AGENCY, TRUST and PARTNERHIP
1.) PURPOSE OF AGENCY
The purpose of agency is to extend the personality of the
principal. It enables the activity of man which is naturally
limited in its exercise by the impositions of his physiological
conditions to be legally extended by permitting him to be
constructively present in many different places and to
perform diverse juridical acts and carry on many different
activities through another when physical presence is
impossible or inadvisable at the same time.
With the expansion of commercial transactions and the
consequent increase in business organization conducted
mainly through the combined effort of individuals acting in a
representative capacity, the subject of agency has grown in
importance.
In a contract of agency, a person binds himself to render
some service or to do something in representation or on
behalf of another with the latters consent. The underlying
principle of the contract of agency is to accomplish results by
using the services of others to do a great variety of things
like selling, buying, manufacturing, and transporting. Its
purpose is to extend the personality of the principal or
the party for whom another acts and from whom he or
she derives the authority to act. It is said that the basis
of agency is representation, that is, the agent acts for
and on behalf of the principal on matters within the
scope of his authority and said acts have the same legal
effect as if they were personally executed by the
principal. By this legal fiction, the actual or real absence of
the principal is converted into his legal or juridical presence
qui facit per alium facit per se.
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1. ORIENT AIR SERVICE and HOTEL
REPRESENTATIVES vs. COURT OF APPEALS (197
SCRA 645)
FACTS: American Airlines, inc, an air carrier offering passenger and air
cargo transportation in the Phils, and Orient Air Services and Hotel
Representatives entered into a General Sales Agency Agreement whereby
the former authorized the latter to act as its exclusive general sales agent
within the Phils for the sale of air passenger transportation. Some of the
pertinent provisions are:
Orient Air Services shall perform these services:
a. solicit and promote passenger traffic for the services of American and if
necessary, employ staff competent and sufficient to do so
b. provide and maintain a suitable area in its place of business to be used
exclusively for the transaction of the business of American
c. arrange for distribution of Americans timetables, tariffs and promotional
material to sales agents and the general public in the assigned territory
d. service and supervise sales agents in the assigned territory including if
required by American the control of remittances and commissions retained
e. hold out a passenger reservation facility to sales agents and general public
in the assigned territory
Alleging that Orient Air had reneged on its obligations under the
Agreement by failing to remit the net proceeds of sale in the amount of US $
254,400, American Air by itself undertook the collection of the proceeds of
tickets sold originally by Orient Air and terminated forthwith the Agreement
American Air instituted suit against Orient Air for Accounting with
Preliminary Attachment or Garnishment, Mandatory Injunction and
Restraining Order averring the basis for the termination of the Agreement as
well as Orient Airs previous record of failures to promptly settle past
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AGENCY, TRUST and PARTNERHIP
outstanding refunds of which there were available funds in the possession of
the Orient Air to the damage and prejudice of American Air
Trial Court ruled in favor of Orient Air to which the Intermediate
Appellate Court (now CA) affirmed Trial Courts decision with modifications
with respect to monetary awards granted.
ISSUE: 1. Whether or not Orient Air is entitled to the 3% overriding
commission
2. Whether or not American Air should reinstate Orient air as its
General Sales Agent (related to the subject)
RULING: 1.) Yes, Orient Air is entitled to 3% overriding commission.
It is a well settled principle that in the interpretation of a contract, the
entirety thereof must be taken into consideration to ascertain the meaning of
its provisions. The various stipulations in the contract must be read together
to give effect to all
The Agreement, when interpreted in accordance with the foregoing
principles, entitles Orient Air to the 3% overriding commission based on total
revenue or as referred to by the parties, total flown revenues.
As the designated General Sales Agent of American Air, Orient Air
was responsible for the promotion and marketing of American Airs services
for air passenger transportation and the solicitation of sales therefore. In
return for such efforts and services, Orient Air was to be paid commissions of
2 kinds: first, a sales agency commission, ranging from 7 to 8% of tariff fares
and charges from sales by Orient Air when made on American Air ticket
stock; and second, an overriding commission of 3% of tariff fares and
charges for all sales of passenger transportation over American Air services.
The second type of commissions would accrue for sales of American
Air services made not on its ticket stock but on the ticket stock of other air
carriers sold by such carriers or other authorized ticketing facilities or travel
agents.
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In addition, it is clear from the records that American Air was the
party responsible for the preparation of the Agreement. Consequently, any
ambiguity in this contract of adhesion is to be taken contra proferentem
construed against the party who cause the ambiguity and could have avoided
it by the exercise of a little more care.
2.) It is believed, however, that respondent appellate court erred in
affirming the rest of the decision of the trial court, particularly to the lower
court's decision ordering American Air to "reinstate defendant as its general
sales agent for passenger transportation in the Philippines in accordance
with said GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court,
in effect, compels American Air to extend its personality to Orient Air. Such
would be violative of the principles and essence of agency, defined by
law as a contract whereby "a person binds himself to render some
service or to do something in representation or on behalf of another,
WITH THE CONSENT OR AUTHORITY OF THE LATTER . (emphasis
supplied) In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. In so doing, the
agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only
be effected with the consent of the principal, which must not, in any
way, be compelled by law or by any court. The Agreement itself between
the parties states that "either party may terminate the Agreement without
cause by giving the other 30 days' notice by letter, telegram or cable."
(emphasis supplied) The Court, therefore, set aside the portion of the ruling
of the respondent appellate court reinstating Orient Air as general sales
agent of American Air.
***The Court held that the purpose of every contract of agency is the
ability, by legal fiction, to extend the personality of the principal through the
facility of the agent; but that the same can only be effected with the consent
of the principal.
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2. Eurotech vs Cuizon (521 SCRA 584) Ruling: No, since EDWIN did not act in excess of the authority granted by
his principal. The powers of an agent are particularly broad in the case of one
Facts: Petitioner sold to Impact Systems, a sole proprietorship owned by acting as a general agent or manager; such a position presupposes a degree
ERWIN Cuizon, various products allegedly amounting to (P91,338.00). of confidence reposed and investiture with liberal powers for the exercise of
Subsequently, respondents sought to buy from petitioner one unit of sludge judgment and discretion in transactions and concerns which are incidental or
pump valued at P250,000.00 with respondents making a down payment of appurtenant to the business entrusted to his care and management. In the
fifty thousand pesos (P50,000.00). When the sludge pump arrived from the absence of an agreement to the contrary, a managing agent may enter into
United Kingdom, petitioner refused to deliver the same to respondents any contracts that he deems reasonably necessary or requisite for the
without their having fully settled their indebtedness to petitioner. Because of protection of the interests of his principal entrusted to his management.
this, respondent EDWIN, brother of ERWIN Cuizon, and Alberto de Jesus,
There is, therefore, no doubt in our mind that respondent EDWINs
general manager of petitioner, executed a Deed of Assignment of receivables
participation in the Deed of Assignment was "reasonably necessary" to
in favor of petitioner from Toledo Power Corp. in the amount of P365,000.00.
protect the business of his principal since it can be easily assumed that the
Thereafter, the sludge pump was delivered. But allegedly, despite the
company desperately needed the sludge pump. Had he not acted in the way
existence of the Deed of Assignment, respondent still proceeded to collect
he did, the business of his principal would have been adversely affected and
from Toledo Power Company the amount of P365k. Alarmed, petitioner made
he would have violated his fiduciary relation with his principal.
several demands to the respondent and after the final demand letter,
petitioner instituted a complaint for sum of money and damages against As we declare that respondent EDWIN acted within his authority as an agent,
herein respondents. who did not acquire any right nor incur any liability arising from the Deed of
Assignment, it follows that he is not a real party in interest who should be
By way of special and affirmative defenses, respondent EDWIN alleged that
impleaded in this case. A real party in interest is one who "stands to be
he is not a real party in interest in this case. According to him, he was acting
benefited or injured by the judgment in the suit, or the party entitled to the
as mere agent of his principal, which was the Impact Systems, in his
avails of the suit. In this respect, we sustain his exclusion as a defendant in
transaction with petitioner and the latter was very much aware of this fact.
the suit before the court a quo.
The trial court rendered a decision directing the defendant EDWIN B. Cuizon
be dropped as party defendant to which the Court of Appeals affirmed.
Petitioner now contends that the Court of Appeals failed to appreciate the
effect of ERWINs act of collecting the receivables from the Toledo Power
Corporation notwithstanding the existence of the Deed of Assignment signed
by EDWIN on behalf of Impact Systems. While said collection did not revoke
the agency relations of respondents, petitioner insists that ERWINs action
repudiated EDWINs power to sign the Deed of Assignment. As EDWIN did
not sufficiently notify it of the extent of his powers as an agent, petitioner
claims that he should be made personally liable for the obligations of his
principal.

Issue: Whether or not EDWIN B. Cuizon should be made liable as a party

defendant?
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AGENCY, TRUST and PARTNERHIP
3. Doles vs. Angeles (492 SCRA 407)
FACTS: The respondent filed a complaint for specific performance with
damages against the petitioner. Respondent alleged that petitioner was
indebted to her as a personal loan amounting to P405, 530.00 representing
the principal amount and interest.
Petitioner denied that she borrowed money from the respondent and averred
that she referred her friends to respondent whom she knew to be engaged in
the business of lending money, in exchange for personal checks through her
capitalist, Arsenio Pua. She alleged that her friends borrowed money from
the respondent and issued personal checks but the checks bounced for
insufficiency of funds. Despite her efforts to assist respondent, she could no
longer locate them; that she was forced to issue eight checks amounting to
P350, 000 to answer for the bounced checks of the borrowers she referred;
that prior to the issuance of the checks she informed the respondent that
they were not sufficiently funded but the latter nonetheless deposited the
checks but they were subsequently dishonored. She was forced by
respondent to execute an Absolute Deed of Sale over her property in Bacoor,
Cavite to avoid criminal prosecution.
ISSUE: 1)Whether or not the petitioner can be considered as debtor of the
respondent.
2)Whether or not an agent who was not authorized by the principal
to collect debt on his behalf could directly collect from the debtor.
HELD: Both no. Petitioner knew that the financier of respondent is Pua; and
respondent knew that the borrowers are friends of petitioner. The Court has
affirmed that, under 1868 of the Civil Code, the basis of agency is
representation. In the case at bar, both petitioner and respondent have
undeniably disclosed to each other that they are representing someone else,
so both of them are estopped to deny the same. It is sufficient that petitioner
disclosed to respondent that the former was acting in behalf of her principal,
her friends whom she referred to respondents. For an agency to arise, it is
not necessary that the principal personally encounter the third person with
whom the agent interacts. The principal need not personally know or meet
1ST DIGEST 8/25/16
the third persons. Precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent. And since
petitioner, being an agent was not authorized by the principal to collect debt
in his behalf, and respondent was acting only as an agent with regards to the
debtors, the sale of the respondents property having been predicated on the
loan is void for lack of consideration.
2.) What is the nature of agency?
The word agency when used in its broadest meaning is both a contract
and a representative relation.
Since it is a contract, it is essential that the minds of the parties should meet
in making it. Like other contracts, the following requisites must concur:
a. consent of the contracting parties
b. object which is the subject matter of the contract; and
c. cause which is established.
The principal must intend that the agent shall act for him, the agent must
intend to accept the authority and act on it, and the intention of the parties
must find expression either in words or conduct betwwen them.
Although the agency is usually a contractual one, either expressed or
implied, based upon a consideration, this is not necessarily so; that is, the
relationship may be created by operation of law, or a person who acts for
another as principal may do so gratuitously.
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AGENCY, TRUST and PARTNERHIP
4. RALLOS VS FELIX GO CHAN& SONS REALTY
(81 SCRA251)
FACTS:
Concepcion and Gerundia both surnamed Rallos were sisters and registered
co-owners of a parcel of land known as lot no. 5983 of Cadastral Survey of
Cebu covered by TCT No. 11116 of Registry of Cebu.On April 21, 1954 the
sisters executed a special power of attorney in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their behalf Lot no. 5983. On March
3, 1955, Concepcion Rallos died.
In September 12, 1955 Simeon Rallos sold the undivided shares of his
sisters in Lot no. 5983 to Felix Go Chan & Sons Realty Corporation for the
sum of P 10,686.90.The deed of sale was registered in the Registry of Deeds
of Cebu and TCT No. 11116 was cancelled and a new TCT no. 12989 was
issued in favour of the Vendee.
In May 18, 1956, Ramon Rallos as administrator of Intestate Estate of
Concepcion Rallos filed a complaint praying that:
Sale of the undivided share of the deceased Concepcion in Lot no. 5983 be
unenforceable, and said share be reconveyed to her estate.
Certificate of Title issued in the name of Felix Go Chan & Sons Realty
Corporation be cancelled and another Title be issued in the names of the
Corporation and the Intestate estate of Concepcion Rallos in equal undivided
shares
Plaintiff be indemnified by way of attorneys fees and payment of cost of suit.
Named party defendants were Felix Go Chan Realty Corp, Simeon Rallos,
and the Register of Deeds of Cebu, but subsequently , the latter was
dropped from the complaint.
While the case was pending in the trial court, both Simeon and Gerundia
died and they were substituted by the respective administrators of their
estates.
TRIAL COURTS RULING: ( Later affirmed by SC)
CFI:
1ST DIGEST 8/25/16
[Plaintiffs Complaint]
Sale of land was null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate
of Concepcion in the proportion of share each pro-indiviso and the
payment of attorneys fees and cost of litigation[Respondent filed cross claim
against Simon Rallos
Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered
to paydefendant the price of the share of the land (P5,343.45) plus
attorneys fees[Borromeo filed a third party complaint against Josefina
Rallos, special administratrix of theEstate of Gerundia]
Dismissed without prejudice to filing either a complaint against the
regularadministrator of the Estate of Gerundia Rallos or a claim in the
Intestate-Estate of Cerundia Rallos, covering the same subject-matter
CA:
CFI Decision reversed, upheld the sale of Concepcions share.
MR: denied.
Issues:
WON sale was valid although it was executed after the death of the
principal,Concepcion.
WON sale fell within the exception to the general rule that death extinguishes
the authority of the agent
WON agents knowledge of the principals death is a material factor.
WON petitioner must suffer the consequence of failing to annotate a notice
of death in the title (thus there was good faith on the part of the Respondent
vendee)
Held/Ratio:
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AGENCY, TRUST and PARTNERHIP
(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art 13171 and
14032)- one party, caged the principal (mandante), authorizes another, called
the agent (mandatario), to act for and in his behalf in transactions with third
persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal
Essential Elements:
there is consent, express or implied of the parties to establish the
relationship;
the object is the execution of a juridical act in relation to a third person;
the agents acts as a representative and not for himself, and
the agent acts within the scope of his authority.
Extinguishment
Generally: among others3, By the death, civil interdiction, insanity or
insolvency of the principal or of the agent
- death of the principal effects instantaneous and absolute revocation of the
authority of the agent
Exceptions:
(Art. 1930) if it has been constituted in the common interest of the latter and
of the agent, or in the interest of a third person who has accepted the
stipulation in his favor.
(Art. 1931) agent acted without knowledge of the pricipals death and that the
third person was in good faith (both these reqs should be present)
IN THE CASE AT BAR:
1) Sale was void.
1
2
3
1ST DIGEST 8/25/16
No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent
him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon Concolacions
death
2) The sale did not fall under the exceptions to the general rule that
death ipso jure extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not
coupled with interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his
pleadings) of principal Concepcions death
For Art 1931 to apply, both requirements must be
present
3) Yes, agents knowledge of principals death is material.
Respondent asserts that: there is no provision in the Code which provides
that whatever is done by an agent having knowledge of the death of his
principal is void even with respect to third persons who may have contracted
with him in good faith and without knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general
rule enunciated in Article 1919 that the death of the principal extinguishes the
agency. Article 1931, being an exception to the general rule, is to be strictly
construed.
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4) NO, the Civil Code does not impose a duty upon the heirs to notify
the agent or others of the death of the principal.

If revocation was by the act of the principal: a general power

which does not specify the persons to whom represents' on
should be made, it is the general opinion that all acts, executed
with third persons who contracted in good faith, Without
knowledge of the revocation, are valid.

BUT, if revocation was due to death of the principal:

extinguishment, by operation of law, is instantaneous without the
need for notification to the parties concerned.

5) No.

Laws on agency, the terms of which are clear and unmistakable

leaving no room for an interpretation contrary to its tenor, should
apply, the law provides that death of the principal ipso jure
extinguishes the authority of the agent to sell rendering the sale
to a third person in good faith unenforceable unless at the agent
had no knowledge of the principals death at that time (exception
under Art. 1931)

Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and
void.

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AGENCY, TRUST and PARTNERHIP
5. LOADMASTERS CUSTOMS SERVICES INC., vs.
GLODEL BROKERAGE CORPORATION ( 639 SCRA
69)
FACTS
R&B Insurance issued a marine policy in favor of Columbia to insure
the shipment of 132 bundles of electric copper cathodes against all
risks.
When the cargoes arrived at pier 10, North Harbor, Manila, Columbia
engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and its subsequent delivery to its
warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of
its delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded into 12 trucks owned by Loadmasters and
driven by its employed drivers. 6 of which were to be delivered to
Bulacan and the other 6 to Valenzuela. En route, one of the trucks
headed to bulacan failed to deliver its cargo. Later on, the truck was
recovered but without the cargo.
Columbia filed with R&B Insurance a claim for insurance indemnity
which the latter paid. After which, R&B Insurance filed a claim for
damages against both Glodel and Loadmasters before the RTC.
RTC held Glodel liable for damages and dismissed Loadmasters
counterclaim.
On appeal, CA held that Loadmasters is liable to Glodel as it is an
agent of the latter.
Loadmasters hence filed a petition for review on certiorari before the
SC
1ST DIGEST 8/25/16
ISSUE
Whether Loadmasters can be considered as an agent of Glodel.
HELD
No. Loadmasters is not an agent of Glodel.
Article 1868 of the Civil Code provides that: "By the contract of
agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent
or authority of the latter."
Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation. It is a settled rule that the
basis for agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were personally
executed by the principal. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from
his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it.
3.) Explain the concept of representation.
Article 1868, Civil Code: By the contract of agency a person binds himself
to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter.
The basis of agency is representation. On the part of the principal, there
must be an actual intention to appoint or an intention naturally inferable from
his words or actions; and on the part of the agent, there must be an intention
to accept the appointment and act on it, and in the absence of such intent,
there is generally no agency. (Victorias Milling Co., Inc. vs. Court of Appeals)
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AGENCY, TRUST and PARTNERHIP
4.) Explain the control factor in agency
A Prinipal-Agent relationship to exist, the following should be present:
(i) Assent. Assent means an informal agreement between the principal, who
has capacity, and the agent.
(ii) Benefit. The agent's conduct must be for the principal's benefit.
(iii) Control. The principal must have the right to control the agent by having
the power to supervise the manner of its performance.
Consideration is not necessary for the creation of an agency relationship
and, absent an express statutory provision to the contrary, neither is a
writing.
Any person may be an agent, even a minor or a person with minimal mental
competency.
A person is not required to have contractual capacity to act as an agent.
5.) What are the elements of agency?
The elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his
authority.
6. RALLOS VS. FELIX GO CHAN & SONS REALTY
CORP
( 81 SCRA 251)
FACTS: Concepcion and Gerundia Rallos were sisters and registered co-
owners of a parcel of land known as Lot No. 5983. In 1954, they executed a
special power of attorney in favor of their brother, Simeon Rallos, authorizing
1ST DIGEST 8/25/16
him to sell for and in their behalf the aforementioned parcel of land. On
March 1955, Concepcion Rallos died. On September 1955, Simeon Rallos
sold the undivided shares of his sisters in lot 5983 to Felix Go Chan and
Sons Realty Corporation. The deed of sale was registered and the previous
TCT was cancelled.
On May 1956, Ramos Rallos, as administrator of the Intestate Estate of
Concepcion Rallos, filed a complaint with the CFI of Cebu, praying (1) that
the sale of the undivided share of the deceased Concepcion Rallos be
declared unenforceable, and said share be reconveyed to her estate; (2) that
the TCT issued in the name of Felix Go Chan and Sons Realty Corporation
be cancelled; and (3) that the plaintiff be indemnified by way of attorneys
fees and payment of costs of suit.
The trial court rendered judgment declaring the deed of sale null and void,
insofar as the one-half pro-indiviso share of Concepcion Rallos in the
property in question, and sentencing Juan
Borromeo, the administrator of the estate of Simeon Rallos, to pay Felix Go
Chan and Sons Realty Corporation the sum representing the price of one-
half of the lot. The appellate court reversed the decision and sustained the
sale.
ISSUE: Whether or not the sale of the agent of the principals property after
the latters death is valid
HELD: NO. The general rule in Article 1919 of the NCC is that death is one
of the causes for the extinguishment of agency. There being an integration of
the personality of the principal into that of the agent, it is not possible for the
representation to continue once the death of either is established. There are
certain exceptions, however, Article 1931 being one of them. Under this
provision, an act done by the agent after the death of the principal is valid
and effective if two conditions concur: (1) the agent acted without knowledge
of the death of the principal; and (2) that the third person who contracted with
the agent acted in good faith. But because it was established that Simeon
Rallos had knowledge of the death of his principal when he made the sale,
Article 1931 will not apply. The general rule shall apply then that any act of an
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AGENCY, TRUST and PARTNERHIP
agent after the death of his principal is void ab initio. Simeon Rallos actof
selling the share of Concepcion after her death is therefore null and void.
AGENCY: The relationship of agency is whereby one party, called the
principal (mandante), authorizes another, called the agent (mandatario), to
act for and in his behalf in transactions with third persons. The essential
elements of agency are: (1) there is consent, express or implied of the
parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agents acts as a
representative and not for himself, and (4) the agent acts within the scope of
his authority. Agency is basically personal representative, and derivative in
nature. The authority of the agent to act emanates from the powers granted
to him by his principal; his act is the act of the principal if done within the
scope of the authority. Qui facit per alium facit se. "He who acts through
another acts himself".
7. BORDADOR VS LUZ
(283 SCRA 374)
FACTS: The petitioners question the decision of the trial court which was
affirmed by the Court of Appeals concerning the acquittal of the respondent
spouses on the ground that Deganos, Brigida Luz brother, is not an agent of
the respondent spouses.
Petitioners are in the business of purchase and sale of jewelry and
respondent Brigida D. Luz, also known as Aida D. Luz, was their regular
customer. On several occasions during the period from April 27, 1987 to
September 4, 1987, respondent Deganos, received several pieces of gold
and jewelry from petitioners amounting to P382,816.00. These items and
their prices were indicated in seventeen receipts covering the same. Eleven
of the receipts stated that they were received for a certain Evelyn Aquino, a
niece of Deganos, and the remaining six indicated that they were received for
Brigida D. Luz.
Only fifty three thousand pesos was remitted by Deganos and for the
insufficiency, the petitioners seek the help of the Barangay. The agreement in
the barangay was in vain which resulted to the institution of the present civil
1ST DIGEST 8/25/16
case in question. The spouses was made respondents to the civil case
because Deganos is there agent as alleged by the petitioners.
ISSUE: WON respondent spouses are liable to petitioners claim despite the
fact that the evidence does not show that they signed any of the subject
receipts or authorized Deganos to receive the items of jewelry on their
behalf.
HELD: No, respondent spouses are NOT liable to petitioners. The basis for
agency is representation. Here, there is no showing that Brigida consented to
the acts of Deganos or authorized him to act on her behalf, much less with
respect to the particular transactions involved. Petitioners attempt to foist
liability on respondent spouses through the supposed agency relation with
Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to
Deganos, not once or twice but on at least six occasions as evidenced by six
receipts, several pieces of jewelry of substantial value without requiring a
written authorization from his alleged principal. A person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the
agent.
The records show that neither an express nor an implied agency was proven
to have existed between Deganos and Brigida D. Luz. Evidently, petitioners,
who were negligent in their transactions with Deganos, cannot seek relief
from the effects of their negligence by conjuring a supposed agency relation
between the two respondents where no evidence supports such claim.
REFER TO:
NCC, Art. 1868: By the contract of agency a person binds himself to render
some service or to do something in representation or on behalf of another,
with the consent or authority of the latter.
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AGENCY, TRUST and PARTNERHIP
9. Sps. Viloria vs. Constinental Airlines
(G.R. No. 188288 Jan. 16, 2012)
Facts: Spouses Viloria purchased two round tickets, from California to New
Jersey on board Continental Airlines, from Holiday Travel through the latters
travel agent Margaret Mager. The spouses agreed to buy the said tickets
after Mager informed them that there were no available seats at AMTRAK.
However, the spouses learned that the train trip (AMTRAK) wasnt fully
booked and so they request for a refund for the plane tickets. The spouses
filed their request with the CAIs office alleging that they were misled by
Mager into buying the plane tickets. CAI refused to refund the said tickets
and so the spouses filed a case against CAI. The RTC ruled in favor of the
spouses but the CA reversed the ruling stating that CAI cannot be held liable
for Magers act in the absence of any proof that a principal-agent relationship
existed between CAI and Holiday Travel.
Issue: WON a principal-agent relationship exists between CAI and Holiday
Travel.
Held: Yes. In Rallos vs. Felix Go Chan & Sons Realty Corporation the Court
explained the nature of an agency and spelled out the essential elements
thereof: Out of the above given principles, sprung the creation and
acceptance of the relationship of agency whereby one party, called the
principal, authorizes another, called the agent, to act for and in his behalf in
transactions with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation
to a third person; (3) the agent acts as a representative and not for
himself, and (4) the agent acts within the scope of his authority. Agency
is basically personal, representative, and derivative in nature. The authority
of the agent to act emanates from the powers granted to him by his principal;
his act is the act of the principal if done within the scope of the authority. Qui
facit per alium facit se. He who acts through another acts himself.
Contrary to the findings of the CA, all the elements of an agency exists in this
case. The first and second elements are present as CAI does not deny that it
1ST DIGEST 8/25/16
concluded an agreement with Holiday Travel, whereby Holiday Travel would
enter into contracts of carriage with third persons on CAIs behalf. The third
element is also present as it is undisputed that Holiday Travel merely acted in
a representative capacity and it is CAI and not Holiday Travel who is bound
by the contracts of carriage entered into by Holiday Travel on its behalf. The
fourth element is also present considering that CAI has not made any
allegation that Holiday Travel exceeded the authority that was granted to it.
10. APEX MINING CO. INC. vs. SOUTHEAST
MINDANAO GOLD MINING CORP ET. AL
(492 SCRA 355)
FACTS: The case involves the Diwalwal Gold Rush Area (Diwalwal),
a rich tract of mineral land located inside the Agusan-Davao-Surigao
Forest Reserve in Davao del Norte and Davao Oriental.
Since the early 1980s, Diwalwal has been stormed by conflicts
brought about by numerous mining claims over it. On March 10, 1986,
Marcopper Mining Corporation (MMC) was granted an Exploration Permit
(EP 133) by the Bureau of Mines and Geo-Sciences (BMG). A long
battle ensued between Apex and MMC with the latter seeking the
cancellation of the mining claims of Apex on the ground that such
mining claims were within a forest reservation (Agusan-Davao-Surigao
Forest Reserve) and thus the acquisition on mining rights should have
been through an application for a permit to prospect with the BFD and not
through registration of a DOL with the BMG.
When it reached the SC in 1991, the Court ruled against Apex
holding that the area is a forest reserve and thus it should have applied for a
permit to prospect with the BFD. On February 16 1994, MMC assigned all
its rights to EP 133 to Southeast Mindanao Gold Mining Corporation (SEM),
a domestic corporation which is alleged to be a 100%-owned subsidiary of
MMC. EP 133 is subject to the following terms and conditions :
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AGENCY, TRUST and PARTNERHIP
xxx 6. That this permit shall be for the exclusive use and benefit of the
permittee or his duly authorized agents and shall be used for mineral
exploration purposes only and for no other purpose. xxx
Subsequently, BMG registered SEMs Mineral Production Sharing
Agreement (MPSA) application and the Deed of Assignment. Several
oppositions were filed. The Panel of Arbitrators created by the DENR upheld
the validity of EP 133. During the pendency of the case, DENR AO No.
2002-18 was issued declaring an emergency situation in the Diwalwal
Gold Rush Area and ordering the stoppage of all mining operations
therein.
ISSUE: Whether or not SEM is an agent of MMC?
RULING: NO. SEM is not an agent of MMC.
Condition number 6 categorically states that the permit shall be for
the exclusive use and benefit of MMC or its duly authorized agents. While it
may be true that SEM, the assignee of EP 133, is a 100% subsidiary
corporation of MMC, records are bereft of any evidence showing that the
former is the duly authorized agent of the latter. For a contract of agency to
exist, it is essential that the principal consents that the other party, the agent,
shall act on its behalf, and the agent consents so as to act. In the case of Yu
Eng Cho v. Pan American World Airways, Inc., this Court had the occasion to
set forth the elements of agency, viz:
(1) consent, express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority.
The existence of the elements of agency is a factual matter that
needs to be established or proven by evidence. The burden of proving that
agency is extant in a certain case rests in the party who sets forth such
allegation. This is based on the principle that he who alleges a fact has the
1ST DIGEST 8/25/16
burden of proving it. It must likewise be emphasized that the evidence to
prove this fact must be clear, positive and convincing.
In the instant Petitions, it is incumbent upon either MMC or SEM to
prove that a contract of agency actually exists between them so as to allow
SEM to use and benefit from EP 133 as the agent of MMC. SEM did not
claim nor submit proof that it is the designated agent of MMC to represent
the latter in its business dealings or undertakings. SEM cannot, therefore, be
considered as an agent of MMC which can use EP 133 and benefit from it.
Since SEM is not an authorized agent of MMC, it goes without saying that
the assignment or transfer of the permit in favor of SEM is null and void as it
directly contravenes the terms and conditions of the grant of EP 133.
Furthermore, the concept of agency is distinct from assignment. In
agency, the agent acts not on his own behalf but on behalf of his
principal. While in assignment, there is total transfer or relinquishment of right
by the assignor to the assignee. The assignee takes the place of the
assignor and is no longer bound to the latter.
Bearing in mind the just articulated distinctions and the language of
the Deed of Assignment, it is readily obvious that the assignment by MMC of
EP 133 in favor of SEM did not make the latter the formers agent. Such
assignment involved actual transfer of all rights and obligations MMC have
under the permit in favor of SEM, thus, making SEM the permittee. It is not a
mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a
total abdication of MMCs rights over the permit. Hence, the assignment in
question did not make SEM the authorized agent of MMC to make use and
benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of
the permittee or its duly authorized agent is not without any reason.
Exploration permits are strictly granted to entities or individuals possessing
the resources and capability to undertake mining operations. Without such a
condition, non-qualified entities or individuals could circumvent the strict
requirements under the law by the simple expediency acquiring the permit
from the original permittee.
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AGENCY, TRUST and PARTNERHIP
We cannot lend recognition to the Court of Appeals theory that SEM,
being a 100% subsidiary of MMC, is automatically an agent of MMC.
A corporation is an artificial being created by operation of law, having
the right of succession and the powers, attributes, and properties expressly
authorized by law or incident to its existence. It is an artificial being invested
by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be
related. Resultantly, absent any clear proof to the contrary, SEM is a separate
and distinct entity from MMC.
11. Litonjua vs Eternit Corp.
(490 SCRA 204)
Facts: The Eternit Corporation (EC) manufactures roofing materials and pipe
products. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation registered under the
laws of Belgium. Jack Glanville was the General Manager and President of
EC, while Frederick Delsaux was the Regional Director for Asia of ESAC. In
1986, because of the political situation in the Philippines the management of
ESAC wanted to stop its operations and to dispose their 8 parcels of land
located in Mandaluyong City. They engaged the services of realtor/broker
Lauro G. Marquez. Marquez thereafter offered the land to Eduardo B.
Litonjua, Jr. for P27,000,000.00. Litonjua counter offered P20,000,000.00
cash. Marquez apprised Glanville & Delsaux of the offer. Delsaux sent a
telex stating that, based on the "Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to
final liquidation. The Litonjua brothers deposited US$1,000,000.00 with the
Security Bank & Trust Company, and drafted an Escrow Agreement to
expedite the sale. Meanwhile, with the assumption of Corazon C. Aquino as
President, the political situation improved. Marquez received a letter from
Delsaux that the ESAC Regional Office decided not to proceed with the sale.
When informed of this, the Litonjuas, filed a complaint for specific
performance and payment for damages on account of the aborted sale. Both
the trial court and appellate court rendered judgment in favor of defendants
and dismissed the complaint. The lower court declared that since the
1ST DIGEST 8/25/16
authority of the agents/realtors was not in writing, the sale is void and not
merely unenforceable.
Issue: WON there was already a perfected contract of sale of the parcels of
land that would in effect make the respondents in default and therefore liable
for damages?
Ruling: None. Respondents maintain that Glanville, Delsaux and Marquez
had no authority from the stockholders of EC and its Board of Directors to
offer the properties for sale to the petitioners. Petitioners assert that there
was no need for a written authority from the Board of Directors of EC for
Marquez to validly act as broker. As broker, Marquez was not an ordinary
agent because his only job as a broker was to look for a buyer and to bring
together the parties to the transaction. He was not authorized to sell the
properties; hence, petitioners argue, Article 1874 of the New Civil Code does
not apply.
A corporation is a juridical person separate and distinct from its stockholders
and is not affected by the personal rights, obligations and transactions of the
latter. It may act only through its board of directors or, when authorized by its
board resolution, through its officers or agents. The general principles of
agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions
of law. Agency may be oral unless the law requires a specific form. However,
to create or convey real rights over immovable property, a special
power of attorney is necessary. Thus, when a sale of a piece of land or
any portion thereof is through an agent, the authority of the latter shall
be in writing, otherwise, the sale shall be void. In this case, the petitioners
failed to adduce in evidence any resolution of the Board of Directors of EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in its behalf, the eight parcels of land owned by it.
Moreover, the evidence of petitioners shows that Adams and Glanville acted
on the authority of Delsaux, who, in turn, acted on the authority of ESAC,
through its Committee for Asia, and the Belgian/Swiss component of the
management of ESAC. The offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire management or Board of
Directors of ESAC. While it is true that petitioners accepted the counter-offer
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AGENCY, TRUST and PARTNERHIP
of ESAC, EC was not a party to the transaction between them; hence, EC
was not bound by such acceptance. Decision of the lower court is affirmed.
6.) Who are the parties to the contract of agency?
PRINCIPAL The person represented (mandante)
AGENT The person who acts for and in representation of another
(mandatario)
7.) Must the parties in an agency arrangement be capacitated?
Capacity of the Parties:
1. Principal
a) He may be a natural or a juridical person
b) He must be capacitated. The rule is if a
person is capacitated to act for himself or his
own right, he can act through an agent.
i. The agent is not liable where he
was ignorant of the principals
incapacity.
2. Agent
a) Insofar as the third persons are concerned,
it is enough that the principal is capacitated.
b) Insofar as his obligations to his principal are
concerned, the agent must be able to bind
himself.
c) But as an agent, some mental capacity is
necessary, so, those who are absolutely
incapacitated (ex. Insane persons) cannot
be agents.
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8.) Are agents real party-in-interest
An agent of the seller is not a party to the contract of sale between
his principal and the buyer; Since a contract may be violated only by the
parties thereto as against each other, the real party-in-interest, either as
plaintiff or defendant, in an action upon the contract must, generally, either be
parties to said contract. (Uy vs Roxas)
The agent has neither rights nor liabilities as agains the third party;
he cannot thus sue or be sued on the contract. (Angeles vs PNR)
12. Uy and Roxas vs CA
(G.R NO. 120465)
FACTS: William Uy and Rodel Roxas (petitioners) are agents authorized to
sell 8 parcels of land in Benguet. The petitioners offered to sell the parcels of
land to NHA for a housing project. On 1989, NHA passed a resolution
approving the acquisition of the said lands and they executed Deed of
Absolute Sale. However, only 5 out of 8 lands were paid for by NHA because
of a report from DENR that the remaining area is located at an active
landslide and are therefore not conducive for housing. NHA issued a
resolution cancelling the sale of the remaining lands and offered P1.225
million to the landowners. For such reason, Uy and Roxas filed a complaint
for damages against NHA.
ISSUE: Whether or not Uy and Roxas are real parties-in-interest.
HELD: No. They are not parties-in-interest because they are merely
agents of their principals. An action shall be prosecuted in the name of the
party who, by the substantive law, has the right sought to be enforced. Uy
and Roxas are not parties to the contract of sale between their
principals and NHA. They are mere agents of the owners of the land
subject of the sale. As agents, they only render some service or do
something in representation or in behalf of the principals. The rendering of
such service did not make them parties to the contract of sale executed in
behalf of the latter. Since a contract may be violated only by the parties
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AGENCY, TRUST and PARTNERHIP 1ST DIGEST 8/25/16

thereto as against each other, the real parties-in-interest may be either the It cannot be over emphasized that Romualdezs use of the active verb
plaintiff or defendant. authorized instead of assigned, indicated an intent on his part to keep and
retain his interest in the subject matter.

13. ANGELES VS. PNR

The petition is denied.
(G.R. NO. 150128)

14. Ong vs. CA

FACTS: On May 5, 1980, respondent Philippone National Railways (PNR)
informed Gaudencio Romualdez that it has accepted his offer to buy PNRs (G.R NO.119858)
scrap/unserviceable rails in Del Carmen, Lubao, Pampanga. After paying the
purchase price, Romuladez addressed a letter to PNR authorizing Lizette R. FACTS:
Wijanco-Angeles to be his lawful representative in the withdrawal of scrap
Representing AMAGRI International Corp. (AMAGRI), Edward Ong
rails in Pampanga but it was not ready for hauling. The PNR instead granted
applied for a letter of credit with SOLIDBANK Corp. (Bank) to finance
Lizette to withdraw scrap rails from Tarlac instead. However, they suspended
the purchase of differential assemblies from Metropole Industrial
such withdrawal in view of internal issues regarding the Tarlsc properties.
Sales and subsequently executed the trust.
The spouses Angeles demanded a refund but PNR refused to pay. On
August 10, 1988, the spouses angeles filed a suit against the PNR against On a later date, Ong, representing AMAGRI, applied for another
specific performance and damages before the RTC in Quezon City. Later,
letter of credit to finance the purchase merchandise from Fretiphil
Lizette W. Angeles passed away and was substituted by her heirs. The RTC
Corporation. The Bank approved the application and Ong,
dismissed the case since the spouses Angeles were not real parties-in-
representing AMAGRI, executed another trust in favor of the Bank
interest. The Ca affirmed such decision.
acknowledging receipt of the merchandise.
ISSUE: WON the Spouses Angeles are real paties-in-interest in the case.
When the trust receipts became due and demandable, ARMAGRI
HELD: No. Lizette was not an assignee but merely an agent whose authority failed to pay or deliver the goods to the Bank despite several
was limited to the withdrawal of the scrap rails, hence without personality to demand letters.
sue. Where agency exists, the third partys (PNR) liability on the contract is to
ISSUE
the principal (Romualdez) and not to the agent (Lizette) and the relationship
of the third party to the principal is the same as that in a contract in which Whether Ong is liable for the default of ARMAGRI as its agent.
there is no agent. The words of Romualdezs letter to PNR was very clear.
HELD
I have authorized the bearer, Lizette r. Wicangco-Angeles XXX to be my
lawful representative in the withdrawal of the scrap/unserviceable rails Yes. The Informations expressly state that ARMAGRI, represented
awarded to me. by Ong, received the goods in trust for the Bank under the express
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AGENCY, TRUST and PARTNERHIP
obligation to remit the proceeds of the sale or to return the goods
upon demand by the Bank. Under the Trust Receipts Law, it is
sufficient to allege and establish the failure of ARMAGRI, whom Ong
represented, to remit the proceeds or to return the goods to the
Bank.
When Ong signed the trust receipts, he claimed he was representing
ARMAGRI. The corporation obviously acts only through its human
agents and it is the conduct of such agents which the law must deter.
The existence of the corporate entity does not shield from
prosecution the agent who knowingly and intentionally commits a
crime at the instance of a corporation.
9.) Explain integration and extension as effects of the contract of
agency.
Integration- Personality of the principal is merged with that of the agent.
Extension- Personality of the principal is reproduced in the persons of his
agent
1. Authority to act.
By legal fiction, the agent becomes the principal, authorized
to perform all acts which the latter would have him do.
(Orient Air Services v. CA)
The actual or real absence of the principal is converted into
his legal or juridical presence. (Eurotech vs. Cuison)
The principal becomes liable for obligations contracted by
the agent provided that the act is within the authority of the
agent. (Prudential Bank vs. CA)
2. Agent not real party-in-interest
Since the agent is a mere extension of the personality of the
principal, he is not a party to the contract with the third
person. The liability of the third party is to the principal and
not to the agent.
1ST DIGEST 8/25/16
This rule does not apply in criminal cases. (Ong vs. CA) If
the agent is being sued in a criminal action, this cannot be
used as a defense. Otherwise, the agent can commit any
crime and not be held liable for it.
3. Notice to agent is notice to principal.
General rule: information relayed to the agent in connection
with the object of the contract is deemed to have been
relayed to the principal. (this is known as the theory of
imputed knowledge)
However, the rule does not apply conversely. Notice to the
principal is not notice to the agent. (Sunace Intl vs. CA)
Exception to the rule: where the conduct and dealings of the
agent re such as to raise a clear presumption that he will not
communicate to the principal the facts in controversy.
(Cosmic Lumber vs. CA)
o This is because if the agent were committing
fraud, it would be contrary to common sense
to presume that he would communicate the
facts to the principal. When an agent is
engaged in the perpetration of fraud upon
his principal for his own exclusive benefit, he
is not really acting for the principal but is
really acting for himself.
4. Bad faith of the agent is bad faith of the principal.
10.) IS NOTICE TO AGENT, A NOTICE TO PRINCIPAL?
Yes. Notice to the agent is a notice to the principal.
ARTICLE 1910. The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
In Air France vs. Court of Appeals, employing the principle that
knowledge of the agent is chargeable as knowledge of the principal, the
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AGENCY, TRUST and PARTNERHIP
Court held that an airline company cannot be held liable for breach of
contract when it dishonoured the tickets given to the spouses, whose travel
arrangement were handled by their travel agent, since the evidence showed
that their travel agent was duly informed by the airline companys proper
officers that the tickets in question could not be extended beyond the period
of their validity without paying the fare rate and travel taxes.
The Court held that To all legal intents and purposes, Teresita
was the agent of the GANAS and notice to her of the rejection of the
request for extension of the validity of the tickets was notice to the
GANAS, her principals.
11.) Is bad faith of the agent, a bad faith of the principal?
YES- Bad faith of agent imputable to principal (Caram vs. Laureta)
Where the principals acts contributed to deceive a third person in good faith.
NO- if principal had no notice, and even expressly forbade it, the principal is
not liable.
Art. 1911. Even when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as though
he had full powers.
12.) Distinguished General Agency from Agency couched in general
terms.
Article 1876, Civil Code: General agency comprises all the business of the
principal.
Article 1877, CC: An Agency couched in general terms comprises only acts
of administration, even if the principal should state that she withholds no
power or that the agent may execute such acts as he may consider
appropriate, or eventhough the agency should authorize a general and
unlimited management.
1ST DIGEST 8/25/16
13.) Distinguish general agency from agency
couched in specific terms.
a) What are the covered transactions?
b) What is/are the effect/s of absence of specific
authorization?
Effect of absence of specific authorization
- in the absence of a grant of special power of attorney to the agent,
he is deemed to have been extended only a general power of
attorney by the principal who only grants authority to perform acts of
administration
c) What is/are the effect/s of specific authorization?
Art. 1897. The agent who acts as such is not personally liable to the party
with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his powers.
14.) Who has the obligation to determine existence and scope of
agency?
At any rate, even if such affidavit is to be given any probative value,
the existence of the agency relationship cannot be established on its
sole basis. The declarations of the agent alone are generally
insufficient to establish the fact or extent of his authority.[18] In
addition, as between the negative allegation of respondents Canilao
and Tagunicar that neither is an agent nor principal of the other, and
the affirmative allegation of petitioners that an agency relationship
exists, it is the latter who have the burden of evidence to prove their
allegation, failing in which, their claim must necessarily fail. (Yu Eng
Cho v. Pan American, 328 SCRA 717 (2000))
And not only must the person dealing with the agent ascertain the
existence of the conditions, but he must also, as in other cases, be
able to trace the source of his reliance to some word or act of the
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AGENCY, TRUST and PARTNERHIP
principal himself if the latter is to be held responsible. As has often
been pointed out, the agent alone cannot enlarge or extend his
authority by his own acts or statements, nor can he alone remove
limitations or waive conditions imposed by his principal. To charge
the principal in such a case, the principal's consent or concurrence
must be shown. (Mechem on Agency, vol. I, section 757.)
15. KEELER ELECTRIC CO. VS. RODRIGUEZ
(44 PHIL. 19)
Matthews electric plant, buyer did not deliver the payment after the
inspection and installation of a certain Cenar.
Facts: Keeler sells Matthews electric plant. AC Montelibano approached
Keeler at Manila office, claiming that he was from Iloilo and that he could find
purchases for the Matthews plant. Keeler promised a 10% commission for
every sale consummated.
Montelibano convinced Rodriguez to buy, and the plant was shipped from
Manila to Iloilo and later installed in the buyers premises.
Without Keelers knowledge, Rodriquez paid the purchase price to
Montelibano (P2,513.55). Keeler filed an action for specific performance in
CFI Manila. Lower court ruled for Rodriguez, stating that the payment to
Montelibano discharged the debt of the defendant.
According to Keller, at the time of the shipment, the company sent Juan
Cenar, one of its employees, with the shipment for the purposes of installing
the plant on the defendants premises and to give the statement of account to
Rodrizuez totaling P2,563.95. According to Cenar, Rodriquez kept the
statement of account while the former made no efforts to collect from the
latter because Rodriquez said that he would pay for the plant in Manila.
Keeler alleges that Montelibano has no authority from the company to
receive or receipt for money, and that his services were confined to the
finding of purchases for the Matthews plant.
1ST DIGEST 8/25/16
Rodriquez however alleges that it was Montelibano himself sold and
delivered the plant to him, and was the one who ordered the installation of
the electric plant. Rodriguez presented a statement and receipt which
Montelibano signed.
Issue: WON Montelibano had authority to accept payment. NO
Held:
1. There is nothing on the receipt which showed that Montelibano was
the agent of the plaintiff. It was his own personal receipt and his
signature.
2. Payments for fare negated the allegation of defendant that
Montelibano was the one who installed the electric plant. (Cenar was
the one who travelled)
3. After Cenars return to Manila, Keller wrote a letter to Rodriguez
requesting payment, and the latter responded with a telegram (paid
to Montelibano 3wks Keeler did not present bill). The telegram was in
direct conflict with the receipt Montelibano issued, which was an
itemized statement of account. As mentioned, there was no evidence
that Montelibano was authorized to receive payment for Keeler.
A1162 CC: Payment must be made to the person in whose favor the
obligation is constituted, or to another authorized to receive it in his name.
A1727: The principal shall be liable as to matters with respect to which the
agent has exceeded his authority only when he ratifies the same expressly or
by implication.
Mechem on Agency Sec.743
Fundamental principles:
1. The law indulges no bare presumptions that an agency
exists. It must be proved or presumed from facts
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AGENCY, TRUST and PARTNERHIP
2. The agent cannot establish his own authority either by
his representations or by assuming to exercise it
3. An authority cannot be established by mere rumor or
general reputation
4. Even general authority is not an unlimited one
5. Every authority must find its ultimate source in some act
or omission of the principal
Persons dealing with an assumed agency, whether the it be a
general or special one, are bound at their peril, if they would hold the
principal to ascertain not only the fact of the agency but the nature and extent
of the authority and in case either is controverted, the burden of proof is upon
them to establish it.
Against the agent, the third person has the obligation to determine
existence and scope of agency. It is moreover in any case entirely within the
power of the person dealing with the agent to satisfy himself that the agent
has the authority he assumed to exercise, or to decline to enter into relations
with him. The person dealing with the agent must also act with ordinary
prudence and reasonable diligence. If, he knows or has good reason to
believe that the agent is exceeding his authority, he cannot claim protection.
Judgment reversed.
16. Yu Eng Cho vs. Pan American
(328 SCRA 717)
1ST DIGEST 8/25/16
Facts: On July 10, 1976, plaintiffs bought plane tickets from defendant
Claudia Tagunicar who represented herself to be an agent of defendant
Tourist World Services, Inc. (TWSI). The destinations are Hongkong, Tokyo,
San Francisco, USA, for the amount of P25,000.00.
On said date, only the passage from Manila to Hongkong, then to Tokyo,
were confirmed. Their flight from Tokyo to San Francisco was on request
status. After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs
that their flight is now confirmed all the way. Thereafter, she attached the
confirmation stickers on the plane tickets.
The plaintiffs left for Hongkong and stayed there for five days and after that
they left for Tokyo. Upon arrival in Tokyo, they called Pan-Am for
reconfirmation of their flight to San Francisco but the said airlines informed
them that their names are not in the manifest. The plaintiffs then bought
airline tickets for Taipei because they could not remain in Japan for more
than 72 hours and there was no chance for the plaintiffs to obtain airline
seats to the US because Northwest Airlines was on strike.Upon reaching
Taipei, there were no flights available for plaintiffs, thus, they were forced to
return back to Manila instead of proceeding to the US.
Petitioners filed a complaint against private respondents Pan-Am,TWSI,
Julieta Canilao, and Claudia Tagunicar for expenses allegedly incurred by the
former.The RTC of Manila held the defendants jointly and severally liable
except Julieta Canilao. The CA however rendered a decision holding
Tagunicar solely liable and absolving Pan-Am and TWSI from any liability.
Petitioners contends that TWSI and Pan-Am should be held principally liable
for the acts of Tagunicar,because the latter is the sub-agent of TWSI which is
a duly authorized ticketing agent of Pan-Am.
Issue: WON there is an agency relationship between Tagunicar, TWSI, and
Pan-Am.
Held: No. Petitioners stubbornly insist that the existence of the agency
relationship has been established by the judicial admissions allegedly made
by respondents herein, to wit: (1) the admission made by Pan Am in its
Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by
Tagunicar where she admitted that she is a duly authorized agent of TWSI;
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and (3) the admission made by Canilao that TWSI received commissions
from ticket sales made by Tagunicar. However, respondent Tagunicar
categorically denied in open court that she is a duly authorized agent of
TWSI, and declared that she is an independent travel agent.
By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent or
authority of the latter. The elements of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his
authority. It is a settled rule that persons dealing with an assumed agent
are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is
upon them to establish it.
15.) How is agency distinguished from other
contracts/relationship?
a) Master-servant
Differences between Agent & Servant
An Agent Is a Person Who Represents His Principal
in Dealing With Third Persons.
A Servant Is a Person Who Acts for His Master in a
Ministerial Capacity.
A Servant occupies a position which sounds parallel to that
occupied by an agent. For instance, both are employed to act for an
on behalf of the master. Similarly, an agent and a servant transact
business (to a greater or less extent) under the control and
supervision of their respective employers. Yet, there is a material
difference between an agent and a servant, which can be summed
up as follows.
Difference between an Agent & Servant
1ST DIGEST 8/25/16
1) Authority to create contractual relationship: Apart from acting
on behalf of his/her principal, an agent has the authority to create
contractual relations between the principal and a third party. A
servant ordinarily, has no such authority.
2) Control and Supervision: A servant is bound to work under
direct control and supervision of his employer. A principal directs the
agent as to what is to be done, but a master or employer of a servant
not only has that right, but also the right to direct how it is to be done.
3) Number of Masters: A servant usually serves only one
master, but an agent may work for several principals at the same
time.
4) Remuneration: The mode of remuneration is usually
different. Remuneration for a servant is paid by way of salary or
wages, whereas an agent generally gets his remuneration in terms of
commission calculated on the basis of the amount of business
transacted.
5) Duty Assignment: A servant in certain cases to some extent
may be assigned the duties of an agent, and may act as one. For
example, the secretary of a company is regarded as the servant of
the company, but in respect of the matters that come under his/her
domain he/she becomes an agent in their dealings with third
persons. An agent as such never occupies the position of a servant
because whenever he acts, he acts on behalf of his principal and
binds him/her (principal) to third parties.
6) Liability: A principal is liable on contracts made by his agent
within scope of authority. But a master is answerable for any
wrongful act of his servant if it is committed in the course of the
servants employment.
b) Employer-employee
Unlike an agency relationship which is essentially contractual in
nature, an employment contract under Article 1700 of the New Civil Code is
the relationship between capital and labor which are not merely contractual.
The purpose of an employer-employee relationship is for the
employee to render service for the direct benefit of the employer or of the
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business of the employer; while agency relationship is entered into to enter

into juridical relationship on behalf of the principal with third parties. There is,
therefore, no element of representation in a contract of employment, since
the employee does not have the power to enter into juridical relations on
behalf of employer.
c) Lease of service
The distinctions are the following:
1.) In agency, the basis is representation, while in lease of service, it is
Agency vs Sale
employment;
e) Trust
The essential distinctions between trust and an agency are
found ordinarily in the fact that in trust, the title and control of the
property under the trust instrument passes to the trustee who acts in
his own name, while the agent represents and acts for his principal
and in the further fact that while a trust may ordinarily be terminated
only by the fulfilment of its purpose, an agency may in general be
revoked at any time.
f) Sale

2.) In agency, the agent exercises discretionary powers, while in lease of Agency to Sell
service, the lessor ordinarily performs only ministerial functions. Agent receives the goods as the
goods of the principal
3.) In agency, three persons are involved: the principal, the agent, and the Agent delivers the proceeds of the
third person with whom the agent has contracted, while in lease of service, sale
Agent can return the object in case
only two persons are involved: the lessor and the lessee.
he is unable to sell it to a 3rd
person
4.) Agency relates to commercial or business transactions, while lease of
Agent in dealing with the thing
service relates more to matters of mere manual or mechanical execution, in received is bound to act according
which the servant acts under the direction and control of the master. to the instructions of his principal
Sale
Buyer receives the goods as
owner
Buyer pays the price
Generally, buyer cannot return the
object sold
Buyer can deal with the thing as
he pleases, being the owner

d) Independent contractor
g) Partnership
Independent Contractor- A person who contracts to do work for another
person according to his or her own processes and methods. While an agent acts only for his principal, a partner acts not only for his co-
partners and the partnership but also as principal of himself. (Arts. 1767,
Distinction: In Independent Contractor, the contractor is not subject to 1803)
anothers control except for what is specified in mutually binding agreement
for a specific job, with regards to Agency, the agent agrees to act under the
control or direction of another the principal. h) Negotiorum gestio/ quasi contract
Control is one factor which most clearly distinguishes agency from Essential Requisites [2144]
other legal concepts. 1. no meeting of the minds
2. taking charge of anothers business or property
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3. the property or business must have been abandoned or
neglected (otherwise, the rules on unauthorized contracts would
apply)
4. the officious manager must not have been expressly or
implicitly authorized (otherwise the rules on agency will apply)
5. the officious manager must have voluntarily taken charge.
Diligence Required of Officious Manager [2145]
1. The officious manager shall perform his duties with all the
diligence of a good father of a family.
2. He shall pay the damages which through his fault or
negligence may be suffered by the owner of the property or
business under management. The courts may, however,
increase or moderate the indemnity according to the
circumstances of each case.
Agency v Negotiorum Gestio
1.Consent: In agency, there is a contract caused by a
meeting of the minds, expressly or impliedly; Negotiorum
Gestio is a quasi-contract, there having been no meeting of
the minds.
2.Control: Agent is controlled by the principal; the officious
manager follows his judgment and the presumed will of the
owner
i) Judicial administration
The provision of law on agency should not apply to a judicial
administration.
A judicial administrator is appointed by the court. He is not only the
representative of the said court, but also the heirs and creditors of
the estate. A judicial administrator, before entering into his duties, is
required to file a bond. These circumstances re not true in agency.
the agent is only answerable to his principal. The protection which
the law gives the principal, in limiting the powers and rights of an
agent, stems from the fact that control by the principal can only be
through agreements; whereas, the acts of a judicial administrator are
subject to specific provisions of law and orders of the appointing
court.
j) Brokerage
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A commission agent is one engaged in the purchase or sale
for another of personal property which for this purpose, is placed in
his possession and at his disposal. He maintains a relation not only
with his principal and the purchaser or vendor, but also with the
property which is the subject matter of the transaction.
On the other hand, a broker has no relation with the thing he buys or
sells. He is merely an intermediary or negotiator between the
purchaser and the vendor relative to the property with the custody or
possession of which he has no concern. His only office is to bring
together the parties to the transaction never acting in his own name
but in the name of those who employed him.in effecting a
transaction, he, however, acts in a certain sense as the agent of both
parties.
k) Guardianship
The distinctions are:
While the agent derives his authority from his principal, the guardian,
although he acts for and on behalf of his ward, does not derive his
authority so to act from the ward.
The relation of principal and agent is founded upon consent of the
parties thereto, while that of guardian and ward may be created
irrespective of the consent or capacity of the ward.
Agents are subject to the control of their principals, while guardians
are not subject to the direction of their wards;
A legal guardian is substituted by law, while ordinarily an agent is the
appointee of the principal and his power may at any time be
abrogated or modified by the principal; and
While an agent represents one who has capacity to contract for
himself where he present, a guardian represents one who has no
such capacity.
l) Loan
Whether in a particular case the relation between the parties is one
of lender and borrower or principal or agent depends on the terms of the
contract between them and their intention.
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Where money advanced to another is expressly regarded as money

lent, no agency results. One who borrows money to conduct a
business in which the lender has no interest or concern in the
manner of its conduct is not an agent of the lender, but the financing
of the operations to be carried on by another for the mutual
advantage of both, without any obligation of such other to return the
money advanced, makes such other an agent rather than a
borrower.
An agent may be given funds by the principal to advance the latters
business, while a borrower is given money for purposes of his own
and he must generally return it whether or not his business is
successful. A lot, however, depends on the intent of the parties.
Where checks are deposited with a collecting bank, the nature of the
relationship created at that stage is one of agency, that is, the bank is
to collect from the drawees of the checks the corresponding
proceeds. After the checks are collected and converted into cash, the
creditor and debtor relationship is created between the depositor and
the bank.
Where one deposits money with a bank with instructions to apply it in
satisfaction of the debt of a third person, the conventional debtor
and creditor relationship between the bank and the depositor is
created, coupled with an agency on the part of the bank to pay the
debt, which is revocable at the will of the depositor.

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