1. Chemphil Export & Import Corporation (CEIC) v.

CA, GR 112438-39, December 12,

1995, Kapunan, J.
FACTS:
Dynetics and Antonio Garcia filed a complaint against PH Investment System Organization
(PISO), BPI, LBP, PCIB, and RCBC (the consortium) in RTC seeking to enjoin the latter from
enforcing the surety agreement between the two parties. The consortium filed their counterclaim.
This is case 8527.

In Case 10398, Dynetics, Garcia, and Matrix Corp. filed a complaint against Security Bank &
Trust Co. (SBTC) in RTC. RTC granted SBTC’s prayer for attachment. A notice of garnishment
covering Garcia’s shares, including the disputed 1.7M shares, in Chemphil (CEIC) was served on
CEIC on July 9, 1985. The notice was annotated in the stock and transfer books of CEIC.

Meanwhile, in case 8527, RTC granted the consortium’s prayer for writ of attachment which was
issued on July 19, 1985 and Dynetics and Garcia’s properties, including the disputed shares, were
garnished. This garnishment was not annotated in CEIC’s stock and transfer book.

RTC eventually dismissed Dynetics and Garcia’s complaint and the consortium’s counterclaim.
During pendency of consortium’s appeal in CA, Garcia entered into a compromise agreement with
consortium.

Garcia, under a deed of sale, transferred to Ferro Chemicals Inc. (FCI) the disputed shares and
other properties for P79M (Garcia was president of FCI). It was agreed that part of the price shall
not be paid by FCI to Garcia but instead FCI will pay it directly to SBTC for whatever credit may
be adjudged in SBTC’s favor against Garcia in their case 10398. FCI assigned the disputed shares
to CEIC.

Garcia failed to comply with the compromise agreement he entered with consortium. Thus,
consortium filed a motion for execution which was granted by RTC on August 11, 1989. The
disputed shares which were previously garnished on July 19, 1985 were levied. On August 22,
1989, consortium acquired the shares at public auction sale. A certificate of sale of the disputed
shares was issued. RTC issued an order on September 4, 1989 for CEIC secretary to enter in the
stock and transfer books of CEIC the certificate of sale. CEIC moved to intervene in case 8527 on
the ground that it was the owner of the disputed shares sold to it by FCI. The motion to intervene
was granted.

RTC set aside its September 4, 1989 order and ruled in favor of CEIC. CA reversed. The
consortium, except PISO, assigned its rights to Jaime Gonzales. Hence this petition.

ISSUE:
Whether CEIC was subrogated to the rights of SBTC.
HELD: NO.
1) CEIC claims that it owns the disputed shares due to the attachment lien obtained by SBTC on
July 2 1985 against Garcia. When FCI paid SBTC the obligations of Garcia and when FCI sold to
CEIC the shares, CEIC was subrogated to the rights of SBTC on the attachment lien over the
disputed shares. SBTC’s lien is superior as it was obtained on July 2, 1985 ahead of consortium’s
attachment on July 19, 1985. SBTC’s lien was also recorded.
Subrogation is the “transfer of all rights of the creditor to a third person, who substitutes him in all
his rights.” It may be legal or conventional. CEIC’s theory is premised on Art. 1302 (2) of NCC:
Art. 1302: It is presumed that there is legal subrogation:
(2) When a third person, not interested in the obligation, pays with the express or tacit
approval of the debtor;

However, this article is inapplicable. Garcia sold the disputed shares to FCI for P79M. FCI did not
pay the entire amount to Garcia as it delivered part of the price directly to SBTC pursuant to their
deed of sale. Thus, when FCI issued a Bank of America check to SBTC for P35M to pay Garcia’s
debt to SBTC, it in effect was paying with Garcia’s money, not its own, because said amount
was part of the purchase price which FCI owed Garcia as payment for the sale of the disputed
shares. The money “paid” by FCI to SBTC thus belonged to Garcia. It is as if Garcia paid his own
debt to SBTC but thru a third party- FCI. Garcia and FCI’s arrangement was for the sake of
convenience to prevent money from changing hands needlessly.

Since the money used to pay Garcia’s debt belonged to him, FCI cannot be considered a third
party payor under Art. 1302 (2). It was an AGENT as defined in Art. 1868 of NCC. FCI was
merely fulfilling its obligation under their deed of sale.

Also, FCI was not a disinterested party in Art. 1302 (2) since the extinguishment of the obligation
to SBTC would benefit it. The attachment lien on the disputed shares purchased by FCI would be
discharged and FCI would have a clean title to the shares.

Thus, CEIC was not subrogated to the rights of SBTC and did not acquire SBTC’s attachment
lien on the disputed shares which had already been discharged by payment of Garcia thru FCI of
the debt to SBTC.

2) CEIC also claims that consortium’s attachment lien on the disputed CEIC shares is void since
it was not registered in the stock and transfer books of CEIC. But the Rules of Court and
Corporatino Code do not require annotation in said books for attachment of shares of stock to
be valid on the corporation and third party.

S63 of the Corporation Code states:

Sec. 63. Certificate of stock and transfer of shares. Xxx. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or certificates
indorsed by the owner or his attorney-in-fact or other person legally authorized to make
the transfer. No transfer, however, shall be valid, except as between the parties, until
the transfer is recorded in the books of the corporation so as to show the names of the
parties to the transaction, the date of the transfer, the number of the certificate or certificates
and the number of shares transferred.

Attachments of shares of stock is not included in the term “transfer” under S63. As declared in
Monserrat v. Ceron, “chattel mortgage over shares of stock need not be registered in the
corporation’s stock and transfer book” as this does not involve “transfer of shares.” Only absolute
transfers of shares of stock are required to be recorded to be valid against third persons. The
Monserrat case, although referring to a chattel mortgage, may be applied to attachment of the
disputed shares in this case since attachment is not an absolute conveyance.

3) CEIC claims that consortium’s writ of attachment on July 19 is void as the notice of garnishment
was not validly served, being served only to Ruiz who was secretary of CEIC president only and
thus the notice was not served on the president nor managing agent of CEIC.

But a secretary is in effet an extension of his superior. One of his duties is to receive letters and
notices for his superior. The notice here was actually received by CEIC president thru his secretary.
In one case, we ruled that the secretary of the presideny may be considered an “agent” of the
corporation and held that service of summons on him is binding on the corporation.

The receipt of notice of garnishment was also duly acknowledged by the corporate secretary of
CEIC. There was thus substantial compliance with S7(d) of Rule 57 of RoC.

4) CEIC argues that when consortium entered into a compromise agreement with Garcia resulting
in the termination of their case, the disputed shares were released from garnishment since
attachment is a mere auxiliary remedy which, upon dismissal of the case, also dies.

We disagree. A writ of preliminary attachment is a provisional remedy issued upon order of the
court where an action is pending to be levied upon the properties of the defendant therein to be
held by the sheriff as security for the satisfaction of whatever judgment might be secured in said
action by the attaching creditor against the defendant. The purpose is to secure a contingent lien
on defendant’s property until plaintiff can obtain a judgment and have such property applied to its
satisfaction. An attachment lien continues until the debt is paid, or sale is had under execution
issued on the judgment or until judgment is satisfied, or attachment is discharged or vacated
in the same manner provided by law. attachment is a proceeding in rem. It is against the particular
property. the law does not provide the length of time an attachment lien shall continue after
rendition of judgment, and it must thus continue until the debt is paid etc.

This case is peculiar as it involves a compromise agreement. Nonetheless, the rule aforestated still
applies. The parties to the compromise agreement should not be deprived of the protection
provided by the attachment lien especially where one reneges on his obligations under the
agreement as Garcia in this case. If we rule otherwise, we would create a back door by which a
debtor can easily escape his creditors.

Also, violation of the terms of a compromise agreement entitles the aggrieved party to a writ of
execution.

2. PNB v. Ritratto Group, Inc., GR 142616, July 31, 2001, Kapunan, J.

FACTS:
PNB International Finance Ltd. (PNB-IFL) is a subsidiary company of PNB doing business in
HK. PNB-IFL extended a letter of credit in favor of respondents Ritratto, Riatto International Inc.,
and Dadasan General Merchandise. This was secured by real estate mortgages over 4 lands in
Makati. But as of April 30, 1998, their outstanding obligations stood at $1,497,274. Pursuant to
the terms of the real estate mortgages, PNB-IFL, thru its attorney-in-fact PNB, notified
respondents of the foreclosure of the mortgages and that the properties were to be publicly
auctioned on May 27, 1999.

Respondents filed a complaint for injunction in RTC. RTC issued a writ of preliminary injunction.
CA dismissed PNB’s certiorari. Hence this petition.

ISSUE:
Whether PNB is the real-party-in-interest in the suit by respondents.
HELD: NO.
1) PNB claims that the complaint against it has no cause of action as it is not a real party in interest,
being a mere attorney-in-fact authorized to enforce an ancillary contract. Respondents claim that
even if PNB and PNB-IFL are 2 separate entities, PNB is still the party-in-interest in the
application for preliminary injunction as it is tasked to foreclose respondents’ properties.
Respondents claim that the credit facility is void as the interest rates are left to the sole discretion
of PNB, contravening mutuality of contracts.

The contract is one entered into between respondent and PNB-IFL, not PNB. PNB is a mere
attorney-in-fact for PNB-IFL with full power and authority to, inter alia, foreclose on the
mortgaged properties. In other words, PNB is an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage. It is NOT PRIVY
to the loan contracts entered into by respondents and PNB-IFL. The issue of validity of the loan
contracts is a matter between PNB-IFL, PNB’s principal, and respondents. Respondents prayed
that PNB be ordered to recompute the interest, but PNB, not being part of the contract, has no
power to recompute the interest rates in the contract. Thus, respondents have no cause of action
against PNB.

A suit against an agent cannot, without compelling reasons, be considered a suit against the
principal. Under RoC, every action must be prosecuted or defended in the name of the real party-
in-interest unless otherwise authorized by law or said Rules. RoC requires that parties-in-interest
without whom no final determination can be had, an action shall be joined either as plaintiffs or
defendants. Here, the injunction suit is directed only against the agent, not the principal.

2) RTC ruled that since PNB-IFL is a wholly-owned subsidiary of PNB, the suit against PNB is a
suit against PNB-IFL, citing Koppel Phil. Inc. v. Yatco.

We disagree. A corporation has a personality distinct and separate from its stockholders or
members. The mere fact that a corporation owns all of the stocks of another corporation, taken
alone, is not sufficient to justify their being treated as one entity. While the courts may pierce the
veil of corporate entity to prevent abuses of separate entity privilege, the ruling in Koppel is
inapplicable as the separate existence of the parent and subsidiary corporation therein was
disregarded because the subsidiary was formed merely to evade payment of higher taxes. Here,
respondents fail to show any cogent reason why the separate entities of PNB and PNB-IFL should
be disregarded.

The test to determine the applicability of the doctrine of piercing the veil of corporate fiction is:
 1) Control, not mere majority or complete control, but complete domination, not only of
finances but of policy and business practice as to the transaction attacked so that the
corporate entity as to the transaction has no separate mind, will, or existence of its own;
2) Such control is used to commit fraud or wrong, to perpetuate violation of a statutory or
other positive legal duty etc.; and
3) The control and breach of duty must proximately cause the injury or unjust loss
complained of.

Aside from the fact that PNB-IFL is a wholly owned subsidiary of PNB, there is no showing of
the indicative factors that PNB-IFL is a mere instrumentality of PNB. Neither is there a
demonstration that any of the evils sought to be prevented by the doctrine of piercing the corporate
veil exists. Thus, the doctrine is not applicable in this case.

3. Nielson & Company, Inc. v. Lepanto Consolidated Mining Company, GR L-21601,

December 28, 1968, Zaldivar, J.
FACTS:
Lepanto seeks reconsideration of the decision of SC. It claims for the first time that the contract it
entered into with Nielson was a contract of agency and thus, pursuant to Art. 1733 of the old Civil
Code (Art. 1920 of the New Civil Code), it has the right to revoke the contract. Lepanto claims
that 1) Nielson was to operate the mining properties on behalf of Lepanto and 2) Nielson was
authorized to represent Lepanto in entering, on Lepanto’s behalf, into contracts for hiring of
laborers, purchase of supplies, etc. These show that, Lepanto claims, Nielson was destined to
execute juridical acts for Lepanto under control of Lepanto’s board of directors.

Under the contract, Nielson had agreed, for a period of five years, with the right to renew for a like
period, to explore, develop and operate the mining claims of Lepanto, and to mine such pay ore as
may be found therein and to market the metallic products recovered therefrom which may prove
to be marketable, as well as to render for Lepanto other services specified in the contract. We
gather from the contract that the work undertaken by Nielson was to take complete charge subject
at all times to the general control of the Board of Directors of Lepanto, of the exploration and
development of the mining claims, of the hiring of a sufficient and competent staff and of sufficient
and capable laborers, of the prospecting and development of the mine, of the erection and operation
of the mill, and of the beneficiation and marketing of the minerals found on the mining properties;
and in carrying out said obligation Nielson should proceed diligently and in accordance with the
best mining practice. In connection with its work, Nielson was to submit reports, maps, plans and
recommendations with respect to the operation and development of the mining properties, make
recommendations and plans on the erection or enlargement of any existing mill, dispatch mining
engineers and technicians to the mining properties as from time to time may reasonably be required
to investigate and make recommendations without cost or expense to Lepanto. Nielson was also
to "act as purchasing agent of supplies, equipment and other necessary purchases by Lepanto,
provided, however, that no purchase shall be made without the prior approval of Lepanto; and
provided further, that no commission shall be claimed or retained by Nielson on such purchase";
and "to submit all requisition for supplies, all constricts and arrangement with engineers, and staff
and all matters requiring the expenditures of money, present or future, for prior approval by
Lepanto; and also to make contracts subject to the prior approve of Lepanto for the sale and
marketing of the minerals mined from said properties, when said products are in a suitable
condition for marketing."

ISSUE:
Whether the contract is one of agency or lease of services.
HELD: Lease of services.
1) In both agency and lease of services, one of the parties binds himself to render some service to
the other party. Agency is distinguished from lease of service in that the basis of agency is
representation, while in lease of service the basis is employment. The lessor of services does not
represent his employer. Another distinction is that agency is a preparatory contract as agency
does not stop with the agency because the purpose is to enter into other contracts. The agent is
destined to execute juridical acts (creation, modification or extinction of relations with third
parties). Lease of services contemplate only material or non-juridical acts.

The principal and paramount undertaking of Nielson under the management contract was the
operation and development of the mine and operation of the mill. The other undertakings are
necessary or incidental to the principal undertaking, being dependent upon the work on the
development of the mind and operation of the mill. In performing this principal undertaking,
Nielson was not executing juridical acts for Lepanto. It was not acting as Lepanto’s agent in the
sense that the term “agent” is interpreted under the law of agency, but as one who was performing
MATERIAL ACTS for an employer, for a compensation.

While the contract provides that Nielson would act as purchasing agent of supplies and enter into
contracts as to the sale of minerals, the contract also provides that Nielson could not make any
purchase, or sell the minerals, without prior approval of Lepanto. Thus, even in these cases,
Nielson could not execute juridical acts which would bind Lepanto without first securing
approval of Lepanto. Nielson, then, was to act only as an intermediary, not an agent.

2) A proviso in the contract militates against the stand of Lepanto. Par. XI thereof states:
Both parties to this agreement fully recognize that the terms of this Agreement are made
possible only because of the faith or confidence that the Officials of each company have in
the other; therefore, in order to assure that such confidence and faith shall abide and
continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time upon
ninety (90) days written notice, in the event that NIELSON for any reason whatsoever,
except acts of God, strike and other causes beyond its control, shall cease to prosecute the
operation and development of the properties herein described, in good faith and in
accordance with approved mining practice.
Thus, Lepanto could not terminate the agreement at will. It must give notice of termination 90
days in advance only when Nielson should prosecute in bad faith etc. Indeed, if the management
contract was intended to create a relationship of principal and agent, par. XI should not have been
inserted because as provided in Art. 1733 of the old Civil Code (A1920, NCC), agency is
revocable at the will of the principal- which means, WITH OR WITHOUT CAUSE. But
precisely par. XI was inserted to provide for the cause for its revocation.

4. Dr. Sevilla v. CA, GR L-41182-3, April 16, 1988, Sarmiento, J.

FACTS:
Under a contract, Tourist World Service Inc. (TWS), represented by Canilao, leased the premises
of Segundina Noguera in Mabini St., Manila for TWS’s use as branch office. The branch office
was run by Lina Sevilla who held herself solidarily liable with TWS for monthly rental under the
lease contract. Lina would get 4% commission.

TWS appears to have been informed that Lina was connected with a rival firm. TWS board issued
2 resolutions, abolishing the office of manager and vice-president of TWS Ermita branch and
authorizing corporate secretary Canilao to receive the properties of the branch office. On Jan. 3,
1962, the contract for lease of the premises was terminated. To comply with the mandate of TWS,
Canilao went to the branch office and padlocked the premises on June 4, 1962. When Lina and her
employees could not enter the padlocked premises, a complaint was filed against TWS, Canilao,
and Noguera for mandatory injunction.

The trial court ruled for TWS ruling that it being the lessee, it had prerogative to terminate the
lease and padlock the premises. It found Lina to be a mere employee of TWS and thus bound by
the acts of her employer. CA affirmed. Hence this petition.

ISSUE:
Whether Sevilla is entitled to damages for the padlocking of the branch office by Canilao without
her knowledge.
HELD: YES.
Lina Sevilla claims that the relation between her and TWS was one of joint venture or partnership.
TWS claims that Lina was a mere employee, being “branch manager” of its Ermita branch.

1) There has been no uniform test to determine the existence of an employer-employee relation.
Generally, we relied on the right of control test- “where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end.” Subsequently, we considered also the economic conditions
prevailing between the parties, like inclusion of the employee in the payrolls.

Lina was not subject to control by private respondent TWS either as to the result of the enterprise
or the means used in connection therewith. She bound herself in solidum for the rental payments.
A true employee cannot be made to part with his own money in pursuance of his employer’s
business or assume any liability thereof. In that event, the parties must be bound by some other
relation, but certainly not employment. The branch office was run by Sevilla payable to TWS by
any airline for any fare brought in on the effort of Sevilla. Thus, she was not under the control of
TWS as to the means used. Sevilla, in pursuing the business, obviously relied on her own gifts
and capabilities.

Sevilla was also not in the company’s payroll. She retained 4%commissions from airline obokings,
the remaining 3% going to TWS. Unlike an employee, who earns a fixed salary usually, she earned
compensation in fluctuating amounts.

2) But there is also no partnership as Sevilla claims. In her letter, she expressly “concedes your
(TWS’s) right to stop the operation of your branch office,” in effect accepting TWS’s control over
the manner in which the business was run. A joint venture, including a partnership, presupposes
a standing between each partner in which they have an equal proprietary interest in the capital
or property contributed, and where each party exercises equal rights in the conduct of the
business. The parties also did not hold themselves out as partners, and the building itself was
embellished with the electric sign “Tourist World Service, Inc.” in lieu of a distinct partnership
name.

3) Sevilla manned TWS’s branch office pursuant thus to a contract of agency. It is the essence of
agency that the agent renders services “in representation or on behalf of another.” here, Sevilla
solicited airline fares, but she did so for and on behalf of her principal, TWS. She received 4%
commission as compensation.

But unlike simple grants of a power of attorney, the agency we hereby declare to be compatible
with the intent of the parties cannot be revoked at will. The reason is that it is one coupled with
an interest, the agency having been created for MUTUAL INTEREST of the agent and
principal. Sevilla is a travel agent herself, and as such, she had acquired an interest in the business
entrusted to her. She had also assumd a personal obligation for the operation thereof, holding
herself solidarily liable for rentals. She continued the business using her own name after TWS
stopped further operations. Her interest is not to the commissions, but one that tends to the very
subject matter of the power of management delegated to her. Thus, the revocation of the
agency by TWS entitles Sevilla to damages.

4) The fact that TWS was the lessee named in the lease contract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to padlock the premises. Sevilla
has acquired a personal stake in the business herself. Sevilla was not a stranger to that contract,
having been named therein explicitly as third party in charge of rent solidarily with TWS.

5. Hahn v. CA, GR 113074, January 22, 1997, Mendoza, J.

FACTS:
Hahn executed a deed of assignment with SPA, assigning the BMW trademark and device in the
Philippines to BMW in exchange for being the authorized exclusive dealer of BMW in the
Philippines. But later, in a letter to Hahn, BMW expressed dissatisfaction with Hahn’s business,
mentioning decline in sales, deteriorating services, and inadequate showroom and warehouse
facilities, and Hahn’s alleged failure to comply with the standards for an exclusive BMW dealer.
Nonetheless, BMW expressed willingness to continue business relations with Hahn based on a
“standard BMW importer” contract. If this was unacceptable to Hahn, BMW would terminate
Hahn’s exclusive dealership on June 30, 1993.

Hahn protested and insisted on the former business relation. BMW withdrew the offer of a standard
importer contract and terminated the exclusive dealer relation on June 30, 1993. Hahn filed a
complaint for specific performance and damages against BMW to compel it to continue the
exclusive dealership.

Summons was served on BMW thru the DTI pursuant to Rule 14, 14 of RoC. DTI sent the
complaint, summons etc. to BMW via mail. RTC granted preliminary injunction.
BMW moved to dismiss, contending that RTC did not acquire jurisdiction over it thru the
summons to DTI because BMW was a foreign corporation not doing business in PH. Hahn claims
that BMW was doing business in PH thru him as agent of BMW.

RTC deferred resolution on the motion to dismiss until after trial on the merits. CA found that
RTC committed gadalej when it deferred resolution of the motion. It resolved the motion, ruling
that BMW was not doing business in the country and, thus, jurisdiction over BMW could not be
acquired thru service of summons on DTI. Hence this appeal.

ISSUE:
Whether Hahn is the agent of BMW such that BMW is doing business in PH through Hahn.
HELD: YES.
Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign corporation, or a
nonresident joint stock company or association, doing business in the Philippines, service
may be made on its resident agent designated in accordance with law for that purpose, or,
if there be no such agent, on the government official designated by law to that effect, or on
any of its officers or agents within the Philippines.
“Doing business in the PH” under 3(d) of the Foreign Investments Act of 1991 (RA 7042) states
that the phrase includes “appointing representatives or distributors domiciled in the PH” but not if
the representative “transacts business in its own name and for its own account.”

If Hahn is the agent of BMW in PH, BMW may be considered doing business in PH and RTC
acquired jurisdiction over BMW from the service of summons on DTI. If Hahn is an independent
dealer albeit of BMW cars and products, BMW is not considered doing business in PH and RTC
did not acquire jurisdiction over BMW.

1) Hahn claimed that he took orders for BMW cars and transmitted them to BMW. BMW fixed
the down payment and pricing charges, notified Hahn of the scheduled production month for
the orders, and reconfirmed the orders. Payment was made by the buyer directly to BMW. Hahn
was credited a commission of 14% of the purchase price. Upon confirmation that the vehicles had
been registered in PH, Hahn received 3% additional. All orders were on invoices and forms of
BMW.

This arrangement shows an agency. An agent receives a commission upon successful conclusion
of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and seller
together, even if no sale is eventually made.

2) As to the service centers and showrooms which Hahn claims he put up at his own expense, he
had to follow BMW specifications as exclusive dealer of BMW in PH. BMW inspected the centers.
That Hahn invested his own money to put up these service centers does not necessarily prove
that he is not an agent of BMW. BMW exercised CONTROL over Hahn’s activities as dealer.

3) RTC properly deferred resolution of the motion to dismiss because there are genuine issues of
facts which can only be determined based on evidence duly presented. Rule 16, 3 authorizes courts
to defer resolution of a motion to dismiss until after trial if the ground it is based on does not appear
to be indubitable. Hahn alleged that whether he is considered agent of BMW, the fact is BMW did
business in PH because it sold cars directly to PH buyers. This was denied by BMW. Thus, the
question of whether BMW was doing business could not be resolved simply by considering the
parties’ pleadings.

The case was remanded to trial court for further proceedings.

6. Conde v. CA, GR L-40242, December 15, 1982, Melencio-Herrera, J. (Art. 1869, NCC)
FACTS:
On April 7, 1938, Margarita, Bernardo, and petitioner Dominga Conde sold, with right of
repurchase within 10 years, a land to Casamira Pasagui, married to Pio Altera for P165. On
November 28, 1945, private respondent Paciente Cordero, son-in-law of the Pasagui and Altera,
signed a document, stating that Altera and Cordero received P165 and that from then on,
possession of the land repurchased will belong to Dominga, Bernardo, and Margarita. However,
this document was not signed by Altera or Pasagui, the vendees-a-retro. Petitioner Dominga
Conde claims that Altera was very ill at the time, so Cordero executed the deed of resale on behalf
of Altera.

Altera, on June 30, 1965, sold the land to Ramon and Catalina Conde, private respondents.
Dominga Conde filed a complaint for quieting of title and declaration of ownership. Conde claims
that Cordero signed the memorandum of repurchase on behalf of Altera. Private respondents claim
that Cordero signed the document only to show that he had no objection to the repurchase and that
he did not receive P165 from Dominga.

Trial court dismissed the complaint. CA affirmed. Hence this petition.

ISSUE:
Whether Conde validly repurchased the land.
HELD: YES.
From execution of the repurchase document in 1945, Conde possessed the land. She paid land
taxes yearly from 1947 to 1969. If as opined by both lower courts that conde had done nothing to
formalize her repurchase, by the same token, neither have vendees-a-retro done anything to
clear their title of the encumbrance therein regarding Conde’s right to repurchase. If, as
alleged, Conde exerted no effort to procure the signature of Altera after Altera recovered from
his illness, neither did Altera nor Pasagui repudiate the deed that their son-in-law Cordero
had signed. Thus, an implied agency must be held to have been created from their silence or lack
of action, or their failure to repudiate the agency. (Art. 1869, NCC) There is nothing in the
document of repurchase to show that Cordero had signed merely to indicate that he had no
objection to Conde’s right of repurchase.

Petitioner was declared the owner of the land.

7. Cosmic Lumber Corporation v. CA, GR 114311, November 29, 1996, Bellosillo, J. (Sale of
land by agent, authority must be written; Art. 1878 [5]; interpretation of SPA)
FACTS:
Cosmic executed a Special Power of Attorney, appointing Paz Villamil Estrada as attorney-in-fact
to “initiate, institute and file any court action for the ejectment of xxx squatters of the entire lot
9127 and 443 xxx and for this purpose to appear at the pre-trial conference and enter into any
stipulation of facts and/or compromise agreement so far as it shall protect the rights and
interest of the corporation in the aforementioned lots.” Thus, Paz filed an action for ejectment
of private respondent Isidro Perez and recover possession of a portion of Lot 443 in RTC.

But Paz entered into a compromise agreement with Perez, selling the portion of Lot 443 to Perez:
2. That to buy peace said defendant (Perez) pays unto the plaintiff through herein attorney-
in-fact (Paz) the sum of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of
this compromise agreement over said portion of 333 square m. of lot 443
The agreement was approved by the trial court and judgment was rendered in accordance
therewith. The decision became final but was not executed within the 5-year period from its
finality. Perez filed a complaint to revive judgment (Case 10459)

Cosmic claims that it was only when it was served with summons in Case 10459 that it came to
know of the compromise agreement entered into between Paz and Perez. Thus, it sought annulment
of the trial court judgment based on the agreement on the grounds that Paz did not have authority
to dispose of Cosmic’s ownership over the land; that Paz’s authority to enter into a compromise
agreement was limited to the eviction of the squatters in order that Cosmic may possess the entire
lot; that the P26,640 consideration of the agreement was never received by Cosmic.

CA dismissed the complaint, finding that not one of the grounds for annulment of judgment exists.
Hence this petition.

ISSUE:
Whether the judgment based on the compromise agreement is valid.
HELD: NO.
Cosmic claims that the trial court decision is void because the compromise agreement on which it
is based is void. We agree.

1) The authority granted Paz in the SPA was explicit and exclusionary- for her to institute any
action in court to eject all persons found on the lots so that Cosmic could take material possession
thereof, and for this purpose, to appear at the pretrial and enter into any stipulation of facts
and/or compromise agreement but only insofar as this was protective of the rights and
interests of Cosmic in the property. Nowhere was Paz granted expressly or impliedly any power
to sell the property. The power to sell cannot be inferred from the authority to compromise because
of the explicit limitation that the compromise shall be only so far as it protects the rights and
interest of Cosmic in the lots. The alienation by sale of an immovable is not protective of the
right of Cosmic to possess the lots, more so when the land was sold only for P80/m2, much less
than its assessed value of P250/m2.

When the sale of a piece of land or interest thereon is thru an agent, the authority of the agent shall
be in writing, else the sale is void (A1874, NCC). A SPA is necessary to enter into any contract
by which the ownership of an immovable is transmitted or acquired either gratuitously or for a
valuable consideration (A1878, [5]). The mandate required by law to enable an appointee of an
agency couched in general terms to sell must be one that expressly mentions a sale or that
includes a sale as a necessary ingredient of the act mentioned. A power of attorney must express
the powers of the agent to sell real estate in clear and unmistakable language. When there is
reasonable doubt that the language used conveys such power, no such construction shall be given
the document.

Thus, by selling to Perez, Paz acted without authority. The sale ipso jure is void. So is the
compromise agreement. The judgment based thereon is thus also void.

2) The grounds to annul judgment are that it is void for want of jurisdiction, or for lack of due
process of law, or it was obtained by fraud. Since the judgment of the trial court emanated from a
void compromise agreement, the trial court had no jurisdiction to render judgment based thereon.
The judgment based on the void compromise agreement is void.

3) A judgment based on a compromise entered into by an attorney without specific authority from
the client is void. A defendant against whom a judgment based on a compromise is sought to be
enforced may file a petition for certiorari to quash the execution. He could not move that the
compromise be set aside since he was not a party to the compromise. The CA’s obiter that the
nullity of the compromise should be raised as a defense against its enforcement is not legally
feasible. Cosmic could not question the compromise agreement in the action to revive compromise
judgment since it was never privy to such agreement. Paz may have been the attorney-in-fact,
but she could not legally bind Cosmic thereto as she was not entrusted with a special authority to
sell the land as required in A1878 (5) of NCC.

4) It may be argued that Cosmic knew of the compromise since the principal is chargeable with
and bound by the knowledge of or notice to his agent while the agent was acting as such. But
the general rule is intended to protect those who exercise GF and not as a shield for unfair dealing.
Hence, there is an exception to the general rule as where the dealings of the agent are such as to
raise a clear presumption that he will not communicate to the principal the facts in
controversy. The logical reason is that where the agent is committing a fraud, it is contrary to
common sense to expect that he would communicate the facts to the principal. An agent engaged
in perpetration of a fraud upon his principal for his own benefit is not really acting for the
principal but for himself, entirely outside the scope of his agency.

8. Siasat v. IAC, GR L-67889, October 10, 1985, Gutierrez, Jr., J. (Universal, General,
Special agent
FACTS:
Teresita Nacianceno, private respondent, convinced officials of Department of Education and
Culture (DEC) to purchase P1M worth of national flags for the use of public schools throughout
the country. Nacianceno contacted the owners of United Flag Industry. After the transaction was
discussed, this document was drawn up:
Mrs. Tessie Nacianceno,
This is to formalize our agreement for you to represent United Flag Industry to deal with
any entity or organization, private or government in connection with the marketing of our
products-flags and all its accessories.
 For your service, you will be entitled to a commission of thirty (30%) percent.
Signed
Mr. Primitivo Siasat
Owner and Gen. Manager
On Oct. 16, 1974, the first delivery of 7,933 flags was made by UFI. On Oct. 17, 1974,
Nacianceno’s authority to represent UFI was revoked by petitioner Primitivo Siasat. There was a
second delivery of 7,833 flags. Nacianceno learned that Siasat had already received payment for
the second delivery, but when she confronted petitioners, they denied receipt of payment and at
the same time claiming that Nacianceno had no participation as to the second delivery and that the
agency had already been revoked.

Nacianceno filed an action in CFI to recover her 30% commission on the second delivery. Trial
court ruled in her favor. IAC affirmed. Hence this petition for review.

ISSUE:
Whether Nacianceno is entitled to the 30% commission on the second delivery.
HELD: YES.
Siasat claims the authorization making Nacianceno petitioner’s representative merely states that
she could deal with any entity in connection with the marketing of their products for 30%
commission; there was no specific authorization for the sale of 15,666 flags to DEC. He claims
that the revocation of the agency on Oct. 17, 1974 with mutual consent of the parties forecloses
Nacianceno’s claim of 30% commission on the second transaction.

1) There are several kinds of agents. A universal agent is one authorized to do all acts for his
principal which can be lawfully delegated to an agent. A general agent is one authorized to do all
acts pertaining to a business of a certain kind or at a particular place. A special agent is one
authorized to do some particular act or to act upon some particular occasion, like acts usually in
accordance with specific instructions or under limitations necessarily implied from the nature of
the act to be done.

Here, the Nacianceno was instituted as a general agent. It can be easily seen by the way general
words were employed in the agreement that no restrictions were intended as to the manner
the agency was to be carried out or in the place where it was to be executed. The power granted
was so broad that it practically covers the negotiations leading to, and the execution of, a
contract of sale of Siasat’s merchandise with any entity or organization.

2) The Supreme Court found that there was only one transaction despite there being two deliveries.
The government’s procurement process did not repeat and there were mere indorsements for the
release of funds. Thus, the revocation of agency could not prevent Nacianceno from earning her
commission because it came too late, the contract of sale having already perfected and partly
executed on Oct. 16.

The principal cannot deprive his agent of the commission agreed upon by cancelling the agency
and, thereafter, dealing directly with the buyer.
9. Veloso v. CA, GR 102737, August 21, 1996, Torres, Jr., J. (When special power is stated
in general power of attorney like power to sell land, no need to execute separate SPA)
FACTS:
Francisco Veloso was the owner of a land in Tondo. A new title was issued in the name of
Aglaloma Escario. Veloso filed an action for annulment of documents and reconveyance. Hee
claims that he never authorized anybody, not even his wife Irma, to sell it. He claims that when
his wife left for abroad, he found his copy of the land title was missing. He discovered that his title
in the register of deeds was already cancelled in favor of Escario. The transfer to Escario was
supported by a General Power of Attorney and deed of absolute sale executed by Irma Veloso.
Francisco Veloso claims that his signature in the GPA was falsified. Thus, the sale to Escario was
void. Escario claims that she was a buyer in good faith.

Trial court ruled that Escario was the owner of the land. CA affirmed. Hence this petition.

ISSUE:
Whether the GPA authorized the sale of the land.
HELD: YES.
1) The GPA was valid and regular on its face. It was notarized and thus carries the evidentiary
weight conferred upon it as to its due execution. While it is denominated as a general power of
attorney, it stated an authority to sell:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and
hereditaments or other forms of real property, more specifically TCT No. 49138, upon such
terms and conditions and under such covenants as my said attorney shall deem fit and
proper.
Thus, there was no need to execute a separate and special power of attorney since the general
power of attorney had expressly authorized the agent or attorney in fact the power to sell the
property. The SPA can be included in the general power when it is specified therein the act
or transaction for which the special power is required.

Whether the instrument be denominated GPA or SPA, what matters is the extent of the power s
contemplated upon the agent.

2) Veloso failed to sustain his allegation of forgery.

10. Pelayo v. Perez, GR 141323, June 08, 2005, Austria-Martinez, J.

FACTS:
David Pelayo, by a deed of absolute sale, conveyed to Perez 2 lands. Loreza Pelayo, wife of David,
signed as witness but only on the third page on the space provided for witnesses, on account of
which Perez’s application for registration of the deed with the register of deeds in Davao was
denied. Perez asked Loreza to sign on the first and second pages, but she refused. Perez filed a
complaint for specific performance against David and Loreza.

Pelayos claim that as the lands were illegally occupied by some persons against whom they filed
an ejectment case, they and Perez, their friend and known at the time as a leftist and thus feared
by many, just made it appear in the deed that the lots were sold to Perez to frighten the illegal
occupants. David also claims that the deed was without his wife Loreza’s consent and htus, under
Art. 166 of the NCC, it is void. Perez claims that the lots were given to him by Pelayos in
consideration for his services as attorney-in-fact to negotiate with the illegal occupants-
defendants in the ejectment suit.

RTC ruled that the deed of sale was void. CA reversed, declaring the deed as valid and ordered
Loreza to sign on all pages. Hence this petition for review on certiorari.

ISSUE:
Whether the deed of sale to Perez is valid.
HELD: YES.
1) Loreza, by affixing her signature to the deed of sale on the space provided for witnesses, is
deemed to have given her implied consent to the contract of sale. A wife’s consent to the husbands
disposition of conjugal property does not always have to be explicit or set forth in any particular
document, as long as it is shown by acts of the wife that such consent was given. Here, while it
appears on the face of the deed that Loreza signed only as witness, circumstances show that Loreza
was fully aware of the sale of conjugal property and consented thereto. Petitioners admitted that
they have been having serious problems, including threats to the life of David, due to conflicts
with the illegal occupants of the land so that Perez offered his help in driving them out. Human
experience tells us that a wife would surely be aware of serious problems such as threats to her
husband’s life. It is highly improbable for Loreza not to be aware of what her husband was doing
to remedy such problems.

2) As to the claim of petitioners that the deed is invalid under Art. 1491 (2) of NCC, we find the
argument unmeritorious:
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another:
Xxx
(2) Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given;

The prohibition against agents purchasing property in their hands for sale or management does not
apply if the principal consents to the sale. Petitioners, by signing the deed of sale in favor of
Perez, are deemed to have given their consent to the sale of the property.

*p.419 De Leon ATP, note 39 under Art. 1868 (5).

11. Bravo-Guerrero v. Bravo, GR 152658, July 29, 2005, Carpio, J.

FACTS:
Spouses Mauricio and Simona Bravo owned 2 lands. Simona executed a GPA appointing Mauricio
as her attorney-in-fact. In the GPA, she authorized Mauricio to mortgage or otherwise
hypothecate, sell, etc. “any and all of my property xxx.” Mauricio mortgaged the properties to
PNB and DBP for P10k and P5k respectively.

Mauricio later executed a deed of sale with assumption of mortgage conveying the lands to Roland
Bravo (son of Sps.), Ofelia Bravo, and Elizabeth Bravo (grandchildren). Mauricio and Simona
died.
Edward (grandchild) filed an action for judicial partition of the properties, claiming that he and the
other grandchildren of Mauricio and Simona are co-owners of the lands by succession. David Jr.
(grandchild) also filed a complaint-in-intervention impugning the validity of the deed of sale and
praying for partition.

RTC upheld the deed of sale. CA reversed, declaring the deed of sale void for lack of Simona’s
consent and because the GPA executed by Simona was not sufficient to authorize Mauricio to sell
the properties as Art. 1878 of NCC requires a SPA for such transactions. Hence this petition.

ISSUE:
Whether Mauricio was validly authorized to sell the lands under the GPA.
HELD: YES.
True, Art. 1878 of NCC requires a SPA for an agent to execute a contract that transfers ownership
of an immovable. But Art. 1878 refers to the nature of the authorization, not to its form. Even
if a document is titled GPA, the requirement of a SPA is met if there is a CLEAR MANDATE
from the principal specifically authorizing the performance of the act. The SPA can be
included in the general power when it is specified therein the act or transaction for which
the special power is required. Here, Simona expressly authorized Mauricio in the GPA to sell,
assign, dispose “of any and all my property xxx.” These provisions in the GPA constitute a clear
and specific mandate to Mauricio to sell the lands. Even if it is called a GPA, the specific provisions
in the GPA are sufficient for the purposes of Art. 1878. These provisions in the GPA likewise
indicate that Simona consented to the sale of the properties.

12. PNB v. Sta. Maria, GR L-24765, August 29, 1969, Teehankee, J.

FACTS:
PNB filed an action against Maximo Sta. Maria and his 6 brothers and sisters, Valeriana, Emetria,
Teofilo, Quintin, Rosario, and Leonila, all surnamed Sta. Maria, for collection of certain amounts
representing unpaid balances on 2 sugar crop loans.

The loans were obtained by Maximo from PNB under a SPA executed in his favor by his 6 siblings
which gave him the authority “to mortgage, or convey as security to any bank, company or to
any natural or juridical person, our undivided shares over a certain parcel of land together the
improvements thereon xxx.” The land is jointly owned by all of them.

Valeriana alone also executed an SPA authorizing Maximo “to borrow money and make, execute,
sign and deliver mortgages of real estate now owned by me standing in my name and to make,
execute, sign and deliver any and all promissory notes necessary in the premises.”

By virtue of the 2 SPAs, Maximo applied for the 2 crop loans. As security, Maximo mortgaged,
among others, the land jointly owned by him and his 6 siblings.

RTC ruled in favor of PNB. Hence this appeal by Maximo’s 6 siblings. The 6 siblings claim that
they did not give Maximo the authority to borrow money but only to mortgage the real estate
jointly owned by them. They claim that they did not benefit from the loan.
ISSUE:
Whether the SPA authorizing the mortgage of the land included the power to borrow money.
HELD: NO.
1) PNB has no cause of action against the siblings (except Valeriana) as to hold them liable for
the unpaid balance of the loans obtained by Msximo. In BPI v. De Coster, we held that the power
of attorney by the wife to the husband to transact the wife’s business did not authorize the
husband to make her liable as surety for the payment of the debt of a third person. We cited the
fundamental construction rule that “where in an instrument powers and duties are specified and
defined, that all of such powers and duties are limited and confined to those which are specified
and defined, and all other powers and duties are excluded.”

In De Villa v. Fabricante, we held that where the power of attorney given to the husband by the
wife was limited to a grant of authority to mortgage a land titled in the wife’s name, the wife may
not be held liable for payment of the mortgage debt contracted by the husband, as the authority
to mortgage does not carry with it the authority to contract obligation. There is a difference
between authority to mortgage and authority to contract obligation.

The authority granted by defendants/siblings (except Valeriana) to Maximo was merely to

mortgage the jointly-owned property. They did not grant Maximo any authority to contract for
any loans in their behalf. Only Maximo and Valeriana must answer for said loans and the other
defendants’ only liability is that the real estate they authorized to be mortgaged would be subject
to foreclosure.

2) PNB’s argument that “a mortgage is simply an accessory contract, and that to effect the
mortgage, a loan has to be secured” falls far short of the mark. Maximo secured the loan on his
own account and the other siblings had authorized him to mortgage their undivided shares of the
real property jointly owned by them. But that was the extent of their authority and consequent
liability, to have the real property answer for the loan in case of non-payment.

It is not unusual in family and business circles that one would allow his property or an undivided
share in real estate to be mortgaged by another as security, either as accommodation or for
valuable consideration, but grant of such authority does not extend to assuming personal liability
for any loan secured by the grantee.

3) As to the extent of Valeriana’s liability, she is not joint and several or solidarily liable, but only
jointly liable pursuant to Art. 1207 of NCC that “xxx. There is solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires solidarity.”
In the additional SPA executed by Valeriana, she did not grant Maximo authority to bind her
solidarily on any loans.

13. BA Finance Corporation v. CA, GR 94566, July 3, 1992, Medialdea, J.

FACTS:
Sps. Gaytano applied for and was granted a loan with respondent Traders Royal Bank for P60k. in
a letter addressed to TRB, Philip Wong, as credit administrator of BA Finance Corporation, for
and in behalf of BA Finance, undertook to guarantee the loan of Sps. Gaytano:
 Xxxp lease be advised that we unconditionally guarantee full payment in peso value the
said accommodation (sic) upon non-payment by subject up to a maximum amount of
P60,000.00.

There was a balance of P85k on the loan. Since Sps. Gaytano refused to pay their obligation, TRB
filed in trial court a complaint for sum of money against Sps. Gaytano and BA Finance. BA
Finance raised the defense of lack of authority of Philip Wong to bind the corporation.

Philip Wong claims that he had authority to issue guarantees based on the memorandum given to
him by BA Finance on his lending authority, which partly reads:
I am pleased to delegate to you in your capacity as Credit Administrator the following
lending limits:
a) P650,000.00 — Secured Loans
b) P550,000.00 — Supported Loans
c) P350,000.00 — Truck Loans/Contracts/Leases
d) P350,000.00 — Auto Loan Contracts/Leases
e) P350,000.00 — Appliance Loan Contracts
f) P350,000.00 — Unsecured Loans
Total loans and/or credits [combination of (a) thru (f) extended to any one borrower
including parents, affiliates and/or subsidiaries, should not exceed P750,000.00. In
exercising the limits aforementioned, both direct and contingent commitments to the
borrower(s) should be considered.

RTC held that only Sps. Gaytano were liable. CA held that BA Finance was also liable. Hence this
petition.

ISSUE:
Whether BA Finance’s credit administrator had authority to guarantee the loan of Sps. Gaytano.
HELD: NO.
Although Wong was authorized to approve loans even up to P350k without security, which is far
above the subject of guaranty of P60k, nothing in the memorandum expressly vests on him power
to issue guarantees. We cannot agree with TRB that the phrase “contingent commitment” in the
memorandum means guarantees. A power of attorney of an agent should not be inferred from
the use of vague or general words. Guaranty is not presumed. It must be expressed and cannot
be extended beyond its specified limits. In BPI v. Coster we held that a wife who gave her
huspand power of attorney to loan money did not authorize him to make her liable as surety for
the payment of the debt of a third person.

14. Sargasso Construction & Development Corporation v. PH Ports Authority, GR 170530,

July 5, 2010, Mendoza, J.
FACTS:
SCDC was awarded the construction of Pier 2 in La Union after public bidding by respondent
PPA. Thru a letter of Mr. Go, executive director, SCDC offered to undertake the reclamation
between the Timber Pier and Pier 2 of the San Fernando Port, LU for P36M. PPA replied thru its
assistant general manager Landicho, whose letter stated that the offer may be favorable considered
if the offer price was reduced to P30M, “subject to the approval of higher authority.”

Later, a notice of award signed by PPA general manager Dayan was sent to SCDC for the
reclamation contract for P30M. The contract proposal for reclamation was presented to the PPA
board. But in a meeting by PPA board of directors, the board decided not to approve the contract
proposal.

SCDC filed a complaint for specific performance and damages in RTC, alleging that PPA’s
unjustified refusal to comply with its undertaking led to the delay in the implementation of the
award to it and put on hold SCDC’s men and resources earmarked for the project. PPA claims that
the notice of award was revoked when the supplemental agreement which should have
implemented the award was denied approval by PPa’s board.

RTC ruled in favor of SCDC. CA reversed, dismissing SCDC’s complaint. Hence this petition.

ISSUE:
Whether PPA is bound by the notice of award sent by its general manager.
HELD: NO.
SCDC claims that the notice of award proves that a contract has already been perfected and that
PPA is bound by the acts of its general manager under the doctrine of apparent authority.

1) The elements of contract are consent, object, and cause. A government or public contract is a
contract entered into by state officers acting on behalf of the state and in which the entire people
of the state are directly interested. It relates wholly to matters of public concern. It is similar to a
private contract under the Civil Code with the same requisites. The issue of reclamation here
involves a government infrastructure project. The applicable rules and regulations on government
contracts or projects apply.

2) On the matter of entering into negotiated contracts by GOCCs, the provisions of existing laws
are clear in requiring the governing board’s approval (EO380 as amended by IB 10.6.2, Revised
Administrative Code).

3) Contracts to which the government is a party are generally subject to the same laws and
regulations which govern the validity of contracts between private individuals. But a government
contract is perfected only upon approval by a competent authority where such approval is
required.

The contracting officer functions as agent of the PH government for the purpose of making the
contract. But the contracting official posseses only actual agency authority, that is, his
contracting power exists, where it exists at all, only because and by virtue of a law creating or
conferring it. He may make only such contracts as he is so authorized to make. The government
is bound only to the extent of the power it has actually given its officers-agents. Conformably
to a fundamental principle in agency, the acts of such agents in entering into contracts beyond their
authority do not bind the government. Under Art. 1881 of NCC, the agent must act within the
scope of his authority to bind his principal.
The law merely vests the general manager the power to sign contracts and perform such other
duties as the board may assign. Thus, unless PPA’s board authorizes its general manager, the
latter cannot bind PPA to a contract. SCDC failed to present competent evidence to prove that
PPA’s general manager possessed actual authority delegated either by PPA’s board or by statutory
provision. The authority of government officials to represent the government in any contract must
proceed from an express provision of law or valid delegation of authority.

4) SCDC’s invocation of the doctrine of apparent authority (or holding out theory/doctrine of
ostensible agency) is misplaced. This doctrine, in the realm of government contracts, has been
restated to mean that the government is not bound by unauthorized acts of its agents, even
though within the apparent scope of their authority. Under the law on agency, however,
apparent authority is defined as the power to affect the legal relations of another person by
transactions with third persons arising from the other manifestations to such third person such that
the liability of the principal for the acts and contracts of his agent extends to those which are within
the apparent scope of the authority conferred on him, although no actual authority to do such
acts or to make such contracts has been conferred.

This doctrine imposes liability not as the result of the reality of a contractual relationship but
rather because the actions of a principal or an employer in somehow misleading the public
into believing that the relationship or authority exists. Apparent authority may be ascertained
thru 1) the general manager which the corporation holds out as an officer or agent as having the
power to act or the apparent authority to act in general with which it clothes him, or 2) the
acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
whether within or beyond the scope of his ordinary powers.

Thus, apparent authority is determined only by the ACTS OF THE PRINCIPAL and NOT by
the acts of the AGENT. The principal is thus not responsible where the agent’s own conduct have
created the apparent authority. Here, not a single act of PPA, acting thru its board, was cited as
clothing its general manager with apparent authority.

15. Strong v. Repide, GR 2101, November 15, 1906, Tracey, J.

FACTS:
Repide purchased Mrs. Strong’s shares in Philippine Sugar Estates Development Company thru
Repide’s broker, Sloane. Sloane dealt with Strong’s agent, Jones, who had the script in her
possession and who made the sale without the knowledge of Strong. Strong brought this action to
recover 800 shares of the capital stock of PSEDC. Strong claims that her agent had no power to
sell her stock.

Jones was acting as Strong’s agent gratuitously, not only under a written power special in terms to
collect money, but also as a general agent managing all her business under a parol employment,
the terms of which are not in evidence. Jones held other securities of Strong and had on at least
one prior occasion, without special instruction, sold other of her stocks, understanding that the act
was within the scope of his general agency.

ISSUE:
Whether Jones had authority to sell Strong’s stock.
HELD: NO.
1) Art. 1713 of the Civil Code (*old) reads:
"An agency stated in general terms only includes acts of administration. In order to
compromise, alienate, mortgage, or to execute any, other act of strict ownership an express
mandate is required."
Such mandate may be either oral or written, may stand by itself or may be included in the general
power, the vital thing being that the right to sell shall be express or shall be a necessary ingredient
of the power that is expressed. The only express commission in evidence to dispose of any stock
is found in an interview between Strong and Jones in which she told Jones, speaking of her shares,
“not part with them until I got their face value.” While the words have their effect as evidence of
a preexisting power, they do not sufficiently define the power. The sale of Jones of other stock
at another time, his possession of the shares all add to the force of these words, but they fail to
reveal the terms of the preexisting power. It may have been general or special, or express, but on
the other hand it may have been merely assumed by Strong and Jones to follow as a matter of
course from Jones’ general power of administration. This would lead to the very assumption
prohibited by Art. 1713. The general management of Strong’s property did not necessitate
incidentally the sale of stock. Thus, we fail to find proof of an effective power given Jones to
dispose of the stock.

2) It is urged that we apply estoppel. By Art. 1719 it is provided that an agent cannot do anything
beyond the limit of his power. In commenting on this, Dalloz, after stating that the acts of an agent
beyond his limited powers are null, states three qualifications whereby the principal is held
bound:
1) Where his acts have contributed to deceive a third person in good faith; 2) Where the
limitations upon the power created by him could not have been known by a third person;
and 3) Where he has placed in the hands of the agent instrument signed by him in blank.

When Sloane sent written inquiry whether the shares were for sale, Strong’s husband referred
Sloane to Jones with whom he was directed to consult as he had the shares in his possession. While
the referral may have been made with a view to a sale, it was not inconsistent with Jones’ office
as general administrator and adviser of Strong, and is by Strong’s husband statted to have been a
direction to consult and not to negotiate. Had Repide made inquiry as was incumbent on him
as to the extent of the agent’s powers, he might have required production of the written power of
attorney from Strong and that, upon inspection, would have been sufficient to send him for further
assurance to the grantor of the power and no misunderstanding could have arisen. Thus, we cannot
find in the proofs either acts contributing to deceive Repide or limitations upon the power of
attorney which could not have been known to him, nor do we discover the third qualification.

16. Gold Star Mining Co., Inc. v. Lim-Jimena, GR L-25301, October 26, 1968, Reyes, JBL.,
J.
FACTS:
Lincallo bound himself to turn to Victor Jimena ½ of the proceeds from all mining claims that he
would purchase with the money advanced by Jimena, including the lands constituting the mining
claims. Lincallo assigned the mining rights to Gold Star Mining Co. Lincallo entered into various
contracts in his own name without the slightest intimation of Jimena’s interests over the same.
Lincallo entered into an agreement with Gold on the allotment of 45% royalties. Lincallo also
leased mining claims to Cabarrus who, in turn, transferred to Marinduque Iron Mines Agents his
rights under the lease. 43% of the royalties due from Marinduque Iron were agreed to be paid to
Lincallo.

Jimena repeatedly apprised Gold and Marinduque Iron of his interests over the mining claims
assigned/leased by Lincallo and demanded payment of his ½ share in the royalties. Both
corporations ignored Jimena’s demands. Jimena also demanded ½ share from Lincallo, but not
only did Lincallo fail to settle his accounts with Jimena, but he also transferred 35% of his 45%
share in royalties from Gold to one Tolentino.

Jimena filed suit against Lincallo, Gold, Marinduque Iron, and Tolentino to recover his ½ share.
Trial court ruled in favor of Jimena (substituted by his widow and children). CA affirmed. Hence
this petition.

ISSUE:
Whether Jimena has a cause of action against Gold.
HELD: YES.
Gold claims that Jimenas has no cause of action against it because there is no privity of contract
between Gold and Jimena.

We are of the same opinion as the CA that Jimenas have a cause of action against Gold:
“While there is no privity of contract between them, yet the common subject-matter supplies the
juridical link. Jimena made demands upon Gold for his ½ share of the royalties but all in vain so
Jimena was constrained to implead Gold Star because it refused to recognize his right.

From another standpoint, it can be said that Lincallo, in transferring the mining claims to Gold
Star (without disclosing that Jimena was a co-owner xxx), acted as Jimena’s agent with respect
to Jimena’s share of the claims. Under such conditions, Jimena has an action against Gold
pursuant to Art. 1883 of NCC, which provides that the principal may sue the person with whom
the agent dealt with in his (agent’s) own name, when the transaction involves ‘things belonging
to the principal.’”

17. National Food Authority v. IAC, GR 75640, April 05, 1990, Paras, J.
FACTS:
Medalla, as commission agent of Superior Shipping Corporation, entered into a contract for hire
of MV Sea Runner with National Grains Authority. Medalla was to transport on the MV Sea
Runner 8,550 sacks of rice belonging to NGA/NFA from Occidental Mindoro to Malabon, Metro
Manila. The delivery was completed. SSC on November 5, 1979 wrote NFA requesting that
payment for freightage and other charges be made to SSc and not to Medalla because SSC was the
owner of the vessel MV Sea Runner. NFA replied that it could not grant the request as the contract
was entered into between NFA and Medalla who did not disclose that he was acting as mere agent
of SSC. Thus, on Nov. 19, 1979, NFA paid Medalla. SSC demanded Medalla turn over the amount
paid to him, which demand was ignored. SSC thus filed the instant complaint.

Trial court ruled in favor of SSC. CA affirmed. Hence this petition.

ISSUE:
Whether this case falls within the exception of the general rule in Art. 1883 of NCC.
HELD: YES.
NFA claims that it is not liable under the exception in Art. 1883 as it had no knowledge of the fact
of agency between SSC and Medalla. It claims that an undisclosed principal cannot maintain an
action upon a contract made by his agent unless the principal was disclosed in such contract.

NFA’s contention is untenable. Art. 1883 provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal.
In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.
The provision of this article shall be understood to be without prejudice to the actions
between the principal and agent.
Consequently, when things belonging to the principal (SSC) are dealt with, the agent is bound to
the principal although he does not assume the character of such agent and appears acting in his
own name.Iin other words, the agent’s apparent representation yields to the principal’s true
representation and that, in reality and in effect, the contract must be considered as entered into
between the principal and the third person. Corollarily, if the principal can be obliged to
perform his duties under the contract, then it can also demand the enforcement of its rights arising
from the contract.

18. Awad v. Filma Mercantile Co., Inc., GR L-25950, December 24, 1926, Ostrand, J. (p. 447)
FACTS:
E. Awad & Co. delivered merchandise worth P11,140 to Chua Lioc to be sold on commission by
Chua. Representing himself as owner, Chua sold it to Filma for P12k. Chua’s debts worth P5,497
was deducted from the purchase price, leaving a balance of P6,657 which Filma promised to pay
to Chua. Filma immediately offered the merchandise for sale. Awad, having ascertained that the
goods entrusted to Chua was being offered for sale by Filma, wrote a letter to Filma, informing it
that since the merchandise belonged to Awad, the purchase price should be paid to them. Filma
advised Awad that it cannot comply with Awad’s request. Awad filed a complaint against Filma
demanding P11,140 (Awad had previously filed an action against Chua Lioc also [Case 26]). Filma
claims that it bought the merchandise in good faith.

The Philippine Trust Company had filed a complaint against Chua to recover P1,036, and the
balance due Chua from Filma was garnished (Case 27).

ISSUE:
Whether Filma is liable to Awad for P11,140.
HELD: NO.
The court below dismissed the case on the ground that Awad was only entitled to payment of
P6,657, but which sum Filma had the right to retain subject to the orders of the court in cases 26
and 27. Hence this appeal.
Art. 247 of the Code of Commerce reads:
When the agent transacts business in his own name, it shall not be necessary for him to
state who is the principal and he shall be directly liable, as if the business were for his own
account, to the persons with whom he transacts the same, said persons not having any right
of action against the principal, nor the latter against the former, the liabilities of the
principal and of the agent to each other always being reserved.
Awad points out several circumstances indicating that Filma was aware of the condition under
which the merchandise was entrusted to Chua and thus Filma did not purchase in good faith. If
this were true, it would lead to a decision of the case in favor of Awad, but there is nothing
conclusive about the circumstances referred to and they are insufficient to overcome the
presumption of good faith.

The appealed judgment is in accordance with the law and facts and is affirmed.

19.