G.R. No. L-30573 October 29, 1971
Purisima to
VICENTE M. DOMINGO, represented by his heirs, ANTONINA
RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE
JR., SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P.
PURISIMA, intervenor-respondent.
Teofilo Leonin for petitioners-appellants.
Osorio, Osorio & Osorio for respondent-appellee.
Teofilo P. Purisima in his own behalf as intervenor-respondent.
MAKASIAR, J.:
Petitioner-appellant Vicente M. Domingo, now deceased and represented by
his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia,
Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the
reversal of the majority decision dated, March 12, 1969 of the Special
Division of Five of the Court of Appeals affirming the judgment of the trial
court, which sentenced the said Vicente M. Domingo to pay Gregorio M.
Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with
interest on both amounts from the date of the filing of the complaint, to pay
Gregorio Domingo P1,000.00 as moral and exemplary damages and P500.00
as attorney's fees plus costs.
The following facts were found to be established by the majority of the
Special Division of Five of the Court of Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo
granted Gregorio Domingo, a real estate broker, the exclusive agency to sell
his lot No. 883 of Piedad Estate with an area of about 88,477 square meters
at the rate of P2.00 per square meter (or for P176,954.00) with a
commission of 5% on the total price, if the property is sold by Vicente or by
anyone else during the 30-day duration of the agency or if the property is
sold by Vicente within three months from the termination of the agency to
apurchaser to whom it was submitted by Gregorio during the continuance
of the agency with notice to Vicente. The said agency contract was in
triplicate, one copy was given to Vicente, while the original and another copy
were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P.
look for a buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than
the price of P2.00 per square meter (Exhibit "B"). Vicente directed Gregorio
to tell Oscar de Leon to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on
June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by
signing Exhibit "C". Upon demand of Vicente, Oscar de Leon issued to him a
check in the amount of P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his
former offer to pay for the property at P1.20 per square meter in another
letter, Exhibit "D". Subsequently, Vicente asked for an additional amount of
P1,000.00 as earnest money, which Oscar de Leon promised to deliver to
him. Thereafter, Exhibit "C" was amended to the effect that Oscar de Leon
will vacate on or about September 15, 1956 his house and lot at Denver
Street, Quezon City which is part of the purchase price. It was again
amended to the effect that Oscar will vacate his house and lot on December
1, 1956, because his wife was on the family way and Vicente could stay in
lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June
30, 1956 (the year 1957 therein is a mere typographical error) and marked
Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift
or propina the sum of One Thousand Pesos (P1,000.00) for succeeding in
persuading Vicente to sell his lot at P1.20 per square meter or a total in
round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift
of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to
Vicente. Neither did Oscar pay Vicente the additional amount of One
Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale
was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on
August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did
not receive his money from his brother in the United States, for which reason
he was giving up the negotiation including the amount of One Thousand
Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand
Pesos (P1,000.00) given to Gregorio aspropina or gift. When Oscar did not
see him after several weeks, Gregorio sensed something fishy. So, he went
to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect
that Vicente was still committed to pay him 5% commission, if the sale is
consummated within three months after the expiration of the 30-day period
of the exclusive agency in his favor from the execution of the agency
contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente
during the said 30-day period. Vicente grabbed the original of Exhibit "A"
and tore it to pieces. Gregorio held his peace, not wanting to antagonize
Vicente further, because he had still duplicate of Exhibit "A". From his
meeting with Vicente, Gregorio proceeded to the office of the Register of
1
Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed
on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their
house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente
as down payment by Oscar de Leon on the purchase price of Vicente's lot
No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property
to the same buyer, Oscar de Leon and his wife, he demanded in writting
payment of his commission on the sale price of One Hundred Nine Thousand
Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon,
who 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 One Hundred
Four Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's letter,
Exhibit "H", 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.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive
agency contract, is genuine; that Amparo Diaz, the vendee, being the wife
of Oscar de Leon the sale by Vicente of his property is practically a sale to
Oscar de Leon since husband and wife have common or identical interests;
that Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo
Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos
(P1,000.00) as "propina" or gift and not as additional earnest money to be
given to the plaintiff, because Exhibit "66", Vicente's letter addressed to
Oscar de Leon with respect to the additional earnest money, does not appear
to have been answered by Oscar de Leon and therefore there is no writing
or document supporting Oscar de Leon's testimony that he paid an additional
earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery
to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid
by Oscar de Leon to Vicente as earnest money, evidenced by the letter
Exhibit "4"; and that Vicente did not even mention such additional earnest
money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand
of the 5% commission.
The three issues in this appeal are (1) whether the failure on the part of
Gregorio to disclose to Vicente the payment to him by Oscar de Leon of the
amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having
persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per
square meter, so constitutes fraud as to cause a forfeiture of his commission
on the sale price; (2) whether Vicente or Gregorio should be liable directly
to the intervenor Teofilo Purisima for the latter's share in the expected
commission of Gregorio by reason of the sale; and (3) whether the award
of legal interest, moral and exemplary damages, attorney's fees and costs,
was proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and
concurred in by Justice Juan Enriquez did not touch on these issues which
were extensively discussed by Justice Magno Gatmaitan in his dissenting
opinion. However, Justice Esguerra, in his concurring opinion, affirmed that
it does not constitute breach of trust or fraud on the part of the broker and
regarded same as merely part of the whole process of bringing about the
meeting of the minds of the seller and the purchaser and that the
commitment from the prospect buyer that he would give a reward to
Gregorio if he could effect better terms for him from the seller, independent
of his legitimate commission, is not fraudulent, because the principal can
reject the terms offered by the prospective buyer if he believes that such
terms are onerous disadvantageous to him. On the other hand, Justice
Gatmaitan, with whom Justice Antonio Cafizares corner held the view that
such an act on the part of Gregorio was fraudulent and constituted a breach
of trust, which should deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are essentially those
which an agent owes to his principal.1
Consequently, the decisive legal provisions are in found Articles 1891 and
1909 of the New Civil Code.
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may
not be owing to the principal.
Every stipulation exempting the agent from the obligation
to render an account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but
also for negligence, which shall be judged with more less
rigor by the courts, according to whether the agency was or
was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil
Code which provides that:
Art. 1720. Every agent is bound to give an account of his
transaction and to pay to the principal whatever he may
have received by virtue of the agency, even though what he
has received is not due to the principal.
2
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 of the New Civil Code is essentially a reinstatement of Article
1726 of the old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for
negligence, which shall be judged with more or less severity
by the courts, according to whether the agency was
gratuitous or for a price or reward.
The aforecited provisions 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.2
Hence, 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; because the rule is to prevent the possibility
of any wrong, not to remedy or repair an actual damage.3 By taking such
profit or bonus or gift or propina from the vendee, the agent thereby
assumes a position wholly inconsistent with that of being an agent for
hisprincipal, 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.
This Court has been consistent in the rigorous application of Article 1720 of
the old Spanish Civil Code. Thus, for failure to deliver sums of money paid
to him as an insurance agent for the account of his employer as required by
said Article 1720, said insurance agent was convicted estafa.4 An
administrator of an estate was likewise under the same Article 1720 for
failure to render an account of his administration to the heirs unless the
heirs consented thereto or are estopped by having accepted the correctness
of his account previously rendered.5
Because of his responsibility under the aforecited article 1720, an agent is
likewise liable for estafa for failure to deliver to his principal the total amount
collected by him in behalf of his principal and cannot retain the commission
pertaining to him by subtracting the same from his collections.6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his
client all the money and property received by him for his client despite his
attorney's lien.7 The duty of a commission agent to render a full account his
operations to his principal was reiterated in Duhart, etc. vs. Macias.8
The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission
while ignorant of the fact that the latter has been unfaithful,
the principal may recover back the commission paid, since
an agent or broker who has been unfaithful is not entitled to
any compensation.
xxx xxx xxx
In discussing the right of the principal to recover
commissions retained by an unfaithful agent, the court
in Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34
LRA (NS) 1046, said: "It is well settled that the agent is
bound to exercise the utmost good faith in his dealings with
his principal. As Lord Cairns said, this rule "is not a technical
or arbitrary rule. It is a rule founded on the highest and
truest principles, of morality." Parker vs. McKenna (1874)
LR 10,Ch(Eng) 96,118 ... If the agent does not conduct
himself with entire fidelity towards his principal, but is guilty
of taking a secret profit or commission in regard the matter
in which he is employed, he loses his right to compensation
on the ground that he has taken a position wholly
inconsistent with that of agent for his employer, and which
gives his employer, upon discovering it, the right to treat
him so far as compensation, at least, is concerned as if no
agency had existed. This may operate to give to the principal
the benefit of valuable services rendered by the agent, but
the agent has only himself to blame for that result."
3
 xxx xxx xxx
The intent with which the agent took a secret profit has been
held immaterial where the agent has in fact entered into a
relationship inconsistent with his agency, since the law
condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps (1911) 94 NE 260.9
As a general rule, it is a breach of good faith and loyalty to
his principal for an agent, while the agency exists, so to deal
with the subject matter thereof, or with information
acquired during the course of the agency, as to make a profit
out of it for himself in excess of his lawful compensation;
and if he does so he may be held as a trustee and may be
compelled to account to his principal for all profits,
advantages, rights, or privileges acquired by him in such
dealings, whether in performance or in violation of his
duties, and be required to transfer them to his principal
upon being reimbursed for his expenditures for the same,
unless the principal has consented to or ratified the
transaction knowing that benefit or profit would accrue or
had accrued, to the agent, or unless with such knowledge
he has allowed the agent so as to change his condition that
he cannot be put in status quo. The application of this rule
is not affected by the fact that the principal did not suffer
any injury by reason of the agent's dealings or that he in
fact obtained better results; nor is it affected by the fact that
there is a usage or custom to the contrary or that the agency
is a gratuitous one. (Emphasis applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker,
received a gift or propina in the amount of One Thousand Pesos (P1,000.00)
from the prospective buyer Oscar de Leon, without the knowledge and
consent of his principal, herein petitioner-appellant 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 Three Hundred Pesos (P300.00) 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, the broker, herein defendant-appellee
Gregorio Domingo, succeeded in persuading his principal to accept the
counter-offer of the prospective buyer to purchase the property at P1.20 per
square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round
figure for the lot of 88,477 square meters, which is very much lower the the
price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine
Hundred Fifty-Four Pesos (P176,954.00) for said lot originally offered by his
principal.
The duty embodied in Article 1891 of the New Civil Code will not apply if the
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. Neither would the rule apply
if the 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
therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a
middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar
de Leon. He was the broker and agent of said petitioner-appellant only. And
therein petitioner-appellant was not aware of the gift of One Thousand Pesos
(P1,000.00) received by Gregorio Domingo from the prospective buyer;
much less did he consent to his agent's accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the
wife of Oscar de Leon, does not materially alter the situation; because the
transaction, to be valid, must necessarily be with the consent of the husband
Oscar de Leon, who is the administrator of their conjugal assets including
their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were
given as part of and constituted the down payment on, the purchase price
of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in
law and in fact, it was still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee
Gregorio Domingo must forfeit his right to the commission and must return
the part of the commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from
Gregorio Domingo his one-half 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 Domingo received from
Vicente Domingo and Oscar de Leon respectively the amounts of Three
Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total
of One Thousand Three Hundred Pesos (P1,300.00), one-half of the same,
which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio
Domingo to Teofilo Purisima.
Because Gregorio Domingo's clearly unfounded complaint caused Vicente
Domingo mental anguish and serious anxiety as well as wounded feelings,
petitioner-appellant Vicente Domingo should be awarded moral damages in
the reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees
in the reasonable amount of One Thousand Pesos (P1,000.00), considering
that this case has been pending for the last fifteen (15) years from its filing
on October 3, 1956.
4
WHEREFORE, the judgment is hereby rendered, reversing the decision of
the Court of Appeals and directing defendant-appellee Gregorio Domingo:
(1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos
(P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as
attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty
Pesos (P650.00); and (3) to pay the costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando,

Teehankee, Barredo and Villamor, JJ., concur.

5
DOMINGO vs. DOMINGO
GR No. L-30573 | Oct. 29, 1971| Makasiar | Petition for Review of
CA Decision1
Petitioners: Vicente Domingo represented by his heirs
Respondents: Gregorio Domingo [Vicente Domingo’s agent & broker]
Intervenor: Teofilo Purisima [Gregorio Domingo’s sub-agent]
Quick Summary:
Facts: 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.
Held: 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. 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.
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 porspective buyer.
 Oscar submitted a written offer which was very much lower than the
P2 per sq. m. price.
1
Just a guess. My photox of the case does not have the 1st 2 pages.
 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]
6

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 hisprincipal, 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 18912 and 19093 CC
 The modification contained in the first paragraph Article 1891
consists in changing the phrase "to pay" to "to deliver", which latter
2 Every agent is bound to render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may not be owing to the
principal.
Every stipulation exempting the agent from the obligation to render an account shall be void.
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.
3
The agent is responsible not only for fraud, but also for negligence, which shall be judged with more
or less rigor by the courts, according to whether the agency was or was not for a compensation.
7

G.R. No. 192602
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR., Petitioners
vs.
LAND BANK OF THE PHILIPPINES and the REGISTER OF DEEDS FOR
DAVAO CITY, Respondents
DECISION
JARDELEZA, J.:
The Civil Code sets the default rule that an agent may appoint a substitute
if the principal has not prohibited him from doing so. The issue in this
petition for review on certiorari, 1 which seeks to set aside the
Decision2 dated September 22, 2009 and Resolution3 dated May 26, 2010
of the Court of Appeals (CA) in CA-G.R. CV No. 01307, is whether the
mortgage contract executed by the substitute is valid and binding upon the
principal.
I prohibition against Agbisit appointing a substitute. Accordingly, the RTC
Sometime in 1996, Paula Agbisit (Agbisit), mother of petitioner May S.
Villaluz (May), requested the latter to provide her with collateral for a loan.
At the time, Agbisit was the chairperson of Milflores Cooperative and she
needed ₱600,000 to ₱650,000 for the expansion of her backyard cut flowers
business.4 May convinced her husband, Johnny Villaluz (collectively, the
Spouses Villaluz), to allow Agbisit to use their land, located in Calinan, Davao
City and covered by Transfer Certificate of Title (TCT) No. T-202276, as
collateral. 5 On March 25, 1996, the Spouses Villaluz executed a Special
Power of Attorney6 in favor of Agbisit authorizing her to, among others,
"negotiate for the sale mortgage, or other forms of disposition a parcel of
land covered by Transfer Certificate of Title No. T-202276" and "sign in our
behalf all documents relating to the sale, loan or mortgage, or other
disposition of the aforementioned property. "7 The one-page power of
attorney neither specified the conditions under which the special powers
may be exercised nor stated the amounts for which the subject land may be
sold or mortgaged.
On June 19, 1996, Agbisit executed her own Special Power of
Attorney, 8 appointing Milflores Cooperative as attorney-in-fact in obtaining
a loan from and executing a real mortgage in favor of Land Bank of the
Philippines (Land Bank). On June 21, 1996, Milflores Cooperative, in a
representative capacity, executed a Real Estate Mortgage 9 in favor of Land
Bank in consideration of the ₱3,000,000 loan to be extended by the latter.
On June 24, 1996, Milflores Cooperative also executed a Deed of Assignment
of the Produce/Inventory 10 as additional collateral for the loan. Land Bank
partially released one-third of the total loan amount, or ₱995,500, to
Milflores Cooperative on June 25, 1996. On the same day, Agbisit borrowed
the amount of ₱604,750 from Milflores Cooperative. Land Bank released the
remaining loan amount of ₱2,000,500 to Milflores Cooperative on October
4, 1996. 11
Unfortunately, Milflorcs Cooperative was unable to pay its obligations to
Land Bank. Thus, Land Bank filed a petition for extra-judicial foreclosure
sale with the Office of the Clerk of Court of Davao City. Sometime in August,
2003, the Spouses Villaluz learned that an auction sale covering their land
had been set for October 2, 2003. Land Bank won the auction sale as the
sole bidder. 12
The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of
Davao City seeking the annulment of the foreclosure sale. The sole question
presented before the RTC was whether Agbisit could have validly delegated
her authority as attorney-in-fact to Milflores Cooperative. Citing Article 1892
of the Civil Code, the RTC held that the delegation was valid since the Special
Power of Attorney executed by the Spouses Villaluz had no specific
dismissed the complaint. 13
On appeal, the CA affirmed the RTC Decision. In its Decision14 dated
September 22, 2009, the CA similarly found Article 1892 to be squarely
applicable. According to the CA, the rule is that an agent is allowed to
appoint a sub-agent in the absence of an express agreement to the contrary
and that "a scrutiny of the Special Power of Attorney dated March 25, 1996
executed by appellants in favor of [Agbisit] contained no prohibition for the
latter to appoint a sub-agent." 15 Therefore, Agbisit was allowed to appoint
Milflores Cooperative as her sub-agent.
After the CA denied their motion for reconsideration, the Spouses Villaluz
filed this petition for review. They argue that the Real Estate Mortgage was
void because there was no loan yet when the mortgage contract was
executed and that the Special Power of Attorney was extinguished when
Milflores Cooperative assigned its produce and inventory to Land Bank as
additional collateral. 16 In response, Land Bank maintains that the CA and
RTC did not err in applying Article 1892, that the Real Estate Mortgage can
only be extinguished after the amount of the secured loan has been paid,
and that the additional collateral was executed because the deed of
assignment was meant to cover any deficiency in the Real Estate
Mortgage. 17
8
II
Articles 1892 and 1893 of the Civil Code provide the rules regarding the
appointment of a substitute by an agent:
Art. 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and
the person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal
shall be void.
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article,
the principal may furthermore bring an action against the substitute with
respect to the obligations which the latter has contracted under the
substitution.
The law creates a presumption that an agent has the power to appoint a
substitute. The consequence of the presumption is that, upon valid
appointment of a substitute by the agent, there ipso jure arises an agency
relationship between the principal and the substitute, i.e., the substitute
becomes the agent of the principal. As a result, the principal is bound by the
acts of the substitute as if these acts had been performed by the principal's
appointed agent. Concomitantly, the substitute assumes an agent's
obligations to act within the scope of authority, 18to act in accordance with
the principal's instructions, 19 and to carry out the agency, 20 among others.
In order to make the presumption inoperative and relieve himself from its
effects, it is incumbent upon the principal to prohibit the agent from
appointing a substitute.
Although the law presumes that the agent is authorized to appoint a
substitute, it also imposes an obligation upon the agent to exercise this
power conscientiously. To protect the principal, Article 1892 allocates
responsibility to the agent for the acts of the substitute when the agent was
not expressly authorized by the principal to appoint a substitute; and, if so
authorized but a specific person is not designated, the agent appoints a
substitute who is notoriously incompetent or insolvent. In these instances,
the principal has a right of action against both the agent and the substitute
if the latter commits acts prejudicial to the principal.
The case of Escueta v. Lim21illustrates the prevailing rule. In that case, the
father, through a special power of attorney, appointed his daughter as his
attorney-in-fact for the purpose of selling real properties. The daughter then
appointed a substitute or sub-agent to sell the properties. After the
properties were sold, the father sought to nullify the sale effected by the
subagent on the ground that he did not authorize his daughter to appoint a
subagent. We refused to nullify the sale because it is clear from the special
power of attorney executed by the father that the daughter is not prohibited
from appointing a substitute. Applying Article 1892, we held that the
daughter "merely acted within the limits of the authority given by her father,
but she will have to be 'responsible for the acts of the sub-agent,' among
which is precisely the sale of the subject properties in favor of respondent."22
In the present case, the Special Power of Attorney executed by the Spouses
Villaluz contains no restrictive language indicative of an intention to prohibit
Agbisit from appointing a substitute or sub-agent. Thus, we agree with the
findings of the CA and the RTC that Agbisit's appointment of Milflores
Cooperative was valid.
III
Perhaps recognizing the correctness of the CA and the RTC's legal position,
the Spouses Villaluz float a new theory in their petition before us. They now
seek to invalidate the Real Estate Mortgage for want of consideration. Citing
Article 1409(3), which provides that obligations "whose cause or object did
not exist at the time of the transaction" are void ab initio, the Spouses
Villaluz posit that the mortgage was void because the loan was not yet
existent when the mortgage was executed on June 21, 1996. Since the loan
was released only on June 25, 1996, the mortgage executed four days
earlier was without valuable consideration.
Article 1347 provides that "[a]ll things which are not outside the commerce
of men, including future things, may be the object of a contract." Under
Articles 1461 and 1462, things having a potential existence and "future
goods," i.e., those that are yet to be manufactured, raised, or acquired, may
be the objects of contracts of sale.1âwphi1 The narrow interpretation
advocated by the Spouses Villaluz would create a dissonance between
Articles 1347, 1461, and 1462, on the one hand, and Article 1409(3), on
the other. A literal interpretation of the phrase "did not exist at the time of
the transaction" in Article 1409(3) would essentially defeat the clear intent
and purpose of Articles 1347, 1461, and 1462 to allow future things to be
the objects of contracts. To resolve this apparent conflict, Justice J.B.L.
Reyes commented that the phrase "did not exist" should be interpreted as
"could not come into existence" because the object may legally be a future
thing.23 We adopt this interpretation.
9
One of the basic rules in statutory interpretation is that all parts of a statute
are to be harmonized and reconciled so that effect may be given to each
and every part thereof, and that conflicting intentions in the same statute
are never to be supposed or so regarded.24 Thus, in order to give effect to
Articles 134 7, 1461, and 1462, Article 1409(3) must be interpreted as
referring to contracts whose cause or object is impossible of existing at the
time of the transaction. 25
The cause of the disputed Real Estate Mortgage is the loan to be obtained
by Milflores Cooperative. This is clear from the terms of the mortgage
document, which expressly provides that it is being executed in
"consideration of certain loans, advances, credit lines, and other credit
facilities or accommodations obtained from [Land Bank by Milflores
Cooperative] x x x in the principal amount of [₱3,000,000]." 26 The
consideration is certainly not an impossible one because Land Bank was
capable of granting the ₱3,000,000 loan, as it in fact released one-third of
the loan a couple of days later. Although the validity of the Real Estate
Mortgage is dependent upon the validity of the loan,27 what is essential is
that the loan contract intended to be secured is actually perfected, 28 not at
the time of the execution of the mortgage contract vis-a-vis the loan
contract. In loan transactions, it is customary for the lender to require the
borrower to execute the security contracts prior to initial drawdown. This is
understandable since a prudent lender would not want to release its funds
without the security agreements in place. On the other hand, the borrower
would not be prejudiced by mere execution of the security contract, because
unless the loan proceeds are delivered, the obligations under the security
contract will not arise.29 In other words, the security contract-in this case,
the Real Estate Mortgage-is conditioned upon the release of the loan
amount. This suspensive condition was satisfied when Land Bank released
the first tranche of the ₱3,000,000 loan to Milflores Cooperative on June 25,
1996, which consequently gave rise to the Spouses Villaluz's obligations
under the Real Estate Mortgage.1awp++i1
IV
The Spouses Villaluz claim that the Special Power of Attorney they issued
was mooted by the execution of the Deed of Assignment of the
Produce/Inventory by Milflores Cooperative in favor of Land Bank. Their
theory is that the additional security on the same loan extinguished the
agency because the Deed of Assignment "served as payment of the loan of
the [Milflores] Cooperative."30
The assignment was for the express purpose of "securing the payment of
the Line/Loan, interest and charges thereon."31 Nowhere in the deed can it
be reasonably deduced that the collaterals assigned by Milflores Cooperative
were intended to substitute the payment of sum of money under the loan.
It was an accessory obligation to secure the principal loan obligation.
The assignment, being intended to be a mere security rather than a
satisfaction of indebtedness, is not a elation in payment under Article
124532 and did not extinguish the loan obligation. 33 "Dation in payment
extinguishes the obligation to the extent of the value of the thing delivered,
either as agreed upon by the parties or as may be proved, unless the parties
by agreement-express or implied, or by their silence-consider the thing as
equivalent to the obligation, in which case the obligation is totally
extinguished."34 As stated in the second condition of the Deed of
Assignment, the "Assignment shall in no way release the ASSIGNOR from
liability to pay the Line/Loan and other obligations, except only up to the
extent of any amount actually collected and paid to ASSIGNEE by virtue of
or under this Assignment."35 Clearly, the assignment was not intended to
substitute the payment of sums of money. It is the delivery of cash
proceeds, not the execution of the Deed of Assignment, that is considered
as payment. Absent any proof of delivery of such proceeds to Land Bank,
the Spouses Villaluz' s claim of payment is without basis.
Neither could the assignment have constituted payment by cession under
Article 125536 for the plain and simple reason that there was only one
creditor, Land Bank. Article 1255 contemplates the existence of two or more
creditors and involves the assignment of all the debtor's property. 37
The Spouses Villaluz understandably feel shorthanded because their
property was foreclosed by reason of another person's inability to pay.
However, they were not coerced to grant a special power of attorney in favor
of Agbisit. Nor were they prohibited from prescribing conditions on how such
power may be exercised. Absent such express limitations, the law
recognizes Land Bank's right to rely on the terms of the power of attorney
as written.38 "Courts cannot follow one every step of his life and extricate
him from bad bargains, protect him from unwise investments, relieve him
from one-sided contracts, or annul the effects of [unwise] acts."39 The
remedy afforded by the Civil Code to the Spouses Villaluz is to proceed
against the agent and the substitute in accordance with A1iicles 1892 and
1893.
WHEREFORE, the petition is DENIED. The Decision dated September 22,
2009 and Resolution dated May 26, 2010 of the Court of Appeals in CA-G.R.
CV No. 01307 are AFFIRMED.
SO ORDERED.
10
SPOUSES MAY S. VILLALUZ AND JOHNNY VILLALUZ, JR. vs. LAND
BANK OF THE PHILIPPINES AND THE REGISTER OF DEEDS FOR
DAVAO CITY
G.R. No. 192602, January 18, 2017, J. Jardeleza
An agent may appoint a substitute if the principal has not expressly
prohibited him from doing so.
Facts:
Paula Agbisit, the mother of May Villaluz, requested the latter to
provide her a collateral for a loan. May and her husband Johnny agreed to
allow Agbisit to use their property in Davao as collateral for a loan. For such
purpose, they executed an SPA in favor of Agbisit. Notably, the SPA did not
expressly prohibit Agbisit from appointing a substitute.
Agbisit later executed an SPA, appoint Milflores Cooperative as
attorney-in-fact in obtaining a loan from Land Bank. Milflores Cooperative
then executed a Real Estate Mortgage in favor of Land Bank in consideration
for a loan.
performed by the principal's appointed agent. Concomitantly, the substitute
assumes an agent's obligations to act within the scope of authority, to act
in accordance with the principal's instructions, and to carry out the
agency, among others. In order to make the presumption inoperative and
relieve himself from its effects, it is incumbent upon the principal to
expressly prohibit the agent from appointing a substitute.
Although the law presumes that the agent is authorized to appoint
a substitute, it also imposes an obligation upon the agent to exercise this
power conscientiously. To protect the principal, Article 1892 allocates
responsibility to the agent for the acts of the substitute when the agent was
not expressly authorized by the principal to appoint a substitute; and, if so
authorized but a specific person is not designated, the agent appoints a
substitute who is notoriously incompetent or insolvent. In these instances,
the principal has a right of action against both the agent and the substitute
if the latter commits acts prejudicial to the principal.
In this case, the SPA executed by the Spouses Villaluz contains no
restrictive language indicative of an intention to prohibit Agbisit from
appointing a substitute or sub-agent.

Milflores Cooperative was not able to pay the loan to Land Bank.
Hence, the latter foreclosed the property. Land Bank won the auction sale
of the property as the highest bidder.

The Spouses Villaluz filed a complaint for annulment of the

foreclosure sale, claiming that Agbisit could no have validly delegated her
authority as attorney-in-fact to Milflores Cooperative. The RTC, however,
ruled in favor of Land Bank and held that the delegation of Agbisit to Milflores
Cooperative was valid because the SPA executed by the Spouses Villaluz
had no specific prohibition againt Agbisit appointing a substitute. The CA
affirmed the RTC’s ruling.

Issue:

Whether the mortgage contract executed by the substitute (Milflores

Cooperative) is valid and binding upon the principal (Spouses Villaluz).

Ruling:

The mortgage contract executed by the substitute (Milflores

Cooperative) is valid and binding upon the principal (Spouses Villaluz).

The law creates a presumption that an agent has the power to

appoint a substitute. The consequence of the presumption is that, upon valid
appointment of a substitute by the agent, there ipso jure arises an agency
relationship between the principal and the substitute. As a result, the
principal is bound by the acts of the substitute as if these acts had been
11
G.R. No. 167552 April 23, 2007
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,
vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision 1 of the
Court of Appeals dated 10 August 2004 and its Resolution 2 dated 17 March
2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial Technologies,
Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution
affirmed the Order3 dated 29 January 2002 rendered by Judge Antonio T.
Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a
party defendant in Civil Case No. CEB-19672.
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution of
various European industrial equipment for customers here in the Philippines.
It has as one of its customers Impact Systems Sales ("Impact Systems")
which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN).
Respondent EDWIN is the sales manager of Impact Systems and was
impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various
products allegedly amounting to ninety-one thousand three hundred thirty-
eight (₱91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at ₱250,000.00 with respondents
making a down payment of fifty thousand pesos (₱50,000.00).4 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, the pertinent part of which
states:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo
Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (₱365,000.00) PESOS as payment for the purchase of
one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and
CONVEY unto the ASSIGNEE6 the said receivables from Toledo
Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (₱365,000.00) PESOS which receivables the ASSIGNOR
is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.7
Following the execution of the Deed of Assignment, petitioner delivered to
respondents the sludge pump as shown by Invoice No. 12034 dated 30 June
1995.8
Allegedly unbeknownst to petitioner, respondents, despite the existence of
the Deed of Assignment, proceeded to collect from Toledo Power Company
the amount of ₱365,135.29 as evidenced by Check Voucher No.
09339prepared by said power company and an official receipt dated 15
August 1995 issued by Impact Systems.10Alarmed 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 ₱295,000.00 excluding interests and attorney’s
fees.11 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 before
the Regional Trial Court of Cebu City.12
On 8 January 1997, the trial court granted petitioner’s prayer for the
issuance of writ of preliminary attachment.13
On 25 June 1997, respondent EDWIN filed his Answer 14 wherein he admitted
petitioner’s allegations with respect to the sale transactions entered into by
Impact Systems and petitioner between January and April 1995.15 He,
however, disputed the total amount of Impact Systems’ indebtedness to
petitioner which, according to him, amounted to only ₱220,000.00.16
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.
In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of
petitioner’s Complaint stating –
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident
of Cebu City. He is the proprietor of a single proprietorship business
known as Impact Systems Sales ("Impact Systems" for brevity),
12
 with office located at 46-A del Rosario Street, Cebu City, where he
may be served summons and other processes of the Honorable
Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a
resident of Cebu City. He is the Sales Manager of Impact Systems
and is sued in this action in such capacity.17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in
Default with Motion for Summary Judgment. The trial court granted
petitioner’s motion to declare respondent ERWIN in default "for his failure
to answer within the prescribed period despite the opportunity
granted"18 but it denied petitioner’s motion for summary judgment in its
Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001.19 However, the conduct of the pre-trial conference was
deferred pending the resolution by the trial court of the special and
affirmative defenses raised by respondent EDWIN.20
After the filing of respondent EDWIN’s Memorandum21 in support of his
special and affirmative defenses and petitioner’s opposition22 thereto, the
trial court rendered its assailed Order dated 29 January 2002 dropping
respondent EDWIN as a party defendant in this case. According to the trial
court –
A study of Annex "G" to the complaint shows that in the Deed of Assignment,
defendant Edwin B. Cuizon acted in behalf of or represented [Impact]
Systems Sales; that [Impact] Systems Sale is a single proprietorship entity
and the complaint shows that defendant Erwin H. Cuizon is the proprietor;
that plaintiff corporation is represented by its general manager Alberto de
Jesus in the contract which is dated June 28, 1995. A study of Annex "H" to
the complaint reveals that [Impact] Systems Sales which is owned solely by
defendant Erwin H. Cuizon, made a down payment of ₱50,000.00 that Annex
"H" is dated June 30, 1995 or two days after the execution of Annex "G",
thereby showing that [Impact] Systems Sales ratified the act of Edwin B.
Cuizon; the records further show that plaintiff knew that [Impact] Systems
Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it
accepted the down payment of ₱50,000.00. Plaintiff, therefore, cannot say
that it was deceived by defendant Edwin B. Cuizon, since in the instant case
the principal has ratified the act of its agent and plaintiff knew about said
ratification. Plaintiff could not say that the subject contract was entered into
by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales
made a down payment of ₱50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon
be dropped as party defendant.23
Aggrieved by the adverse ruling of the trial court, petitioner brought the
matter to the Court of Appeals which, however, affirmed the 29 January
2002 Order of the court a quo. The dispositive portion of the now assailed
Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the
conclusions reached by the public respondent in his Order dated January 29,
2002, it is hereby AFFIRMED.24
Petitioner’s motion for reconsideration was denied by the appellate court in
its Resolution promulgated on 17 March 2005. Hence, the present petition
raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT
RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT
SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE
HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE
PARTICIPATE IN THE PERPETUATION OF A FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil
Code which states:
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.
Petitioner contends that the Court of Appeals failed to appreciate the effect
of ERWIN’s act of collecting the receivables from the Toledo Power
Corporation notwithstanding the existence of the Deed of Assignment signed
by EDWIN on behalf of Impact Systems. While said collection did not revoke
the agency relations of respondents, petitioner insists that ERWIN’s action
repudiated EDWIN’s power to sign the Deed of Assignment. As EDWIN did
not sufficiently notify it of the extent of his powers as an agent, petitioner
claims that he should be made personally liable for the obligations of his
principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of
respondents who induced it into selling the one unit of sludge pump to
Impact Systems and signing the Deed of Assignment. Petitioner directs the
attention of this Court to the fact that respondents are bound not only by
their principal and agent relationship but are in fact full-blooded brothers
whose successive contravening acts bore the obvious signs of conspiracy to
defraud petitioner.27
13
In his Comment,28 respondent EDWIN again posits the argument that he is
not a real party in interest in this case and it was proper for the trial court
to have him dropped as a defendant. He insists that he was a mere agent
of Impact Systems which is owned by ERWIN and that his status as such is
known even to petitioner as it is alleged in the Complaint that he is being
sued in his capacity as the sales manager of the said business venture.
Likewise, respondent EDWIN points to the Deed of Assignment which clearly
states that he was acting as a representative of Impact Systems in said
transaction.
We do not find merit in the petition.
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.29 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 like selling, buying, manufacturing, and transporting.30 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.31 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.32 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.33
The elements of the contract of agency are: (1) 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 agent acts as a
representative and not for himself; (4) the agent acts within the scope of
his authority.34
In this case, the parties do not dispute the existence of the agency
relationship between respondents ERWIN as principal and EDWIN as agent.
The only cause of the present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of Assignment thereby
binding himself personally to pay the obligations to petitioner. Petitioner
firmly believes that respondent EDWIN acted beyond the authority granted
by his principal and he should therefore bear the effect of his deed pursuant
to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such,
is not personally liable to the party with whom he contracts. The same
provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority.
In the last instance, the agent can be held liable if he does not give the third
party sufficient notice of his powers. We hold that respondent EDWIN does
not fall within any of the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed
thereon as the sales manager of Impact Systems. As discussed elsewhere,
the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a
general agent or manager; such a position presupposes a degree of
confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental
or appurtenant to the business entrusted to his care and management. In
the absence of an agreement to the contrary, a managing agent may enter
into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. x x
x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted
well-within his authority when he signed the Deed of Assignment. To recall,
petitioner refused to deliver the one unit of sludge pump unless it received,
in full, the payment for Impact Systems’ indebtedness.36 We may very well
assume that Impact Systems desperately needed the sludge pump for its
business since after it paid the amount of fifty thousand pesos (₱50,000.00)
as down payment on 3 March 1995,37 it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of
its receivables from Toledo Power Company on 28 June 1995.38 The
significant amount of time spent on the negotiation for the sale of the sludge
pump underscores Impact Systems’ perseverance to get hold of the said
equipment. There is, therefore, no doubt in our mind that respondent
EDWIN’s participation in the Deed of Assignment was "reasonably
necessary" or was required in order for him to protect the business of his
principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary
relation with his principal.
We likewise take note of the fact that in this case, petitioner is seeking to
recover both from respondents ERWIN, the principal, and EDWIN, the agent.
It is well to state here that Article 1897 of the New Civil Code upon which
petitioner anchors its claim against respondent EDWIN "does not hold that
in case of excess of authority, both the agent and the principal are liable to
the other contracting party."39 To reiterate, the first part of Article 1897
declares that the principal is liable in cases when the agent acted within the
14
bounds of his authority. Under this, the agent is completely absolved of any
liability. The second part of the said provision presents the situations when
the agent himself becomes liable to a third party when he expressly binds
himself or he exceeds the limits of his authority without giving notice of his
powers to the third person. However, it must be pointed out that in case of
excess of authority by the agent, like what petitioner claims exists here, the
law does not say that a third person can recover from both the principal and
the agent.40

As we declare that respondent EDWIN 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."41 In this respect, we sustain his exclusion as a defendant
in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the

Decision dated 10 August 2004 and Resolution dated 17 March 2005 of the
Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29
January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch
8, Cebu City, for the continuation of the proceedings against respondent
Erwin Cuizon.

SO ORDERED.

15
Eurotech Industrial Technologies, Inc. v. Edwin Cuizon and Erwin
Cuizon
G.R. No. 167552 April 23, 2007
Chico-Nazario, J.
FACTS:
 Eurotech is engaged in the business of importation and distribution of
various European industrial equipment. It has as one of its customers
Impact Systems Sales which is a sole proprietorship owned by Erwin
Cuizon.
 Eurotech sold to Impact Systems various products allegedly amounting to
P91,338.00. Cuizons sought to buy from Eurotech 1 unit of sludge pump
valued at P250,000.00 with Cuizons making a down payment of
P50,000.00. When the sludge pump arrived from the United Kingdom,
Eurotech refused to deliver the same to Cuizons without their having fully
settled their indebtedness to Eurotech. Thus, Edwin Cuizon and Alberto de
Jesus, general manager of Eurotech, executed a Deed of Assignment of
receivables in favor of Eurotech.
 Cuizons, despite the existence of the Deed of Assignment, proceeded to
collect from Toledo Power Company the amount of P365,135.29. Eurotech
made several demands upon Cuizons to pay their obligations. As a result,
Cuizons were able to make partial payments to Eurotech. Cuizons’ total
obligations stood at P295,000.00 excluding interests and attorney’s fees.
 Edwin Cuizon 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 Eurotech and the latter was
very much aware of this fact.
ISSUE: WON Edwin exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to
Eurotech
HELD: No.
 Edwin insists that he was a mere agent of Impact Systems which is owned
by Erwin and that his status as such is known even to Eurotech as it is
alleged in the Complaint that he is being sued in his capacity as the sales
manager of the said business venture. Likewise, Edwin points to the Deed
of Assignment which clearly states that he was acting as a representative
of Impact Systems in said transaction.
 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 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. 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.
 elements of the contract of agency: (1) 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 agent acts as a
representative and not for himself; (4) the agent acts within the scope of
his authority
 An agent, who acts as such, is not personally liable to the party with whom
he contracts. There are 2 instances when an agent becomes personally
liable to a third person. The first is when he expressly binds himself to the
obligation and the second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. Edwin does not fall within any of the
exceptions contained in Art. 1897.
 In the absence of an agreement to the contrary, a managing agent may
enter into any contracts that he deems reasonably necessary or requisite
for the protection of the interests of his principal entrusted to his
management.
 Edwin Cuizon acted well-within his authority when he signed the Deed of
Assignment. Eurotech refused to deliver the 1 unit of sludge pump unless
it received, in full, the payment for Impact Systems’ indebtedness. Impact
Systems desperately needed the sludge pump for its business since after
it paid the amount of P50,000.00 as downpayment it still persisted in
negotiating with Eurotech which culminated in the execution of the Deed
of Assignment of its receivables from Toledo Power Company. The
significant amount of time spent on the negotiation for the sale of the
sludge pump underscores Impact Systems’ perseverance to get hold of
the said equipment. Edwin’s participation in the Deed of Assignment was
“reasonably necessary” or was required in order for him to protect the
business of his principal.
16
G.R. No. 174610 July 14, 2009
SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK
RONAS, Petitioners,
vs.
SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing
business under the style PAPA TRANSPORT SERVICES, Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari, under Rule 45 of the
Revised Rules of Court, is the Decision1dated 22 June 2006 and
Resolution2 dated 7 September 2006 of the Court of Appeals in CA-G.R. CV
No. 74987. The appellate court affirmed with modification the
Decision3 dated 22 April 2002 of the Regional Trial Court (RTC), Branch 46,
of Manila, in Civil Case No. 98-89047, granting the Complaint for Sum of
Money of herein respondent Sprint Transport Services, Inc. (Sprint) after
the alleged failure of herein petitioner Soriamont Steamship Agencies, Inc.
(Soriamont) to return the chassis units it leased from Sprint and pay the
accumulated rentals for the same.
The following are the factual and procedural antecedents:
Soriamont is a domestic corporation providing services as a receiving agent
for line load contractor vessels. Patrick Ronas (Ronas) is its general
manager.
On the other hand, Sprint is a domestic corporation engaged in transport
services. Its co-respondent Ricardo Cruz Papa (Papa) is engaged in the
trucking business under the business name "Papa Transport Services"
(PTS).
Sprint filed with the RTC on 2 June 1998 a Complaint 4 for Sum of Money
against Soriamont and Ronas, docketed as Civil Case No. 98-89047. Sprint
alleged in its Complaint that: (a) on 17 December 1993, it entered into a
lease agreement, denominated as Equipment Lease Agreement (ELA) with
Soriamont, wherein the former agreed to lease a number of chassis units to
the latter for the transport of container vans; (b) with authorization letters
dated 19 June 1996 issued by Ronas on behalf of Soriamont, PTS and
another trucker, Rebson Trucking, were able to withdraw on 22 and 25 June
1996, from the container yard of Sprint, two chassis units (subject
equipment),5evidenced by Equipment Interchange Receipts No. 14215 and
No. 14222; (c) Soriamont and Ronas failed to pay rental fees for the subject
equipment since 15 January 1997; (d) Sprint was subsequently informed by
Ronas, through a letter dated 17 June 1997, of the purported loss of the
subject equipment sometime in June 1997; and (e) despite demands,
Soriamont and Ronas failed to pay the rental fees for the subject equipment,
and to replace or return the same to Sprint.
Sprint, thus, prayed for the RTC to render judgment:
1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and
severally, actual damages, in the amount of Five Hundred Thirty-
Seven Thousand Eight Hundred Pesos (₱537,800.00) representing
unpaid rentals and the replacement cost for the lost chassis units.
2. Ordering [Soriamont and Ronas], jointly and severally, to pay
[Sprint] the amount of Fifty-Three Thousand Five Hundred Four
Pesos and Forty-Two centavos (₱53,504.42) as interest and
penalties accrued as of March 31, 1998 and until full satisfaction
thereof.
3. Ordering [Soriamont and Ronas], jointly and severally, to pay
[Sprint] the amount equivalent to twenty-five percent (25%) of the
total amount claimed for and as attorney’s fees plus Two Thousand
Pesos (₱2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6
Soriamont and Ronas filed with the RTC their Answer with Compulsory
Counterclaim.7 Soriamont admitted therein to having a lease agreement
with Sprint, but only for the period 21 October 1993 to 21 January 1994. It
denied entering into an ELA with respondent Sprint on 17 December 1993
as alleged in the Complaint. Soriamont further argued that it was not a
party-in-interest in Civil Case No. 98-89047, since it was PTS and Rebson
Trucking that withdrew the subject equipment from the container yard of
Sprint. Ronas was likewise not a party-in-interest in the case since his
actions, assailed in the Complaint, were executed as part of his regular
functions as an officer of Soriamont.
Consistent with their stance, Soriamont and Ronas filed a Third-Party
Complaint8 against Papa, who was doing business under the name PTS.
Soriamont and Ronas averred in their Third-Party Complaint that it was PTS
and Rebson Trucking that withdrew the subject equipments from the
container yard of Sprint, and failed to return the same. Since Papa failed to
file an answer to the Third-Party Complaint, he was declared by the RTC to
be in default.9
17
After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22
April 2002, finding Soriamont liable for the claim of Sprint, while absolving
Ronas and Papa from any liability. According to the RTC, Soriamont
authorized PTS to withdraw the subject equipment. The dispositive portion
of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered in favor of [herein respondent]
Sprint Transport Services, Inc. and against [herein petitioner] Soriamont
Steamship Agencies, Inc., ordering the latter to pay the former the
following:
 Three hundred twenty thousand pesos (₱320,000) representing the
value of the two chassis units with interest at the legal rate from the
filing of the complaint;
 Two hundred seventy thousand one hundred twenty four & 42/100
pesos (₱270,124.42) representing unpaid rentals with interest at
the legal rate from the filing of the complaint;
 ₱20,000.00 as attorney’s fees.
The rate of interest shall be increased to 12% per annum once this decision
becomes final and executory.
Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are
absolved from liability.10
Soriamont filed an appeal of the foregoing RTC Decision to the Court of
Appeals, docketed as CA-G.R. CV No. 74987.
The Court of Appeals, in its Decision dated 22 June 2006, found the following
facts to be borne out by the records: (1) Sprint and Soriamont entered into
an ELA whereby the former leased chassis units to the latter for the specified
daily rates. The ELA covered the period 21 October 1993 to 21 January 1994,
but it contained an "automatic" renewal clause; (2) on 22 and 25 June 1996,
Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis 2-
07 with Plate No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-
55 with Plate No. NUP-533 Serial MOTZ-160080, from the container yard of
Sprint; (3) Soriamont authorized the withdrawal by PTS and Rebson
Trucking of the subject equipment from the container yard of Sprint; and
(4) the subject pieces of equipment were never returned to Sprint. In a
letter to Sprint dated 19 June 1997, Soriamont relayed that it was still trying
to locate the subject equipment, and requested the former to refrain from
releasing more equipment to respondent PTS and Rebson Trucking.
Hence, the Court of Appeals decreed:
WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court
is affirmed, subject to the modification that the specific rate of legal interest
per annum on both the ₱320,000.00 representing the value of the two
chassis units, and on the ₱270,124.42 representing the unpaid rentals, is
six percent (6%), to be increased to twelve percent (12%) from the finality
of this Decision until its full satisfaction.11
In a Resolution dated 7 September 2006, the Court of Appeals denied the
Motion for Reconsideration of Soriamont for failing to present any cogent
and substantial matter that would warrant a reversal or modification of its
earlier Decision.
Aggrieved, Soriamont12 filed the present Petition for Review with the
following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
LIMITING AS SOLE ISSUE FOR RESOLUTION OF WHETHER OR NOT AN
AGENCY RELATIONSHIP EXISTED BETWEEN PRIVATE RESPONDENT SPRINT
TRANSPORT AND HEREIN PETITIONERS SORIAMONT STEAMSHIP
AGENCIES AND PRIVATE RESPONDENT PAPA TRUCKING BUT TOTALLY
DISREGARDING AND FAILING TO RULE ON THE LIABILITY OF PRIVATE
RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY OF
PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT
OF THE THIRD-PARTY COMPLAINT WAS TOTALLY IGNORED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING HEREIN PETITIONERS STEAMSHIP AGENCIES SOLELY LIABLE.
EVIDENCE ON RECORD SHOW THAT IT WAS PRIVATE RESPONDENT PAPA
TRUCKING WHICH WITHDREW THE SUBJECT CHASSIS. PRIVATE
RESPONDENT PAPA TRUCKING WAS THE LAST IN POSSESSION OF THE
SAID SUBJECT CHASSIS AND IT SHOULD BE HELD SOLELY LIABLE FOR THE
LOSS THEREOF;
III.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN
IT IGNORED A MATERIAL INCONSISTENCY IN THE TESTIMONY OF PRIVATE
RESPONDENT SPRINT TRANSPORT’S WITNESS, MR. ENRICO G. VALENCIA.
THE TESTIMONY OF MR. VALENCIA WAS ERRONEOUSLY MADE THE BASIS
FOR HOLDING HEREIN PETITIONERS LIABLE FOR THE LOSS OF THE
SUBJECT CHASSIS.
18
We find the Petition to be without merit.
The Court of Appeals and the RTC sustained the contention of Sprint that
PTS was authorized by Soriamont to secure possession of the subject
equipment from Sprint, pursuant to the existing ELA between Soriamont and
Sprint. The authorization issued by Soriamont to PTS established an agency
relationship, with Soriamont as the principal and PTS as an agent.
Resultantly, the actions taken by PTS as regards the subject equipment were
binding on Soriamont, making the latter liable to Sprint for the unpaid
rentals for the use, and damages for the subsequent loss, of the subject
equipment.
Soriamont anchors its defense on its denial that it issued an authorization
to PTS to withdraw the subject equipment from the container yard of Sprint.
Although Soriamont admits that the authorization letter dated 19 June 1996
was under its letterhead, said letter was actually meant for and sent to
Harman Foods as shipper. It was then Harman Foods that tasked PTS to
withdraw the subject equipment from Sprint. Soriamont insists that the
Court of Appeals merely presumed that an agency relationship existed
between Soriamont and PTS, since there was nothing in the records to
evidence the same. Meanwhile, there is undisputed evidence that it was PTS
that withdrew and was last in possession of the subject equipment.
Soriamont further calls attention to the testimony of Enrico Valencia
(Valencia), a witness for Sprint, actually supporting the position of
Soriamont that PTS did not present any authorization from Soriamont when
it withdrew the subject equipment from the container yard of Sprint.
Assuming, for the sake of argument that an agency relationship did exist
between Soriamont and PTS, the latter should not have been exonerated
from any liability. The acts of PTS that resulted in the loss of the subject
equipment were beyond the scope of its authority as supposed agent of
Soriamont. Soriamont never ratified, expressly or impliedly, such acts of
PTS.
Soriamont is essentially challenging the sufficiency of the evidence on which
the Court of Appeals based its conclusion that PTS withdrew the subject
equipment from the container yard of Sprint as an agent of Soriamont. In
effect, Soriamont is raising questions of fact, the resolution of which requires
us to re-examine and re-evaluate the evidence presented by the parties
below.
Basic is the rule in this jurisdiction that only questions of law may be raised
in a petition for review under Rule 45 of the Revised Rules of Court. The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing errors of law, the findings of fact of the
appellate court being conclusive. We have emphatically declared that it is
not the function of this Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that may have
been committed by the lower court.13
These questions of fact were threshed out and decided by the trial court,
which had the firsthand opportunity to hear the parties’ conflicting claims
and to carefully weigh their respective sets of evidence. The findings of the
trial court were subsequently affirmed by the Court of Appeals. Where the
factual findings of both the trial court and the Court of Appeals coincide, the
same are binding on this Court. We stress that, subject to some exceptional
instances, only questions of law – not questions of fact – may be raised
before this Court in a petition for review under Rule 45 of the Revised Rules
of Court.14
Given that Soriamont is precisely asserting in the instant Petition that the
findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted by the evidence on record,15 we
accommodate Soriamont by going over the same evidence considered by
the Court of Appeals and the RTC.
In Republic v. Court of Appeals,16 we explained that:
In civil cases, the party having the burden of proof must establish his case
by a preponderance of evidence. Stated differently, the general rule in civil
cases is that a party having the burden of proof of an essential fact must
produce a preponderance of evidence thereon (I Moore on Facts, 4, cited in
Vicente J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII,
Part II, p. 542, 1973 Edition). By preponderance of evidence is meant simply
evidence which is of greater weight, or more convincing than that which is
offered in opposition to it (32 C.J.S., 1051), The term 'preponderance of
evidence' means the weight, credit and value of the aggregate evidence on
either side and is usually considered to be synonymous with the terms
`greater weight of evidence' or 'greater weight, of the credible evidence.'
Preponderance of the evidence is a phrase which, in the last analysis, means
probability of the truth. Preponderance of the evidence means evidence
which is more convincing to the court as worthy of belief than that which is
offered in opposition thereto. x x x." (20 Am. Jur., 1100-1101)
After a review of the evidence on record, we rule that the preponderance of
evidence indeed supports the existence of an agency relationship between
Soriamont and PTS.
It is true that a person dealing with an agent is not authorized, under any
circumstances, to trust blindly the agent’s statements as to the extent of his
powers. Such person must not act negligently but must use reasonable
diligence and prudence to ascertain whether the agent acts within the scope
of his authority. The settled rule is that persons dealing with an assumed
19
agent are bound at their peril; and if they would hold the principal liable, by either party in accordance with paragraph no. 23 hereof. However, in this
they must ascertain not only the fact of agency, but also the nature and case, termination will take effect immediately.18
extent of authority, and in case either is controverted, the burden of proof
is upon them to prove it. Sprint has successfully discharged this burden. There being no showing that the ELA was terminated by either party, then
it was being automatically renewed in accordance with the afore-quoted
The ELA executed on 17 December 1993 between Sprint, as lessor, and paragraph 24.
Soriamont, as lessee, of chassis units, explicitly authorized the latter to
appoint a representative who shall withdraw and return the leased chassis It was, therefore, totally regular and in conformity with the ELA that PTS
units to Sprint, to wit: and Rebson Trucking should appear before Sprint in June 1996 with
authorization letters, issued by Soriamont, for the withdrawal of the subject
EQUIPMENT LEASE AGREEMENT equipment.19On the witness stand, Valencia testified, as the operations
between manager of Sprint, as follows:
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And Atty. Porciuncula:
SORIAMONT STEAMSHIP AGENCIES, INC.
(LESSEE)
Q. Mr. Witness, as operation manager, are you aware of any
TERMS and CONDITIONS
transactions between Sprint Transport Services, Inc. and the
defendant Soriamont Steamship Agencies, Inc.?
xxxx
A. Yes, Sir.
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document
accomplished every time a chassis is withdrawn and returned to a
Q. What transactions are these, Mr. Witness?
designated depot. The EIR relates the condition of the chassis at the point
of on-hire/off-hire duly acknowledged by the LESSOR, Property Custodian
and the LESSEE’S authorized representative. A. They got from us chassis, Sir.

xxxx Court:

5. Chassis Withdrawal/Return Slip as mentioned herein is that document Q. Who among the two, who withdrew?
where the LESSEE authorizes his representative to withdraw/return the
chassis on his behalf. Only persons with a duly accomplished and signed A. The representative of Soriamont Steamship Agencies, Inc., Your
authorization slip shall be entertained by the LESSOR for purposes of Honor.
withdrawal/return of the chassis. The signatory in the Withdrawal/Return
Slip has to be the signatory of the corresponding Lease Agreement or the Atty. Porciuncula:
LESSEE’s duly authorized representative(s).17 (Emphases ours.)

Q. And when were these chassis withdrawn, Mr. Witness?

Soriamont, though, avers that the aforequoted ELA was only for 21 October
1993 to 21 January 1994, and no longer in effect at the time the subject
pieces of equipment were reportedly withdrawn and lost by PTS. This A. June 1996, Sir.
contention of Soriamont is without merit, given that the same ELA expressly
provides for the "automatic" renewal thereof in paragraph 24, which reads: Q. Will you kindly tell this Honorable Court what do you mean by
withdrawing the chassis units from your container yard?
There shall be an automatic renewal of the contract subject to the same
terms and conditions as stipulated in the original contract unless terminated Witness:

20
Before they can withdraw the chassis they have to present Mark them.
withdrawal authority, Sir.
xxxx
Atty. Porciuncula:
Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and
And what is this withdrawal authority? 2-55?

A. This is to prove that they are authorizing their representative to A. The representative of Soriamont Steamship Agencies, Inc., the
get from us a chassis unit. Papa Trucking, Sir.

Q. And who is this authorization send to you, Mr. Witness? Q. And are these trucking companies authorized to withdraw these
chassis units?
A. Sometime a representative bring to our office the letter or the
authorization or sometime thru fax, Sir. A. Yes, Sir, it was stated in the withdrawal authority.

Q. In this particular incident, Mr. Witness, how was it sent? Atty. Porciuncula:

A. By fax, Sir. Q. Showing you again Mr. Witness, this authorization previously
marked as Exhibits JJ and KK, could you please go over the same
Q. Is this standard operating procedure of Sprint Transport Services, and tell this Honorable Court where states there that the trucking
Inc.? companies which you mentioned awhile ago authorized to withdraw?

A. Yes, Sir, if the trucking could not bring to our office the original A. Yes, Sir, it is stated in this withdrawal authority.
copy of the authorization they have to send us thru fax, but the
original copy of the authorization will be followed. Atty. Porciuncula:

Atty. Porciuncula: At this juncture, Your Honor, may we request that the Papa trucking
and Rebson trucking identified by the witness be bracketed and
Q. Mr. Witness, I am showing to you two documents of Soriamont mark as our Exhibits JJ-1 and KK-1, Your Honor.
Steamship Agencies, Inc. letter head with the headings
Authorization, are these the same withdrawal authority that you Court:
mentioned awhile ago?
Mark them. Are these documents have dates?
A. Yes, Sir.
Atty. Porciuncula:
Atty. Porciuncula:
Yes, Your Honor, both documents are dated June 19, 1996.
Your Honor, at this point may we request that these documents
identified by the witness be marked as Exhibits JJ and KK, Your Q. Mr. Witness, after this what happened next?
Honor.
A. After they presented to us the withdrawal authority, we called up
Court: Soriamont Steamship Agencies, Inc. to verify whether the one sent

21
 to us through truck and the one sent to us through fax are one and
the same.
Q. Then what happened next, Mr. Witness?
A. Then after the verification whether it is true, then we asked them
to choose the chassis units then my checker would see to it whether
the chassis units are in good condition, then after that we prepared
the outgoing Equipment Interchange Receipt, Sir.
Q. Mr. Witness, could you tell this Honorable Court what an outgoing
Equipment Interchange Receipt means?
A. This is a document proving that the representative of Soriamont
Steamship Agencies, Inc. really withdraw (sic) the chassis units, Sir.
xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned awhile ago that your
company issued outgoing Equipment Interchange Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange Receipt Mr. Witness?
A. We have not made Incoming Equipment Interchange Receipt with
respect to Soriamont Steamship Agencies, Inc., Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two chassis units.20
In his candid and straightforward testimony, Valencia was able to clearly
describe the standard operating procedure followed in the withdrawal by
Soriamont or its authorized representative of the leased chassis units from
the container yard of Sprint. In the transaction involved herein,
authorization letters dated 19 June 1996 in favor of PTS and Rebson
Trucking were faxed by Sprint to Soriamont, and were further verified by
Sprint through a telephone call to Soriamont. Valencia’s testimony
established that Sprint exercised due diligence in its dealings with PTS, as
the agent of Soriamont.
Soriamont cannot rely on the outgoing Equipment Interchange Receipts as
proof that the withdrawal of the subject equipment was not authorized by
it, but by the shipper/consignee, Harman Foods, which actually designated
PTS and Rebson Trucking as truckers. However, a scrutiny of the Equipment
Interchange Receipts will show that these documents merely identified
Harman Foods as the shipper/consignee, and the location of said shipping
line. It bears to stress that it was Soriamont that had an existing ELA with
Sprint, not Harman Foods, for the lease of the subject equipment. Moreover,
as stated in the ELA, the outgoing Equipment Interchange Receipts shall be
signed, upon the withdrawal of the leased chassis units, by the lessee,
Soriamont, or its authorized representative. In this case, we can only hold
that the driver of PTS signed the receipts for the subject equipment as the
authorized representative of Soriamont, and no other.
Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf
of Soriamont, which stated:
As we are currently having a problem with regards to the whereabouts of
the subject trailers, may we request your kind assistance in refraining from
issuing any equipment to the above trucking companies.
reveals that PTS did have previous authority from Soriamont to withdraw
the leased chassis units from Sprint, hence, necessitating an express
request from Soriamont for Sprint to discontinue recognizing said
authority.1avvphi1
Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is
liable for the loss of the subject equipment, since PTS acted beyond its
authority as agent. Soriamont cites Article 1897 of the Civil Code, which
provides:
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.
The burden falls upon Soriamont to prove its affirmative allegation that PTS
acted in any manner in excess of its authority as agent, thus, resulting in
the loss of the subject equipment. To recall, the subject equipment was
withdrawn and used by PTS with the authority of Soriamont. And for PTS to
be personally liable, as agent, it is vital that Soriamont be able to prove that
PTS damaged or lost the said equipment because it acted contrary to or in
excess of the authority granted to it by Soriamont. As the Court of Appeals
and the RTC found, however, Soriamont did not adduce any evidence at all
to prove said allegation. Given the lack of evidence that PTS was in any way
responsible for the loss of the subject equipment, then, it cannot be held
22
liable to Sprint, or even to Soriamont as its agent. In the absence of
evidence showing that PTS acted contrary to or in excess of the authority
granted to it by its principal, Soriamont, this Court cannot merely presume
PTS liable to Soriamont as its agent. The only thing proven was that
Soriamont, through PTS, withdrew the two chassis units from Sprint, and
that these have never been returned to Sprint.
Considering our preceding discussion, there is no reason for us to depart
from the general rule that the findings of fact of the Court of Appeals and
the RTC are already conclusive and binding upon us.
Finally, the adjustment by the Court of Appeals with respect to the applicable
rate of legal interest on the ₱320,000.00, representing the value of the
subject equipment, and on the ₱270,124.42, representing the unpaid rentals
awarded in favor of Sprint, is proper and with legal basis. Under Article 2209
of the Civil Code, when an obligation not constituting a loan or forbearance
of money is breached, then an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per annum.
Clearly, the monetary judgment in favor of Sprint does not involve a loan or
forbearance of money; hence, the proper imposable rate of interest is six
(6%) percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court
of Appeals,22 the interim period from the finality of the judgment awarding
a monetary claim until payment thereof is deemed to be equivalent to a
forbearance of credit. Eastern Shipping Lines, Inc. v. Court of
Appeals23 explained, to wit:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance
of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the
amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit.
Consistent with the foregoing jurisprudence, and later on affirmed in more
recent cases,24 when the judgment awarding a sum of money becomes final
and executory, the rate of legal interest shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent of a forbearance of credit. Thus, from the time the judgment
becomes final until its full satisfaction, the applicable rate of legal interest
shall be twelve percent (12%).
WHEREFORE, premises considered, the instant Petition for Review on
Certiorari is hereby DENIED. The Decision dated 22 June 2006 and
Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R. CV
No. 74987 are hereby AFFIRMED. Costs against petitioner Soriamont
Steamship Agencies, Inc.
SO ORDERED.
23
Soriamont Steamship Agencies Inc. & Ronas v Sprint Transport
Services, & Papa
 Sprint filed for a complaint for a sum of money against Soriamont
and Ronas
 Subject of dispute: ELA (EQUIPMENT LEASE AGREEMENT)
Sprint alleges:
 It entered into a lease agreement for Equipment with Soriamont
 Sprint agreed to lease chassis units for the transport of container
vans
 Thru authorization letters, Ronas (on behalf of Soriamont and PAPA
TRUCKING SERVICES [PTS]) were able to withdraw 2 chassis
units from the container yard of Sprint.
 Soriamont and Ronas failed to pay rental fees.
 Sprint was subsequently informed that the equipment was LOST
 Despite demands, Soriamont and Ronas failed to pay rental fees and
failed to replace equipment.
Soriamont and Ronas alleges:
 It was [PTS] who withdrew the equipment.
 Soriamont and Ronas filed a Third Party Complaint against [PTS],
who failed to answer and thus was declared in default
RTC favored Sprint, held Soriamont liable
CA
- found that the contract contained an AUTOMATIC RENEWAL CLAUSE
- Found that Soriamont authorized the withdrawal of [PTS] of the
equipment
- Affirmed RTC decision
ISSUE: Whether or not PTS is an agent of Soriamont?
 Soriamont is essentially challenging court findings that PTS
withdrew the equipment as an agent of Soriamont.
 In effect, Soriamont is raising questions of fact which is NOT
ALLOWED
 Rule 45 -> only questions of law may be raised in a petition for
review
Since the ELA was not shown to be terminated, its AUTOMATIC
RENEWAL CLAUSE took effect pursuant to their contract.
The settled rule is that persons dealing with an assumed agent are
bound at their peril; and if they would hold the principal liable, they must
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. Sprint has successfully discharged this burden.
Alternatively, if PTS is found to be its agent, Soriamont argues that
PTS is liable for the loss of the subject equipment, since PTS acted beyond
its authority as agent. Soriamont cites Article 1897 of the Civil Code, which
provides:
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.
The burden falls upon Soriamont to prove its affirmative allegation
that PTS acted in any manner in excess of its authority as agent, thus,
resulting in the loss of the subject equipment. To recall, the subject
equipment was withdrawn and used by PTS with the authority of Soriamont.
And for PTS to be personally liable, as agent, it is vital that Soriamont be
able to prove that PTS damaged or lost the said equipment because it acted
contrary to or in excess of the authority granted to it by Soriamont. As the
Court of Appeals and the RTC found, however, Soriamont did not adduce
any evidence at all to prove said allegation.

Evidence shows that the preponderance of evidence supports the

existence of an agency relationship between Soriamont and PTS.
The ELA explicitly authorized Soriamont to appoint a representative
who shall withdraw and return the leased chassis units (which is
PTS)

24

G.R. No. 151319 November 22, 2004
MANILA MEMORIAL PARK CEMETERY, INC., petitioner,
vs.
PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in
the law on agency.
This is a petition for review assailing the Decision1 of the Court of Appeals
dated 22 June 2001, and its Resolution2 dated 12 December 2001 in CA G.R.
CV No. 49802 entitled "Pedro L. Linsangan v. Manila Memorial Cemetery,
Inc. et al.," finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and
severally liable with Florencia C. Baluyot to respondent Atty. Pedro L.
Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot
called Garden State at the Holy Cross Memorial Park owned by petitioner
(MMPCI). According to Baluyot, a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and had
opted to sell his rights subject to reimbursement of the amounts he already
paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan
that once reimbursement is made to the former buyer, the contract would
be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to
complete the down payment to MMPCI.3 Baluyot issued handwritten and
typewritten receipts for these payments.4
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would
be issued Contract No. 28660, a new contract covering the subject lot in the
name of the latter instead of old Contract No. 25012. Atty. Linsangan
protested, but Baluyot assured him that he would still be paying the old
price of P95,000.00 with P19,838.00 credited as full down payment leaving
a balance of about P75,000.00.5
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No.
A11 (15), Block 83, Garden Estate I denominated as Contract No. 28660
and the Official Receipt No. 118912 dated 6 April 1985 for the amount of
P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty.
Linsangan objected to the new contract price, as the same was not the
amount previously agreed upon. To convince Atty. Linsangan, Baluyot
executed a document6 confirming that while the contract price is
P132,250.00, Atty. Linsangan would pay only the original price of
P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of
P1,800.00 and the difference will be issued as discounted to conform
to the previous price as previously agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase
under Contract No. 28660 states that the total price of P132,250.00
your undertaking is to pay only the total sum of P95,000.00 under
the old price. Further the total sum of P19,838.00 already paid by
you under O.R. # 118912 dated April 6, 1985 has been credited in
the total purchase price thereby leaving a balance of P75,162.00 on
a monthly installment of P1,800.00 including interests (sic) charges
for a period of five (5) years.
25

(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and
accepted Official Receipt No. 118912. As requested by Baluyot, Atty.
Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor
of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again issued
twelve (12) postdated checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No.
28660 was cancelled for reasons the latter could not explain, and presented
to him another proposal for the purchase of an equivalent property. He
refused the new proposal and insisted that Baluyot and MMPCI honor their
undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement,
Atty. Linsangan filed a Complaint7 for Breach of Contract and Damages
against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that
Contract No. 28660 was cancelled conformably with the terms of the
contract8 because of non-payment of arrearages.9 MMPCI stated that
Baluyot was not an agent but an independent contractor, and as such was
not authorized to represent MMPCI or to use its name except as to the extent
expressly stated in the Agency Manager Agreement.10 Moreover, MMPCI was
not aware of the arrangements entered into by Atty. Linsangan and Baluyot,
as it in fact received a down payment and monthly installments as indicated
in the contract.11 Official receipts showing the application of payment were
turned over to Baluyot whom Atty. Linsangan had from the beginning
allowed to receive the same in his behalf. Furthermore, whatever
misimpression that Atty. Linsangan may have had must have been rectified
by the Account Updating Arrangement signed by Atty. Linsangan which
states that he "expressly admits that Contract No. 28660 'on account of
serious delinquency…is now due for cancellation under its terms and
conditions.'''12
The trial court held MMPCI and Baluyot jointly and severally liable.13 It found
that Baluyot was an agent of MMPCI and that the latter was estopped from
denying this agency, having received and enchased the checks issued by
Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that
Baluyot was authorized to receive only the down payment, it allowed her to
continue to receive postdated checks from Atty. Linsangan, which it in turn
consistently encashed.14
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby
rendered in favor of plaintiff declaring Contract No. 28660 as valid
and subsisting and ordering defendants to perform their
undertakings thereof which covers burial lot No. A11 (15), Block 83,
Section Garden I, Holy Cross Memorial Park located at Novaliches,
Quezon City. All payments made by plaintiff to defendants should
be credited for his accounts. NO DAMAGES, NO ATTORNEY'S FEES
but with costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery
Incorporated as against defendant Baluyot is GRANTED up to the
extent of the costs.
SO ORDERED.15
MMPCI appealed the trial court's decision to the Court of Appeals.16 It
claimed that Atty. Linsangan is bound by the written contract with MMPCI,
the terms of which were clearly set forth therein and read, understood, and
signed by the former.17 It also alleged that Atty. Linsangan, a practicing
lawyer for over thirteen (13) years at the time he entered into the contract,
is presumed to know his contractual obligations and is fully aware that he
cannot belatedly and unilaterally change the terms of the contract without
the consent, much less the knowledge of the other contracting party, which
was MMPCI. And in this case, MMPCI did not agree to a change in the
contract and in fact implemented the same pursuant to its clear terms. In
view thereof, because of Atty. Linsangan's delinquency, MMPCI validly
cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with
Baluyot as the latter exceeded the terms of her agency, neither did MMPCI
ratify Baluyot's acts. It added that it cannot be charged with making any
misrepresentation, nor of having allowed Baluyot to act as though she had
full powers as the written contract expressly stated the terms and conditions
which Atty. Linsangan accepted and understood. In canceling the contract,
MMPCI merely enforced the terms and conditions imposed therein.18
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it
was the former's obligation, as a party knowingly dealing with an alleged
agent, to determine the limitations of such agent's authority, particularly
when such alleged agent's actions were patently questionable. According to
MMPCI, Atty. Linsangan did not even bother to verify Baluyot's authority or
ask copies of official receipts for his payments.19
26
The Court of Appeals affirmed the decision of the trial court. It upheld the
trial court's finding that Baluyot was an agent of MMPCI at the time the
disputed contract was entered into, having represented MMPCI's interest
and acting on its behalf in the dealings with clients and customers. Hence,
MMPCI is considered estopped when it allowed Baluyot to act and represent
MMPCI even beyond her authority.20 The appellate court likewise found that
the acts of Baluyot bound MMPCI when the latter allowed the former to act
for and in its behalf and stead. While Baluyot's authority "may not have been
expressly conferred upon her, the same may have been derived impliedly
by habit or custom, which may have been an accepted practice in the
company for a long period of time."21 Thus, the Court of Appeals noted,
innocent third persons such as Atty. Linsangan should not be prejudiced
where the principal failed to adopt the needed measures to prevent
misrepresentation. Furthermore, if an agent misrepresents to a purchaser
and the principal accepts the benefits of such misrepresentation, he cannot
at the same time deny responsibility for such misrepresentation.22 Finally,
the Court of Appeals declared:
There being absolutely nothing on the record that would show that the court
a quo overlooked, disregarded, or misinterpreted facts of weight and
significance, its factual findings and conclusions must be given great weight
and should not be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED
and the appealed decision in Civil Case No. 88-1253 of the Regional
Trial Court, National Capital Judicial Region, Branch 57 of Makati, is
hereby AFFIRMED in toto.
SO ORDERED.23
MMPCI filed its Motion for Reconsideration,24 but the same was denied for
lack of merit.25
In the instant Petition for Review, MMPCI claims that the Court of Appeals
seriously erred in disregarding the plain terms of the written contract and
Atty. Linsangan's failure to abide by the terms thereof, which justified its
cancellation. In addition, even assuming that Baluyot was an agent of
MMPCI, she clearly exceeded her authority and Atty. Linsangan knew or
should have known about this considering his status as a long-practicing
lawyer. MMPCI likewise claims that the Court of Appeals erred in failing to
consider that the facts and the applicable law do not support a judgment
against Baluyot only "up to the extent of costs."26
Atty. Linsangan argues that he did not violate the terms and conditions of
the contract, and in fact faithfully performed his contractual obligations and
complied with them in good faith for at least two years.27 He claims that
contrary to MMPCI's position, his profession as a lawyer is immaterial to the
validity of the subject contract and the case at bar.28 According to him,
MMPCI had practically admitted in its Petition that Baluyot was its agent,
and thus, the only issue left to be resolved is whether MMPCI allowed
Baluyot to act as though she had full powers to be held solidarily liable with
the latter.29
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review under Rule 45
of the Rules of Court is limited to reviewing only errors of law, not fact,
unless the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on misapprehension
of facts.30 In BPI Investment Corporation v. D.G. Carreon Commercial
Corporation,31 this Court ruled:
There are instances when the findings of fact of the trial court and/or
Court of Appeals may be reviewed by the Supreme Court, such as
(1) when the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the inference made
is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings
are contrary to those of the trial court; (8) when the findings of fact
are conclusions without citation of specific evidence on which they
are based; (9) when the facts set forth in the petition as well as in
the petitioners' main and reply briefs are not disputed by the
respondents; and (10) the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and contradicted
by the evidence on record.32
In the case at bar, the Court of Appeals committed several errors in the
apprehension of the facts of the case, as well as made conclusions devoid
of evidentiary support, hence we review its findings of fact.
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.33 Thus, the elements of agency are (i) consent,
express or implied, of the parties to establish the relationship; (ii) the object
is the execution of a juridical act in relation to a third person; (iii) the agent
acts as a representative and not for himself; and (iv) the agent acts within
the scope of his authority.34
27
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out
that under its Agency Manager Agreement; an agency manager such as
Baluyot is considered an independent contractor and not an
agent.35 However, in the same contract, Baluyot as agency manager was
authorized to solicit and remit to MMPCI offers to purchase interment spaces
belonging to and sold by the latter.36 Notwithstanding the claim of MMPCI
that Baluyot was an independent contractor, the fact remains that she was
authorized to solicit solely for and in behalf of MMPCI. As properly found
both by the trial court and the Court of Appeals, Baluyot was an agent of
MMPCI, having represented the interest of the latter, and having been
allowed by MMPCI to represent it in her dealings with its clients/prospective
buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot
be bound by the contract procured by Atty. Linsangan and solicited by
Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase
interment spaces obtained on forms provided by MMPCI. The terms of the
offer to purchase, therefore, are contained in such forms and, when signed
by the buyer and an authorized officer of MMPCI, becomes binding on both
parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and
validated by MMPCI showed a total list price of P132,250.00. Likewise, it
was clearly stated therein that "Purchaser agrees that he has read or has
had read to him this agreement, that he understands its terms and
conditions, and that there are no covenants, conditions, warranties or
representations other than those contained herein." 37 By signing the Offer
to Purchase, Atty. Linsangan signified that he understood its contents. That
he and Baluyot had an agreement different from that contained in the Offer
to Purchase is of no moment, and should not affect MMPCI, as it was
obviously made outside Baluyot's authority. To repeat, Baluyot's authority
was limited only to soliciting purchasers. She had no authority to alter the
terms of the written contract provided by MMPCI. The document/letter
"confirming" the agreement that Atty. Linsangan would have to pay the old
price was executed by Baluyot alone. Nowhere is there any indication that
the same came from MMPCI or any of its officers.
It is a settled rule that persons dealing with an agent are bound at their
peril, if they would hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. 38 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. 39 If he
does not make such an inquiry, he is chargeable with knowledge of the
agent's authority and his ignorance of that authority will not be any
excuse.40
As noted by one author, the ignorance of a person dealing with an agent as
to the scope of the latter's authority is no excuse to such person and the
fault cannot be thrown upon the principal.41 A person dealing with an agent
assumes the risk of lack of authority in the agent. He cannot charge the
principal by relying upon the agent's assumption of authority that proves to
be unfounded. The principal, on the other hand, may act on the presumption
that third persons dealing with his agent will not be negligent in failing to
ascertain the extent of his authority as well as the existence of his agency.42
In the instant case, it has not been established that Atty. Linsangan even
bothered to inquire whether Baluyot was authorized to agree to terms
contrary to those indicated in the written contract, much less bind MMPCI
by her commitment with respect to such agreements. Even if Baluyot was
Atty. Linsangan's friend and known to be an agent of MMPCI, her
declarations and actions alone are not sufficient to establish the fact or
extent of her authority.43 Atty. Linsangan as a practicing lawyer for a
relatively long period of time when he signed the contract should have been
put on guard when their agreement was not reflected in the contract. More
importantly, Atty. Linsangan should have been alerted by the fact that
Baluyot failed to effect the transfer of rights earlier promised, and was
unable to make good her written commitment, nor convince MMPCI to
assent thereto, as evidenced by several attempts to induce him to enter into
other contracts for a higher consideration. As properly pointed out by
MMPCI, as a lawyer, a greater degree of caution should be expected of Atty.
Linsangan especially in dealings involving legal documents. He did not even
bother to ask for official receipts of his payments, nor inquire from MMPCI
directly to ascertain the real status of the contract, blindly relying on the
representations of Baluyot. A lawyer by profession, he knew what he was
doing when he signed the written contract, knew the meaning and value of
every word or phrase used in the contract, and more importantly, knew the
legal effects which said document produced. He is bound to accept
responsibility for his negligence.
The trial and appellate courts found MMPCI liable based on ratification and
estoppel. For the trial court, MMPCI's acts of accepting and encashing the
checks issued by Atty. Linsangan as well as allowing Baluyot to receive
checks drawn in the name of MMPCI confirm and ratify the contract of
agency. On the other hand, the Court of Appeals faulted MMPCI in failing to
adopt measures to prevent misrepresentation, and declared that in view of
MMPCI's acceptance of the benefits of Baluyot's misrepresentation, it can no
longer deny responsibility therefor.
28
The Court does not agree. Pertinent to this case are the following provisions
of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal,
exceeding the scope of his authority, and the principal does not
ratify the contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he undertook
to secure the principal's ratification.
Art. 1910. The principal must comply with all the obligations that
the agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the
principal, unless he ratifies them, expressly or impliedly. Only the principal
can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the
principal must have knowledge of the acts he is to ratify.44
Ratification in agency is the adoption or confirmation by one person of an
act performed on his behalf by another without authority. The substance of
the doctrine is confirmation after conduct, amounting to a substitute for a
prior authority. Ordinarily, the principal must have full knowledge at the
time of ratification of all the material facts and circumstances relating to the
unauthorized act of the person who assumed to act as agent. Thus, if
material facts were suppressed or unknown, there can be no valid
ratification and this regardless of the purpose or lack thereof in concealing
such facts and regardless of the parties between whom the question of
ratification may arise.45 Nevertheless, this principle does not apply if the
principal's ignorance of the material facts and circumstances was willful, or
that the principal chooses to act in ignorance of the facts.46 However, in the
absence of circumstances putting a reasonably prudent man on inquiry,
ratification cannot be implied as against the principal who is ignorant of the
facts.47
No ratification can be implied in the instant case.
A perusal of Baluyot's Answer48 reveals that the real arrangement between
her and Atty. Linsangan was for the latter to pay a monthly installment of
P1,800.00 whereas Baluyot was to shoulder the counterpart amount of
P1,455.00 to meet the P3,255.00 monthly installments as indicated in the
contract. Thus, every time an installment falls due, payment was to be made
through a check from Atty. Linsangan for P1,800.00 and a cash component
of P1,455.00 from Baluyot.49 However, it appears that while Atty. Linsangan
issued the post-dated checks, Baluyot failed to come up with her part of the
bargain. This was supported by Baluyot's statements in her letter 50 to Mr.
Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received
the copy of the Complaint. In the letter, she admitted that she was remiss
in her duties when she consented to Atty. Linsangan's proposal that he will
pay the old price while the difference will be shouldered by her. She likewise
admitted that the contract suffered arrearages because while Atty.
Linsangan issued the agreed checks, she was unable to give her share of
P1,455.00 due to her own financial difficulties. Baluyot even asked for
compassion from MMPCI for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the
arrangement. As far as MMPCI is concerned, the contract price was
P132,250.00, as stated in the Offer to Purchase signed by Atty. Linsangan
and MMPCI's authorized officer. The down payment of P19,838.00 given by
Atty. Linsangan was in accordance with the contract as well. Payments of
P3,235.00 for at least two installments were likewise in accord with the
contract, albeit made through a check and partly in cash. In view of
Baluyot's failure to give her share in the payment, MMPCI received only
P1,800.00 checks, which were clearly insufficient payment. In fact, Atty.
Linsangan would have incurred arrearages that could have caused the
earlier cancellation of the contract, if not for MMPCI's application of some of
the checks to his account. However, the checks alone were not sufficient to
cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latter's
check payments for being insufficient. It would not have applied to his
account the P1,800.00 checks. Moreover, the fact that Baluyot had to
practically explain to MMPCI's Sales Manager the details of her
"arrangement" with Atty. Linsangan and admit to having made an error in
entering such arrangement confirm that MMCPI had no knowledge of the
said agreement. It was only when Baluyot filed her Answer that she claimed
that MMCPI was fully aware of the agreement.
Neither is there estoppel in the instant case. The essential elements of
estoppel are (i) conduct of a party amounting to false representation or
concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the
party subsequently attempts to assert; (ii) intent, or at least expectation,
that this conduct shall be acted upon by, or at least influence, the other
party; and (iii) knowledge, actual or constructive, of the real facts.51
29
While there is no more question as to the agency relationship between
Baluyot and MMPCI, there is no indication that MMPCI let the public, or
specifically, Atty. Linsangan to believe that Baluyot had the authority to alter
the standard contracts of the company. Neither is there any showing that
prior to signing Contract No. 28660, MMPCI had any knowledge of Baluyot's
commitment to Atty. Linsangan. One who claims the benefit of an estoppel
on the ground that he has been misled by the representations of another
must not have been misled through his own want of reasonable care and
circumspection.52 Even assuming that Atty. Linsangan was misled by
MMPCI's actuations, he still cannot invoke the principle of estoppel, as he
was clearly negligent in his dealings with Baluyot, and could have easily
determined, had he only been cautious and prudent, whether said agent was
clothed with the authority to change the terms of the principal's written
contract. Estoppel must be intentional and unequivocal, for when
misapplied, it can easily become a most convenient and effective means of
injustice.53 In view of the lack of sufficient proof showing estoppel, we refuse
to hold MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals' findings that
"the authority of defendant Baluyot may not have been expressly conferred
upon her; however, the same may have been derived impliedly by habit or
custom which may have been an accepted practice in their company in a
long period of time." A perusal of the records of the case fails to show any
indication that there was such a habit or custom in MMPCI that allows its
agents to enter into agreements for lower prices of its interment spaces, nor
to assume a portion of the purchase price of the interment spaces sold at
such lower price. No evidence was ever presented to this effect.
As the Court sees it, there are two obligations in the instant case. One is the
Contract No. 28660 between MMPCI and by Atty. Linsangan for the purchase
of an interment space in the former's cemetery. The other is the agreement
between Baluyot and Atty. Linsangan for the former to shoulder the amount
P1,455.00, or the difference between P95,000.00, the original price, and
P132,250.00, the actual contract price.
To repeat, the acts of the agent beyond the scope of his authority do not
bind the principal unless the latter ratifies the same. It also bears emphasis
that when the third person knows that the agent was acting beyond his
power or authority, the principal cannot be held liable for the acts of the
agent. If the said third person was aware of such limits of authority, he is
to blame and is not entitled to recover damages from the agent, unless the
latter undertook to secure the principal's ratification.54
This Court finds that Contract No. 28660 was validly entered into both by
MMPCI and Atty. Linsangan. By affixing his signature in the contract, Atty.
Linsangan assented to the terms and conditions thereof. When Atty.
Linsangan incurred delinquencies in payment, MMCPI merely enforced its
rights under the said contract by canceling the same.
Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist
on what he claims to be the terms of Contract No. 28660. The agreement,
insofar as the P95,000.00 contract price is concerned, is void and cannot be
enforced as against MMPCI. Neither can he hold Baluyot liable for damages
under the same contract, since there is no evidence showing that Baluyot
undertook to secure MMPCI's ratification. At best, the "agreement" between
Baluyot and Atty. Linsangan bound only the two of them. As far as MMPCI
is concerned, it bound itself to sell its interment space to Atty. Linsangan for
P132,250.00 under Contract No. 28660, and had in fact received several
payments in accordance with the same contract. If the contract was
cancelled due to arrearages, Atty. Linsangan's recourse should only be
against Baluyot who personally undertook to pay the difference between the
true contract price of P132,250.00 and the original proposed price of
P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI when
she promised to shoulder the said difference would be to conclude that
MMPCI undertook to pay itself the difference, a conclusion that is very
illogical, if not antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate
action to recover damages from Baluyot, not as an agent of MMPCI, but in
view of the latter's breach of their separate agreement. To review, Baluyot
obligated herself to pay P1,455.00 in addition to Atty. Linsangan's P1,800.00
to complete the monthly installment payment under the contract, which, by
her own admission, she was unable to do due to personal financial
difficulties. It is undisputed that Atty. Linsangan issued the P1,800.00 as
agreed upon, and were it not for Baluyot's failure to provide the balance,
Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan
has a cause of action against Baluyot, which he can pursue in another case.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of
Appeals dated 22 June 2001 and its Resolution dated 12 December 2001 in
CA- G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of
the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and
SET ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack
of cause of action. No pronouncement as to costs.
SO ORDERED.
30
[G.R. No. 151319. November 22, 2004]
MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L.
LINSANGAN, respondent.
FACTS:
Sometime in 1984, Florencia Baluyot offered respondent Atty.
Linsangan a lot called Garden State at the Holy Cross Memorial Park owned
by petitioner (MMPCI). According to Baluyot, a former owner of a memorial
lot was no longer interested in acquiring the lot and had opted to sell his
rights subject to reimbursement of the amounts he already paid. The
contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be
transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original buyer and to
complete the down payment to MMPCI. Baluyot issued handwritten and
typewritten receipts for these payments.
In March 1985, Baluyot informed Atty. Linsangan that he would be
issued a new contract covering the subject lot in the name of the latter
instead of the old one. Atty. Linsangan protested, but Baluyot assured him
that he would still be paying the old price of P95,000.00, despite the new
listed price, with P19,838.00 credited as full down payment leaving a
balance of about P75,000.00. Baluyot executed a document confirming that
while the contract price is P132,250.00, Atty. Linsangan would pay only the
original price of P95,000.00.
By virtue of this letter, Atty. Linsangan signed the said contract. As
requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks
each in favor of MMPCI. The next year, Atty. Linsangan again issued twelve
(12) postdated checks in favor of MMPCI.
On May 1987, Baluyot verbally advised Atty. Linsangan that the
contract was cancelled for some unexplainable reasons, and presented to
him another proposal for the purchase of an equivalent property. He refused
the new proposal and insisted that Baluyot and MMPCI honor their
undertaking. Atty. Linsangan filed a Complaint for Breach of Contract and
Damages against the former for their alleged failure to conform to the
agreement.
MMPCI alleged that the contract was cancelled conformably with the
terms of the contract because of non-payment of arrearages.
Moreover, MMPCI was not aware of the arrangements entered into by
Atty. Linsangan and Baluyot. Official receipts showing the application of
payment were turned over to Baluyot whom Atty. Linsangan had from the
beginning allowed to receive the same in his behalf. Furthermore, whatever
misimpression that Atty. Linsangan may have had must have been rectified
by the Account Updating Arrangement signed by Atty. Linsangan which
states that he expressly admits that the new contract on account of serious
delinquency is now due for cancellation under its terms and conditions.
The trial court held MMPCI and Baluyot jointly and severally liable
finding that Baluyot was an agent of MMPCI and that the latter was estopped
from denying this agency, having received and enchased the checks issued
by Atty. Linsangan and given to it by Baluyot.
Petitioner MMPCI appealed the trial court’s decision to the Court of
Appeals, claiming that Atty. Linsangan is bound by the written contract with
MMPCI, the terms of which were clearly set forth therein and read,
understood, and signed by the former. MMPCI further alleged that it cannot
be held jointly and solidarily liable with Baluyot as the latter exceeded the
terms of her agency, neither did MMPCI ratify Baluyot’s acts. In canceling
the contract, MMPCI merely enforced the terms and conditions imposed
therein.
The Court of Appeals affirmed the decision of the trial court.
Subsequently, the MMPCI filed its Motion for Reconsideration, but the same
was denied for lack of merit. Hence, this petition for review.
ISSUE:
1) Whether or not Baluyot was an Agent of MMPCI;
2) Whether or not petitioner MMCPI may be bound by the contract
procured by Atty. Linsangan and solicited by Baluyot;
3) Whether or not MMPCI was estopped from denying liability to Atty.
Linsangan.
HELD:
(1) NO. By the contract of agency, a person binds himself to render
some service or to do something in representation on or behalf of
another, with the consent or authority of the latter. Thus, the
elements of agency are (i) consent, express or implied, of the parties
to establish the relationship; (ii) the object is the execution of a
juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv)the agent acts within the
scope of his authority. In the Agency Manager Agreement, Baluyot
as agency manager was authorized to solicit and remit to MMPCI
offers to purchase interment spaces belonging to and sold by the
latter. Notwithstanding the claim of MMPCI that Baluyot was an
independent contractor, the fact remains that she was authorized to
solicit solely for and in behalf of MMPCI as well as remit to MMPCI
offers to purchase interment spaces obtained on forms provided by
the latter.
(2) NO. The terms of the offer to purchase are contained in such forms
and, when signed by the buyer and an authorized officer of MMPCI,
becomes binding on both parties. By signing the Offer to Purchase,
Atty. Linsangan signified that he understood its contents. That he
and Baluyot had an agreement different from that contained in the
31
 Offer to Purchase is of no moment, and should not affect MMPCI, as but in view of the latter’s breach of their separate agreement.
it was obviously made outside Baluyot’s authority. Nevertheless, WHEREFORE, the instant petition is GRANTED.
MMPCI cannot be bound by the contract procured by Atty. Linsangan
and solicited by Baluyot.

Under the Civil Code, the acts of an agent beyond the scope of his
authority do not bind the principal, unless he ratifies them, expressly
or impliedly. Only the principal can ratify; the agent cannot ratify
his own unauthorized acts. Moreover, the principal must have
knowledge of the acts he is to ratify. Ratification in agency is the
adoption or confirmation by one person of an act performed on his
behalf by another without authority. Ordinarily, the principal must
have full knowledge at the time of ratification of all the material facts
and circumstances relating to the unauthorized act of the person
who assumed to act as agent. Thus, if material facts were
suppressed or unknown, there can be no valid ratification. In this
case, Atty. Linsangan failed to show that MMPCI had knowledge of
the arrangement. If MMPCI was aware of the arrangement, it would
have refused the latter’s check payments for being insufficient. It
was only when Baluyot filed her Answer that she claimed that MMCPI
was fully aware of the agreement.

(3) NO. The essential elements of estoppel are (i) conduct of a party
amounting to false representation or concealment of material facts
or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (ii) intent, or at least expectation,
that this conduct shall be acted upon by, or at least influence, the
other party; and (iii) knowledge, actual or constructive, of the real
facts.

One who claims the benefit of an estoppel on the ground that he has
been misled by the representations of another must not have been
misled through his own want of reasonable care and circumspection.
Even assuming that Atty. Linsangan was misled by MMPCI’s
actuations, he still cannot invoke the principle of estoppel, as he was
clearly negligent in his dealings with Baluyot, and could have easily
determined, had he only been cautious and prudent, whether said
agent was clothed with the authority to change the terms of the
principals written contract. Estoppel must be intentional and
unequivocal, for when misapplied, it can easily become a most
convenient and effective means of injustice. In view of the lack of
sufficient proof showing estoppel, we refuse to hold MMPCI liable on
this score.

However, this does not preclude Atty. Linsangan from instituting a

separate action to recover damages from Baluyot, not as an agent of MMPCI,

32
G.R. No. 120465 September 9, 1999
WILLIAM UY and RODEL ROXAS, petitioners,
vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY, respondents.
KAPUNAN, J.:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight
parcels of land by the owners thereof. By virtue of such authority, petitioners
offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent
National Housing Authority (NHA) to be utilized and developed as a housing
project.
On February 14, 1989, the NHA Board passed Resolution No. 1632
approving the acquisition of said lands, with an area of 31.8231 hectares,
at the cost of P23.867 million, pursuant to which the parties executed a
series of Deeds of Absolute Sale covering the subject lands. Of the eight
parcels of land, however, only five were paid for by the NHA because of the
report 1 it received from the Land Geosciences Bureau of the Department of
Environment and Natural Resources (DENR) that the remaining area is
located at an active landslide area and therefore, not suitable for
development into a housing project.
On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the
sale over the three parcels of land. The NHA, through Resolution No. 2394,
subsecguently offered the amount of P1.225 million to the landowners
as daños perjuicios.
On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of
Quezon City a Complaint for Damages against NHA and its General Manager
Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the
contract to be justified. The trial court nevertheless awarded damages to
plaintiffs in the sum of P1.255 million, the same amount initially offered by
NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of
the trial court and entered a new one dismissing the complaint. It held that
since there was "sufficient justifiable basis" in cancelling the sale, "it saw no
reason" for the award of damages. The Court of Appeals also noted that
petitioners were mere attorneys-in-fact and, therefore, not the real parties-
in-interest in the action before the trial court.
. . . In paragraph 4 of the complaint, plaintiffs
alleged themselves to be "sellers' agents" for the
several owners of the 8 lots subject matter of the
case. Obsviously, William Uy and Rodel Roxas in
filing this case acted as attorneys-in-fact of the lot
owners who are the real parties in interest but who
were omitted to be pleaded as party-plaintiffs in the
case. This omission is fatal. Where the action is
brought by an attorney-in-fact of a land owner in his
name, (as in our present action) and not in the
name of his principal, the action was properly
dismissed (Ferrer vs. Villamor, 60 SCRA 406
[1974]; Marcelo vs. de Leon, 105 Phil. 1175)
because the rule is that every action must be
prosecuted in the name of the real parties-in-
interest (Section 2, Rule 3, Rules of Court).
When plaintiffs UY and Roxas sought payment of
damages in their favor in view of the partial
rescission of Resolution No. 1632 and the Deed of
Absolute Sale covering TCT Nos. 10998, 10999 and
11292 (Prayer complaint, page 5, RTC records), it
becomes obviously indispensable that the lot
owners be included, mentioned and named as party-
plaintiffs, being the real party-in-interest. UY and
Roxas, as attorneys-in-fact or apoderados, cannot
by themselves lawfully commence this action, more
so, when the supposed special power of attorney, in
their favor, was never presented as an evidence in
this case. Besides, even if herein plaintiffs Uy and
Roxas were authorized by the lot owners to
commence this action, the same must still be filed
in the name of the principal, (Filipino Industrial
Corporation vs. San Diego, 23 SCRA 706 [1968]).
As such indispensable party, their joinder in the
action is mandatory and the complaint may be
dismissed if not so impleaded (NDC vs. CA, 211
SCRA 422 [1992]). 2
Their motion for reconsideration having been denied, petitioners seek relief
from this Court contending that:
33
 I. THE RESPONDENT CA ERRED IN DECLARING
THAT RESPONDENT NHA HAD ANY LEGAL BASIS
FOR RESCINDING THE SALE INVOLVING THE LAST
THREE (3) PARCELS COVERED BY NHA
RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE RESPONDENT
NHA HAD LEGAL BASIS TO RESCIND THE SUBJECT
SALE, THE RESPONDENT CA NONETHELESS ERRED
IN DENYING HEREIN PETITIONERS' CLAIM TO
DAMAGES, CONTRARY TO THE PROVISIONS OF
ART. 1191 OF THE CIVIL CODE.
III. THE RESPONDENT CA ERRED IN DISMISSING
THE SUBJECT COMPLAINT FINDING THAT THE
PETITIONERS FAILED TO JOIN AS INDISPENSABLE
PARTY PLAINTIFF THE SELLING LOT-OWNERS. 3
We first resolve the issue raised in the the third assignment of error.
Petitioners claim that they lodged the complaint not in behalf of their
principals but in their own name as agents directly damaged by the
termination of the contract. The damages prayed for were intended not for
the benefit of their principals but to indemnify petitioners for the losses they
themselves allegedly incurred as a result of such termination. These
damages consist mainly of "unearned income" and advances. 4 Petitioners,
thus, attempt to distinguish the case at bar from those involving agents
or apoderedos instituting actions in their own name but in behalf of their
principals. 5 Petitioners in this case purportedly brought the action for
damages in their own name and in their own behalf.
We find this contention unmeritorious.
Sec. 2, Rule 3 of the Rules of Court requires that every action must be
prosecuted and defended in the name of the real party-in-interest. The real
party-in-interest is the party who stands to be benefited or injured by the
judgment or the party entitled to the avails of the suit. "Interest, within the
meaning of the rule, means material interest, an interest in the issue and to
be affected by the decree, as distinguished from mere interest in the
question involved, or a mere incidental interest. 6Cases construing the real
party-in-interest provision can be more easily understood if it is borne in
mind that the true meaning of real party-in-interest may be summarized as
follows: An action shall be prosecuted in the name of the party who, by the
substantive law, has the right sought to be enforced. 7
Do petitioners, under substantive law, possess the right they seek to
enforce? We rule in the negative.
The applicable substantive law in this case is Article 1311 of the Civil Code,
which states:
Contracts take effect only between the parties, their
assigns, and heirs, except in case where the rights
and obligations arising from the contract are not
transmissible by their nature, or by stipulation, or
by provision of law. . . .
If a contract should contain some stipulation in favor
of a third person, he may demand its
fulfillment provided he communicated his
acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third
person. (Emphasis supplied.)
Petitioners are not parties to the contract of sale between their principals
and NHA. They are mere agents of the owners of the land subject of the
sale. As agents, they only render some service or do something in
representation or on behalf of their principals. 8 The rendering of such
service did not make them parties to the contracts of sale executed in behalf
of the latter. Since a contract may be violated only by the parties thereto as
against each other, the real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract must, generally, either be parties
to said contract. 9
Neither has there been any allegation, much less proof, that petitioners are
the heirs of their principals.
Are petitioners assignees to the rights under the contract of sale?
In McMicking vs. Banco Español-Filipino, 10 we held that the rule requiring
every action to be prosecuted in the name of the real party-in-interest.
. . . recognizes the assignments of rights of action
and also recognizes that when one has a right of
action assigned to him he is then the real party in
interest and may maintain an action upon such
claim or right. The purpose of [this rule] is to require
the plaintiff to be the real party in interest, or, in
other words, he must be the person to whom the
proceeds of the action shall belong, and to prevent
34
 actions by persons who have no interest in the result
of the same. . . .
Thus, an agent, in his own behalf, may bring an action founded on a contract
made for his principal, as an assignee of such contract. We find the following
declaration in Section 372 (1) of the Restatement of the Law on Agency
(Second): 11
Sec. 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or
who acquires an interest in a contract which he
makes on behalf of his principal can, although not a
promisee, maintain such action thereon maintain
such action thereon as might a transferee having a
similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract
on behalf of another may become an assignee of the
contract and bring suit against the other party to it,
as any other transferee. The customs of business or
the course of conduct between the principal and the
agent may indicate that an agent who ordinarily has
merely a security interest is a transferee of the
principals rights under the contract and as such is
permitted to bring suit. If the agent has settled with
his principal with the understanding that he is to
collect the claim against the obligor by way of
reimbursing himself for his advances and
commissions, the agent is in the position of an
assignee who is the beneficial owner of the chose in
action. He has an irrevocable power to sue in his
principal's name. . . . And, under the statutes which
permit the real party in interest to sue, he can
maintain an action in his own name. This power to
sue is not affected by a settlement between the
principal and the obligor if the latter has notice of
the agent's interest. . . . Even though the agent has
not settled with his principal, he may, by agreement
with the principal, have a right to receive payment
and out of the proceeds to reimburse himself for
advances and commissions before turning the
balance over to the principal. In such a case,
although there is no formal assignment, the agent
is in the position of a transferee of the whole claim
for security; he has an irrevocable power to sue in
his principal's name and, under statutes which
permit the real party in interest to sue, he can
maintain an action in his own name.
Petitioners, however, have not shown that they are assignees of their
principals to the subject contracts. While they alleged that they made
advances and that they suffered loss of commissions, they have not
established any agreement granting them "the right to receive payment and
out of the proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the principal[s]."
Finally, it does not appear that petitioners are beneficiaries of a
stipulation pour autrui under the second paragraph of Article 1311 of the
Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute
Sale "clearly and deliberately" conferring a favor to any third person.
That petitioners did not obtain their commissions or recoup their advances
because of the non-performance of the contract did not entitle them to file
the action below against respondent NHA. Section 372 (2) of the
Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as
to entitle him to maintain an action at law upon it in his own
name merely because he is entitled to a portion of the
proceeds as compensation for making it or because he is
liable for its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal
will gain or suffer loss by the performance or
nonperformance of the contract by the principal or by the
other party thereto does not entitle him to maintain an
action on his own behalf against the other party for its
breach. An agent entitled to receive a commission from his
principal upon the performance of a contract which he has
made on his principal's account does not, from this fact
alone, have any claim against the other party for breach of
the contract, either in an action on the contract or otherwise.
An agent who is not a promisee cannot maintain an action
at law against a purchaser merely because he is entitled to
have his compensation or advances paid out of the purchase
price before payment to the principal. . . .
35
Thus, in Hopkins vs. Ives, 12 the Supreme Court of Arkansas, citing Section
372 (2) above, denied the claim of a real estate broker to recover his alleged
commission against the purchaser in an agreement to purchase property.
In Goduco vs. Court of appeals, 13 this Court held that:
. . . granting that appellant had the authority to sell
the property, the same did not make the buyer liable
for the commission she claimed. At most, the owner
of the property and the one who promised to give
her a commission should be the one liable to pay the
same and to whom the claim should have been
directed. . . .
As petitioners are not parties, heirs, assignees, or beneficiaries of a
stipulation pour autrui under the contracts of sale, they do not, under
substantive law, possess the right they seek to enforce. Therefore, they are
not the real parties-in-interest in this case.
Petitioners not being the real parties-in-interest, any decision rendered
herein would be pointless since the same would not bind the real parties-in-
interest. 14
Nevertheless, to forestall further litigation on the substantive aspects of this
case, we shall proceed to rule on me merits. 15
Petitioners submit that respondent NHA had no legal basis to "rescind" the
sale of the subject three parcels of land. The existence of such legal basis,
notwithstanding, petitioners argue that they are still entitled to an award of
damages.
Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Article 1191 of the Civil Code. The right of
rescission or, more accurately, resolution, of a party to an obligation under
Article 1191 is predicated on a breach of faith by the other party that violates
the reciprocity between them. 16 The power to rescind, therefore, is given
to the injured party. 17 Article 1191 states:
The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become
impossible.
In this case, the NHA did not rescind the contract. Indeed, it did not have
the right to do so for the other parties to the contract, the vendors, did not
commit any breach, much less a substantial breach, 18 of their obligation.
Their obligation was merely to deliver the parcels of land to the NHA, an
obligation that they fulfilled. The NHA did not suffer any injury by the
performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather,
the cancellation was based on the negation of the cause arising from the
realization that the lands, which were the object of the sale, were not
suitable for housing.
Cause is the essential reason which moves the contracting parties to enter
into it. 19 In other words, the cause is the immediate, direct and proximate
reason which justifies the creation of an obligation through the will of the
contracting parties. 20Cause, which is the essential reason for the contract,
should be distinguished from motive, which is the particular reason of a
contracting party which does not affect the other party. 21
For example, in a contract of sale of a piece of land, such as in this case,
the cause of the vendor (petitioners' principals) in entering into the contract
is to obtain the price. For the vendee, NHA, it is the acquisition of the
land. 22 The motive of the NHA, on the other hand, is to use said lands for
housing. This is apparent from the portion of the Deeds of Absolute
Sale 23 stating:
WHEREAS, under the Executive Order No. 90 dated
December 17, 1986, the VENDEE is mandated to focus and
concentrate its efforts and resources in providing housing
assistance to the lowest thirty percent (30%) of urban
income earners, thru slum upgrading and development of
sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and 557 [as]
amended by Letter of Instruction No. 630, prescribed slum
improvement and upgrading, as well as the development of
sites and services as the principal housing strategy for
dealing with slum, squatter and other blighted communities;
xxx xxx xxx
36
 WHEREAS, the VENDEE, in pursuit of and in compliance with
the above-stated purposes offers to buy and the VENDORS,
in a gesture of their willing to cooperate with the above
policy and commitments, agree to sell the aforesaid
property together with all the existing improvements there
or belonging to the VENDORS;
NOW, THEREFORE, for and in consideration of the foregoing
premises and the terms and conditions hereinbelow
stipulated, the VENDORS hereby, sell, transfer, cede and
convey unto the VENDEE, its assigns, or successors-in-
interest, a parcel of land located at Bo. Tadiangan, Tuba,
Benguet containing a total area of FIFTY SIX THOUSAND
EIGHT HUNDRED NINETEEN (56,819) SQUARE METERS,
more or less . . . .
Ordinarily, a party's motives for entering into the contract do not affect the
contract. However, when the motive predetermines the cause, the motive
may be regarded as the cause. In Liguez vs. Court of Appeals, 24 this Court,
speaking through Justice J.B.L. REYES, HELD:
. . . it is well to note, however, that Manresa himself
(Vol. 8, pp. 641-642), while maintaining the
distinction and upholding the inoperativeness of the
motives of the parties to determine the validity of
the contract, expressly excepts from the rule those
contracts that are conditioned upon the attainment
of the motives of either party.
The same view is held by the Supreme Court of
Spain, in its decisions of February 4, 1941, and
December 4, 1946, holding that the motive may be
regarded as causa when it predetermines the
purpose of the contract.
In this case, it is clear, and petitioners do not dispute, that NHA would not
have entered into the contract were the lands not suitable for housing. In
other words, the quality of the land was an implied condition for the NHA to
enter into the contract. On the part of the NHA, therefore, the motive was
the cause for its being a party to the sale.
Were the lands indeed unsuitable for housing as NHA claimed?
We deem the findings contained in the report of the Land Geosciences
Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale,
thus:
In Tadiangan, Tuba, the housing site is situated in
an area of moderate topography. There [are] more
areas of less sloping ground apparently habitable.
The site is underlain by . . . thick slide deposits (4-
45m) consisting of huge conglomerate boulders
(see Photo No. 2) mix[ed] with silty clay
materials. These clay particles when saturated have
some swelling characteristics which is dangerous for
any civil structures especially mass housing
development. 25
Petitioners contend that the report was merely "preliminary," and not
conclusive, as indicated in its title:
MEMORANDUM
TO: EDWIN G. DOMINGO
Chief, Lands Geology Division
FROM: ARISTOTLE A. RILLON
Geologist II
SUBJECT: Preliminary Assessment of
Tadiangan Housing Project in Tuba, Benguet 26
Thus, page 2 of the report states in part:
xxx xxx xxx
Actually there is a need to conduct further
geottechnical [sic] studies in the NHA property.
Standard Penetration Test (SPT) must be carried out
to give an estimate of the degree of compaction (the
relative density) of the slide deposit and also the
bearing capacity of the soil materials. Another thing
to consider is the vulnerability of the area to
landslides and other mass movements due to thick
soil cover. Preventive physical mitigation methods
such as surface and subsurface drainage and
regrading of the slope must be done in the area. 27
37
We read the quoted portion, however, to mean only that further tests are
required to determine the "degree of compaction," "the bearing capacity of
the soil materials," and the "vulnerability of the area to landslides," since
the tests already conducted were inadequate to ascertain such geological
attributes. It is only in this sense that the assessment was "preliminary."

Accordingly, we hold that the NHA was justified in canceling the contract.
The realization of the mistake as regards the quality of the land resulted in
the negation of the motive/cause thus rendering the contract
inexistent. 28 Article 1318 of the Civil Code states that:

Art. 1318. There is no contract unless the following

requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the

contract;

(3) Cause of the obligation which is established.

(Emphasis supplied.)

Therefore, assuming that petitioners are parties, assignees or beneficiaries

to the contract of sale, they would not be entitled to any award of damages.

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.

Puno, Pardo and Ynares-Santiago, JJ., concur.

38
 UY V. COURT OF APPEALS
G.R. No. 120465, 09 September 1999
WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON.
ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
FACTS:
Petitioners Uy and Roxas are agents authorized to sell eight parcels of land
by the owners thereof. By virtue of such authority, petitioners offered to
sell the lands located in Benguet to respondent NHA to be utilized and
developed as a housing project. On February 14, 1989, the NHA Board
approved the acquisition of said lands, at the cost of P23.87M, pursuant to
which the parties executed a series of Deeds of Absolute Sale covering the
subject lands. Of the eight parcels, however, only five were paid for by the
NHA because of the report it received from the Land Geosciences Bureau of
the DENR that the remaining area is located at an active landslide area and
therefore, not suitable for development into a housing project.
In 1991, the NHA cancelled the sale of the 3 parcels of land and
subsequently offered the amount of P1.225 million to the landowners as
daños perjuicios. On 9 March 1992, petitioners filed before the QC RTC a
Complaint for Damages.
The RTC rendered a decision declaring the cancellation of the contract to be
justified. The trial court nevertheless awarded damages to plaintiffs in the
same amount offered by NHA to petitioners as damages. Upon appeal by
petitioners, the CA held that since there was "sufficient justifiable basis" in
cancelling the sale, "it saw no reason" for the award of damages. Hence,
this petition.
ISSUES:
(1) Was there a legal basis for the rescission of the sale of the 3 parcels of
land? And granting arguendo that NHA has legal basis to rescind, does the
petitioner have the right to claim for damages?
(2) [Irrelevant] Were the petitioners allowed to lodge a complaint as agents?
HELD:
(1) There was no “rescission” per se. What is involved is a cancellation
based on the negation of the cause of the contract.
(2) [Irrelevant] No. Petitioners are not parties, heirs, assignees, or
beneficiaries of a stipulation pour autrui under the contracts of sale, they do
not, under substantive law, possess the right they seek to enforce.
RATIO:
(1) Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Art. 1191. The right of rescission or, more
accurately, resolution, is predicated on a breach of faith by the other party.
NHA did not have the right to rescind for the other parties to the contract,
the vendors, did not commit any breach of their obligation. The cancellation
was based on the negation of the cause arising from the realization that the
lands, which were the object of the sale, were not suitable for housing.
Cause, which is the essential reason for the contract, should be distinguished
from motive, which is the particular reason of a party which does not affect
the other party.
In a contract of sale of a piece of land, such as in this case, the cause of the
vendor (petitioners' principals) in entering into the contract is to obtain the
price. For the vendee, NHA, it is the acquisition of the land. The motive of
the NHA, on the other hand, is to use said lands for housing.
Ordinarily, a party's motives for entering into the contract do not affect the
contract. However, when the motive predetermines the cause, the
motive may be regarded as the cause. In this case, it is clear, and
petitioners do not dispute, that NHA would not have entered into the
contract were the lands not suitable for housing. In other words, the
quality of the land was an implied condition for the NHA to enter into
the contract. On NHA’s part, therefore, the motive was the cause for its
being a party to the sale. The findings of the Land Geosciences Bureau were
sufficient for the cancellation of the sale
NHA was justified in canceling the contract. The realization of the mistake
as regards the quality of the land resulted in the negation of the
motive/cause thus rendering the contract inexistent. Article 1318 of the
Civil Code enumerates the essential requisites of a contract: (1) Consent of
the parties; (2) Subject matter; and (3) Cause of the obligation which is
established. Therefore, assuming that petitioners are parties, assignees or
beneficiaries to the contract of sale, they would not be entitled to any award
of damages.
(2) [Irrelevant, but again, this is worth knowing ] Sec. 2, Rule 3 of
the Rules of Court requires that every action must be prosecuted and
defended in the name of the real party-in-interest. An action shall be
prosecuted in the name of the party who, by the substantive law, has the
right sought to be enforced.
Do petitioners, under substantive law, possess such right? No. Contracts
take effect only between the parties, their assigns, and heirs, except in case
where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation, or by provision of law. . .
Article 1311 of the Civil Code.
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient.
39
Petitioners are mere agents of the owners of the land subject of the sale. As
agents, they only render some service or do something in representation or
on behalf of their principals. The rendering of such service did not make
them parties to the contracts of sale executed in behalf of the latter.

An agent, in his own behalf, may bring as an assignee of such

contract. Section 372 (1) of the Restatement of the Law on Agency.
Petitioners, however, were not able to show that they were
assignees of their principal. They were not able to establish any
agreement granting them "the right to receive payment and out of the
proceeds to reimburse [themselves] for advances and commissions before
turning the balance over to the principal[s]."

Finally, it did not appear that petitioners were beneficiaries of a

stipulation pour autrui under the second paragraph of Article 1311
of the Civil Code. That petitioners did not obtain their commissions or
recoup their advances because of the non-performance of the contract did
not entitle them to file the action against respondent NHA. Section 372 (2)
of the Restatement of the Law on Agency (Second).

WHEREFORE, the instant petition is hereby DENIED.

40