would do, as required by the nature of the business.
f. Account/deliver
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.
g. Solidary liability
Art. 1894. The responsibility of two or more agents, even
though they have been appointed simultaneously, is not
solidary, if solidarity has not been expressly stipulated. (1723)
Art. 1895. If solidarity has been agreed upon, each of the
agents is responsible for the non-fulfillment of agency, and
for the fault or negligence of his fellows agents, except in the
latter case when the fellow agents acted beyond the scope of
their authority. (n)
h. Pay interest
Art. 1896. The agent owes interest on the sums he has
applied to his own use from the day on which he did so, and
on those which he still owes after the extinguishment of the
agency. (1724a)
i. Fraud; negligence
Art. 1909. The agent is responsible not only for fraud, but also
for negligence, which shall be judged with more or less rigor
by the courts, according to whether the agency was or was
not for a compensation.
Commission Agents:
Note: Commission agent’s distinction: has possession of the
object of the principal. What are the rules related to them?
Can he sell on credit? (Only if authorization is given). Why?

Difference between commission agent and broker? Broker
only brings the parties to the table as a middle-man.
What is a guarantee commission? He must guarantee
proceeds of the agency. Commission agent bears the risk of
the proceeds of the agency.
Art. 1903. The commission agent shall be responsible for the
goods received by him in the terms and conditions and as
described in the consignment, unless upon receiving them he
should make a written statement of the damage and
deterioration suffered by the same.
Art. 1904. The commission agent who handles goods of the
same kind and mark, which belong to different owners, shall
distinguish them by countermarks, and designate the
merchandise respectively belonging to each principal.
Art. 1905. The commission agent cannot, without the express
or implied consent of the principal, sell on credit. Should he
do so, the principal may demand from him payment in cash,
but the commission agent shall be entitled to any interest or
benefit, which may result from such sale.
Art. 1906. Should the commission agent, with authority of the
principal, sell on credit, he shall so inform the principal, with a
statement of the names of the buyers. Should he fail to do so,
the sale shall be deemed to have been made for cash insofar
as the principal is concerned.
Art. 1907. Should the commission agent receive on a sale, in
addition to the ordinary commission, another called a
guarantee commission, he shall bear the risk of collection and
shall pay the principal the proceeds of the sale on the same
terms agreed upon with the purchaser.
Art. 1908. The commission agent who does not collect the
credits of his principal at the time when they become due and
demandable shall be liable for damages, unless he proves
that he exercised due diligence for that purpose.
PNB v Sta Maria
Facts: PNB filed an action against the Sta. Maria
family and Associated Surety for the collection of certain
amounts representing unpaid balances on two crop loans due
from the defendants. Maximo Sta Maria obtained a Special
Power of Attorney, executed in his favor from his brothers
and sisters. Said power of attorney authorized Maximo to
“mortgage or convey as security to any bank, company or to
any natural or juridical person, our undivided shares over a
certain parcel of land together with the improvements
thereon.” In addition, sister Valerina alone executed in favor
of Maximo, a Special Power of Attorney authorizing the latter
to “borrow money and make, execute, sign and deliver
mortgages of real estate in my name xxx”. By virtue of these
two powers, applied for two loans from the PNB. As security,
Maximo executed in his own name, in favor of PNB, two
chattel mortgages over the standing crops on the land,
guaranteed by Associated. The lower court found for PNC,
holding that the Sta. Marias and Associated liable. The Sta
Maria brothers and sisters (except Maximo) appealed. The
Sta Maria’s contend that they did not authorize Maximo to
borrow money but only to mortgage the real estate jointly
owned by them.
Issue: W/N the SPAs of (1) the Sta Marias and (2)
Valeriana authorized Maximo to borrow money.
Held: A Special Power of Attorney to mortgage real
estate is limited to such authority to mortgage and does not
carry with it the authority to contract obligation unless the
contrary is shown.
In the case at bar, the authority granted by the Sta
Marias (except Valeriana) to Maximo was merely to mortgage
the property jointly owned by them. They did not grant
Maximo any authority to contract for any loans in their
names and behalf. MAximo alone and Valeriana who
authorized him to borrow money, must answer for said loans
and the others’ only liability is that the real estate authorized
by them would be subject to foreclosure and sale to respond
for the obligations contracted by Maximo. Hence, in the
absence of ratification on their part by estoppel, they cannot
be held personally liable for the payment of such obligations.
BPI vs. De Coster
Facts:
- De Coster, La Orden and Poizat issued a promissory
note in favor of BPI for P292,000
- The promissory note was secured by several
mortgages on the several properties of the debtors
- The debtors defaulted so BPI asked the court to
foreclose the mortgages
- CFI issued an execution order against the three
debtors
- Gabriela de Coster, wife of Poizat, complained that
at the time of the filing of the complaint she was in
Paris and was absent in the Philippines .and has no
knowledge of the actual facts. De Coster also
alleged that the mortgage was made without her
consent and made in excess of the authority given
his husband and therefore it was null and void.
Issue:
- W/N de Coster is also liable as to the debt incurred
by his husband
Held:
- No!
- Husband has no authority to execute a promissory
note in behalf of his wife or to make the latter liable
as an accommodation maker. Also, the debt was a
preexisting debt of the husband wherein the wife
was not a party and has no legal obligation to pay.
 - The obligation of the husband stated in the power if
attorney was to borrow money for or in account of
his wife as her agent as her attorney in fact. That
does not carry with it the power to make his wife
liable as a surety for his preexisting debt
- Also, the husband, the agent of his wife, failed to
represent the interest of his principal in court. This
gave the principal the authority to obtain relief
under section 113 of the Code of Civil Procedure.
Hodges vs. Salas and Salas Agent’s powers are
limited by the stipulation in the PoA
Facts:
- Salas and Salas executed a PoA in favor of Felix Yulo
authorizing the latter to obtain a loan in the Salas’
name and mortgage a parcel of land owned by the
Salas’. This PoA was registered in the RD.
- Yulo obtained a loan from C.N. Hodges in the
amount of 28k and mortgaged the land of the Salas’.
The loan was in the name of Salas and Salas, holding
them solidarily liable.
- The whole 28k was not delivered to the Yulo. Part of
it was applied to a separate loan obtained by Yulo
from Hodges.
- Salas and Salas was not able to pay at maturity so
Hodges filed for foreclosure of the mortgaged land.
- RTC absolved Salas and Salas from liability on the
whole amount. The RTC only held the Salas’ liable
for the amount which was actually delivered to
them.
Issue:
- W/n the Salas’ can be held liable for the whole debt.
Held:
- SC says no. The powers granted to Yulo by the PoA’s
were only limited to obtaining a loan and securing
such with a mortgage on the property of the Salas’.
There is nothing to indicate that the Salas’ had
authorized Yulo to convert the money to his
personal use. In applying part of the loan to pay his
obligations, Yulo exceeded the authority granted to
him by the PoA’s. in cases like this, the agent was
obliged to turn over the money to the principal or at
least, place it at their disposal.
- (side issues) Registration of the mortgage was
proven through oral evidence. The SC allowed this
because there was no objection to the presentation
of such evidence. Also, the loans were not usurious.
The law allows the creditor to require payments of
interest in advance, provided it does not exceed 1
year.
Strong vs Gutierrez Repide
Facts:
- Strong owned Phil. Sugar Estates Dev’t Co. (company)
- the company, through its majority stockholder, agent,
administrator general and one if its directors – Repide,
negotiated to sell its friar land to the gov’t
- pending negotiations, Repide employed Kauffman, who in
turn designated Sloan to purchase 800 shares of stock in the
company
- such shares were then possessed by Jones, the agent of
Strong
- Sloan and Jones did not know who really wanted to buy the
stocks
- contract of sale of the shares of stock was consummated
between Jones (who assumed he had the power w/o
consulting w/ the principal Strong) and Sloan
- the shares of stock were delivered to Kauffman who paid it
at a much lower price (about 1/10 of the amount it could
have been sold to the gov’t)
- Kauffman delivered them to Repide
- Mrs. Strong sued to recover from Repide the shares of stock
alleging that such had been sold and delivered by her agent
(Jones) to the agent of Repide (Kauffman) w/o her authority
- Strong contends that she would not have sold the shares
had she known they would ultimately go to Repide
- Strong contends that Repide, by hiring an agent to purchase
the shares, fraudulently concealed who the ultimate buyer
was
Issue: W/N Repide is guilty of fraud in the purchase of the
stock.
Held. Yes.
- by employing an agent to buy, concealing his identity as the
buyer and his knowledge of the state of the negotiations for
the sale of the lands to the gov’t and the probable result
thereof, Repide violated his duty as an agent of the company
- Repide, being a director, owner of ¾ of the company’s entire
stock, administrator general of the company engaged in
negotiations w/ the sale of the lands to the gov’t w/c greatly
enhances the value of the stock, it was his duty to act in good
faith, to disclose to Sloan (agent of Strong) that fact w/c
might affect the value of the stock
- Repide employed deceit in the purchase of stocks
- had Sloan known the actual state of the negotiations on the
lands, he would not have sold the stocks
- Repide liable for fraud
Katigbak vs. Tai Hing Co
Facts:
- Barreto mortgaged his land to PNB for a loan of
P60,000
- Po Tecsi executed a general power of attorney in
favor of Barreto authorizing him to buy and sell all
sorts of property belonging to Po Tecsi
- Po Tecsi acknowledged his indebtedness to Barreto
for the sum of P68,000 by virtue of the general
power of attorney
- A second mortgage was made by Barreto on the
same land to Limjuico for P140,000
 - Thereafter, Barreto sold the land to Po Tecsi for
P10,000 subject to the 2 mortgages
- Then, using his general power of attorney sold the
land to Katigbak mentioning only the PNB mortgage
and without recording the sale in the TCT
- Po Tecsi remained on possession of the land because
of an oral contract of lease
- Po Tecsi died and he was replaced by his son Po Sun
Suy
- Po Sun Suy failed to pay the rents so Katigbak filed
the case
- PO Sun Suy: Katigbak is not the real owner of the
land because the sale made by Barreto is null and
void for lack of registration of the said power of
attorney in the Registry of Deeds
Issue:
- W/N Barreto is authorized to sell the land to
Katigbak
Held:
- Yes!
- The general power of attorney authorized Barreto to
sell any kind of realty “that might” belong Po Tecsin.
The use of the words “might belong” and not
“belong” means that the authority given referred
not only to the property Po Tecsin had at the time of
the execution of the power of attorney, but also to
all properties he might acquire afterwards.
- Although the sale was not recorded in the Registry of
Deeds and the it does not bind third parties, it does
however bind the principal to acknowledge the acts
performed by his agent. It is evident in the case that
Po Tecsin acknowledged and was aware of the sale
to Katigbak.
Vda. De Chua vs IAC
Facts:
- Herrera executed a contract of lease in favor of Tian On.
The contract of lease contains a stipulation giving the lessees
an option to buy the leased property. Tian On erected a
residential house on the leased premises.
- Tian On executed a deed of absolute sale of building in favor
of Chua Bok (predecessor-in-interest of petitioners herein)
whereby Tian On sold the said residential house to Chua.
Chua Bok and his family resided in the said residential
building and paid the rentals thereof. When the contract of
lease expired, Chua Bok and Herrera, landowner, through her
alleged attorney-in-fact Vicenta Reynes, executed another
contract of lease over the same parcel of land.
- Herrera then through another attorney-in-fact, Luz Tormis,
sold lots leased by Chua Bok to Vicente and Victoria Go. The
spouses registered the sale.
- Chua Bok filed this complaint for the annulment of the said
sale between Herrera and Spouses Go. The trial court
dismissed the complaint against the spouses Go and declared
that the contract of lease (yung 2nd na contract) between
Herrrera and Chua void.
Issue: W/n the contract of lease is void...
Held: YES.
- The contract involves a lease of real property for a period of
more than one year. The contract was entered into by the
agent of the lessor Herrera and not Herrera herself. In such a
case the law requires that the agent be armed with a special
power of attorney to lease premises. Art 1878 par 8 states
"to lease any real property for more that one year". Vicenta
Reynes the agent was not armed with a special power of
attorney to enter into a lease contract for a period of more
that one year.
Austria vs. CA
(Liability of Agent in case of loss of the thing)
Facts:
 Abad received from Austria one pendant with
diamonds to be sold on commission or to be
returned on demand.
 However, while Abad was walking home, the jewelry
was snatched. The incident gave rise to a case of
robbery against the men who allegedly stole the
item.
 As Abad failed to return the jewelry or pay for its
value, Austria brought an action against the former
for the recovery of the pendant.
 TC favored Austria and said that Abad failed to prove
the fact of robbery or that it was not negligent when
the item was stolen. CA reversed and said that Abad
was not responsible for the loss of the pendant on
account of a fortuitous event.
 Austria contends that for robbery to fall under the
category of a fortuitous event, there should be a
finding on the guilt of the persons liable thereon.
Issue:
Can Abad be held liable for the loss of the pendant? Is a prior
conviction of persons who committed the robbery necessary
to exempt the consignee from liability of such loss?
Held:
No (in both questions). It is not disputed that if Abad were
indeed the victim of robbery, then the occurrence of such
fortuitous event would extinguish her liability. And in order to
avail of this exempting circumstance, Art 1174 (“…no person
shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable.”) of the
Civil Code should be satisfied. In this provision, the emphasis
is on the event and not on the agents or factors responsible
for the same. It is not necessary that the person responsible
for occurrence should be found or punished; it is sufficient to
prove that the unforeseeable event took place without the
concurrent fault of the debtor. This can be established by
preponderant evidence. To require prior conviction of the
culprits in the criminal case would be to demand proof
beyond reasonable doubt.

PNB vs Manila Surety
Facts:
PNB had opened a letter of credit and advanced thereon
$120,000 to Edgington Oil Refinery for 8,000 tons of hot
asphalt. Of this amount, 2,000 tons worth P279,000 were
released and delivered to ATACO under a trust receipt
guaranteed by Manila Surety and Fidelity.
To pay for the asphalt, ATACO constituted PNB its assignee
and attorney-in-fact to receive and collect for Bureau of
Public Works the amount out of the funds payable to the
assignor.
ATACO delivered to the Bureau of Public Works and the latter
accepted. Of this amount the Bank regularly collected.
Thereafter for unexplained reasons, the Bank ceased to
collect from the bureau. It was later on discovered that more
money were payable to ATACO from the Public Works office
but the bank allowed another creditor to collect the funds
due to ATACO.
Issue: W/n the bank was negligent in failing to collect the
funds from the bureau and therefore liable for damages...
Held: Yes.
The bank has been negligent in having stopped collecting
from the bureau the moneys falling due in favor of ATACO,
thereby allowing such funds to be taken and exhausted by
other creditors to the prejudice of the surety.
These acts of PNB were contrary to its duty as holder of an
exclusive and irrevocable power of attorney to make such
collection, since an agent is required to act with the care of a
good father of a family. PNB thereby becomes liable for the
damages which the principal may suffer through its non-
performance.
Manila Surety is released from liability as guarantor of the
obligation. By the acts of the creditor PNB, guarantor Manila
Surety cannot be subrogated to the rights of PNB.
(SECTRANS)
Domingo vs. Domingo
Facts:
Vicente Domingo granted Gregorio Domingo the exclusive
agency to sell his lot with a commission of 5% on the total
price
Gregorio authorized Teofilo Purisima to look for a buyer with
half of the 5% as his commission
Teofilo introduced Oscar de Leon to Gregorio as a prospective
buyer
Oscar offered to purchase the lot at a lower price than that
made by Vicente.
Gregorio was able to persuade Vicente to accept Oscar's offer
and an agreement was made between Vicente and Oscar
P1,000 was given by Oscar as earnest money P300 of which
was advanced by Vicente to Gregorio as his commission
Also, Gregorio received P1,000 from Oscar as 'promised' by
Oscar if Gregorio will be able to persuade Vicente to sell the
lot at a lower price
This 'promised money' or secret bonus of Gregorio was not
disclosed to Vicente
Oscar talked to Gregorio that he is now canceling the sale but
he will not try to recover the earnest money of the secret
bonus he gave
Gregorio, sensing something fishy, went to the Register of
Deeds and discovered that Vicente actually sold the land to
Oscar's wife as shown in the title
Gregorio approached Vicente and demanded his commission
but the latter refused to give him any amount
Issue:
W/N Vicente is still liable to pay Gregorio his commission
even though the latter failed to disclose everything he
received form the transaction
Held:
Gregorio cannot demand from Vicente his commission
Article 1891 states that 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
When Gregorio accepted the secret bonus and failed to
disclose this to his principal, he violated the agency
agreement and FORFEITS HIS RIGHT TO COLLECT THE
COMMISSION FORM THE PRINCIPAL. This is regardless to
W/N the principal suffered any injury because of the breach
of trust.
His acceptance of the secret profit corrupted his duty to serve
the interest only of the principal. Instead of exerting his best
to persuade the buyer to purchase the lot on the most
advantageous terms desired by his principal, he succeeded in
persuading his principal to accept the terms of the buyer to
the detriment of his principal.
Severino vs. Severino
Facts: During the lifetime of Melecio Severino, his brother
Agapito was the administrator of his property. This is
evidenced by a possessory information secured by Agapito on
Melecio's behalf. Melecio died. The land became subject of a
cadastral proceeding. Thus, Hofilena (Agapito's lawyer)
appeared on his behalf. At this point, Fabiola was still a
minor.
The claim was successful. Agapito was able to register the
land in his name. Fabiola now claims the parcel of land
TC: ruled in favor of Fabiola
Agapito contends that his title to the land is indefeasible
Issue: who has a better claim to the parcel of land? Will the
registration of hte land under the Torrens system divest
Fabiola of ownership?
Ruling: The relations of an agent and his principal are
fiduciary in nature. In regard to the property of Melecio,
Agapito is estopped from acquiring or asserting title adverse
that of his principal.
Agapito is a trustee and whatever he does for the advantage
of the trust estate inures to the benefit of the principal.