III.

Distinguished from other contracts and proceeds in the concept of commissions and not from the
Relationships payroll, like an employee would.
And as we said, Sevilla herself, based on her letter of
Cases: November 28, 1961, presumed her principal's authority
as owner of the business undertaking. We are convinced,
1. Sevilla v. CA considering the circumstances and from the respondent
FACTS: Court's recital of facts, that the parties had contemplated
On Oct. 19, 1960, the Tourist World Service, Inc. leased a principal-agent relationship, rather than a joint
an office at Mabini St., Manila for the former's use as a management or a partnership.
branch office. When the branch office was opened, the But unlike simple grants of a power of attorney, the
same was run by the herein appellant Lina O. Sevilla agency that we hereby declare to be compatible with the
payable to Tourist World Service Inc. by any airline for intent of the parties, cannot be revoked at will. The
any fare brought in on the efforts of Mrs. Lina Sevilla, reason is that it is one coupled with an interest, the
4% was to go to Lina Sevilla and 3% was to be withheld agency having been created for the mutual interest of
by the Tourist World Service, Inc. the agent and the principal. Accordingly, the revocation
On or about November 24, 1961, the Tourist World complained of should entitle the petitioner, Lina Sevilla,
Service, Inc. appears to have been informed that Lina to damages
Sevilla was connected with a rival firm, the Philippine
Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing
down its office. 2. Shell v. Firemen's Insurance Co.
This was firmed up by two resolutions of the board of
directors of Tourist World Service, Inc. dated Dec. 2, Facts:
1961, the first abolishing the office of the manager and - A Plymouth car owned by Salvador Sison was
vice-president of the Tourist World Service, Inc., Ermita brought to the Shell Gasoline and Service Station
Branch, and the second, authorizing the corporate operated by Porfirio De La Fuente for washing, greasing
secretary to receive the properties of the Tourist World and spraying upon payment of P8.00.
Service then located at the said branch office. It further - Before the greasing job could be completed, the
appears that on Jan. 3, 1962, the contract with the car fell resulting to damages. The case was immediately
appellees for the use of the Branch Office premises was reported to Manila Adjustor Company, the adjustor of
terminated and while the effectivity thereof was Jan. 31, the Firemen’s Insurance Company and the Commercial
1962, the appellees no longer used it. As a matter of fact Casualty Insurance Company, as the car was insured
appellants used it since Nov. 1961. Because of this, and with them.
to comply with the mandate of the Tourist World Service, - The car was restored to running condition after
the corporate secretary Gabino Canilao went over to the repairs amounting to P1,651.38, and was delivered to
branch office, and, finding the premises locked, and, Salvador Sison, who, in turn made assignments of his
being unable to contact Lina Sevilla, he padlocked the rights to recover damages in favor of FIC and CCIC.
premises on June 4, 1962 to protect the interests of the - The insurance companies together with Salvador
Tourist World Service. Sison filed an action for the recovery of the total amount
When neither the appellant Lina Sevilla nor any of her of the damage from defendants Porfirio de la Fuente and
employees could enter the locked premises, a complaint Shell Company of the Philippines, Ltd on the ground of
was filed by the herein appellants against the appellees negligence.
with a prayer for the issuance of mandatory preliminary - CFI of Manila dismissed the complaint.
injunction. Both appellees answered with counterclaims. - CA reversed the judgment and sentenced Shell
RTC: The trial court held for the private respondents on and De La Fuente to pay the amount sought to be
the premise that the private respondent, Tourist World recovered, legal interest and costs, jointly and severally.
Service, Inc., being the true lessee, it was within its Issue:
prerogative to terminate the lease and padlock the - W/N Shell is liable for the damage.
premises. It likewise found the petitioner, Lina Sevilla, to Held:
be a more employee of said Tourist World Service, Inc. - Yes.
and as such, she was bound by the acts of her employer. - De La Fuente owed his position to the company
CA: affirmed and the latter could remove him or terminate his
ISSUE: services at will; the service station belonged to the
Whether or not the act of Tourist World Service in company and bore its tradename and the operator sold
abolishing its Ermita branch was proper and whether or only products of the company; the equipment used by
not there exists an employee-employer relationship the operator belonged to the company and were just
SC: loaned to the operator and the company took charge of
No, the act of Tourist World Service in abolishing its their repair and maintenance; the employee of the
Ermita branch was not proper. The Supreme Court held company supervised the operator and conducted periodic
that when the petitioner, Lina Sevilla, agreed to manage inspection of the company’s gasoline and service station;
Tourist World Service, Inc.'s Ermita office, she must price of the products sold by the operator was fixed by
have done so pursuant to a contract of agency. the company, not by the operator; and the receipt
In the case at bar, Sevilla solicited airline fares, but she signed by the operator (for receipt of loaned equipment)
did so for and on behalf of her principal, Tourist World indicated he was a mere agent, are sufficient to conclude
Service, Inc. As compensation, she received 4% of the that the operator was an agent and not an independent
contractor
- The servicing job on Sison’s automobile was searched, though vainly, for judicial authorities and
accepted by De la Fuente in the normal and ordinary enlightenment. All the laws and principles of law we have
conduct of his business as operator of his co-appellee’s found, as regards master and servants, or employer and
service station, and the jerking and swaying of the employee, refer to cases of physical injuries, light or
hydraulic lift which caused the fall of the subject car serious, resulting in loss of a member of the body or of
were due to its defective condition, resulting in its faulty any one of the senses, or permanent physical disability
operation or even death, suffered in line of duty and in the course
- As the act of the agent or his employees acting of the performance of the duties assigned to the servant
within the scope of his authority is the act of the or employee, and these cases are mainly governed by
principal, the breach of the undertaking by the agent is the Employer's Liability Act and the Workmen's
one for which the principal is answerable. Compensation Act. But a case involving damages caused
to an employee by a stranger or outsider while said
3. Dela Cruz v. Northern Theatrical Enterprises employee was in the performance of his duties, presents
(1954) a novel question which under present legislation we are
neither able nor prepared to decide in favor of the
Alleged principal: (NTEI) Northern Theatrical employee.
Enterprises Inc., Alleged agent: Domingo de la Cruz · But we are not prepared to say and to hold that
(plaintiff) the giving of said legal assistance to its employees is a
legal obligation. While it might yet and possibly be
Facts: regarded as a normal obligation, it does not at present
· De la Cruz is a special guard to one of the movie count with the sanction of man-made laws.
houses of NTEI. · If the employer is not legally obliged to give,
· Benjamin wanted to gate crash without ticket legal assistance to its employee and provide him
inside the movie house but was prevented by the guard with a lawyer, naturally said employee may not
De la Cruz. Infuriated, Benjamin attacked De la Cruz recover the amount he may have paid a lawyer
with a bolo, cornered, De la Cruz shot his gun which hired by him.
killed Benjamin. · Viewed from another angle it may be said that the
· A homicide case was filed against him and thus, damage suffered by the plaintiff by reason of the
hired a lawyer. In which, he asked the former employer expenses incurred by him in remunerating his lawyer, is
for reimbursement of expenses but was refused. not caused by his act of shooting to death the gate
· He filed the present action against the movie crasher but rather by the filing of the charge of
corporation and three members of its board of directors homicide which made it necessary for him to
for recovery and also for damages. defend himself with the aid of counsel.
· Still another point of view is that the damages
CFI dismissed the case rejecting the theory that he was incurred here consisting of the payment of the lawyer's
an agent of the defendants. No Cause of Action. fee did not flow directly from the performance of his
Issue: duties but only indirectly because there was an efficient,
· Whether a security guard in an employer- intervening cause, namely, the filing of the criminal
employee relationship is an agent and may recover for charges. In other words, the shooting to death of the
damages. deceased by the plaintiff was not the proximate cause of
· Whether an employee or servant who in line of the damages suffered but may be regarded as only a
duty and while in the performance of the task assigned remote cause, because from the shooting to the
to him, performs an act which eventually results in his damages suffered there was not that natural and
incurring in expenses, caused not directly by his master continuous sequence required to fix civil
or employer or his fellow servants or by reason of his responsibility.
performance of his duty, but rather by a third party or
stranger not in the employ of his employer, may recover
said damages against his employer. (found in the case)
Ruling: The judgment of the lower court is affirmed. No
costs
Held:
· No, the relationship between the movie 4. Nielson & Company, Inc v. Lepanto Consolidated
corporation and the plaintiff was not that of Mining Company
principal and agent because the principle of
representation was in no way involved. Facts:
· Plaintiff was not employed to represent the
defendant corporation in its dealings with third parties. A contract was made by the parties on January 30, 1937
He was a mere employee hired to perform a certain for a period of 5 years whereby NIELSON operated and
specific duty or task, that of acting as special guard and managed the mining properties owned by the LEPANTO
staying at the main entrance of the movie house to stop for a management fee of P2,500.00 a month and a 10%
gate crashers and to maintain peace and order within the participation in the net profits resulting from the
premises. operation of the mining properties.
· We confess that we are not aware of any law or
judicial authority that is directly applicable to the present In the latter part of 1941, the parties agreed to renew
case, and realizing the importance and far-reaching the contract for another period of five (5) years, but in
effect of a ruling on the subject-matter we have the meantime, the Pacific War broke out in December,
1941. Thus, the operation of the mining properties was
disrupted. In this case, it appears that the principal and paramount
undertaking of Nielson under the management contract
Shortly after the mines were liberated from the Japanese was the operation and development of the mine and the
invaders in 1945, a disagreement arose between operation of the mill. All the other undertakings
NIELSON and LEPANTO over the status of the operating mentioned in the contract are necessary or incidental to
contract in question which was renewed expired in 1947. the principal undertaking — these other undertakings
Under the terms thereof, the management contract shall being dependent upon the work on the development of
remain in suspense in case fortuitous event or force the mine and the operation of the mill. In the
majeure, such as war or civil commotion, adversely performance of this principal undertaking Nielson was
affects the work of mining and milling. not in any way executing juridical acts for Lepanto,
destined to create, modify or extinguish business
In the meantime Lepanto took possession of the mining relations between Lepanto and third persons. In other
properties and embarked in rebuilding and words, in performing its principal undertaking Nielson
reconstructing the mines and mill. The rehabilitation and was not acting as an agent of Lepanto, in the sense that
reconstruction of the mine and mill was not completed the term agent is interpreted under the law of agency,
until 1948. On June 26, 1948 the mines resumed but as one who was performing material acts for an
operation under the exclusive management of LEPANTO. employer, for a compensation.

On February 6, 1958, NIELSON brought this action It was also stated that the management contract
against defendant before the Court of First Instance of provides that Nielson would also act as purchasing agent
Manila to recover certain sums of money representing of supplies and enter into contracts regarding the sale of
damages allegedly suffered by the former in view of the mineral, BUT the contract also provides that Nielson
refusal of LEPANTO to comply with the terms of a could not make any purchase, or sell the minerals,
management contract. without the prior approval of Lepanto. It is clear,
therefore, that even in these cases Nielson could not
NIELSON held that on account of the war, the contract execute juridical acts which would bind Lepanto without
was suspended during the war; hence the life of the first securing the approval of Lepanto. Nielson, then, was
contract should be considered extended for such time of to act only as an intermediary, not as an agent.
the period of suspension. On the other hand, LEPANTO
contended that the contract should expire in 1947 as The principal consideration of the employment by
originally agreed upon because the period of suspension Lepanto of Nielson to operate and manage its mines was
accorded by virtue of the war did not operate to extend the latter’s know-how and technical services it offered.
further the life of the contract. The contract thus entered into pursuant to the offer
made by Nielson and accepted by Lepanto was a
CFI: Dismissed the complaint. "detailed operating contract". Nowhere in the record is it
SC: Reversed, ruled in favor of the plaintiff. shown that Lepanto considered Nielson as its agent.

LEPANTO filed a motion for reconsideration. They now Therefore, the management contract entered into by the
assert that the management contract in question is a parties is not a contract of agency.
contract of agency such that it has the right to revoke
and terminate the said contract, as it did terminate the
same, under the law of agency 5. Quiroga v. Parsons Hardware

ISSUE: WON the management contract is a contract of Facts:

agency or a contract of lease of services. A contract was entered into by herein plaintiff Quiroga
and defendant J. Parsons wherein the former granted the
RULING: latter with the exclusive right to sale Quiroga beds in the
Visayan Islands subject to conditions.
In both agency and lease of services one of the parties
binds himself to render some service to the other party. A complaint was filed by plaintiff averring that defendant
Agency, however, is distinguished from lease of work or violated the ff. obligations: not to sell the beds at higher
services in that the basis of agency is representation, prices than those of the invoices; to have an open
while in the lease of work or services the basis is establishment in Iloilo; itself to conduct the agency; to
employment. The lessor of services does not represent keep the beds on public exhibition, and to pay for the
his employer, while the agent represents his principal. advertisement expenses for the same; and to order the
beds by the dozen and in no other manner.
Agency is a preparatory contract, as agency "does not
stop with the agency because the purpose is to enter With the exception of the obligation on the part of the
into other contracts." The most characteristic feature of defendant to order the beds by the dozen and in no
an agency relationship is the agent's power to bring other manner, none of the obligations imputed to the
about business relations between his principal and third defendant are expressly set forth in the contract
persons. "The agent is destined to execute juridical acts executed by Quiroga and Parsons.
(creation, modification or extinction of relations with
third parties). Lease of services contemplate only
material (non-juridical) acts."
Plaintiff alleged that the defendant was his agent for the insurance, banking charges, cables, etc.
sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency. 3. The petitioner did not show the respondent
the cable of inquiry nor the reply of Star Piano Company
Issue: Whether there was a contract of sale or a but merely informed the Arco of the price of $1,700.
contract of agency between the plaintiff and the Being agreeable to this price, the Arco in a letter signed
defendant. by C. S. Salmon dated November 19, 1929, formally
authorized the order.
Held:
The contract contains the essential features of a contract 4. The equipment arrived and upon delivery the
of purchase and sale. There was the obligation on the price of $1.700, plus the 10 per cent commission agreed
part of the plaintiff to supply the beds, and, on the part upon and plus all the expenses and charges, was duly
of the defendant, to pay their price. These features paid by Arco to Puyat & Sons. Same process happened
exclude the legal conception of an agency or order to sell the next year, this time priced at $1,600. Puyat & Sons
whereby the mandatory or agent received the thing to ordered the equipment from Star Piano Company,
sell it, and does not pay its price, but delivers to the delivered it to Arco and the latter payed the price plus
principal the price he obtains from the sale of the thing the commission agreed.
to a third person, and if he does not succeed in selling it,
he returns it. I By virtue of the contract between the 5. About three years later, the officials of the
plaintiff and the defendant, the latter, on receiving the Arco discovered that the price quoted to them by the
beds, was necessarily obliged to pay their price within Puyat & Sons was not the net price but rather the list
the term fixed, without any other consideration and price, and that the Puyat & Sons had obtained a discount
regardless as to whether he had or had not sold the from the Starr Piano Company. Moreover, thru reviews
beds. and literature on prices of machinery and cinematograph
equipment, said officials were convinced that the prices
charged them by the defendant were much too high
Not a single one of the clauses in the contract
including the charges for out-of-pocket expense.
necessarily conveys the idea of an agency. The words
commission on sales used in clause (A) of article 1 mean
6. For these reasons, they sought to obtain a
nothing else, as stated in the contract itself, than a mere
reduction from the defendant or rather a reimbursement,
discount on the invoice price. The word agency, also
and failing in this they brought the present action for
used in articles 2 and 3, only expresses that the
reimbursement of certain amounts allegedly overpaid by
defendant was the only one that could sell the plaintiff’s
it on account of the purchase price.
beds in the Visayan Islands. It must be understood that
a contract is what the law defines it to be, and not what
7. RTC - ruled in favour of Gil Puyat & Sons: the
it is called by the contracting parties.
contract between the petitioner and the respondent was
one of outright purchase and sale, and absolved that
Only the acts of the contracting parties, subsequent to, petitioner from the complaint.
and in connection with, the execution of the contract,
must be considered for the purpose of interpreting the 8. CA - reversed RTC’s decision: the relation
contract, when such interpretation is necessary, but not between petitioner and respondent was that of agent
when, as in the instant case, its essential agreements and principal, the petitioner acting as agent of the
are clearly set forth and plainly show that the contract respondent in the purchase of the equipment in
belongs to a certain kind and not to another. question, and sentenced the petitioner to pay the
respondent alleged overpayments. That even if the
contract between the petitioner and the respondent was
6. Gonzalo Puyat & Sons v. Arco Amusement Co. one of purchase and sale, the petitioner was guilty of
fraud in concealing the true price and hence would still
FACTS be liable to reimburse the respondent for the
overpayments made by the latter.
1. Alleged Principal(Buyer): Arco Amusement
Company, respondent, a corporation engaged in the 9. SC - reversed CA’s decision, sustained RTC
business of operating cinematographs. decision.
Alleged Agent(Seller): Gonzalo Puyat & Sons,
Inc., petitioner, a corporation doing businesses in Manila, ISSUE
and acting as exclusive agent in the Philippines for the
Starr Piano Company of Richmond, Indiana, U. S. A., a Whether or not the contract between petitioner and
company that deals in cinematograph equipment and respondent is one of agency.
machinery
HELD
2. Contract: Both parties agreed that Gonzalo
Puyat & Sons would, on behalf of the Arco Amusement No, the contract between the petitioner and the
Company, order sound reproducing equipment from the respondent was one of purchase and sale, and not one of
Star Piano Company and that Arco would pay the Puyat agency.
& Sons, in addition to the price of the equipment, a 10
per cent commission, plus all expenses, such as, freight, The contract is the law between the parties and should
include all the things they are supposed to have been Of the total value of P799.50, Lim had paid to Ayroso
agreed upon. What does not appear on the face of the only P240.00, and this was paid on three different times.
contract should be regarded merely as "dealer's" or Demands for the payment of the balance of the value of
"trader's talk", which can not bind either party. the tobacco were made upon Lim by Ayroso.

The letters by which the respondent accepted the prices No further amount was paid prompting Ayroso to file a
of $1,700 and $1,600, respectively, are clear in their complaint against Lim for estafa.
terms and admit no other interpretation. The respondent
admitted in its complaint filed with the Court of First RTC: Lim was found guilty of the crime of estafa, to
Instance of Manila that the petitioner agreed to sell to it suffer imprisonment, indemnify the offended party and in
the first sound reproducing equipment and machinery. case of insolvency, subsidize imprisonment shall take
effect.
This is incompatible with the pretended relation of
agency between the petitioner and the respondent, CA: Affirmed the decision of the lower court but modified
because in agency, the agent is exempted from all the penalty imposed by sentencing her "to suffer an
liability in the discharge of his commission provided he indeterminate penalty, to indemnify the complainant of
acts in accordance with the instructions received from his less than 9.50 from the previous amount and without
principal, and the principal must indemnify the agent for subsidiary imprisonment.
all damages which the latter may incur in carrying out
the agency without fault or imprudence on his part ISSUE: Whether the receipt is a contract of agency to
(article 1729, Civil Code). sell or a contract of sale of the subject tobacco between
petitioner and the complainant.
While the letters, state that the petitioner was to receive
ten per cent (10%) commission, this does not HELD: The receipt is a contract of agency to sell.
necessarily make the petitioner an agent of the
respondent, as this provision is only an additional price In an agency to sell, the agent receives the thing to sell
which the respondent bound itself to pay, and which it, and does not pay its price, but delivers to the principal
stipulation is not incompatible with the contract of the price he obtains from the sale of the thing to a third
purchase and sale. person, and if he does not succeed in selling it, he
returns it.
Also, to hold the petitioner an agent of the respondent in It is clear in the agreement, that the proceeds of the sale
the purchase of equipment and machinery from the Starr of the tobacco should be turned over to the complainant
Piano Company of Richmond, Indiana, is incompatible as soon as the same was sold. The fact that appellant
with the fact that the petitioner is the exclusive agent of received the tobacco to be sold at P1.30 per kilo and the
the same company in the Philippines. It is out of the proceeds to be given to complainant as soon as it was
ordinary for one to be the agent of both the vendor and sold, strongly negates transfer of ownership of the goods
the purchaser. The facts and circumstances indicated do to the petitioner. The agreement constituted her as an
not point to anything but plain ordinary transaction agent with the obligation to return the tobacco if the
where the respondent enters into a contract of purchase same was not sold.
and sale with the petitioner, the latter as exclusive agent
of the Starr Piano Company in the United States. ***Supplemental Explanation***

It follows that the petitioner as vendor is not bound to Aside from the fact that Maria Ayroso testified that the
reimburse the respondent as vendee for any difference appellant asked her to be her agent in selling Ayroso's
between the cost price and the sales price which tobacco, the appellant herself admitted that there was
represents the profit realized by the vendor out of the an agreement that upon the sale of the tobacco she
transaction. This is the very essence of commerce would be given something. Lim (appellant) is a
without which merchants or middleman would not exist businesswoman, and it is unbelievable that she would go
to the extent of going to Ayroso's house and take the
tobacco with a jeep which she had brought if she did not
7. Lim v. People intend to make a profit out of the transaction. Certainly,
if she was doing a favor to Maria Ayroso and it was
FACTS: Ayroso who had requested her to sell her tobacco, it
would not have been the appellant who would have gone
Lourdes Lim is a businesswoman, who went to the house to the house of Ayroso, but it would have been Ayroso
of Maria Ayroso and proposed to sell Ayroso's tobacco. who would have gone to the house of the appellant and
Ayroso agreed to the proposition of Lim to sell her deliver the tobacco to the appellant.
tobacco consisting of 615 kilos at P1.30 a kilo.

Lim was to receive the overprice for which she could sell
the tobacco. An agreement was made in the presence of 8. Pacific Commercial v. Yatco
plaintiff's sister, Salud G. Bantug. Salvador Bantug drew
the document. FACTS: Pacific Commercial Company (PCC) is a corp.
engaged in business as a merchat officed in Manila, Cebu
and Iloilo sold for Victorias Milling Co. (VMC) 4/1/1934 to
12/31/1935, refined sugar manufactured by the latter
for P1,126,135.96 and received by way of commission which was delivered to the purchaser's ex-ship. The
for this sale PCC received P29,944.90. VMC paid to the sugar sold under these conditions was shipped by the
Collector of Internal Revenue (CIR) P16,944.90 as as plaintiff at its expense and risk until it reached its
manufacturer and owner of sugar sold. CIR also taxed destination, where it was later taken ex-ship by the
PCC the same amount. purchaser. The plaintiff never had possession of the
sugar at any time. The circumstance that the bill of
Sales were made by PCC in two ways. PCC looked for lading was sent to the plaintiff does not alter its
purchases of sugar, and one the corresponding purchase character of being merely a broker, or constitute
order is obtained, the same is sent to VMC in Manila and possession by it of the sugar shipped, inasmuch as the
endorses the order to its Negros office, with instructions same was sent to it for the sole purpose of turning it
to ship the sugar to Manila, Cebu or Iloilo, as the case over to the purchaser for the collection of the price. The
may be.The purchase is made for the delivery of the sugar did not come to its possession in any sense.
sugar ex-warehouse of PCC and at other times delivery
ex-ship. In all cases, the bill of lading is sent to PCC. If Note: Side issue on double taxation. No double taxation. The
ex-ship, all that PCC did was hand over the bill of lading tax is not upon property or products, but upon occupation or
to the purchaser and collect the price. If ex-warehouse, industry. The tax was paid by Aldecoa & Co. and Gil Hermanos
in consideration of the occupation or industry in which each is
the sugar is first deposited in the warehouse of PCC
engaged. The value of the thing sold is taken into account only
before delivery to the purchaser.
as a basis for the fixing of the amount of the tax and not as the
reason and purpose thereof.
The court found that of the sugar sold, the amount of
P588,550.41 was ex-warehouse and P567,585.55 was Definitions: “ex warehouse” - used to state that the buyer of
ex-ship. Considering in the first case that PCC acted as a goods is responsible for arranging and paying for them to be
commission merchant and in the second a broker, the transported from the seller's warehouse
court ordered the defendant to return to PCC the amount
"ex ship" - is a trade term requiring the seller to deliver goods
paid for the sales of sugar sold ex-warehouse.
to a buyer at an agreed port of arrival.

ISSUE: Whether or not PCC acted as commission

merchant as to sugar delivered ex-warehouse and mere
commercial broker as to sugar delivered ex-ship.
9. Ker v. Lingad
FACTS:
RULING: Decision of lower court Affirmed. PCC as Principal – United States Rubber International
commission merchant for sugar delivered ex-warehouse Agent – Ker & Co., LTD
and commercial broker for ex-ship.
Petitioner was assessed by the then Commissioner of
RATIO: The question of whether the appellant, in Internal Revenue Melecio R. Domingo the sum of
connection with the sugar delivered ex-warehouse and P20,272.33 as the commercial broker's percentage
thereafter sold to the purchasers, acted as a commission tax, surcharge, and compromise penalty .There was a
merchant , presents no doubt. A commission merchant is request on the part of petitioner for the cancellation of
one engaged in the purchase or sale for another of such assessment, which request was turned down. It
personal property which, for this purpose, is placed in his filed a petition for review with the Court of Tax Appeals.
possession and at his disposal. He maintains a relation The Court of Tax Appeals held petitioner taxable except
not only with his principal and the purchasers or as to the compromise penalty of P500.00, the amount
vendors, but also with the property which is the subject due from it being fixed at P19,772.33.
matter of the transaction. In the present case, the sugar Such liability arose from a contract of petitioner with the
was shipped by Victorias Milling Co., and upon arrival at United States Rubber International, the former being
the port of destination, the plaintiff received and referred to as the Distributor and the latter specifically
transferred it for deposit in its warehouses until the designated as the Company.
purchaser called for it. The deposit of the sugar in the
warehouses of the plaintiff was made upon its own In the contract, there was a crucial stipulation whereby
account and at its own risk until it was sold and taken by the Company shall from time to time consign to the
the purchaser. There is, therefore, no doubt that the Distributor and the Distributor will receive, accept
plaintiff, after taking the sugar on board until it was sold, and/or hold upon consignment the products specified
had it in its possession and at its own risk, circumstances under the terms of this agreement in such quantities as
determinative of its status as a commission merchant in in the judgment of the Company may be necessary for
connection with the sale of sugar under these conditions. the successful solicitation and maintenance of business
in the territory, and the Distributor agrees that
There is also no doubt on the question of whether the responsibility for the final sole of all goods delivered shall
plaintiff merely acted as a commercial broker as to the rest with him. All goods on consignment shall remain
sale of the sugar delivered to the purchaser ex-ship. The the property of the Company until sold by the
broker, unlike the commission merchant, has no relation Distributor to the purchaser or purchasers, but all sales
with the thing he sells or buys. He is merely an made by the Distributor shall be in his name.
intermediary between the purchaser and the vendor. He
acquires neither the possession nor the custody of the It is further agreed that this agreement does not
things sold. His only office is to bring together the constitute Distributor the agent or legal
parties to the transaction. These circumstances are representative of the Company for any purpose
present in connection with the plaintiff's sale of the sugar
whatsoever. Distributor is not granted any right or between contracts of sale and the creation of an agency
authority to assume or to create any obligation or to sell has led to the establishment of rules by the
responsibility, express or implied, in behalf of or in the application of which this difficulty may be solved. The
name of the Company, or to bind the Company in any decisions say the transfer of title or agreement to
manner or thing whatsoever. transfer it for a price paid or promised is the
essence of sale. If such transfer puts the transferee in
Moreover, all resale prices, lists, discounts and general the attitude or position of an owner and makes him liable
terms and conditions of local resale were to be subject to the transferor as a debtor for the agreed price, and
to the approval of the Company and to change from not merely as an agent who must account for the
time to time in its discretion. On a date to be determined proceeds of a resale, the transaction is a sale; while the
by the Company, the petitioner, as Distributor, was essence of an agency to sell is the delivery to an
required to report to it data showing in detail all sales agent, not as his property, but as the property of
during the month immediately preceding, specifying the principal, who remains the owner and has the
therein the quantities, sizes and types together with right to control sales, fix the price, and terms,
such information as may be required for accounting demand and receive the proceeds less the agent's
purposes, with the Company rendering an invoice on commission upon sales made.' "
sales as described to be dated as of the date of inventory
and sales report. The terms of the contract, as noted, speak quite clearly.
The Company, at its own expense, was to keep the There is lacking that degree of ambiguity sufficient to
consigned stock fully insured against loss or damage by give rise to serious doubt as to what was contemplated
fire or as a result of fire, the policy of such insurance to by the parties. A reading thereof discloses that the
be payable to it in the event of loss. Petitioner, as relationship arising therefrom was not one of seller
Distributor, assumed full responsibility with reference to and purchaser. If it were thus intended, then it would
the stock and its safety at all times; and upon request of not have included covenants which in their totality would
the Company at any time, it was to render inventory of negate the concept of a firm acquiring as vendee goods
the existing stock which could be subject to change. from another. Instead, the stipulations were so worded
There was furthermore this equally tell-tale covenant: as to lead to no other conclusion than that the control by
"Upon the termination or any cancellation of this the United States Rubber International over the goods in
agreement all goods held on consignment shall be question is, in the language of the Constantino opinion,
held by the Distributor for the account of the "pervasive". The insistence on a relationship opposed to
Company, without expense to the Company, until that apparent from the language employed might even
such time as provision can be made by the Company for yield the impression that such a mode of construction
disposition. was resorted to in order that the applicability of a taxing
statute might be rendered nugatory. Certainly, such a
ISSUE: result is to be avoided.
Whether or not the relationship thus
created is of broker and principal/ agency The Decision of Court of Tax Appeals is affirmed.
RULING:
Yes. Upon the analysis of the contract as
a whole, the relationship created is of broker and
principal/ agency.qq 10. Hahn v. CA
According to the National Internal Revenue Code, a
commercial broker "includes all persons, other than FACTS:
importers, manufacturers, producers, or bona fide
employees, who, for compensation or profit, sell or bring
● Principal - BMW; Agent - Alfred Hahn
about sales or purchases of merchandise for other
persons or bring proposed buyers and sellers together,
● Alfred Hahn is a Filipino citizen doing
or negotiate freights or other business for owners of business under the name and style "Hahn-
vessels or other means of transportation, or for the Manila." On the other hand, private
shippers, or consignors or consignees of freight carried respondent Bayerische Motoren Werke
by vessels or other means of transportation. The term Aktiengesellschaft (BMW) is a nonresident
includes commission merchants."
foreign corporation existing under the laws of
the former Federal Republic of Germany, with
The controlling decision as to the test to be followed as
to who falls within the above definition of a commercial principal office at Munich, Germany.
broker is that of Commissioner of Internal Revenue v. ● On March 7, 1967, petitioner executed in
Constantino. In the language of Justice J. B. L. Reyes, favor of private respondent a "Deed of
who penned the opinion: "Since the company retained Assignment with Special Power of Attorney,"
ownership of the goods, even as it delivered which reads in full as follows:
possession unto the dealer for resale to customers,
the price and terms of which were subject to the
company's control, the relationship between the
○ WHEREAS, the ASSIGNOR is the
company and the dealer is one of agency, ... ." present owner and holder of the BMW
trademark and device in the
An excerpt from Salisbury v. Brooks cited in support of Philippines which ASSIGNOR uses
such a view follows: " 'The difficulty in distinguishing
 and has been using on the products of ASSIGNEE's limited production, the
manufactured by ASSIGNEE, and for latter shall not be able to supply
which ASSIGNOR is the authorized automobiles to ASSIGNOR.
exclusive Dealer of the ASSIGNEE in
the Philippines, the same being ● Per the agreement, the parties "continue[d]
evidenced by certificate of registration business relations as has been usual in the
issued by the Director of Patents on past without a formal contract." But on
12 December 1963 and is referred to February 16, 1993, in a meeting with a BMW
as Trademark No. 10625; representative and the president of Columbia
Motors Corporation (CMC), Jose Alvarez,
○ WHEREAS, the ASSIGNOR has petitioner was informed that BMW was
agreed to transfer and consequently arranging to grant the exclusive dealership of
record said transfer of the said BMW BMW cars and products to CMC, which had
trademark and device in favor of the expressed interest in acquiring the same. On
ASSIGNEE herein with the Philippines February 24, 1993, petitioner received
Patent Office; confirmation of the information from BMW
which, in a letter, expressed dissatisfaction
○ NOW THEREFORE, in view of the with various aspects of petitioner's business,
foregoing and in consideration of the mentioning among other things, decline in
stipulations hereunder stated, the sales, deteriorating services, and inadequate
ASSIGNOR hereby affirms the said showroom and warehouse facilities, and
assignment and transfer in favor of the petitioner's alleged failure to comply with the
ASSIGNEE under the following terms standards for an exclusive BMW dealer.2
and conditions: Nonetheless, BMW expressed willingness to
continue business relations with the petitioner
1. The ASSIGNEE shall take on the basis of a "standard BMW importer"
appropriate steps against any user contract, otherwise, it said, if this was not
other than ASSIGNOR or infringer of acceptable to petitioner, BMW would have no
the BMW trademark in the Philippines; alternative but to terminate petitioner's
for such purpose, the ASSIGNOR exclusive dealership effective June 30, 1993;
shall inform the ASSIGNEE Petitioner protested, claiming that the
immediately of any such use or termination of his exclusive dealership would
infringement of the said trademark be a breach of the Deed of Assignment.3
which comes to his knowledge and Hahn insisted that as long as the assignment
upon such information the ASSIGNOR of its trademark and device subsisted, he
shall automatically act as Attorney-In- remained BMW's exclusive dealer in the
Fact of the ASSIGNEE for such case, Philippines because the assignment was
with full power, authority and made in consideration of the exclusive
responsibility to prosecute unilaterally dealership.
or in concert with ASSIGNEE, any ● Because of Hahn's insistence on the former
such infringer of the subject mark and business relation, BMW withdrew on March
for purposes hereof the ASSIGNOR is 26, 1993 its offer of a "standard importer
hereby named and constituted as contract" and terminated the exclusive dealer
ASSIGNEE's Attorney-In-Fact, but any relationship. BMW proposed that Hahn and
such suit without ASSIGNEE's CMC jointly import and distribute BMW cars
consent will exclusively be the and parts.
responsibility and for the account of ● Hahn found the proposal unacceptable. He
the ASSIGNOR, filed a complaint for specific performance and
damages against BMW to compel it to
2. That the ASSIGNOR and the continue the exclusive dealership. Later he
ASSIGNEE shall continue business filed an amended complaint to include an
relations as has been usual in the past application for temporary restraining order
without a formal contract, and for that and for writs of preliminary, mandatory and
purpose, the dealership of ASSIGNOR prohibitory injunction to enjoin BMW from
shall cover the ASSIGNEE's complete terminating his exclusive dealership.
production program with the only
limitation that, for the present, in view RTC:
 ● RTC ruled in favor of Hahn; The trial court
deferred resolution of the motion to dismiss ● The fact that Hahn invested his own money to
until after trial on the merits for the reason put up these service centers and showrooms
that the grounds advanced by BMW in its does not necessarily prove that he is not an
motion did not seem to be indubitable. agent of BMW. For as already noted, there
are facts in the record which suggest that
CA: BMW exercised control over Hahn's activities
● Without seeking reconsideration of the as a dealer and made regular inspections of
aforementioned order, BMW filed a petition Hahn's premises to enforce compliance with
for certiorari with the Court of Appeals. BMW standards and specifications.
● CA reversed RTC decision; it rendered
judgment finding the trial court guilty of grave ● In effect, BMW was holding Hahn accountable
abuse of discretion in deferring resolution of to it under the 1967 Agreement.
the motion to dismiss. It ruled that BMW was
not doing business in the country and, ● In addition, BMW held out private respondent
therefore, jurisdiction over it could not be Hahn as its exclusive distributor in the
acquired through service of summons on the Philippines, even as it announced in the Asian
DTI pursuant to Rule 14, §14. 'The court region that Hahn was the "official BMW agent"
upheld private respondent's contention that in the Philippines.
Hahn acted in his own name and for his own
account and independently of BMW, based WHEREFORE, the decision of the Court of Appeals
on Alfred Hahn's allegations that he had is REVERSED and the case is REMANDED to the
invested his own money and resources in trial court for further proceedings.
establishing BMW's goodwill in the Philippines
and on BMW's claim that Hahn sold products 11. Valeroso v. SkyCable Corporation
other than those of BMW. It held that
FACTS: Petitioners Valeroso and Legatona alleged that
petitioner was a mere indentor or broker and they worked as account executives from November 1,
not an agent through whom private 1998 to July 13, 1998 as evidenced by the Certification
respondent BMW transacted business in the issued by the Sales Territory Manager, Michael De la
Philippines. Consequently, the Court of Cuesta. The petitioners received commissions upon
Appeals dismissed petitioner's complaint reaching specific quota every month. However, on
January 1, 2007 the petitioners were transferred to
against BMW.
Armada Resources & Marketing Solutions, Inc. (ARMI),
formerly Skill Plus Manpower Services, an independent
ISSUE: Whether petitioner Alfred Hahn is the agent contractor. On February 2009, they were informed that
or distributor in the Philippines of private respondent their commission will be reduced due to the introduction
BMW. of prepaid cards sold to cable subscribers which resulted
to a lower monthly cable subscriptions. Since they are
dismayed to such reduction, they informed their
RULING: Yes, Hahn is an agent of BMW.
manager in ARMI, Marlon Pasta, that they will be filing a
● Contrary to the appellate court's conclusion,
labor case with the NLRC. Because of that threat, Pasta
this arrangement shows an agency. An agent informed them that they will be dropped from the list of
receives a commission upon the successful its account executives. A complaint for illegal dismissal,
conclusion of a sale. On the other hand, a non-payment of 13th month pay separation pay and
broker earns his pay merely by bringing the illegal deduction, including additional cause of action
buyer and the seller together, even if no sale such as regularization and payment of moral and
exemplary damages, was filed by petitioners against
is eventually made.
respondent on February 25, 2009 before the Labor
Arbiter. In defense, the respondent claimed that it did
● As to the service centers and showrooms not terminate the services of petitioners for there was
which he said he had put up at his own never an employer-employee relationship to begin with.
expense, Hahn said that he had to follow The respondent averred that they engaged petitioners as
BMW specifications as exclusive dealer of independent contractors under a Sales Agency
Agreement. Since they decided to streamline its
BMW in the Philippines. According to Hahn,
operations, they engaged the services of ARMI instead of
BMW periodically inspected the service contracting numerous independent account executives.
centers to see to it that BMW standards were Respondent insisted that he engaged in a legitimate job
maintained. Indeed, it would seem from contracting and that there was no employer-employee
BMW's letter to Hahn that it was for Hahn's relation that exist between them. The Labor Arbiter
alleged failure to maintain BMW standards dismissed the case. But upon appeal to the NLRC, the
that BMW was terminating Hahn's dealership.
decision of the Labor Arbiter was reversed. The NLRC's from the said 20% net profit share and he should be
decision was reversed by the CA. thankful that he was given a job to feed his family
Lirio then verbally dismissed Genovia from work.
ISSUE: WON an employer-employee relationship exists Genovia filed a complaint for illegal dismissal and prayed
between petitioners, Valeroso and Legtona, and for his reinstatement without loss of seniority rights, or
respondent Skycable Corp. that he be paid separation pay, backwages and overtime
pay; and that he be awarded unpaid commission for
HELD: No. The SC ruled that the employer- services rendered as a studio technician as well as moral
employee relationship is absent in this case. The and exemplary damages.
evidence adduced by the petitioners were not sufficient Lirio’s defense:
to prove that such relationship existed between them Respondent could not have been hired as a studio
and the Skycable Corp. The SC cite guidelines to manager, since the recording studio has no personnel
establish competent evidence to prove employer- except petitioner.
employee relationship: To prove the claim of an Respondent verbally agreed with petitioner to co-
employer-employee relationship, the following should be produce the album based on the following terms and
established by competent evidence: (1) the selection and conditions: (1) petitioner shall provide all the financing,
engagement of the employee; (2) the payment of equipment and recording studio; (2) Celine Mei Lirio
wages; (3) the power of dismissal; and (4) the shall sing all the songs; (3) respondent shall act as
employer's power to control the employee with respect composer and arranger of all the lyrics and the music of
to the means and methods by which the work is to be the five songs he already composed and the revival
accomplished (or the "right of control test"). Based on songs; (4) petitioner shall have exclusive right to market
the right of control test, when they engaged the the album; (5) petitioner was entitled to 60% of the net
services of ARMI, they do not have the power to control profit, while respondent and Celine Mei Lirio were each
the actions of the petitioners with respect to the means entitled to 20% of the net profit; and (6) respondent
and methods for them to achieve the goals set by shall be entitled to draw advances of P7,000.00 a month,
Skycable. The respondent's act of giving them incentives which shall be deductible from his share of the net
(commissions) for meritorious performance, updates of profits and only until such time that the album has been
new promos & price listings, conducting meetings and produced.
trainings, and imposing quotas and penalties, does not Accordingly, their relationship was an informal
pertain to the means and methods of how the petitioners partnership under Article 1767 of the Civil Code because:
were to perform and accomplish their tasks. The a. They agreed to contribute money, property or
supervision and monitoring done by Skycable is not industry to a common fund with the intention of
sufficient to establish the employer-employee dividing the profits among themselves
relationship. As evidenced by the Sales Agency b. Petitioner had no control over the time and
Agreement duly executed and signed, petitioners and manner by which respondent composed or arranged
respondent unequivocally agreed that former's services the songs, except on the result thereof.
were to be engaged on an agency basis as sales account Labor Arbiter: Ruled that there was an employee-
executives and that no employer-employee relationship employer relationship and not partnership and that
is created but an independent contractorship. Genovia was illegally dismissed.
NLRC: Reversed. Genovia failed to prove with
substantial evidence that he was selected and engaged
12. Cesar Lirio (doing business under the name of by petitioner, that petitioner had the power to dismiss
Celkor Ad Sonic mix) v. Genovia him, and that they had the power to control him not only
as to the result of his work, but also as to the means and
FACTS: methods of accomplishing his work.
Petitioner Lirio, owner of Celkor Ad Sonicmix Recording CA: set aside the ruling of the NLRC.
Studio (Celkor), hired Resp. Genovia as studio manager ISSUE: Whether or not the relationship between Lirio
particularly, to manage and operate Celkor and to and Genovia has an employee-employer relation.
promote and sell the recording studio's services to music HELD: Yes was not partnership but an employer-
enthusiasts and other prospective clients. employee relationship. CA decision affirmed.
He was to receive a monthly salary of P7, 000 and RATIO:
P100.00 per hour as recording technician. His work was The elements to determine the existence of an
from Monday to Friday, 9am-6pm. Days after he started employment relationship are: (a) the selection and
working as a studio manager, petitioner approached him engagement of the employee; (b) the payment of
and told him about his project to produce an album for wages; (c) the power of dismissal; and (d) the
his 15-year-old daughter. Petitioner asked respondent to employer's power to control the employee’s
compose and arrange songs and promised that he (Lirio) conduct. The most important element is the employer's
would draft a contract to assure respondent of his control of the employee's conduct, not only as to the
compensation for such services. result of the work to be done, but also as to the means
The album was completed and finally aired but Lirio and methods to accomplish it.
denied him his compensation despite several demands. All the aforesaid elements are present and was proven
Lirio told Genovia that he was entitled only to 20% of the by Genovia through documentary evidence. A document
net profit, and not of the gross sales of the album, and denominated as "payroll" (dated July 31, 2001 to March
that the salaries he received and would continue to 15, 2002) certified correct by petitioner which showed
receive as studio manager of Celkor would be deducted that respondent received a monthly salary of P7, 000.00
(P3, 500.00 every 15th of the month and another P3,
500.00 every 30th of the month) with the corresponding arbiter. On November 7,2008, the Supreme Court
deductions due to absences incurred by respondent; and reversed the CA, hence the present Motion for
(2) copies of petty cash vouchers, showing the amounts Reconsideration.
he received and signed for in the payrolls.
Petitioner wielded the power to dismiss as respondent ISSUE:
stated that petitioner verbally dismissed him, and
respondent, thereafter, filed an action for illegal Whether or not Tongco is an agent of Manulife.
dismissal against petitioner.
Petitioner certainly had the power to check on the RULING:
progress and work of respondent as stated in his Position
Paper and that it was agreed that he would help and Yes, Tongco is an agent of Manulife.
teach respondent how to use the studio equipment.
Lirio failed to prove that his relationship with respondent RATIO:
was one of partnership. Such claim was not supported by
any written agreement: One of the differences between agency and employment
In the payroll dated July 31, 2001 to March 15, 2002, is the degree of control exerted by the
there were deductions from the wages of respondent for principal/employer. In agency, the principal exerts
his absence from work, which negates petitioner's claim control over the agent but the means and manner of
that the wages paid were advances for respondent’s undertaking the agent’s tasks are largely left at the
work in the partnership. discretion of the latter. In contrast, the degree of control
It is a well-settled doctrine, that if doubts exist between exerted by the employer over the employee is greater,
the evidence presented by the employer and the when even the means and manner are dictated to by the
employee, the scales of justice must be tilted in favor of former.
the latter. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably In the present case, it was very evident that Manulife
arising from the evidence or in the interpretation of has practically left Tongco alone not only in doing the
agreements and writing should be resolved in the business of selling insurance but also in guiding the
former’s favor. agents under his wing. It was only during de Dios’ first
letter that Manulife exerted some control on the means
and manner but even then, the court construed the
13. Tongko v. Manulife same as recommendations. That Tongco was saddled up
with administrative responsibilities does not afford an
FACTS: employer-employee relationship as he was construed by
the court as a “Lead Agent”. Finally, Tongco is estopped
Petitioner was a Regional Sales Manager for respondent. from claiming otherwise as his tax declarations specifies
Their contractual relationship began on July 1,1977 him as self-employed.
under a Career Agent's Agreement. The agreement
stipulated that Tongko, as agent, is an independent
contractor and nothing in said agreement will give rise to
an employer-employee relationship. The agreement also 14. Degaños v. People
provides that Manulife may terminate Tongco within 15
days of breach and that both parties may terminate the FACTS: Narciso Degaños (Degaños) and Brigida/Aida
agreement 15 days after notice. On 1983, Tongco was Luz (Luz), brother and sister, were accused of estafa for
named Unit Manager and was again named as Branch failure to return the proceeds or jewelry worth
Manager in 1990. Six years later, Tongco became a ₱438,702.00 to Spouses Atty. Jose Bordador and Lydia
Regional Sales Manager. Since the beginning, Tongco Bordador, which they were under express obligation to
has declared himself to be self-employed in his income sell on commission, then remit the proceeds or return
tax returns. the unsold pieces of jewelry, despite repeated demands
for compliance.
In 2001, Manulife instituted manpower development Complainants testified that they know the accused
programs at the regional sales management level. because they are relatives of Atty. Borbador and their
Respondent Renato Vergel de Dios wrote a letter to kumpadre/kumadre. Degaños frequently visited the
Tongco concerning the low agent recruitment numbers of complainants’ house to sell religious articles, where
Tongco’s assigned area. Subsequently, on December 18, Degaños saw Lydia counting jewelry. Degaños showed
2001, de Dios sent Tongco ba termination letter effective the jewelry to Luz who later called Lydia to ask if she
in 15 days. could trust Degaños to get pieces of jewelry from her for
Luz to sell. Lydia agreed with the condition that if they
Tongco responded by filing and illegal dismissal could not pay it in cash, they should pay it after one
complaint with NLRC. Tongco contended that ge was an month or return the unsold jewelry within the said
employee of Manulife and that his dismissal was illegal. period. She delivered the said jewelry as evidenced by
Manulife contends that Tongco was their agent. several documents entitled “Katibayan at Kasunduan.”
Everytime Degaños got jewelry from her, he signed the
The labor arbiter decreed that no employer-employee receipts in her presence. They were able to pay only up
relationship exist. NLRC reversed said ruling. In the to a certain point. However, there were jewelry,
petition for Certiorari CA found that NLRC gravely evidenced by receipts, no longer paid or returned despite
abused its discretion and reinstated the decision of the oral and written demands.
Luz testified that she requested for an accounting of her and Lubao, Pampanga were not ready for hauling. The
indebtedness. Lydia made an accounting which Luz paid PNR granted said request and allowed Lizette to
only the principal for the interest was excessive. Atty. withdraw scrap/unserviceable rails in Murcia, Capas and
Bordador brought a ledger to Luz and asked her to sign San Miguel, Tarlac instead. However, the PNR
the same. She refused to sign because the contents are subsequently suspended the withdrawal in view of what
not her indebtedness but that of her brother’s. it considered as documentary discrepancies coupled by
Degaños testified that all the “Kasunduan at Katibayan” reported pilferages of over P500,000.00 worth of PNR
were signed by him. The phrase “for Brigida Luz” and for scrap properties in Tarlac.
“Evely Aquino” were written on the receipts so that in
case he fails to pay for the items the private Consequently, the spouses Angeles demanded the refund
complainants would have someone to collect from. He of the amount of P96,000.00. The PNR, however, refused
categorically admitted that he is the only one who was to pay, alleging that as per delivery receipt duly signed
indebted to the private complainants by Lizette, 54.658 metric tons of unserviceable rails had
RTC - found Deganos guilty but acquitted Luz. already been withdrawn which, at P2,100.00 per metric
CA - affirmed conviction but modified the prescribed ton, were worth P114,781.80, an amount that exceeds
penalty. the claim for refund.

ISSUE: WON the agreement between the parties was On August 10, 1988, the spouses Angeles filed suit
one of Sale on Credit against the PNR and its corporate secretary, Rodolfo
Flores, among others, for specific performance and
HELD: No. Transaction was an Agency, not a Sale on damages before the Regional Trial Court of Quezon City.
Credit. In it, they prayed that PNR be directed to deliver 46
metric tons of scrap/unserviceable rails and to pay them
RATIO: Based on the express terms and tenor of the damages and attorney's fees.
Kasunduan at Katibayan , Degaños received and
accepted the items under the obligation to sell them in On April 16, 1996, the trial court, on the postulate that
behalf of the complainants and he would be the spouses Angeles are not the real parties-in-interest,
compensated with the overprice as his commission. rendered judgment dismissing their complaint for lack of
Plainly, the transaction was a consignment under the cause of action. As held by the court, Lizette was merely
obligation to account for the proceeds of sale, or to a representative of Romualdez in the withdrawal of scrap
return the unsold items. As such, he was the agent of or unserviceable rails awarded to him and not an
the complainants in the sale to others of the items listed assignee to the latter's rights with respect to the award.
in the Kasunduan at Katibayan.
In contrast, according the first paragraph of Article 1458 CoA - complaint for specific performance and damages.
of the Civil Code, one of the contracting parties in a
contract of sale obligates himself to transfer the RTC - the spouses Angeles are not the real parties-in-
ownership of and to deliver a determinate thing, while interest, rendered judgment dismissing their complaint
the other party obligates himself to pay therefor a price for lack of cause of action. As held by the court, Lizette
certain in money or its equivalent. Contrary to the was merely a representative of Romualdez in the
contention of Degaños, there was no sale on credit to withdrawal of scrap or unserviceable rails awarded to
him because the ownership of the items did not pass to him and not an assignee to the latter's rights with
him. respect to the award.

CA - Affirmed the RTC

15. Angeles v. PNR ISSUE: Whether or not Lizette, and consequently her
husband (Laureano T. Angeles), was a mere agent and
therefore not a real party in interest.
FACTS: On May 5, 1980, the respondent Philippine
National Railways (PNR) informed a certain Gaudencio HELD: Yes. Lizette was not an assignee, but merely an
Romualdez (Romualdez, hereinafter) that it has accepted agent whose authority was limited to the withdrawal of
the latter’s offer to buy, on an AS IS, WHERE IS basis, the scrap rails, hence, without personality to sue.
the PNRs scrap/unserviceable rails located in Del Carmen
and Lubao, Pampanga at P1,300.00 and P2,100.00 per Where agency exists, the third party's (in this case,
metric ton, respectively, for the total amount of PNR's) liability on a contract is to the principal and not to
P96,600.00. After paying the stated purchase price, the agent and the relationship of the third party to the
Romualdez addressed a letter to Atty. Cipriano Dizon, principal is the same as that in a contract in which there
PNRs Acting Purchasing Agent. Bearing date May 26, is no agent. Normally, the agent has neither rights nor
1980, authorizing LIZETTE R. WIJANCO to be his lawful liabilities as against the third party. He cannot thus sue
representative where he waived his rights, interests and or be sued on the contract. Since a contract may be
participation in favor of Wijanco (Lizette Wijanco - violated only by the parties thereto as against each
Angeles, herein petitioner’s deceased wife). other, the real party-in-interest, either as plaintiff or
defendant in an action upon that contract must,
That very same day May 26, 1980 Lizette requested the generally, be a contracting party.
PNR to transfer the location of withdrawal for the reason
that the scrap/unserviceable rails located in Del Carmen
The legal situation is, however, different where an agent Article 1371 of the Civil Code provides that to judge the
is constituted as an assignee. In such a case, the agent intention of the contracting parties, their
may, in his own behalf, sue on a contract made for his contemporaneous and subsequent acts shall be
principal, as an assignee of such contract. The rule principally considered. In other words, in case of doubt,
requiring every action to be prosecuted in the name of resort may be made to the situation, surroundings, and
the real party-in-interest recognizes the assignment of relations of the parties
rights of action and also recognizes that when one has a
right assigned to him, he is then the real party-in- The fact of agency was, as the trial court aptly observed,
interest and may maintain an action upon such claim or confirmed in subsequent letters from the Angeles
right. spouses in which they themselves refer to Lizette as
authorized representative of San Juanico Enterprises.
Upon scrutiny of the subject Romualdez's letter to Atty. Mention may also be made that the withdrawal receipt
Cipriano Dizon dated May 26, 1980, it is at once which Lizette had signed indicated that she was doing so
apparent that Lizette was to act just as a representative in a representative capacity. One professing to act as
of Romualdez in the withdrawal of rails, and not an agent for another is estopped to deny his agency both as
assignee. For perspective, we reproduce the contents of against his asserted principal and third persons
said letter: interested in the transaction which he engaged in.
Lizette, with respect to the withdrawal of the scrap in
“This is to inform you as President of San Juanico Enterprises, question, was acting for Romualdez. And with the view
that I have authorized the bearer, LIZETTE R. WIJANCO x x x we take of this case, there were substantial pieces of
to be my lawful representative in the withdrawal of the evidence adduced to support this determination.
scrap/unserviceable rails awarded to me.

A power of attorney is only but an instrument in writing

For this reason, I have given her the ORIGINAL COPY of the
AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May by which a person, as principal, appoints another as his
20, 1980 which will indicate my waiver of rights, interests and agent and confers upon him the authority to perform
participation in favor of LIZETTE R. WIJANCO.” certain specified acts on behalf of the principal. The
written authorization itself is the power of attorney, and
If Lizette was without legal standing to sue and appear in this is clearly indicated by the fact that it has also been
this case, there is more reason to hold that her called a letter of attorney. Its primary purpose is not to
petitioner husband, either as her conjugal partner or her define the authority of the agent as between himself and
heir, is also without such standing. his principal but to evidence the authority of the agent to
third parties with whom the agent deals. The letter under
Petitioner submits that the second paragraph of the consideration is sufficient to constitute a power of
Romualdez letter, stating - I have given [Lizette] the attorney. Except as may be required by statute, a power
original copy of the award x x x which will indicate my of attorney is valid although no notary public intervened
waiver of rights, interests and participation in favor of in its execution.
Lizette R. Wijanco - clarifies that Lizette was intended to
be an assignee, and not a mere agent. All that Lizette was authorized to do was to withdraw the
unserviceable/scrap railings. Allowing her authority to
We are not persuaded. As it were, the petitioner sue therefor, especially in her own name, would be to
conveniently omitted an important phrase preceding the read something not intended, let alone written in the
paragraph which would have put the whole matter in Romualdez letter.
context. The phrase is “For this reason”, and the
antecedent thereof is his (Romualdez) having appointed Finally, the petitioner's claim that Lizette paid the
Lizette as his representative in the matter of the amount of P96,000.00 to the PNR appears to be a mere
withdrawal of the scrap items. In fine, the key phrase afterthought; it ought to be dismissed outright under the
clearly conveys the idea that Lizette was given the estoppel principle. In earlier proceedings, petitioner
original copy of the contract award to enable her to himself admitted in his complaint that it was Romualdez
withdraw the rails as Romualdez’s authorized who paid this amount.
representative.

Article 1374 of the Civil Code provides that the various 16. Victorias Milling v. CA
stipulations of a contract shall be read and interpreted
together, attributing to the doubtful ones that sense FACTS:
which may result from all of them taken jointly. In fine,
the real intention of the parties is primarily to be Principal - St. Therese Merchandising
determined from the language used and gathered from Agent - Consolidated Sugar Corporation
the whole instrument. When put into the context of the
letter as a whole, it is abundantly clear that the rights St. Therese Merchandising (STM) regularly bought sugar
which Romualdez waived or ceded in favor of Lizette from Victorias Milling Co., Inc. (petitioner), (VMC). In the
were those in furtherance of the agency relation that he course of their dealings, Victoria Milling Co (petitioner)
had established for the withdrawal of the rails. issued several Shipping List/Delivery Receipts (SLDRs) to
STM as proof of purchases.
At any rate, any doubt as to the intent of Romualdez Among these was SLDR No. 1214M. SLDR No. 1214M
generated by the way his letter was couched could be covers 25,000 bags of sugar."
clarified by the acts of the main players themselves.
STM sold to private respondent Consolidated Sugar deliver to plaintiff-appellee 23,000 bags of refined sugar
Corporation (CSC) its rights in SLDR No. 1214M. under SLDR No. 1214M.
CSC(respondent) issued one check and three postdated
checks in payment. Ration behind the modification:

CSC wrote petitioner that it had been authorized by STM The rationale for this is to afford the party against whom
to withdraw the sugar covered by SLDR No. 1214M. the evidence is presented to object thereto if he deems it
Enclosed in the letter were a copy of SLDR No. 1214M necessary. Plaintiff-appellee is, therefore, correct in its
and a letter of authority from STM authorizing CSC "to argument that Exhibit F' which was offered to prove that
withdraw for and in our behalf the refined sugar covered checks in the total amount of P15,950,000.00 had been
by Shipping List/Delivery Receipt-Refined Sugar (SDR) cleared. (Formal Offer of Evidence for Plaintiff, Records
No. 1214 dated October 16, 1989 in the total quantity of p. 58) cannot be used to prove the proposition that
25,000 bags." 12,586 bags of sugar remained undelivered.

STM then issued 16 checks with VMC (petitioner) as The testimonial evidence, by Teresita and Marianito,
payee. VMC, in turn, issued Official Receipt No. 33743 presented by plaintiff-appellee was to the effect that it
acknowledging receipt of the said checks in payment of had withdrawn only 2,000 bags of sugar from SLDR after
50,000 bags. Aside from SLDR No. 1214M, said checks which it was not allowed to withdraw anymore.
also covered SLDR No. 1213. Documentary evidence show that plaintiff-appellee had
sent demand letters to defendant-appellant asking the
CSC (private respondent) surrendered SLDR No. 1214M latter to allow it to withdraw the remaining 23,000 bags
to the petitioner's NAWACO warehouse and was allowed of sugar from SLDR 1214M. Defendant-appellant, on the
to withdraw sugar. However, after 2,000 bags had been other hand, alleged that sugar delivery to the STM
released, petitioner refused to allow further withdrawals corresponded only to the value of cleared checks; and
of sugar against SLDR No. 1214M. that all sugar corresponded to cleared checks had been
withdrawn. Defendant-appellant did not rebut plaintiff-
CSC then sent petitioner a letter, informing that SLDR appellee's assertions. It did not present evidence to
No. 1214M had been "sold and endorsed" to it but that show how many bags of sugar had been withdrawn
it had been refused further withdrawals of sugar from against SLDR No. 1214M, precisely because of its theory
petitioner's warehouse despite the fact that only 2,000 that all sales in question were a series of one single
bags had been withdrawn. CSC thus inquired when it transaction and withdrawal of sugar depended on the
would be allowed to withdraw the remaining 23,000 clearing of checks paid therefor.
bags.
ISSUE: Whether CSC was an agent of STM and hence,
Petitioner replied that it could not allow any further estopped to sue upon SLDR No. 1214M as an assignee.
withdrawals of sugar against SLDR No. 1214M because
STM had already withdrawn all the sugar covered by the HELD: No, CSC was not an agent of STM.
cleared checks.
The basis of agency is representation. On the part of the
VMC reiterated that all the sugar corresponding to the principal, there must be an actual intention to appoint or
amount of STM's cleared checks had been fully an intention naturally inferable from his words or
withdrawn and hence, there would be no more deliveries actions; and on the part of the agent, there must be an
of the commodity to STM's account. Petitioner also noted intention to accept the appointment and act on it, and in
that CSC had represented itself to be STM's agent the absence of such intent, there is generally no agency.
as it had withdrawn the 2,000 bags against SLDR No. One factor which most clearly distinguishes agency from
1214M "for and in behalf" of STM. other legal concepts is control; one person - the agent -
agrees to act under the control or direction of another -
CSC filed a complaint for specific performance. the principal.
Defendants were Teresita Ng Sy (doing business under
the name of St. Therese Merchandising) and herein In the instant case, it appears plain to us that private
petitioner. Since the former could not be served with respondent CSC was a buyer of the SLDFR form, and not
summons, the case proceeded only against the latter. an agent of STM. Private respondent CSC was not
During the trial, it was discovered that Teresita Ng Go subject to STM's control. The question of whether a
who testified for CSC was the same Teresita Ng Sy who contract is one of sale or agency depends on the
could not be reached through summons. CSC, however, intention of the parties as gathered from the whole
did not bother to pursue its case against her, but instead scope and effect of the language employed. That the
used her as its witness. authorization given to CSC contained the phrase "for and
in our (STM's) behalf" did not establish an agency.
RTC: Ordered VMC to deliver to plaintiff the 23,000 bags Ultimately, what is decisive is the intention of the
of refined sugar sugar. parties. That no agency was meant to be established by
the CSC and STM is clearly shown by CSC's
CA: Modified the trial court’s judgment. Ordered VMC to communication to petitioner that SLDR No. 1214M had
deliver 12,586 bags of sugar covered by SLDR No. been "sold and endorsed" to it. The use of the words
1214M. "sold and endorsed" means that STM and CSC intended a

Appellate court modified its decision. Ordered VMC to

contract of sale, and not an agency. authorized to receive the money.

IV. Obligation to Determine Existence and It is a settled principle in agency that a person dealing
Scope of Agency with an agent must be careful in ascertaining the fact of
the agency and the nature and extent of authority of the
Cases: agent. Accordingly, “In approaching the consideration of
the inquiry whether an assumed authority exists in a
17. Keeler Electric Co. v. Rodriguez given case, there are certain fundamental principles
FACTS: which must not be overlooked. Among these are, as has
Harry Keeler is engaged in the electrical business and is been seen,
selling the “Matthews” plant in the Philippine Islands.
One day, A.C Montelibano went to the office of Harry
(1) that the law indulges in no bare presumptions that
Keeler and told him that he could find purchasers of the
an agency exists: it must be proved or presumed from
“Matthews” plant.
facts;

Keeler agreed with the understanding that for every

(2) that the agent cannot establish his own authority,
customer that he could find or any plant that he could
either by the representations or by assuming to exercise
sell, he would be given a 10% commission if the sale
it;
was consummated. Pursuant to this agreement,
Montelibano was able to negotiate the sale of the
(3) that an authority cannot be established by mere
Matthews plant between Keeler and Rodriguez. After the
rumor or general reputation;
machine had been installed, Rodriguez paid the purchase
price of ₱2,513.55 to Montelibano, without the
knowledge of Keeler. (4) that even a general authority is not an unlimited
Keeler alleged that it was his employee Cenar who one; and
installed the equipment in defendant’s premises.
Moreover, Keeler also claimed that it was Cenar who (5) that every authority must find its ultimate source in
gave him the statement of account totaling ₱2,563.95. some act or omission of the principal.
Cenar did not make any effort to collect the money since
he was assured by Rodriguez that he will pay it in Thus, when Rodriguez paid to Montelibano, he did so at
Manila. his own peril. He is therefore, still liable to pay Keeler
the amount of the electric plant.
On the other hand, Rodriguez alleged that he paid the
purchase price to Montelibano, since he was the one who
sold, delivered and installed the electrical plant; that he 18. Yu Eng Cho v. Pan American
was the one who presented the account; that he was
assured by Montelibano that he was authorized to collect FACTS: On July 10, 1976, Plaintiffs bought plane tickets
the value of the plant. from defendant Claudia Tagunicar who represented
herself to be an agent of defendant Tourist World
The lower court decided in favor of Rodriguez, holding Services, Inc. (TWSI) for the destinations Hongkong,
that Montelibano was an agent authorized to collect the Tokyo, San Francisco, USA
purchase price. On said date, only the passage from Manila to Hongkong,
then to Tokyo, were confirmed. Flight from Tokyo to San
ISSUE: WON the payment made by Rodriguez to Francisco was on “RQ” status, meaning “on request.”
Montelibano discharged his obligation to Harry Keeler. Per instruction of defendant Claudia Tagunicar, plaintiffs
returned after a few days for the confirmation of the Tokyo-
HELD: San Francisco segment of the trip. After calling up Canilao
No. According to the Court, there is nothing in the of TWSI, defendant Tagunicar told plaintiffs that their flight
receipt issued by Montelibano that would indicate that he is now confirmed all the way. Thereafter, she attached the
was authorized by Keeler to collect the money. confirmation stickers on the plane tickets.
Accordingly, what was contained therein were his Upon arrival in Tokyo, the plaintiffs called up Pan-Am
personal receipt and personal signature. There were no office for reconfirmation of their flight to San Francisco.
more indications of his authority. However, they were informed that their names are not in
the manifest. They were not allowed to stay in Japan for
Moreover, the Court also ruled that the receipt presented more than 72 hours so the officials advised them to go to
in evidence by Rodriguez actually shows that it was Taipei instead.
Cenar who gave the statement of accounts to him; There were no flights available for plaintiffs, thus, they
otherwise, there would have been no need to incur
were forced to return back to Manila instead of proceeding
shipping costs of P81.60 if it was Montelibano who
to the United States.
installed the plant in his premises.
Defendant Tagunicar alleges that it was only in the first
week of August, 1978 that she learned that the plaintiffs
In sum, there was no evidence that Keeler ever delivered
were not able to take the flight from Tokyo to San
any statement to Montelibano or that he was ever
Francisco, USA. She claims that plaintiffs asked for her
help so they can file an action against Pan-Am, hence, she
was asked to sign an affidavit stating that she was an CFI: The trial court rendered judgment in favor for the
agent of TWSI. plaintiff which is Austria. It held that defendant sps Abad
failed to prove the fact of robbery, or, if indeed it was
RTC - ordered defendants Pan-Am, TWSI, and Claudia committed, the defendant was guilty of negligence.
Tagunicar solidarily liable for damages to plaintiffs.
CA - modified the amount of damages awarded, and held CA: The defendants appealed to the Court of Appeals
Tagunicar solely liable, and absolved Pan-Am and TWSI and secured a reversal of judgment. It declared
respondents not responsible for the loss of the jewelry
from any liability.
on account of fortuitous event, and relieved them from
liability for damages to the owner.
ISSUE: WON the declaration of Tagunicar in the affidavit
that she is an agent of TWSI is sufficient to establish fact Hence, this case contending that for robbery to fall
or existence of her authority. under the category of fortuitous event and relieve the
obligor form his obligation under a contract, there ought
HELD: No. The declarations of the agent alone are to be prior judgment on the guilt of the persons
generally insufficient to establish the fact or extent of his responsible therefor.
authority.
ISSUE:
RATIO: Tagunicar was prevailed upon by the petitioners’
son and their lawyer to sign the affidavit despite her Whether in a contract of agency (consignment of goods
objection to the statement therein that she was an agent of for sale) it is necessary that there be prior conviction for
TWSI. They assured her that “it is immaterial” and that “if robbery before the loss of the article shall exempt the
we file a suit against you we cannot get anything from consignee from liability for such loss.
you.” This purported admission of respondent Tagunicar
cannot be used by petitioners to prove their agency RULING:
relationship. At any rate, even if such affidavit is to be
given any probative value, the existence of the agency NO, the law provides that except in case expressly
relationship cannot be established on its sole basis. The specified by law, or when it is otherwise declared by
declarations of the agent are generally insufficient to stipulation, or when the nature of the obligation require
the assumption of risk, no person shall be responsible
establish the fact or extent of his authority. In addition, as
for those events which could not be foreseen, or which,
between the negative allegation of respondents Canilao
though foreseen, were inevitable.
and Tagunicar that neither is an agent nor principal of the
other, and the affirmative allegation of petitioners that an
It must be noted that to avail of the exemption granted
agency relationship exists, it is the latter who have the in the law, it is not necessary that the persons
burden of evidence to prove their allegation, failing in responsible for the occurrence should be punished; it
which, their claim must necessarily fail. would only be sufficient to establish that the enforceable
event, the robbery in this case did take place without
any concurrent fault on the debtor`s part, and this can
V. Obligations and Liabilities of Agents to be done by preponderant evidence.
Third Parties
It must also be noted that a court finding that a robbery
Cases: has happened would not necessarily mean that those
accused in the criminal action should be found guilty of
19. Austria v. CA the crime; nor would be a ruling that those actually
accused did not commit the robbery be inconsistent with
FACTS: a finding that a robbery did take place. The evidence to
establish these facts would not necessarily be the
On January 30, 1961, Maria G. Abad acknowledged same.
that she received from Guillermo Austria one (1)
pendant with diamonds to be sold on a commission
basis or to be returned on demand. However, on
February 1, 1961, while walking home to her residence,
Abad was said to have been accosted by two men, one
of whom hit her on the face, while the other snatched 20. PNB v. Manila Surety
her purse containing jewelry and cash, and ran away.

Since Abad failed to return the jewelry or pay for its FACTS:
value notwithstanding demands, Austria brought in the
● ATACO - Principal; PNB - Agent
Court of First Instance of Manila an action against her
and her husband for recovery of the pendant or of its
value, and damages. On their answer, the defendant ● The Philippine National Bank had opened a
spouses set up the defense that the alleged robbery letter of credit and advanced thereon
had extinguished their obligation. $120,000.00 to Edgington Oil Refinery for
8,000 tons of hot asphalt.
 ● CA found PNB to have been negligent in
● Of this amount, 2,000 tons worth P279,000.00 having stopped collecting from the Bureau of
were released and delivered to Adams & Public Works the moneys falling due in favor
Taguba Corporation (known as ATACO) of principal debtor, ATACO before the debt
under a trust receipt guaranteed by Manila was fully collected, thereby allowing such
Surety & Fidelity Co. up to the amount of funds to be taken and exhausted by other
P75,000.00. creditors to the prejudice of the surety, and
held that PNB’s negligence resulted in
● To pay for the asphalt, ATACO constituted exoneration of Manila Surety.
the PNB as its assignee and attorney-in-fact
to receive and collect from the Bureau of The bank contends the power of attorney obtained
Public Works the amount aforesaid out of from ATACO was merely in additional security in its
funds payable to the assignor under Purchase favor, and it was the duty of the surety, and not of the
Order No. 71947. This assignment stipulated creditor owed to see to it that the obligor fulfills his
that the power of attorney shall also remain obligation, and that the creditor owed the surety no
irrevocable until ATACO’s total indebtedness duty of active diligence to collect any, sum from the
to PNB have been fully liquidated. principal debtor.

● ATACO delivered to the Bureau of Public

Works, and the latter accepted, asphalt to the ISSUE: Whether PNB has exercised due diligence in
total value of P431,466.52. Of this amount the collecting from the Bureau of Public Works. (No)
Bank regularly collected, from April 1948 to
November 1948, P106,382.01.
RULING:
● For unexplained reasons, the Bank ceased to
collect, until in 1952 its investigators found ● CA found PNB to be negligent in collecting
that more moneys were payable to ATACO the sums due to ATACO from the Bureau of
from the Public Works office, because the Public Works, contrary to its duty as holder of
latter had allowed mother creditor to collect an exclusive and irrevocable power of
funds due to ATACO under the same attorney to make such collections, since an
purchase order to a total of P311,230.41. agent is required to act with the care of a
good father of a family (CC Art 1887) and
● Its demands on the principal debtor and the becomes liable for the damages which the
Surety having been refused, the PNB sued principal may suffer through his non-
ATACO and Manila Surety in the Court of performance (CC Art 1884)
First Instance of Manila to recover the
balance plus interests and costs. ● Even if the assignment with power of attorney
from the principal debtor were considered as
mere additional security, still, by allowing the
CFI (RTC): assigned funds to be exhausted without
● Ruled in favor of PNB ordering ATACO and notifying the surety, the bank deprived the
Manila Surety to pay PNB. former of any possibility of recoursing against
that security.
● CFI also ordered ATACO and 3rd party
defendant Pedro Taguba, jointly and ● Because of the Bank’s inactivity, the other
severally, to pay Manila Surety, whatever creditors were enabled to collect
amount the latter has paid or shall pay under P173,870.31, when the balance due to
this judgement. appellant Bank was only P158,563.18. The
finding of negligence by CA is thus not only
Manila Surety appealed to CA conclusive but fully supported by the
evidence.

CA: WHEREFORE, the appealed decision is affirmed,

● Rendered a decision adverse to PNB and with costs against appellant Philippine National Bank.
modified the judgment of CFI as to the
surety’s liability. 21. Domingo v. Domingo (1971)
• Principal: Vicente M. Domingo ; Agent: Thousand Pesos (P1,000.00) as moral damages and One
Gregorio Domingo (real estate broker) Thousand Pesos (P1,000.00) as attorney's fees; (2) to
Facts: pay Teofilo Purisima the sum of Six Hundred Fifty Pesos
• Vicente granted Gregorio an exclusive agency to (P650.00); and (3) to pay the costs.
sell his lot No. 883 with an area of about 88,477 square
meters at the rate of P2.00 per square meter (or for Held:
P176,954.00) with a commission of 5% on the total • Yes. An agent who takes a secret profit in
price, if the property is sold by Vicente or by anyone else the nature of a bonus, gratuity or personal benefit
during the 30-day duration of the agency or if the from the vendee, without revealing the same to his
property is sold by Vicente within three months from the principal, the vendor, is guilty of a breach of his
termination of the agency to a purchaser to whom it was loyalty to the principal and forfeits his right to
submitted by Gregorio during the continuance of the collect the commission from his principal, even if
agency with notice to Vicente. The said agency contract the principal does not suffer any injury by reason
was in triplicate, one copy was given to Vicente, while of such breach of fidelity, or that he obtained
the original and another copy were retained by Gregorio. better results or that the agency is a gratuitous
• On June 3, 1956, Gregorio authorized the one, or that usage or custom allows it; because the
intervenor Teofilo P. Purisima to look for a buyer, rule is to prevent the possibility of any wrong, not
promising him one-half of the 5% commission. to remedy or repair an actual damage. By taking
• Thereafter, Teofilo Purisima introduced Oscar de such profit or bonus or gift or propina from the vendee,
Leon to Gregorio as a prospective buyer. the agent thereby assumes a position wholly inconsistent
• Oscar de Leon offered a price much lower than with that of being an agent for his principal, who has a
provided, thus, Vicente directed Gregorio to tell Oscar to right to treat him, insofar as his commission is
raise the offer. It was then raised to (P109,000.00) concerned, as if no agency had existed. The fact that the
which was agreed by both parties during a conference. principal may have been benefited by the valuable
• Upon demand by Vicente, Oscar de Leon issued services of the said agent does not exculpate the agent
P1000 as earnest money which Vicente advanced P300 who has only himself to blame for such a result by
to Gregorio. reason of his treachery or perfidy.
• Oscar gave Gregorio a gift or propina of
P1000 for succeeding in persuading Vicente to sell • Art. 1720. Every agent is bound to give an
his lot for a lower price. This gift was not disclosed account of his transaction and to pay to the
by Gregorio to Vicente. (root of the issue) principal whatever he may have received by virtue
• Oscar told Gregorio that he will give up the of the agency, even though what he has received is
negotiation and earnest money because his brother did not due to the principal.
not send the money.
• Gregorio was suspicious so he went to Vicente • The law imposes upon the agent the absolute
and reminded him that Vicente was still committed to obligation to make a full disclosure or complete account
pay him 5% commission, if the sale is consummated to his principal of all his transactions and other material
within three months. Vicente tore the original copy of the facts relevant to the agency, so much so that the law as
agreement document. amended does not countenance any stipulation
• Gregorio went to the Register of Deeds and exempting the agent from such an obligation and
found out that the sale was consummated between considers such an exemption as void. The duty of an
Vicente and Oscario’s wife. agent is likened to that of a trustee. This is not a
• He also conferred with Oscar de Leon, who told technical or arbitrary rule but a rule founded on the
him that Vicente went to him and asked him to highest and truest principle of morality as well as of the
eliminate Gregorio in the transaction and that he strictest justice.
would sell his property to him for One Hundred Four
Thousand Pesos (P104,000). (cheaper) • In the case at bar, defendant-appellee Gregorio
(A complaint was filed not mentioned what. Recovery Domingo as the broker, received a gift or propina in the
plus damages?) amount of One Thousand Pesos (P1,000.00) from the
Trial Court: In favor of Gregorio. prospective buyer Oscar de Leon, without the knowledge
CA: Affirmed. Sentenced the said Vicente M. Domingo to and consent of his principal, herein petitioner-appellant
pay Gregorio M. Domingo P2,307.50 and the intervenor Vicente Domingo. His acceptance of said substantial
Teofilo P. Purisima P2,607.50 with interest on both monetary gift corrupted his duty to serve the
amounts from the date of the filing of the complaint, to interests only of his principal and undermined his
pay Gregorio Domingo P1,000.00 as moral and loyalty to his principal, who gave him partial
exemplary damages and P500.00 as attorney's fees plus advance of Three Hundred Pesos (P300.00) on his
costs. commission. As a consequence, instead of exerting his
best to persuade his prospective buyer to purchase the
Issue: property on the most advantageous terms desired by his
• Whether the gift or propina given by Oscar to principal, the broker, herein defendant-appellee Gregorio
Gregorio constitutes fraud as to cause a forfeiture of his Domingo, succeeded in persuading his principal to accept
commission on the sale price. the counter-offer of the prospective buyer to purchase
Ruling: Yes. WHEREFORE, the judgment is hereby the property at P1.20 per square meter or One Hundred
rendered, reversing the decision of the Court of Appeals Nine Thousand Pesos (P109,000.00) in round figure for
and directing defendant-appellee Gregorio Domingo: (1) the lot of 88,477 square meters, which is very much
to pay to the heirs of Vicente Domingo the sum of One 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. 22. Severino v. Severino
• The duty embodied in Article 1891 of the New
Civil Code will not apply if the agent or broker acted only Agent: Defendant Guillermo Severino
as a middleman with the task of merely bringing Principal: Melecio Severino
together the vendor and vendee, who themselves
thereafter will negotiate on the terms and conditions of FACTS:
the transaction. Neither would the rule apply if the agent Melecio Severino owned 428 hectares of land in Silay,
or broker had informed the principal of the gift or bonus Occidental Negros. During Melecio’s lifetime, his brother,
or profit he received from the purchaser and his principal Guillermo (D), worked to administer the land for Melecio’s
did not object therto. 11 Herein defendant-appellee behalf. When Melecio died in 1915, D continued to occupy the
Gregorio Domingo was not merely a middleman of the said land.
petitioner-appellant Vicente Domingo and the buyer In 1916, a parcel survey was made of the lands in the
Oscar de Leon. He was the broker and agent of said municipality of Silay, including the land here in question, and
petitioner-appellant only. And therein petitioner- cadastral proceedings were instituted for the registration of
appellant was not aware of the gift of One Thousand the land titles within the surveyed area. In the cadastral
Pesos (P1,000.00) received by Gregorio Domingo from proceedings, Roque Hofileña, as lawyer for D, filed answers
the prospective buyer; much less did he consent to his in D’s behalf, claiming the lots mentioned as the property of
agent's accepting such a gift. his client. No opposition was presented in the proceedings,
• The fact that the buyer appearing in the deed of therefore, the court decreed the title in D’s favor in 1917.
sale is Amparo Diaz, the wife of Oscar de Leon, does not
materially alter the situation; because the transaction, to It may be further observed that at the time of the cadastral
be valid, must necessarily be with the consent of the proceedings, P-Fabiola was a minor; that D did not appear
husband Oscar de Leon, who is the administrator of their personally in the proceedings and did not there testify; that
conjugal assets including their house and lot at No. 40 the only testimony in support of his claim was that of his
Denver Street, Cubao, Quezon City, which were given as attorney Hofileña, who swore that he knew the land and that
part of and constituted the down payment on, the he also knew that Guillermo Severino inherited the land from
purchase price of herein petitioner-appellant's lot No. his father and that he, by himself, and through his
883 of Piedad Estate. Hence, both in law and in fact, it predecessors in interest, had possessed the land for thirty
was still Oscar de Leon who was the buyer. years.
• As a necessary consequence of such breach of
trust, defendant-appellee Gregorio Domingo must forfeit Thus, this action brought by P, alleged natural daughter and
his right to the commission and must return the part of sole heir of Melecio to compel D to convey to her four parcels
the commission he received from his principal. of land described in the complaint, or in default thereof to pay
her the sum of P800,000 in damages for wrongfully causing
Relevant provisions: (extra, for review) said land to be registered in his own name. Felicitas
Art. 1891. Every agent is bound to render an account of his Villanueva, in her capacity as administratrix of the estate of
transactions and to deliver to the principal whatever he may Melecio Severino, has filed a complaint in intervention
have received by virtue of the agency, even though it may not claiming the same relief as P, except in so far as she prays
be owing to the principal. that the conveyance be made, or damages paid, to the estate.
Every stipulation exempting the agent from the obligation to
render an account shall be void.
LC: recognized P as the natural child of Melecio; ordered D to
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but
convey the land to the administratrix of the estate. The court
also for negligence, which shall be judged with more less rigor did not allow D to present evidence to the effect that the land
by the courts, according to whether the agency was or was not was owned in common by all heirs of Ramon Severino (father
for a compensation. of the Severino brothers), and not by Melencio alone. The
Article 1891 of the New Civil Code amends Article 17 of the old court also said that D was already stopped from denying
Spanish Civil Code which provides that: Melencio’s title (in the Ratio, there was a previous case
Art. 1720.Every agent is bound to give an account of his Montelibano vs Severino wherein D himself admitted that he
transaction and to pay to the principal whatever he may have
was Melencio’s mere agent and that the land was Melencio’s)
received by virtue of the agency, even though what he has
received is not due to the principal.
The modification contained in the first paragraph Article 1891 ISSUES:
consists in changing the phrase "to pay" to "to deliver", which W/N the acts of Guillermo Severino as administrator in
latter term is more comprehensive than the former. registering his name valid?
Paragraph 2 of Article 1891 is a new addition designed to stress
the highest loyalty that is required to an agent — condemning HELD:
as void any stipulation exempting the agent from the duty and SC: This is not an action under Section 38 of the LRA to reopen or set
liability imposed on him in paragraph one thereof. aside a decree; it is an action in personam against an agent to compel
Article 1909 of the New Civil Code is essentially a reinstatement him to return, or retransfer, to the heirs or the estate of its principal, the
of Article 1726 of the old Spanish Civil Code which reads thus: property committed to his custody as such agent, to execute the
Art. 1726. The agent is liable not only for fraud, but also for necessary documents thereof, to pay damages.
negligence, which shall be judged with more or less severity by
the courts, according to whether the agency was gratuitous or Proof of Agency
for a price or reward. D’s testimony in the case of Montelibano v. Severino (which forms a part
of the evidence in the present case) is, in fact, conclusive in this respect.
He there stated under oath that from the year 1902 up to the time the
testimony was given, in the year 1913, he had been continuously in
charge and occupation of the land as the encargado or administrator of Valley can give to direct and turnover accounts no to go
Melecio Severino; that he had always known the land as the property of beyond 10%;
Melecio Severino; and that the possession of the latter had been
• Bond of 20,000;
peaceful, continuous, and exclusive. In his answer filed in the same case,
the same defendant, through his attorney, disclaimed all personal interest • An indication on the payment of purchases of
in the land and averred that it was wholly the property of this brother Squibb products to be due 60 days from date of invoice
Melecio. or nearest business day thereto;
Neither is it disputed that the possession enjoyed by the defendant at the • And that “It is mutually agreed that this non-
time of obtaining his decree was of the same character as that held
exclusive distribution agreement can be terminated by
during the lifetime of his brother, except in so far as shortly before the trial
of the cadastral case the defendant had secured from his brothers and either Green Valley Poultry & Allied Products, Inc. or
sisters a relinquishment in his favor of such rights as they might have in Squibb Philippines on 30 days notice of mutual
the land. satisfaction.

Agent-Principal Relationship is Fiduciary 3. For goods delivered to Green Valley but unpaid,
It is an elementary and very old rule that in regard to property Squibb filed suit to collect.
forming the subject-matter of the agency, an agent is
estopped from acquiring or asserting a title adverse to that of 4. Green Valley claimed that the contract with
the principal. His position is analogous to that of a trustee and Squibb was a mere agency to sell; that it never
he cannot consistently, with the principles of good faith, be purchased goods from Squibb; that the goods received
allowed to create in himself an interest in opposition to that of were on consignment only with the obligation to turn
his principal or cestui que trust. The Court then cited several over the proceeds, less its commission, or to return the
US cases to this effect. goods if not sold, and since it had sold the goods but had
An agent is not only estopped from denying his principal’s title not been able to collect from the purchasers thereof, the
to the property, but he is also disabled from acquiring action was premature.
interests therein adverse to those of his principal during the
term of the agency. 5. Squibb claimed that the contract was one of sale
so that Green Valley was obligated to pay for the goods
Conveyance by Agent To Principal received upon the expiration of the 60-day credit period.
An action in personam will lie against an agent to compel
him to return or transfer to his principal, or the latter’s 6. RTC gave judgment in favor of Squibb - that the
estate, the real property committed to his custody as agreement between the parties was a sales contract.
such agent and also it execute the necessary documents
of conveyance to effect such transfer. 7. CA affirmed RTC decision.

8. SC affirmed CA’s judgement.

23. Green Valley Poultry v. IAC ISSUE

FACTS Whether or not agreement between Green Valley and

Squibb is a sales contract or an agency to sell.
1. Principal - Squibb & Sons Philippine Corporation,
respondent. Agent - Green Valley Poultry & Allied HELD
Products, Inc., petitioner.
Yes. The agreement between Green Valley and Squibb is
2. Contract: On November 3, 1969, Squibb and one of a sales contract.
Green Valley entered into a letter agreement which
appointed Green Valley Poultry as a non-exclusive “We do not have to categorize the contract. Whether
distributor for Squibb veterinary products. Contained in viewed as an agency to sell or as a contract of sale, the
the letter of agreement were liability of Green Valley is indubitable. Adopting Green
• the discounts (10%) in price entitled to Green Valley’s theory that the contract is an agency to sell, it is
Valley; liable because it sold on credit without authority from its
• Exempted products from the discount; principal. The Civil Code has a provision exactly in point.
• Distributor commission at 5% for every sale of It reads:
completed deal to a feedstor, drugstore or other
accounts; “Art. 1905. The commission agent cannot, without the
• A stipulation which contains advise on price express or implied consent of the principal, sell on credit.
changed will be communicated; Should he do so, the principal may demand from him
• That Green Valley Poultry will accept turn-over payment in cash, but the commission agent shall be
orders from Squibb representatives for delivery to entitled to any interest or benefit, which may result from
customers in his area. If for credit or other valid reasons such sale.”
a turnover order is not served, the Squibb representative
will be notified within 48 hours and hold why the order WHEREFORE, petition is hereby dismissed; the judgment
will not be served. of the defunct Court of Appeals is affirmed with costs
• The distributorship area of the respondent which against the petitioner.
is only for Central and Northern Luzon including Cagayan
Valley areas;
• Stipulations on the maximum discount Green
 24. Municipal Council of Iloilo v. Evangelista assigned by her attorney-in-fact Tan Boon Tiong, to Atty
FACTS: Soriano in payment of professional services rendered by
* Tan Ong Sze Vda. De Tan Taco, respondent, the latter to Tan Toco and her coheirs in connection with
wanted to recover from the Municipality of Iloilo, other cases, that particular case had been decided, and
petitioner, the value of the strip of land belonging to the the only thing left to do was to collect the judgment
former taken by the latter to widen a public street There was no relation of attorney and client,
* Atty. Jose Evangelista, in his own behalf and as then, between Soriano and Tan Toco thus the
counsel for the administratrix of Jose Ma. Arroyo’s assignment of her credit, right and interest to said
intestate estate, filed a claim in the same case for lawyer did not violate prohibition against ”lawyers and
professional services rendered by him which the court, solicitors with respect to any property or rights involved
acting within the widow of respondent, fixed at 15% of in any litigation in which they may take part by virtue of
the amount of the judgment their profession and office.”
*Aside from other claiamants and PNB, Antero As to whether Tan Boon Tiong, as atty-in-
Soriano also appeared claiming the amount of the fact/agent of Tan Toco was empowered by his principal
judgment as it had been assigned to him, and by him, in to make an assignment of credits, rights, and interests,
turn, assigned to Mauricio Cruz and Co, Inc. in payment of debts for professional services rendered
* After hearing all the claims on the amount of by lawyers, the former is authorized to employ and
the judgment, the court ordered that the attorney’s lien contract for the services of lawyers upon such conditions
in the amount of 15% of the judgment be recorded in as he may deem convenient, to take charge of any
favor of Atty. Evangelista, in his own behalf and as actions necessary or expedient for the interests of his
counsel for the administratrix of deceased Jose Arroyo principal, and to defend suits brought against her.
and directed the municipality of Iloilo to file an action of This power necessarily implies the authority to
interpleading against adverse claimants including, PNB, pay for the professional servicers thus engaged. The
Soriano etc. assignment made by Tan Boon Tiong, in favor of Atty.
* The municipal treasurer of Iloilo, with the Soriano for professional services rendered in other cases
approval of the auditor, of the provincial treasurer of in the interests of Tan Toco and her coheirs, was that
Iloilo, and the Executive Bureau, paid the late Antero credit which she had against the municipality, and such
Soriano the amount of P6,000 in part payment of the assignment was equivalent to the payment of the
judgment assigned to him by Tan Boon Tiong, acting as amount of said credit to Soriano for professional services
atty-in-fact of Tan Toco which she then deposited with
the clerk of CFI of Iloilo SC: (1) That an agent or atty-in-fact empowered to pay
* In pursuance of the court ordering that the the debts of a principal, and to employ lawyers to defend
atty’s lien of 15% in favor of Atty. Evangelista, in his the latter’s interests, is impliedly empowered to pay the
own behalf and as counsel for the late Jose Arroyo, the lawyer’s fees for services rendered in the interests of
said clerk of court delivered on the said date to said Atty. said principal, and may satisfy them by an assignment of
Evangelista the said amount of P6,000 a judgment rendered in favor of said principal; (2) that
* This case is confined to the claim of Mauricio when a person appoints two attys-in—fact
as alleged assignee of the rights of the late Atty Soriano independently, the consent of one will not be required to
by virtue of said judgment in payment of professional validate the acts of the other unless that appears
services rendered by him to the said widow and her positively to have been the principal’s intention and (2)
coheirs that the assignment of the amount of a judgment made
CFI: declared valid and binding the deed of assignment by a person to his attorney, who has not taken any part
of the credit executed by Tan Toco's widow, through her in the case wherein said judgment was rendered, made
attorney-in-fact Tan Buntiong, in favor of late Antero in payment of professional services in other cases does
Soriano; likewise the assignment executed by the latter not contravene the prohibition
during his lifetime in favor of the defendant Mauricio
Cruz & Co., Inc.

ISSUE: 1. W/N there was a contract of agency between

25. Del Rosario v. La Badenia
Tan Toco, principal, and Tan Boon Tiong, atty-in-
fact/agent DOCTRINE: An agent may lawfully appoint a substitute
2. W.N the assignment made by Tan Boon Tiong, if the principal has not prohibited him from doing such.
as atty-in-fact of Tan Toco, to Atty Soriano, of all the The principal shall be bound by the acts of the sub-agent
credits, rights and interests belonging to Tan Toco by if it is shown that the agent who appointed such sub-
virtue of a judgment was legal agent did not act in excess of his authority in doing so.

HELD: Yes to both FACTS:

It does not appear that Atty. Soriano was Principal – La Badenia General Agent – Celestino
counsel for Tan Toco in his case which she instituted Aragon Sub-agent – Teofila del Rosario de Costa
against the municipality of Iloilo for the recovery of a the
value of a strip of land expropriated by said municipality Plaintiffs, Spouses Teofila del Rosario de Costa and
for the widening of a public street. The only lawyers who Bernardino Costa are residents of Legaspi, Albay and
appear to have represented her in that case were Arroyo sought to recover from the defendant corporation the
and Evangelista, who filed a claim for their professional sum of P1,795.25, a balance alleged to be due Teofila
fees del Rosario de Costa as the agent of the defendant
When Tan Toco’s credit, right, and interests were
corporation for services rendered and expenses incurred RTC: in favor of the defendants - The lower court was of
in the sale of its products. the opinion that the specific goods sold to the delinquent
Defendant corporation is engaged in the manufacture debtors, whose unpaid accounts form the basis of this
and sale of tobacco products with its head office in the litigation, had already been paid for by the plaintiffs and
city of Manila. In year 1911, the defendant corporation, that this was conclusive evidence that the plaintiffs were
a new concern, inaugurated an extensive selling not acting as the agents of the defendant corporation,
campaign for the purpose of introducing its products to and that in effect, the purpose of this suit was to recover
the retail trade. back money already paid for the goods purchased and
sold by the plaintiffs.
Celestino Aragon, a general agent of the defendant
corporation, was in charge of this campaign in Albay, ISSUE:
Sorsogon, and other provinces in the southern end of Whether or not plaintiffs are agents of the
Luzon. He established a central distributing agency defendant corporation
or depot at Legaspi (he established his headquarters
there and took up his residence with the plaintiffs, using RULING:
the lower part of their house as a store room or Yes, plaintiffs are agents by the defendant
depository for large quantities of cigarettes and cigars) corporation.
with the plaintiff, Teofila del Rosario de Costa, nominally It is not clear from the record just what were the precise
in charge, though her husband, Bernardino de Costa terms of the arrangement made by Aragon with the
appears to have been the actual manager of the agency. plaintiffs. It is not denied however, that Aragon was
acting as the general agent of the defendant corporation
The business relations between the plaintiffs and the and that as such he was invested with authority to
defendant extended from February 1, 1911, to March 24, inaugurate and carry out a selling campaign with a
1912. All goods sent to Legaspi were charged by the view of interesting the sale of the defendant's products
head office at Manila against the general agent, Aragon, in the territory assigned to him. The record does not
while on the books kept by Aragon these goods were show what limitations, if any, were placed upon his
charged against the plaintiffs, and as goods were powers to act for the corporation. The general conduct of
withdrawn by himself, he credited the amount of the the selling campaign intrusted to him was approved and
withdrawals to the account of the plaintiffs. commended by the head office, and judging from the
amount of the sales the business appears to have been a
The business at Legaspi appears to have been that of a very prosperous one for the corporation.
distributing agency actively in charge of the plaintiffs but
over which the general agent maintained a close It appears further that the head office at Manila was
supervision. Goods were withdrawn from the depository fully informed of plaintiffs' relations with the
at Legaspi from time to time by the general agent for general agent in extending the sales of its products.
shipment to other points; goods were likewise withdrawn Plaintiffs made direct remittances to the head office in
by plaintiffs and shipped to neighboring towns without Manila and these remittances were credited to the
any intervention on the part of the general agent. account of the agency at Legaspi, and acknowledgment
was made directly to the plaintiffs. Neither the head
All accounts incident to the business were carried on the office nor Aragon appear to have made any distinction
books of Aragon. The account as carried on the books of between the business done by Aragon and that done by
Aragon, the general agent, was between Teofila del the plaintiffs. The purchases, sales and remittances
Rosario de Costa and La Badenia, the defendant made by the plaintiffs do not seem to have been
corporation. On March 24, 1912, the general agent had a considered as those of an independent business concern,
settlement with the plaintiffs and acknowledged over his but rather as a part of the work of the Legaspi agency
signature that these books showed a balance in favor of under the control and supervision of Aragon. The fact
the plaintiffs amounting to P1,795.25. that the defendant corporation carried the Legaspi
account in the name of the general agent, Aragon,
When this final settlement of accounts was had on the and carried no account with the plaintiffs, would
24th of March, 1912, both Aragon and the plaintiff, seem to negative the contention that plaintiffs
Teofila del Rosario de Costa, confirmed it as a true were simply merchants purchasing their goods in
statement of the account. The defendant corporation Manila at wholesale and selling them locally on
however, refused to pay over to plaintiffs the balance of their own account.
P1,795.25.
The active management and participation of the plaintiffs
It is the contention of the defendant corporation that the in the conduct of the business at Legaspi are fully
plaintiffs were simply merchants who purchased the recognized in the following letters (exhibits A & B)
goods at fixed wholesale prices and sold them on their written by the assistant manager of the defendant
own account, and that they were never employed as corporation to one of the plaintiffs and are sufficient
their agents. On the other hand plaintiffs contend that enough to show that the defendant was fully aware of
they were the agents of the defendant corporation; that plaintiffs' connection with the agency at Legaspi, and
they received commissions on the sales made by the recognized them as agents of the company, and clearly
agency; and that they were authorized to extend a did not consider them as independent merchants buying
reasonable credit under the supervision of the general solely on their own account, but rather as subagents
agent. working under the supervision of the general agent,
Aragon.
 insurance for the film. Bernard then requested that the
The general agent who was in control of the Legaspi film be kept in defendant's vault under his responsibility.
business, and who was fully conversant with all of its Defendant agreed.
details, clearly recognized the right of the plaintiffs
to have credit on their account for the amount of Subsequently, Gabelman severed his connection with
these unpaid claims. This agent had employed the plaintiff and briefed his replacement, Lazarus Joseph the
plaintiffs to assist him in extending the sale of the film “ Monte Carlo Madness” was in the vault of
defendant's products, and the defendant was well aware defendant company and that defendant would act as a
of this fact. Certainly the only reliable source of sub-agent of plaintiff company. That defendant would
information as to what plaintiffs' account with the exhibit said film after the original contract between the
defendant corporation was, is to be found in the books parties. Thereafter, Lazarus demanded the return of 3
kept by the general agent, Aragon. The defendant films but “Monte Carlo Madness” could not be returned
carried no account whatever with the plaintiffs, and as the same ws still being shown in Cebu. On August 19,
having intrusted the entire management of the Legaspi 1933, the bodega were the film was stored burned down
business to Aragon, it can not now come into court and without insurance for said film.
repudiate the account confirmed by him, unless it can
show that he acted beyond the scope of his authority in Petitioner filed a complaint with the Court of First
making the arrangement he did with the plaintiffs. Instance of Manila. Said court dismissed the complaint,
Aragon's powers as a selling agent appear to have hence the appeal to the Supreme Court.
been very broad, and there is no evidence in the
record to indicate that he acted beyond his powers ISSUE:
in conducting the business at Legaspi as he did; and
there can be no doubt that plaintiffs had been authorized Whether or not Lyric Film Exchange is responsible to the
by him to extend credit on behalf of the agency. There is plaintiff for the destruction of the film without securing
no other reasonable explanation of the entries made by insurance.
Aragon in his books of account, and his approval of the
balance in favor of the plaintiffs. RULING:
As already stated, the record does not disclose what
were the precise terms of arrangement made with the No, Lyric Film Exchange is not responsible to the plaintiff
plaintiffs. The record does show however, that in many for the destruction of the film without securing
instances the plaintiffs were allowed commissions insurance.
on sales made by them, but whether or not these
were in addition to other profits allowed them the record RATIO:
does not show. Upon a careful examination of the
whole record we are satisfied that plaintiffs were not An agent or sub-agent is not obliged to fulfill more than
conducting an independent business but were the the contents of the mandate and to answer for the
agents of the defendant corporation operating damages caused to the principal by his failure to do so
under the supervision of the general agent, (art. 1718 of the then Civil Code)
Aragon.
By virtue of the verbal contract between the plaintiff,
The Supreme Court reversed the decision. represented by Bernard Gabelman, and defendant
company, the latter was to be the sub-agent of the
former in keeping and showing the film in question. The
court held that defendant is not civilly liable as it was not
26. International Films v. Lyric Film obliged to fulfill more than the contents of the mandate,
which was to store the film and exhibit. Nowhere in the
FACTS: verbal agreement shows that defendant should secure an
insurance for the film. Neither negligence nor fraud
Bernard Gabelman was the Philippine agent for the occurred.
plaintiff company, International Films. Starting June 2,
1933, petitioner, through said agent, leased a couple of
films (including “Monte Carlo Madness” ) to defendant 27. Thomas v. Pineda
company Lyric Film Exchange Inc. Defendant would then
show these films while petitioner would get a percentage Facts:
of the receipts. One of the conditions of the contract was - Plaintiff owns the bar and restaurant known as
that defendant would answer for the loss of the film in Silver Dollar Café located in Plaza Santa Cruz, Manila. In
question whatever the cause. the course of time, the defendant became successively
cashier and manager of the business.
On June 23, 1933, after the last showing of the film and - On the onset of war, plaintiff made a fictitious
question and when defendant was set to return the sale of the business to defendant to prevent the business
same, Bernard Gabelman asked defendant whether the and its property from falling into enemy hands.
same could he deposited in the vault of Lyric Film as Simultaneously, the plaintiff and defendant signed a
International Films did not yet have a safety vault as per secret document stating that the deed of sale conveying
regulations of the fire department. Lyric Film’s then Chief the restaurant was fictitious and upon the restoration of
Vicente Albo, after consultation from O’Malley (his chief), peace, the sale automatically becomes null and void.
stated that the same cannot be done as they don't have
- In 1945, the building was destroyed by fire but one’s integrity and duty to another, making it possible to
defendant had been able to remove some furniture which profit by yielding to temptation.
according to defendant, were all accounted for and
turned over to the plaintiff. 28. Palma v. Cristobal
- On May 8 1945, a bar was opened on Calle
Bambang under the same name and then on the same
year it was transferred to its original location in Plaza ● FACTS:
Santa Cruz.
- After liberation, plaintiff brought a CPA to the •1909 - after registration proceedings under ACT
café for the purpose of examining the books of the 496, the original certificate of title was issued
business but the defendant resisted, and even pointed a in the names of Palma and his wife (Luisa
gun at them. He avers that a third verbal agreement was Cristobal).
entered into, the import of which was that he was to • 1923 - said certificate was cancelled by virtue
operate the business with no liability other than to turn it of CFI decree, but was later substituted by
over to the plaintiff as the he would find it after the war another certificate of title also in the name of
and that he was relieved of any duty to make an Palma and his wife.
accounting. • 1928 - Because of his wife's death, a new
- Also, on September 27, 1945, defendant certificate was issued in Palma's name only
registered the business and its name as his own alleging • Palma sought at first to eject Cristobal from a
that the plaintiff has abandoned his rights. parcel of land in Tondo (TCT of w/c registered to
- Lower court summarily rendered a decision in Palma). Cristobal raised the question of
favor of defendant. ownership and the case was dismissed. Palma
Issue: filed w/ CFI Manila praying he be declared owner
W/N the defendant is obliged to render an accounting to of the land and for Cristobal to be ordered to
the plaintiff. restore its possession to him and remove his
W/N defendant may register the business and its name house therefrom.
as his own.
Held: • The CFI dismissed the case, and when the case
- 1st issue Yes;2nd issue No was brought to the CA it was similarly
- The defendant’s contention is at war with the dismissed.
care and precaution which the plaintiff took to insure his • CA concluded that:
rights in the business and its assets. Unless Thomas was
willing to give away his property and its profits, no man 1. the parcel of land in question is a
in his right senses would have given his manager an community property held by Palma in
outright license such as defendant claims to have gotten trust for the real owners (respondent
from his employer. Cristobal being an heir of one of them),
- The exact legal character of the defendant’s the registration having been made in
relation to the plaintiff matters not a bit. It was enough accordance with an understanding
to show that he had been entrusted with the possession between the co-owners, by reason of the
and management of the plaintiff’s business and property confidence they had in Palma and his
for the owner’s benefit and had not made an accounting. wife.
- Neither did the defendant’s sweeping statement 2. This confidence, close relationship, and
at the trial that all the proceeds from the business had the fact that co-owners were receiving
been used to support the plaintiff and his daughters and their shares in the rentals, were the
to entertain and bribe the Japanese officers dispense reasons why no step had been taken to
with his duty to render an account. partition the property.
- That defendant was only a manager is evidenced 3. CA, in dismissing the case, invoked SC
by the fact that a written contract of lease with the rulings w/c declared that the registration
owner of the Santa Cruz location was under the name of of the property in the name of the
Thomas as its proprietor and that the defendant had trustees in possession thereof, must be
cause the printing business cards to the same effect. deemed to have been effected for the
- The relations of an agent to his principal are benefit of the principal/cestui que trust.
fiduciary and it is an elementary and very old rule that in
regard to property forming the subject matter of the
agency, he is estopped from acquiring or asserting a title ● Thus this appeal by certiorari.
adverse to that of the principal. His position is analogous
to that of a trustee and he cannot consistently, with the ISSUE: Whether or not a trustee has the right to
principles of good faith, be allowed to create in himself acquire by prescription the ownership of a property
an interest in opposition to that of his principal. A entrusted to him.
receiver, trustee, attorney, agent, or any other person
occupying fiduciary relations respecting property or HELD: NO,
persons are utterly disabled from acquiring for his own
benefit the property committed to his custody for Palma's claimed that even granting the property was
management. The rule stands on moral obligation to owned by several co-owners he now owns it because of
refrain from placing one’s self in position which ordinarily prescription. This theory holds no water because,
excite conflicts between self-interest at the expense of according to the pronouncement of the CA, Palma held
the property and secured its the registration in his name Petitioners contend that the words or language used in the
in a fiduciary capacity, and it is elementary that a insurance contract, particularly under paragraph 15, is clear
trustee cannot acquire by prescription the ownership of a and plain or readily understandable by any reader which leaves
no room for construction. Petitioners also maintain that
property entrusted to him.
ignorance about the insurance policy does not exempt
respondent from abiding by the deadline and petitioners cannot
The position of a trustee is of representative nature. His be faulted for respondent's failure to comply.
position is the position of a cestui que trust. It is logical
that all benefits derived by the possession and acts of Respondent, on the other hand, insists that the insurance
the agent, as such agent, should accrue to the benefit of contract is ambiguous since there is no provision indicating how
his principal. the beneficiary is to be informed of the three calendar month
claim period. Since petitioners did not notify her of the
29. BPI v. Laingo insurance coverage of her son where she was named as
beneficiary in case of his death, then her lack of knowledge
made it impossible for her to fulfill the condition set forth in the
FACTS: On 7/20/1999, Rheozel Laingo (Rheozel), son of
insurance contract.
Yolanda Laingo (Laingo), opened an account with BPI in
Davao. The account was a Platinum 2-in-1 Savings and
ISSUE: Whether or not Laingo, as beneficiary without
Insurance account, which is a savings account where
knowledge, is bound by the 3 month deadline for filing a
depositors are automatically covered by an insurance
notice of claim upon the death of the insured.
policy against disability or death issued by FGU
(Considering BPI as an agent of FGU)
Insurance Corporation (FGU), now BPI/MS Insurance
Corporation. BPI issued a passbook to Rheozel for the
RULING: Denied. CA Affirmed.
account. A personal Accident Insurance Coverage
Certificate (PAICC) was also issued by FGU in the name
RATIO: The account was a marketing strategy promoted
of Rheozel with Laingo as beneficiary,
by BPI to entice clients to invest their money with BPI
with the added benefit of insurance.
On 9/25/2000, Rheozel died via car accident. Rheozel's
story was headlined in the Daily Mirror, a newspaper, on
As the main proponent of the 2-in-1 deposit account, BPI
9/26/2000. On 9/27/2000, Liago instructed her
tied up with its affiliate, FGU Insurance, as its partner.
secretary, Alice Torbanos (Alice) to go to BPI and inquire
Any customer interested to open a deposit account under
about Rheozel's savings account. The money in the
this 2-in-1 product, after submitting all the required
account was to be used for burial and funeral expenses.
documents to BPI and obtaining BPI's approval, will
automatically be given insurance coverage. Thus, BPI
Alice went to BPI and talked to Jaime Ibe Rodriguez,
acted as agent of FGU Insurance with respect to the
BPI's Manager re Laingo's request. BPI accommodated
insurance feature of its own marketed product.
Laingo allowing the withdrawal of P995,000. However,
BPI did not notify her of the attached insurance
Under the law, an agent is one who binds himself to
policy. A certain Laura Cabico, employee of BPI, went to
render some service or to do something in
Rheozel's wake to verify some information from Alice
representation of another. The basis of an agency is
and brought documents for Laingo to sign for the
representation. The question of whether an agency has
withdrawal. Over two years later on 1/21/2003,
been created is ordinarily a question which may be
Rheozel's sister, Rhealyn Laingo-Concepcion, while
established in the same way as any other fact, either by
arranging Rheozel's personal things in his room found
direct or circumstantial evidence. The question is
the PAICC and conveyed the information to Laingo.
ultimately one of intention. Agency may even be implied
from the words and conduct of the parties and the
Laingo sent two letters 9/11 and 11/7/2003 to BPI and
circumstances of the particular case. For an agency to
FGU claiming on the PAICC. On 2/19/2004 in a letter
arise, it is not necessary that the principal
sent, FGU denied her claim, stating that the claim should
personally encounter the third person with whom
have been filed within 3 calendar months from the death
the agent interacts. The law in fact contemplates
as required by par 15 of the PAICC:
impersonal dealings where the principal need not
personally know or meet the third person with
15. Written notice of claim shall be given to and filed at FGU
Insurance Corporation within three calendar months of death or whom the agent transacts: precisely, the purpose
disability. of agency is to extend the personality of the
principal through the facility of the agent.
CoA - Specific Performance with Damages and
Attorney's Fees
In this case, since the Platinum 2-in-1 Savings and
RTC - in favor of respondents, dismissing both claim and Insurance account was BPI's commercial product,
counterclaim. claim was filed beyond the 3 month offering the insurance coverage for free for every deposit
period. account opened, Rheozel directly communicated with
BPI, the agent of FGU Insurance. BPI not only facilitated
CA - Reversed. Laingo could not be expected to do an the processing of the deposit account and the collection
obligation she didn't know existed, not being a party to of necessary documents but also the necessary
the insurance contract. BPI and FGU to bear the loss and endorsement for the prompt approval of the insurance
compensate Liago. coverage without any other action on Rheozel's part.
Rheozel did not interact with FGU Insurance directly and within three months from Rheozel's death as required by
every transaction was coursed through BPI. the insurance company.

BPI, as agent of FGU Insurance, had the primary BPI had 3 opportunities of inform Laingo: 1) when the
responsibility to ensure that the 2-in-1 account be death was headlined in a newspaper; 2) when Laingo
reasonably carried out with full disclosure to the parties through Alice inquired about the account, was allowed to
concerned, particularly the beneficiaries. Thus, it was withdraw money from Rheozel's account; 3) When an
incumbent upon BPI to give proper notice of the employee of BPI went to the wake to have documents
existence of the insurance coverage and the stipulation signed. Despite the opportunities to inform Laingo, BPI
in the insurance contract for filing a claim to Laingo, as neglected to do so.
Rheozel's beneficiary, upon the latter's death.
As agent of FGU, BPI fell short in notifying Laingo of the
Articles 1884 and 1887 of the Civil Code state: insurance policy, Laingo having no means to know of
such.
Art. 1884. The agent is bound by his acceptance to carry out
the agency and is liable for the damages which, through his
non-performance, the principal may suffer. 30. HSBC v. National Steel Corporation and City
Trust Banking Corporation (Now BPI) [and
He must also finish the business already begun on the death of CityTrust]
the principal, should delay entail any danger.
FACTS: Respondent NSC entered into an Export Sales
Art. 1887. In the execution of the agency, the agent shall act in
Contract (the Contract) with Klockner East Asia Limited
accordance with the instructions of the principal.
(Klockner) on 10/12/1993. NSC sold 1,200 metric tons
In default, thereof, he shall do all that a good father of a family of prime cold rolled coils to Klockner, FOB ST Iligan
would do, as required by the nature of the business. terms. As required by the Contract, Klockner applied for
an irrevocable letter of credit (LoC) with HSBC in favor of
An agent is bound to carry out the agency. The NSC for $468,000. On 10/22/1993, HSBC issued an
relationship existing between principal and agent is a irrevocable and onsight LoC #HKH 239409 in favor of
fiduciary one, demanding conditions of trust and NSC. The LOC stated that it is governed by the
confidence. It is the duty of the agent to act in good faith International Chamber of Commerce Uniform Customs
for the advancement of the interests of the principal. In and Practice for Documentary Credits (UCP 400). Under
this case, BPI had the obligation to carry out the agency UCP 400, HSBC has the obligation to immediately pay
by informing the beneficiary, who appeared before BPI NSC upon presentment of the documents listed in the
to withdraw funds of the insured who was BPI's LoC.
depositor, not only of the existence of the insurance
contract but also the accompanying terms and conditions The LoC was amended twice to reflect changes in the
of the insurance policy in order for the beneficiary to be terms of delivery. First, on 11/2/1993 - FOB ST Iligan >
able to properly and timely claim the benefit. FOB ST Manila & increase amount to $484,400. Second,
on 11/18/1993 - extended expiry and shipment date to
Upon Rheozel's death, which was properly communicated 12/8/1993. On 11/21/1993, NSC, through Emerald
to BPI by his mother Laingo, BPI, in turn, should have Forwarding Corporation, loaded and shipped the cargo
fulfilled its duty, as agent of FGU Insurance, of advising on board MV Sea Dragon under China Ocean Shipping
Laingo that there was an added benefit of insurance Company Bill of Lading #HKG 266001 and arrived in
coverage in Rheozel's savings account. An insurance Hongkong on 11/25/1993.
company has the duty to communicate with the
beneficiary upon receipt of notice of the death of the NSC coursed the collection from Klockner through
insured. This notification is how a good father of a family CityTrust Banking Corporation (CityTrust). NSC obtained
should have acted within the scope of its business a loan earlier from CityTrus secured by the LoC.
dealings with its clients. BPI is expected not only to
provide utmost customer satisfaction in terms of its own On 11/29/1993, CityTrust sent a collection order (CO) to
products and services but also to give assurance that its HSBC. The CO contained, among others, the following
business concerns with its partner entities are statement: "Subject to Uniform Rules for the Collection
implemented accordingly. of Commercial Paper Publication No. 322." (UCP 322)
Furthermore that the proceeds should be remitted ti
There is a rationale in the contract of agency, which Standard Chartered Bank of Australia, Ltd., Offshore
flows from the "doctrine of representation," that notice Branch Manila (SCB-M) which was, in turn, in charge of
to the agent is notice to the principal, Here, BPI had remitting the amount to CityTrust.
been informed of Rheozel's death by the latter's family.
Since BPI is the agent of FGU Insurance, then such On 11/2/1993, HSBC sent a cablegram to CityTrust
notice of death to BPI is considered as notice to FGU acknowledging the CO. It also stated that the documents
Insurance as well. FGU Insurance cannot now justify the will be presented to "the drawee against payment
denial of a beneficiary's insurance claim for being filed subject to UCP 322 (URC - Uniform Rules for Collection
out of time when notice of death had been 322) as instructed..." SCB-M then sent a cablegram to
communicated to its agent within a few days after the HSBC requesting the latter to urgently remit the
death of the depositor-insured. In short, there was proceeds, and further asked that HSBC inform it "if
timely notice of Rheozel's death given to FGU Insurance unable to pay" and of the “reasons thereof." Neither
CityTrust nor SCB-M objected to HSBC's statement that RTC - Dismissed. HSBC not liable, applicable law is URC
the collection will be handled under URC 322. 322 as it was the law which CityTrust intended to apply
to the transaction. Under URC 322, HSBC has no liability
On 12/7/1993, HSBC responded to SCB-M where it when Klockner refused payment.
repeated that "this bill is being handled subject to URC
322 as instructed by collecting bank." The next day the CA - NSC and CityTrust appealed, found that UCP 400
LoC expired. and not URC 322 governs the transaction. Further, even
if the LoC did not state UCP 400 governs, it nevertheless
On 12/10/1993, HSBC advised SCB-M that Klockner had finds application as this Court has consistently
refused payment, and that it intends to return the recognized it under PH jurisdiction. Applying UCP 400,
documents to NSC with all the banking charges for its the obligation of the issuing bank is to pay the seller or
account. On 12/14/1993 CityTrust requested HSBC to beneficiary once the draft and required documents are
inform of Klockner's reason for refusing. HSBC did not properly presented. Independence principle - the issuing
respond and CityTrust sent a follow up cablegram on bank's obligation to pay under the LoC is separate from
12/17/1993 insisting that a demand payment must be the compliance of the parties in the main contract.
made from Klockner since the documents "were found in
compliance with LC terms and conditions." HSBC replied Motion for Reconsideration - Denied.
on the same day stating that HSBC treated the
transaction under URC 322. THus, demanded payment ISSUE: Whether or not CityTrust, as agent, is liable to
from Klockner who refused to pay for unspecified NSC its principal.
reasons noting that under URC 322, Klockner has no
duty to provide reason for the refusal. HSBC requested RULING: No. Since NSC has not raised any claim
for further instruction as to where it should continue to against CityTrust.
press for payment or return of the documents. CityTrust
responded that as advised by its client, HSBC should RATIO: When NSC obtained the services of CityTrust in
continue to press for payment. collecting under the Letter of Credit, it constituted
CityTrust as its agent. Article 1868 of the Civil Code
Klockner continued to refuse payment and HSBC notified states that a contract of agency exists when a person
CityTrust in a cablegram dated 1/7/1994, that should binds himself or herself "to render some service or to do
Klockner still refuse to accept the bill by 1/12/1994, it something in representation or on behalf of another, with
will return the full set of documents to CityTrust with all the consent or authority of the latter." In this case,
the charges for the account of the drawer. CityTrust bound itself to collect under the Letter of Credit
in behalf of NSC.
Meanwhile, on 1/12/1994, CityTrust sent a letter to NSC
stating that it executed NSC's instructions "to send, ON One of the obligations of an agent is to carry out the
COLLECTION BASIS (URC 322), the export documents ... agency in accordance with the instructions of the
" CityTrust also explained that its act of sending the principal. 127 In ascertaining NSC's instructions to
export documents on collection basis has been its usual CityTrust, its letter dated January 18, 1994 is
practice in response to NSC's instructions in its determinative. In this letter, NSC clearly stated that it
transactions. "negotiated with CityTrust the export documents
pertaining to LC No. HKH 239409 of HSBC and it was
Ultimately Klockner refused to pay and HSBC and CityTrust which wrongfully treated the negotiation as 'on
CityTrust kept arguing on whether UCP 400 or URC 322 collection basis."' 128 HSBC persistently communicated
should be applied. with CityTrust and consistently repeated that it will
proceed with collection under URC 322. At no point did
CoA - Collection of sum of money against HSBC. CityTrust correct HSBC or seek clarification from NSC. In
insisting upon its course of action, CityTrust failed to act
NSC: NSC coursed the collection of the LoC through in accordance with the instructions given by NSC, its
CityTrust and despite the latter's complete compliance of principal. Nevertheless while this Court recognizes that
the requirements in the LoC, HSBC unreasonably refused CityTrust committed a breach of its obligation to NSC,
to pay the obligation of $485,767.93. this carries no implications on the clear liability of HSBC.
As this Court already mentioned, HSBC had a separate
HSBC: Denied liability under LoC, CityTrust having obligation that it failed to perform by reason of acts
modified the obligation from UCP 400 to URC 322. Filed independent of CityTrust's breach of its obligation under
a Motion to Admit Attached Third-Party Complaint its contract of agency. If CityTrust has incurred any
against CityTrust, claiming CityTrust instructed collection liability, it is to its principal NSC. However, NSC has not
under URC 322 and never raised the intention to collect raised any claim against CityTrust at any point in these
under the LoC, and in the event HSBC is found liable, proceedings. Thus, this Court cannot make any finding of
HSBC is to be subrogated by CityTrust. RTC Makati liability against CityTrust in favor of NSC.
granted the motion to which CityTrust answered
denying modifying the obligation acting as a mere agent, Note: On the main issue WON HSBC is liable, HSBC is indeed
it cannot modify the terms without the consent of all the liable. It was unable to prove that URC 322 is the norm in
parties. That the instruction to subject the transaction to transacting with LoCs. The testimony of the witness attesting to
this contention was not considered an expert witness.
322 was merely in fine print in a pro forma document.
Furthermore, URC 322 is more lenient compared to UCP 400 in
terms of liability to the client. In the former the issuing bank is
a mere collecting agent who assumes no liability, while the That in case payment of any amount or amounts
latter recognizes two liabilities of the issuing bank: 1) Liability collected from the Philippine War Damage Commission,
to pay the obligation in behalf of its client; 2) Liability to pay my nephew and at the same time attorney-in-fact, shall
the beneficiary of the LoC upon fulfillment of its terms. UCP 400
give my sister Teopista Vda. de Basa one-half (½), of
was the law between the parties and NSC, as the beneficiary,
the corresponding amount and the other half (½) shall
did not consent to the change to URC 322. UCP 400 is also in
accordance with the norm in the Philippines and the courts have be given to my nephew and niece Mr. and Mrs. Benigno
upheld so, on the ground that to apply URC 322, instead of UCP A. Caoibes.
400 would render LoCs mere pieces of paper and would defeat
their very purpose of assuring payment as a commercial paper IN WITNESS WHEREOF, I have hereunto set my hand
used in commerce as a reliable form of payment. this 16th day of August, 1948, in the City of Manila.

31. Ramos v. Caoibes

Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Facts:

Concepcion Ramos died on August 19, 1948, leaving a

This is an appeal by Consolacion L. Ramos as
will dated January 7, 1927 admitted to probate on
administratrix of the estate of Concepcion Ramos from
October 4, 1948, in which she ordered that the credits
an order issued by the Court of First Instance of
due to her be distributed among the children of the
Batangas on June 15, 1951.
deceased Antonino Ramos, namely, Consolacion, Ramon,
Socorro and Cirila.
On August 16, 1948, Concepcion Ramos Dipusoy
executed before a notary public two documents which
One year before she died, Concepcion Ramos filed with
have been marked as Annex "A" and Annex "B".
the War Damage Commission a claim which was
identified as No. 411773. On August 31, 1948, the
Annex A is a power of attorney which includes:
Commission issued check No. 348444, in the amount of
P501.62, payable to the deceased Concepcion Ramos.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx This check was returned to the Commission and
substituted by the latter which check No. 564614, on
KNOW ALL MEN BY THESE PRESENTS: November 10, 1948, for the same amount, but payable
to Benigno A. Caoibes (Appellee), who had presented
That I, Concepcion Ramos Dipusoy……. have made, to said entity Annexes "A" and "B", above mentioned, in
constituted and appointed, and by these presents do order to exchange the first check No. 564614, which he
make, constitute and appoint Mr. Benigno A. Caoibes,…. cashed for himself.
my true and lawful attorney-in-fact, for me and in my
name, place and stead, to collect any amount due me Annexes "A" and "B" were presented to the Commission
from the Philippine War Damage Commission, regarding by Caoibes after the death of Concepcion.
my claim filed for my properties that were lost during the
last war in Balayan, Batangas, to cash checks, warrants Consolacion L. Ramos (Appellant), the appellant herein,
and to sign receipts, vouchers, documents which shall be discovered the collection made by Caoibes when she saw
necessary to the said purpose. the note "previous payment" which appeared in the
account sent to her by the Commission on October 13,
That I am giving and granting unto my said attorney-in- 1950. She filed a motion with the court asking that
fact Benigno A. Caoibes, full and absolute power and Caoibes be ordered to deposit the sum of P501.62 with
authority to do and perform all any every act or thing the clerk of court. Caoibes answered the motion
whatsoever to be done necessary in and about the admitting that after the death of Concepcion, he
premises, as fully to all intents and purposes as I might presented Annexes "A" and "B" to the Commission and
or could myself do if I were personally present, and received in cash the sum of P501.62, amount of the
hereby confirming and ratifying all that my said second check, above mentioned, but stating that he was
attorney-in-fact shall lawfully do or cause to be done and willing to deliver to the clerk the sum of P250.81. He
by virtue of these presents. contended that, by virtue of Annex "A", and Annex "B",
he had the right to retain, for himself, half of the sum of
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx P501.62.

Annex B is an affidavit of the following tenor: Court Ruled in Favor of appellee and issued the following
order:
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Atty. Caoibes being agreeable to turn over the amount of
REPUBLIC OF THE PHILIPPINES} P250.81 to the Clerk of this Court in final settlement of
CITY OF MANILA } s.s. this matter — it is ordered that the said Atty. Caoibes
deposit the said amount to be at the disposal of the
AFFIDAVIT administratrix and the other parties in this intestate
proceedings. With this order, the matter before this
Court is deemed closed.
That I, CONCEPCION RAMOS DIPUSOY,.......
Appellant’s motion for reconsideration was denied, hence with the crime of illegal recruitment in large scale
this appeal to the supreme court. committed as follows:

"That sometime between the period from August 1994 to

October 1994 in the City of Manila, Philippines and within
the jurisdiction of this Honorable Court, the above-
named accused, representing themselves to have the
Issue: capacity to contract, enlist and transport workers for
employment abroad, conspiring, confederating and
Whether or not Caoibes is correct with his contention mutually helping one another, did then and there
that he had the right to retain the money by virtue of the willfully, unlawfully and feloniously recruit the herein
power of attorney granted him by Cooncepcion. complainants: Estrella B. Calleja, Melvin C. Miranda and
Aser S. Sasis, individually or as a group for employment
in Korea without first obtaining the required license
and/or authority from the Philippine Overseas
Held:
Employment Administration."

Annex A is only a power of attorney. Caoibes, as agent,

They were likewise charged with three counts of estafa
had the obligation to deliver the amount collected by
committed against private complainants. The State
virtue of said power to his principal, Concepcion, or,
Prosecutor, however, later dismissed the estafa charges
after her death, to the administratrix of her estate,
against Chowdury and filed an amended information
Consolacion. There is absolutely no cession of rights
indicting only Ong for the offense.
made in favor of Caoibes in Annex "A", and under Article
1711 of the old Civil Code (which was in force at the
time of the transaction), the contract of agency is Chowdury was arraigned on April 16, 1996 while Ong
presumed to be gratuitous, unless the agent is a remained at large. He pleaded "not guilty" to the charge
professional agent. There is no proof that Caoibes was of illegal recruitment in large scale.
such. Furthermore, according to Article 1732 of said
Code, an agency is terminated, among other causes, by The prosecution presented four witnesses: private complainants
the death of the principal or of the agent. When Caoibes Aser Sasis, Estrella Calleja and Melvin Miranda, and Labor
made use of the power of attorney, his principal, Employment Officer Abbelyn Caguitla.
Concepcion was already dead.
The first three private complainants in their testimony said that
they were interviewed by Chowdury who informed them about
Donations of personal property may be made verbally or
the requirements for employment. He told them to submit their
in writing.
passport, NBI clearance, passport size picture and medical
certificates. They all filed a complaint with the Philippine
Verbal donation requires the simultaneous delivery of the Overseas Employment Administration (POEA) a case for illegal
gift. In the absence of this requisite the donation shall recruitment against Chowdury, when they were informed that
produce no effect, unless made in writing and accepted they would no longer be deployed for employment abroad. pon
in the same form. verification with the POEA, he learned that Craftrade's license
had already expired and has not been renewed and that
The alleged donation was made in writing but it has not Chowdury, in his personal capacity, was not a licensed recruiter.
been accepted in the same form, and consequently, has
no validity. It cannot be considered a donation upon The trial court found Chowdury guilty beyond reasonable
valuable consideration, for no services nor any valuable doubt of the crime of illegal recruitment in large scale. It
consideration had passed from the donees to the donor. sentenced him to life imprisonment and to pay a fine of
The mere fact that Caoibes collected the claim from the P100,000.00. It further ordered him to pay Aser Sasis
War Damage Commission is not such a service as to the amount of P16,000.00, Estrella Calleja, P20,000.00
require compensation. Caoibes did not even prepare the and Melvin Miranda, P25,000.00. The dispositive portion
claim. of the decision reads:

In view of the foregoing, the order appealed from is "WHEREFORE, in view of the foregoing considerations,
hereby reversed and Benigno A. Caoibes is ordered to the prosecution having proved the guilt of the accused
deposit with the Clerk of Court of Batangas the sum of Bulu Chowdury beyond reasonable doubt of the crime of
P501.62 to be at the disposal of the administratrix in her Illegal Recruitment in large scale, he is hereby sentenced
capacity as such, without pronouncement as to costs. So to suffer the penalty of life imprisonment and a fine of
ordered. P100,000.00 under Art. 39 (b) of the New Labor Code of
the Philippines. The accused is ordered to pay the
complainants Aser Sasis the amount of P16,000.00;
Estrella Calleja the amount of P20,000.00; Melvin
32. People v. Chowdury Miranda the amount of P25,000.00.".
Facts:
Chowdury Appealed the trial courts decision.
In November 1995, Bulu Chowdury and Josephine Ong
were charged before the Regional Trial Court of Manila This court finds
 consciously contributes his efforts to its conduct and
Evidence shows that accused-appellant interviewed promotion, however slight his contribution may be. The law
private complainants in the months of June, August and of agency, as applied in civil cases, has no application in criminal
cases, and no man can escape punishment when he participates
September in 1994 at Craftrade's office. At that time, he
in the commission of a crime upon the ground that he simply
was employed as interviewer of Craftrade which was
acted as an agent of any party. The culpability of the employee
then operating under a temporary authority given by the
therefore hinges on his knowledge of the offense and his
POEA pending renewal of its license.[29] The temporary
active participation in its commission. Where it is shown
license included the authority to recruit workers.[30] He
that the employee was merely acting under the direction of
was convicted based on the fact that he was not his superiors and was unaware that his acts constituted a
registered with the POEA as employee of Craftrade. crime, he may not be held criminally liable for an act done
Neither was he, in his personal capacity, licensed to for and in behalf of his employer.
recruit overseas workers. Section 10 Rule II Book II of
the Rules and Regulation Governing Overseas
Hence, we hold that the prosecution failed to prove
Employment (1991) requires that every change,
beyond reasonable doubt accused-appellant's conscious
termination or appointment of officers, representatives
and active participation in the commission of the crime
and personnel of licensed agencies be registered with the
of illegal recruitment. His conviction, therefore, is
POEA. Agents or representatives appointed by a licensed
without basis.
recruitment agency whose appointments are not
previously approved by the POEA are considered "non-
This is not to say that private complainants are left with
licensee " or "non-holder of authority" and therefore not
no remedy for the wrong committed against them. The
authorized to engage in recruitment activity.[31]
Department of Justice may still file a complaint against
Upon examination of the records, however, we find that
the officers having control, management or direction of
the prosecution failed to prove that accused-appellant
the business of Craftrade Overseas Developers
was aware of Craftrade's failure to register his name with
(Craftrade), so long as the offense has not yet
the POEA and that he actively engaged in recruitment
prescribed. Illegal recruitment is a crime of economic
despite this knowledge. The obligation to register its
sabotage which need to be curbed by the strong arm of
personnel with the POEA belongs to the officers of the
the law. It is important, however, to stress that the
agency.[32] A mere employee of the agency cannot be
government's action must be directed to the real
expected to know the legal requirements for its
offenders, those who perpetrate the crime and benefit
operation. The evidence at hand shows that accused-
from it.
appellant carried out his duties as interviewer of
Craftrade believing that the agency was duly licensed by
the POEA and he, in turn, was duly authorized by his IN VIEW WHEREOF, the assailed decision of the Regional
agency to deal with the applicants in its behalf. Accused- Trial Court is REVERSED and SET ASIDE. Accused-
appellant in fact confined his actions to his job appellant is hereby ACQUITTED. The Director of the
description. He merely interviewed the applicants and Bureau of Corrections is ordered to RELEASE accused-
informed them of the requirements for deployment but appellant unless he is being held for some other cause,
he never received money from them. Their payments and to REPORT to this Court compliance with this order
were received by the agency's cashier, Josephine Ong. within ten (10) days from receipt of this decision. Let a
Furthermore, he performed his tasks under the copy of this Decision be furnished the Secretary of the
supervision of its president and managing director. Department of Justice for his information and
appropriate action.

SO ORDERED.
Issue:

Whether or not an employee or agent can be held liable

for the offenses of their principles.
33. Olaguer v. Purugganan
FACTS:
Held: Petitioner Eduardo B. Olaguer alleges that he was the
owner of 60,000 shares of stock of Businessday
As stated in the first sentence of Section 6 of RA 8042, the Corporation (Businessday) with a total par value of
persons who may be held liable for illegal recruitment are the ₱600,000.00.
principals, accomplices and accessories. An employee of a Petitioner, together with respondent Raul Locsin (Locsin)
company or corporation engaged in illegal recruitment may be and Enrique Joaquin (Joaquin), was active in the political
held liable as principal, together with his employer, if it is shown opposition against the Marcos dictatorship.3 Anticipating
that he actively and consciously participated in illegal the possibility that petitioner would be arrested and
recruitment. It has been held that the existence of the corporate detained by the Marcos military, Locsin, Joaquin, and
entity does not shield from prosecution the corporate agent who Hector Holifeña had an unwritten agreement that, in the
knowingly and intentionally causes the corporation to commit a event that petitioner was arrested, they would support
crime. The corporation obviously acts, and can act, only by and
the petitioner’s family by the continued payment of his
through its human agents, and it is their conduct which the law
salary.
must deter. The employee or agent of a corporation engaged
Petitioner also executed a Special Power of Attorney
in unlawful business naturally aids and abets in the carrying
(SPA), on 26 May 1979, appointing as his attorneys-in-
on of such business and will be prosecuted as principal if,
with knowledge of the business, its purpose and effect, he fact Locsin, Joaquin and Hofileña for the purpose of
selling or transferring petitioner’s shares of stock with Respondent averred inter alia that she bought the
Businessday. hereditary shares (consisting of 10 lots) of Ignacio Rubio
On 24 December 1979, petitioner was arrested by the [and] the heirs of Luz Baloloy, namely: Alejandrino,
Marcos military by virtue of an Arrest, Search and Bayani, and other co-heirs; that said vendors executed a
Seizure Order and detained for allegedly committing contract of sale dated April 10, 1990 in her favor; that
arson. During the petitioner’s detention, respondent Ignacio Rubio and the heirs of Luz Baloloy received [a
Locsin ordered fellow respondent Purugganan to cancel down payment] or earnest money in the amount of
the petitioner’s shares in the books of the corporation P102,169.86 and P450,000, respectively.
and to transfer them to respondent Locsin’s name. It was agreed in the contract of sale that the vendors
On 16 January 1986, petitioner was finally released from would secure certificates of title covering their respective
detention. He then discovered that he was no longer hereditary shares; that the balance of the purchase price
registered as stockholder of Businessday in its corporate would be paid to each heir upon presentation of their
books. He also learned that Purugganan, as the individual certificates of title.
Corporate Secretary of Businessday, had already Ignacio Rubio refused to receive the other half of the
recorded the transfer of shares in favor of respondent down payment which is P100, 000 and to deliver to
Locsin, while petitioner was detained. When petitioner respondent the certificates of title covering his share on
demanded that respondents restore to him full the two lots
ownership of his shares of stock, they refused to do so. For petitioners Ignacio Rubio (Rubio for brevity) and
On 29 July 1986, petitioner filed a Complaint before the Corazon Escueta (Escueta for brevity):
trial court against respondents Purugganan and Locsin to Respondent has no cause of action, because Rubio has
declare as illegal the sale of the shares of stock, to not entered into a contract of sale with her; that he has
restore to the petitioner full ownership of the shares, and appointed his daughter Patricia Llamas to be his
payment of damages. attorney-in-fact and not in favor of Virginia Rubio Laygo
TRIAL COURT: DISMISSED THE COMPLAINT Lim (Lim for brevity) who was the one who represented
COURT OF APPEALS: AFFIRMED him in the sale of the disputed lots in favor of
ISSUE : WON respondent Locsin exceeded his authority respondent.
under the SPA. RTC: rendered in favor of respondent and against
HELD : NO. petitioners.
It is a general rule that a power of attorney must be CA: Affirmed
strictly construed; the instrument will be held to grant ISSUE: WON the contract of sale between petitioners
only those powers that are specified, and the agent may and respondent is valid.
neither go beyond nor deviate from the power of HELD: YES
attorney. However, the rule is not absolute and should Art. 1892. The agent may appoint a substitute if the
not be applied to the extent of destroying the very principal has not prohibited him from doing so; but he
purpose of the power. If the language will permit, the shall be responsible for the acts of the substitute:
construction that should be adopted is that which will (1) When he was not given the power to appoint
carry out instead of defeat the purpose of the one.
appointment. Clauses in a power of attorney that are Applying the above-quoted provision to the special
repugnant to each other should be reconciled so as to power of attorney executed by Ignacio Rubio in favor of
give effect to the instrument in accordance with its his daughter Patricia Llamas, it is clear that she is not
general intent or predominant purpose. Furthermore, the prohibited from appointing a substitute. By authorizing
instrument should always be deemed to give such Virginia Lim to sell the subject properties, Patricia merely
powers as essential or usual in effectuating the express acted within the limits of the authority given by her
powers. The language of the SPA clearly enumerates, as father, but she will have to be "responsible for the acts
among those acts that the agents were authorized to do, of the sub-agent,"19 among which is precisely the sale
the act of applying the proceeds of the sale of the shares of the subject properties in favor of respondent. Even
to any obligations petitioner might have against the assuming that Virginia Lim has no authority to sell the
Businessday group of companies. This interpretation is subject properties, the contract she executed in favor of
supported by the use of the word "and" in enumerating respondent is not void, but simply unenforceable, under
the authorized acts, instead of phrases such as "only the second paragraph of Article 1317 of the Civil Code.
for," "for the purpose of," "in order to" or any similar
terms to indicate that the petitioner intended that the
SPA be used only for a limited purpose, that of paying
any liabilities with the Businessday group of companies.
35.Baltazar v. Ombudsman

Doctrine: An agent cannot delegate to another the same

34. Escueta v. Lim agency. The legal maxim potestas delegata non delegare
FACTS : potest; a power once delegated cannot be re-delegated.
Respondent Rufina Lim filed an action to remove cloud For another, a re-delegation of the agency would be
on, or quiet title to, real property, with preliminary detrimental to the principal as the second agent has no
injunction and issuance of [a hold-departure order] from privity of contract with the former.
the Philippines against Ignacio E. Rubio. Respondent
amended her complaint to include specific performance FACTS:
and damages. 1. Paciencia Regala owns a 7-hectare fishpond located at
Sasmuan, Pampanga. Her attorney-in-fact Faustino R.
Mercado leased the fishpond to Eduardo Lapid who in aforecited Article that what is allowed is a substitute and
turn sub-leased the fishpond to Rafael Lopez during the not a delegation of the agency.
last seven months of the original lease. Lapid hired Petition DISMISSED.
Ernesto Salenga as fishpond watchman (bante-
encargado). In the sub-lease, Lopez rehired respondent
Salenga.

2. Salenga filed a complaint in the Provincial Agrarian 36. MBTC v. CA

Reform Adjudication Board (PARAB) against Lopez and
Lapid for unpaid salaries and non-payment of the 10% FACTS:
share in the harvest. The board ruled in his favor of ● Gomez opened an account with Golden
Salenga and granted the TRO requested. Savings bank and deposited 38 treasury
warrants.
3. On November 24, 1994, pending resolution of the ● All these warrants were endorsed by the
agrarian case, the instant case was instituted by cashier of Golden Savings, and deposited it
petitioner Antonio Baltazar, an alleged nephew of to the savings account in a Metrobank
Faustino Mercado, through a Complaint-Affidavit against branch since the former has no clearing facilities
private respondents before the Office of the Ombudsman of its own. They were sent later on for
for violation of Sec 3 (e) RA 3019. Petitioner charged clearing by the branch office to the principal
private respondents of conspiracy through the issuance office of Metrobank, which forwarded them
of the TRO in allowing respondent Salenga to retain to the Bureau of Treasury for special
possession of the fishpond, operate it, harvest the clearing.
produce, and keep the sales under the safekeeping of ● On persistent inquiries on whether the
other private respondents. warrants have been cleared, the branch manager
of Metrobank branch allowed Golden Savings to
Office of the Ombudsman: withdraw the warrants.
- On May 10, 1996 - Omb issued a Resolution ● Subsequently, relying on the go-signal given by
finding cause to bring respondents to court, denying the Metrobank, Golden Savings allowed Gomez also
motion to dismiss of respondent Ilao, Jr., and to make withdrawals from his own account, only
recommending the filing of an Information for violation to find out later on that the treasury
of Section 3 (e) of RA 3019. Respondent Ilao filed MR warrants have been dishonored by Bureau of
and 2nd MR. Treasury because of the alleged forgery of the
- On August 21, 1998. Omb approved an Order signatures of the drawers, not of Gomez as
issued by OSP which recommended the dismissal of the payee or indorsee.
complaint against all private respondents. ● Metrobank demanded refund from Golden
Savings for the amount withdrawn by the latter
ISSUE: WON Baltazar has the authority to act in behalf but Golden Savings rejected. Metrobank sued
of Faustino Mercado Golden Savings and argued that latter should
have exercised more care in checking the
HELD: personal circumstances of Gomez before
No. Baltazar has no authority to act in behalf of Faustino accepting his deposit. It further argued that
Mercado. Metrobank is just a collecting agent of Golden
Petitioner asserts that he is duly authorized by Faustino Savings, and as a mere agent it cannot be liable
Mercado to institute the suit and presented a Special to the principal. RTC first rendered judgment in
Power of Attorney (SPA) from Faustino Mercado. favor of Golden Savings. When Metrobank filed
However, such SPA is unavailing for petitioner. For one, motion for reconsideration, it only modified the
petitioner’s principal, Faustino Mercado, is an agent judgment but still in favor of Golden Savings. CA
himself and as such cannot further delegate his agency affirmed the RTC's decision.
to another. Otherwise put, an agent cannot delegate to
another the same agency. The legal maxim potestas ISSUE: WON Metrobank can hold Golden Savings liable
delegata non delegare potest; a power once delegated for the dishonored treasury warrants.
cannot be re-delegated, while applied primarily in
political law to the exercise of legislative power, is a HELD: No. In stressing that it was acting only as a
principle of agency. For another, a re-delegation of the collecting agent for Golden Savings, Metrobank seems to
agency would be detrimental to the principal as the be suggesting that as a mere agent it cannot be liable to
second agent has no privity of contract with the former. the principal. This is not exactly true. On the contrary,
In the instant case, petitioner has no privity of contract Article 1909 of the Civil Code clearly provides that — Art.
with Paciencia Regala, owner of the fishpond and 1909. — The agent is responsible not only for fraud, but
principal of Faustino Mercado. also for negligence, which shall be judged 'with more or
less rigor by the courts, according to whether the agency
Moreover, while the Civil Code under Article 1892 allows was or was not for a compensation. In this case, the
the agent to appoint a substitute, such is not the negligence of Metrobank has been sufficiently
situation in the instant case. The SPA clearly delegates established, be it noted that it misled Golden Savings
the agency to petitioner to pursue the case and not when the former assured the latter that it was already
merely as a substitute. Besides, it is clear in the safe to allow Gomez to withdraw the proceeds of the
treasury warrants. SC finds that Metrobank exhibited
extraordinary carelessness and that Golden Savings have Garrucho, executed in favor of PNB the deed
acted with due care and diligence and cannot be faulted whereby he constituted a mortgage on lots of Paz
for the withdrawals it allowed Gomez to make. Agudelo y Gonzaga and that of Amparo A.
Garrucho.
In connection of the credits, loans, and commercial
VI. OBLIGATIONS AND LIABILITIES OF overdrafts amounting to P21,000 Mauro A.
AGENTS TO THIRD PARTIES Garrucho, executed the promissory note for
P21,000 as a novation of the former promissory
notes for P6,000 and P16,000, respectively.
37. PNB v AGUDELO
Philippine National Bank, then, cancelled the
mortgages constituted on lots Nos. 61, 207 and
AGENT- Mauro A. Garrucho
878- Lots of Amparo and Paz.
PRINCIPAL- Paz Agudelo y Gonzaga
Amparo A. Garrucho, then, sold lot No. 878 to Paz
THE PHILIPPINE NATIONAL BANK, plaintiff-
Agudelo y Gonzaga.
appellee,
CFI- Absolving the defendant Mauro A. Garrucho
vs.
from the complaint and ordering the defendant Paz
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
Agudelo y Gonzaga to pay to the plaintiff, PNB.
PAZ AGUDELO Y GONZAGA, appellant.
Defendant-appellant Paz Agudelo y Gonzaga
ISSUE:
executed in favor of her nephew, Mauro A.
WON Paz is liable for the payment of the loans
Garrucho, a special power of attorney sufficiently
obtained by his agent, Mauro A. Garrucho from the
broad in scope to enable him to sell, alienate and
Philippine National Bank for the security of which
mortgage, all her real estate situated in the
he constituted a mortgage on the aforesaid real
municipalities of Murcia and Bacolod, Occidental
estate belonging to Paz.
Negros, consisting in lots Nos. 61 and 207 of
Bacolod, Occidental Negros.
SC. NO.
Also, Amparo A. Garrucho executed the document
In view of the foregoing consideration, when an
whereby she conferred upon her brother Mauro A
agent negotiates a loan in his personal capacity
Garrucho a special power of attorney sufficiently
and executes a promissory note under his own
broad in scope to enable him to sell, alienate,
signature, without express authority from his
mortgage or otherwise encumber, all her real
principal, giving as security therefor real estate
estate situated in the municipalities of Murcia and
belonging to the letter, also in his own name and
Bago, Occidental Negros.
not in the name and representation of the said
Nothing in the aforesaid powers of attorney
principal, the obligation do constructed by him is
expressly authorized Mauro A. Garrucho to contract
personal and does not bind his aforesaid principal.
any loan nor to constitute a mortgage on the
Aside from the phrases "attorney in fact of his
properties belonging to the respective principals, to
sister, Amparo and of her aunt Paz written after
secure his obligations.
the name of Garrucho in the mortgage deeds,
Garrucho executed in the favor of Philippine
there is nothing in the said mortgage deeds to
National bank, the document, whereby he
show that Garrucho is attorney in fact of them.
constituted a mortgage on lot of Amparo A.
The above-quoted phrases which simply described
Garrucho, in the amount not exceeding P6,000,
his legal personality, did not mean that Mauro A.
issuing the corresponding promissory note to that
Garrucho obtained the said loans and constituted
effect.
the mortgages in question for the account, and at
Again, Garrucho executed in favor of the Philippine
the request, of his principals. From the titles as
National Bank, the document whereby he
well as from the signatures therein, Garrucho,
constituted a mortgage on lots of Paz Agudelo y
appears to have acted in his personal capacity.
Gonzaga, in the amount of P16,000, payable on
There is absolutely no mention of Mauro A.
August 24, 1922, executing the corresponding
Garrucho being attorney in fact of anybody, and
promissory note to that effect.
which shows that he obtained such credit for
The mortgage deeds as well as the corresponding
himself in his personal capacity and secured the
promissory notes for P6,000 and P16,000,
payment thereof by mortgage constituted by him
respectively, were executed in Mauro A. Garrucho's
in his personal capacity.
own name and signed by him in his personal
capacity, authorizing the mortgage creditor, the
Philippine National Bank, to take possession of the
38. PHILIPPINE PRODUCTS v PRIMATERIA
mortgaged properties, by means of force if
necessary, in case he failed to comply with any of
Principal- Premateria Zurich
the conditions stipulated therein.
Agent-Alexander G. Baylin and Jose Crame Principal – New York based International Commodities
Corporation
( Primateria Phil)
Agent - NAMERCO

FACTS: Primateria is a foreign juridical entity and FACTS:

had its main office at Zurich, Switzerland. It was This case is about the recovery of liquidated damages
engaged in international trade with agricultural from a seller’s agent that allegedly exceeded its
authority in negotiating the sale.
products.
National Power Corporation (plaintiff) and National
On Oct. 24, 1951, Primateria Zurich, through Merchandising Corporation (Namerco), as the
Alexander Baylin, entered into an agreement with representative of the International Commodities
plaintiff Philippine Products Company, whereby the Corporation based in New York , executed in Manila a
latter took to buy copra for the former. During the contract for the purchase by the NPC from the New York
firm of four thousand long tons of crude sulfur for its
period of the contract, plaintiff caused the shipment
Maria Cristina Fertilizer Plant in Iligan City.
of copra to foreign countries, pursuant to instructions
from defendant Primateria Zurich, thru Primateria On that same date, a performance bond was executed
Phil. acting by Alexander Baylin and Jose Crame. As by the Domestic Insurance Company in favor of the NPC
a result, the total amount due to the plaintiff as of to guarantee the seller’s obligations.
May 30, 1955, was Php 33,009.71.
It was stipulated in the contract of sale that the seller
would deliver the sulfur at Iligan City within sixty days
Alexander Baylin acted in the dual capacities of
from notice of the establishment in its favor of a letter of
agent of the Zurich firm and executive vice-president credit and that failure to effect delivery would subject
of Primateria Phil. which also acted as agent of the seller and its surety to the payment of liquidated
Primateria Zurich. Primateria Zurich had no license to damages.
transact business in the Philippines.
NPC advised John Z. Sycip, the president of Namerco, of
the opening of a letter of credit in favor of International
An action to recover from the defendants was filed.
Commodities Corporation. Notice of that letter of credit
was, received by cable by the New York firm.
Lower court rendered judgment holding Primateria
Zurich liable to the plaintiff absolving defendants The New York supplier was not able to deliver the sulfur
Primateria Phil, Alexander Baylin and Jose Crame. due to its inability to secure shipping space. There was a
Plaintiff appealed the portion of the judgment shutdown of the NPC’s fertilizer plant because there was
dismissing its complaint as regards the three no sulfur. No fertilizer was produced.

defendants.
In a letter, the general manager of the NPC advised
Namerco and the Domestic Insurance Company that
Plaintiff alleges that the appelles as agents are liable under Article 9 of the contract of sale "non-availability of
to it under art. 1897 of the NCC. bottom or vessel" was not a fortuitous event that would
excuse non-performance and that the NPC would resort
ISSUE: Whether or not Agents may be held liable on to legal remedies to enforce its rights.
contracts made in the name of the entity with third
The Government Corporate Counsel in his letter to Sycip
persons in the Philippines. (Pres of Namerco) rescinded the contract of sale due to
the New York supplier’s non-performance of its
HELD: obligations. The same counsel in his letter demanded
No, There is no proof that, as agents, they from Namerco payment as liquidated damages. He
exceeded the limits of their authority. At any rate, art explained that time was of the essence of the contract. A
similar demand was made upon the surety.
1897 does not hold that in cases of excess of
authority, both the agent and the principal are liable
NPC sued the New York firm, Namerco and the Domestic
to the other contracting party. In the absence of Insurance Company for the recovery of the stipulated
express legislation, the liability of the agent of a liquidated damages (Civil Case No. 33114).
foreign corporation doing business, but not licensed
in the Philippines, is premised on the inability to sue TC – Civil Case No.33114 – Dismissed the case as to the
the principal or non-liability thereof. New York firm for lack of jurisdiction because it was not
doing business in the Philippines
Civil Case 37019 - Dismissed Wallick’s (allegedly an
assignee of the NY corporation but was later dropped as
defendant in the other case) action for damages against
39. NPC v. NATIONAL MERCHANDISING Namerco because the assignment in favor of Wallick was
champertous in character (sharing in the proceeds of
litigation by one who agrees with either the plaintiff or
defendant to help promote it or carry it on). Wallick authority, and the principal does not ratify the contract,
appealed to this Court. The appeal was dismissed it shall be void if the party with whom the agent
because the record on appeal did not disclose that the contracted is aware of the limits of the powers granted
appeal was perfected on time. by the principal."

ISSUE: Whether Namerco acted within the scope of his It is being enforced against the agent because article
authority as agent in signing the contract of sale. 1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he
HELD: No, he did not act within the scope of his contracted.
authority
And the rule is complemented by article 1898 of the
Under Article 1897 of the Civil Code the agent who Civil Code which provides that "if the agent contracts in
exceeds the limits of his authority without giving the the name of the principal, exceeding the scope of his
party with whom he contracts sufficient notice of his authority, and the principal does not ratify the contract,
powers is personally liable to such party. it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted
In the present case, Namerco, the agent of a New York- by the principal."
based principal, entered into a contract of sale with the
National Power Corporation without disclosing to the NPC
the limits of its powers and, contrary to its principal’s 40. NATIONAL BANK v WELCH FAIRCHILD
prior cabled instructions that the sale should be subject (PNB v Welch Fairchild & Co. 44 phil 780)
to availability of a steamer, it agreed that non-
availability of a steamer was not a justification for FACTS:
nonpayment of the liquidated damages. Namerco.
La Compañia Naviera applied to the Philippine
therefore, is liable for damages since he exceeded his
scope of authority.
National Bank for a loan of $125,000, with which to
purchase a boat called Benito Juarez, which had
***Supplemental*** been found on the market in the United States.
Through the efforts Mr. Fairchild, president of Welch
The rule relied upon by NAMERCO (defendants- Fairchild and Co. Inc. that the consent of the proper
appellants) that every person dealing with an agent is
authorities in Washington, D.C. was obtained for the
put upon inquiry and must discover upon his peril the
transfer of the ship to Philippine registry. While the
authority of the agent would apply in this case if the
principal is sought to be held liable on the contract ship was being delivered to the agent of the buyer in
entered into by the agent. San Francisco, it was found out that it needed repairs
be it could be transported to the Philippines.
That is not so in this case. Here, it is the agent that it
sought to be held liable on a contract of sale which was Defendant wrote a letter to PNB to request them to
expressly repudiated by the principal because the agent
cable Anglo-London (agent of PNB in San Francisco)
took chances, it exceeded its authority, and, in effect, it
acted in its own name.
to release the money and make payment for the ship
upon Welch and Co.s application without requiring
The defendants also contend that the trial court erred in the delivery of the bill of sale or insurance policy
holding as enforceable the stipulation for liquidated which became impracticable to deliver. The latter
damages despite its finding that the contract was stated that “the Compania Naviera will deliver to you
executed by the agent in excess of its authority and is,
here the bill of sale also the insurance policy covering
therefore, allegedly unenforceable. The defendants cite
the voyage to Manila”. La Compania also addressed
article 1403 of the Civil Code which provides that a
contract entered into in the name of another person by a letter to PNB confirming the request and
one who has acted beyond his powers is unenforceable. authorizing the bank to send the necessary
cablegram. PNB sent the cablegram authorizing
Defendants’ contention is untenable because article 1403 payment without the production of the bill of sale or
refers to the unenforceability of the contract insurance policy. The ship was then delivered. After
against the principal. In the instant case, the contract
the repair of the ship, it was insured by Welch & Co
containing the stipulation for liquidated damages is not
being enforced against it principal but against the agent
to the value of $150,000 and was dispatched on its
and its surety. voyage to the Phils.

It is being enforced against the agent because article However, the vessel encountered a storm off the
1807 implies that the agent who acts in excess of his Island in Hawaii and was lost. When the insurance
authority is personally liable to the party with whom he
was taken out to cover the voyage to Manila, no
contracted.
policy was issued by any insurer; but the insurance
And that rule is complemented by article 1898 of the was placed by Welch & Co. of San Francisco, upon
Civil Code which provides that "if the agent contracts in the instructions of Welch, Fairchild & Co., as agents
the name of the principal, exceeding the scope of his of the Compaña Naviera, and it was taken out in the
ordinary course of business to protect the interests of 41. TUAZON v OROSCO
all
Principal: Juan de Vargas
parties concerned. Agent: Enrique Grupe
FACTS: Juan de Vargas y Amaya, the defendant's
The amount of $13,000 was mistakenly remitted to husband, executed a power of attorney to Enrique
PNB in New York, and it was only a month after this Grupe, authorizing him, among other things, to dispose
that PNB Manila received authority to pay defendant of all his property, and particularly of a certain house
and lot known as No. 24 Calle Nueva, Malate, in the city
the said amount. This drew the attention of the bank
of Manila, for the price at which it was actually sold. He
to the fact that the transfer was related to the
was also authorized to mortgage the house for the
proceeds of the insurance on Benito Juarez. PNB purpose of securing the payment of any amount
Manila first determined to intercept the transfer and advanced to his wife, Dolores Orozco de Rivero, who,
withhold the credit from the defendant. inasmuch as the property had been acquired with funds
belonging to the conjugal partnership, was a necessary
The lower court ruled in favor of the defendants. party to its sale or incumbrance.
Grupe and Orozco obtained a loan from the plaintiff
secured by a mortgage on the property referred to in the
ISSUE: WON the agent ( Welch, Fairchild and Co. power of attorney. In the caption of the instrument
Inc.) is liable. evidencing the debt it is stated that Grupe and Orozco
appeared as the parties of the first part and Gonzalo
HELD: Tuason, the plaintiff, as the party of the second part.
While it is true that an agent who acts for a revealed Grupe acted for himself and also in behalf of Juan Vargas
by virtue of the power granted him by the latter, and
principal in the making of a contract does not become
Orozco appeared merely for the purpose of complying
personally bound to the other party in the sense that with the requirement contained in the power of attorney.
an action can ordinarily be maintained upon such This instrument was duly recorded in the Registry of
contract directly against the agent (art. 1725, Civ. Property, and it appears therefrom that Enrique Grupe,
Code), yet that rule clearly does not control this case; as attorney in fact for Vargas, received from the plaintiff
for even conceding that the obligation created by the a loan of 2,200 pesos and delivered the same to the
letter of August 8, 1918, was directly binding only on defendant; that to secure its payment he mortgaged the
property of his principal with defendant's consent as
the principal, and that in law the agent may stand
required in the power of attorney. He also received
apart therefrom, yet it is manifest upon the simplest 1,300 pesos. This amount he borrowed for his own use.
principles of jurisprudence that one who has In the instrument, Grupe bound himself liable for the
intervened in the making of a contract in the whole amount of 3,500 and pledged his 13 shares of
character of agent cannot be permitted to intercept stock in the "Compañia de los Tranvias de Filipinas" as
and appropriate the thing which the principal is bound security, and mortgaged the property of Vargas to
secure the 2,200 loan.
to deliver, and thereby make performance by the
The defendant denies having received this sum.
principal impossible. The agent in any event must be Contention of the defendant:
precluded from doing any positive act that could (1)The appellant claims that the instrument is evidence
prevent performance on the part of his principal. This of a debt personally incurred by Enrique Grupe for his
much, ordinary good faith towards the other own benefit, and not incurred for the benefit of his
contracting party requires. principal, Vargas, as alleged in the complaint.
(2) Enrique Grupe pledged to the plaintiff thirteen shares
of stock in the "Compañia de los Tranvias de Filipinas" to
By virtue of the promise contained in the letter of
secure the payment of the entire debt, and contends that
August 8, 1918, the bank became the equitable it must be shown what has become of these shares, the
owner of the insurance effected on the Benito Juarez value of which might be amply sufficient to pay the debt,
to the extent necessary to indemnify the bank for the before proceeding to foreclose the mortgage.
money advanced by it, in reliance upon that promise, (3) in order to render judgment against the mortgaged
for the purchase of said vessel; and this right of the property it would be necessary that the minor children of
Juan de Vargas be made parties defendant in this action,
bank must be respected by all persons having due
they having an interest in the property.
notice thereof, and most of all by the defendant which
took out the insurance itself in the interest of the “Court Below” (CFI? assumed decision) decided in favour
parties then concerned, including of course the bank. of Tuason and held Orozco personally liable to the loan.
The defendant therefore cannot now be permitted to Issues:
ignore the right of the bank and appropriate the (1) WON Vargas, as principal, is liable to the loan
insurance to the prejudice of the bank, even though obtained by Grupe.
(2) WON Vargas is relieved from obligation when
the act be done with the consent of its principal.
Grupe bound himself personally to the payment of
debt.
(3) WON the judgment may be rendered against the
property of the now deceased principal.
HELD: w/ PAL for him to board the flight in San Francisco
instead of boarding it in LA.
(1) Yes. Under the provision of article 1727 of the
Civil Code the principal directly liable to the creditor When Cervantes checked in at the PAL counter in San
for the payment of a debt incurred by his agent Francisco he was not allowed to board and PAL personnel
acting within the scope of his authority. made a notation on his ticket that read “TICKET NOT
The judgment of the court below should be modified in ACCEPTED DUE TO EXPIRATION OF VALIDITY”.
so far as it holds the defendant personally liable for the
Aggrieved, Cervantes filed a complaint for damages for
payment of the debt.
Breach of Contract of Carriage.
The agreement, so far as that amount is concerned, was
signed by Grupe as attorney in fact for Vargas. Pursuant RTC: dismissed the complaint
to instructions contained in the power of attorney the CA: affirmed RTC
money was delivered to Varga's wife, the defendant in
this case. To secure the payment of the debt, Varga's ISSUE: WON the act of the PAL agents in confirming the
property was mortgaged. His wife took part in the ticket of Cervantes extended the period of validity.
execution of the mortgage as required in the power of
attorney. A debt thus incurred by the agent is binding RULING: No.
directly upon the principal, provided the former acted, as
in the present case, within the scope of his authority The plane ticket itself provides that it is not valid after
March 27, 1990. It is also stipulated in paragraph 8 of
the Conditions of Contract that "8. This ticket is good for
(2) No. Irrespective of such liability on the part of carriage for one year from date of issue, except as
the principal, the agent may bind himself personally otherwise provided in this ticket, in carrier's tariffs,
to the payment of the debt incurred for the benefit conditions of carriage, or related regulations.
and in behalf of the principal. In such a case the
liability expressly incurred by the agent does not The fare for carriage hereunder is subject to change prior
preclude the personal liability of the principal but to commencement of carriage. Carrier may refuse
constitutes further security in favour of the creditor. transportation if the applicable fare has not been paid."
The individual liability of the agent constitutes in the
present case a further security in favor of the creditor In the case of Lufthansa vs. Court of Appeals, the SC
and does not affect or preclude the liability of the held that the "ticket constitute the contract between the
parties. It is axiomatic that when the terms are clear and
principal. In the present case the latter's liability was
leave no doubt as to the intention of the contracting
further guaranteed by a mortgage upon his property.
parties, contracts are to be interpreted according to their
The law does not provide that the agent can not bind literal meaning."
himself personally to the fulfillment of an obligation
incurred by him in the name and on behalf of his In his effort to evade this inevitable conclusion,
principal. On the contrary, it provides that such act on petitioner theorized that the confirmation by the PAL's
the part of an agent would be valid. agents in Los Angeles and San Francisco changed the
compromise agreement between the parties. The 2
(3) Yes. Where a debt is secured by a mortgage personnel from PAL did not have authority to extend the
upon property belonging to the principal, duly validity of the ticket. Cervantes knew this from the start
when he called up the Legal Department of appellee in
recorded in the Registry of Property, the creditor
the Philippines before he left for the United States of
may bring his action directly against the mortgaged
America. He had first hand knowledge that the ticket in
property notwithstanding the liability incurred by question would expire on March 27, 1990 and that to
himself. A mortgage directly subjects the secure an extension, he would have to file a written
encumbered property, whoever its possessor may request for extension at the PAL's office in the
be, to the fulfilment of the obligation for the security Philippines. ). Despite this knowledge, he persisted to
of which it was created. use the ticket in question. Since the PAL agents are not
privy to the said Agreement and Cervantes knew that a
written request to the legal counsel of PAL was
42. CERVANTES v. CA necessary, he cannot use what the PAL agents did to his
advantage. The said agents, according to the Court of
FACTS: Appeals, acted without authority when they confirmed
PAL issued to Cervantes a round trip ticket for Manila- the flights of the petitioner. Under Article 1989 of the
Honolulu-Los Angeles-Honolulu-Manila. This ticket New Civil Code, the acts an agent beyond the scope
expressly provides an expiry date of 1 year from of his authority do not bind the principal, unless
issuance or until March 27, 1990.The ticket was issued in the latter ratifies the same expressly or impliedly.
compliance w/ a Compromise Agreement entered Furthermore, when the third person (herein petitioner)
between PAL & Cervantes in 2 previous suits between knows that the agent was acting beyond his power or
them. authority, the principal cannot be held liable for the acts
of the agent. If the said third person is aware of such
On March 3, 1990, Cervantes used it. Upon his arrival in limits of authority, he is to blame, and is not entitled to
LA, he immediately booked his LA-Manila return ticket w/ recover damages from the agent, unless the latter
PAL office which was confirmed for April 2, 1990. undertook to secure the principal's ratification.

Cervantes learned that the same PAL plane would make

a stop-over in San Francisco and because he would be in
San Francisco on April 2, 1990, he made arrangements
 43. SMITH BELL v SOTELO Vicente Sotelo signed the contracts in his
individual capacity and under his own name. If
FACTS: Mr Vicente Sotelo was agent, he is still liable
since he entered the contract under his own
● Principal - Manila Oil; Agent - Sotelo name, and did not represent that he was under
● On August 1918, Smith, Bell and Co. (Smith commission to represent Manila Oil (Art. 1717 of
Bell), and Vicente Sotelo (Sotelo), entered into a the Old Civil Code, Art. 1883 in the NCC). The
contract where the Company obligated itself Code of Commerce holds Mr Vicente Sotelo since
to sell and Sotelo to buy 2 steel tanks (P21,000
total), 2 expellers (P25,000 each), and two he transacted the business under his own name,
electric motors (P2,000 each). With respect to and therefore directly liable. Intervenor has no
delivery dates, the stipulations were: right of action, so the Court in its disposition only
directed the acceptance and payment of the
○ 2 tanks Within 3 or 4 mos., no obligation ordered goods under Mr Vicente Sotelo’s name,
on the Smith Bell’s part without prejudice to actions he could invoke
○ 2 expellers September 1918 or as soon against his principal.
as possible
○ 2 electric motors Within 90 days, not How did Manila Oil Co. impleaded as party:
guaranteed
● Manila Oil = INTERVENOR alleging that Mr.
Arrival dates: Sotelo had made the contracts in question as
■ 2 tanks April 27, 1919 (8 mos. manager of the intervenor, the Manila Oil
after signing) Refining and By-Products Co., Inc which fact was
■ 2 expellers October 26, 1918 (1 known to the plaintiff, and that "it was only in
mo. “late”) May, 1919, that it notified the intervenor that
■ 2 electric motors February 27, said tanks had arrived, the motors and the
1919 (3 mos. “late”) expellers having arrived incomplete and long
after the date stipulated." As a counterclaim or
● Sotelo refused to receive and pay. The Smith Bell set-off, they also allege that, as a consequence
sued him. Sotelo countered that the deliveries of the plaintiff's delay in making delivery of the
were late and made counterclaims against Smith goods, which the intervenor intended to use in
Bell. the manufacture of coconut oil, the intervenor
suffered damages in the sums of one hundred
● The lower court absolved Sotelo with regards to sixteen thousand seven hundred eighty-three
the tanks and the motors, but ordered him to pesos and ninety-one centavos (P116,783.91)
receive and pay for the expellers. Both parties for the non delivery of the tanks, and twenty-one
appealed. thousand two hundred and fifty pesos (P21,250)
on account of the expellers and the motors not
ISSUE: Whether Smith Bell has fulfilled its obligation to having arrived in due time.
deliver in due time

RULING:
44. RURAL BANK OF BOMBON v CA
● Yes. There really was no fixed date for delivery, Alleged Agent: Aquino
as can be seen from the qualifiers in the contract Alleged Principal: Gallardo
and the final clause providing that the sellers
FACTS:
would not be responsible for any delay due to
fortuitous events and the will of third persons.
The contract was made during war time when -Ederlinda M. Gallardo, married to Daniel Manzo
restrictions on exports from the US were in executed a special power of attorney in favor of
force, hence there were many dilatory factors Rufina S. Aquino authorizing him:
beyond the control of the Company. At best the
obligation may be regarded as conditional. The 1. To secure a loan from any bank or lending institution for
Company did all that it could to deliver, in spite any amount or otherwise mortgage the property covered by
of the restrictions, and thus fulfilled its obligation Transfer Certificate of Title No. S-79238 situated at Las Piñas,
in due and reasonable time. There was no delay Rizal, the same being my paraphernal property, and in that
as there was no fixed date, and Sotelo must pay connection, to sign, or execute any deed of mortgage and sign
for the equipment. other document requisite and necessary in securing said loan
and to receive the proceeds thereof in cash or in check and to
AGENCY-RELEVANT: sign the receipt therefor and thereafter endorse the check
representing the proceeds of loan.
● Moreover, the contracts were signed by Sotelo
on his own individual capacity and not for his -A Deed of Real Estate Mortgage was executed by
own company. Hence his company had no cause Rufino S. Aquino in favor of the Rural Bank of
of action against the plaintiff.Manila Oil doesn’t
seem to have taken part in the contracts. Mr
Bombon (Camarines Sur), Inc. for (P350,000.00), in favor of the Rural Bank of Bombon (Cam. Sur),
plus interest at the rate of fourteen (14%) per annum. Inc. is valid.

-Plaintiffs were surprised to discover that the property Held:

was mortgaged to pay personal loans of Aquino No.
and for his for personal use and benefit; that the -The Special Power of Attorney above quoted shows
mortgagor in the deed was defendant Aquino the extent of authority given by the plaintiff to
instead of plaintiff Gallardo and in the deed vesting defendant Aquino. But defendant Aquino in executing
power of attorney to Aquino; that correspondence the deed of Real Estate Mortgage in favor of the rural
relative to the mortgage was sent to Aquino's bank over the three parcels of land covered by
address at "Sta. Isabel, Calabanga, Camarines Sur" Gallardo's title named himself as the mortgagor
instead of Gallardo's postal address at Las Piñas, without stating that his signature on the deed
Metro Manila; and that defendant Aquino, in the real was for and in behalf of Ederlinda Gallardo in his
estate mortgage, appointed defendant Rural Bank as capacity as her attorney-in-fact.
attorney in fact, and in case of judicial foreclosure as
receiver with corresponding power to sell and that -It is a general rule in the law of agency that, in order
although without any express authority from to bind the principal by a mortgage on real
Gallardo, defendant Aquino waived Gallardo's property executed by an agent, it must upon its
rights under Section 12, Rule 39, of the Rules of face purport to be made, signed and sealed in the
Court and the proper venue of the foreclosure suit. name of the principal, otherwise, it will bind the
agent only. It is not enough merely that the agent
-The Spouses filed an action (annulment of was in fact authorized to make the mortgage, if he
mortgage) against Aquino and the Bank. The trial has not acted in the name of the principal. Neither is
court temporarily restrained the Rural Bank "from it ordinarily sufficient that in the mortgage the agent
enforcing the real estate mortgage and from describes himself as acting by virtue of a power of
foreclosing it either judicially or extrajudicially until attorney, if in fact the agent has acted in his own
further orders from the court" name and has set his own hand and seal to the
mortgage. This is especially true where the agent
-The Bank filed a complaint against Ederlinda himself is a party to the instrument. However clearly
Gallardo and Rufino Aquino for "Foreclosure of the body of the mortgage may show and intend that it
Mortgage". On motion of the plaintiff, the foreclosure shall be the act of the principal, yet, unless in fact it is
case and the annulment case (Civil Case No. 6062) executed by the agent for and on behalf of his
were consolidated. principal and as the act and deed of the principal, it is
not valid as to the principal.
-RTC: rendered a summary judgment in Civil Case
No. 6062, dismissing the complaint for annulment of -In view of this rule, Aquino's act of signing the Deed
mortgage and declaring the Rural Bank entitled to of Real Estate Mortgage in his name alone as
damages the amount of which will be determined in mortgagor, without any indication that he was
appropriate proceedings. The court lifted the writ of signing for and in behalf of the property owner,
preliminary injunction it previously issued. Ederlinda Gallardo, bound himself alone in his
personal capacity as a debtor of the petitioner
-CA: reversed the trial court. The deed of real estate Bank and not as the agent or attorney-in-fact of
mortgage executed between Rufino S. Aquino with Gallardo.
the appellee Rural Bank of Bombon, Camarines Sur,
unauthorized, void and unenforceable against -Herein respondent Aquino acted purportedly as an
plaintiff Ederlinda Gallardo; ordering the agent of Gallardo, but actually acted in his personal
reinstatement of the preliminary injunction issued at capacity. Involved herein are properties titled in the
the onset of the case and at the same time, ordering name of respondent Gallardo against which the Bank
said injunction made permanent. proposes to foreclose the mortgage constituted by an
agent (Aquino) acting in his personal capacity. Under
SC: Affirmed CA in toto these circumstances, we hold, as we did in Philippine
Sugar Estates Development Co. vs. Poizat, supra,
that Gallardo's property is not liable on the real estate
Issue: mortgage:
Whether the Deed of Real Estate Mortgage executed
by Rufino S. Aquino, purportedly as an agent of -There is no principle of law by which a person can
Gallardo, but actually acted in his personal capacity, become liable on a real mortgage which she never
executed either in person or by attorney in fact. It
should be noted that this is a mortgage upon real In the previous case, the relation of PR and AG exists
property, the title to which cannot be divested except between the plaintiffs and the defendant. This however
does not exist in the present case. By this agency, the
by sale on execution or the formalities of a will or
plaintiffs herein clothed the defendant with their
deed. For such reasons, the law requires that a representation in order to purchase the launch in
power of attorney to mortgage or sell real property question.
should be executed with all of the formalities required However, the defendant acted without this
in a deed. For the same reason that the personal representation and bought the launch in his own name
signature of Poizat, standing alone, would not convey thereby violating the agency.
the title of his wife in her own real property, such a
signature would not bind her as a mortgagor in real But not only must the consequences of the violation of
this agency not be accepted, but the effects of the
property, the title to which was in her name.
agency itself must be sought.
"Philippine Sugar Estates Development Co. vs. Poizat,” o If the defendant contracted the obligation to
but the launch for the plaintiffs and in their
representation, but virtue of the agency, notwithstanding
the fact that he bought it in his own name, he is obliged
to transfer to the plaintiffs the rights he received from
the vendor, and the plaintiffs are entitled to be
45. SY-JUCO v SY-JUCO subrogated in these rights.

Facts: Case Doctrine:

On 1902, defendant Santiago Sy-Juco was appointed by From the rule established in Article 1717 of the
herein plaintiffs Vicente and Cipriana Sy-Juco as Civil Code that, when an agency acts in his own
administrator of their property, and acted as such until name, the principal shall have no right of action
June 1916. Santiago is the son of plaintiffs. against the person with whom the agent has
Vicente and Cipriana alleged that during Santiago’s contracted, cases involving things belonging to the
administration, Santiago asquired the property claimed principal are excepted.
in the complaint in his capacity as the plaintiff’s o According to this exception (when things
administrator with their money and for their benefit. belonging to the principal are dealt with), the
TC: The trial court ordered Santiago to return to the agent is bound to the principal although he does
plaintiffs the launch (a large motorboat) Malabon, two not assume the character of such agent and
cascos (a flat-bottomed, square-ended boat), an appears acting in his own name.
automobile, a typewriting machine, the house occupied o This means that in the case of this
by Santiago and the price of the piano. exception the agent's apparent representation
Both parties appealed from this judgment. yields to the principal's true representation and
ISSUE: WON the properties bought by that, in reality and in effect, the contract must be
Santiago in his own name, as an considered as entered into between the principal
and the third person; and, consequently, if the
administrator, belong to him obligations belong to the former, to him alone
SC: no, except casco 2545. must also belong the rights arising from the
As to launch MALABON: contract.
In July 1914, defendnant bought iti n his
own name from Pacific Commercial Co.m and afterwards The money with which the launch was bought having
registered it at the custom house. This transaction was come from the plaintiff, the exception established in Art.
within the agency which he had received from the 1717 is applicable in the instant case.
plaintiffs. The fact that he has acted in his own name
may be only, as we believe it was, a violation of the As to Casco no. 2584
agency. Santiago’s allegation that it was constructed at his
The question is not in whose favour the document of sale instance and with his money is not supported by the
of the launch is executed nor in whose name the same evidence.
was registered, but with whose money was said launch In fact the only proof presented to support this allegation
bought. The plaintiffs testimony that it was bought with is his own testimony contradicted, on the on hand, by
their money and for them is supported by the fact that, the plaintiffs' testimony and, on the other hand, rebutted
immediately after it s purchase, the launch had to be by the fact that, on the date this casco was constructed,
repaired at their expense although said expense was he did not have sufficient money with which to pay the
collected from the defendant. expense of this construction.
The defendant invokes Martinez vs Martinez: As to the automobile
Martinez Jr. Bought a vessel and in his There is sufficient evidence to show that its prices was
name registered it at the Custom House. This court then paid with plaintiffs' money. Defendant's adverse
said thal although the funds with which the vessel was allegation that it was paid with his own money is not
bought belonged to Martinez, Sr., Martinez Jr. Is its solo supported by the evidence.
and exclusive owner.
SC: Martinez vs Martinez not applicable in this case.
As to Casco no. 2545
Upon examination of the evidence relative to this casco, to whether it is jointly and severally liable with defendant
it was found that it belonged to the plaintiffs but sold it Gil Medalla for freightage.
afterwards to the defendant by means of a public
instrument. 11. CA - affirmed judgement of RTC. Hence this petition
for certiorari.
The plaintiffs have not adduced sufficient proof of such
deceit (on the part of Santiago, when they signed) which 12. SC - affirmed CA decision.,
would destroy the presumption of truth which a public
document carries with it. Attorney Sevilla, who acted as ISSUE
the notary in the execution of this instrument, testifying
as a witness in the case, said that he never verified any Whether or not the case falls within the exception of the
document without first inquiring whether the parties general rule provided for in Art. 1883 of the Civil Code of
knew its content. the Philippines.

Our conclusion is that this casco was lawfully sold to the HELD
defendant by the plaintiffs.
Yes, the case falls within the exception of the general
46. NATIONAL FOOD AUTHORITY v IAC rule provided for in Art. 1883 of the Civil Code of the
Philippines.
FACTS
NFA’s contention is that it is not liable under the
1. Principal - Superior Shipping Corporation (SSC); exception to the rule (Art. 1883) since it had no
Commission Agent - Gil Medalla; Third Party - knowledge of the fact of agency between respondent
National Food Authority then known as the National Superior Shipping and Medalla at the time when the
Grains Authority or NGA contract was entered into between them. Petitioner
submits that "(A)n undisclosed principal cannot maintain
2. Gil Medalla, as commission agent of the Superior an action upon a contract made by his agent unless such
Shipping Corporation, entered into a contract for hire of principal was disclosed in such contract. One who deals
ship known as "MV Sea Runner" with National Grains with an agent acquires no right against the undisclosed
Authority. Under the said contract Medalla obligated to principal."
transport on the "MV Sea Runner" 8,550 sacks of rice
belonging to National Grains Authority from the port of Petitioner NFA's contention holds no water.
San Jose, Occidental Mindoro, to Malabon, Metro Manila.
It is an undisputed fact that Gil Medalla was a
3. October 17, 1979, Upon completion of the delivery of commission agent of respondent Superior Shipping
rice at its destination, Superior Shipping Corporation which owned the vessel "MV Sea Runner"
Corporation(SSC), wrote a letter requesting NGA that it that transported the sacks of rice belonging to petitioner
be allowed to collect the amount stated in its statement NFA. The context of the law is clear. Art. 1883 provides:
of account (costs of freightage, demurrage and
stevedoring = P93,538.70) Art. 1883. If an agent acts in his own name, the principal
has no right of action against the persons with whom the
4. November 5, 1979, SSC wrote again NGA, this time agent has contracted; neither have such persons against
specifically requesting that payment be made to it and the principal.
not to defendant Medalla because SSC (principal) was In such case the agent is the one directly bound in favor
the owner of the vessel "MV Sea Runner" of the person with whom he has contracted, as if the
transaction were his own, except when the contract
5. In a reply, NGA informed SSC that it could not grant involves things belonging to the principal.
it’s request because the contract to transport the rice
was entered into by defendant NGA and Medalla who did The provision of this article shall be understood to be
not disclose that he was acting as a mere agent of SSC. without prejudice to the actions between the principal
and agent. Consequently, when things belonging to the
6. Thereupon on NGA paid Medalla the sum of principal (Superior Shipping Corporation) are dealt with,
P25,974.90, for freight services in connection with the the agent is bound to the principal although he does not
shipment of 8,550 sacks of rice. assume the character of such agent and appears acting
in his own name. In other words, the agent's apparent
7. On December 4, 1979, SSC wrote Medalla demanding representation yields to the principal's true
that he turn over to plaintiff the amount paid to him by representation and that, in reality and in effect, the
NFA. Medalla, however, "ignored the demand.” contract must be considered as entered into between the
principal and the third person
8. Thus SSC constrained to file complaint (not stated: for
collection for sum of money) Corollarily, if the principal can be obliged to perform his
duties under the contract, then it can also demand the
9. RTC - Judgment was rendered in favor of the SSC enforcement of its rights arising from the contract.

10. National Food Authority appealed to the sole issue as

 47. GOLD STAR MINING v LIM JIMENEZ
2. Whether or not the CA erred in condemning Gold Star
FACTS: In 1937, Ananias Isaac Lincallo bound himself in to pay the sum of P30,691.92 for violation of an
writing to turn to Victor Jimena half of the proceeds from allegedly non-existent injunction.
all mining claims that he would purchase with the money
to be advanced by the latter. This agreement was later
RULING & RATIO:
on modified to include in the equal sharing agreement
1. NO. The existence of a common subject-matter
not only the proceeds from several mining claims, but
supplies the juridical link. Jimena repeatedly made
also the lands constituting the same, and so as to being
demands upon Gold Star for the payment of his ½ share
thereby their “heirs, assigns, or legal representatives.”
of the royalties, but all in vain, so he was forced to
implead Gold Star for having refused to recognize his
Eventually, the mining rights over parts of the claims right. From another standpoint, equally valid and
were assigned by Lincallo to Gold Star Mining Co., Inc., acceptable, it can be said that Lincallo, in transferring
while others were assigned to Marinduque Iron Mines the mining claims to Gold Star (without disclosing that
Agents. Meanwhile, Jimena repeatedly apprised both Jimena was a co-owner although Gold Star had
mining corporations of his interests over the mining knowledge of the fact as shown by the proofs heretofore
claims so assigned and/or leased by Lincallo. However, mentioned) acted as Jimena's agent with respect to
both corporations ignored his demands. Jimena also Jimena's share of the claims. Furthermore, under such
demanded Lincallo for the payment of the P5,800 he conditions wherein Jimena was repeatedly denied of his
gave Lincallo as money to purchase the mining claims interests, Jimena has an action against Gold Star,
and the lands, but to no avail. Lincallo did not only fail to pursuant to Art. 1883, NCC, which provides that the
settle his accounts with Jimena, he even transferred principal may sue the person with whom the agent dealt
about majority of his share in the royalties due from with in his (agent’s) own name, when the transaction
Gold Star to Gregorio Tolentino, a salaried employee. ‘involves things belonging to the principal.’

Hence, on Sept. 2, 1954, Jimena filed a suit against 2. NO. Said award is not so much a penalty against
Lincallo for (CoA) recovery of his advances and his one- petitioner as a decree of restitution. Said sum to be paid
half share in the royalties, and impleaded Gold Star and by the company to Jimena is “to be imputed to Lincallo’s
Marinduque Iron Mines, as well as Tolentino, later on as liability under this judgment”. CA thus left the way
defendants. Two weeks later, the trial court issued a writ open for Gold Star to recover later the whole
of preliminary injunction, preventing both mining amount from Lincallo.
companies from paying royalties during the pendency of
the case to Lincallo, his assigns or legal representatives.
Despite of such injunction, Gold Star still paid P30,
691.92 to Lincallo and Tolentino (claiming that a writ of 48. FAR EAST BANK AND TRUST COMPANY AND
preliminary attachment filed by Jimena supposedly ROLANDO BORJA, DEPUTY SHERRIF v SPS.
superseded the injunction, but the condition to such ERNESTO AND LEONOR CAYETANO
attachment - the filing of a bond - was not fulfilled, so it
cannot be said that the injunction was superseded). Far East Bank and Trust Company (now Bank of the Philippine
Islands) vs Sps. Ernesto and Leonor C. Cayetano
Jimena and Tolentino died successively during the
pendency of the case in the trial court and were, FACTS:
accordingly, substituted by their respective widows and Principal - Leonor C. Cayetano (Cayetano)
children.
Agent - Teresita C. Tabing (Tabing)
Respondent Leonor C. Cayetano (Cayetano) executed a
CFI decided in favor of Victor Jimena’s heirs, declaring
special power of attorney in favor of her daughter Teresita C.
among others that they be entitled to half of the shares
of the royalties of Lincallo in his contracts with Gold Star,
Tabing (Tabing) authorizing her to contract a loan from
Marinduque Iron Mines and Alejandro Marquez, that both petitioner in an amount not more than three hundred thousand
mining companies pay directly to the former half of the pesos (P300,000.00) and to mortgage her two (2) lots.
shares of the royalties until said contracts were Petitioner loaned Tabing one hundred thousand pesos
terminated, that Lincallo pay the heirs the capital Victor (P100,000.00) secured by two (2) promissory notes and a real
Jimena gave him to purchase the mining claims and the estate mortgage over Cayetanos two (2) properties. The
latter’s shares with interest, and that Gold Star Mining mortgage document was signed by Tabing and her husband as
Co., Inc. pay them the sum of P30,691.92 solidarily with
mortgagors in their individual capacities, without stating that
Ananias Isaac Lincallo for violation of an injunction.
Tabing was executing the mortgage contract for and in behalf of
the owner (Cayetano).
The defendants appealed to the CA, which affirmed CFI
Manila’s decision.
Respondents and the spouses Tabing failed to pay the
loan so petitioner foreclosed the mortgage. A notice of public
ISSUES: auction was sent to the respondents. The lawyer of the
1. Whether or not the CA erred in finding that the respondents responded with a letterto petitioner requesting
Jimenas have a cause of action against Gold Star Mining that the public auction be postponed. Respondents letter went
Co., as there is no privity of contract between Gold Star unheeded and the public auction was held as scheduled
and Jimena. wherein the subject properties were sold to petitioner for one
hundred sixty thousand pesos (P160,000.00). Subsequently, In the Poizat Case, the Court ruled:
petitioner consolidated its title and obtained new titles in its
name after the redemption period lapsed without respondents It is a general rule in the law of agency that, in order to bind the
taking any action. principal by a mortgage on real property executed by an agent,
More than five (5) years later, Tabing, on behalf of it must upon its face purport to be made, signed and sealed in
Cayetano, sent a letter dated September 10, 1996 to petitioner the name of the principal, otherwise, it will bind the agent only.
expressing the intent to repurchase the properties for two It is not enough merely that the agent was in fact authorized
hundred fifty thousand pesos (P250,000.00) with proposed to make the mortgage, if he has not acted in the name of the
terms of payment. Petitioner refused the offer stating that the principal. Neither is it ordinarily sufficient that in the mortgage
minimum asking price for the properties was five hundred the agent describes himself as acting by virtue of a power of
thousand pesos (P500,000.00) and it was not amenable to the attorney, if in fact the agent has acted in his own name and has
proposed terms of payment. Petitioner nevertheless gave set his own hand and seal to the mortgage. This is especially
respondents the chance to buy back the properties by joining a true where the agent himself is a party to the instrument.
bidding to be set in some future date.However, respondents However clearly the body of the mortgage may show and
filed on December 18, 1996 a complaint for annulment of intend that it shall be the act of the principal, yet, unless in
mortgage and extrajudicial foreclosure of the properties with fact it is executed by the agent for and on behalf of his
damages in the RTC of Naga City. Respondents sought principal and as the act and deed of the principal, it is not
nullification of the real estate mortgage and extrajudicial valid as to the principal. [EMPHASIS SUPPLIED].
foreclosure sale, as well as the cancellation of petitioners title
over the properties.
HOWEVER, notwithstanding the nullity of the real estate
RTC - rendered judgment in favor of the respondents, holding mortgage executed by Tabing and her husband, we find that
that the principal (Cayetano) cannot be bound by the real the equity principle of laches is applicable in the instant case.
estate mortgage executed by the agent (Tabing) unless it is Laches is negligence or omission to assert a right within a
shown that the same was made and signed in the name of the reasonable time, warranting a presumption that the party
principal; hence, the mortgage will bind the agent only. The trial entitled to assert it either has abandoned it or declined to
assert it. Its essential elements are: (1) conduct on the part of
court also found that there was no compliance with the
the defendant, or of one under whom he claims, giving rise to
requirement of publication of the foreclosure sale in a the situation complained of; (2) delay in asserting complainants
newspaper of general circulation as provided in Act No. 3135, as right after he had knowledge of the defendants conduct and
amended. Such requisite must be strictly complied with as any after he has an opportunity to sue; (3) lack of knowledge or
slight deviation therefrom will render the sale voidable. notice on the part of the defendant that the complainant would
assert the right on which he bases his suit; and (4) injury or
prejudice to the defendant in the event relief is accorded to the
CA - affirmed the RTCs ruling. It held that it must be shown that
complainant.
the real estate mortgage was executed by the agent on-behalf
of the principal, otherwise the agent may be deemed to have
There is no absolute rule on what constitutes laches. It
acted on his own and the mortgage is void. However, the
is a creation of equity and applied not really to penalize neglect
appellate court further declared that the principal loan
or sleeping upon ones rights but rather to avoid recognizing a
agreement was not affected, which had become an unsecured right when to do so would result in a clearly inequitable
credit. The Court of Appeals denied petitioners motion for situation. The question of laches, we said, is addressed to the
reconsideration. sound discretion of the court and each case must be decided
Hence, this petition according to its particular circumstances. Verily, in a number of
cases, it had been held that laches, the essence of which is the
neglect to assert a right over a long period of time, may prevent
ISSUE:
recovery of a titled property.
Whether or not the principal is bound by the real estate
mortgage executed by the authorized agent in her own name
In the present case, records clearly show that
without indicating the principal.
respondents could have filed an action to annul the mortgage
on their properties, but for unexplained reasons, they failed to
RULING: do so. They only questioned the loan and mortgage transactions
Yes. The issue is not novel. The RTC and the Court of Appeals in December 1996, or after the lapse of more than five (5) years
are both correct in holding that our decision in The Philippine from the date of the foreclosure sale. It bears noting that the
Sugar Estates Development Co., Ltd., Inc. v. Poizat, et al.(Poizat real estate mortgage was registered and annotated on the titles
Case), as reiterated in the case of Rural Bank of Bombon of respondents, and the latter were even informed of the
extrajudicial foreclosure and the scheduled auction. Instead of
(Camarines Sur), Inc. v. Court of Appeals (Bombon Case), finds
impugning the real estate mortgage and opposing the
application in the instant case. The factual circumstances of said scheduled public auction, respondents lawyer wrote a letter to
cases are similar to the case at bar, where an authorized agent petitioner and merely asked that the scheduled auction be
executed a real estate mortgage on the principals property in postponed to a later date. Even after five (5) years, respondents
her own name without indicating that she was acting on behalf still failed to oppose the foreclosure and the subsequent
of the principal. transfer of titles to petitioner when their agent, Tabing, acting
in behalf of Cayetano, sent a letter proposing to buy back the
properties. It was only when the negotiations failed that
respondents filed the instant case. Clearly, respondents slept on RATIO:
their rights.
Article 1887 of the Civil Code provides that an agent is
not personally liable to the party with whom he
SC granted the said petition.
contracts, unless he expressly binds himself or exceeds
the limits of his authority without giving such party
sufficient notice of his powers.
49. ACE NAVIGATION CO., INC. v FGU INSURANCE
CORPORATION Both exceptions do not obtain in this case. The records
does not show that ACENAV exceeded its authority.
PRINCIPAL: Cardia Limited Neither was it alleged that ACENAV'S limited obligation
AGENT: Ace Navigation Company Inc. or ACENAV as an agent was unknown to HEINRICH. As a mere
agent, ACENAV cannot be made to be made responsible
FACTS: for the damage done by its principal CARDIA as it was
alleged that improper packing (which was the
On July 19, 1990, CARDIA shipped 165,200 bags of Grey responsibility of CARDIA) was the cause of the damage.
Portland Cement aboard M/V Pakarti Tiga at Shanghai
Port with the Port of Manila as the destination. It was to NOTE: ACENAV is also not a ship agent as it was
be delivered to the consignee, HEINDRICH Trading Corp. not entrusted with provisioning the ship or
and the same was insured by FGU and Pioneer against represented it. It's only responsibility was to take
all risk. The vessel is owned by PAKARTI which chartered charge of the goods after unloading.
it to SHINWA. Representing itself as the owner of the
vessel, the latter entered into a charter party contract
with SKY International (agent of KEE YEH), which further 50. DBP v CA
chartered it to REGENCY Express. It was the latter that (RULES AND REGULATION OF THE DBP- The DBP is not
issued the Clean Bill of Lading to HEINRICH. authorized to accept applications for MRI when its clients are
more than 60 years of age.)
Upon arrival of the vessel in Manila, petitioner ACE AGENT-DBP
NAVIGATION CO. (ACENAV) and HEINRICH discovered PRINCIPAL-DBP MRI POOL
that 43,905 out of the 165,200 bags if cement were in 3RD PARTY-JUAN DANS, ESTATE and wife, CANDIDA
bad order and condition. Unable to collect from CARDIA
(as shipper) and REGENCY (as charterer), the DEVELOPMENT BANK OF THE PHILIPPINES,
respondent insurance companies paid HEINRICH and
petitioner,
became subrogated to all the rights causes of the latter.
vs.
Thus on August 8, 1991, respondents filed a complaint
for damages against REGENCY, PAKARTI TIGA, SKY COURT OF APPEALS and the ESTATE OF THE
INTERNATIONAL,SHINWA AND ACE NAVIGATION LATE JUAN B. DANS, represented by CANDIDA
COMPANY. G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
One of the defendants, present petitioner ACENAV
claimed that it was not a real party-in-interest as it was FACTS: In May 1987, Juan B. Dans, together with
the agent if the shipper, CARDIA and it was not a local his wife Candida, his son and daughter-in-law,
ship agent.
applied for a loan of P500,000.00 with the DBP,
Basilan Branch. As the principal mortgagor, Dans,
On November 26, 2001, RTC dismissed the complaint.
However, the Court of Appeals reversed the RTC and then 76 years of age, was advised by DBP to obtain
found PAKARTI, SHINWA, KEE YEH and it's agent, SKY, a mortgage redemption insurance (MRI) with the
solidarily liable for 70% of respondents’ claim while DBP Mortgage Redemption Insurance Pool (DBP
CARDIA and ACENAV are solidarily liable for the MRI Pool).
remaining 30%. PAKARTI'S, SHINWA’S, SKY’S and A loan, in the reduced amount of P300,000.00, was
ACENAV’S respective motions for reconsideration were approved by DBP. From the proceeds of the loan,
also denied. Subsequently, all four filed separate DBP deducted the amount of P1,476.00 as
petitions for review before the Supreme Court. After
payment for the MRI premium.
which PAKARTI, SHINWA and SKY withdrew from the
The MRI premium of Dans, less the DBP service fee
current case. Thus only the petition of ACENAV remains.
of 10 percent, was credited to the savings account
ISSUE: of the DBP MRI Pool. Accordingly, the DBP MRI Pool
was advised of the credit.
Whether or not ACENAV should be solidarily liable with Dans died of cardiac arrest. The DBP then relayed
CARDIA for the 30% of respondents’ claim. this information to the DBP MRI Pool and the latter
notified DBP that Dans was not eligible for MRI
RULING: coverage, being over the acceptance age limit of
60 years at the time of application.
No, ACENAV should not be solidarily liable with CARDIA
for the 30% of respondents’ claim.
DBP then apprised Candida Dans of the disapproval Unimarine Shipping Lines, Inc. is a corporation engaged
of her late husband's MRI application. The DBP in the shipping industry. Unimarine contracted the
offered to refund the premium of P1,476.00 which services of Keppel Cebu Shipyard for dry-docking and
ship repair works on its vessel, the MV Pacific Fortune.
but Candida refused.
Cebu Shipyard issued a bill to Unimarine in consideration
Respondent Estate, through Candida Dans as
for its services. They negotiated to a reduction to P3.85
administratrix, filed a complaint with the RTC M and terms of this agreement were embodied in Cebu
Basilan, against DBP and the insurance pool. Shipyard’s letter to the President/GM of Unimarine. In
Respondent Estate alleged that Dans became compliance with the agreement, Unimarine secured from
insured by the DBP MRI Pool when DBP, with full CBIC, through agent Bethoven Quinain, a Surety Bond of
knowledge of Dans' age at the time of application, P3M. The expiration of the Surety Bond was extended
required him to apply for MRI, and later collected through an endorsement attached to the surety bond.
the insurance premium thereon. Cebu Shipyard sent Unimarine letters, demanding it to
settle its account. Due to Unimarine’s nonpayment, Cebu
Shipyard asked the surety CBIC to fulfill their obligations
RTC- Trial court rendered a decision in favor of
as sureties. However, CBIC alleged that the surety bond
respondent Estate and against DBP. The DBP MRI was issued by its agent, Quinain, in excess of his
Pool, however, was absolved from liability, after authority.
the trial court found no privity of contract between RTC: Judgment in favor of plaintiff Cebu Shipyard &
it and the deceased. The trial court declared DBP in Engineering Works
estoppel for having led Dans into applying for MRI CA: Affirmed judgment.
and actually collecting the premium and the service Issue:
fee, despite knowledge of his age ineligibility. W/N the provisions of Article 1911 of the Civil Code is
applicable in the present case to hold petitioner liable for
the acts done by its agent in excess of authority.
CA- The appellate court affirmed in toto the
Held:
decision of the trial court. CBIC is liable for the surety bond. CBIC could not be
allowed to disclaim liability because Quinain’s actions
ISSUE: WON DBP has exceeded his authority as were within the terms of the special power of attorney
agent (to the defendants) thereby absolving the given to him. Our law mandates an agent to act within
defendants of liability. the scope of his authority. The scope of an agent’s
authority is what appears in the written terms of the
RULING: YES. DBP has exceeded his authority. power of attorney granted upon him.
Under Articles 1898 and 1910, an agent’s act, even if
done beyond the scope of his authority, may bind the
RATIO: Under Article 1897 of the Civil Code of the
principal if he ratifies them, whether expressly or tacitly.
Philippines, "the agent who acts as such is not It must be stressed though that only the principal, and
personally liable to the party with whom he not the agent, can ratify the unauthorized acts, which
contracts, unless he expressly binds himself or the principal must have knowledge of. Neither Unimarine
exceeds the limits of his authority without giving nor Cebu Shipyard was able to repudiate CBIC’s
such party sufficient notice of his powers." testimony that it was unaware of the existence of Surety
The DBP is not authorized to accept applications for Bond and Endorsement. There were no allegations either
MRI when its clients are more than 60 years of that CBIC should have been put on alert with regard to
Quinain’s business transactions done on its behalf. It is
age. Knowing all the while that Dans was ineligible
clear, and undisputed therefore, that there can be no
for MRI coverage because of his advanced age,
ratification in this case, whether express or implied.
DBP exceeded the scope of its authority when it Article 1911, on the other hand, is based on the principle
accepted Dan's application for MRI by collecting the of estoppel, which is necessary for the protection of third
insurance premium, and deducting its agent's persons. It states that the principal is solidarily liable
commission and service fee. with the agent even when the latter has exceeded his
Moreover, the liability of an agent who exceeds the authority, if the principal allowed him to act as though he
scope of his authority depends upon whether the had full powers. However, for an agency by estoppel to
third person is aware of the limits of the agent's exist, the following must be established:
1. The principal manifested a representation of the
powers. There is no showing that Dans knew of the
agent’s authority or knowingly allowed the agent to
limitation on DBP's authority to solicit applications
assume such authority;
for MRI. 2. The third person, in good faith, relied upon such
representation
3. Relying upon such representation, such third person
has changed his position to his detriment. An agency by
estoppel, which is similar to the doctrine of apparent
authority, requires proof of reliance upon the
51. COUNTRY BANKERS INSURANCE representations, and that, in turn, needs proof that the
CORPORATION v KEPPEL CEBU SHIPYARD representations predated the action taken in reliance.
This Court cannot agree with the Court of Appeals’
Facts:
pronouncement of negligence on CBIC’s part. CBIC not
only clearly stated the limits of its agents’ powers in their
contracts, it even stamped its surety bonds with the The above-quoted article is new. It is intended to protect
restrictions, in order to alert the concerned parties. the rights of innocent persons. In such a situation, both
Moreover, its company procedures, such as reporting the principal and the agent may be considered as joint
requirements, show that it has designed a system to tortfeasors whose liability is joint and solidary.
monitor the insurance contracts issued by its agents.
CBIC cannot be faulted for Quinain’s deliberate failure to It is evident from the records that by his own acts and
notify it of his transactions with Unimarine. In fact, CBIC admission, petitioner held out Tiac to the public as the
did not even receive the premiums paid by Unimarine to manager of his store in Binondo. More particularly,
Quinain. petitioner explicitly introduced to Villanueva, Valiant’s
manager, as his (petitioner’s) branch manager as
testified to by Villanueva. Secondly, Tan, who has been
52. CUISON v CA doing business with petitioner for quite a while, also
testified that she knew Tiac to be the manager of the
PRINCIPAL-KUE CUISON Binondo branch. Even petitioner admitted his close
AGENT- TIAC relationship with Tiu Huy Tiac when he said that they are
“like brothers” There was thus no reason for anybody
FACTS: especially those transacting business with petitioner to
Kue Cuison is a sole proprietorship engaged in the even doubt the authority of Tiac as his manager in the
purchase and sale of newsprint, bond paper and scrap. Binondo branch.
Valiant Investment Associates delivered various kinds of
paper products to a certain Tan. The deliveries were
made by Valiant pursuant to orders allegedly placed by 53. MANILA MEMORIAL PARK CEMETERY, INC. v.
Tiac who was then employed as maneger in the Binondo LINSANGAN
office of petitioner.
Upon delivery, Tan paid for the merchandise by issuing Principal : MMPCI
several checks payable to cash at the specific request of Agent : Florencia BALUYOT
Tiac. In turn, Tiac issued nine (9) postdated checks to Buyer : Atty. Pedro L. LINSANGAN
Valiant as payment for the paper products.
Unfortunately, sad checks were later dishonored by the Facts: BALUYOT offered Atty. LINSANGAN an interment
drawee bank. space (lot) for P95,000 under Contract No. 25012,
Thereafter, Valiant made several demands upon located at the Holy Cross Memorial Park owned by
petitioner to pay for the merchandise in question, petitioner (MMPCI). Atty. LINSANGAN was subsequently
claiming that Tiac was duly authorized by petitioner as issued with another contract, Contract No. 28660, which
the manager of his Binondo office, to enter into the covers the same subject lot of the original contract but
questioned transactions with Valiant and Tan. with a listed price of P132,250.00 (a higher price than
Petitioner denied any involvement in the transaction the original contract). At first, Atty. LINSANGAN
entered into by Tiac and refused to pay Valiant. protested but BALUYOT assured him that he would still
Left with no recourse, private respondent filed an action be paying for the original price of P95,000. In order to
against petitioner for the collection of sum of money convince Atty. LINSANGAN, BALUYOT executed a
representing the price of the merchandise. separate document confirming that agreement. Atty.
After due hearing, the trial RTC dismissed the complaint LINSANGAN then signed the Contract No. 28660 (note:
against petitioner(infavor of cuison) for lack of merit. On with price P132,250, not that of the original price). Atty.
appeal, however, the decision of the trial court was LINSANGAN issued post-dated checks, amounting to
modified, P1,800 each, to MMPCI. But unfortunately, MMPCI
CA reversed (infavor of viliant investment) ordered cancelled Contract No. 28660 because of Atty.
petitioner to pay Valiant with the sum plus interest, AF LINSANGAN's alleged non-payment of arrearages. It was
and costs. found out that the arrearages actually resulted from
BALUYOT's failure to give her share of P1,455 since
ISSUE: WON Tiac was an agent of petitioner (Kue based on the new contract, to total monthly payment to
cuison) be effected to MMPCI is actually amounting to P3,255
(that is without the knowledge of MMPCI). BALUYOT
informed Atty. LINSANGAN about the cancellation but did
HELD: not inform him of the reason behind the cancellation. So
YES BALUYOT instead presented another proposal to the
As to the merits of the case, it is a well-established rule Atty. LINSANGAN for the purchase of an equivalent
that one who clothes another with apparent authority as property to which the latter refused. Atty. LINSANGAN
his agent and holds him out to the public as such cannot insisted that BALUYOT and MMPCI should honor their
be permitted to deny the authority of such person to act undertaking. Atty. LINSANGAN filed a complaint for
as his agent, to the prejudice of innocent third parties Breach of Contract and Damages against BALUYOT and
dealing with such person in good faith and in the honest MMPCI. MMPCI argued that BALUYOT was not its agent
belief that he is what he appears to be but the RTC ruled otherwise since MMPCI was estopped
from denying the agency. While MMPCI insisted that
“Even when the agent has exceeded his authority, the BALUYOT was authorized to receive only the down
principal is solidarily liable with the agent if the former payment, it allowed her to continue to receive postdated
allowed the latter to act as though he had full powers.” checks from Atty. LINSANGAN, which it in turn
consistently encashed. Based on CA's findings, even In July and September 1986 Safic placed purchase
though the authority of BALUYOT was not expressly orders with IVO for 2,000 long tons of crude coconut
conferred upon her, the same may have been derived
oil, valued at US$222.50 per ton, covered by
impliedly by habit or custom which may have been
Purchase Contract Nos. A601446 and A601655,
accepted practice in their company in a long period of
time. respectively, to be delivered within the month of
January 1987. IVO, however, failed to deliver the
RTC's decision : In favor of Atty. LINSANGAN; MMPCI is said coconut oil and, instead, offered a wash out
jointly and severally liable with BALUYOT. settlement, whereby the coconut oil subject of the
CA's decision : Affirmed the decision of the RTC.
SC's decision : Reversed CA's decision.
purchase contracts were to be sold back to IVO at
the prevailing price in the international market at the
Issue: WON MMPCI should be jointly and severally time of wash out. Thus, IVO bound itself to pay to
liable with BALUYOT to Atty. LINSANGAN. Safic the difference between the said prevailing price
WON MMPCI is bound to the acts of BALUYOT as and the contract price of the 2,000 long tons of crude
its agent. coconut oil, which amounted to US$293,500.00. IVO
failed to pay this amount despite repeated oral and
Held: No, MMPCI should not be held jointly and severally
written demands.
liable with BALUYOT, nor can it be held liable to Atty.
Safic also alleged that on eight occasions between
LINSANGAN for cancelling the contract. MMPCI cannot
also be bound to the acts of BALUYOT. SC Cited April 24, 1986 and October 31, 1986, it placed
provisions from NCC: purchase orders with IVO for a total of 4,750 tons of
Art. 1898. If the agent contracts in the name of the crude coconut oil. When IVO failed to honor its
principal, exceeding the scope of his authority, and the obligation under the wash out settlement narrated
principal does not ratify the contract, it shall be void if above, Safic demanded that IVO make marginal
the party with whom the agent contracted is aware of
deposits within forty-eight hours on the eight
the limits of the powers granted by the principal. In this
case, however, the agent is liable if he undertook to
purchase contracts in amounts equivalent to the
secure the principal's ratification. difference between the contract price and the market
Art. 1910. The principal must comply with all the price of the coconut oil, to compensate it for the
obligations that the agent may have contracted within damages it suffered when it was forced to acquire
the scope of his authority. coconut oil at a higher price. IVO failed to make the
As for any obligation wherein the agent has exceeded his
prescribed marginal deposits on the eight contracts,
power, the principal is not bound except when he ratifies
it expressly or tacitly.
in the aggregate amount of US$391,593.62, despite
Art. 1911. Even when the agent has exceeded his written demand therefor.
authority, the principal is solidarily liable with the agent In its answer, IVO raised the following special
if the former allowed the latter to act as though he had affirmative defenses: Safic had no legal capacity to
full powers. sue because it was doing business in the Philippines
without the requisite license or authority; the subject
SC finds that the contract entered into by MMPCI and contracts were speculative contracts entered into by
Atty. LINSANGAN is valid since both parties assented to
IVOs then President, Dominador Monteverde, in
the terms and conditions thereof. When Atty.
LINSANGAN incurred delinquencies in payment, MMPCI contravention of the prohibition by the Board of
cancelled the contract. Such action taken by MMPCI was Directors against engaging in speculative paper
only a valid exercise of its rights under the said contract. trading, and despite IVOs lack of the necessary
Although the real agreement that Atty. LINSANGAN license from Central Bank to engage in such kind of
entered with BALUYOT showed that the former was only trading activity.
to pay for P1,800 and the latter was to shoulder the
Trial Court: ruled that Safic failed to substantiate its
P1,455, such agreement does not bind MMPCI since Atty.
LINSANGAN cannot prove that MMPCI had knowledge of
claim for actual damages. Likewise, it rejected IVOs
the arrangement nor was there a ratification made. counterclaim and supplemental counterclaim.
There was even no indication that MMPCI led the public CA: rendered the assailed Decision dismissing the
to believe that BALUYOT had the authority to alter the appeals and affirming the judgment appealed from in
standard contracts of the company. The SC further toto.
stated in its decision that Atty. LINSANGAN was clearly
SC: Affirmed
negligent with his dealings with BALUYOT since he failed
ISSUE: WON President, Dominador Monteverde,
to determine, as a prudent and cautious man should do,
whether the said agent was clothed with authority to validly entered into the 1986 contracts for and on
change the terms of the principal's written contract, behalf of IVO.
most especially he is a lawyer. RULING: NO
Under the IVOs By-laws Monteverde had no blanket
authority to bind IVO to any contract. He must act
54. SAFIC ALCAN & CIE v IMPERIAL VEGETABLE
OIL CO., INC. according to the instructions of the Board of
FACTS: Directors. Even in instances when he was authorized
to act according to his discretion,that discretion must Village, a subdivision in Sta. Cruz, Marilao, Bulacan. The
not conflict with prior Board orders, resolutions and president of Siredy is Ismael E. Yanga
As stated in its Articles of Incorporation, the primary
instructions. The evidence shows that the IVO Board
corporate purpose of Siredy is to acquire lands,
knew nothing of the 1986 contracts and that it did not subdivide and develop them, erect buildings and houses
authorize Monteverde to enter into speculative thereon, and sell, lease or otherwise dispose of said
contracts. In fact, Monteverde had earlier proposed properties to interested buyers.
that the company engage in such transactions but Sometime before October 1978, Yanga executed an
the IVO Board rejected his proposal. Since the 1986 undated Letter of Authority to one Hermogenes B.
contracts marked a sharp departure from past IVO Santos.
On October 15, 1978, Santos entered into a Deed of
transactions, Safic should have obtained from
Agreement with De Guzman. The deed expressly stated
Monteverde the prior authorization of the IVO that Santos was representing Siredy Enterprises, Inc.
Board.Safic cannot rely on the doctrine of implied Private respondent De Guzman was referred to as
agency because before the controversial 1986 contractor while petitioner Siredy was cited as principal.
contracts, IVO did not enter into identical contracts From October 1978 to April 1990, De Guzman
with Safic. The basis for agency is representation constructed 26 residential units at Ysmael Village. Later,
when petitioner failed to pay for the 13 units, De
and a person dealing with an agent is put upon
Guzman filed a case.
inquiry and must discover upon his peril the authority RTC: Ruled in favor of Siredy disregarding the Letter of
of the agent. Authority
The most prudent thing petitioner should have done CA: Reversed RTC. The appellate court held that the
was to ascertain the extent of the authority of Letter of Authority duly signed by Yanga clearly
Dominador Monteverde. Being remiss in this regard, constituted Santos as Siredys agent, whose authority
included entering into a contract for the building of
petitioner cannot seek relief on the basis of a
housing units at Ysmael Village
supposed agency.
ISSUE: WON Hermogenes B. Santos was a duly
Under Article 1898 of the Civil Code, the acts of an constituted agent of Siredy, with authority to enter into
agent beyond the scope of his authority do not bind contracts for the construction of residential units in
the principal unless the latter ratifies the same Ysmael Village and thus the capacity to bind Siredy to
expressly or impliedly. It also bears emphasizing that the Deed of Agreement
when the third person knows that the agent was RULING:
YES. The Court found that a valid agency was created
acting beyond his power or authority, the principal
between Siredy and Santos,
cannot be held liable for the acts of the agent. If the The basis of agency is representation, that is, the agent
said third person is aware of such limits of authority, acts for and in behalf of the principal on matters within
he is to blame, and is not entitled to recover the scope of his authority (Art, 1881) and said acts have
damages from the agent, unless the latter undertook the same legal effect as if they were personally done by
to secure the principals ratification. the principal. By this legal fiction of representation, the
actual or legal absence of the principal is converted into
There was no such ratification in this case. When
his legal or juridical presence.
Monteverde entered into the speculative contracts
The scope of the agents authority is what appears in the
with Safic, he did not secure the Boards approval. He written terms of the power of attorney. While third
also did not submit the contracts to the Board after persons are bound to inquire into the extent or scope of
their consummation so there was, in fact, no the agents authority, they are not required to go beyond
occasion at all for ratification. The contracts were not the terms of the written power of attorney. Third persons
reported in IVOs export sales book and turn-out cannot be adversely affected by an understanding
between the principal and his agent as to the limits of
book. Neither were they reflected in other books and
the latter’s authority. In the same way, third persons
records of the corporation. It must be pointed out that need not concern themselves with instructions given by
the Board of Directors, not Monteverde, exercises the principal to his agent outside of the written power of
corporate power. Clearly, Monteverdes speculative attorney.
contracts with Safic never bound IVO and Safic Within the terms of the Letter of Authority can be found
cannot therefore enforce those contracts against the nature and extent of the authority granted to Santos
which, in turn, determines the extent of Siredy’s
IVO.
participation in the Deed of Agreement.

On its face, the instrument executed by Yanga clearly

and unequivocally constituted Santos to do and execute,
among other things, the act of negotiating and entering
55. SIREDY ENTERPRICES, INC. v CA
into contract or contracts to build Housing Units on our
Conrado De Guzman is an architect-contractor doing subdivision lots in Ysmael Village, Sta. Rosa, Marilao,
business under the name and style of Jigscon Bulacan. Nothing could be more express than the written
Construction. Herein petitioner Siredy Enterprises, Inc. stipulations contained therein.
(hereafter Siredy) is the owner and developer of Ysmael
It was upon the authority of this document that De who accomplished a printed Vehicle Sales Proposal (VSP)
Guzman transacted business with Santos that resulted in N. 982, on which Gilbert signed under the subheading
the construction contract denominated as the Deed of CONFORME. This document shows Sosa as the customer,
Agreement. with home address, the model of the car purchase, that
Aside from the Letter of Authority, Siredys Articles of payment is by installment, the breakdown of the down
Incorporation, duly approved by the Securities and payment, and the balance to be financed with is
Exchange Commission, shows that Siredy may also P274,137. Spaces for "Delivery Terms" were not filled
undertake to erect buildings and houses on the lots and up. Under the conditions of sales:
sell, lease, or otherwise dispose of said properties to
interested buyers. Such Articles, coupled with the Letter "1. This sale is subject to availability of unit.
of Authority, is sufficient to have given De Guzman
reason to believe that Santos was duly authorized to 2. Stated Price is subject to change without prior notice,
Price prevailing and in effect at time of selling will apply. . . ."
represent Siredy for the purpose stated in the Deed of
Agreement. Petitioners theory that it merely sold lots is
Rodrigo Quirante, the Sales Supervisor of Bernardo,
effectively debunked.
checked and approved the VSP.
CA Affirmed.

On the promised date and time, Bernardo called Gilbert

to tell the latter that the release will be delayed to 2pm.
56. TOYOTA SHAW, INC., v CA
TOYOTA SHAW, INC., petitioner, Sosa and Gilbert met Bernardo who informed the former
vs. two that the car could not be delivered because the unit
COURT OF APPEALS and LUNA L. SOSA, respondents. was released to a more prefered client instead. However,
Toyota contends that the reason for non-release was the
disapproval by BA Finance of the loan application of
Principal: Toyota Shaw, Inc.
Sosa. It being clear that the unit would not be delivered,
Agent: Popong Bernardo
Sosa ask that his down payment be refunded which
Toyota did the same day in the form of a Far East Bank
FACTS: In June 1989, Luna Sosa (Sosa) wanted to
check for P100k, the check voucher of Toyota was signed
purchase a Toyota Lite Ace. It was then a seller's market
by Sosa with the reservation, "without prejudice to our
and Sosa had difficulty finding a dealer with an available
future claims for damages."
unit. Sosa contacted Toyota Shaw, Inc. (Toyota) and was
told that there was an available unit. On 6/14/1989,
Sosa sent two letters to Toyota the first by Sosa,
Sosa and his son, Gilbert, went to Toyota's office where
demanding for refund and interest from the time it was
they met Popong Bernardo, as sales representative of
paid, with damages. The second by Sosa's counsel
Toyota.
demanding P 1m representing interest and damages.
Toyota refused to accede to the demands of Sosa.
Sosa emphasized that the Lite Ace is needed not later
than 6/17/1989, for they will be using it for their guests
CoA - Complaint for damages. Toyota alleged that there
the next day. Furthermore, should he fail to arrive in a
was no sale, and that Bernardo had no authority to sign
new car in his home town on 6/19/1989, he would be a
the agreement in its behalf, and rather, Bernardo signed
laughing stock. In turn, Bernardo assured Sosa that a
in his personal capacity. Sosa has also not yet
unit would be ready at 10am on 6/17/1989, and an
accomplished the documentary requirement and as such,
agreement in writing was made.
the unit cannot be released. The P 100k was also return
and received by Sosa.
4 June 1989

AGREEMENTS BETWEEN MR. SOSA RTC - There was a valid sale. Ruling that agreement was
& POPONG BERNARDO OF TOYOTA a valid perfected contract of sale between Sosa and
SHAW, INC. Toyota which bound Toyota to deliver the vehicle to
Sosa, and further agreed with Sosa that Toyota acted in
1. all necessary documents will be submitted to TOYOTA bad faith in selling to another the unit already reserved
SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of
for him.
Mr. Sosa from the Province (Marinduque) where the unit will be
used on the 19th of June.
CA - affirmed RTC in toto
2. the downpayment of P100,000.00 will be paid by Mr.
Sosa on June 15, 1989. ISSUE: Whether or not Bernardo had authority to bind
Toyota to the sale to Sosa of the Lite Ace)
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-
up [sic] and released by TOYOTA SHAW, INC. on the 17th of RULING: No. The VSP did not lead to a contract of sale.
June at 10 a.m.
CA Reversed and set aside.

Very truly yours,

RATIO: The Agreement shows the absence of a meeting
(Sgd.) POPONG BERNARDO.
of minds between Toyota and Sosa. For one thing, Sosa
did not even sign it. For another, Sosa was well aware
from its title, written in bold letters, viz.,
On 6/15/1989, Sosa and Gilbert went to Toyota to
deliver the downpayment of P 100k. They met Bernardo AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC. only those clearly expressed in the Authorization which do
not include the power to enter into any contract with
that he was not dealing with Toyota but with Popong SMC.
Bernardo and that the latter did not misrepresent that he
had the authority to sell any Toyota vehicle. He knew
RTC: favored SMC
that Bernardo was only a sales representative of Toyota
CA: affirmed in toto
and hence a mere agent of the latter. It was incumbent
upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as
Issues:
an
agent in respect of contracts to sell Toyota's vehicles. A WON Savellon was duly authorized by petitioners to enter
person dealing with an agent is put upon inquiry and into a Trip Charter Party.
must discover upon his peril the authority of the agent. WON SMC is liable for entering into a contract with
Savellon (having no authority).
At the most, Exhibit "A" may be considered as part of
the initial phase of the generation or negotiation stage of Ruling:
a contract of sale. There are three stages in the contract
of sale, namely: No. The broadest scope of Savellon’s authority is limited
to the use of the coal operating contract and the clause
(a) preparation, conception, or generation, which is
cannot contemplate any other power not included in the
the period of negotiation and bargaining, ending at the
enumeration or which are unrelated either to the power
moment of agreement of the parties;
to use the coal operating contract or to those already
(b) perfection or birth of the contract, which is the enumerated. In short, while the clause allows some room
moment when the parties come to agree on the terms of for flexibility, it can comprehend only additional
the contract; and prerogatives falling within the primary power and within
the same class as those enumerated. There is no evidence
(c) consummation or death, which is the fulfillment at all that Bacaltos Coal Mines as a coal mining company
or performance of the terms agreed upon in the contract. owns and operates vessels, and even if it owned any such
vessels, that it was allowed to charter or lease them.
Note:
Seller's market - an economic situation in which goods or
The Authorization is not a general power of attorney, it is
shares are scarce and sellers can keep prices high.
a special power of attorney for it refers to a clear
57. Bacaltos Coal Mines v. CA mandate specially authorizing the performance of a
Facts: specific power and of express acts subsumed therein.

Principal: Bacaltos Coal Mines SMC is liable for entering into a contract with Savellon
Agent: Rene Savellon (having no authority). Had SMC exercised due diligence
Third Party: San Miguel Corporation and prudence, it should have known in no time that there
is absolutely nothing on the face of the Authorization that
In an “Authorization”, petitioner Bacaltos authorized confers upon Savellon the authority to enter into any Trip
Savellon to use the coal operating contract of Bacaltos Charter Party. Since the principal subject of the
Coal Mines of which Bacaltos is the proprietor, stating, Authorization is the coal operating contract, SMC should
“ have required its presentation to determine what it is and
(1) To acquire purchase orders how it may be used by Savellon. Such a determination is
(2) To engage in trading indispensable to an inquiry into the extent or scope of his
(3) To collect all receivables due or in arrears authority.
(4) To extend to any person or company by
substitution the same extent of authority that is granted Every person dealing with an agent is put upon inquiry
to Rene Savellon; and must discover upon his peril the authority of the
(5) In connection with the preceding paragraphs to agent. If he does not make such inquiry, he is chargeable
execute and sign documents, contracts, and other with knowledge of the agent's authority, and his
pertinent papers.” ignorance of that authority will not be any excuse.
Persons dealing with an assumed agent, whether the
In 1988, a Trip Charter Party was executed between assumed agency be a general or special one, are bound at
Bacaltos Coal Mines (represented by Savellon) and SMC. their peril, if they would hold the principal, to ascertain
The agreement was for Php 650,000 for three round trips not only the fact of the agency but also the nature and
to Davao to be paid within 7 days. The vessel was able to extent of the authority, and in case either is controverted,
make one trip only. SMC filed an action for specific the burden of proof is upon them to establish it.
performance.

Petitioners alleged that Savellon was not their Chief 58. BA FINANCE CORPORATION v CA
Operating Officer and that the powers granted to him are Facts:
· Renato Gaytano under the name Gebbs memorandum given to him by petitioner corporation
International, applied for and was granted a loan with on his lending authority.
respondent Traders Royal Bank in the amount of · Although Wong was clearly authorized to
P60,000.00. As security for the payment of said loan, approve loans even up to P350,000.00 without any
the Gaytano spouses executed a deed of suretyship security requirement, which is far above the amount
whereby they agreed to pay jointly and severally to subject of the guaranty in the amount of P60,000.00,
respondent bank the amount of the loan including nothing in the said memorandum expressly vests on
interests, penalty and other bank charges. the credit administrator power to issue guarantees.
Philip Wong as credit administrator of BA Finance We cannot agree with respondent's contention that the
Corporation for and in behalf of the latter, undertook phrase "contingent commitment" set forth in the
to guarantee the loan of the Gaytano spouses.· memorandum means guarantees. It has been held that
Gaytano spouses refused to pay their obligation, a power of attorney or authority of an agent should
respondent bank filed with the trial court complaint not be inferred from the use of vague or general
for sum of money against the Gaytano spouses and words. Guaranty is not presumed, it must be
petitioner corporation as alternative defendant. expressed and cannot be extended beyond its
· BA finance raised the defense of lack of specified limits (Director v. Sing Juco, 53 Phil. 205).
authority of its credit administrator to bind the In one case, where it appears that a wife gave her
corporation husband power of attorney to loan money, this Court
· The Trial court rendered a decision ordering ruled that such fact did not authorize him to make her
the Gaytano spouses latter to jointly and severally pay liable as a surety for the payment of the debt of a third
the plaintiff, but dismissed the case against defendant person (Bank of Philippine Islands v. Coster, 47 Phil.
BA Finance Corporation 594).
· Traders Royal Bank appealed, the CA ordered · The sole allegation of the credit administrator
the defendants Gaytano spouses and alternative in the absence of any other proof that he is authorized
defendant BA Finance Corporation, jointly and to bind petitioner in a contract of guaranty with third
severally, to pay the plaintiff persons should not be given weight. The
· Based on the testimony of the credit representation of one who acts as agent cannot by
administrator and from the memorandum which itself serve as proof of his authority to act as agent or
allegedly authorized Wong not only to approve and of the extent of his authority as agent (Velasco v. La
grant loans but also to enter into contracts of guaranty Urbana, 58 Phil. 681). Wong's testimony that he had
in behalf of the corporation entered into similar transactions of guaranty in the
past for and in behalf of the petitioner, lacks credence
Issue: WON BA Finance can be jointly and severally due to his failure to show documents or records of the
liable with the Gaytano spouses or they can be bound alleged past transactions. The actuation of Wong in
by the action of the credit administrator claiming and testifying that he has the authority is
Ruling: NO understandable. He would naturally take steps to save
Petitioner contends that the letter guaranty is ultra himself from personal liability for damages to
vires, and therefore unenforceable; that said letter- respondent bank considering that he had exceeded his
guaranty was issued by an employee of petitioner authority. The rule is clear that an agent who exceeds
corporation beyond the scope of his authority since his authority is personally liable for damages
the petitioner itself is not even empowered by its (National Power Corporation v. National
articles of incorporation and by-laws to issue Merchandising Corporation, Nos. L-33819 and
guaranties L-33897, October 23, 1982, 117 SCRA 789).
· We find the petitioner's contentions · Anent the conclusion of respondent appellate
meritorious. It is a settled rule that persons dealing court that petitioner is estopped from alleging lack of
with an assumed agent, whether the assumed agency authority due to its failure to cancel or disallow the
be a general or special one are bound at their peril, if guaranty, We find that the said conclusion has no
they would hold the principal liable, to ascertain not basis in fact. Respondent bank had not shown any
only the fact of agency but also the nature and extent evidence aside from the testimony of the credit
of authority, and in case either is controverted, the administrator that the disputed transaction of guaranty
burden of proof is upon them to establish it was in fact entered into the official records or files of
· Hence, the burden is on respondent bank to petitioner corporation, which will show notice or
satisfactorily prove that the credit administrator with knowledge on the latter's part and its consequent
whom they transacted acted within the authority given ratification of the said transaction. In the absence of
to him by his principal, petitioner corporation. The clear proof, it would be unfair to hold petitioner
only evidence presented by respondent bank was the corporation guilty of estoppel in allowing its credit
testimony of Philip Wong, credit administrator, who administrator to act as though the latter had power to
testified that he had authority to issue guarantees as guarantee.
can be deduced from the wording of the
 59. EUGENIO v. CA HELD: Yes, TPRs presented in evidence by
petitioners are disputably presumed as evidentiary of
FACTS: Private respondent Pepsi-Cola Bottling payments made on the account of petitioner. Even
Company of the Philippines, Inc. is engaged in the assuming arguendo that herein private respondent's
business of manufacturing, making bottling and cashier never received the amounts reflected in the
selling soft drinks and beverages to the general TPRs, still private respondent failed to prove that
public. Estrada, who is its duly authorized agent with respect
to petitioners, did not receive those amounts from the
Petitioner Nora S. Eugenio was a dealer of the soft latter. As correctly explained by petitioners, "in so far
drink products of private respondent corporation. Her as the private respondent's customers are
husband and co-petitioner, Alfredo Y Eugenio, used concerned, for as long as they pay their obligations to
to be a route manager of private respondent in its the sales representative of the private respondent
Quezon City plant. using the latter's official receipt, said payment
extinguishes their obligations." Otherwise, it would
Respondent corporation alleged that on several unreasonably cast the burden of supervision over its
occasions in 1979 and 1980, petitioners purchased employees from respondent corporation to its
and received on credit various products from its customers.
Quezon City plant. As of December 31, 1980,
petitioners allegedly had an outstanding balance of The substantive law is that payment shall be made to
P20,437.40 therein. Likewise, on various occasions the person in whose favor the obligation has been
in 1980, petitioners also purchased and received on constituted, or his successor-in-interest or any
credit various products from respondent's Muntinlupa person authorized to receive it. As far as third
plant and, as of December 31, 1989, petitioners persons are concerned, an act is deemed to have
supposedly had an outstanding balance of been performed within the scope of the agent's
P38,357.20 there. In addition, it was claimed that authority, if such is within the terms of the power of
petitioners had an unpaid obligation for the loaned attorney, as written, even if the agent has in fact
"empties" from the same plant in the amount of exceeded the limits of his authority according to an
P35,856.40 as of July 11, 1980. Altogether, understanding between the principal and his agent.
petitioners had an outstanding account of In fact, Atty. Rosario, private respondent's own
P94,651.00, so the complaint filed by Pepsi Cola witness, admitted that "it is the responsibility of the
alleged, they failed to pay despite oral and written collector to turn over the collection."
demands.

In their defense, petitioners presented four trade

provisional receipts (TPRs) allegedly issued to and
received by them from private respondent's Route VII. OBLIGATIONS AND LIABILITIES OF
Manager Jovencio Estrada of its Malate Warehouse PRINCIPALS TO AGENTS
(Division 57), showing payments in the total sum of
P80,500.00 made by Abigail's Store. Petitioners
60. WOODCHILD HOLDINGS INC v. ROXAS
contended that had the amounts in the TPRs been ELECTRIC
credited in their favor, they would not be indebted to FACTS:
Pepsi-Cola.
Principal – ROXAS Electric & Construction Co
Agent – Roberto Roxas (President)
Lower court ordered herein petitioners to pay jointly
and severally. Roxas Electric and Construction Company (respondent)
owns two parcel of lands. The other lot which is the
subject property of the case is a dirt road accessing a
On appeal, CA declared said decision a nullity for
highway. Its Board of Directors approved a resolution
failure to comply with the requirements of the authorizing the corporation, through its president,
Constitution. CA accordingly remanded the records Roberto B. Roxas, to sell the second parcel of land on
to the trial court to render another decision. CA behalf of the company. The said authorization contains
the price, terms and conditions of the sale which he
affirmed the trial court's decision.
deemed most reasonable and advantageous to the
corporation; and to execute, sign and deliver the
ISSUE: Whether or not route manager Estrada was pertinent sales documents and receive the proceeds of
acting within its authority when he received the the sale.
payment, which consequently extinguishes the debt
Subsequently, petitioner (Woodchild Holdings) and
of the petitioner. respondent (RECCI through Roberto Roxas) executed a
contract to sell in which RECCI bound and obliged itself bound) by the provisions in the deed of absolute sale
to sell to Dy (WHI President) the parcel of land in which granting WHI the beneficial use and right of way over
a deed of absolute sale was executed in favor of WHI to the adjacent lot of the lot they previously bought.
have beneficial use of and a right of way from Sumulong
Highway to the property conveyed consisting of 25 sq. HELD: NO.
m. wide to be used as the latter's egress from and
ingress to and an additional 25 sq. m. in the corner of A corporation is a juridical person separate and distinct
the other lot, as turning and/or maneuvering area for from its stockholders or members. Accordingly, the
WHI's vehicles. In the event that the right of way is property of the corporation is not the property of its
insufficient, RECCI shall sell additional sq. m. from its stockholders or members and may not be sold by the
current adjacent property. stockholders or members without express authorization
from the corporation’s board of directors. Indubitably, a
WHI (petitioner) then entered into a construction
corporation may act only through its board of directors
agreement with Wimbeco Builders for the construction of
or, when authorized either by its by-laws or by its board
a warehouse and a lease agreement with Poderosa
resolution, through its officers or agents in the normal
Leather Goods Company. The building was finished and
course of business. The general principles of agency
Poderosa became the lessee.
govern the relation between the corporation and its
officers or agents, subject to the articles of
WHI complained to Roberto Roxas that the vehicles of incorporation, by-laws, or relevant provisions of law.
RECCI were parked on a portion of the property over
which WHI had been granted a right of way. Roxas
promised to look into the matter. Dy and Roxas Generally, the acts of the corporate officers within the
discussed the need of the WHI to buy a 500-square- scope of their authority are binding on the corporation.
meter portion of the lot as provided for in the deed of However, acts done by such officers beyond the
absolute sale. However, Roxas died soon thereafter. scope of their authority cannot bind the
corporation unless it has ratified such acts
WHI wrote the RECCI, reiterating its verbal requests to expressly or tacitly, or is estopped from denying
purchase a portion of the said lot as provided for in the them.
deed of absolute sale, and complained about the latters
failure to eject the squatters within the three-month
Thus, contracts entered into by corporate officers beyond
period agreed upon in the said deed. RECCI rejected the
the scope of authority are unenforceable against the
demand of WHI prompting the latter to file for a
corporation unless ratified by the corporation.
complaint against RECCI for specific performance and
damages.
In BA Finance Corporation v. Court of Appeals, we also
ruled that persons dealing with an assumed agency,
RTC: Rendered judgment in favor of WHI. Ordered
whether the assumed agency be a general or special
RECCI to allow WHI (plaintiff) for the beneficial use of
one, are bound at their peril, if they would hold the
the existing right of way plus the stipulated 25sqm and
principal liable, to ascertain not only the fact of agency
55 sqm, to sell to WHI the additional 500sqm to allow
but also the nature and extent of authority, and in case
said plaintiff full access and use of the purchased
either is controverted, the burden of proof is upon them
property pursuant to the deed of absolute of sale, to
to establish it.
cause annotation on TCT the beneficial use and right of
way granted by their deed of absolute sale and pay
plaintiff the actual damages and unrealized income. In this case, the respondent denied authorizing its then
The trial court ruled that the RECCI was president Roberto B. Roxas to sell a portion of its lot, to
estopped from disowning the apparent authority of create a lien or burden thereon. The petitioner was thus
Roxas under the Resolution of its Board of Directors. The burdened to prove that the respondent so authorized
court reasoned that to do so would prejudice the WHI Roxas to sell the same and to create a lien thereon.
which transacted with Roxas in good faith, believing that
he had the authority to bind the WHI relating to the Evidently, Roxas was not specifically authorized under
easement of right of way, as well as the right to the said resolution to grant a right of way in favor of the
purchase a portion of the lot. petitioner on a portion of the subjected lot or to agree to
CA: Reversed the decision. sell to the petitioner a portion thereof. The authority of
The CA ruled that, under the resolution of the Board of Roxas, under the resolution, to sell the lot did not
include the authority to sell a portion of the adjacent lot,
Directors of the RECCI, Roxas was merely authorized to
or to create or convey real rights thereon. Neither may
sell the lot, but not to grant right of way in favor of the
such authority be implied from the authority granted to
WHI over a portion of the lot, or to grant an option to Roxas to sell the adjacent lot to the petitioner on such
the petitioner to buy a portion thereof. The appellate terms and conditions which he deems most reasonable
court also ruled that the grant of a right of way and an and advantageous.
option to the respondent were so lopsided in favor of the
respondent because the latter was authorized to fix the Under paragraph 12, Article 1878 of the New Civil Code,
location as well as the price of the portion of its property A special power of attorney is required to convey
to be sold to the respondent. Hence, such provisions real rights over immovable property.
contained in the deed of absolute sale were not binding Article 1358 of the New Civil Code
on the RECCI. The appellate court ruled that the delay in “ requires that contracts which have for their
the construction of WHIs warehouse was due to its fault. object the creation of real rights over immovable
property must appear in a public document.”
ISSUE: Whether the ROXAS Electric (respondent is
The petitioner cannot feign ignorance of the need for they had deceived her and explained that no display
Roxas to have been specifically authorized in writing by space was registered in her name as she was only
the Board of Directors to be able to validly grant a right
supposed to share the space leased by Hontiveros in
of way and agree to sell a portion of the adjacent lot.
its name. She was not allowed to display her goods
The rule is that if the act of the agent is one which
requires authority in writing, those dealing with him are in that space because she had not paid her balance
charged with notice of that fact. of $1,750.00, in violation of their contract. Bedia also
made the particular averment that she did not sign
Powers of attorney are generally construed strictly and the Participation Contract on her own behalf but as
courts will not infer or presume broad powers from an agent of Hontiveros and that she had later
deeds which do not sufficiently include property or
subject under which the agent is to deal.
returned the advance payment of $500.00 to the
plaintiff. The defendants filed their own counterclaim
Generally, the power of attorney must be pursued within and complained of malice on the part of the plaintiffs.
legal strictures, and the agent can neither go beyond it;
nor beside it. The act done must be legally identical with In the course of the trial, the complaint against
that authorized to be done. Hence, the consent of the
Hontiveros was dismissed on motion of the White.
respondent to the assailed provisions in the deed of
absolute sale was not obtained; hence, the assailed
provisions are not binding on it. RTC: It found Bedia solely liable for fraud and
awarded the plaintiffs actual and moral damages plus
***Apparent authority is based on estoppel and can attorney's fees and the costs. The court said:
arise from two instances: first, the principal may
knowingly permit the agent to so hold himself out as
In claiming to be a mere agent of Hontiveros &
having such authority, and in this way, the principal
becomes estopped to claim that the agent does not have Associated Producers Phil. Yields, Inc., defendant
such authority; second, the principal may so clothe the Sylvia H. Bedia evidently attempted to escape liability
agent with the indicia of authority as to lead a for herself. Unfortunately for her, the "Participation
reasonably prudent person to believe that he actually
Contract" is not actually in representation or in the
has such authority.
***
There can be no apparent authority of an agent name of said corporation. It is a covenant entered
without acts or conduct on the part of the principal and into by her in her personal capacity, for no one may
such acts or conduct of the principal must have been contract in the name of another without being
known and relied upon in good faith and as a result of authorized by the latter, or unless she has by law a
the exercise of reasonable prudence by a third person as right to represent her. (Art. 1347, new Civil Code)
claimant and such must have produced a change of
position to its detriment. The apparent power of an
agent is to be determined by the acts of the principal CA: Sustained RTC’s decision. The court said:
and not by the acts of the agent.
The evidence, on the whole, shows that she definitely
acted on her own. She represented herself as
61. BEDIA v WHITE authorized by the State of Texas to solicit and assign
FACTS:
booths at the Texas fair; she assured the appellee
Petitioner Sylvia H. Bedia entered into the subject
that she could give her booth. Under Article 1883 of
contract with private respondent Emily A. White. She
the New Civil Code, if the agent acts in his own
averred that Bedia had approached her and
name, the principal has no right of action against the
persuaded her to participate in the State of Texas
persons with whom the agent had contracted.
Fair, and that she made a down payment of $500.00
to Bedia on the agreed display space. In due time,
ISSUE:
she enplaned for Dallas with her merchandise but
WON principal Hontiveros & Associated Producers
was dismayed to learn later that the defendants had
Phil. Yields, Inc. is liable to its agent Sylvia H. Bedia.
not paid for or registered any display space in her
name, nor were they authorized by the state fair
HELD:
director to recruit participants.
It has not been found that Bedia was acting beyond
the scope of her authority when she entered into the
On August 10, 1986, White and her husband filed a
Participation Contract on behalf of Hontiveros, it is
complaint in the Regional Trial Court of Pasay City
the latter that should be held answerable for any
for damages against Bedia and Hontiveros &
obligation arising from that agreement.
Associated Producers Phil. Yields, Inc. She said she
incurred losses as a result for which the defendants
Hontiveros itself has not repudiated Bedia's agency
should be held solidarily liable.
as it would have if she had really not signed in its
name. In the answer it filed with Bedia, it did not deny
The defendants denied the plaintiff's allegation that
the latter's allegation that she was only acting as its
agent when she solicited White's participation. In fact, Respondents filed a complaint for injunction with
by filing the answer jointly with Bedia through their prayer for the issuance of a writ of preliminary
common counsel, Hontiveros affirmed this allegation. injunction and/or temporary restraining order
before the Regional Trial Court of Makati.
The Participation Contract signed by Bedia was an RTC – ruled in favour of the respondents, and
acknowledgment by White that Bedia was only acting dismissed petitioner’s motion to dismiss.
for Hontiveros when it recruited her as a participant in CA – dismissed the petition for certriorari by the
the Texas State Fair and charged her a partial petitioner.
payment of $500.00. This amount was to be fortified Petitioner prays, inter alia, that the CA’s decision
and the RTC’s Orders be set aside and the
to Hontiveros in case of cancellation by her of the
dismissal of the complaint in the case.
agreement. The fact that the contract was typewritten
Respondents argue that even assuming arguendo
on the letterhead stationery of Hontiveros bolsters
that petitioner and PNB-IFL are two separate
this conclusion in the absence of any showing that
entities, petitioner is still the party-in-interest in
said stationery had been illegally used by Bedia.
the application for preliminary injunction because it
is tasked to commit acts of foreclosing
Furthermore, by moving to dismiss the complaint respondents' properties. In addition, respondents
against Hontiveros, the plaintiffs White virtually justified the act of the court a quo in applying the
disarmed themselves and forfeited whatever claims doctrine of "Piercing the Veil of Corporate Identity"
they might have proved against the latter under the by stating that petitioner is merely an alter ego or
contract signed for it by Bedia. It should be obvious a business conduit of PNB-IFL.
that having waived these claims against the principal, ISSUES:
they cannot now assert them against the agent. WON petitioner is merely an alter ego of PNB-IFL
WON the suit against PNB is a suit against PNB-IFL
HELD:
No. PNB was an attorney-in-fact of PNB-IFL. The
62. PNB v RITRATTO GROUP, INC., et al
mere fact that a corporation owns all of the stocks
Principal: PNB-IFL of another corporation, taken alone is not sufficient
Agent: PNB to justify their being treated as one entity.
No. A suit against an agent cannot without
FACTS: Petitioner Philippine National Bank is a compelling reasons be considered a suit against the
domestic corporation organized and existing under principal.
Philippine law. Meanwhile, respondents Ritratto In any case, the parent-subsidiary relationship
Group, Inc., Riatto International, Inc. and Dadasan between PNB and PNB-IFL is not significant legal
General Merchandise are domestic corporations, relationship involved in this case since petitioner
likewise, organized and existing under Philippine was not sued because it is the parent company of
law. PNB-IFL. Rather, the petitioner was sued because it
PNB International Finance Ltd. (PNB-IFL) a acted as an attorney-in-fact of PNB-IFL in initiating
subsidiary company of PNB, organized and doing the foreclosure proceedings. A suit against an
business in Hong Kong, extended a letter of credit agent cannot without compelling reasons be
in favor of the respondents in the amount of considered a suit against the principal.
US$300,000.00 secured by real estate mortgages
constituted over four (4) parcels of land in Makati
63. MACONDRAY v SELLNER
City. This credit facility was later increased
successively to US$1,140,000.00 in September Principal: Macondray & Co.
1996; to US$1,290,000.00 in November 1996; to Agent: George Sellner
US$1,425,000.00 in February 1997; and decreased
to US$1,421,316.18 in April 1998. Respondents FACTS
made repayments of the loan incurred by remitting 1. Sellner, a real estate broker, sold a parcel of
those amounts to their loan account with PNB-IFL land to the company Macondray & Co., Inc. for
in Hong Kong. P17,175. The land was flooded by high tides
However, as of April 30, 1998, their outstanding and Macondray became highly dissatisfied with
obligations stood at US$1,497,274.70. Pursuant to its purchase.Macondray informed Sellner that
the terms of the real estate mortgages, PNB-IFL, the land was not suited for use as a coal-yard,
through its attorney-in-fact PNB, notified the the purpose for which it had been bought, and
respondents of the foreclosure of all the real estate requested the latter to find another buyer.The
mortgages and that the properties subject thereof land was to be sold at the price Macondray
were to be sold at a public auction on May 27, purchased it for, and exceed proceeds would
1999 at the Makati City Hall. serve as Sellner’s commission.
2. Sellner informed Macondray that he found a reasonable time in which to examine the
buyer: Antonio Barretto, who was willing to pay documents of title, and that defendant exercising
P18,892.50, or P2.75/sq. m.Macondray an authority impliedly if not expressly conferred
executed a formal deed of conveyance and upon him, gave the purchaser a reasonable time in
delivered this together with the certificate of title which to satisfy himself as to the legality and
to Sellner on the understanding that the latter correctness of the documents of title.
would deliver these to Barretto, conclude the That the company through its manager Young,
sale, and receive the purchase price. acquiesced in and ratified what had been done by
3. Barretto agreed to accept the land on the defendant in this regard when, with full knowledge
condition that he finds the title and deed of all the facts, Young advised the defendant,
satisfactory after inspection. Sellner left the during Barretto's absence in Tayabas, that the deal
deed of conveyance with Barretto, with the must be closed up without delay on Barretto's
understanding that if the title and the deed of return to Manila.
conveyance were as represented, Barretto Time does not appear to have been of the essence
would give him his check for the amount of the of the contract. The agreement to sell was made
purchase price. without any express stipulation as to the time
4. Barretto retained possession of the TCT; but a within which the purchase price was to be paid.
few days later, he was compelled to go to The commission agreed upon was all that was
Tayabas on business and was detained by a over the purchase price P17,175 which the
typhoon which delayed his return. During defendant could secure from the property, and it is
Barretto’s absence, Macondray advised Sellner clear that allowing the defendant this
that he must consummate the sale without commission, and offsetting it against the
delay upon Barretto’s return. unpaid balance of the market value of the land,
5. Aug. 31: Barretto returned; Sellner informed the plaintiff company is not entitled to a money
him of the company’s desire to close up the judgment against defendant.
transaction; but the former requested for 1-2 The business of a real estate broker or agent,
more days to inspect the documents before generally, is only to find a purchaser, and the
issuing the check. settled rule as stated by the courts is that, in the
6. Sept. 2: was reported to Young, Macondray’s absence of an express contract between the
general manager. Young informed Sellner that broker and his principal, the implication
unless the purchase price was paid before 5PM generally is that the broker becomes entitled to
of the same day, the deal would be off.Sellner the usual commissions whenever he brings to
called Barretto, and the latter told him that if the his principal a party who is able and willing to
TCT was sent, he would issue the take the property and enter into a valid contract
check.Sellner sent the TCT but received the upon the terms then named by the principal,
check 36 hours after.Upon receipt of the check although the particulars may be arranged and the
from Barretto, Sellner immediately tendered matter negotiated and completed between the
Macondray a check for the agreed selling price principal and the purchaser directly.
of P17,175. The rights of a real estate broker are to be
7. Macondray refused to accept the check and protected against the arbitrary revocation of his
filed this action to recover damages claiming agency, without remuneration for services
that the sale had been cancelled because rendered in finding a suitable purchaser prior to the
Sellner failed to turn over the purchase price on revocation.
Sept. 2. Macondray’s letter demanding payment at 5PM on
the afternoon of Sept. 2 under penalty of
ISSUE : cancellation of the agreement to sell was an
arbitrary unreasonable attempt to deny to
W/N Macondray is entitled to damages? Barretto the reasonable opportunity to inspect
the documents of title, to which he was entitled
HELD: by virtue of the express agreement with Sellner,
Macondray’s agent, before any attempt was made
NO. to revoke his agency.
There appears to be no reason for the demand of It follows that Barretto's right to enforce the
Macondray through its general manager, Young, agreement to sell was in no wise affected by the
for the delivery of the purchase price at the attempt of the plaintiff company to "cancel" the
specified hour under threat that failure to do so agreement; and that Macondray suffered no
would cancel the agreement other than that the damage by the consummation of the agreement by
manger was annoyed with the delays which the acceptance of the stipulated purchase price by
occurred during the negotiations and changed his the defendant real estate agent.
mind as to the purchase price agreed upon.
From the nature of the transaction, it was 64. DANON v BRIM & CO.
understood that the purchaser should have a
FACTS: ● To that complaint the BRIMO interposed a
general denial
● Principal - Brimo; Agent (broker) - Danon
● The trial court ruled in favor of DANON and
● Antonio A. Brimo, manager of BRIMO & CO, in a ordered BRIMO to pay the sum prayed for plus
conversation with Julio DANON, informed the costs – hence this petition by BRIMO
latter that he (BRIMO) desired to sell his factory,
the Holland American Oil Co., for the sum of
P1.2M ISSUE: Whether DANON is entitled to recover the sum
of P60,000 as compensation for his “services”
● BRIMO agreed and promised to pay DANON a
commission of 5% of the stipulated price
provided the latter could sell said factory for that RULING:

amount. No definite period of time was fixed NO. The judgment appealed from is hereby revoked and
within which DANON should effect the sale BRIMO is hereby absolved from all liability under the
DANON’s complaint.
● Meanwhile, another broker, a certain SELLNER,
was also negotiating the sale of the same factory ● Note that DANON's action here is not one for
for BRIMO. The records are not clear but it damages for breach of contract; it is an action to
appears that DANON was aware that he was not recover "the reasonable value" of services
alone as broker. The records seem to point that rendered. Hence, to determine whether DANON
DANON exerted earnest effort to forestall his is entitled to recover the commission agreed
competitor by being the first to find a purchaser upon, the pivotal question to be resolved is
and effect the sale whether DANON had performed all that was
required of him under his contract with BRIMO
● In time, DANON found a willing purchaser. It
appears that after having the conversation with ● As can be gleaned from the facts, the most that
BRIMO, DANON went to see Mauro PRIETO, can be said as to what DANON had accomplished
president of the STA ANA Oil Mill, and offered to is that he had found a person (STA ANA Oil Mill)
sell to him BRIMO’s property at P1.2M who MIGHT have bought the subject factory had
BRIMO not sold it to someone else
● STA ANA was at that time in need of such a
factory. As such, PRIETO, its president, eagerly ● However, even this point is dubious as the
expressed interest in DANON’s offer. PRIETO evidence does not show that the STA ANA had
immediately sought to ascertain whether BRIMO definitely decided to buy the property in question
really wanted to sell said factory, and after at the price of P1.2M. The board of directors of
getting such confirmation from BRIMO, sought STA ANA had not resolved to purchase said
also to inspect the factory (which he did) property; and even if its president, PRIETO,
could legally make the purchase without board
● PRIETO then set for an appointment with BRIMO authorization, yet PRIETO himself did not
to perfect the negotiation. However, such pretend that he had definitely agreed to buy the
appointment never pushed through because at factory on behalf of his corporation at the price
that time, the other broker, SELLNER, had stated
already found a purchaser for the same property
who ultimately bought it for P1.3M ● It must be emphasized the DANON himself (in
his complaint and testimony in open court)
● DANON filed the instant case to recover the sum admitted that BRIMO agreed to pay him a
of P60,000, alleged to be the value of services commission of 5% provided he could sell the
rendered by him to BRIMO as a broker factory at P1.2M under the circumstances
presented, it is difficult to see how DANON can
● DANON claimed that as compensation for his recover anything
services, a commission of 5% on the said sum of
P1.2M (P60,000) was promised to him by BRIMO ● What benefit did DANON, by his "services,"
if the sale was consummated OR even if he bestow upon BRIMO to entitle him to recover
should merely find a purchaser ready, able and from the latter the sum of P60,000? It is
willing to buy said factory for the stipulated price perfectly clear and undisputed that his "services"
did not any way contribute towards bringing
● DANON averred that BRIMO refused to sell the about the sale of the factory in question.
said factory without any justifiable motive or He was not "the efficient agent or the procuring
reason and without having previously notifying cause of the sale."
DANON of its desistance or variation in the price
and terms of the sale ● DOCTRINE: The broker must be the efficient
agent or the procuring cause of sale. The means
employed by him and his efforts must result in
 the sale. He must find the purchaser, and the absolute right before a bargain is made while
sale must proceed from his efforts acting as negotiations remain unsuccessful, before
broker commissions are earned, to revoke the broker's
authority, and the latter cannot thereafter claim
● DOCTRINE (restated): The duty assumed by the compensation for a sale made by the principal,
broker is to bring the minds of the buyer and even though it be to a customer with whom the
seller to an agreement for a sale, and the price broker unsuccessfully negotiated, and even
and terms on which it is to be made, and until though, to some extent, the seller might justly
that is done his right to commissions does not be said to have availed himself of the fruits of
accrue. A broker is never entitled to the broker's labor
commissions for unsuccessful efforts. The risk of
a failure is wholly his. The reward comes only ● The obligation of a broker to procure a purchaser
with his success. requires of broker not simply to name or
introduce a person who may be willing to make
● The broker may devote his time and labor, and any sort of contract in reference to the property,
expend his money with ever so much of devotion but to actually produce a party capable, and who
to the interest of his employer, and yet if he ultimately becomes the purchaser
fails, if without effecting an agreement or
accomplishing a bargain, he abandons the effort, ● It is clear from the foregoing that although
or his authority is fairly and in good faith DANON could probably have effected the sale of
terminated, he gains no right to commissions the factory had BRIMO not sold it to someone
else, he is not entitled to the commissions
● Simply put, a broker is never successful and agreed upon because he had no intervention
never becomes entitled to his commission until whatever in the sale that transpired
and unless the sale is consummated. Even when
he has successfully brought the would be buyer ● It must be borne in mind that no definite period
and seller together, or when his efforts have was fixed by BRIMO within which DANON might
created impressions favorable to seller, or when effect the sale of its factory. Nor was DANON
seller otherwise benefited from broker’s labor – given by BRIMO the exclusive agency of such
as long as no sale has been consummated, he is sale. Therefore, DANON cannot complaint of
not entitled to commission BRIMO's conduct in selling the property through
another agent (SELLNER) before DANON's efforts
● Such a rule, however, has an exception: If the were crowned with success
efforts of the broker are rendered a failure by
the fault of the employer, then the broker does ● DOCTRINE: One who has employed a broker
not lose his commissions. For instance, when the can himself sell the property to a purchaser
employer capriciously changes his mind after the whom he has procured, without any aid
purchaser, ready, willing, and able has already from the broker.
been produced by the broker; or when the
purchaser declines to complete a sale because of
some defect of title in the ownership of the
seller, which defect is the fault of the seller 65. ROCHA v PRATS

● Usually the broker is entitled to a fair and PRINCIPAL: Prats & Company
reasonable opportunity to perform his obligation, AGENT: Alfonso Rocha
subject of course to the right of the seller to sell
independently. But the right of the principal to
terminate broker’s authority is absolute and
FACTS:
unrestricted, except only that he may not do it in
bad faith, and as a mere device to escape the On May 1919, Antonio Brimo, manager of defendant
payment of the broker's commissions company, verbally authorized Joaquin Mencarini to
negotiate the sale of a lot in Calle David, Manila. It
● Thus, if in the midst of negotiations instituted by was to be sold for P 150,000 and the excess was to
the broker, and which were approaching success, be the commission. Plaintiff Rocha agreed to help
the seller should revoke the authority of the
and received a similar authorization.
broker, with the view of concluding the bargain
without his aid, and avoiding the payment of
commission about to be earned, it might be well On July 30,1919, Rocha obtained an offer from
said that the due performance his obligation by Vicente Madrigal for P 165,000. Upon Rocha’s
the broker was purposely prevented by the request, Brimo gave him a power in writing allowing
principal plaintiff to sell the land. At this point, Rocha alleged
that he protested because the document asked for
● But if the seller acts in good faith, not seeking to
escape the payment of commissions, but moved
banking security from the buyer. Allegedly, Brimo told
fairly by a view of his own interest, he has the
the plaintiff that the latter can strike out said clause property for P30,000 subject to the condition that the
upon sale. Brimo denied this allegation. purchaser would assume the mortgage existing thereon
in the favor of the Rehabilitation Finance Corporation; in
return she would pay them a commission of 5% on the
The following day, Rocha endeavored to close the purchase price plus whatever overprice they may obtain
transaction but Madrigal (the buyer) declined to give for the property.
such banking security. This caused the sale to fail.
16. Agents found one Pio S. Noche who was willing to
An action to recover sum (P15,000) was lodged by buy the property under the terms agreed upon with
plaintiff to the trial court. The trial court ruled in favor principal but when they introduced him, Consejo
informed agents that she was no longer interested in
of the defendant, hence the appeal to the Supreme
selling the property and made them sign a document
Court. cancelling the written authority she had given them.

ISSUE: 17. However, on December 20, 1948, Consejo dealt

Whether or not Rocha is entitled to have commission. directly with Pio S. Noche selling to him the property for
P31,000.
RULING:
18. Upon learning this transaction, Cunanan and Mijares
No, Rocha is not entitled to have commission. demanded from Consejo the payment of their
commission, but she refused and so they brought the
RATIO: present action.
A broker not having quite succeeded in bringing the
minds of buyer and seller to an agreement in regards 19. RTC rendered judgement in favor of Cunanan and
Mijares.
to the terms of a sale is not entitled to commission.
20. CA affirmed RTC decision. Hence this petition to
The present case shows that Madrigal and Brimo review.
never agreed as to the terms of sale. It follows that
the broker, Rocha, never succeeded in bringing their 21. Consejo’s contention:
minds together. Furthermore, plaintiff did not adduce • Admitted having contracted the services of the herein
sufficient evidence to back his claim that defendant Agents to sell her property but stated that she agreed to
pay them a commission of P1,200 only on condition that
really agreed to strike out the aforementioned
they buy her a property somewhere in Taft Avenue to
banking security clause. where she might transfer after selling her property. After
Cunanan and Mijares sold the property at Taft Avenue to
NOTE: Mencarini at first claimed compensation for another party, it was agreed that the authority she had
his services in connection with the negotiation for the given them be cancelled.
sale to Madrigal, but subsequently relinquished his • That the authority has already been withdrawn by the
voluntary act of respondents when petitioner sold the
claim in favor of Rocha.
property to Pio S. Noche; that she was already free from
her commitment with respondents and, therefore, was
not in duty bound to pay them any commission for the
transaction

66. INLAND REALTY v CA

22. Agents’ claim: While they agreed to cancel the
written authority given to them, they did so merely upon
the verbal assurance given by Consejo that, should the
property be sold to Pio S. Noche they would be given the
67. INFANTE v CUNANAN
commission agreed upon.
FACTS
23. SC affirmed CA’s decision.
13. Principal: Consejo Infantem - owner of two parcels of
land with a house built thereon; ISSUE
Agents: Jose Cunanan and Juan Mijares - for the sale of
the property of Consejo. Whether or not principal Consejo is bound to pay agents
Third Party: Pio S. Noche - buyer of property Cunanan and Mijares commission for the sale of her
property to Pio Noche (with oral evidence as proof to
14. Consejo Infante, was the owner of two parcels of contract).
land, together with a house built thereon, situated in the
City of Manila and covered by a Transfer Certificate of HELD
Title.
*On bad faith of the Principal*
15. On or before November 30, 1948, she contracted the
services of Jose Cunanan and Juan Mijares to sell the The fact that petitioner had changed her mind even if
respondents had found a buyer who was willing to close
the deal, is a matter that would not give rise to a legal -Feb. 14, 1968, Doronilla granted plaintiff Prats an
consequence if respondents agree to call off the exclusive option and authority in writing to negotiate the
transaction in deference to the request of the petitioner. sale of the said property. The option would last for 60
But the situation varies if one of the parties takes days and will be automatically extended until said
advantage of the benevolence of the other and acts in a negotiations are terminated, but not more than 15 days.
manner that would promote his own selfish interest. This -Feb 19, 1968, In view of his exclusive option, Prats
act is unfair as would amount to bad faith. This act asked Doronilla if he could take immediate steps to
cannot be sanctioned without according to the party withdraw any and all papers pertaining to the property
prejudiced the reward which is due him. offered to the SSS
-Feb 20, 1968, Doronilla wrote a letter to SSS requesting
Petitioner took advantage of the services rendered by for the return of all papers concerning the property.
respondents, but believing that she could evade payment -Feb. 27, 1968, SSS replies, asking for a meeting with
of their commission, she made use of a ruse/strategem Doronilla on Mar 4, 1968
by inducing them to sign the deed of cancellation. This -Feb.28 1968, Doronilla replies to SSS, saying that Prats
act of subversion cannot be sanctioned and cannot serve has the exclusive option and authority to negotiate the
as basis for petitioner to escape payment of the sale, thus SSS will have to communicate directly with
commission agreed upon. Prats.
-April 18, 1968, Doronilla extended Prats exclusive
*Supplemental infom - On Oral Evidence* option and authority to expire May 18, 1968.
-May 6, 1968, Prats made a formal letter to SSS offering
The plea that oral evidence should not have been the said lot for 6 pesos per square meter.
allowed to prove the alleged verbal assurance is well -May 17, 1968, Doronilla receives a telegram from the
taken it appearing that the written authority given to SSS, saying that the SSS was considering the purchase
respondents has been cancelled in a written statement. of the land.
-May 18, 1968, the exclusive option was extended for 15
Section 22, Rule 123, Rules of Court "When the terms of days, as per the option agreement that the option shall
an agreement have been reduced to writing, it is to be be extended if there were negotiations.
considered as containing all those terms, and, therefore, -May 18, 1968, Prats writes again to SSS offering the
there can be, between parties and their successors in same land for4.50 pesos per square meter.
interest, no evidence of the terms of the agreement -May 30, 1968. Prats writes to Doronilla, stating that the
other than the contents of the writing, except (a) Where SSS had agreed to buy the said land and that the SSS
a mistake or imperfection of the writing, or its failure to would contact Doronilla.
express the true intent and agreement of the parties, or -June 6, 1968, Doronilla writes to prats saying that he
the validity of the agreement is put in issue by the had not received any written offer from the SSS, and
pleadings, and (b) where there is an intrinsic ambiguity reminding Prats that the exclusive authority had already
in the writing." expired on June 3, 1968.
-June 19, 1968. Doronilla offers the land to SSS at 4
There is no doubt that the point raised does not come pesos.
under any of the cases excepted, for there is nothing -June 25, 1968, SSS makes a counter-offer of 3.25
therein that has been put in issue by respondents in -June 30, 1968, Doronilla executes the deed of sale to
their complaint. The terms of the document of the SSS
cancellation seem to be clear and they do not contain -September 17, 1968, Prats demands 1.38 million as his
any reservation which may in any way run counter to the fee for professional services as previously agreed upon in
clear intention of the parties. the exclusive option and authority to negotiate.
TC: rendered in favor of plaintiff
=>However the Court disregarded this rule and CA: reversed the decision of the trial court and
considered the bad faith of the Principal in affirming CA’s dismissed the complaint because as per agreement a
decision written offer by the prospective buyer was required, and
if no such written offer is made until the las day of the
authorization, the option shall expire.
68. PRATS v CA
ISSUE:
FACTS: WON Prats is entitled to the 1.38 million for the
-Private defendant Alfonso Doronilla was the registered professional services rendered.
owner of 300 hectares of land located in Montalban Rizal. HELD:
-Doronilla has been trying to sell the said land for a time. No he is not entitled to 1.38 million, the exclusive option
-On July 3, 1967, Doronilla offered to sell the land to the to negotiate had already elapsed when Doronilla and SSS
Social Security System (SSS) at 4 pesos per square perfected their sale.
meter. RATIO:
-July 17, 1967, SSS replied, asking if there was any -Though Prats argues that he was instrumental in
possibility if the price could be reduced to 3.25 pesos per bringing the two parties together, it can be seen from
square meter. the facts that Doronilla and SSS were already talking
-July 19, 1967, Doronilla replied saying that he was even before Prats became the agent of Doronilla.
amenable to the decrease in price and would sell at 3.25. -However, the court notes that Prats had diligently taken
-Aug. 10, 1967, SSS replied that it would study the sale, steps to bring back together Doronilla and SSS. He had
and would reply after it finishes its studies.
the two parties meet in various luncheons, he P24,070,000.00, which is slightly higher than the amount
communicated with the Office of the Presidential Housing previously offered by Counsel Realty Corp. No bid was
Commission, wrote follow up letters to the SSS. Thus the submitted for the office building lot.
Court grates in equity the sum of 100,000 pesos byway
DBP still approved the sale of the warehouse lot to
of compensation for Prats' efforts and assistance in the
Charges Realty Corp. even if there was no bidder for the office
transaction.
building lot, the proper documentation of the sale was
made.The office building lot, it was later sold by DBP in a
negotiated sale to the Bank of P.I. as trustee for the "Perpetual
69. UNILAND RESOURCES v DBP Care Fund of the Manila Memorial Park" for P17,460,000.00,
Uniland Resources vs DBP and proper documentation of the sale was made. The DBP
admittedly paid the (five percent) broker's fee on this sale to
FACTS: the DBP Management Corporation, which acted as broker for
(Alleged) Principal – DBP said negotiated sale.
(Alleged) Agent – Uniland Resources After the aforesaid sale, petitioner, through its
President, wrote two letters to respondent DBP, the first
Petitioner Uniland Resources is a private through its Senior Vice President, and, the second through its
corporation engaged in real estate brokerage and licensed as Vice Chairman, asking for the payment of its broker's fee in
such, while respondent DBP, as we all know, is a government instrumenting the sale of its (DBP's) warehouse lot to Charges
corporation engaged in finance and banking in a proprietary
Realty Corp. The claim was referred to the Bidding Committee
capacity.
chaired by Amanda S. Guiam which met on November 9, 1987,
Marinduque Mining Corporation obtained a loan from and which, on November 18, 1987, issued a decision denying
the DBP and as security therefor, mortgaged certain real petitioner'sclaim. Hence, the instant case filed by petitioner to
properties to the latter, namely: (1) office building lot; and (2) recover from respondent DBP the aforesaid broker's fee.
warehouse lot. RTC – rendered judgment in favor of petitioners ordering
respondent to pay petitioner the sum of P1,203,500,00 which is
Said lots hadbeen previously mortgaged by
Marinduque Mining Corp., to Caltex, and the mortgage in favor the equivalent of five percent broker's fee plus legal interest
of DBP was entered on their titles as a second mortgage. The thereto from the filing of the complaint on until fully paid and
account of the Marinduque Mining Corp., with the DBP was the sum of P50,000.00 as and for attorney's fees. costs against
later transferred to the Assets Privatization Trust (APT) pursuant respondent DBP.
to Proclamation No. 50. CA - reversed the judgment of the lower court and dismissed
the complaint. The motion for reconsideration filed by
Marinduque Mining Corp., failed to pay its obligations
petitioner was also subsequently denied. Hence, this petition.
so Caltex foreclosed its mortgage on the aforesaid two lots. APT
on the other hand, to recover its investment on the ISSUE:
Marinduque Account, offered for sale to the public through DBP Whether or not the petitioner is entitled to the five percent
its right of redemption on said two lots by public bidding. broker’s fee though in the first place, had no authority, express
Considering, however, that Caltex had required that both lots or implied, from the seller to broker the transaction
be redeemed, the bidding guidelines set by DBP provided that
any bid to purchase either of the two lots would be considered
RULING:
only should there be two bids or a bid for the two items which,
No. It is obvious that petitioner was never able to
when combined, would fully cover the sale of the two lots in
question. secure the required accreditation from respondent DBP to
transact business on behalf of the latter. The letters sent by
The bidding was held with only one bidder, the petitioner to the higher officers of the DBP and the APT are
Counsel Realty Corp. [an affiliate of Glaxo, Philippines, the client merely indicative of petitioner's desire to secure such
of petitioner], which offered a bid only for the warehouse lot in accreditation. At best these missives are self-serving; the most
the amount of P23,900,000.00. Said bid was thus rejected by
that they prove is that they were sent by petitioner and
DBP.
received by respondent DBP, which clearly never agreed to be
Seeing, however, that it would make a profit if it bound thereto. As declared by the trial court even when it
redeemed the two lots and then offer them for sale, and as its found in favor of petitioner, there was no express reply from
right to redeem said lots from Caltex would expire on May 8, the DBP or the APT as to the accreditation sought by petitioner.
1987, DBP retrieved the account from APT and, on the last day From the very beginning, therefore, petitioner was aware that it
for the exercise of its right of redemption, May 8, 1987, had no express authority from DBP to find buyers of its
redeemed said lots from Caltex for P33,096,321.62, thus
properties.
acquiring them as its physical assets.
In preparation for the sale of the two lots in question, In its reply submitted pursuant to the resolution
DBP called a pre-bidding conference wherein a new set of requiring the same,petitioner also invokes Article 1869 of the
bidding guidelines were formulated. Then, the public bidding new Civil Code in contending that an implied agency existed.
for the sale of the two lots was held and again, there was only Petitioner argues that it "should have been stopped,
one bidder, the Charges Realty Corp. [another affiliate of Glaxo, disauthorized and outrightly prevented from dealing the 12,355
Philippines], for only the warehouse lot and for the amount of sq. m with warehouse by the DBP from the inception." On the
contrary, these steps were never necessary. In the course of
petitioner's dealings with the DBP, it was always made clear to Accordingly, petitioner's other arguments need not now be
petitioner that only accredited brokers may look for buyers on discussed.
behalf of respondent DBP. This is not a situation wherein a third
SC affirmed the decision of the CA with
party was prejudiced by the refusal of respondent DBP to
modificationthat in equity respondent DBP is ordered to pay
recognize petitioner as its broker. The controversy is only petitioner the amount of One Hundred Thousand Pesos
between the DBP and petitioner, to whom it was emphasized in (P100,000.00).
no uncertain terms that the arrangement sought did not exist.
Article 1869, therefore, has no room for operation in this case.
Petitioner would also disparage the formality of
accreditation as merely a mechanical act, which requires not 70. DOMINGO v DOMINGO
21. Domingo v. Domingo (1971)
much discretion, as long as a person or entity looks for a buyer
and initiate or promote the interests of the seller. Being
engaged in business, petitioner should do better to adopt the • Principal: Vicente M. Domingo ; Agent:
opposite attitude and appreciate that formalities, such as the Gregorio Domingo (real estate broker)
need for accreditation, result from the evolution of sound Facts:
business practices for the protection and benefit of all parties • Vicente granted Gregorio an exclusive agency
concerned. They are designed and adopted specifically to to sell his lot No. 883 with an area of about 88,477
prevent the occurrence of situations similar to that obtaining in square meters at the rate of P2.00 per square meter
this case. (or for P176,954.00) with a commission of 5% on the
total price, if the property is sold by Vicente or by
More importantly, petitioner's stance goes against the anyone else during the 30-day duration of the agency
basic axiom in Civil Law that no one may contract in the name or if the property is sold by Vicente within three
of another without being authorized by the latter, unless the
months from the termination of the agency to a
former has by law a right to represent him. From this principle,
among others, springs the relationship of agency which, as purchaser to whom it was submitted by Gregorio
with other contracts, is one founded on mutual consent: the during the continuance of the agency with notice to
principal agrees to be bound by the acts of the agent and the Vicente. The said agency contract was in triplicate,
latter in turn consents to render service on behalf or in one copy was given to Vicente, while the original and
representation of the principal.
another copy were retained by Gregorio.
Petitioner, however, also invokes equity • On June 3, 1956, Gregorio authorized the
considerations, and in equity, the Court recognizes the efforts intervenor Teofilo P. Purisima to look for a buyer,
of petitioner in bringing together respondent DBP and an promising him one-half of the 5% commission.
interested and financially-able buyer. While not actively • Thereafter, Teofilo Purisima introduced Oscar
involved in the actual bidding and transfer of ownership of the de Leon to Gregorio as a prospective buyer.
warehouse property, petitioner may be said to have initiated,
albeit without proper authority, the transaction that eventually
• Oscar de Leon offered a price much lower
took place. The Court is also aware that respondent DBP was than provided, thus, Vicente directed Gregorio to tell
able to realize a substantial profit from the sale of its two Oscar to raise the offer. It was then raised to
properties. While purely circumstantial, there is sufficient (P109,000.00) which was agreed by both parties
reason to believe that the DBP became more confident to during a conference.
venture and redeem the properties from the APT due to the
• Upon demand by Vicente, Oscar de Leon
presence of a ready and willing buyer, as communicated and
assured by petitioner. issued P1000 as earnest money which Vicente
advanced P300 to Gregorio.
It was petitioner who advised Glaxo, Philippines of the • Oscar gave Gregorio a gift or propina of
availability of the warehouse property and aroused its interest P1000 for succeeding in persuading Vicente to sell
over the same. Through petitioner, respondent DBP was
his lot for a lower price. This gift was not disclosed by
directly informed of the existence of an interested buyer.
Petitioner's persistence in communicating with respondent DBP Gregorio to Vicente. (root of the issue)
reinforced the seriousness of the offer. This piece of • Oscar told Gregorio that he will give up the
information no doubt had a bearing on the subsequent negotiation and earnest money because his brother
decisions made by respondent DBP as regards the disposition of did not send the money.
its properties.
• Gregorio was suspicious so he went to
Under the foregoing disquisition and following the Vicente and reminded him that Vicente was still
precedent, as well as roughly the proportion, set in Prats, the committed to pay him 5% commission, if the sale is
Court in equity grants petitioner the sum of One Hundred consummated within three months. Vicente tore the
Thousand Pesos (Pl00,000.00) for the role it played in the original copy of the agreement document.
transaction between respondent DBP and buyer Glaxo, • Gregorio went to the Register of Deeds and
Philippines. It is emphasized, however, that the circumstances
that came into play in this case do not meet the minimum legal
found out that the sale was consummated between
standards required for the existence of an agency relationship Vicente and Oscario’s wife.
and that the award is based purely on equity considerations. • 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 • The law imposes upon the agent the absolute
would sell his property to him for One Hundred Four obligation to make a full disclosure or complete
Thousand Pesos (P104,000). (cheaper) account to his principal of all his transactions and
(A complaint was filed not mentioned what. Recovery other material facts relevant to the agency, so much
plus damages?) so that the law as amended does not countenance
Trial Court: In favor of Gregorio. any stipulation exempting the agent from such an
CA: Affirmed. Sentenced the said Vicente M. obligation and considers such an exemption as void.
Domingo to pay Gregorio M. Domingo P2,307.50 and The duty of an agent is likened to that of a trustee.
the intervenor Teofilo P. Purisima P2,607.50 with This is not a technical or arbitrary rule but a rule
interest on both amounts from the date of the filing of founded on the highest and truest principle of
the complaint, to pay Gregorio Domingo P1,000.00 morality as well as of the strictest justice.
as moral and exemplary damages and P500.00 as
attorney's fees plus costs. • In the case at bar, defendant-appellee
Gregorio Domingo as the broker, received a gift or
Issue: propina in the amount of One Thousand Pesos
• Whether the gift or propina given by Oscar to (P1,000.00) from the prospective buyer Oscar de
Gregorio constitutes fraud as to cause a forfeiture of Leon, without the knowledge and consent of his
his commission on the sale price. principal, herein petitioner-appellant Vicente
Ruling: Yes. WHEREFORE, the judgment is hereby Domingo. His acceptance of said substantial
rendered, reversing the decision of the Court of monetary gift corrupted his duty to serve the interests
Appeals and directing defendant-appellee Gregorio only of his principal and undermined his loyalty to his
Domingo: (1) to pay to the heirs of Vicente Domingo principal, who gave him partial advance of Three
the sum of One Thousand Pesos (P1,000.00) as Hundred Pesos (P300.00) on his commission. As a
moral damages and One Thousand Pesos consequence, instead of exerting his best to
(P1,000.00) as attorney's fees; (2) to pay Teofilo persuade his prospective buyer to purchase the
Purisima the sum of Six Hundred Fifty Pesos property on the most advantageous terms desired by
(P650.00); and (3) to pay the costs. his principal, the broker, herein defendant-appellee
Gregorio Domingo, succeeded in persuading his
Held: principal to accept the counter-offer of the
• Yes. An agent who takes a secret profit in the prospective buyer to purchase the property at P1.20
nature of a bonus, gratuity or personal benefit from per square meter or One Hundred Nine Thousand
the vendee, without revealing the same to his Pesos (P109,000.00) in round figure for the lot of
principal, the vendor, is guilty of a breach of his 88,477 square meters, which is very much lower the
loyalty to the principal and forfeits his right to collect the price of P2.00 per square meter or One Hundred
the commission from his principal, even if the Seventy-Six Thousand Nine Hundred Fifty-Four
principal does not suffer any injury by reason of such Pesos (P176,954.00) for said lot originally offered by
breach of fidelity, or that he obtained better results or his principal.
that the agency is a gratuitous one, or that usage or • The duty embodied in Article 1891 of the New
custom allows it; because the rule is to prevent the Civil Code will not apply if the agent or broker acted
possibility of any wrong, not to remedy or repair an only as a middleman with the task of merely bringing
actual damage. By taking such profit or bonus or gift together the vendor and vendee, who themselves
or propina from the vendee, the agent thereby thereafter will negotiate on the terms and conditions
assumes a position wholly inconsistent with that of of the transaction. Neither would the rule apply if the
being an agent for his principal, who has a right to agent or broker had informed the principal of the gift
treat him, insofar as his commission is concerned, as or bonus or profit he received from the purchaser and
if no agency had existed. The fact that the principal his principal did not object thereto. 11 Herein
may have been benefited by the valuable services of defendant-appellee Gregorio Domingo was not
the said agent does not exculpate the agent who has merely a middleman of the petitioner-appellant
only himself to blame for such a result by reason of Vicente Domingo and the buyer Oscar de Leon. He
his treachery or perfidy. was the broker and agent of said petitioner-appellant
only. And therein petitioner-appellant was not aware
• Art. 1720. Every agent is bound to give an of the gift of One Thousand Pesos (P1,000.00)
account of his transaction and to pay to the principal received by Gregorio Domingo from the prospective
whatever he may have received by virtue of the buyer; much less did he consent to his agent's
agency, even though what he has received is not due accepting such a gift.
to the principal. • 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 72. ALBALADEJO Y CIA v PHILIPPINE REFINING
CO.
transaction, to be valid, must necessarily be with the
FACTS:
consent of the husband Oscar de Leon, who is the
Albaladejo y Cia is a limited partnership, which was
administrator of their conjugal assets including their
engaged in the buying and selling of copra in
house and lot at No. 40 Denver Street, Cubao,
Legaspi, and in the conduct of a general mercantile
Quezon City, which were given as part of and
business. Visayan Refining Co. [PRC’s successor]
constituted the down payment on, the purchase price
was engaged in operating its extensive plant for the
of herein petitioner-appellant's lot No. 883 of Piedad
manufacture of coconut oil. On August 1918,
Estate. Hence, both in law and in fact, it was still
Albaladejo made a contract with the Visayan
Oscar de Leon who was the buyer.
Refining, wherein they agreed that VRC will buy for a
• As a necessary consequence of such breach
period of 1 year all the copra that Albaladejo
of trust, defendant-appellee Gregorio Domingo must
purchased in Albay. It was also agreed upon that
forfeit his right to the commission and must return the
during the continuance of the contract, VRC will not
part of the commission he received from his principal.
appoint any other agent for the purchase of copra in
Legaspi, nor buy copra from any vendor in the same
71. FORTIS v. GUTIERREZ HERMANOS place. In addition, VRC would provide transportation
Facts: for the copra delivered to it by Albaladejo.
· Plaintiff Fortis is an employee of defendant At the end of said year, both parties found
themselves satisfied with the existing arrangement,
Gutierrez Hermanos. The former brought an action to
and they continued by tacit consent to govern their
recover a balance due him as salary for the year 1902.
future relations by the same agreement. On July 9,
He also alleged that he was entitled, as salary, to 5 1920, VRC closed down its factory at Opon and
percent of the net profits of the business of the withdrew from the copra market. After VRC ceased to
defendants for said year. The complaint also buy copra, the copra supplies already purchased by
contained a cause of action for the sum of 600pesos, Albaladejo were gradually shipped out and accepted
money expended by plaintiff for the defendants by the VRC, and in the course of the next 8-10
during the year1903. months, the accounts between the two parties were
· The lower court ruled in favor of the plaintiff. liquidated. The last account rendered by VRC to
The total judgment rendered amounted to P13, Albaladejo showed a balance of P288 in favor of
VRC. Albaladejo addressed a letter to the PRC
025.40, which was reduced to Philippine currency.
(which had now succeeded to the rights and liabilities
· The defendants moved for new trial but were
of VRC), expressing its approval of said account.
denied. They brought the case in the SC thru bill of Albaladejo filed a complaint against PRC, seeking to
exceptions; recover P110k, the alleged amount that Albaladejo
· Gutierrez Hermanos alleged that that the contract spent in maintaining and extending its organization.
made the plaintiff a co-partner of the defendants in Albaladejo alleges that such maintenance and
the business, which they were carrying on. extension was made at the express request of PRC.
Issue: WON the plaintiff is a co-partner of the On the other hand, PRC contends that the contract
defendants in the business between them created the relation of principal and
Ruling: NO. It was a mere contract of employment. agent; therefore, the principal should indemnify the
agent for damages incurring in carrying out the
The plaintiff had neither voice nor vote in the
agency. The lower court ruled in favor of Albaladejo,
management of the affairs of the company. The fact
but granted only 30% of the amount prayed for, in
that the compensation received by him was to be view of the fact that Albaladejo’s transactions in
determined with reference to the profits made by the copra amounted in the past to only about 30% of the
defendants in their business did not in any sense make total business it transacted.
by a partner therein. The articles of partnership CFI: ruled in favor of Albaladejo, but granted only
between the defendants provided that the profits 30% of the amount prayed for.
should be divided among the partners named in a SC: REVERSED. Defendant will be completely
certain proportion. The contract made between the absolved from the complaint.
plaintiff and the then manager of the defendant ISSUE: WON the plaintiff's expense in maintaining
and extending its organization for the purchase of
partnership did not in any way vary or modify this
copra in the period between July, 1920, to July, 1921,
provision of the articles of partnership
were incurred at the instance and request of the
defendant.
RULING: NO. The relation between the parties was
not that of principal and agent in so far as relates to Hence, he sued to collect the balance of P303,606.24
after having received P48,893.76 in advance.
the purchase of copra by Albaladejo. While VRC
made Albaladejo one of its instruments for the De Castros argued that appellee is selfishly asking for
collection of copra, in making its purchases from the more than what he truly deserved as commission to the
producers, Albaladejo was buying upon its own prejudice of other agents who were more instrumental to
account. When Albaladejo turned over the copra to the consummation of the sale and that there were more
VRC, a second sale was effected. or less 18 others who took active efforts.
In the contract, it is declared that during the
The De Castros argued that Artigo’s complaint should
continuance of the agreement, VRC would not
have been dismissed for failure to implead all the co
appoint any other agent for the purchase of copra in owners of the 2 lots. .
Legaspi; and this gives rise indirectly to the inference The De Castros contend that failure to implead such
that Albaladejo was considered its buying agent. indispensable parties is fatal to the complaint since
However, the use of this term in one clause of the Artigo, as agent of all the four co-owners, would be paid
contract cannot dominate the real nature of the with funds co-owned by the four co-owners. It was
shown also that Constante Amor De Castro signed the
agreement as revealed in other clauses, no less than
authorization of Artigo as owner and representative of
in the caption of the agreement itself. This the co-owners.
designation was used for convenience. The title to all
of the copra purchased by Albaladejo remained in it RTC: Ruled infavor of artigo ordering the De Castros
until it was delivered by way of subsequent sale to jointly and solidarily liable to pay Artigo
VRC. CA: Affirmed
Lastly, the letters from VRC to Albaladejo that the
ISSUE: Whether or not the complaint merits dismissal
Court quoted did not indicate anything to the effect
for failure to implead other co-owners as indispensable
that VRC is liable for the such expenses incurred by parties
Albaladejo, as the letters only noted the dire
condition of VRC’s copra business, as well as its HELD:
hopes to enter the market on a more extensive scale ●
[which was unfortunately unrealized]. No. The De Castros’ contentions are devoid of
legal basis.
The CA explained that it is not necessary to
implead the co-owners since the action is
exclusively based on a contract of agency
between Artigo and Constante. The rule on
73. CONSTANTE DE CASTRO v CA
mandatory joinder of indispensable parties is not
applicable to the instant case. Constante signed
Principals: De Castros the note as owner and as representative of the
Agent: Artigo other co-owners. Under this note, a contract of
agency was clearly constituted between
FACTS: Constante and Artigo. Whether Constante
appointed Artigo as agent, in Constante’s
Private respondent Artigo sued petitioners Constante and individual or representative capacity, or both, the
Amor De Castro to collect the unpaid balance of his De Castros cannot seek the dismissal of the case
broker’s commission from the De Castros. for failure to implead the other co-owners as
indispensable parties. The De Castros admit that
The appellants, De Castros, were co-owners of 4 lots in the other co-owners are solidarily liable under
Cubao, Quezon City. The appellee, Artigo, was the contract of agency, citing Article 1915 of the
authorized by appellants to act as real estate broker in Civil Code, which reads:
the sale of these properties for the amount of Art. 1915. If two or more persons have
P23,000,000.00, 5% of which will be given to the agent appointed an agent for a common transaction or
as commission. undertaking, they shall be solidarily liable to the
agent for all the consequences of the agency.
Appellee(Aritgo) first found the Times Transit The solidary liability of the four co-owners,
Corporation and 2 lots were sold. In return, he received however, militates against the De Castros theory
P48,893.76 as commission. Appellee apparently felt that the other co-owners should be impleaded as
short changed because according to him, his total indispensable parties. A noted commentator
commission should be P352,500.00 which is 5% of the explained Article 1915 thus
agreed price of P7,050,000.00 paid by Times Transit The rule in this article applies even when the
Corporation to appellants for the 2 lots and that it was appointments were made by the principals in
he who introduced the buyer to appellants and separate acts, provided that they are for the
unceasingly facilitated the negotiation which ultimately same transaction. The solidarity arises from the
led to the consummation of the sale. common interest of the principals, and not from
the act of constituting the agency. By virtue of
 this solidarity, the agent can recover from any the contract and to return to him what he paid plus
principal the whole compensation and indemnity damages.
owing to him by the others. The parties,
however, may, by express agreement, negate Issue: Whether or not Gonzales was free of the
this solidary responsibility. The solidarity does liabilities that her husband incurred from the
not disappear by the mere partition effected by misrepresentations in the sale of the land?
the principals after the accomplishment of the
agency. Held: No, Gonzalez shall be liable with the
If the undertaking is one in which several are misrepresentations made by her husband.
interested, but only some create the agency,
only the latter are solidarily liable, without Under the NCC:
prejudice to the effects of negotiorum gestio with Art. 1910. The principal must comply with all the
respect to the others. And if the power granted obligations which the agent may have contracted within
includes various transactions some of which are the scope of his authority.
common and others are not, only those As for any obligation wherein the agent has exceeded his
interested in each transaction shall be liable for power, the principal is not bound except when he ratifies
it. it expressly or tacitly.
When the law expressly provides for solidarity of
the obligation, as in the liability of co-principals Art. 1911. Even when the agent has exceeded his
in a contract of agency, each obligor may be authority, the principal is solidarily liable with the agent
compelled to pay the entire obligation. The agent if the former allowed the latter to act as though he had
may recover the whole compensation from any full powers.
one of the co-principals, as in this case.
Art. 1900. So far as third persons are concerned, an act
is deemed to have been performed within the scope of
VIII. OBLIGATIONS OF PRINCIPALS TO the agent's authority, if such act is within the terms of
THIRD PARTIES the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to
74. GONZALEZ v HABERES an understanding between the principal and the agent.

Facts: A tract of land was acquired by Guadalupe As to the plaintiff’s contention that Gonzales cannot be
Gonzalez. Her husband, Luis Gomez, acting as her agent, charged by her husband’s misrepresentation, it is
entered into a contract of sale with E.J. Haberes. Gomez, sufficient to say that the latter in negotiating for the sale
as written in the contract, granted his wife a "marital of the land acted as an agent and representative of his
license" to execute a deed of sale and other necessary wife; having accepted the benefit of the representations
documents in order that the full ownership over the of her agent, she cannot, of course, escape liability for
aforesaid land will be transferred to E.J. Haberes, the them. The latter cannot accept such benefits and at the
buyer. However, the application for the registration of same time deny the responsibility for them.
the said land was still pending at that time in the CFI.
Habares paid P30,000 as a downpayment, and agreed to
pay the unpaid balance within six (6) months. Conditions
were set in their contract; that Haberes shall have the 75. TUAZON v OROSCO
right to take possession of the aforesaid land and all its
improvements, and to pay for the expenses for the Principal: Juan de Vargas
registration, and it was also agreed that in case the court Agent: Enrique Grupe
shall hold in the application filed by Gonzalez that: FACTS: Juan de Vargas y Amaya, the defendant's
- she is not the owner of the land, she bind herself to husband, executed a power of attorney to Enrique
return the amount paid to her without interest; or Grupe, authorizing him, among other things, to dispose
- she is adjudicated a part of the aforesaid land, she bind of all his property, and particularly of a certain house
herself to sell said portion adjudicated to her to Haberes and lot known as No. 24 Calle Nueva, Malate, in the city
and to return all the amounts received in excess of the of Manila, for the price at which it was actually sold. He
price. was also authorized to mortgage the house for the
purpose of securing the payment of any amount
However, when Haberes found out that the land was in advanced to his wife, Dolores Orozco de Rivero, who,
the adverse possession of many others, he stopped inasmuch as the property had been acquired with funds
paying for the remaining balance. Thus, Gonzalez filed belonging to the conjugal partnership, was a necessary
an action against Haberes to recover the remaining party to its sale or incumbrance.
balance plus damages. Haberes filed a counterclaim. Grupe and Orozco obtained a loan from the plaintiff
One of Haberes' allegations was that at the time of secured by a mortgage on the property referred to in the
entering into the contract the plaintiffs through false power of attorney. In the caption of the instrument
representations lead him to believe that they were in evidencing the debt it is stated that Grupe and Orozco
possession of the land and that the title to the greater appeared as the parties of the first part and Gonzalo
portion thereof was not in dispute, and that the plaintiffs Tuason, the plaintiff, as the party of the second part.
have made no efforts to prosecute the proceedings for Grupe acted for himself and also in behalf of Juan Vargas
the registration of the land. He asks for the rescission of by virtue of the power granted him by the latter, and
Orozco appeared merely for the purpose of complying and in behalf of the principal. In such a case the
with the requirement contained in the power of attorney. liability expressly incurred by the agent does not
This instrument was duly recorded in the Registry of preclude the personal liability of the principal but
Property, and it appears therefrom that Enrique Grupe, constitutes further security in favour of the creditor.
as attorney in fact for Vargas, received from the plaintiff The individual liability of the agent constitutes in the
a loan of 2,200 pesos and delivered the same to the present case a further security in favor of the creditor
defendant; that to secure its payment he mortgaged the and does not affect or preclude the liability of the
property of his principal with defendant's consent as principal. In the present case the latter's liability was
required in the power of attorney. He also received further guaranteed by a mortgage upon his property.
1,300 pesos. This amount he borrowed for his own use. The law does not provide that the agent can not bind
In the instrument, Grupe bound himself liable for the himself personally to the fulfillment of an obligation
whole amount of 3,500 and pledged his 13 shares of incurred by him in the name and on behalf of his
stock in the "Compañía de los Tranvías de Filipinas" as principal. On the contrary, it provides that such act on
security, and mortgaged the property of Vargas to the part of an agent would be valid.
secure the 2,200 loan.
The defendant denies having received this sum. (3) Yes. Where a debt is secured by a mortgage
Contention of the defendant: upon property belonging to the principal, duly
(1)The appellant claims that the instrument is evidence recorded in the Registry of Property, the creditor
of a debt personally incurred by Enrique Grupe for his may bring his action directly against the mortgaged
own benefit, and not incurred for the benefit of his property notwithstanding the liability incurred by
principal, Vargas, as alleged in the complaint. himself. A mortgage directly subjects the
(2) Enrique Grupe pledged to the plaintiff thirteen shares encumbered property, whoever its possessor may
of stock in the "Compañia de los Tranvías de Filipinas" to be, to the fulfilment of the obligation for the security
secure the payment of the entire debt, and contends of which it was created.
that it must be shown what has become of these shares,
the value of which might be amply sufficient to pay the
debt, before proceeding to foreclose the mortgage. 76. STA ROMANA v IMPERIO, et al
(3) in order to render judgment against the mortgaged
property it would be necessary that the minor children of Diosdado Sta. Romana, appellant
Juan de Vargas be made parties defendant in this action, Carlos Imperio, appellee
they having an interest in the property. Silvio R. Viola, the Principal
Dr. Jose R. Viola, the Agent
“Court Below” (CFI? assumed decision) decided in favour
of Tuason and held Orozco personally liable to the loan. FACTS:
Issues: On January 6, 1946, Silvio R. Viola, the Principal,
(1) WON Vargas, as principal, is liable to the loan executed in favor of his brother, Dr. Jose R. Viola, the
obtained by Grupe. Agent, a power of attorney, vesting in the latter the
(2) WON Vargas is relieved from obligation when authority to take charge of, manage and administer
Grupe bound himself personally to the payment of seven (7) parcels of registered land situated in the
debt. municipality of San Miguel, Province of Bulacan, to be
(3) WON the judgment may be rendered against the converted into a "subdivision" for residential purposes,
property of the now deceased principal. until all of the subdivision lots therein shall have been
HELD: sold. It would seem that some of these parcels of land,
one of which was known as Lot No. 622 of the Cadastral
(1) Yes. Under the provision of article 1727 of the Survey of San Miguel, Bulacan, were covered by Transfer
Civil Code the principal directly liable to the creditor Certificates of Title Nos. 19556 and 19559 of said
for the payment of a debt incurred by his agent province.
acting within the scope of his authority.
The judgment of the court below should be modified in On April 26, 1946, the Principal asked CFI Bulacan to
so far as it holds the defendant personally liable for the order the issuance of a second owner's duplicate of TCT
payment of the debt. No. 19556, upon the ground that his duplicate thereof
The agreement, so far as that amount is concerned, was had been lost. CFI granted motion.
signed by Grupe as attorney in fact for Vargas. Pursuant
to instructions contained in the power of attorney the
Meanwhile, or on June 18, 1946, the agent had
money was delivered to Varga's wife, the defendant in
executed, in favor of Pablo Ignacio, a deed in to sell on
this case. To secure the payment of the debt, Varga's
installments 6 lots covered by said TCT No. 19556, with
property was mortgaged. His wife took part in the
an aggregate area of 3,804 square meters. This
execution of the mortgage as required in the power of
instrument and the Agent's aforementioned power of
attorney. A debt thus incurred by the agent is binding
attorney were filed with the office of the register of
directly upon the principal, provided the former acted, as
deeds and annotated on said TCT No. 19556 on July 2,
in the present case, within the scope of his authority
1946.

(2) No. Irrespective of such liability on the part of

Notwithstanding, 4 months later, the Principal sold a
the principal, the agent may bind himself personally
land of about 30 hectares, including said Lot No. 622, to
to the payment of the debt incurred for the benefit
Diosdado Sta. Romana. A week later, Sta. Romana
conveyed said land to the Carlos Imperio, by virtue of a
deed which was filed with the office of the register of
deeds on November 4, 1946. TCT No. 19556 was
cancelled and, in lieu thereof, TCT No. 28946 was issued
in Imperio's name. About one month later, Imperio sold
portions of said lot No. 622 to 4 sets of occupants.

Having failed to take possession of the land sold to him

by the Agent, on April 22, 1947, Pablo Ignacio
commenced this action in the CFI Bulacan, against said
occupants, as well as against appellee, appellant, and
the Principal, to annul the sales made.

Appellees and the occupants allege that they acted in

good faith and for value in purchasing said land from
appellant, in whose name the title to said land was free
from any lien or encumbrance in favor of Ignacio; that
the sale in favor of Ignacio was fraudulent; and that
Ignacio knew that said occupants were in possession of
said portions, and had a right of pre-emption thereto.

CFI Bulacan: declared that Ignacio is the owner in fee

simple of the lots in question directing appellee to
execute the corresponding deed of final sale thereof to
Ignacio
CA: CA affirmed CFI that Ignacio is the owner;
sentenced Sta. Romana to reimburse to Imperio, the
sum of P8,463
ISSUE: Whether or not the Principal is bound by the act
of his agent in selling lots in question to Ignacio

RULING: Yes. it is an elementary principle of law

(Articles 1495, 1547 and 1555, Civil Code of the
Philippines), as well as of justice and equity that, unless
a contrary intention appears, the vendor warrants his
title to the thing sold, and that, in the event of eviction,
the vendee shall be entitled to the return of the value
which the thing sold has at the time of the eviction, be it
greater or less than the price of the sale. In the case at
bar, it has been established that the land in dispute was,
at the time of the eviction, worth at least the sum of
P8,463, which is the aggregate amount charged by the
appellee from said occupants.
Appellant cites Article 1412 of the Civil Code of the
Philippines, in support of the view that appellee may not
recover said amount from appellant, upon the ground
that both are in pari delicto. This provision is part of Title
II of Book IV of the Civil Code, on contracts in general,
and it refers to contracts which are null and void ab
initio, pursuant to Article 1409 of the Civil Code. The
contract between appellant and appellee does not fall,
however, under this provision, and is, accordingly,
beyond the purview of the aforementioned Article 1412.
Said contract is governed by Title VI of the same Book,
on Sales in particular, specially by the aforesaid Articles
1495, 1547 and 1555, which are part of said Title VI,
regarding breach of the warranty arising from a valid
contract of sale, due to the application of Art. 1544 of
the same title, regulating the effects of double sales.
Incidentally, these provisions suggest, also, the remedies
available to appellant herein.
WHEREFORE, the amended decision appealed from is
hereby affirmed, with costs against the appellant.