Sections 1 To 2

SECTION ONE
“Agency is basically personal, representative, and derivative in

nature. The authority of the agent to act emanates from the powers
granted to him by his principal; his act is the act of the principal if
done within the scope of the authority. Qui facit per alium facit se.
‘He who acts through another acts himself.’”6
7. NATURE AND OBJECT OF AGENCY
7.1. DEFINITION (ART. 1868) AND PARTIES TO A CONTRACT OF AGENCY
DEFINITION. Under Article 1868 of the Civil Code, a contract of agency is one whereby “a
person binds himself to render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter.” 7
PARTIES. The Spanish term for “principal” is “mandante”; and among the terms used for
“agent” are “mandatario”, “factor”, “attorney-in-fact”, “proxy”, “delegate” or
“representative.”
7.2. ROOT AND OBJECTIVES OF AGENCY (ARTS. 1317 AND 1403[1])
Art. 1317. No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party.
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority
or legal representation, or who has acted beyond his powers;
REPRESENTATION IS THE OBJECTIVE. The right of inspection given to a stockholder under the
law can be exercised either by himself or by an attorney-in-fact, and either with or without
the attendance of the stockholder. This is in conformity with the general rule that what a man
may do in person he may do through another.8
SAME. The purpose of every contract of agency is the ability, by legal fiction, to extend the
personality of the principal through the facility of the agent; but the same can only be effected
with the consent of the principal. 9
LEASE IS NOT AGENCY. Where a common carrier leases the trucks of another common carrier
there can be no contract of agency between them, for there is no representation by one with
respect to the other and neither was there any authority to represent the other by the terms of
6
Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288, 16 January 2012
7
See Chemphil Export v. Court of Appeals, 251 SCRA 217 (1995); Dominion Insurance Corp. v. Court of
Appeals, 376 SCRA 239 (2002); Republic v. Evangelista, 466 SCRA 544 (2005); Litonjua, Jr. v. Eternit Corp.,
490 SCRA 204 (2006); Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).
8
Philpotts v. Phil. Mfg. Co., 40 Phil 471 (1919).
9
Orient Air Service & Hotel Representatives v. Court of Appeals, 197 SCRA 645 (1991).
1 MSEUF- CBA/LAW
the arrangements.10
7.3. ELEMENTS OF THE CONTRACT OF AGENCY
ELEMENTS OF AGENCY. The following are the essential elements of the contract of agency:
a) Consent, express or implied, of the parties to establish the relationship;
b) Object, which is the execution of a juridical act in relation to third parties;
c) The agent acts as a representative and not for himself; and,
d) The agent acts within the scope of his authority. 11
Rallos v. Felix Go Chan & Sons Realty Corp., G.R. No. L-24332, 81 SCRA 251, 31 January
1978
FACTS:
• Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel
of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.
• They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.
• After Concepcion died, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum
of P10, 686.90. New TCTs were issued to the latter.
• Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
complaint praying
◦ (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983
be unenforceable, and said share be reconveyed to her estate;
◦ (2) that the Certificate of 'title issued in the name of Felix Go Chan & SonsRealty
Corporation be cancelled and another title be issued in the names of the corporation
and the "Intestate estate of Concepcion Rallos" in equal undivided and
◦ (3) that plaintiff be indemnified by way of attorney's fees and payment of costs
of suit.
• CFI ruled that the Sale of land was null and void insofar as the one-half pro-indiviso
share of Concepcion Rallos
• CA: CFI Decision reversed, upheld the sale of Concepcion’s share.
• MR: denied
ISSUE: WON the death extinguishes the authority of the agent
RULING: Yes, the sale is void!

• The court held that no one may contract in the name of another without being authorized
by the latter, or unless he has by law a right to represent him (ARTICLE 1317 of the Civil
Code)
◦ Simon’s authority as agent was extinguished upon Consolacion’s death.
• The sale did not fall under the exceptions to the general rule that death ipso
jure extinguishes the authority of the agent
• Article 1913 is inapplicable since SPA in favor of Simon Rallos was not coupled with
interest and ARTICLE 1931 inapplicable because Rallos knew of principal Concepcion’s
death
• For ARTICLE 1931 to apply, both requirements must be present
• laws on agency, the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, should apply,
◦ the law provides that death of the principal ipso jure extinguishes the authority of
10
Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp., 639 SCRA 69 (2011).
11
Reiterated in Yu Eng Cho v. Pan American World Airways, Inc., 328 SCRA 717 (2000); Manila Memorial Park
Cemetery, Inc. v. Linsangan, 443 SCRA 377 (2004); Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA
584 (2007); Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp., 639 SCRA 69 (2011); Urban Bank, Inc.
v. Pena, 659 418 (2011); Westmont Investment Corp. v. Francis, Jr., 661 SCRA 787 (2011); Villoria v. Continental
Airlines, Inc., 663 SCRA 57 (2012).
ELS: ATP SG with cases Rae Gammad 2

the agent to sell rendering the sale to a third person in good faith unenforceable
unless at the agent had no knowledge of the principal’s death at that time
/exception under ARTICLE 1931.
• Thus, the sale was null and void.
Whether or not an agency has been created is determined by the fact that one is representing and
acting for another. The law makes no presumption of agency; proving its existence, nature and
extent is incumbent upon the person alleging it. Urban Bank, Inc. v. Peña, 659 SCRA 418
(2011).
There is no principal-agent relationship between an establishment and the security guards

assigned by the security company to guard its premises because there is no power of
representation. The security guards are the employees of the security agency; consequently, the
establishment cannot be held liable for the negligence committed by the security guards causing
loss to third parties. Mamaril v. Boy Scouts of the Philippines, 688 SCRA 437 (2013).
7.3.1. Consent (Arts. 1317 and 1403[1])
The basis for agency is representation; on the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or actions; and on the part
of the agent, there must be an intention to accept the appointment and act on it; in the absence of
such intent, there is no agency. Dominion Insurance Corp. v. CA, 376 SCRA 239 (2002).12
7.3.2. Subject Matter: Service - Execution of Juridical Acts in Behalf of Principal
It is clear from Art. 1868 that the basis of agency is representation. . . .One factor which most
clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees
to act under the control or direction of another - the principal. Indeed, the very word "agency"
has come to connote control by the principal. Victorias Milling Co. v. CA, 333 SCRA 663
(2000).13
In an agent-principal relationship, the personality of the principal is extended through the facility
of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform
all acts which the latter would have him do. Such a relationship can only be effected with the
consent of the principal, which must not, in any way, be compelled by law or by any court.
Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).
i) Consideration: Agency Presumed to Be for Compensation,

Unless There Is Proof to the Contrary (Art. 1875)
Old Civil Code: The service rendered by the agent was deemed to be gratuitous, apart from the
occupation of some of the house of the deceased by the plaintiff and his family; for if it were true
that the agent and the principal had an understanding to the effect that the agent was to receive
compensation aside from the use and occupation of the houses of the deceased, it cannot be
explained how the agent could have rendered services as he did for eight years without receiving
and claiming any compensation from the deceased. xAguña v. Larena, 57 Phil 630 (1932).
Prescinding from the principle that the terms of the contract of agency constituted the law
between the principal and the agent, then the mere fact that “other agents” intervened in the
consummation of the sale and were paid their respective commissions could not vary the terms
of the contract of agency with the plaintiff of a 5% commission based on the selling price. De
Castro v. Court of Appeals, 384 SCRA 607 (2002).
12
Urban Bank, Inc. v. Peña, 659 SCRA 418 (2011).
13
Amon Trading Corp. v. Court of Appeals, 477 SCRA 552 (2005).

ii) Unless There Is Proof to the Contrary (Art. 1875)
7.4. ESSENTIAL CHARACTERISTICS OF AGENCY
7.4.1. Nominate and Principal
Act done by one person in behalf of another is in its essential nature one of agency – it will be an
agency whether the parties understood the exact nature of the relation or not. Doles v. Angeles,
492 SCRA 607 (2006).
Even when the Agreement provides that the agency manager is considered an independent
contractor and not an agent, nonetheless when the agency manager is expressly authorized to
solicit and remit offers to purchase interments spaces, it covers an agency arrangement since the
agency manager represented the interest of the memorial company. Manila Memorial Park
Cemetery, Inc. v. Linsangan, 443 SCRA 377 (2004).
7.4.2. Unilateral14 and Primarily Onerous (Art. 1875)
Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.
Agency is presumed to be for compensation. When an agent performs services for a principal at
the latter's request, the law will normally imply a promise on the part of the principal to pay for
the reasonable worth of those services; principal’s intent to compensate the agent for services
performed will be inferred from the principal's request for the agent’s service. Urban Bank, Inc.
v. Peña, 659 SCRA 418 (2011).
7.4.3. Consensual (Arts. 1869 and 1870)
Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.
Agency may be oral, unless the law requires a specific form.
Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry
out the agency, or from his silence or inaction according to the circumstances.
An agency may be expressed or implied from the act of the principal, from his silence or lack of
action, or failure to repudiate the agency. Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006).
The basis for agency is representation. Where there is no showing that Brigida consented to the
acts of Deganos or authorized him to act on her behalf, much less with respect to the particular
transactions involved, then any attempt to foist liability on respondents-spouses through the
supposed agency relation with Deganos is groundless and ill-advised. It was grossly and
inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six
occasions as evidenced by six receipts, several pieces of jewelry of substantial value without
requiring a written authorization from his alleged principal. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent.
14
A unilateral contract has been defined as “A contract in which one party makes a promise or undertakes a
performance.” Thus, it was observed that “[M]any unilateral contacts are in reality gratuitous promises enforced for
good reason with no element of bargain.” [BLACK’S LAW DICTIONARY 326 (1990)] It is perhaps in this sense that
agency is unilateral because it is the agent who undertakes the performance of the agency. However, one must not
forget that agency is still a contract with a bilateral character. Manresa explains: “As regards whether the agency has
a unilateral or bilateral character, it is evident, in our considered opinion, from the point of view of the Code, that the
totality of cases involving agency will always be bilateral, not because, as one ordinarily supposes, there will be
obligations exclusively for the agent and rights exclusively for the principal. It is clear that at times it happens this
way, but what is common in agency with other contracts is the mutuality and the reciprocity that arises from the
existence of an obligation against another obligation, a right against another right.” 11 MANRESA. COMENTARIOS AL
CODIGO CIVIL ESPAÑOL 443 (1950)

READ: Bordador v. Luz, G.R. No. 130148, 283 SCRA 374, 15 December 1997
FACTS:
• Petitioners were engaged in the business of purchase and sale of jewelry and respondent
Brigida Luz, also known as Aida Luz, was their regular customer.
• On several occasions, respondent Deganos, brother of Luz, received several pieces of
gold and jewelry from petitioners amounting to P382, 816.
◦ items and their prices were indicated in seventeen receipts covering the same.
◦ 11 of the receipts stated that they were received for a certain Aquino, a niece of
Deganos, and the remaining 6 receipts indicated that they were received for Luz.
• Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and
return the unsold items to Bordador.
◦ Deganos remitted only the sum of P53, 207. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to petitioners.
◦ The total of his unpaid account to Bordador, including interest, reached the sum of
P725, 463.98.
• Petitioners eventually filed a complaint in the barangay court against Deganos to recover
said amount.
• Barangay proceedings: Luz, who was not impleaded in the cases, appeared as a witness
for Deganos and ultimately, she and her husband, together with Deganos signed a
compromise agreement with petitioners.
◦ Deganos obligated himself to pay petitioners, on installment basis , the balance of his
account plus interest thereon.
◦ However, he failed to comply.
• Petitioners instituted a complaint for recovery of sum of money and damages, with an
application for preliminary attachment against Deganos and Luz.
• Deganos and Luz was also charged with estafa
• Civil case: petitioners claimed that Deganos acted as agent of Luz when received the
subject items of jewelry, and because he failed to pay for the same, Luz, as principal, and
her spouse are solidarily liable with him
• RTC ruled that only Deganos was liable to Bordador for the amount and damages
claimed.
◦ While Luz did have transactions with petitioners in the past, the items involved were
already paid for and all that Luz owed Bordador was the sum or P21, 483
representing interest on the principal account which she had previously paid for.
• CA affirmed RTC’s decision
ISSUE: WoN Luz are liable to petitioners for the latter’s claim for money and damages?
RULING: No
• Evidence does not support the theory of Bordador that Deganos was an agent of Luz and
that the latter should consequently be held solidarily liable with Deganos in his obligation
to petitioners.
• The basis for agency is representation. Here, there is no showing that Luz consented to
the acts of Deganos or authorized him to act on her behalf, much less with respect to
the particular transactions involved.
• It was grossly and inexcusably negligent of petitioner to entrust to Deganos, not once or
twice but on at least six occasions as evidenced by 6 receipts, several pieces of jewelry of
substantial value without requiring a written authorization from his alleged principal.
• A person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent.
• Records show that neither an express nor an implied agency was proven to have existed
between Deganos and Luz.
• Evidently, Bordador who were negligent in their transactions with Deganos cannot seek
relief from the effects of their negligence by conjuring a supposed agency relation
between the two respondents where no evidence supports such claim.
• The trial court also found that it was petitioner Lydia Bordador who indicated in the

receipts that the items were received by Deganos for Evelyn Aquino and Brigida D. Luz.
◦ Said court was persuaded that Brigida D. Luz was behind Deganos, but because there
was no memorandum to this effect, the agreement between the parties was
unenforceable under the Statute of Frauds.
◦ Absent the required memorandum or any written document connecting the respondent
Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf,
the alleged agreement between petitioners and Brigida D. Luz was unenforceable.
The basis for agency is representation and a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. A co-owner does not become an agent of
the other co-owners, and any exercise of an option to buy a piece of land transacted with one co-
owner does not bind the other co-owners of the land. The most prudent thing the purported buyer
should have done was to ascertain the extent of the authority said co-owner; being negligent in
this regard, he cannot seek relief on the basis of a supposed agency. Dizon v. CA, 302 SCRA 288
(1999).
7.4.4. Preparatory, Representative and Derivative (Art. 1868)

Art. 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
Agency is basically personal, representative, and derivative in nature. The authority of the agent
to act emanates from the powers granted to him by his principal; his act is the act of the principal
if done within the scope of the authority. Qui facit per alium facit per se. “He who acts through
another acts himself.”
READ: Rallos v. Felix Go Chan & Sons Realty Corp., G.R. No. L-24332, 81 SCRA 251, 31
January 1978.
Facts:
• Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.
• They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.
• After Concepcion died, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of
P10,686.90. New TCTs were issued to the latter.
• Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
complaint praying (1) that the sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation
be cancelled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by
way of attorney's fees and payment of costs of suit.
• CFI: [Plaintiff’s Complaint]
◦ Sale of land was null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos
◦ Ordered the issuance of new TCTs to respondent corporation and the estate of
Concepcion in the proportion of ½ share each pro-indiviso and the payment of
attorney’s fees and cost of litigation
• [Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during
pendency of case)]
◦ Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay
defendant the price of the ½ share of the land (P5,343.45) plus attorney’s fees
• [Borromeo filed a third party complaint against Josefina Rallos, special administratrix of
the Estate of Gerundia]
◦ Dismissed without prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of

Cerundia Rallos, covering the same subject-matter
• CA: CFI Decision reversed, upheld the sale of Concepcion’s share.
• MR: denied.
Issues:
1) WON sale was valid although it was executed after the death of the principal, Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the authority of
the agent
3) WON agent’s knowledge of the principal’s death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of death in the title
(thus there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated parallel to
that of an innocent purchaser for a value of a land.
6)
Held/Ratio:
(Court discussed relevant principles first)
Agency is basically personal representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act of the
principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts
through another acts himself.
Relationship of Agency (concept arising from principles under Art 1317(1) and 1403(2)- one
party, caged the principal (mandante), authorizes another, called the agent (mandatario), to act
for and in his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agent’s acts are acts of the principal
Essential Elements:
(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.
Extinguishment
Generally: among other's, By the death, civil interdiction, insanity or insolvency of the principal
or of the agent
- death of the principal effects instantaneous and absolute revocation of the authority of the agent
Exceptions:
(Art. 1930) if it has been constituted in the common interest of the latter and of the agent, or in
the interest of a third person who has accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge of the principal’s death and that the third person was
in good faith (both these reqs should be present)
IN THE CASE AT BAR:
1) Sale was void.

No one may contract in the name of another without being authorized by the latter, or unless he
has by law a right to represent him (Art. 1317 of the Civil Code).
Simon’s authority as agent was extinguished upon Concolacion’s death
2) The sale did not fall under the exceptions to the general rule that death ipso jure extinguishes
the authority of the agent
Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with interest
Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his pleadings) of principal Concepcion’s death
For Art 1931 to apply, both requirements must be present
3) Yes, agent’s knowledge of principal’s death is material.

Respondent asserts that: there is no provision in the Code which provides that whatever is done
by an agent having knowledge of the death of his principal is void even with respect to third
persons who may have contracted with him in good faith and without knowledge of the death of
the principal
Court says: this contention ignored the ignores the existence of the general rule enunciated in
Article 1919 that the death of the principal extinguishes the agency. Article 1931, being an
exception to the general rule, is to be strictly construed.
4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or others of the
death of the principal.
If revocation was by the act of the principal: a general power which does not specify the persons
to whom represents' on should be made, it is the general opinion that all acts, executed with third
persons who contracted in good faith, Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by operation of law, is
instantaneous without the need for notification to the parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, should apply, the law provides that death of the principal ipso
jure extinguishes the authority of the agent to sell rendering the sale to a third person in good
faith unenforceable unless at the agent had no knowledge of the principal’s death at that time
(exception under Art. 1931)
• Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.
The essence of agency being the representation of another, it is evident that the obligations
contracted are for and on behalf of the principal—the principal is liable for the acts of his agent
performed within the limits of his authority. Tan v. Engineering Services, 498 SCRA 93 (2006).
In a situation where two agents enter into a contract of behalf of their principals, even if the
principals do not actually and personally know each other, such ignorance does not affect their
juridical standing as agents, especially since the very purpose of agency is to extent the
personality of the principal through the facility of the agent. Doles v. Angeles, 492 SCRA 607
(2006).
It is said that the underlying principle of the contract of agency is to accomplish results by using
the services of others—to do a great variety of things. Its aim is to extent the personality of the
principal or the party for whom another acts and from whom he or she derives the authority to
act. Westmont Investment Corp. v. Francis, Jr., 661 SCRA 787 (2011).
PRINCIPLES FLOWING FROM AGENCY CHARACTERISTICS OF “PREPARATORY AND

REPRESENTATIVE” (ART. 1897).
ART. 1897. THE AGENT WHO ACTS AS SUCH IS NOT PERSONALLY LIABLE TO THE PARTY WITH WHOM
HE CONTRACTS, UNLESS HE EXPRESSLY BINDS HIMSELF OR EXCEEDS THE LIMITS OF HIS AUTHORITY
WITHOUT GIVING SUCH PARTY SUFFICIENT NOTICE OF HIS POWERS.
In an agency, the principal’s personality is extended through the facility of the agent—the agent,
by legal fiction, becomes the principal, authorized to perform all acts which the latter would have
him do. Such a relationship can only be effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court. The Agreement itself between the parties
states that “either party may terminate the Agreement without cause by giving the other 30 days’
notice by letter, telegram or cable.”
READ: Orient Air Services v. Court of Appeals, G.R. No. 76931, 197 SCRA 645, 29 May
1991.15
FACTS:
15
Litonjua, Jr. v. Eternit Corp., 490 SCRA 204 (2006); Villoria v. Continental Airlines, Inc., 663 SCRA 57 (2012).

• American Air, an air carrier offering passenger and air cargo transportation, entered into a
General Sales Agency Agreement with Orient Air, authorizing the latter to act as its
exclusive general sales agent for the sale of air passenger transportation.
• Orient air failed to remit the net proceeds of sales for several months prompting
American Air to undertake the collection of the proceeds of tickets sold originally by
Orient Air and terminating their agreement.
• American air instituted suit against Orient Air for the settlement of past outstanding funds
in possession of the latter.
• Orient Air contended that because of the unpaid overriding commissions it retained the
sales proceeds before remitting the balance to American Air.
• American Air contended that the sale must be made by Orient Air and the sale must be
done with the use of American Air's ticket stocks in order for it to be entitled to the
overriding commission.
• On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding
commission covers the total revenue of American Air and not merely that derived from
ticketed sales undertaken by Orient Air because it was an exclusive General Sales Agent.
• CA held that Orient Air is entitled to commissions and ordered American Airto reinstate
Orient Air as its General Sales Agent
ISSUE: 1. Whether or not Orient Air is entitled to commissions.

2. Whether CA is correct in ordering reinstatement of Orient Air as an agent.
RULING:
1. Yes. Orient Air was entitled to an overriding commission based on total flown revenue.
• American Air's perception that Orient Air was remiss or in default of its obligations under
the Agreement was, in fact, a situation where the latter acted in accordance with the
Agreement—that of retaining from the sales proceeds its accrued commissions before
remitting the balance to American Air.
• Since the latter was still obligated to Orient Air by way of such commissions.
• Orient Air was clearly justified in retaining and refusing to remit the sums claimed by
American Air.
• The latter's termination of the Agreement was, therefore, without cause and basis, for
which it should be held liable to Orient Air.
2. No. CA in effect compels American Air to extend its personality to Orient Air.
• Such would be violative of the principles and essence of agency, defined by law as a
contract whereby "a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENTOR AUTHORITY OF
THE LATTER.
• In an agent-principal relationship, the personality of the principal is extended through
the facility of the agent.
• In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do.
• Such a relationship can only be effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court.
SAME. It is said that the basis of 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. By this legal fiction, the actual or real
absence of the principal is converted into his legal or juridical presence – qui facit per alium
facit per se.
READ: Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, 521 SCRA 584,
23 April 2007.16
FACTS:
• From January to April 1995, petitioner sold to Impact Systems various products allegedly
16
Country Bankers Insurance Corp. v Keppel Cebu Shipyard, 673 SCRA 427 (2012).

amounting to P91, 338.00 pesos.
• Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued
at P250, 000.00 with respondents making a down payment of P50, 000.00.
• When the sludge pump arrived from the United Kingdom, petitioner refused to deliver
the same to respondents without their having fully settled their indebtedness to petitioner.
• Thus, on 28 June 1995, respondent Edwin and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of receivables in favor of petitioner.
◦ Impact systems are owed by Erwin Cuizon.
• Despite the existence of the Deed of Assignment, respondents proceeded to collect from
Toledo Power Company the amount of P365, 135.29.
• Alarmed by this development, petitioner made several demands upon respondents to pay
their obligations.
◦ As a result, respondents were able to make partial payments to petitioner.
• On 7 October 1996, petitioner's counsel sent respondents a final demand letter wherein it
was stated that as of 11 June 1996, respondents' total obligations stood at P295, 000.00
excluding interests and attorney's fees.
◦ Because of respondents' failure to abide by said final demand letter, petitioner
instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents
• By way of special and affirmative defenses, respondent EDWIN alleged that he is not a
real party in interest in this case.
◦ According to him, he was acting as mere agent of his principal, which was the Impact
Systems, in his transaction with petitioner and the latter was very much aware of this
fact.
ISSUE: WON the act of Edwin Cuizon as sales manager in signing the Deed of Assignment
binds his principal Impact Systems?
RULING: Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems
• The Supreme Court held that in a contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of another with the
latter's consent.
• Its purpose is to extend the personality of the principal or the party for whom another acts
and from whom he or she derives the authority to act.
• It is said that the basis of 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.
• In this case at hand, the parties do not dispute the existence of the agency relationship
between respondents ERWIN as principal and EDWIN as agent.
◦ Respondent Edwin Cuizon acted within his authority as an agent, who did not acquire
any right nor incur any liability arising from the Deed of Assignment, it follows that
he is not a real party in interest who should be impleaded in this case.
◦ A real party in interest is one who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit.
◦ In this respect, we sustain his exclusion as a defendant in the suit before the court a
quo.
THE OTHER CONSEQUENCES OF THE “DOCTRINE OF REPRESENTATION.” Notice to the agent should
always be construed as notice binding on the principal, even when in fact the principal never
became aware thereof. Air France v. CA, 126 SCRA 448 (1983).
SAME. Art. 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally
liable to the party with whom he contracts; it is the principal who is liable on the contracts of the
agent. Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007).
SAME. When an agent purchases the property in bad faith, the principal is deemed a purchaser in
bad faith. Caram, Jr. v. Laureta, 103 SCRA 7 (1981).

SAME. The basis for agency is representation and a person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. Safic Alcan & Cie v. Imperial
Vegetable Oil Co., Inc., 355 SCRA 559 (2001).
7.4.5. Personal, Fiduciary and Revocable
The relations of an agent to his principal are fiduciary and in regard to the property forming the
subject matter of the agency, he is estopped from acquiring or asserting a title adverse to that of
the principal. Severino v. Severino, 44 Phil. 343 (1923).
By reason of the personal, representative and derivative nature of agency, agency is extinguished
by the death of the principal or agent. Rallos v. Felix Go Chan & Sons Realty, 81 SCRA 251
(1978).
A contract of agency is generally revocable as it is a personal contract of representation based on

trust and confidence reposed by the principal on his agent. As the power of the agent to act
depends on the will and license of the principal he represents, the power of the agent ceases
when the will or permission is withdrawn by the principal. Thus, generally, the agency may be
revoked by the principal at will. Republic v. Evangelista, 466 SCRA 544 (2005).
7.5. DISTINGUISHED FROM OTHER SIMILAR CONTRACTS
7.5.1. From Employment Contract
The relationship between the corporation which owns and operates a theatre, and the security
guard it hires to maintain the peace and order at the entrance of the theatre is not that of principal
and agent, because the principle of representation was in no way involved. The security guard
was not employed to represent the defendant corporation in its dealings with third parties; he was
a mere employee hired to perform a certain specific duty or task, that of acting as special guard
and staying at the main entrance of the movie house to stop gate crashers and to maintain peace
and order within the premises. Dela Cruz v. Northern Theatrical Enterprises, 95 Phil 739
(1954).
The concept of a single person having the dual role of agent and employee while doing the same
task is a novel one in our jurisprudence, which must be viewed with caution especially when it is
devoid of any jurisprudential support or precedent. All these, read without any clear
understanding of fine legal distinctions, appear to speak of control by the insurance company
over its agents. They are, however, controls aimed only at specific results in undertaking an
insurance agency, and are, in fact, parameters set by law in defining an insurance agency and the
attendant duties and responsibilities an insurance agent must observe and undertake. They do not
reach the level of control into the means and manner of doing an assigned task that invariably
characterizes an employment relationship as defined by labor law. Tongko v. The Manufacturers
Life Insurance Co. (Phils.), Inc., 640 SCRA 395 (2011).
7.5.2. From Contract for a Piece-of-Work
That the operator owed his position to the company which could remove him or terminate his
services at will; that the service station belonged to the company and bore its tradename and the
operator sold only the products of the company; that the equipment used by the operator
belonged to the company and were just loaned to the operator and the company took charge of
their repair and maintenance; that an employee of the company supervised the operator and
conducted periodic inspection of the company's gasoline and service station; that the price of the
products sold by the operator was fixed by the company and not by the operator; the, the finding
of the Court of Appeals that the operator was an agent of the company and not an independent
contractor should not be disturbed. Shell v. Firemen’s Ins. Co., 100 Phil 757 (1957).
7.5.3. From Broker
The question as to what constitutes a sale so as to entitle a real estate broker to his commissions

is extensively annotated in the case of Lunney vs. Healey (Nebraska) 44 Law Rep. Ann. 593, and
the long line of authorities there cited support the following rule: “The business of a real estate
broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts
is that, in the absence of an express contract between broker and his principal, the implication
generally is that the broker becomes entitled to the usual commissions whenever he brings to his
principal a party who is able and willing to take the property and enter into a valid contract upon
the terms then named by the principal, although the particulars may be arranged and the matter
negotiated and completed between the principal and the purchaser directly.” Macondray & Co. v.
Sellner, 33 Phil. 370 (1916).
“The duties and liability of a broker to his employer are essentially those which an agent owes to
his principal. Consequently, the decisive legal provisions on determining whether a broker is
mandated to give to the employer the propina or gift received from the buyer would be Articles
1891 and 1909 of the Civil Code.”
READ: Domingo v. Domingo, G.R. No. L-30573, 42 SCRA 131, 29 October 1971.
Quick Summary: Gregorio Domingo, Vicente Domingo’s broker and agent, received P1,000
from Oscar de Leon as gift or propina. Oscar gave him said amount after Gregorio succeeded in
persuading Vicente to accept his offer to buy the lot for P1.20 instead of P2.
Facts:
• Vicente Domingo granted to Gregorio Domingo, a real estate broker, the exclusive
agency to sell his Lot No. 883, Piedad Estate in a document. Said lot has an area of
88,477 sq. m.
• According to the document, said lot must be sold for P2 per sq. m. Gregorio is entitled to
5% commission on the total price if the property is sold:
◦ by Vicente or by anyone else during the 30-day duration of the agency or
◦ by Vicente within 3 months from the termination of the agency to a purchaser to
whom it was submitted by Gregorio during the effectivity of the agency with notice to
Vicente.
• This contract is in triplicate with the original and another copy being retained by
Gregorio. The last copy was given to Vicente.
• Subsequently, Gregorio authorized Teofilo Purisima to look for a buyer without notifying
Vicente. Gregorio promised Teofilo ½ of the 5% commission.
• Teofilo introduced Oscar de Leon to Gregorio as a prospective buyer.
• Oscar submitted a written offer which was very much lower than the P2 per sq. m. price.
• Vicente directed Gregorio to tell Oscar to raise his offer.
• After several conferences between Gregorio and Oscar, Oscar raised his offer to P1.20
per sq. m. or P109,000 in total. Vicente agreed to said offer.
• Upon Vicente’s demand, Oscar issued a P1,000 check to him as earnest money. Vicente,
then, advanced P300 to Gregorio.
• Subsequently, Vicente asked for an additional P1,000 as earnest money, which Oscar
promised to deliver to Vicente.
• The written agreement, Exhibit C, between the parties was amended.
◦ Oscar will vacate on or about September 15, 1956 his house and lot at Denver St.,
QC, which is part of the purchase price
• Later on, it was again amended to state that Oscar will vacate his house and lot on Dec. 1,
1956 because his wife was pregnant at that time.
• Oscar gave Gregorio P1,000 as a gift or propina for succeeding in persuading Vicente to
sell his lot at P1.20 per sq. m. Gregorio did not disclose said gift or propina to Vicente.
• Moreover, Oscar did not pay Vicente the additional P1,000 Vicente asked from him as
earnest money.
• The deed of sale was not executed since Oscar gave up on the negotiation when he did
not receive his money from his brother in the US, which he communicated to Gregorio.
• Gregorio did not see Oscar for several weeks thus sensing that something fishy might be
going on.
• So, he went to Vicente’s house where he read a portion of the agreement to the effect that

Vicente was still willing to pay him 5% commission, P5,450.
• Thereafter, Gregorio went to the Register of Deeds of QC, where he discovered that a
Deed of sale was executed by Amparo de Leon, Oscar’s wife, over their house and lot in
favor of Vicente.
• After discovering that Vicente sold his lot to Oscar’s wife, Gregorio demanded in writing
the payment of his commission.
• Gregorio also conferred with Oscar. Oscar told him that Vicente went to him and asked
him to eliminate Gregorio in the transaction and that he would sell his property to him for
P104,000.
• In his reply, Vicente stated that Gregorio is not entitled to the 5% commission because he
sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo
Diaz, wife of Oscar de Leon.
• CA: exclusive agency contract is genuine. The sale of the lot to Amparo de Leon is
practically a sale to Oscar.
Issue:
WON Gregorio’s act of accepting the gift or propina from Oscar constitutes a fraud which would
cause the forfeiture of his 5% commission [YES]
Ratio:
• Gregorio Domingo as the broker, received a gift or propina from the prospective buyer
Oscar de Leon, without the knowledge and consent of his principal, Vicente Domingo.
◦ His acceptance of said substantial monetary gift corrupted his duty to serve the
interests only of his principal and undermined his loyalty to his principal, who gave
him partial advance of P3000 on his commission.
◦ As a consequence, instead of exerting his best to persuade his prospective buyer to
purchase the property on the most advantageous terms desired by his principal,
Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer
of the prospective buyer to purchase the property at P1.20 per sq. m.
• The duties and liabilities of a broker to his employer are essentially those which an
agent owes to his principal.
• An agent who takes a secret profit in the nature of a bonus, gratuity or personal
benefit from the vendee, without revealing the same to his principal, the vendor, is
guilty of a breach of his loyalty to the principal and forfeits his right to collect the
commission from his principal, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or that the agency is
a gratuitous one, or that usage or custom allows it.
◦ Rationale: prevent the possibility of any wrong not to remedy or repair an actual
damage
◦ agent thereby assumes a position wholly inconsistent with that of being an agent for
his principal, who has a right to treat him, insofar as his commission is concerned, as
if no agency had existed
• The fact that the principal may have been benefited by the valuable services of the said
agent does not exculpate the agent who has only himself to blame for such a result by
reason of his treachery or perfidy.
• As a necessary consequence of such breach of trust, Gregorio Domingo must forfeit his
right to the commission and must return the part of the commission he received from his
principal.
Decisive Provisions
• Article 18911 and 19092 CC
◦ The modification contained in the first paragraph Article 1891 consists in changing
the phrase "to pay" to "to deliver", which latter term is more comprehensive than the
former. Paragraph 2 of Article 1891 is a new addition designed to stress the highest
loyalty that is required to an agent — condemning as void any stipulation exempting
the agent from the duty and liability imposed on him in paragraph one thereof.
◦ Article 1909 demand the utmost good faith, fidelity, honesty, candor and fairness on
the part of the agent, the real estate broker in this case, to his principal, the vendor.

The law imposes upon the agent the absolute obligation to make a full disclosure or
complete account to his principal of all his transactions and other material facts
relevant to the agency, so much so that the law as amended does not countenance any
stipulation exempting the agent from such an obligation and considers such an
exemption as void. The duty of an agent is likened to that of a trustee. This is not a
technical or arbitrary rule but a rule founded on the highest and truest principle of
morality as well as of the strictest justice.
Situations where the duty mandated by Art 1891 does not apply
• agent or broker acted only as a middleman with the task of merely bringing together the
vendor and vendee, who themselves thereafter will negotiate on the terms and conditions
of the transaction
• agent or broker had informed the principal of the gift or bonus or profit he received from
the purchaser and his principal did not object
Teofilo Purisima’s entitlement to his share in the 5% commission

• Teofilo can only recover from Gregorio his ½ share of whatever amounts Gregorio
Domingo received by virtue of the transaction as his sub-agency contract was with
Gregorio Domingo alone and not with Vicente Domingo, who was not even aware of
such sub-agency.
• Since Gregorio already received a total of P1,300 from Oscar and Vicente, P650 of which
should be paid by Gregorio to Teofilo.
Dispositive: CA decision reversed.
In agencies to sell where the entitlement of the commission is subject to the successful
consummation of the sale with the buyer located by the agent, said agent would still be entitled
to the commission on sales consummated after the expiration of his agency when the facts show
that the agent was the “efficient procuring cause in bringing about the sale”. Pratts v. Court of
Appeals, 81 SCRA 360 (1978);
READ: Manotok Bros., Inc. v. Court of Appeals, G.R. No. 94753, 221 SCRA 224, 07 April
1993.
FACTS:
• The petitioner is the owner of a certain parcel of land and building which were formerly
leased by the City of Manila and used by the Claro M. Recto High School, at M.F.
Jhocson Street, Sampaloc Manila.
• By means of a letter dated July 5, 1966, petitioner authorized herein private respondent
Salvador Saligumba to negotiate with the City of Manila the sale of the aforementioned
property for not less than P425,000.00.
◦ In the same writing, petitioner agreed to pay private respondent a five percent (5%)
commission in the event the sale is finally consummated and paid.
• The letter of authority was extended three times.
◦ The final one was on Nov. 16, 1967, giving Saligumba an extension of 180 days to
finalize and consummate the sale of the property to the City of Manila for not less
than P410,000.00.
• The Municipal Board of the City of Manila eventually, on April 26, 1968, passed
Ordinance No. 6603, appropriating the sum of P410,816.00 for the purchase of the
property which private respondent was authorized to sell.
◦ Said ordinance however, was signed by the City Mayor only on May 17, 1968, one
hundred eighty three (183) days after the last letter of authorization.
• On January 14, 1969, the parties signed the deed of sale of the subject property.
◦ The initial payment of P200,000.00 having been made, the purchase price was fully
satisfied with a second payment on April 8, 1969 by a check in the amount of
P210,816.00.
• Notwithstanding the realization of the sale, private respondent never received any
commission, which should have amounted to P20,554.50 due to the refusal of petitioner

to pay private respondent said amount as the former does not recognize the latter's role as
agent in the transaction, since:
a. the sale was not made within the period given in the letter of authority
b. Saligumba was not the person responsible for the negotiation and consummation of
the sale but it was Filomeno Huelgas, the PTA presidence.
• Saligumba recounted how he initiated the sale.
◦ He recounted that it first began at a meeting with Rufino Manotok at the office of
Fructuoso Ancheta, principal of C.M. Recto High School.
◦ Atty. Dominador Bisbal, then president of the PTA, was also present.
◦ The meeting was set precisely to ask private respondent to negotiate the sale of the
school lot and building to the City of Manila.
◦ Private respondent then went to Councilor Mariano Magsalin, the author of the
Ordinance which appropriated the money for the purchase of said property, to present
the project.
◦ He also went to the Assessor's Office for appraisal of the value of the property.
◦ While these transpired and his letters of authority expired, Rufino Manotok always
renewed the former's authorization until the last was given, which was to remain in
force until May 14, 1968.
◦ After securing the report of the appraisal committee, he went to the City Mayor's
Office, which indorsed the matter to the Superintendent of City Schools of Manila.
◦ The latter office approved the report and so private respondent went back to the City
Mayor's Office, which thereafter indorsed the same to the Municipal Board for
appropriation.
◦ Subsequently, on April 26, 1968, Ordinance No. 6603 was passed by the Municipal
Board for the appropriation of the sum corresponding to the purchase price.
◦ Petitioner received the full payment of the purchase price, but private respondent did
not receive a single centavo as commission.
• Atty. Bisbal testified that Huelgas was aware of the fact the Saligumba was working on
the sale but he never offered to help in the acquisition of the property.
• The CFI rendered judgment in favor of Saligumba.
• This was affirmed by the CA.
ISSUE: WON Saligumba is entitled to the 5% agent’s commission
HELD: YES.
• As enunciated in the case of Prats vs. CA, the court ruled in favor of the claimant-agent,
despite the expiration of his authority.
"In equity, however, the Court notes that petitioner had diligently taken steps to bring
back together respondent Doronila and the SSS,.
◦ private respondent herein, with more reason, should be paid his commission.
◦ While in Prats vs. Court of Appeals, the agent was not even the efficient procuring
cause in bringing about the sale, unlike in the case at bar, it was still held therein that
the agent was entitled to compensation.
◦ In the case at bar, private respondent is the efficient procuring cause for without his
efforts, the municipality would not have anything to pass and the Mayor would not
have anything to approve.
• In an earlier case, this Court ruled that when there is a close, proximate and causal
connection between the agent's efforts and labor and the principal's sale of his
property, the agent is entitled to a commission.
• the City of Manila ultimately became the purchaser of petitioner's property mainly
through the efforts of private respondent.
◦ when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17,
1968, private respondent's authority had already expired, it is to be noted that the
ordinance was approved on April 26, 1968 when private respondent's authorization
was still in force.
◦ the approval by the City Mayor came only three days after the expiration of private
respondent's authority.

◦ It is also worth emphasizing that from the records, the only party given a written
authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was
private respondent.
• Contrary to what petitioner advances, the case of Danon vs. Brimo, on which it heavily
anchors its justification for the denial of private respondent's claim, does not apply
squarely to the instant petition.
◦ Claimant-agent in said case fully comprehended the possibility that he may not
realize the agent's commission as he was informed that another agent was also
negotiating the sale and thus, compensation will pertain to the one who finds a
purchaser and eventually affects the sale. Such is not the case herein.
◦ On the contrary, private respondent pursued with his goal of seeing that the parties
reach an agreement, on the belief that he alone was transacting the business with the
City Government as this was what petitioner made it to appear.
• While it may be true that Filomeno Huelgas followed up the matter with Councilor
Magsalin, the author of Municipal Ordinance No. 6603 and Mayor Villegas, his
intervention regarding the purchase came only after the ordinance had already been
passed — when the buyer has already agreed to the purchase and to the price for which
said property is to be paid.
◦ Without the efforts of private respondent then, Mayor Villegas would have nothing to
approve in the first place. It was actually private respondent's labor that had set in
motion the intervention of the third party that produced the sale, hence he should be
amply compensated.
A broker is one who is engaged, for others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the negotiator between the other parties,
never acting in his own name but in the name of those who employed him. His occupation is to
bring the parties together, in matter of trade, commerce or navigation. Schmid and Oberly, Inc.
v. RJL Martinez, 166 SCRA 493 (1988).
Where the purported agent was orally given authority to “follow up” the purchase of the fire
truck with the municipal government, there is no authority to sell nor has the purported agent
been empowered to make a sale in behalf of the seller. Guardex v. NLRC, 191 SCRA 487 (1990).
When the terms of the agency arrangement is to the effect that entitlement to the commission
was contingent on the purchase by a customer of a fire truck, the implicit condition being that the
agent would earn the commission if he was instrumental in bringing the sale about. Since the
agent had nothing to do with the sale of the fire truck, and is not therefore entitled to any
commission at all. Guardex v. NLRC, 191 SCRA 487 (1990).
An agent receives a commission upon the successful conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made. (Obiter – the issue was whether it was an independent distributor of BMW cars
in the Philippines) xHahn v. Court of Appeals, 266 SCRA 537 (1997).
Although the ultimate buyer was introduced by the broker to the seller, nonetheless the broker
was not entitled to receive the commission even with the consummation of the sale because the
lapse of the period of more than one (1) year and five (5) months between the expiration of
broker’s authority to sell and the consummation of the sale to the buyer, is significant index of
the broker’s non-participation in the really critical events leading tot he consummation of said
sale. Broker was not the efficient procuring cause in bringing about the sale and therefore not
entitled to the stipulated broker’s commission.
READ: Inland Realty v. Court of Appeals, G.R. No. 76969, 273 SCRA 70, 09 June 1997.
Facts:
• On Sept.6, 1975, defendant corporation Ayala, Inc. through its Assistant General Manager
J. Armando Eduque, granted to Land Realty, authority to sell 9,800 shares of stocks in
Architect's Bldg. Inc.

◦ The terms of the sale was for P1,500.00 per share and the contract was to last for
thirty days.
• Inland Realty, a Company engaged in realty and brokerage, strategized its sale through
sending letters to its prospective buyers.
• Stanford Microsystems, Inc. proposed buying the stocks but submitted a count-offer for
P1,000.00/share for 9,800 shares payable in 5 years at 12% per annul interest until fuly
paid.
• This proposal was communicated by Inland Realty to defendant corporation but the latter
opposed, claiming the offer was too low and asked petitioner if the price can be adjusted
according to the terms of the authority to sell.
• The period of the contract extended for several times.
• Petitioner asked for an exclusive authority and for a longer period but Eduque would not
give the same.
• The sale was made in favor of Stanford.
• Later on, Inland Realty sued defendant for its brokerage fees. Defendant claims that it is
not entitled because after the thirty day period expired, petitioner was no longer
connected to the transaction and that it abandoned it,
Issue: Whether or not Inland Realty is entitled to th brokerage fees.
Held:
• No. Petitioner was not entitled to the brokerage commission of 5%.
• It appeared that there was no express authority given y defendant for th extension of the
thirty-day period of the authority to sell.
• Moreover, petitioner did not do anything except submit the name of the prospective
buyer, Microsystems.
• It did not take part in the consummation of the sale and the processing of the necessary
documents.
• More importantly, what existed was a proposal and a counter-proposal which did not
constitute the closing of the transaction just because it was plaintiff who solely suggested
to defendants the name of Stanford as buyer, and that Inland Realty did not sell the stocks
in accordance with the terms of the agreement with Ayala Co., that each stock be sold at
P1,500 each. (see above)
An agent receives a commission upon the successful conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made.
READ: Tan v. Gullas, G.R. No. 143978, 393 SCRA 334, 03 December 2002.
FACTS:
• Spouses Eduardo and Norma Gullas, were the registered owners of a parcel of land in the
Municipality of Minglanilla, Province of Cebu.
• On June 29, 1992, they executed a special power of attorney authorizing Manuel B. Tan,
a licensed real estate broker, and his associates Gregg M. Tecson and Alexander Saldaa,
to negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per square
meter, at a commission of 3% of the gross price.
◦ The power of attorney was non-exclusive and effective for one month from June 29,
1992.
• Tan accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of
Mary, to see Eduardo Gullas in his office at the University of Visayas.
◦ The Sisters, who had already seen and inspected the land, found the same suitable for
their purpose and expressed their desire to buy it.
◦ However, they requested that the selling price be reduced to Five Hundred Thirty
Pesos (P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) per
square meter.
◦ Private respondent Eduardo Gullas referred the prospective buyers to his wife.
• It was the first time that the buyers came to know that private respondent Eduardo Gullas

was the owner of the property.
• The land was subsequently bought by the sisters.
• However, the Gullas refused to pay Tan their commission on the ground that they were
not the efficient procuring cause in bringing about the consummation of the sale because
another broker, Roberto Pacana, introduced the property to the Sisters of Mary ahead of
the petitioners.
• Private respondents maintained that when petitioners introduced the buyers to private
respondent Eduardo Gullas, the former were already decided in buying the property
through Pacana, who had been paid his commission.
• Private respondent Eduardo Gullas admitted that petitioners were in his office on July 3,
1992, but only to ask for the reimbursement of their cellular phone expenses.
Issue: Whether or not the petitioner was entitled to their commission?
Holding and Ration Decidendi

• There was no dispute as to the role that petitioners played in the transaction. At the very
least, petitioners set the sale in motion. They were not able to participate in its
consummation only because they were prevented from doing so by the acts of the private
respondents.
• The Supreme Court ruled that an agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the
buyer and the seller together, even if no sale is eventually made.
• Clearly, therefore, petitioners, as brokers, should be entitled to the commission whether
or not the sale of the property subject matter of the contract was concluded through their
efforts.
In relation thereto, we have held that the term “procuring cause” in describing a broker’s activity,
refers to a cause originating a series of events which, without break in their continuity, result in
the accomplishment of the prime objective of the employment of the broker—producing a
purchaser ready, willing and able to buy on the owner’s terms. To be regarded as the “procuring
cause” of a sale as to be entitled to a commission, a broker’s efforts must have been the
foundation on which the negotiations resulting in a sale began.
READ: Medrano v. Court of Appeals, G.R. No. 150678, 452 SCRA 77, 18 February 2005.17
FACTS:
• Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by
the Medrano family.
• In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a
foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00,
located in Ibaan, Batangas.
• Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs.
Pacita G. Borbon, a licensed real estate broker.
• The two met through a previous transaction where Lee responded to an ad in a newspaper
put up by Borbon for an 8-hectare property in Lubo, Batangas, planted with atis trees.
• Lee expressed that he preferred a land with mango trees instead.
• Borbon promised to get back to him as soon as she would be able to find a property
according to his specifications.
• Borbon relayed to her business associates and friends that she had a ready buyer for a
mango orchard.
• Flor then advised her that her cousin-in-law owned a mango plantation which was up for
sale.
◦ She told Flor to confer with Medrano and to give them a written authority to negotiate
the sale of the property.
• Upon being informed by Flor that Medrano was selling his mango orchard, Borbon lost
no time in informing Lee that they had found a property according to his specifications.
• An ocular inspection of the property together with Lee was immediately planned;
17
Reiterated in Phil. Healthcare Providers (Maxicare) v. Estrada, 542 SCRA 616 (2008).

unfortunately, it never pushed through for reasons beyond the respondents control.
• Since Lee was in a hurry to see the property, he asked the respondents the exact address
and the directions on how to reach Ibaan, Batangas.
• The respondents thereupon instructed him to look for Teresa Ganzon, an officer of the
Ibaan Rural Bank and the person to talk to regarding the property.
• While the letter-authority issued in favor of the respondents was non-exclusive, no
evidence was adduced to show that there were other persons, aside from the respondents,
who informed Lee about the property for sale.
• Ganzon testified that no advertisement was made announcing the sale of the lot, nor did
she give any authority to other brokers/agents to sell the subject property.
• However, despite of the respondent’s participation in finding a buyer for the petitioner’s
property, the petitioners refuse to pay them commission, asserting that they are not the
efficient procuring cause of the sale.
◦ It was alleged that they since they did not participate in the negotiation of the sale,
they were thus not entitled to their commission.
Issue: Whether or not the brokers are entitled to commission for the sale of the subject property?
Holding and ratio Decidendi

• The brokers were entitled to the commission.
• The aggrieved brokers were the procuring causes in the transaction although they did
not participate in the negotiation of the sale. Armed with an authority to procure a
purchaser and with a license to act as broker, there was no reason why the respondents
cannot recover compensation for their efforts when, in fact, they are the procuring cause
of the sale.
• Procuring cause is meant to be the proximate cause.
◦ The term procuring cause, in describing a brokers activity, refers to a cause
originating a series of events which, without break in their continuity, result in
accomplishment of prime objective of the employment of the broker producing a
purchaser ready, willing and able to buy real estate on the owners terms.
• A broker will be regarded as the procuring cause of a sale, so as to be entitled to
commission, if his efforts are the foundation on which the negotiations resulting in a
sale are begun.
◦ The broker must be the efficient agent or the procuring cause of the sale. The means
employed by him and his efforts must result in the sale. He must find the purchaser,
and the sale must proceed from his efforts acting as broker.
• Indeed, the evidence on record shows that the respondents were instrumental in the sale
of the property to Lee. Without their intervention, no sale could have been consummated.
They were the ones who set the sale of the subject land in motion.
A real estate broker is one who negotiates the sale of real properties. His business, generally
speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the
owner. He has no authority to bind the principal by signing a contract of sale. Indeed, an
authority to find a purchaser of real property does not include an authority to sell.
READ: Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, 490 SCRA 204, 08 June 2006.
FACTS:
• The Eternit Corporation (EC) manufactures roofing materials and pipe products.
◦ Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer
S.A. Corporation (ESAC), a corporation registered under the laws of Belgium.
• Glanville was the General Manager and President of EC, while Delsauxwas the Regional
Director for Asia of ESAC.
• In 1986, because of the political situation in the Philippines the management of ESAC
wanted to stop its operations and to dispose the land in Mandaluyong City.
• They engaged the services of realtor/broker Lauro G. Marquez.
• Marquez thereafter offered the land to Eduardo B. Litonjua, Jr. for P27,000,000.00.
Litonjua counter offered P20,000,000.00 cash. Marquez apprised Glanville & Delsaux of

the offer.
• Delsaux sent a telex stating that, based on the "Belgian/Swiss decision," the final offer
was "US$1,000,000.00 andP2,500,000.00.
• The Litonjua brothers deposited US$1,000,000.00 with the Security Bank & Trust
Company, and drafted an Escrow Agreement to expedite the sale.
• Meanwhile, with the assumption of Corazon C. Aquino as President, the political
situation improved.
• Marquez received a letter from Delsaux that the ESAC Regional Office decided not to
proceed with the sale.
• When informed of this, the Litonjuas, filed a complaint for specific performance and
payment for damages on account of the aborted sale.
• Both the trial court and appellate court rendered judgment in favor of defendants and
dismissed the complaint.
◦ The lower court declared that since the authority of the agents/realtors was not in
writing, the sale is void and not merely unenforceable.
Issue: Whether or not the written authority from the Eternit was necessary before the sale can be
perfected?
Holding and Ration Decidendi: Yes.

• It appears that Marquez acted not only as real estate broker for the petitioners but also as
their agent.
• As gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed,
for and in behalf of the petitioners, that the latter had accepted such offer to sell the land
and the improvements thereon.
• The Supreme Court agrees with the ruling of the appellate court that Marquez had no
authority to bind respondent EC to sell the subject properties.
• A real estate broker is one who negotiates the sale of real properties. His business,
generally speaking, is only to find a purchaser who is willing to buy the land upon
terms fixed by the owner. He has no authority to bind the principal by signing a
contract of sale. Indeed, an authority to find a purchaser of real property does not
include an authority to sell.
Since brokerage relationship is necessary a contract for the employment of an agent, principles
of contract law also govern the broker-principal relationship. xAbacus Securities Corp. v. Ampil,
483 SCRA 315 (2006).
7.5.4. From Sale
When the agreement compels the purported agent to pay for the products received from the
purported principal within the stipulated period, even when there has been no sale thereof to the
public, the underlying relationship is not one of contract of agency to sell, but one of actual sale.
A true agent does not assume personal responsibility for the payment of the price of the object of
the agency; his obligation is merely to turn-over to the principal the proceeds of the sale once he
receives them from the buyer. Consequently, since the underlying agreement is not an agency
agreement, it cannot be revoked except for cause. xQuiroga v. Parsons, 38 Phil 502 (1918).
When under the agreement the purported agent becomes responsible for any changes in the
acquisition cost of the object he has been authorized to purchase from a supplier in the United
States, the underlying agreement is not an contract of agency to buy, since a true agent does not
bear any risk relating to the subject matter or the price. Being a contract of sale and not agency,
any profits realized by the purported agent from discounts received from the American supplier
pertained to it with no obligation to account for it, much less to turn it over, to the purported
principal. Gonzalo Puyat v. Arco, 72 Phil. 402 (1941).
The primordial difference between a sale and an agency to sell is the transfer of ownership or
title over the property subject of the contract. In an agency, the principal retains ownership and
control over the property and the agent merely acts on the principal's behalf and under his

instructions in furtherance of the objectives for which the agency was established. On the other
hand, the contract is clearly a sale if the parties intended that the delivery of the property will
effect a relinquishment of title, control and ownership in such a way that the recipient may do
with the property as he pleases. Spouses Viloria v. Continental Airlines, Inc., 663 SCRA 57
(2012).
Agency Employment
principle of representation is involved principle of representation is not involved
do not reach the level of control into the means hired to perform a certain specific duty or task
and manner of doing an assigned task that
invariably characterizes an employment
relationship as defined by labor law.
Agency Contract for a Piece-of-Work

The agent acts under the control and The IC is authorized to do the work according
instruction of the principal. to his own method, without being subject
to the other party’s control, except insofar
as the result of the work is concerned
Principal is liable for torts committed by the Employer not liable for torts committed by the
agent within the scope of his authority. independent contractor
Agents of the agent can be controlled by The employees of the contractor are not the
the principal employees of the employer of the
contractor
Agency Broker
one who is engaged, for others, on a
commission, negotiating contracts relative to
property with the custody of which he has no
concern; the negotiator between the other
parties, never acting in his own name but in the
name of those who employed him. His
occupation is to bring the parties together, in
matter of trade, commerce or navigation.
receives a commission upon the successful earns his pay merely by bringing the buyer and
conclusion of a sale. the seller together, even if no sale is eventually
made.
May have an authority to bind the principal by no authority to bind the principal by signing a
signing a contract of sale. contract of sale.
Agency Sale
does not assume personal responsibility for the agreement compels to pay for the products
payment of the price of the object of the received within the stipulated period, even
agency; his obligation is merely to turn-over to when there has been no sale thereof to the
the principal the proceeds of the sale once he public
receives them from the buyer.
does not bear any risk relating to the subject agreement the purported agent becomes
matter or the price. responsible for any changes in the acquisition
cost of the object he has been authorized to
purchase from a supplier
the principal retains ownership and control parties intended that the delivery of the
over the property and the agent merely acts on property will effect a relinquishment of title,
the principal's behalf and under his instructions control and ownership in such a way that the

in furtherance of the objectives for which the recipient may do with the property as he
agency was established. pleases.

SECTION TWO
“There are some provisions of law which require certain formalities for
particular contracts: the first is when the form is required for the validity
of the contract; the second is when it is required to make the contract
effective as against third parties; and the third is when the form is
required 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
in may be entered into. Consequently, when the agent signs her signature
on any face of the receipt showing that she receives the jewelry for her to
sell on commission, she is bound to the obligations of an agent. The
exact position of the agent’s signature in the receipt (in this case near the
description of the goods and not on top of her printed name) is
immaterial.”18
8. FORMS AND KINDS OF AGENCY
8.1. HOW AGENCY MAY BE CONSTITUTED (ART. 1869)
8.1.1. From Side of the Principal (Art. 1869)
Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on
Agency may be oral, unless the law requires a specific form.
When the buyers-a-retro failed for several years to clear their title to the property purchased and
allowed the seller-a-retro to remain in possession in spite of the expiration of the period of
redemption, then the execution of the memorandum of repurchase by the buyers’ son-in-law,
which stood unrepudiated for many years, constituted an implied agency under Article 1869 of
the Civil Code, from their silence or lack of action, or their failure to repudiate the agency.
Conde v. Court of Appeals, 119 SCRA 245 (1982).
Where the principal has acquiesced in the act of his agent for a long period of time, and has
received and appropriated to his own use the benefits result in from the acts of his agent, courts
cannot declare the acts of the agent null and void. Linan v. Puno, 31 Phil. 259 (1915).
8.1.2. From Side of the Agent (Arts. 1870, 1871 and 1872)
Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry
out the agency, or from his silence or inaction according to the circumstances. (n)
Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if
the principal delivers his power of attorney to the agent and the latter receives it without any
objection. (n)
Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied
from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without any
objection;
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect to
the business in which he is habitually engaged as an agent, and he did not reply to the letter or
telegram.
18
Lim v. Court of Appeals, 254 SCRA 170 (1996)

8.1.3. From Side of Third Parties/Public (Arts. 1873 and 1408; 1921 and 1922)
Art. 1873. If a person specially informs another or states by public advertisement that he has
given a power of attorney to a third person, the latter thereby becomes a duly authorized agent,
in the former case with respect to the person who received the special information, and in the
latter case with regard to any person.
The power shall continue to be in full force until the notice is rescinded in the same manner in
which it was given.
Art. 1408. Unenforceable contracts cannot be assailed by third persons.
Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons,
its revocation shall not prejudice the latter if they were not given notice thereof. (1734)
Art. 1922. If the agent had general powers, revocation of the agency does not prejudice third
persons who acted in good faith and without knowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is a sufficient warning to third persons.
NOTE: From the perspective of third parties (i.e., strangers or non-parties to the principal-agent
relationship), the following should be kept in mind:
a) Agency Is Not Presumed to Exist; and,
b) Rule When Third Parties Given Notice of Agency.
AGENCY IS NOT PRESUMED TO EXIST. One who alleges the existent of an agency relationship
must prove such fact for the law does not make presumption of agency and proving its existence,
nature and extent is incumbent upon the person alleging it. Yun Kwan Byung v. PAGCOR, 608
SCRA 107 (2009); Nevada v. Casuga, 668 SCRA 441 (2012).
SAME. Persons dealing with an assumed agent are bound at their peril, and 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 prove it.
Country Bankers Insurance Corp. v Keppel Cebu Shipyard, 673 SCRA 427 (2012).19
RULE WHEN THIRD PARTIES GIVEN NOTICE OF AGENCY. When the owner of a hotel/café
business allows a person to use the title “managing agent” and allows such person to take charge
of the business during his prolonged absence, performing the duties usually entrusted to
managing agent, then such owner is bound by the act of such person. “One who clothes another
apparent authority as his agent, and holds him out to the public as such, can not 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 following pre-assumptions or deductions,
which the law expressly directs to be made from particular facts, are deemed conclusive.” Macke
v. Camps, 7 Phil 522 (1907).
SAME. A long-standing client can recover from the defendant-principal the goods sent goods to
sell on commission to the former agent of the defendant, when no previous notice of the
termination of agency was given to said client. Having given client 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 client; and failing to do so,
defendant-principal is responsible to client 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.
READ: Rallos v. Yangco, G.R. No. 6906, 20 Phil 269, 27 September 1911.
FACTS:
• Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907 offering a
19
Woodschild Holdings, Inc. v. Roxas Electric and Construction Co., Inc., 436 SCRA 235 (2004); Manila Memorial
Park Cemetery, Inc. v. Linsangan, 443 SCRA 377 (2004); Umipig v. People, 677 SCRA 53 (2012);Recio v. Heirs of
the Spouses Altamirano, 702 SCRA 137 (2013).

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 Yangco is liable to Rallos for having failed to notify that Collantes was
no longer in his employ?
RULING:
• Yes, Yangco is liable.
• 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.
SAME. When the law firm has allowed for quite a period the messenger of another office to
receive mails and correspondence on their behalf, an implied agency had been duly constituted,
specially when there is no showing that counsel had objected to such practice or took step to put
a stop to it. Equitable PCI-Bank v. Ku, 355 SCRA 309 (2001).
8.2. KINDS OF AGENCY
8.2.1. Based on Business or Transactions Encompassed (Art. 1876)
NOTE: Generally, an agent may be classified as either: a) universal; b) general; or, c) special.
TYPES OF AGENTS, GENERALLLY. An agent may be (1) universal; (2) general, or (3) special.
A UNIVERSAL AGENT is one authorized to do all acts for his principal which can lawfully be
delegated to an agent; such an agent may be said to have universal authority.
A GENERAL AGENT is one authorized to do all acts pertaining to a business of a certain kind or at a
particular place, or all acts pertaining to a business of a particular class or series. He has usually
authority either expressly conferred in general terms or in effect made general by the usages,
customs or nature of the business which he is authorized to transact. An agent, therefore, who is
empowered to transact all the business of his principal of a particular kind or in a particular

place, would for this reason, be ordinarily deemed a general agent.
A SPECIAL AGENT is one authorized to do some particular act or to act upon some particular
occasion; he acts usually in accordance with specific instructions or under limitations necessarily
implied from the nature of the act to be done. Siasat v. IAC, 139 SCRA 238 (1985).
SPECIAL OR PARTICULAR AGENCY. The right of an agent to indorse commercial paper (check) is a
very responsible power and will not be lightly inferred. A salesman with authority to collect
money for his principal does not have the implied authority to indorse checks received in
payment. Any person taking checks made payable to a corporation which can act only by agents
does so at his peril, and must abide by the consequence if the agent who indorses the same is
without authority. Insular Drug v. PNB, 58 Phil. 684 (1933).
8.2.2. Whether It Covers Legal Matters
NOTE: Under circumstances involving settlement of legal matters, an agent may either be: a)
Attorney-at-Law; and, b) Attorney-in-Fact.
ATTORNEY-AT-LAW. Only the employee, not his counsel, can impugn the consideration of the
compromise as being unconscionable. The relation of attorney and client is in many respects one
of agency, and the general rules of agency apply to such relation—the circumstances of this case
indicate that the employee’s counsel acted beyond the scope of his authority in questioning the
compromise agreement. Although a client has undoubtedly the right to compromise a suit
without the intervention of his lawyer, the same cannot be done to defraud the lawyer of the
earned attorney’s fees. J-Phil Marine, Inc. v. NLRC, 561 SCRA 675 (2008).
SAME. An attorney cannot, without a client’s authorization, settle the action or subject matter of
the litigation even when he believes that such a settlement will best serve his client’s interest.
Philippine Aluminum Wheels, Inc. v. FASGI Enterprises, Inc., 342 SCRA 722 (2000).
ATTORNEY-IN-FACT. The relationship of attorney and client is in many respects one of agency,
and the general rules of agency apply to such relation. The acts of an agent are deemed the acts
of the principal only if the agent acts within the scope of his authority. Thus, when the lawyer
files an opposition to the compromise agreement that has been validly entered into by his client,
he is acting beyond the scope of his authority. TJ-Phil. Marine, Inc. v. NLRC, 561 SCRA 675
(2008).
8.2.3. Whether It Covers Acts of Administration or Acts of Dominion: “Powers of

Attorney”
NOTE: The following must be taken into account under this heading: a) Form of Powers of
Attorney; b) General Power of Attorney (Art. 1877); c) Special Power of Attorney (At. 1878);
and, d) Express Power of Attorney Excludes Powers of Administration (e.g., General Power of
Attorney).
FORM OF POWERS OF ATTORNEY. In a case involving authority to act in barangay conciliation

cases covering an ejectment for failure to pay rentals: “A power of attorney is an instrument in
writing by which one person, as principal, appoints another as his agent and confers upon him
the authority to perform certain specified acts or kinds of acts on behalf of the principal. The
written authorization itself is the power of attorney, and this is clearly indicated by the fact that it
has also been called a “letter of attorney.” Wee v. De Castro, 562 SCRA 695 (2008).
SAME. The Letter dated January 16, 1996 relied upon by the petitioners was signed by
respondent Fernandez alone, without any authority from the respondents-owners. There is no
actuation of respondent Fernandez in connection with her dealings with the petitioners. As such,
said letter is not binding on the respondents as owners of the subject properties.
READ: Litonjua v. Fernandez, G.R. No. 148116, 427 SCRA 478, 14 April 2004.

FACTS:
• Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as
brokers, offered to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua,
Jr., the parcels of land covered by TCT Nos. 36754 and 36766.
◦ The petitioners were shown a locator plan and copies of the titles showing that the
owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively.
◦ The brokers told the petitioners that they were authorized by respondent Fernandez to
offer the property for sale.
◦ The petitioners, thereafter, made two ocular inspections of the property, in the course
of which they saw some people gathering coconuts.
• In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez
and the two brokers at the petitioners office in Mandaluyong City.
◦ The petitioners and respondent Fernandez agreed that the petitioners would buy the
property consisting of 36,742 square meters, for the price of P150 per square meter,
or the total sum of P5,098,500.
◦ They also agreed that the owners would shoulder the capital gains tax, transfer tax
and the expenses for the documentation of the sale.
◦ The petitioners and respondent Fernandez also agreed to meet on December 8, 1995
to finalize the sale.
• It was also agreed upon that on the said date, respondent Fernandez would present a
special power of attorney executed by the owners of the property, authorizing her to sell
the property for and in their behalf, and to execute a deed of absolute sale thereon.
◦ The petitioners would also remit the purchase price to the owners, through respondent
Fernandez.
• However, only Agapito Fisico attended the meeting.
◦ He informed the petitioners that respondent Fernandez was encountering some
problems with the tenants and was trying to work out a settlement with them.
• After a few weeks of waiting, the petitioners wrote respondent Fernandez on January 5,
1995, demanding that their transaction be finalized by January 30, 1996.
◦ When the petitioners received no response from respondent Fernandez, the petitioners
sent her another Letter dated February 1, 1996, asking that the Deed of Absolute Sale
covering the property be executed in accordance with their verbal agreement dated
November 27, 1995.
◦ The petitioners also demanded the turnover of the subject properties to them within
fifteen days from receipt of the said letter; otherwise, they would have no option but
to protect their interest through legal means.
• Respondent Fernandez wrote the petitioners on February 14, 1996, clarifying that their
claims are not true.
• On April 2, 1996, the petitioners filed the instant complaint for specific performance with
damages against respondent Fernandez and the registered owners of the property.
• The trial court rendered judgement in favor of petitioners while the appellate court
reversed the decision.
ISSUE: Whether or not the letter signed by Respondent Fernandez is binding on the registered
owners of the subject properties?
RULING:
• No. The Letter relied upon by the petitioners was signed by respondent Fernandez alone,
without any authority from the respondents-owners.
• There is no evidence on record that the respondents-owners ratified all the actuations of
respondent Fernandez in connection with her dealings with the petitioners.
• As such, said letter is not binding on the respondents as owners of the subject properties.
• Article 1878 of the New Civil Code provides that 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, or to create
or convey real rights over immovable property, or for any other act of strict dominion.
• Any sale of real property by one purporting to be the agent of the registered owner

without any authority therefor in writing from the said owner is null and void.
• The declarations of the agent alone are generally insufficient to establish the fact or
extent of her authority.
• In this case, the only evidence adduced by the petitioners to prove that respondent
Fernandez was authorized by the respondents owners is the testimony of petitioner
Antonio Litonjua that respondent Fernandez openly represented herself to be the
representative of the respondents owners, and that she promised to present to the
petitioners on December 8, 1996 a written authority to sell the properties.
SAME. It is a general rule that a power of attorney must be strictly construed; the instrument will
be held to grant only those powers that are specified, and the agent may neither go beyond nor
deviate from the power of attorney. Olaguer v. Purugganan, Jr., 515 SCRA 460 (2007).
GENERAL POWER OF ATTORNEY (ART. 1877).
Art. 1877. An agency couched in general terms comprises only acts of administration, even if the
principal should state that he withholds no power or that the agent may execute such acts as he
may consider appropriate, or even though the agency should authorize a general and unlimited
management.
Agency couched in general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management. Yoshizaki v. Joy Training Center of Aurora, Inc., 702 SCRA 631 (2013).
SAME. We stress that the power of administration does not include acts of disposition or
encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed
from an authority to administer, and vice versa, for the two powers may only be exercised by an
agent by following the provisions on agency of the Civil Code (from Article 1876 to Article
1878).
READ: Aggabao v. Parulan Jr., G.R. No. 165803, 629 SCRA 562, 01 September 2010.
FACTS:
• In January 1991, real estate broker Marta K. Atanacio offered the property to spouses
Aggabao, who initially did not show interest due to the rundown condition of the
improvements.
◦ But Atanacio’s persistence prevailed upon them, so that on February 2, 1991, they and
Atanacio met with Ma. Elena at the site of the property.
◦ During their meeting, Ma. Elena showed to them the owners original copy of TCT
No. 63376, a certified true copy of TCT No. 63377, three tax declarations, and a copy
of the special power of attorney (SPA) dated January 7, 1991 executed by Dionisio,
authorizing Ma. Elena, to sell the property.
◦ Before the meeting ended, they paid P20, 000.00 as earnest money, for which Ma.
Elena executed a handwritten Receipt of Earnest Money, whereby the parties
stipulated that: (a) they would pay an additional payment of P130,000.00 on February
4,1991; (b) they would pay the balance of the bank loan of the respondents amounting
to P650,000.00 on or before February 15, 1991; and (c) they would make the final
payment of P700,000.00 once Ma. Elena turned over the property on March 31, 1991.
• On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma.
Elena, who executed a deed of absolute sale in their favor.
◦ However, Ma. Elena did not turn over the owners duplicate copy of TCT No. 63376,
claiming that said copy was in the possession of a relative who was then in
Hongkong.
◦ She assured them that the owners duplicate copy of TCT No. 63376 would be turned
over after a week.
• On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name
of the petitioners.
◦ Ma. Elena did not turn over the duplicate owner’s copy of TCT No. 63376 as

promised.
◦ In due time, the petitioners learned that the duplicate owners copy of TCT No. 63376
had been all along in the custody of Atty. Jeremy Z. Parulan, who appeared to hold an
SPA executed by his brother Dionisio authorizing him to sell both lots.
◦ At Atanacios instance, the petitioners met on March 25, 1991 with Atty. Parulan at the
Manila Peninsula.
◦ For that meeting, they were accompanied by one Atty. Olandesca. They recalled that
Atty. Parulan smugly demanded P800,000.00 in exchange for the duplicate owners
copy of TCT No. 63376, because Atty. Parulan represented the current value of the
property to be P1.5 million. As a counteroffer, however, they tendered P250,000.00,
which Atty. Parulan declined, giving them only until April 5, 1991 to decide.
• Hearing nothing more from the petitioners, Atty. Parulan decided to call them on April
5,1991, but they informed him that they had already fully paid to Ma. Elena.
• Thus, on April 15, 1991, Dionisio, through Atty. Parulan, commenced an action, praying
for the declaration of the nullity of the deed of absolute sale executed by Ma. Elena, and
the cancellation of the title issued to the petitioners by virtue thereof.
• The RTC ruled in favor of Plaintiff Parulan and declared the sale of both lots null and
void, declaring that the SPA in the hands of Elena was a forgery. The CA affirmed the
decision of the RTC.
ISSUE: Whether or not the sale of the conjugal party executed without the consent of Dionisio
valid on the ground that his power of administration had been delegated to his brother through an
SPA?
RULING:
• No, the sale is not valid.
• The petitioners failed to substantiate their contention that Dionisio, while holding the
administration over the property, had delegated to his brother, Atty. Parulan, the
administration of the property, considering that they did not present in court the SPA
granting to Atty. Parulan the authority for the administration.
• Nonetheless, the Supreme court stress that the power of administration does not include
acts of disposition or encumbrance, which are acts of strict ownership. As such, an
authority to dispose cannot proceed from an authority to administer, and vice versa, for
the two powers may only be exercised by an agent by following the provisions on
agency of the Civil Code (from Article 1876 to Article 1878).
• Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited
to the sale of the property in question, and did not include or extend to the power to
administer the property.
SPECIAL POWER OF ATTORNEY (ART. 1878). Although a “Special Power of Attorney” was issued
by the insurance company to its agency manager, it wordings show that it sought only to
establish an agency that comprises all the business of the principal within the designated locality,
but couched in general terms, and consequently was limited only to acts of administration. A
general power permits the agent to do all acts for which the law does not require a special power.
Thus, the acts enumerated in or similar to those enumerated in the “Special Power of Attorney”
(i.e., really a general power of attorney) did not require a special power of attorney, and could
only cover acts of administration.
READ: Dominion Insurance Corp. v. Court of Appeals, G.R. No. 129919, 376 SCRA 239,
06 February 2002.
SUMMARY: Guevarra instituted a civil case for the recovery of a sum of money against
Dominion Insurance. He sought to recover sums he had advanced in his capacity as manager.
Dominion denied any liability to Guevarra. RTC ruled that Dominion was to pay Guevarra. CA
affirmed. SC also ruled that Dominion should pay Guevarra, but not under the law on agency, but
the law on obligations and contracts. This is because Guevarra deviated from the instructions of
Dominion under which he would have had authority to settler the latter’s claims, i.e. to pay
through the revolving fund. Nevertheless, recovery may be made under Art. 1236.

DOCTRINE: When a special power of attorney is required for the agent to do a certain act,
the agent, in the performance of such act, must comply with the specifications embodied in the
special power of attorney giving him authority to do such.
FACTS:
• Rodolfo Guevarra instituted a civil case for the recovery of a sum of money against
Dominion Insurance.
◦ He sought to recover P156,473.90, which he claimed to have advanced in his capacity
as manager of Dominion to satisfy claims filed by Dominion’s clients.
◦ Dominion denied any liability to Guevarra and asserted a counterclaim for premiums
allegedly unremitted by the latter.
• The pre-trial conference never pushed through despite being scheduled and postponed
nine times over the course of six months.
• Finally, the case was called again for pre-trial and Dominion and counsel failed to show
up.
• The trial court declared Dominion in default and denied any reconsideration.
• On the merits of the case, the RTC ruled that Dominion was to pay Guevarra the
P156,473.90 claimed as the total amount advanced by the latter in the payment of the
claims of Dominion’s clients.
• The CA affirmed.
ISSUES + RATIO: WON Guevarra acted within his authority as agent for Dominion – NO
• A perusal of the “Special Power of Attorney” would show that Dominion and Guevarra
intended to enter into a principal-agent relationship.
◦ Despite the word “special,” the contents of the document reveal that what was
constituted was a general agency.
◦ The agency comprises all the business of the principal, but, couched in general terms,
is limited only to acts of administration.
◦ A general power permits the agent to do all acts for which the law does not require
a special power.
• Art. 1878 enumerates the instances when a special power of attorney is required,
including (1) to make such payments as are not usually considered as acts of
administration; (15) any other act of strict dominion.
• The payment of claims is not an act of administration.
◦ The settlement of claims is not included among the acts enumerated in the Special
Power of Attorney, neither is it of a character similar to the acts enumerated therein.
◦ A special power of attorney would have been required before Guevarra could settle
the insurance claims of the insured.
• Guevarra’s authority to settle claims is embodied in the Memorandum of Management
Agreement which enumerated the scope of Guevarra’s duties and responsibilities.
◦ However, the Memorandum showed the instruction of Dominion that payment of
claims shall come from a revolving fund.
◦ Having deviated from the instructions of the principal, the expenses that Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from
Dominion.
ISSUE: WON Guevarra is entitled to reimbursement of amounts – YES

• However, while the law on agency prohibits Guevarra from obtaining reimbursement, his
right to recovery may still be justified under the general law on Obligations and
Contracts, particularly, Art. 12361.
◦ In this case, when the risk insured against occurred, Dominion’s liability as insurer
arose.
◦ This obligation was extinguished when Guevarra paid such claims.
◦ Thus, to the extent that the obligation of Dominion had been extinguished, Guevarra
may demand reimbursement from his principal.
◦ To rule otherwise would result in unjust enrichment of Dominion.
RULING: Dominion is ordered to pay Guevarra P112,6762.11, representing the total amount

advanced by the latter in the payment of the claims of the former’s clients, minus the amount in
the revolving fund and the outstanding balance and remittance.
SAME. Even when the title given to a deed is as a “General Power of Attorney,” but its operative
clause contains an authority to sell, it constituted the requisite special power of attorney to sell a
piece of land. “Thus, there was no need to execute a separate and special power of attorney since
the general power of attorney had expressly authorized the agent or attorney in fact the power to
sell the subject property. The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special power is required.”
READ: Veloso v. Court of Appeals, G.R. No. 102737, 260 SCRA 593, 21 August 1996.
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 attorney in fact, 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, 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.

ISSUE: Whether or not the general power of attorney is valid and regular on its face?
RULING:
• Yes. An examination of the records showed that the assailed power of attorney was valid
and regular on its face.
◦ It was notarized and as such, it carries the evidentiary weight conferred upon it with
respect to its due execution.
◦ While it is true that it was denominated as a general power of attorney, a perusal
thereof revealed that it stated an authority to sell.
• Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power
to sell the subject property.
◦ The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required.
• Whether the instrument be denominated as general power of attorney or special power
of attorney, what matters is the extent of the power or powers contemplated upon the
agent or attorney in fact.
◦ If the power is couched in general terms, then such power cannot go beyond acts of
administration.
◦ However, where the power to sell is specific, it not being merely implied, much less
couched in general terms, there can not be any doubt that the attorney in fact may
execute a valid sale.
◦ An instrument may be captioned as special power of attorney but if the powers
granted are couched in general terms without mentioning any specific power to sell
or mortgage or to do other specific acts of strict dominion, then in that case only
acts of administration may be deemed conferred.
SAME. When an agent has been given general control and management of the business, he is
deemed to have power to employ such agents and employees as are usual and necessary in the
conduct of the business, and needs no special power of attorney for such purpose. Yu Chuck v.
“Kong Li Po,” 46 Phil. 608 (1924).
SAME. An attorney-in-fact empowered to pay the debts of the principal and employ legal counsel
to defend the principal’s interest, has certainly the implied power to pay on behalf of the
principal the attorney’s fees charged by the lawyer. Municipal Council of Iloilo v. Evangelista, 55
Phil. 290 (1930).
A co-owner who is made an attorney-in-fact, with the same power and authority to deal with the
property which the principal might or could have had if personally present, may adopt the usual
legal means to accomplish the object, including acceptance of service and engaging of legal
counsel to preserve the ownership and possession of the principal’s property. Government of PI
v. Wagner, 54 Phil. 132 (1929).
SAME. Contracts of agency and general powers of attorney, must be interpreted in accordance
with the language used by the parties. The real intention of the parties is primarily to be
determined from the language used. The intention is to be gathered from the whole instrument. In
case of doubt, resort must be had to the situation, surroundings, and relations of the parties.
Whenever it is possible, effect is to be given to every word or clause used by the parties. It is to
be presumed that the parties said what they intended to say and that they used each word or
clause with sole purpose, and that purpose is, if possible, to be ascertained and enforced. If the
contract be open to two constructions, one of which would while the other would overthrow it,
the former is to be chosen. If by one construction the contract would be illegal, and by another
equally permissible construction would be lawful, the latter must be adopted. The acts of the
parties will be presumed to be done in conformity with and not contrary to the intent of the
contract. The meaning of general words must be construed with reference to the specific object
to be accomplished and limited by the recitals made in reference to such object. Linan v. Puno,
31 Phil. 259 (1915).
EXPRESS POWER OF ATTORNEY EXCLUDES POWERS OF ADMINISTRATION (E.G., GENERAL POWER

OF ATTORNEY). The instrument which grants to the agent the power “To follow-up, ask, demand,

collect and receipt for my benefit indemnities or sum due me relative to the sinking of M.V.
NEMOS in the vicinity of El Jadida, Casablanca, Morocco on the evening of February 17,
1986,” is a special power of attorney, excludes any intent to grant a general power of attorney or
to constitute a universal agency. Being special powers of attorney, they must be strictly
construed. The instrument cannot be read to give power to the attorney-in-fact “to obtain,
receive, receipt from” the insurance company the proceeds arising from the death of the seaman-
insured, especially when the commercial practice for group insurance of this nature is that it is
the employer-policyholder who took out the policy who is empowered to collect the proceeds on
behalf of the covered insured or their beneficiaries.
READ: Pineda v. Court of Appeals, G.R. No. 105562, 226 SCRA 754, 27 September 1993.
FACTS:
• On 23 September 1983, Prime Marine Services, Inc., a crewing/manning outfit, procured
Group PoIicy No. G004694 from respondent-appellant Insular Life Assurance Co., Ltd.
to provide life insurance coverage to its sea-based employees enrolled under the plan.
• On 17 February 1986, during the effectivity of the policy, six covered employees of the
PMSI perished at sea when their vessel, M/V Nemos, a Greek cargo vessel, sunk
somewhere in El Jadida, Morocco.
◦ They were survived by complainants-appellees, the beneficiaries under the policy.
• Following the tragic demise of their loved ones, complainants-appellees sought to claim
death benefits due them and, for this purpose, they approached the President and General
Manager of PMSI, Capt. Roberto Nuval. Capt. Nuval evinced willingness to assist
complainants-appellees to recover Overseas Workers Welfare Administration (OWWA)
benefits from the POEA and to work for the increase of their PANDIMAN and other
benefits arising from the deaths of their husbands/sons.
◦ They were thus made to execute, with the exception of the spouses Alarcon, special
powers of attorney authorizing Capt. Nuval to, among others, "follow up, ask,
demand, collect and receive" for their benefit indemnities of sums of money due them
relative to the sinking of M/V Nemos.
◦ By virtue of these written powers of attorney, complainants-appellees were able to
receive their respective death benefits.
◦ Unknown to them, however, the PMSI, in its capacity as employer and policy holder
of the life insurance of its deceased workers, filed with respondent-appellant formal
claims for and in behalf of the beneficiaries, through its President, Capt. Nuval.
◦ Among the documents submitted by the latter for the processing of the claims were
five special powers of attorney executed by complainants-appellees.
• On the basis of these and other documents duly submitted, respondent-appellant drew
against its account with the Bank of the Philippine Islands on 27 May 1986 six (6)
checks, four for P200,00.00 each, one for P50,000.00 and another for P40,00.00, payable
to the order of complainants-appellees.
◦ These checks were released to the treasurer of PMSI upon instructions of Capt. Nuval
over the phone to Mr. Mariano Urbano, Assistant Department Manager for Group
Administration Department of respondent-appellant.
◦ Capt. Nuval, upon receipt of these checks from the treasurer, who happened to be his
son-in-law, endorsed and deposited them in his account with the Commercial Bank of
Manila, now Boston Bank.
• On 3 July 1989, after complainants-appellees learned that they were entitled, as
beneficiaries, to life insurance benefits under a group policy with respondent-appellant,
they sought to recover these benefits from Insular Life but the latter denied their claim on
the ground that the liability to complainants-appellees was already extinguished upon
delivery to and receipt by PMSI of the six (6) checks issued in their names.
ISSUE: Whether or not the power of attorney relied upon by Insular Life sufficient to convey
absolute authority to Capt. Nuval to collect the insurance proceeds?
RULING:
• No. The special powers of attorney "do not contain in unequivocal and clear terms

authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance
proceeds arising from the death of the seaman-insured.
◦ On the contrary, the said powers of attorney are couched in terms which could easily
arouse suspicion of an ordinary man."
• There is nothing in the law which mandates a specific or special power of attorney to
be executed to collect insurance proceeds.
◦ Such authority is not included in the enumeration of Art. 1878 of the New Civil Code.
◦ Neither does the Supreme Court perceive collection of insurance claims as an act of
strict dominion as to require a special power of attorney.
• The person dealing with an agent must also act with ordinary prudence and
reasonable diligence.
◦ Obviously, if he knows or has good reason to believe that the agent is exceeding his
authority, he cannot claim protection.
◦ So if the suggestions of probable limitations be of such a clear and reasonable
quality, or if the character assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily prudent
man upon his guard, the party dealing with him may not shut his eyes to the real
state of the case, but should either refuse to deal with the agent at all, or should
ascertain from the principal the true condition of affairs.
8.2.4. Cases Where Special Powers of Attorney Are Necessary (Art. 1878)
NOTE: Under the ART. 1878 OF THE CIVIL CODE, the following incidents require a SPECIAL
POWER OF ATTORNEY:
a) To Make Payments “As Are Not Usually Considered as Acts of Administration;”
b) To Effect Novations Which Put an End to Obligations Already in Existence at the Time
the Agency Was Constituted;
c) To Compromise, To Submit Questions to Arbitration, To Renounce the Right to Appeal
from a Judgment, To Waive Objections to the Venue of an Action, or To Abandon a
Prescription Already Acquired;
d) To Waive Any Obligation Gratuitously;
e) To Enter Into Any Contract by Which the Ownership of an Immovable Is Transmitted
or Acquired Either Gratuitously or for a Valuable Consideration
[see also
i) Sale of a Piece of Land or Interest Therein (Art. 1874);
ia) Corporate Sale of Land;
ii) Agents Cannot Buy Property of Principal Unless Authorized (Art. 1491[2])];
f) To Lease Real Property for More Than One Year;
g) To Create or Convey Real Rights over Immovable Property;
h) To Make Gifts;
i) To Loan or Borrow Money;
j) To Bind the Principal to Render Some Service Without Compensation;
k) To Bind the Principal in a Contract of Partnership;
l) To Obligate the Principal as a Guarantor or Surety;
m) To Accept or Repudiate an Inheritance; and,
n) To Ratify or Recognize Obligations Contracted Before the Agency.
TO MAKE PAYMENTS “AS ARE NOT USUALLY CONSIDERED AS ACTS OF ADMINISTRATION.” In the
case of the area manager of an insurance company, it was held that the payment of claims is not
an act of administration, and that since the settlement of claims was not included among the acts
enumerated in the Special Power of Attorney issued by the insurance company, nor is of a
character similar to the acts enumerated therein, then a special power of attorney was required
before such area manager could settle the insurance claims of the insured. Consequently, the
amounts paid by the area manager to settle such claims cannot be reimbursed from the principal
insurance company.

READ: Dominion Insurance Corp. v. Court of Appeals, G.R. No. 129919, 376 SCRA 239,
06 February 2002.
SUMMARY: Guevarra instituted a civil case for the recovery of a sum of money against
Dominion Insurance. He sought to recover sums he had advanced in his capacity as manager.
Dominion denied any liability to Guevarra. RTC ruled that Dominion was to pay Guevarra. CA
affirmed. SC also ruled that Dominion should pay Guevarra, but not under the law on agency, but
the law on obligations and contracts. This is because Guevarra deviated from the instructions of
Dominion under which he would have had authority to settler the latter’s claims, i.e. to pay
through the revolving fund. Nevertheless, recovery may be made under Art. 1236.
DOCTRINE: When a special power of attorney is required for the agent to do a certain act,
the agent, in the performance of such act, must comply with the specifications embodied in the
special power of attorney giving him authority to do such.
FACTS:
• Rodolfo Guevarra instituted a civil case for the recovery of a sum of money against
Dominion Insurance.
◦ He sought to recover P156,473.90, which he claimed to have advanced in his capacity
as manager of Dominion to satisfy claims filed by Dominion’s clients.
◦ Dominion denied any liability to Guevarra and asserted a counterclaim for premiums
allegedly unremitted by the latter.
• The pre-trial conference never pushed through despite being scheduled and postponed
nine times over the course of six months.
• Finally, the case was called again for pre-trial and Dominion and counsel failed to show
up.
• The trial court declared Dominion in default and denied any reconsideration.
• On the merits of the case, the RTC ruled that Dominion was to pay Guevarra the
P156,473.90 claimed as the total amount advanced by the latter in the payment of the
claims of Dominion’s clients.
• The CA affirmed.
ISSUES + RATIO: WON Guevarra acted within his authority as agent for Dominion – NO
• A perusal of the “Special Power of Attorney” would show that Dominion and Guevarra
intended to enter into a principal-agent relationship.
◦ Despite the word “special,” the contents of the document reveal that what was
constituted was a general agency.
◦ The agency comprises all the business of the principal, but, couched in general terms,
is limited only to acts of administration.
◦ A general power permits the agent to do all acts for which the law does not require
a special power.
• Art. 1878 enumerates the instances when a special power of attorney is required,
including (1) to make such payments as are not usually considered as acts of
administration; (15) any other act of strict dominion.
• The payment of claims is not an act of administration.
◦ The settlement of claims is not included among the acts enumerated in the Special
Power of Attorney, neither is it of a character similar to the acts enumerated therein.
◦ A special power of attorney would have been required before Guevarra could settle
the insurance claims of the insured.
• Guevarra’s authority to settle claims is embodied in the Memorandum of Management
Agreement which enumerated the scope of Guevarra’s duties and responsibilities.
◦ However, the Memorandum showed the instruction of Dominion that payment of
claims shall come from a revolving fund.
◦ Having deviated from the instructions of the principal, the expenses that Guevarra
incurred in the settlement of the claims of the insured may not be reimbursed from
Dominion.
• payment of claims is not an act of administration, and that since the settlement of
claims was not included among the acts enumerated in the Special Power of Attorney

issued by the insurance company, nor is of a character similar to the acts enumerated
therein, then a special power of attorney was required before such area manager could
settle the insurance claims of the insured. Consequently, the amounts paid by the area
manager to settle such claims cannot be reimbursed from the principal insurance
company.
NOTE: The power to compromise excludes the power to submit to arbitration. It would also be
reasonable to conclude that the power to submit to arbitration does not carry with it the power to
compromise. (Art. 1880)
TO COMPROMISE, TO SUBMIT QUESTIONS TO ARBITRATION, TO RENOUNCE THE RIGHT TO

APPEAL FROM A JUDGMENT, TO WAIVE OBJECTIONS TO THE VENUE OF AN ACTION, OR TO
ABANDON A PRESCRIPTION ALREADY ACQUIRED. When an agent has been empowered to sell
hemp in a foreign country, that express power carries with it the implied power to make and enter
into the usual and customary contract for its sale, which sale contract may provide for settlement
of issues by arbitration. “We are clearly of the opinion that the contract in question is valid and
binding upon the defendant [principal], and that authority to make and enter into it for and on
behalf of the defendant [principal], but as a matter of fact the contract was legally ratified and
approved by the subsequent acts and conducts of the defendant [principal].” Robinson Fleming v.
Cruz, 49 Phil 42 (1926).
SAME. 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). 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.
READ: Home Insurance Co. v. USL, G.R. L-25593, 21 SCRA 863, 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).

◦ 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.
UNDER THE OLD CIVIL CODE. The power to bring suit in order to collect sums of money
accruing in the ordinary course of business “as properly belonging to the class of acts described
in article 1713 of the Civil Code as acts of ‘strict ownership’. It seems rather to be something
which is necessarily a part of the mere administration of such a business as that described in the
instrument in question and only incidentally, if at all, involving a power to dispose of the title to
property.” [In any event, the provision to “exact the payment of sums of money “by legal means”
was construed to be express power to sue.] Germann v. Donaldson, 1 Phil 63 (1901).
TO ENTER INTO ANY CONTRACT BY WHICH THE OWNERSHIP OF AN IMMOVABLE IS TRANSMITTED

OR ACQUIRED EITHER GRATUITOUSLY OR FOR A VALUABLE CONSIDERATION. According to the
provisions of Article 1874 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.
READ: Estate of Lino Olaguer v. Ongjoco, G.R. No. 173312, 563 SCRA 373, 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.
• 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's properties; 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 1874 of 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.
SAME. Article 1878 provides that 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, or to create or convey real rights over immovable property, or for
any other act of strict dominion. Any sale of real property by one purporting to be the agent of
the registered owner without any authority therefore in writing from the said owner is null and
void; declarations of the agent alone are generally insufficient to establish the fact or extent of
her authority.”
READ: Litonjua v. Fernandez, G.R. No. 148116, 427 SCRA 478, 14 April 2004.
FACTS:
• Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as
brokers, offered to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua,
Jr., the parcels of land covered by TCT Nos. 36754 and 36766.
◦ The petitioners were shown a locator plan and copies of the titles showing that the
owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively.
• The brokers told the petitioners that they were authorized by respondent Fernandez to
offer the property for sale.
◦ The petitioners, thereafter, made two ocular inspections of the property, in the course
of which they saw some people gathering coconuts.
• In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez
and the two brokers at the petitioners office in Mandaluyong City.
◦ The petitioners and respondent Fernandez agreed that the petitioners would buy the
property consisting of 36,742 square meters, for the price of P150 per square meter,
or the total sum of P5,098,500.
◦ They also agreed that the owners would shoulder the capital gains tax, transfer tax
and the expenses for the documentation of the sale.
◦ The petitioners and respondent Fernandez also agreed to meet on December 8, 1995
to finalize the sale.
• It was also agreed upon that on the said date, respondent Fernandez would present a
special power of attorney executed by the owners of the property, authorizing her to sell
the property for and in their behalf, and to execute a deed of absolute sale thereon.
◦ The petitioners would also remit the purchase price to the owners, through respondent
Fernandez.
• However, only Agapito Fisico attended the meeting.
◦ He informed the petitioners that respondent Fernandez was encountering some
problems with the tenants and was trying to work out a settlement with them.
◦ After a few weeks of waiting, the petitioners wrote respondent Fernandez on January
5, 1995, demanding that their transaction be finalized by January 30, 1996.
ISSUE: Whether or not the letter signed by Fernandez alone without any authority from the
respondents-owners binding on the latter as owners of the subject properties?
RULING:
• No. In this case, we agree with the findings of the appellate court that there was no
perfected contract of sale between the respondents-owners, as sellers, and the petitioners,
as buyers.
◦ There is no documentary evidence on record that the respondents-owners specifically
authorized respondent Fernandez to sell their properties to another, including the

petitioners.
• Article 1878 of the New Civil Code provides that 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 or to create
or convey real rights over immovable property, or for any other act of strict dominion.
◦ Any sale of real property by one purporting to be the agent of the registered owner
without any authority therefor in writing from the said owner is null and void. The
declarations of the agent alone are generally insufficient to establish the fact or
extent of her authority.
• In this case, the only evidence adduced by the petitioners to prove that respondent
Fernandez was authorized by the respondents-owners is the testimony of petitioner
Antonio Litonjua that respondent Fernandez openly represented herself to be the
representative of the respondents-owners, and that she promised to present to the
petitioners on December 8, 1996 a written authority to sell the properties.
• The settled rule is that persons dealing with an assumed agent are bound at their peril,
and 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 prove it.
• In this case, respondent Fernandez specifically denied that she was authorized by the
respondents-owners to sell the properties, both in her answer to the complaint and when
she testified.
◦ The Letter dated January 16, 1996 relied upon by the petitioners was signed by
respondent Fernandez alone, without any authority from the respondents-owners.
• There is no evidence on record that the respondents-owners ratified all the actuations of
respondent Fernandez in connection with her dealings with the petitioners. As such, said
letter is not binding on the respondents as owners of the subject properties.
SAME. The power expressly conferred on the agent to sell “for such price or amount” is broad
enough to cover the exchange contemplated in the Deed of Assignment and Conveyance between
the properties and the corresponding corporate shares in a corporation, with the latter replacing
the cash equivalent of the option money initially agreed to be paid by the said corporation under
the Memorandum of Agreement. A special power of attorney to sell is sufficient to enable the
agent to make a binding commitment under the Deed of Assignment and Conveyance.
Hernandez-Nievera v. Hernandez, 642 SCRA 646 (2011).
SAME. SALE OF A PIECE OF LAND OR INTEREST THEREIN (ART. 1874). [Article 1874 and Aritcle
1875 (5) explicitly require a written authority when the sale of a piece of land is through an
agent, whether the sale is gratuitously or for a valuable consideration. Absent such authority in
writing, the sale is null and void. … In the case at bar, it is undisputed that the sale of the subject
lots to Spouses Bautista was void. Based on the records, Nasino had no written authority from
Spouses Jalandoni to sell the subject lots. The testimony of Eliseo that Nasino was empowered
by a special power of attorney to sell the subject lots was bereft of merit as the alleged special
power attorney was neither presented in court nor was it referred to in the deeds of absolute sale.
Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of
Court.
READ: Bautista v. Spouses Jalandoni, G.R. No. 171464, 27 November 2013

FACTS:
• In May 1997, the Spouses Jalandoni applied for a loan with a commercial bank and, as a
security thereof, they offered to constitute a real estate mortgage over the two lots they
were allegedly the absolute owners of.
• After a routine credit investigation, it was discovered that their titles over the two lots had
been cancelled and new TCTs were issued in the names of Spouses Baustista.
• Upon further investigation, they found out that the bases for the cancellation of their titles
were two deeds of absolute sale,7 dated April 4, 1996 and May 4, 1996, purportedly
executed and signed by them in favor of Spouses Baustista.
• Spouses Bautista claimed that in March 1996, a certain Teresita Nasino (Nasino) offered
to Eliseo Baustista (Eliseo) two parcels of land located in Muntinlupa City; that the

parcels of land were sold at a bargain price because the owners were in dire need of
money; that upon their request, Nasino showed them the photocopies of the titles
covering the subject lands; that Nasino told them that she would negotiate with the
Spouses Jalandoni, prepare the necessary documents and cause the registration of the sale
with the Register of Deeds; and that since Nasino was a wife of a friend, Spouses
Baustista trusted her and gave her the authority to negotiate with Spouses Jalandoni on
their behalf.
• On December 17, 2004, the RTC rendered judgment declaring the sale of the subject lots
void.
• The RTC explained that Nasino had no authority to negotiate for the Spouses Jalandoni,
much less to receive the consideration of the sale.
◦ Spouses Bautista were not innocent purchasers in good faith and for value for their
failure to personally verify the original copies of the titles of the subject properties
and to ascertain the authority of Nasino since they were not dealing with the
registered owner.
• The RTC, nonetheless, found MCC a mortgagee in good faith and upheld the validity of
the mortgage contract between Spouses Bautista and MCC.
ISSUE: Whether or not Nasino has the authority to negotiate for the Spouses Jalandoni in the
contract of sale made to Spouses Bautista?
RULING:
• No. Article 1874 and Aritcle 1875 (5) explicitly require a written authority when the
sale of a piece of land is through an agent, whether the sale is gratuitously or for a
valuable consideration.
• Articles 1874 of the Civil Code provides: When a 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.
• Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the
authority of the agent to sell a real property must be conferred in writing, to wit:
◦ Art. 1878. Special powers of attorney are necessary in the following cases:
◦ (5) To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
◦ Absent such authority in writing, the sale is null and void.
• In the case at bar, it is undisputed that the sale of the subject lots to Spouses Bautista was
void.
◦ Based on the records, Nasino had no written authority from Spouses Jalandoni to sell
the subject lots.
◦ The testimony of Eliseo that Nasino was empowered by a special power of attorney to
sell the subject lots was bereft of merit as the alleged special power attorney was
neither presented in co urt nor was it referred to in the deeds of absolute sale.
◦ Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the
Rules of Court.
• In addition Spouses Bautista cannot be deemed purchasers in good faith.
◦ There were several circumstances that should have placed them on guard and
prompted them to conduct an investigation that went beyond the face of the title of
the subject lots.
◦ Their failure to take the necessary steps to determine the status of the subject lots and
the extent of Nasino’s authority puts them into bad light.
• Spouses Bautista’s claim of good faith is negated by their failure to verify the extent and
nature of Nasino’s authority.
◦ Since Spouses Bautista did not deal with the registered owners but with Nasino, who
merely represented herself to be their agent, they should have scrutinized all factual
circumstances necessary to determine her authority to insure that there are no flaws in
her title or her capacity to transfer the land.
◦ They should not have merely relied on her verbal representation that she was selling
the subject lots on behalf of Spouses Jalandoni.
• Moreover, Eliseo’s claim that he did not require Nasino to give him a copy of the special

power of attorney because he trusted her is unacceptable.
• Well settled is the rule that persons dealing with an assumed agency 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.
• As stated, Spouses Bautista’s failure to observe the required degree of caution in
ascertaining the genuineness and extent of Nasino’s authority is tantamount to bad faith
that precludes them from claiming the rights of a purchaser in good faith.
SAME. SAME. Where the nephew in his own name sold a parcel of land with a masonry house
constructed thereon to the company, when in fact it was property owned by the uncle, but in the
estafa case filed by the company against the nephew, the uncle swore under oath that he had
authorized his nephew to sell the property, the uncle can be compelled in the civil action to
execute the deed of sale covering the property. “It having been proven at the trial that he gave his
consent to the said sale, it follows that the defendant conferred verbal, or at least implied, power
of agency upon his nephew Duran, who accepted it in the same way by selling the said property.
The principal must therefore fulfill all the obligations contracted by the agent, who acted within
the scope of his authority. (Arts. 1709, 1710 and 1727)
READ: Gutierrez Hermanos v. Orense, G.R. No. L-9188, 28 Phil. 572, 04 December 1914.
FACTS:
• On and before Februaru 14, 1907, Engracio Orense had been the owner of a parcel of
land in Guinobatan, Albay.
• On February 14, 1907, Jose Duran, a nephew of Orense, sold the property for P1,500 to
Gutierrez Hermanos, with Orense‘s knowledge and consent, executed before a notary a
public instrument.
◦ The said public instrument contained a provision giving Duran the right to repurchase
it for the same price within a period of four years from the date of the said instrument.
• Orense continued occupying the land by virtue of a contract of lease.
◦ After the lapse of four years, Gutierrez asked Orense to deliver the property to the
company and to pay rentals for the use of the property.
• Orense refused to do so. He claimed that the sale was void because it was done without
his authority and that he did not authorize his nephew to enter into such contract.
• During trial, Orense was presented as witness of the defense.
◦ He states that the sale was done with his knowledge and consent.
◦ Because of such testimony, it was ascertained that he did give his nephew, Duran,
authority to convey the land.
• Duran was acquitted of criminal charges and the company demanded that Orense execute
the proper deed of conveyance of the property.
ISSUE: Whether or not Orense is bound by Duran‘s act of selling the former‘s property?
RULING:
• Yes. It was proven during trial that he gave his consent to the sale.
◦ Such act of Orense impliedly conferred to Duran the power of agency.
◦ The principal must therefore fulfill all the obligations contracted by the agent, who
acted within the scope of his jurisdiction.
• Where the nephew in his own name sold a parcel of land with a masonry house
constructed thereon to the company, when in fact it was property owned by the uncle, but
in the estafa case filed by the company against the nephew, the uncle swore under oath
that he had authorized his nephew to sell the property, the uncle can be compelled in the
civil action to execute the deed of sale covering the property.
• It having been proven at the trial that he gave his consent to the said sale, it follows that
the defendant conferred verbal, or at least implied, power of agency upon his nephew
Duran, who accepted it in the same way by selling the said property.
SAME. SAME. When no particular formality is required by law, rules or regulation, then the

principal may appoint his agent in any form which might suit his convenience or that of the
agent, in this case a letter addressed to the agent requesting him to file a protest in behalf of the
principal with the Collector of Customs against the appraisement of the merchandise imported
into the country by the principal. Kuenzle and Streiff v. Collector of Customs, 31 Phil 646
(1915).
SAME. SAME. A power of attorney to convey real property need not be in a public document, it
need only be in writing, since a private document is competent to create, transmit, modify, or
extinguish a right in real property. Jimenez v. Rabot, 38 Phil 378 (1918).
Under Sec. 335 of the Code of Civil Procedure, an agreement for the leasing for a longer period
than one year, or for the sale of real property, or of an interest therein, is invalid if made by the
agent unless the authority of the agent be in writing and subscribed by the party sought to be
charged. Rio y Olabbarrieta v.Yutec, 49 Phil 276 (1926).
SAME. SAME. The express mandate required by Article 1874 to enable an appointee of an agency
couched in general terms to sell must be one that expressly mentions a sale of a piece of land or
that includes a sale as a necessary ingredient of the act mentioned. The power of attorney need
not contain a specific description of the land to be sold, such that giving the agent the power to
sell “any or all tracts, lots, or parcels” of land belonging to the principal is adequate. Domingo v.
Domingo, 42 SCRA 131 (1971).
SAME. SAME. Where the special power of attorney primarily empowered the agent of the
corporation to bring an ejectment case against the occupant and also “to compromise . . . so far
as it shall protect the rights and interest of the corporation in the aforementioned lots,” and that
the agent did execute a compromise in the legal proceedings filed which sold the lots to the
occupant, the compromise agreement is void for the power to sale by way of compromise could
not be implied to protect the interests of the principal to secure possession of the properties.
READ: Cosmic Lumber v. Court of Appeals, G.R. No. 114311, 265 SCRA 168, 29
November 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.
• 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:
• Yes. 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 sale Ip so jure is 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.
• In Alviar v Court of First Instance of La Union, the Court held --“As the judgment
inquestion is null and void ab 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 own exclusive 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.
SAME. SAME. Article 1878 provides that in the sale of a parcel of land or any interest therein
made through an agent, a special power of attorney is essential; Article 1874 provides that such
authority must be in writing, otherwise the sale shall be void.”
READ: Pineda v. Court of Appeals, G.R. No. 127094, 376 SCRA 222, 06 February 2002.
FACTS:
• On 23 September 1983, Prime Marine Services, Inc., a crewing/manning outfit, procured
Group PoIicy No. G004694 from respondent-appellant Insular Life Assurance Co., Ltd.
to provide life insurance coverage to its sea-based employees enrolled under the plan.
• On 17 February 1986, during the effectivity of the policy, six covered employees of the
PMSI perished at sea when their vessel, M/V Nemos, a Greek cargo vessel, sunk
somewhere in El Jadida, Morocco.

◦ They were survived by complainants-appellees, the beneficiaries under the policy.
• Following the tragic demise of their loved ones, complainants-appellees sought to claim
death benefits due them and, for this purpose, they approached the President and General
Manager of PMSI, Capt. Roberto Nuval. Capt. Nuval evinced willingness to assist
complainants-appellees to recover Overseas Workers Welfare Administration (OWWA)
benefits from the POEA and to work for the increase of their PANDIMAN and other
benefits arising from the deaths of their husbands/sons.
◦ They were thus made to execute, with the exception of the spouses Alarcon, special
powers of attorney authorizing Capt. Nuval to, among others, "follow up, ask,
demand, collect and receive" for their benefit indemnities of sums of money due them
relative to the sinking of M/V Nemos.
◦ By virtue of these written powers of attorney, complainants-appellees were able to
receive their respective death benefits.
◦ Unknown to them, however, the PMSI, in its capacity as employer and policy holder
of the life insurance of its deceased workers, filed with respondent-appellant formal
claims for and in behalf of the beneficiaries, through its President, Capt. Nuval.
◦ Among the documents submitted by the latter for the processing of the claims were
five special powers of attorney executed by complainants-appellees.
• On the basis of these and other documents duly submitted, respondent-appellant drew
against its account with the Bank of the Philippine Islands on 27 May 1986 six (6)
checks, four for P200,00.00 each, one for P50,000.00 and another for P40,00.00, payable
to the order of complainants-appellees.
◦ These checks were released to the treasurer of PMSI upon instructions of Capt. Nuval
over the phone to Mr. Mariano Urbano, Assistant Department Manager for Group
Administration Department of respondent-appellant.
◦ Capt. Nuval, upon receipt of these checks from the treasurer, who happened to be his
son-in-law, endorsed and deposited them in his account with the Commercial Bank of
Manila, now Boston Bank.
• On 3 July 1989, after complainants-appellees learned that they were entitled, as
beneficiaries, to life insurance benefits under a group policy with respondent-appellant,
they sought to recover these benefits from Insular Life but the latter denied their claim on
the ground that the liability to complainants-appellees was already extinguished upon
delivery to and receipt by PMSI of the six (6) checks issued in their names.
ISSUE: Whether or not the power of attorney relied upon by Insular Life sufficient to convey
absolute authority to Capt. Nuval to collect the insurance proceeds?
RULING:
• No. The special powers of attorney "do not contain in unequivocal and clear terms
authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance
proceeds arising from the death of the seaman-insured.
◦ On the contrary, the said powers of attorney are couched in terms which could easily
arouse suspicion of an ordinary man."
• There is nothing in the law which mandates a specific or special power of attorney to
be executed to collect insurance proceeds.
◦ Such authority is not included in the enumeration of Art. 1878 of the New Civil Code.
◦ Neither does the Supreme Court perceive collection of insurance claims as an act of
strict dominion as to require a special power of attorney.
• The person dealing with an agent must also act with ordinary prudence and
reasonable diligence.
◦ Obviously, if he knows or has good reason to believe that the agent is exceeding his
authority, he cannot claim protection.
◦ So if the suggestions of probable limitations be of such a clear and reasonable
quality, or if the character assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks to exercise is of such an
unusual or improbable character, as would suffice to put an ordinarily prudent
man upon his guard, the party dealing with him may not shut his eyes to the real
state of the case, but should either refuse to deal with the agent at all, or should

ascertain from the principal the true condition of affairs.
SAME. SAME. Agency may be oral unless the law requires a specific form. However, to create or
convey real rights over immovable property, a special power of attorney is necessary. Thus, when
a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall
be in writing, otherwise, the sale shall be void.
READ: Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, 490 SCRA 204, 08 June 2006.20
FACTS:
• The Eternit Corporation (EC) manufactures roofing materials and pipe products.
◦ Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer
S.A. Corporation (ESAC), a corporation registered under the laws of Belgium.
• Glanville was the General Manager and President of EC, while Delsauxwas the Regional
Director for Asia of ESAC.
• In 1986, because of the political situation in the Philippines the management of ESAC
wanted to stop its operations and to dispose the land in Mandaluyong City.
• They engaged the services of realtor/broker Lauro G. Marquez.
• Marquez thereafter offered the land to Eduardo B. Litonjua, Jr. for P27,000,000.00.
Litonjua counter offered P20,000,000.00 cash. Marquez apprised Glanville & Delsaux of
the offer.
• Delsaux sent a telex stating that, based on the "Belgian/Swiss decision," the final offer
was "US$1,000,000.00 andP2,500,000.00.
• The Litonjua brothers deposited US$1,000,000.00 with the Security Bank & Trust
Company, and drafted an Escrow Agreement to expedite the sale.
• Meanwhile, with the assumption of Corazon C. Aquino as President, the political
situation improved.
• Marquez received a letter from Delsaux that the ESAC Regional Office decided not to
proceed with the sale.
• When informed of this, the Litonjuas, filed a complaint for specific performance and
payment for damages on account of the aborted sale.
• Both the trial court and appellate court rendered judgment in favor of defendants and
dismissed the complaint.
◦ The lower court declared that since the authority of the agents/realtors was not in
writing, the sale is void and not merely unenforceable.
Issue: Whether or not the written authority from the Eternit was necessary before the sale can be
perfected?
Holding and Ration Decidendi: Yes.

• The Supreme Court agrees with the ruling of the appellate court that Marquez had no
authority to bind respondent EC to sell the subject properties.
• Agency may be oral unless the law requires a specific form. However, to create or
convey real rights over immovable property, a special power of attorney is necessary.
Thus, when a sale of a piece of land or any portion thereof is through an agent, the
authority of the latter shall be in writing, otherwise, the sale shall be void.
• In this case, the petitioners failed to adduce in evidence any resolution of the Board of
Directors of EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let
alone offer for sale, for and in its behalf, the eight parcels of landowned by it.
SAME. SAME. Under Article 1878 of the Civil Code, a special power of attorney is necessary 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. Absence of a written authority to
sell a piece of land is ipso jure void, precisely to protect the interest of an unsuspecting owner
from being prejudiced by the unwarranted act of another.
20
CLV: Notice that the article does not declare the agency to be void, but the resulting contract of sale effected by
the agent. Is the agency itself void?

READ: Pahud v. Court of Appeals, G.R. No. 160346, 597 SCRA 13, 25 August 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: WON the sale of the property by Eufemia to the Pahuds are valid?
Held: Yes. We find the transaction to be valid and enforceable.

• Under Art. 1874, a sale of a piece of land or any interest through an agent, requires
that the authority of the latter shall be in writing; otherwise, the sale shall be void.
• Also, Article 1878, a special power of attorney is necessary for an agent to enter into a
contract by which the ownership of an immovable property is transmitted or acquired.
• The express mandate required by law to enable an appointee of an agency in general
terms to sell must be one that expressly mentions a sale.
◦ A power of attorney must so express the powers of the agent in clear and
unmistakable language.
• Absence of a written authority to sell a piece of land is, ipso jure, void, precisely to
protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another.
• In this case, the sale made by Eufemia, Isabelita and her two brothers to the Pahuds
sometime in 1992 should be valid only with respect to the 4/8 portion of the subject
property.
• The sale with respect to the 3/8 portion, 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 explicitly required by law.
• While the sale with respect to the 3/8 portion is void by express provision of law, it is still

valid on the basis of the principle of estoppel. Under Art 1431, Through estoppel an
admission or representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.
• Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8
portion of the property. Initially, in their answer to the complaint in intervention, Eufemia
and her other co-heirs denied having sold their shares to the Pahuds. Later, however, they
admitted that they had indeed sold 7/8 of the property to the Pahuds sometime in
1992.33 Thus, the previous denial was superseded, if not accordingly amended, by their
subsequent admission.
• Also, the three heir concerned did not assail the validity of the sale by Eufemia to the
Pahuds on the basis of want of written authority to sell. They opted to remain silent and
left the task of raising the validity of the sale as an issue to their co-heir, Virgilio, who is
not privy to the said transaction.
• It is a basic rule in the law of agency that a principal is subject to liability for loss caused
to another by the latter’s reliance upon a deceitful representation by an agent in the course
of his employment (1) if the representation is authorized; (2) if it is within the implied
authority of the agent to make for the principal; or (3) if it is apparently authorized,
regardless of whether the agent was authorized by him or not to make the representation.
• By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to
believe that they have indeed clothed Eufemia with the authority to transact on their
behalf. Clearly, the three co-heirs are now estopped from impugning the validity of the
sale from assailing the authority of Eufemia to enter into such transaction.
• Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void because
they no longer had any interest over the subject property which they could alienate at the
time of the second transaction.38 Nemo dat quod non habet. Virgilio, however, could still
alienate his 1/8 undivided share to the Belarminos.
SAME. SAME. In sales involving real property or any interest therein, a written authority in favor
of the agent is necessary, otherwise the sale is void. As a general rule, a contract of agency may
be oral. However, it must be written when the law requires a specific form. Specifically, Article
1874 of the Civil Code provides that the contract of agency must be written for the validity of the
sale of a piece of land or any interest therein. Otherwise, the sale shall be void. A related
provision, Article 1878 of the Civil Code, states that special powers of attorney are necessary to
convey real rights over immovable properties.
READ: Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, 702 SCRA 631,
31 July 2013).21
Facts:
• Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit
religious educational institution. It was the registered owner of a parcel of land
designated as Lot No. 125-L and was covered by Transfer Certificate of Title (TCT) No.
T-25334.[4]
• On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties,
a Wrangler jeep, and other personal properties in favor of the spouses Sally and Yoshio
Yoshizaki. On the same date, a Deed of Absolute Sale[5] and a Deed of Sale of Motor
Vehicle[6] were executed in favor of the spouses Yoshizaki.
◦ The spouses Johnson were members of Joy Training’s board of trustees at the time of
sale. On December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-
26052[7] was issued in the name of the spouses Yoshizaki.
• On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V.
Rubio, filed an action for the Cancellation of Sales and Damages with prayer for the
issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against
the spouses Yoshizaki and the spouses Johnson before the Regional Trial Court of Baler,
Aurora (RTC).
• In the complaint, Joy Training alleged that the spouses Johnson sold its properties without
the requisite authority from the board of directors.
21
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v. Pajo-Reyes, 632 SCRA 400 (2010); Recio v.
Heirs of the Spouses Altamirano, 702 SCRA 137 (2013);

◦ It assailed the validity of a board resolution dated September 1, 1998[11] which
purportedly granted the spouses Johnson the authority to sell its real properties.
◦ It averred that only a minority of the board, composed of the spouses Johnson and
Alexander Abadayan, authorized the sale through the resolution.
• After the presentation of their testimonial evidence, the spouses Yoshizaki formally
offered in evidence photocopies of the resolution and certification, among others.
◦ Joy Training objected to the formal offer of the photocopied resolution and
certification on the ground that they were not the best evidence of their contents.
[18] In an Order[19] dated May 18, 2004, the RTC denied the admission of the
offered copies.
• The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the
real properties.
◦ However, it held that the sale was valid because Joy Training authorized the spouses
Johnson to sell the real properties.
• The CA upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to
the sale of real properties.
◦ It maintained that the present action is cognizable by the RTC because it involves
recovery of ownership from third parties.
◦ It also ruled that the resolution is void because it was not approved by a majority of
the board of trustees.
◦ It stated that under Section 25 of the Corporation Code, the basis for determining the
composition of the board of trustees is the list fixed in the articles of incorporation.
ISSUE: Whether or not there was a contract of agency to sell the real properties between Joy
Training and the spouses Johnson.
HELD:
• There is no contract of agency between Joy Training and the spouses Johnson to sell the
parcel of land with its improvements
• Article 1868 of the Civil Code defines a contract of agency as a contract whereby a
person “binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.”
◦ It may be express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is acting on
• The special power of attorney mandated by law must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the authorized act.
◦ a special power of attorney must express the powers of the agent in clear and
unmistakable language for the principal to confer the right upon an agent to sell real
estate.
◦ When there is any reasonable doubt that the language so used conveys such power, no
such construction shall be given the document.
• The documents do not convince of the existence of the contract of agency to sell the real
properties.
◦ TCT No. T-25334 merely states that Joy Training is represented by the spouses
Johnson.
◦ The title does not explicitly confer to the spouses Johnson the authority to sell the
parcel of land and the building thereon.
◦ Moreover, the phrase “Rep. by Sps. Richard A. Johnson and LINDA S. JOHNSON”
only means that the spouses Johnson represented Joy Training in land registration.
• The lower courts should not have relied on the resolution and the certification in
resolving the case.
◦ The spouses Yoshizaki did not produce the original documents during trial.
◦ They also failed to show that the production of pieces of secondary evidence falls
under the exceptions enumerated in Section 3, Rule 130 of the Rules of Court.
◦ Thus, the general rule – that no evidence shall be admissible other than the original
document itself when the subject of inquiry is the contents of a document – applies.

• Nonetheless, if only to erase doubts on the issues surrounding this case, we declare that
even if we consider the photocopied resolution and certification, this Court will still
arrive at the same conclusion.
SAME. SAME. CORPORATE SALE OF LAND. 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 same situation applies when the sale of corporate piece of land is pursued through an
officer without written authority.
READ: City-Lite Realty Corp. v. Court of Appeals, G.R. No. 138639, 325 SCRA 385, 10
February 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
• 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
SAME. SAME. SAME. When the corporation’s primary purpose is to market, distribute, export and
import merchandise, the sale of land is not within the actual or apparent authority of the
corporation acting through its officers, much less when acting through the treasurer. Likewise,
Arts. 1874 and 1878 require that when land is sold through an agent, the agent’s authority must
be in writing, otherwise the sale is void. San Juan Structural v. CA, 296 SCRA 631 (1998).22
SAME. AGENTS CANNOT BUY PROPERTY OF PRINCIPAL UNLESS AUTHORIZED (ART. 1491[2]). The
prohibition against agents purchasing property in their hands for sale or management is,
however, clearly, not absolute. When so authorized by the principal, the agent is not disqualified
from purchasing the property he holds under a contract of agency to sell. Olaguer v.
Purugganan, Jr., 515 SCRA 460 (2007).
TO LEASE REAL PROPERTY FOR MORE THAN ONE YEAR. The lease of real property for more
than one year is considered not merely an act of administration but an act of strict dominion or of
ownership. A special power of attorney is thus necessary for its execution through an agent.
Shopper’s Paradise Realty v. Roque, 419 SCRA 93 (2004).
SAME. Where the lease contract involves the lease of real property for a period of more than one
year, and it was entered into by the agent of the lessor and not the lessor herself, in such a case,
Article 1878 of the Civil Code requires that the agent be armed with a special power of attorney
to lease the premises. Consequently, the provisions of the contract of lease, including the grant
therein of an option to purchase to the lessee, would be unenforceable. Vda. De Chua v. IAC, 229
SCRA 99 (1994).
SAME. When the attorney-in-fact was empowered by his principal to make an assignment of
credits, rights, and interests, in payment of debts for professional serviced rendered by laws, and
the hiring of lawyers to take charge of any actions necessary or expedient for the interests of his
principal, and to defend suits brought against the principal, such powers necessarily implies the
authority to pay for the professional services thus engaged, which includes assignment of the
judgment secured for the principal in settlement of outstanding professional fees. Municipal
Council of Iloilo v. Evangelista, 55 Phil. 290 (1930).
TO LOAN OR BORROW MONEY. A special power of attorney is necessary for an agent to borrow
money, unless it be urgent and indispensable for the preservation of the things which are under
administration. Yasuma v. Heirs of Cecilio S. De Villa, 499 SCRA 466 (2006).23 EXCEPT: The
agent may borrow money when it s urgent and indispensable for the preservation of the things
which are under administration. NOTE: Power to Sell Excludes Power to Mortgage and Vice
Versa (Art. 1879)
SAME. It is a general rule in the law agency that, in order to bind the principal by a mortgage on
real property executed by an agent, it must upon its face purport to be made, signed and sealed in
the name of the principal, otherwise, it will bind the agent only. Gozun v. Mercado 511 SCRA
305 (2006).
SAME. A power of attorney, like any other instrument, is to be construed according to the natural
import of its language; and the authority which the principal has conferred upon his agent is not
22
AF Realty & Dev., Inc. v. Dieselman Freight Services Co., 373 SCRA 385 (2002); Firme v. Bukal Enterprises and
Dev. Corp., 414 SCRA 190 (2003).
23
Gozun v. Mercado 511 SCRA 305 (2006).

to be extended by implication beyond the natural and ordinary significance of the terms in which
that authority has been given. The attorney has only such authority as the principal has chosen to
confer upon him, and one dealing with him must ascertain at his own risk whether his acts will
bind the principal. Thus, where the power of attorney which vested the agent with authority “for
me and in my name to sign, seal and execute, and as my act and deed, delivery any lease, any
other deed for conveying any real or personal property” or “any other deed for the conveying of
any real or personal property,” it does not carry with it or imply that the agent for and on behalf
of his principal has the power to execute a promissory note or a mortgage to secure its payment.
National Bank v. Tan Ong Sze, 53 Phil. 451 (1929).
SAME. Where the power of attorney executed by the principal authorized the agent “By means of
a mortgage of my real property, to borrow and lend sums in cash, at such interest and for such
periods and conditions as he may deem property and to collect or to pay the principal and interest
thereon when due,” while it did not authorize the agent to execute deeds of sale with right of
repurchase over the property of the principal, nonetheless would validate the main contract of
loan entered into with the deed of sale with right of repurchase constituting merely an equitable
mortgage, both contracts of which were within the scope of authority of the agent. Rodriguez v.
Pamintuan and De Jesus, 37 Phil 876 (1918).
SAME. An SPA to mortgage real estate is limited to such authority to mortgage and does not bind
the grantor personally to other obligations contracted by the grantee (in this case the personal
loan obtained by the agent in his own name from the PNB) in the absence of any ratification or
other similar act that would estop the grantor from questioning or disowning such other
obligations contracted by the grantee. PNB v. Sta. Maria, 29 SCRA 303 (1969).
SAME. In other words, the power to mortgage does not include the power to obtain loans,
especially when the grantors allege that they had no benefit at all from the proceeds of the loan
taken by the agent in his own name from the bank. “It is not unusual in family and business
circles that one would allow his property or an undivided share in real estate to be mortgaged by
another as security, either as an accommodation or for valuable consideration, but the grant of
such authority does not extend to assuming personal liability, much less solidary liability, for any
loan secured by the grantee in the absence of express authority so given by the grantor.” PNB v.
Sta. Maria, 29 SCRA 303, 310 (1969).
SAME. The wife may not be held liable for the payment of the mortgage debt contracted by the
husband, where the power of attorney given to the husband was limited to a grant of authority to
mortgage land titled in the wife’s name. De Villa v. Fabricante, 105 Phil. 672 (1959).
TO OBLIGATE THE PRINCIPAL AS A GUARANTOR OR SURETY. Where a power of attorney is

executed primarily to enable the attorney-in-fact, as manager of a mercantile business, to conduct
its affairs for and on behalf of the principal, who is the owner of the business, and to this end the
attorney-in-fact is authorized to execute contracts relating to the principal’s property [“act and
deed delivery, any lease, or any other deed for the conveying any real or personal property” and
“act and deed delivery, any lease, release, bargain, sale, assignment, conveyance or assurance, or
any other deed for the conveying any real or personal property”] , such power will not be
interpreted as giving the attorney-in-fact power to bind the principal by a contract of independent
guaranty or surety unconnected with the conduct of the mercantile business. General words
contained in such power will not be interpreted to extend power to the making of a contract of
suretyship, but will be limited, under the well-know rule of construction indicated in the express
in ejusdem generis, as applying to matters similar to those particularly mentioned. Director v.
Sing Juco, 53 Phil 205 (1929).
SAME. Our law mandates an agent to act within the scope of his authority (Art. 1881), which is
what appears in the written terms of the power of attorney granted upon him (Art. 1900) Under
Article 1878(11) of the Civil Code, a special power of attorney is necessary to obligate the
principal as a guarantor or surety. Country Bankers Insurance Corp. v Keppel Cebu Shipyard,
673 SCRA 427 (2012).

TO RATIFY OR RECOGNIZE OBLIGATIONS CONTRACTED BEFORE THE AGENCY. Where a wife gave
her husband a power of attorney “to loan and borrow money” and to mortgage her property, that
fact does not carry with it or imply that he has a legal right to sign her name to a promissory note
which would make her liable for the payment of a pre-existing debt of the husband or that of his
firm, for which she was not previously liable, or to mortgage her property to secure the pre-
existing debt. B.P.I. v. De Coster, 47 Phil 594 (1925).
SAME. Where the power granted to substituted attorney-in-fact was to the end that the principal-
seller may be able to collect the balance of the selling price of the printing establishment sold,
such substitute agent had no power to enter into new sales arrangements with the buyer, or to
novate the terms of the original sale. Villa v. Garcia Bosque, 49 Phil 126 (1926).
8.2.5. Notarized Power of Attorney
NATURE AND EFFECT OF NOTARIZATION. A notarized power of attorney carries with it the
evidentiary weight conferred upon it with respect to its due exectuion. Velso v. Court of Appeals,
260 SCRA 593 (1996).
SAME. When a special power of attorney is duly notarized, the notarial acknowledgment is prima
facie evidence of the fact of its due execution—a buyer has every reason to rely on a person’s
authority to sell a particular property owned by a corporation on the basis of a notarized board
resolution—undeniably the buyer is an innocent purchaser for value in good faith. St. Mary’s
Farm, Inc. v. Prima Real Properties, Inc., 560 SCRA 704 (2008).

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SECTION ONE

“Agency is basically personal, representative, and derivative in

7. NATURE AND OBJECT OF AGENCY

7.1. DEFINITION (ART. 1868) AND PARTIES TO A CONTRACT OF AGENCY

7.2. ROOT AND OBJECTIVES OF AGENCY (ARTS. 1317 AND 1403[1])

7.3. ELEMENTS OF THE CONTRACT OF AGENCY

ISSUE: WON the death extinguishes the authority of the agent

RULING: Yes, the sale is void!

ELS: ATP SG with cases Rae Gammad 2

There is no principal-agent relationship between an establishment and the security guards

7.3.1. Consent (Arts. 1317 and 1403[1])

7.3.2. Subject Matter: Service - Execution of Juridical Acts in Behalf of Principal

i) Consideration: Agency Presumed to Be for Compensation,

ELS: ATP SG with cases Rae Gammad 3

7.4. ESSENTIAL CHARACTERISTICS OF AGENCY

7.4.1. Nominate and Principal

7.4.2. Unilateral14 and Primarily Onerous (Art. 1875)

7.4.3. Consensual (Arts. 1869 and 1870)

Agency may be oral, unless the law requires a specific form.

ELS: ATP SG with cases Rae Gammad 4

ELS: ATP SG with cases Rae Gammad 5

7.4.4. Preparatory, Representative and Derivative (Art. 1868)

ELS: ATP SG with cases Rae Gammad 6

IN THE CASE AT BAR:

1) Sale was void.

3) Yes, agent’s knowledge of principal’s death is material.

ELS: ATP SG with cases Rae Gammad 7

PRINCIPLES FLOWING FROM AGENCY CHARACTERISTICS OF “PREPARATORY AND

ELS: ATP SG with cases Rae Gammad 8

ISSUE: 1. Whether or not Orient Air is entitled to commissions.

ELS: ATP SG with cases Rae Gammad 9

ELS: ATP SG with cases Rae Gammad 10

7.4.5. Personal, Fiduciary and Revocable

A contract of agency is generally revocable as it is a personal contract of representation based on

7.5. DISTINGUISHED FROM OTHER SIMILAR CONTRACTS

7.5.1. From Employment Contract

7.5.2. From Contract for a Piece-of-Work

7.5.3. From Broker

ELS: ATP SG with cases Rae Gammad 11

ELS: ATP SG with cases Rae Gammad 12

ELS: ATP SG with cases Rae Gammad 13

Teofilo Purisima’s entitlement to his share in the 5% commission

Dispositive: CA decision reversed.

ELS: ATP SG with cases Rae Gammad 14

ISSUE: WON Saligumba is entitled to the 5% agent’s commission

ELS: ATP SG with cases Rae Gammad 15

ELS: ATP SG with cases Rae Gammad 16

Issue: Whether or not Inland Realty is entitled to th brokerage fees.

ELS: ATP SG with cases Rae Gammad 17

Issue: Whether or not the petitioner was entitled to their commission?

Holding and Ration Decidendi

ELS: ATP SG with cases Rae Gammad 18

Holding and ratio Decidendi

ELS: ATP SG with cases Rae Gammad 19

Holding and Ration Decidendi: Yes.

7.5.4. From Sale

ELS: ATP SG with cases Rae Gammad 20

Agency Contract for a Piece-of-Work

ELS: ATP SG with cases Rae Gammad 21

ELS: ATP SG with cases Rae Gammad 22

8. FORMS AND KINDS OF AGENCY

8.1. HOW AGENCY MAY BE CONSTITUTED (ART. 1869)

8.1.1. From Side of the Principal (Art. 1869)