III.
Distinguished from other contracts and proceeds in the concept of commissions and not from the
Relationships
Cases:
1. Sevilla v. CA
FACTS:
On Oct. 19, 1960, the Tourist World Service, Inc. leased
an office at Mabini St., Manila for the former's use as a
branch office. When the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla
payable to Tourist World Service Inc. by any airline for any
fare brought in on the efforts of Mrs. Lina Sevilla, 4% was
to go to Lina Sevilla and 3% was to be withheld by the
Tourist World Service, Inc.
On or about November 24, 1961, the Tourist World
Service, Inc. appears to have been informed that Lina
Sevilla was connected with a rival firm, the Philippine
Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down
its office.
This was firmed up by two resolutions of the board of
directors of Tourist World Service, Inc. dated Dec. 2,
1961, the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita
Branch, and the second, authorizing the corporate
secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was
terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact
appellants used it since Nov. 1961. Because of this, and
to comply with the mandate of the Tourist World Service,
the corporate secretary Gabino Canilao went over to the
branch office, and, finding the premises locked, and, being
unable to contact Lina Sevilla, he padlocked the premises
on June 4, 1962 to protect the interests of the Tourist
World Service.
When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a complaint
was filed by the herein appellants against the appellees
with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims.
RTC: The trial court held for the private respondents on
the premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the
premises. It likewise found the petitioner, Lina Sevilla, to
be a more employee of said Tourist World Service, Inc.
and as such, she was bound by the acts of her employer.
CA: affirmed
ISSUE:
Whether or not the act of Tourist World Service in
abolishing its Ermita branch was proper and whether or
not there exists an employee-employer relationship
SC:
No, the act of Tourist World Service in abolishing its Ermita
branch was not proper. The Supreme Court held that
when the petitioner, Lina Sevilla, agreed to manage
Tourist World Service, Inc.'s Ermita office, she must have
done so pursuant to a contract of agency.
In the case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist World
Service, Inc. As compensation, she received 4% of the
payroll, like an employee would.
And as we said, Sevilla herself, based on her letter of
November 28, 1961, presumed her principal's authority as
owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent
Court's recital of facts, that the parties had contemplated
a principal-agent relationship, rather than a joint
management or a partnership.
But unlike simple grants of a power of attorney, the
agency that 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 the mutual interest of the agent and the
principal. Accordingly, the revocation complained of
should entitle the petitioner, Lina Sevilla, to damages
2. Shell v. Firemen's Insurance Co.
Facts:
- A Plymouth car owned by Salvador Sison was
brought to the Shell Gasoline and Service Station
operated by Porfirio De La Fuente for washing, greasing
and spraying upon payment of P8.00.
- Before the greasing job could be completed, the
car fell resulting to damages. The case was immediately
reported to Manila Adjustor Company, the adjustor of the
Firemen’s Insurance Company and the Commercial
Casualty Insurance Company, as the car was insured with
them.
- The car was restored to running condition after
repairs amounting to P1,651.38, and was delivered to
Salvador Sison, who, in turn made assignments of his
rights to recover damages in favor of FIC and CCIC.
- The insurance companies together with Salvador
Sison filed an action for the recovery of the total amount
of the damage from defendants Porfirio de la Fuente and
Shell Company of the Philippines, Ltd on the ground of
negligence.
- CFI of Manila dismissed the complaint.
- CA reversed the judgment and sentenced Shell
and De La Fuente to pay the amount sought to be
recovered, legal interest and costs, jointly and severally.
Issue:
- W/N Shell is liable for the damage.
Held:
- Yes.
- De La Fuente owed his position to the company
and the latter could remove him or terminate his services
at will; the service station belonged to the company and
bore its tradename and the operator sold only products of
the company; the equipment used by the operator
belonged to the company and were just loaned to the
operator and the company took charge of their repair and
maintenance; the employee of the company supervised
the operator and conducted periodic inspection of the
company’s gasoline and service station; price of the
products sold by the operator was fixed by the company,
not by the operator; and the receipt signed by the
operator (for receipt of loaned equipment) indicated he
was a mere agent, are sufficient to conclude that the
operator was an agent and not an independent contractor
- The servicing job on Sison’s automobile was
accepted by De la Fuente in the normal and ordinary
conduct of his business as operator of his co-appellee’s
service station, and the jerking and swaying of the
hydraulic lift which caused the fall of the subject car were
due to its defective condition, resulting in its faulty
operation
- As the act of the agent or his employees acting
within the scope of his authority is the act of the principal,
the breach of the undertaking by the agent is one for
which the principal is answerable.
3. Dela Cruz v. Northern Theatrical Enterprises
(1954)
Alleged principal: (NTEI) Northern Theatrical
Enterprises Inc., Alleged agent: Domingo de la Cruz
(plaintiff)
Facts:
· De la Cruz is a special guard to one of the movie
houses of NTEI.
· Benjamin wanted to gate crash without ticket inside
the movie house but was prevented by the guard De la
Cruz. Infuriated, Benjamin attacked De la Cruz with a
bolo, cornered, De la Cruz shot his gun which killed
Benjamin.
· A homicide case was filed against him and thus,
hired a lawyer. In which, he asked the former employer
for reimbursement of expenses but was refused.
· He filed the present action against the movie
corporation and three members of its board of directors
for recovery and also for damages.
CFI dismissed the case rejecting the theory that he was
an agent of the defendants. No Cause of Action.
Issue:
· Whether a security guard in an employer-employee
relationship is an agent and may recover for damages.
· Whether an employee or servant who in line of duty
and while in the performance of the task assigned to him,
performs an act which eventually results in his incurring
in expenses, caused not directly by his master or
employer or his fellow servants or by reason of his
performance of his duty, but rather by a third party or
stranger not in the employ of his employer, may recover
said damages against his employer. (found in the case)
Ruling: The judgment of the lower court is affirmed. No
costs
Held:
· No, the relationship between the movie
corporation and the plaintiff was not that of
principal and agent because the principle of
representation was in no way involved.
· Plaintiff was not employed to represent the
defendant corporation in its dealings with third parties. He
was a mere employee hired to perform a certain specific
duty or task, that of acting as special guard and staying
at the main entrance of the movie house to stop gate
crashers and to maintain peace and order within the
premises.
· We confess that we are not aware of any law or
judicial authority that is directly applicable to the present
case, and realizing the importance and far-reaching effect
of a ruling on the subject-matter we have searched,
though vainly, for judicial authorities and enlightenment.
All the laws and principles of law we have found, as
regards master and servants, or employer and employee,
refer to cases of physical injuries, light or serious,
resulting in loss of a member of the body or of any one of
the senses, or permanent physical disability or even
death, suffered in line of duty and in the course of the
performance of the duties assigned to the servant or
employee, and these cases are mainly governed by the
Employer's Liability Act and the Workmen's Compensation
Act. But a case involving damages caused to an employee
by a stranger or outsider while said employee was in the
performance of his duties, presents a novel question
which under present legislation we are neither able nor
prepared to decide in favor of the employee.
· But we are not prepared to say and to hold that the
giving of said legal assistance to its employees is a legal
obligation. While it might yet and possibly be regarded as
a normal obligation, it does not at present count with the
sanction of man-made laws.
· If the employer is not legally obliged to give,
legal assistance to its employee and provide him
with a lawyer, naturally said employee may not
recover the amount he may have paid a lawyer hired
by him.
· Viewed from another angle it may be said that the
damage suffered by the plaintiff by reason of the expenses
incurred by him in remunerating his lawyer, is not caused
by his act of shooting to death the gate crasher but
rather by the filing of the charge of homicide which
made it necessary for him to defend himself with
the aid of counsel.
· Still another point of view is that the damages
incurred here consisting of the payment of the lawyer's
fee did not flow directly from the performance of his duties
but only indirectly because there was an efficient,
intervening cause, namely, the filing of the criminal
charges. In other words, the shooting to death of the
deceased by the plaintiff was not the proximate cause of
the damages suffered but may be regarded as only a
remote cause, because from the shooting to the
damages suffered there was not that natural and
continuous sequence required to fix civil
responsibility.
4. Nielson & Company, Inc v. Lepanto Consolidated
Mining Company
Facts:
A contract was made by the parties on January 30, 1937
for a period of 5 years whereby NIELSON operated and
managed the mining properties owned by the LEPANTO
for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the operation
of the mining properties.
In the latter part of 1941, the parties agreed to renew the
contract for another period of five (5) years, but in the
meantime, the Pacific War broke out in December, 1941.
Thus, the operation of the mining properties was
disrupted.
Shortly after the mines were liberated from the Japanese
invaders in 1945, a disagreement arose between NIELSON
and LEPANTO over the status of the operating contract in
question which was renewed expired in 1947. Under the
terms thereof, the management contract shall remain in
suspense in case fortuitous event or force majeure, such
as war or civil commotion, adversely affects the work of
mining and milling.
In the meantime Lepanto took possession of the mining
properties and embarked in rebuilding and reconstructing
the mines and mill. The rehabilitation and reconstruction
of the mine and mill was not completed until 1948. On
June 26, 1948 the mines resumed operation under the
exclusive management of LEPANTO.
On February 6, 1958, NIELSON brought this action against
defendant before the Court of First Instance of Manila to
recover certain sums of money representing damages
allegedly suffered by the former in view of the refusal of
LEPANTO to comply with the terms of a management
contract.
NIELSON held that on account of the war, the contract
was suspended during the war; hence the life of the
contract should be considered extended for such time of
the period of suspension. On the other hand, LEPANTO
contended that the contract should expire in 1947 as
originally agreed upon because the period of suspension
accorded by virtue of the war did not operate to extend
further the life of the contract.
CFI: Dismissed the complaint.
SC: Reversed, ruled in favor of the plaintiff.
LEPANTO filed a motion for reconsideration. They now
assert that the management contract in question is a
contract of agency such that it has the right to revoke and
terminate the said contract, as it did terminate the same,
under the law of agency
ISSUE: WON the management contract is a contract of
agency or a contract of lease of services.
RULING:
In both agency and lease of services one of the parties
binds himself to render some service to the other party.
Agency, however, is distinguished from lease of work or
services in that the basis of agency is representation,
while in the lease of work or services the basis is
employment. The lessor of services does not represent his
employer, while the agent represents his principal.
Agency is a preparatory contract, as agency "does not
stop with the agency because the purpose is to enter into
other contracts." The most characteristic feature of an
agency relationship is the agent's power to bring about
business relations between his principal and third persons.
"The agent is destined to execute juridical acts (creation,
modification or extinction of relations with third parties).
Lease of services contemplate only material (non-
juridical) acts."
In this case, it appears that the principal and paramount
undertaking of Nielson under the management contract
was the operation and development of the mine and the
operation of the mill. All the other undertakings mentioned
in the contract are necessary or incidental to the principal
undertaking — these other undertakings being dependent
upon the work on the development of the mine and the
operation of the mill. In the performance of this principal
undertaking Nielson was not in any way executing juridical
acts for Lepanto, destined to create, modify or extinguish
business relations between Lepanto and third persons. In
other words, in performing its principal undertaking
Nielson was not acting as an agent of Lepanto, 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.
It was also stated that the management contract provides
that Nielson would also act as purchasing agent of
supplies and enter into contracts regarding the sale of
mineral, BUT the contract also provides that Nielson could
not make any purchase, or sell the minerals, without the
prior approval of Lepanto. It is clear, therefore, that even
in these cases Nielson could not execute juridical acts
which would bind Lepanto without first securing the
approval of Lepanto. Nielson, then, was to act only as an
intermediary, not as an agent.
The principal consideration of the employment by Lepanto
of Nielson to operate and manage its mines was the
latter’s know-how and technical services it offered. The
contract thus entered into pursuant to the offer made by
Nielson and accepted by Lepanto was a "detailed
operating contract". Nowhere in the record is it shown that
Lepanto considered Nielson as its agent.
Therefore, the management contract entered into by the
parties is not a contract of agency.
5. Quiroga v. Parsons Hardware
Facts:
A contract was entered into by herein plaintiff Quiroga and
defendant J. Parsons wherein the former granted the
latter with the exclusive right to sale Quiroga beds in the
Visayan Islands subject to conditions.
A complaint was filed by plaintiff averring that defendant
violated the ff. obligations: not to sell the beds at higher
prices than those of the invoices; to have an open
establishment in Iloilo; itself to conduct the agency; to
keep the beds on public exhibition, and to pay for the
advertisement expenses for the same; and to order the
beds by the dozen and in no other manner.
With the exception of the obligation on the part of the
defendant to order the beds by the dozen and in no other
manner, none of the obligations imputed to the defendant
are expressly set forth in the contract executed by
Quiroga and Parsons.
Plaintiff alleged that the defendant was his agent for the
sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency.
Issue: Whether there was a contract of sale or a contract
of agency between the plaintiff and the defendant.
Held:
The contract contains the essential features of a contract
of purchase and sale. There was the obligation on the part
of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the
legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it, and does
not pay its price, but delivers to the principal the price he
obtains from the sale of the thing to a third person, and if
he does not succeed in selling it, he returns it. I By virtue
of the contract between the plaintiff and the defendant,
the latter, on receiving the beds, was necessarily obliged
to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had
not sold the beds.
Not a single one of the clauses in the contract necessarily
conveys the idea of an agency. The words commission on
sales used in clause (A) of article 1 mean nothing else, as
stated in the contract itself, than a mere discount on the
invoice price. The word agency, also used in articles 2 and
3, only expresses that the defendant was the only one that
could sell the plaintiff’s beds in the Visayan Islands. It
must be understood that a contract is what the law defines
it to be, and not what it is called by the contracting parties.
Only the acts of the contracting parties, subsequent to,
and in connection with, the execution of the contract,
must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, but not
when, as in the instant case, its essential agreements are
clearly set forth and plainly show that the contract belongs
to a certain kind and not to another.
6. Gonzalo Puyat & Sons v. Arco Amusement Co.
FACTS
1. Alleged Principal(Buyer): Arco Amusement
Company, respondent, a corporation engaged in the
business of operating cinematographs.
Alleged Agent(Seller): Gonzalo Puyat & Sons,
Inc., petitioner, a corporation doing businesses in Manila,
and acting as exclusive agent in the Philippines for the
Starr Piano Company of Richmond, Indiana, U. S. A., a
company that deals in cinematograph equipment and
machinery
2. Contract: Both parties agreed that Gonzalo
Puyat & Sons would, on behalf of the Arco Amusement
Company, order sound reproducing equipment from the
Star Piano Company and that Arco would pay the Puyat &
Sons, in addition to the price of the equipment, a 10 per
cent commission, plus all expenses, such as, freight,
insurance, banking charges, cables, etc.
3. The petitioner did not show the respondent the
cable of inquiry nor the reply of Star Piano Company but
merely informed the Arco of the price of $1,700. Being
agreeable to this price, the Arco in a letter signed by C. S.
Salmon dated November 19, 1929, formally authorized
the order.
4. The equipment arrived and upon delivery the
price of $1.700, plus the 10 per cent commission agreed
upon and plus all the expenses and charges, was duly paid
by Arco to Puyat & Sons. Same process happened the next
year, this time priced at $1,600. Puyat & Sons ordered
the equipment from Star Piano Company, delivered it to
Arco and the latter payed the price plus the commission
agreed.
5. About three years later, the officials of the Arco
discovered that the price quoted to them by the Puyat &
Sons was not the net price but rather the list price, and
that the Puyat & Sons had obtained a discount from the
Starr Piano Company. Moreover, thru reviews and
literature on prices of machinery and cinematograph
equipment, said officials were convinced that the prices
charged them by the defendant were much too high
including the charges for out-of-pocket expense.
6. For these reasons, they sought to obtain a
reduction from the defendant or rather a reimbursement,
and failing in this they brought the present action for
reimbursement of certain amounts allegedly overpaid by
it on account of the purchase price.
7. RTC - ruled in favour of Gil Puyat & Sons: the
contract between the petitioner and the respondent was
one of outright purchase and sale, and absolved that
petitioner from the complaint.
8. CA - reversed RTC’s decision: the relation
between petitioner and respondent was that of agent and
principal, the petitioner acting as agent of the respondent
in the purchase of the equipment in question, and
sentenced the petitioner to pay the respondent alleged
overpayments. That even if the contract between the
petitioner and the respondent was one of purchase and
sale, the petitioner was guilty of fraud in concealing the
true price and hence would still be liable to reimburse the
respondent for the overpayments made by the latter.
9. SC - reversed CA’s decision, sustained RTC
decision.
ISSUE
Whether or not the contract between petitioner and
respondent is one of agency.
HELD
No, the contract between the petitioner and the
respondent was one of purchase and sale, and not one of
agency.
The contract is the law between the parties and should
include all the things they are supposed to have been
agreed upon. What does not appear on the face of the
contract should be regarded merely as "dealer's" or
"trader's talk", which can not bind either party.
The letters by which the respondent accepted the prices
of $1,700 and $1,600, respectively, are clear in their
terms and admit no other interpretation. The respondent
admitted in its complaint filed with the Court of First
Instance of Manila that the petitioner agreed to sell to it
the first sound reproducing equipment and machinery.
This is incompatible with the pretended relation of agency
between the petitioner and the respondent, because in
agency, the agent is exempted from all liability in the
discharge of his commission provided he acts in
accordance with the instructions received from his
principal, and the principal must indemnify the agent for
all damages which the latter may incur in carrying out the
agency without fault or imprudence on his part (article
1729, Civil Code).
While the letters, state that the petitioner was to receive
ten per cent (10%) commission, this does not necessarily
make the petitioner an agent of the respondent, as this
provision is only an additional price which the respondent
bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale.
Also, to hold the petitioner an agent of the respondent in
the purchase of equipment and machinery from the Starr
Piano Company of Richmond, Indiana, is incompatible
with the fact that the petitioner is the exclusive agent of
the same company in the Philippines. It is out of the
ordinary for one to be the agent of both the vendor and
the purchaser. The facts and circumstances indicated do
not point to anything but plain ordinary transaction where
the respondent enters into a contract of purchase and sale
with the petitioner, the latter as exclusive agent of the
Starr Piano Company in the United States.
It follows that the petitioner as vendor is not bound to
reimburse the respondent as vendee for any difference
between the cost price and the sales price which
represents the profit realized by the vendor out of the
transaction. This is the very essence of commerce without
which merchants or middleman would not exist
7. Lim v. People
FACTS:
Lourdes Lim is a businesswoman, who went to the house
of Maria Ayroso and proposed to sell Ayroso's tobacco.
Ayroso agreed to the proposition of Lim to sell her tobacco
consisting of 615 kilos at P1.30 a kilo.
Lim was to receive the overprice for which she could sell
the tobacco. An agreement was made in the presence of
plaintiff's sister, Salud G. Bantug. Salvador Bantug drew
the document.
Of the total value of P799.50, Lim had paid to Ayroso only
P240.00, and this was paid on three different times.
Demands for the payment of the balance of the value of
the tobacco were made upon Lim by Ayroso.
No further amount was paid prompting Ayroso to file a
complaint against Lim for estafa.
RTC: Lim was found guilty of the crime of estafa, to suffer
imprisonment, indemnify the offended party and in case
of insolvency, subsidize imprisonment shall take effect.
CA: Affirmed the decision of the lower court but modified
the penalty imposed by sentencing her "to suffer an
indeterminate penalty, to indemnify the complainant of
less than 9.50 from the previous amount and without
subsidiary imprisonment.
ISSUE: Whether the receipt is a contract of agency to sell
or a contract of sale of the subject tobacco between
petitioner and the complainant.
HELD: The receipt is a contract of agency to sell.
In an agency to sell, the agent receives the thing to sell
it, and does not pay its price, but delivers to the principal
the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns
it.
It is clear in the agreement, that the proceeds of the sale
of the tobacco should be turned over to the complainant
as soon as the same was sold. The fact that appellant
received the tobacco to be sold at P1.30 per kilo and the
proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods
to the petitioner. The agreement constituted her as an
agent with the obligation to return the tobacco if the same
was not sold.
***Supplemental Explanation***
Aside from the fact that Maria Ayroso testified that the
appellant asked her to be her agent in selling Ayroso's
tobacco, the appellant herself admitted that there was an
agreement that upon the sale of the tobacco she would be
given something. Lim (appellant) is a businesswoman,
and it is unbelievable that she would go to the extent of
going to Ayroso's house and take the tobacco with a jeep
which she had brought if she did not intend to make a
profit out of the transaction. Certainly, if she was doing a
favor to Maria Ayroso and it was Ayroso who had
requested her to sell her tobacco, it would not have been
the appellant who would have gone to the house of
Ayroso, but it would have been Ayroso who would have
gone to the house of the appellant and deliver the tobacco
to the appellant.
8. Pacific Commercial v. Yatco
FACTS: Pacific Commercial Company (PCC) is a corp.
engaged in business as a merchat officed in Manila, Cebu
and Iloilo sold for Victorias Milling Co. (VMC) 4/1/1934 to
12/31/1935, refined sugar manufactured by the latter for
P1,126,135.96 and received by way of commission for this
sale PCC received P29,944.90. VMC paid to the Collector
of Internal Revenue (CIR) P16,944.90 as as manufacturer
and owner of sugar sold. CIR also taxed PCC the same
amount.

Sales were made by PCC in two ways. PCC looked for
purchases of sugar, and one the corresponding purchase
order is obtained, the same is sent to VMC in Manila and
endorses the order to its Negros office, with instructions
to ship the sugar to Manila, Cebu or Iloilo, as the case may
be.The purchase is made for the delivery of the sugar ex-
warehouse of PCC and at other times delivery ex-ship. In
all cases, the bill of lading is sent to PCC. If ex-ship, all
that PCC did was hand over the bill of lading to the
purchaser and collect the price. If ex-warehouse, the
sugar is first deposited in the warehouse of PCC before
delivery to the purchaser.
The court found that of the sugar sold, the amount of
P588,550.41 was ex-warehouse and P567,585.55 was ex-
ship. Considering in the first case that PCC acted as a
commission merchant and in the second a broker, the
court ordered the defendant to return to PCC the amount
paid for the sales of sugar sold ex-warehouse.
ISSUE: Whether or not PCC acted as commission
merchant as to sugar delivered ex-warehouse and mere
commercial broker as to sugar delivered ex-ship.
RULING: Decision of lower court Affirmed. PCC as
commission merchant for sugar delivered ex-warehouse
and commercial broker for ex-ship.
RATIO: The question of whether the appellant, in
connection with the sugar delivered ex-warehouse and
thereafter sold to the purchasers, acted as a commission
merchant , presents no doubt. A commission merchant 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 purchasers or vendors, but
also with the property which is the subject matter of the
transaction. In the present case, the sugar was shipped
by Victorias Milling Co., and upon arrival at the port of
destination, the plaintiff received and transferred it for
deposit in its warehouses until the purchaser called for it.
The deposit of the sugar in the warehouses of the plaintiff
was made upon its own account and at its own risk until
it was sold and taken by the purchaser. There is,
therefore, no doubt that the plaintiff, after taking the
sugar on board until it was sold, had it in its possession
and at its own risk, circumstances determinative of its
status as a commission merchant in connection with the
sale of sugar under these conditions.
There is also no doubt on the question of whether the
plaintiff merely acted as a commercial broker as to the
sale of the sugar delivered to the purchaser ex-ship. The
broker, unlike the commission merchant, has no relation
with the thing he sells or buys. He is merely an
intermediary between the purchaser and the vendor. He
acquires neither the possession nor the custody of the
things sold. His only office is to bring together the parties
to the transaction. These circumstances are present in
connection with the plaintiff's sale of the sugar which was
delivered to the purchaser's ex-ship. The sugar sold under
these conditions was shipped by the plaintiff at its expense
and risk until it reached its destination, where it was later
taken ex-ship by the purchaser. The plaintiff never had
possession of the sugar at any time. The circumstance
that the bill of lading was sent to the plaintiff does not
alter its character of being merely a broker, or constitute
possession by it of the sugar shipped, inasmuch as the
same was sent to it for the sole purpose of turning it over
to the purchaser for the collection of the price. The sugar
did not come to its possession in any sense.
Note: Side issue on double taxation. No double taxation. The tax
is not upon property or products, but upon occupation or
industry. The tax was paid by Aldecoa & Co. and Gil Hermanos in
consideration of the occupation or industry in which each is
engaged. The value of the thing sold is taken into account only
as a basis for the fixing of the amount of the tax and not as the
reason and purpose thereof.
Definitions: “ex warehouse” - used to state that the buyer of
goods is responsible for arranging and paying for them to be
transported from the seller's warehouse
"ex ship" - is a trade term requiring the seller to deliver goods to
a buyer at an agreed port of arrival.
9. Ker v. Lingad
FACTS:
Principal – United States Rubber International
Agent – Ker & Co., LTD
Petitioner was assessed by the then Commissioner of
Internal Revenue Melecio R. Domingo the sum of
P20,272.33 as the commercial broker's percentage
tax, surcharge, and compromise penalty .There was a
request on the part of petitioner for the cancellation of
such assessment, which request was turned down. It filed
a petition for review with the Court of Tax Appeals. The
Court of Tax Appeals held petitioner taxable except as to
the compromise penalty of P500.00, the amount due from
it being fixed at P19,772.33.
Such liability arose from a contract of petitioner with the
United States Rubber International, the former being
referred to as the Distributor and the latter specifically
designated as the Company.
In the contract, there was a crucial stipulation whereby
the Company shall from time to time consign to the
Distributor and the Distributor will receive, accept and/or
hold upon consignment the products specified under the
terms of this agreement in such quantities as in the
judgment of the Company may be necessary for the
successful solicitation and maintenance of business in the
territory, and the Distributor agrees that responsibility for
the final sole of all goods delivered shall rest with him. All
goods on consignment shall remain the property of the
Company until sold by the Distributor to the purchaser or
purchasers, but all sales made by the Distributor shall be
in his name.
It is further agreed that this agreement does not
constitute Distributor the agent or legal
representative of the Company for any purpose
whatsoever. Distributor is not granted any right or
authority to assume or to create any obligation or
responsibility, express or implied, in behalf of or in the
name of the Company, or to bind the Company in any
manner or thing whatsoever.

Moreover, all resale prices, lists, discounts and general
terms and conditions of local resale were to be subject
to the approval of the Company and to change from
time to time in its discretion. On a date to be determined
by the Company, the petitioner, as Distributor, was
required to report to it data showing in detail all sales
during the month immediately preceding, specifying
therein the quantities, sizes and types together with such
information as may be required for accounting purposes,
with the Company rendering an invoice on sales as
described to be dated as of the date of inventory and sales
report.
The Company, at its own expense, was to keep the
consigned stock fully insured against loss or damage by
fire or as a result of fire, the policy of such insurance to
be payable to it in the event of loss. Petitioner, as
Distributor, assumed full responsibility with reference to
the stock and its safety at all times; and upon request of
the Company at any time, it was to render inventory of
the existing stock which could be subject to change.
There was furthermore this equally tell-tale covenant:
"Upon the termination or any cancellation of this
agreement all goods held on consignment shall be
held by the Distributor for the account of the
Company, without expense to the Company, until
such time as provision can be made by the Company for
disposition.
ISSUE:
Whether or not the relationship thus
created is of broker and principal/ agency
RULING:
Yes. Upon the analysis of the contract as
a whole, the relationship created is of broker and
principal/ agency.qq
According to the National Internal Revenue Code, a
commercial broker "includes all persons, other than
importers, manufacturers, producers, or bona fide
employees, who, for compensation or profit, sell or bring
about sales or purchases of merchandise for other persons
or bring proposed buyers and sellers together, or
negotiate freights or other business for owners of vessels
or other means of transportation, or for the shippers, or
consignors or consignees of freight carried by vessels or
other means of transportation. The term includes
commission merchants."
The controlling decision as to the test to be followed as to
who falls within the above definition of a commercial
broker is that of Commissioner of Internal Revenue v.
Constantino. In the language of Justice J. B. L. Reyes, who
penned the opinion: "Since the company retained
ownership of the goods, even as it delivered
possession unto the dealer for resale to customers,
the price and terms of which were subject to the
company's control, the relationship between the
company and the dealer is one of agency, ... ."
An excerpt from Salisbury v. Brooks cited in support of
such a view follows: " 'The difficulty in distinguishing
between contracts of sale and the creation of an agency
to sell has led to the establishment of rules by the
application of which this difficulty may be solved. The
decisions say the transfer of title or agreement to
transfer it for a price paid or promised is the
essence of sale. If such transfer puts the transferee in
the attitude or position of an owner and makes him liable
to the transferor as a debtor for the agreed price, and not
merely as an agent who must account for the proceeds of
a resale, the transaction is a sale; while the essence of
an agency to sell is the delivery to an agent, not as
his property, but as the property of the principal,
who remains the owner and has the right to control
sales, fix the price, and terms, demand and receive
the proceeds less the agent's commission upon
sales made.' "
The terms of the contract, as noted, speak quite clearly.
There is lacking that degree of ambiguity sufficient to give
rise to serious doubt as to what was contemplated by the
parties. A reading thereof discloses that the relationship
arising therefrom was not one of seller and purchaser.
If it were thus intended, then it would not have included
covenants which in their totality would negate the concept
of a firm acquiring as vendee goods from another.
Instead, the stipulations were so worded as to lead to no
other conclusion than that the control by the United States
Rubber International over the goods in question is, in the
language of the Constantino opinion, "pervasive". The
insistence on a relationship opposed to that apparent from
the language employed might even yield the impression
that such a mode of construction was resorted to in order
that the applicability of a taxing statute might be rendered
nugatory. Certainly, such a result is to be avoided.
The Decision of Court of Tax Appeals is affirmed.
10. Hahn v. CA
FACTS:
● Principal - BMW; Agent - Alfred Hahn
● Alfred Hahn is a Filipino citizen doing
business under the name and style "Hahn-
Manila." On the other hand, private
respondent Bayerische Motoren Werke
Aktiengesellschaft (BMW) is a nonresident
foreign corporation existing under the laws of
the former Federal Republic of Germany, with
principal office at Munich, Germany.
● On March 7, 1967, petitioner executed in
favor of private respondent a "Deed of
Assignment with Special Power of Attorney,"
which reads in full as follows:
○ WHEREAS, the ASSIGNOR is the
present owner and holder of the BMW
trademark and device in the
Philippines which ASSIGNOR uses
and has been using on the products
manufactured by ASSIGNEE, and for
which ASSIGNOR is the authorized
exclusive Dealer of the ASSIGNEE in
 the Philippines, the same being
evidenced by certificate of registration
issued by the Director of Patents on
12 December 1963 and is referred to
as Trademark No. 10625;
○ WHEREAS, the ASSIGNOR has
agreed to transfer and consequently
record said transfer of the said BMW
trademark and device in favor of the
ASSIGNEE herein with the Philippines
Patent Office;
○ NOW THEREFORE, in view of the
foregoing and in consideration of the
stipulations hereunder stated, the
ASSIGNOR hereby affirms the said
assignment and transfer in favor of the
ASSIGNEE under the following terms
and conditions:
1. The ASSIGNEE shall take
appropriate steps against any user
other than ASSIGNOR or infringer of
the BMW trademark in the Philippines;
for such purpose, the ASSIGNOR
shall inform the ASSIGNEE
immediately of any such use or
infringement of the said trademark
which comes to his knowledge and
upon such information the ASSIGNOR
shall automatically act as Attorney-In-
Fact of the ASSIGNEE for such case,
with full power, authority and
responsibility to prosecute unilaterally
or in concert with ASSIGNEE, any
such infringer of the subject mark and
for purposes hereof the ASSIGNOR is
hereby named and constituted as
ASSIGNEE's Attorney-In-Fact, but any
such suit without ASSIGNEE's
consent will exclusively be the
responsibility and for the account of
the ASSIGNOR,
2. That the ASSIGNOR and the
ASSIGNEE shall continue business
relations as has been usual in the past
without a formal contract, and for that
purpose, the dealership of ASSIGNOR
shall cover the ASSIGNEE's complete
production program with the only
limitation that, for the present, in view
of ASSIGNEE's limited production, the
latter shall not be able to supply
automobiles to ASSIGNOR.
● Per the agreement, the parties "continue[d]
business relations as has been usual in the
past without a formal contract." But on
February 16, 1993, in a meeting with a BMW
representative and the president of Columbia
Motors Corporation (CMC), Jose Alvarez,
petitioner was informed that BMW was
arranging to grant the exclusive dealership of
BMW cars and products to CMC, which had
expressed interest in acquiring the same. On
February 24, 1993, petitioner received
confirmation of the information from BMW
which, in a letter, expressed dissatisfaction
with various aspects of petitioner's business,
mentioning among other things, decline in
sales, deteriorating services, and inadequate
showroom and warehouse facilities, and
petitioner's alleged failure to comply with the
standards for an exclusive BMW dealer.2
Nonetheless, BMW expressed willingness to
continue business relations with the petitioner
on the basis of a "standard BMW importer"
contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no
alternative but to terminate petitioner's
exclusive dealership effective June 30, 1993;
Petitioner protested, claiming that the
termination of his exclusive dealership would
be a breach of the Deed of Assignment.3
Hahn insisted that as long as the assignment
of its trademark and device subsisted, he
remained BMW's exclusive dealer in the
Philippines because the assignment was
made in consideration of the exclusive
dealership.
● Because of Hahn's insistence on the former
business relation, BMW withdrew on March
26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer
relationship. BMW proposed that Hahn and
CMC jointly import and distribute BMW cars
and parts.
● Hahn found the proposal unacceptable. He
filed a complaint for specific performance and
damages against BMW to compel it to
continue the exclusive dealership. Later he
filed an amended complaint to include an
application for temporary restraining order
and for writs of preliminary, mandatory and
prohibitory injunction to enjoin BMW from
terminating his exclusive dealership.
RTC:
● RTC ruled in favor of Hahn; The trial court
deferred resolution of the motion to dismiss
until after trial on the merits for the reason
 that the grounds advanced by BMW in its
motion did not seem to be indubitable.
CA:
● Without seeking reconsideration of the
aforementioned order, BMW filed a petition
for certiorari with the Court of Appeals.
● CA reversed RTC decision; it rendered
judgment finding the trial court guilty of grave
abuse of discretion in deferring resolution of
the motion to dismiss. It ruled that BMW was
not doing business in the country and,
therefore, jurisdiction over it could not be
acquired through service of summons on the
DTI pursuant to Rule 14, §14. 'The court
upheld private respondent's contention that
Hahn acted in his own name and for his own
account and independently of BMW, based
on Alfred Hahn's allegations that he had
invested his own money and resources in
establishing BMW's goodwill in the Philippines
and on BMW's claim that Hahn sold products
other than those of BMW. It held that
petitioner was a mere indentor or broker and
not an agent through whom private
respondent BMW transacted business in the
Philippines. Consequently, the Court of
Appeals dismissed petitioner's complaint
against BMW.
ISSUE: Whether petitioner Alfred Hahn is the agent
or distributor in the Philippines of private respondent
BMW.
RULING: Yes, Hahn is an agent of BMW.
● Contrary to the appellate court's conclusion,
this arrangement shows an agency. An agent
receives a commission upon the successful
conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the
buyer and the seller together, even if no sale
is eventually made.
● As to the service centers and showrooms
which he said he had put up at his own
expense, Hahn said that he had to follow
BMW specifications as exclusive dealer of
BMW in the Philippines. According to Hahn,
BMW periodically inspected the service
centers to see to it that BMW standards were
maintained. Indeed, it would seem from
BMW's letter to Hahn that it was for Hahn's
alleged failure to maintain BMW standards
that BMW was terminating Hahn's dealership.
● The fact that Hahn invested his own money to
put up these service centers and showrooms
does not necessarily prove that he is not an
agent of BMW. For as already noted, there
are facts in the record which suggest that
BMW exercised control over Hahn's activities
as a dealer and made regular inspections of
Hahn's premises to enforce compliance with
BMW standards and specifications.
● In effect, BMW was holding Hahn
accountable to it under the 1967 Agreement.
● In addition, BMW held out private respondent
Hahn as its exclusive distributor in the
Philippines, even as it announced in the Asian
region that Hahn was the "official BMW agent"
in the Philippines.
WHEREFORE, the decision of the Court of Appeals
is REVERSED and the case is REMANDED to the
trial court for further proceedings.
11. Valeroso v. SkyCable Corporation
FACTS: Petitioners Valeroso and Legatona alleged that
they worked as account executives from November 1, 1998
to July 13, 1998 as evidenced by the Certification issued by
the Sales Territory Manager, Michael De la Cuesta. The
petitioners received commissions upon reaching specific
quota every month. However, on January 1, 2007 the
petitioners were transferred to Armada Resources &
Marketing Solutions, Inc. (ARMI), formerly Skill Plus
Manpower Services, an independent contractor. On
February 2009, they were informed that their commission
will be reduced due to the introduction of prepaid cards
sold to cable subscribers which resulted to a lower
monthly cable subscriptions. Since they are dismayed to
such reduction, they informed their manager in ARMI,
Marlon Pasta, that they will be filing a labor case with the
NLRC. Because of that threat, Pasta informed them that
they will be dropped from the list of its account
executives. A complaint for illegal dismissal, non-payment
of 13th month pay separation pay and illegal deduction,
including additional cause of action such as regularization
and payment of moral and exemplary damages, was filed
by petitioners against respondent on February 25, 2009
before the Labor Arbiter. In defense, the respondent
claimed that it did not terminate the services of petitioners
for there was never an employer-employee relationship to
begin with. The respondent averred that they engaged
petitioners as independent contractors under a Sales
Agency Agreement. Since they decided to streamline its
operations, they engaged the services of ARMI instead of
contracting numerous independent account executives.
Respondent insisted that he engaged in a legitimate job
contracting and that there was no employer-employee
relation that exist between them. The Labor Arbiter
dismissed the case. But upon appeal to the NLRC, the
decision of the Labor Arbiter was reversed. The NLRC's
decision was reversed by the CA.
ISSUE: WON an employer-employee relationship exists
between petitioners, Valeroso and Legtona, and
respondent Skycable Corp.
HELD: No. The SC ruled that the employer-employee
relationship is absent in this case. The evidence
adduced by the petitioners were not sufficient to prove
that such relationship existed between them and the
Skycable Corp. The SC cite guidelines to establish
competent evidence to prove employer-employee
relationship: To prove the claim of an employer-employee
relationship, the following should be established by
competent evidence: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the employer's power to control the
employee with respect to the means and methods by
which the work is to be accomplished (or the "right of
control test"). Based on the right of control test, when
they engaged the services of ARMI, they do not have the
power to control the actions of the petitioners with respect
to the means and methods for them to achieve the goals
set by Skycable. The respondent's act of giving them
incentives (commissions) for meritorious performance,
updates of new promos & price listings, conducting
meetings and trainings, and imposing quotas and
penalties, does not pertain to the means and methods of
how the petitioners were to perform and accomplish their
tasks. The supervision and monitoring done by Skycable
is not sufficient to establish the employer-employee
relationship. As evidenced by the Sales Agency
Agreement duly executed and signed, petitioners and
respondent unequivocally agreed that former's services
were to be engaged on an agency basis as sales account
executives and that no employer-employee relationship is
created but an independent contractorship.
12. Cesar Lirio (doing business under the name of
Celkor Ad Sonic mix) v. Genovia
FACTS:
Petitioner Lirio, owner of Celkor Ad Sonicmix Recording
Studio (Celkor), hired Resp. Genovia as studio manager
particularly, to manage and operate Celkor and to
promote and sell the recording studio's services to music
enthusiasts and other prospective clients.
He was to receive a monthly salary of P7, 000 and P100.00
per hour as recording technician. His work was from
Monday to Friday, 9am-6pm. Days after he started
working as a studio manager, petitioner approached him
and told him about his project to produce an album for his
15-year-old daughter. Petitioner asked respondent to
compose and arrange songs and promised that he (Lirio)
would draft a contract to assure respondent of his
compensation for such services.
The album was completed and finally aired but Lirio denied
him his compensation despite several demands. Lirio told
Genovia that he was entitled only to 20% of the net profit,
and not of the gross sales of the album, and that the
salaries he received and would continue to receive as
studio manager of Celkor would be deducted from the said
20% net profit share and he should be thankful that he
was given a job to feed his family
Lirio then verbally dismissed Genovia from work. Genovia
filed a complaint for illegal dismissal and prayed for his
reinstatement without loss of seniority rights, or that he
be paid separation pay, backwages and overtime pay; and
that he be awarded unpaid commission for services
rendered as a studio technician as well as moral and
exemplary damages.
Lirio’s defense:
Respondent could not have been hired as a studio
manager, since the recording studio has no personnel
except petitioner.
Respondent verbally agreed with petitioner to co-produce
the album based on the following terms and conditions:
(1) petitioner shall provide all the financing, equipment
and recording studio; (2) Celine Mei Lirio shall sing all the
songs; (3) respondent shall act as composer and arranger
of all the lyrics and the music of the five songs he already
composed and the revival songs; (4) petitioner shall have
exclusive right to market the album; (5) petitioner was
entitled to 60% of the net profit, while respondent and
Celine Mei Lirio were each entitled to 20% of the net
profit; and (6) respondent shall be entitled to draw
advances of P7,000.00 a month, which shall be deductible
from his share of the net profits and only until such time
that the album has been produced.
Accordingly, their relationship was an informal
partnership under Article 1767 of the Civil Code because:
a. They agreed to contribute money, property or
industry to a common fund with the intention of
dividing the profits among themselves
b. Petitioner had no control over the time and
manner by which respondent composed or arranged
the songs, except on the result thereof.
Labor Arbiter: Ruled that there was an employee-
employer relationship and not partnership and that
Genovia was illegally dismissed.
NLRC: Reversed. Genovia failed to prove with substantial
evidence that he was selected and engaged by petitioner,
that petitioner had the power to dismiss him, and that
they had the power to control him not only as to the result
of his work, but also as to the means and methods of
accomplishing his work.
CA: set aside the ruling of the NLRC.
ISSUE: Whether or not the relationship between Lirio and
Genovia has an employee-employer relation.
HELD: Yes was not partnership but an employer-
employee relationship. CA decision affirmed.
RATIO:
The elements to determine the existence of an
employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the
employer's power to control the employee’s
conduct. The most important element is the employer's
control of the employee's conduct, not only as to the result
of the work to be done, but also as to the means and
methods to accomplish it.
All the aforesaid elements are present and was proven by
Genovia through documentary evidence. A document
denominated as "payroll" (dated July 31, 2001 to March
15, 2002) certified correct by petitioner which showed
that respondent received a monthly salary of P7, 000.00
(P3, 500.00 every 15th of the month and another P3,
500.00 every 30th of the month) with the corresponding
deductions due to absences incurred by respondent; and
(2) copies of petty cash vouchers, showing the amounts
he received and signed for in the payrolls.
Petitioner wielded the power to dismiss as respondent
stated that petitioner verbally dismissed him, and
respondent, thereafter, filed an action for illegal dismissal
against petitioner.
Petitioner certainly had the power to check on the
progress and work of respondent as stated in his Position
Paper and that it was agreed that he would help and teach
respondent how to use the studio equipment.
Lirio failed to prove that his relationship with respondent
was one of partnership. Such claim was not supported by
any written agreement:
In the payroll dated July 31, 2001 to March 15, 2002,
there were deductions from the wages of respondent for
his absence from work, which negates petitioner's claim
that the wages paid were advances for respondent’s work
in the partnership.
It is a well-settled doctrine, that if doubts exist between
the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of
the latter. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably
arising from the evidence or in the interpretation of
agreements and writing should be resolved in the former’s
favor.
13. Tongko v. Manulife
FACTS:
Petitioner was a Regional Sales Manager for respondent.
Their contractual relationship began on July 1,1977 under
a Career Agent's Agreement. The agreement stipulated
that Tongko, as agent, is an independent contractor and
nothing in said agreement will give rise to an employer-
employee relationship. The agreement also provides that
Manulife may terminate Tongco within 15 days of breach
and that both parties may terminate the agreement 15
days after notice. On 1983, Tongco was named Unit
Manager and was again named as Branch Manager in
1990. Six years later, Tongco became a Regional Sales
Manager. Since the beginning, Tongco has declared
himself to be self-employed in his income tax returns.
In 2001, Manulife instituted manpower development
programs at the regional sales management level.
Respondent Renato Vergel de Dios wrote a letter to
Tongco concerning the low agent recruitment numbers of
Tongco’s assigned area. Subsequently, on December 18,
2001, de Dios sent Tongco ba termination letter effective
in 15 days.
Tongco responded by filing and illegal dismissal complaint
with NLRC. Tongco contended that ge was an employee of
Manulife and that his dismissal was illegal. Manulife
contends that Tongco was their agent.
The labor arbiter decreed that no employer-employee
relationship exist. NLRC reversed said ruling. In the
petition for Certiorari CA found that NLRC gravely abused
its discretion and reinstated the decision of the arbiter. On
November 7,2008, the Supreme Court reversed the CA,
hence the present Motion for Reconsideration.
ISSUE:
Whether or not Tongco is an agent of Manulife.
RULING:
Yes, Tongco is an agent of Manulife.
RATIO:
One of the differences between agency and employment
is the degree of control exerted by the principal/employer.
In agency, the principal exerts control over the agent but
the means and manner of undertaking the agent’s tasks
are largely left at the discretion of the latter. In contrast,
the degree of control exerted by the employer over the
employee is greater, when even the means and manner
are dictated to by the former.
In the present case, it was very evident that Manulife has
practically left Tongco alone not only in doing the business
of selling insurance but also in guiding the agents under
his wing. It was only during de Dios’ first letter that
Manulife exerted some control on the means and manner
but even then, the court construed the same as
recommendations. That Tongco was saddled up with
administrative responsibilities does not afford an
employer-employee relationship as he was construed by
the court as a “Lead Agent”. Finally, Tongco is estopped
from claiming otherwise as his tax declarations specifies
him as self-employed.
14. Degaños v. People
FACTS: Narciso Degaños (Degaños) and Brigida/Aida Luz
(Luz), brother and sister, were accused of estafa for
failure to return the proceeds or jewelry worth
₱438,702.00 to Spouses Atty. Jose Bordador and Lydia
Bordador, which they were under express obligation to sell
on commission, then remit the proceeds or return the
unsold pieces of jewelry, despite repeated demands for
compliance.
Complainants testified that they know the accused
because they are relatives of Atty. Borbador and their
kumpadre/kumadre. Degaños frequently visited the
complainants’ house to sell religious articles, where
Degaños saw Lydia counting jewelry. Degaños showed the
jewelry to Luz who later called Lydia to ask if she could
trust Degaños to get pieces of jewelry from her for Luz to
sell. Lydia agreed with the condition that if they could not
pay it in cash, they should pay it after one month or return
the unsold jewelry within the said period. She delivered
the said jewelry as evidenced by several documents
entitled “Katibayan at Kasunduan.” Everytime Degaños
got jewelry from her, he signed the receipts in her
presence. They were able to pay only up to a certain point.
However, there were jewelry, evidenced by receipts, no
longer paid or returned despite oral and written demands.
Luz testified that she requested for an accounting of her
indebtedness. Lydia made an accounting which Luz paid
only the principal for the interest was excessive. Atty.
Bordador brought a ledger to Luz and asked her to sign
the same. She refused to sign because the contents are
not her indebtedness but that of her brother’s.
Degaños testified that all the “Kasunduan at Katibayan”
were signed by him. The phrase “for Brigida Luz” and for
“Evely Aquino” were written on the receipts so that in case
he fails to pay for the items the private complainants
would have someone to collect from. He categorically
admitted that he is the only one who was indebted to the
private complainants
RTC - found Deganos guilty but acquitted Luz.
CA - affirmed conviction but modified the prescribed
penalty.
ISSUE: WON the agreement between the parties was one
of Sale on Credit
HELD: No. Transaction was an Agency, not a Sale on
Credit.
RATIO: Based on the express terms and tenor of the
Kasunduan at Katibayan , Degaños received and accepted
the items under the obligation to sell them in behalf of the
complainants and he would be compensated with the
overprice as his commission. Plainly, the transaction was
a consignment under the obligation to account for the
proceeds of sale, or to return the unsold items. As such,
he was the agent of the complainants in the sale to others
of the items listed in the Kasunduan at Katibayan.
In contrast, according the first paragraph of Article 1458
of the Civil Code, one of the contracting parties in a
contract of sale obligates himself to transfer the ownership
of and to deliver a determinate thing, while the other party
obligates himself to pay therefor a price certain in money
or its equivalent. Contrary to the contention of Degaños,
there was no sale on credit to him because the ownership
of the items did not pass to him.
15. Angeles v. PNR
FACTS: On May 5, 1980, the respondent Philippine
National Railways (PNR) informed a certain Gaudencio
Romualdez (Romualdez, hereinafter) that it has accepted
the latter’s offer to buy, on an AS IS, WHERE IS basis, the
PNRs scrap/unserviceable rails located in Del Carmen and
Lubao, Pampanga at P1,300.00 and P2,100.00 per metric
ton, respectively, for the total amount of P96,600.00.
After paying the stated purchase price, Romualdez
addressed a letter to Atty. Cipriano Dizon, PNRs Acting
Purchasing Agent. Bearing date May 26, 1980, authorizing
LIZETTE R. WIJANCO to be his lawful representative
where he waived his rights, interests and participation in
favor of Wijanco (Lizette Wijanco - Angeles, herein
petitioner’s deceased wife).
That very same day May 26, 1980 Lizette requested the
PNR to transfer the location of withdrawal for the reason
that the scrap/unserviceable rails located in Del Carmen
and Lubao, Pampanga were not ready for hauling. The
PNR granted said request and allowed Lizette to withdraw
scrap/unserviceable rails in Murcia, Capas and San Miguel,
Tarlac instead. However, the PNR subsequently
suspended the withdrawal in view of what it considered as
documentary discrepancies coupled by reported pilferages
of over P500,000.00 worth of PNR scrap properties in
Tarlac.
Consequently, the spouses Angeles demanded the refund
of the amount of P96,000.00. The PNR, however, refused
to pay, alleging that as per delivery receipt duly signed by
Lizette, 54.658 metric tons of unserviceable rails had
already been withdrawn which, at P2,100.00 per metric
ton, were worth P114,781.80, an amount that exceeds the
claim for refund.
On August 10, 1988, the spouses Angeles filed suit against
the PNR and its corporate secretary, Rodolfo Flores,
among others, for specific performance and damages
before the Regional Trial Court of Quezon City. In it, they
prayed that PNR be directed to deliver 46 metric tons of
scrap/unserviceable rails and to pay them damages and
attorney's fees.
On April 16, 1996, the trial court, on the postulate that
the spouses Angeles are not the real parties-in-interest,
rendered judgment dismissing their complaint for lack of
cause of action. As held by the court, Lizette was merely
a representative of Romualdez in the withdrawal of scrap
or unserviceable rails awarded to him and not an assignee
to the latter's rights with respect to the award.
CoA - complaint for specific performance and damages.
RTC - the spouses Angeles are not the real parties-in-
interest, rendered judgment dismissing their complaint for
lack of cause of action. As held by the court, Lizette was
merely a representative of Romualdez in the withdrawal
of scrap or unserviceable rails awarded to him and not an
assignee to the latter's rights with respect to the award.
CA - Affirmed the RTC
ISSUE: Whether or not Lizette, and consequently her
husband (Laureano T. Angeles), was a mere agent and
therefore not a real party in interest.
HELD: Yes. Lizette was not an assignee, but merely an
agent whose authority was limited to the withdrawal of
the scrap rails, hence, without personality to sue.
Where agency exists, the third party's (in this case, PNR's)
liability on a contract is to the principal and not to the
agent and the relationship of the third party to the
principal is the same as that in a contract in which there
is no agent. Normally, the agent has neither rights nor
liabilities as against the third party. He cannot thus sue or
be sued on the contract. 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 that contract must, generally, be a
contracting party.
The legal situation is, however, different where an agent
is constituted as an assignee. In such a case, the agent
may, in his own behalf, sue on a contract made for his
principal, as an assignee of such contract. The rule
requiring every action to be prosecuted in the name of the
real party-in-interest recognizes the assignment of rights
of action and also recognizes that when one has a right
assigned to him, he is then the real party-in-interest and
may maintain an action upon such claim or right.
Upon scrutiny of the subject Romualdez's letter to Atty.
Cipriano Dizon dated May 26, 1980, it is at once apparent
that Lizette was to act just as a representative of
Romualdez in the withdrawal of rails, and not an assignee.
For perspective, we reproduce the contents of said letter:
“This is to inform you as President of San Juanico Enterprises,
that I have authorized the bearer, LIZETTE R. WIJANCO x x x
to be my lawful representative in the withdrawal of the
scrap/unserviceable rails awarded to me.
For this reason, I have given her the ORIGINAL COPY of the
AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May 20,
1980 which will indicate my waiver of rights, interests and
participation in favor of LIZETTE R. WIJANCO.”
If Lizette was without legal standing to sue and appear in
this case, there is more reason to hold that her petitioner
husband, either as her conjugal partner or her heir, is also
without such standing.
Petitioner submits that the second paragraph of the
Romualdez letter, stating - I have given [Lizette] the
original copy of the award x x x which will indicate my
waiver of rights, interests and participation in favor of
Lizette R. Wijanco - clarifies that Lizette was intended to
be an assignee, and not a mere agent.
We are not persuaded. As it were, the petitioner
conveniently omitted an important phrase preceding the
paragraph which would have put the whole matter in
context. The phrase is “For this reason”, and the
antecedent thereof is his (Romualdez) having appointed
Lizette as his representative in the matter of the
withdrawal of the scrap items. In fine, the key phrase
clearly conveys the idea that Lizette was given the original
copy of the contract award to enable her to withdraw the
rails as Romualdez’s authorized representative.
Article 1374 of the Civil Code provides that the various
stipulations of a contract shall be read and interpreted
together, attributing to the doubtful ones that sense which
may result from all of them taken jointly. In fine, the real
intention of the parties is primarily to be determined from
the language used and gathered from the whole
instrument. When put into the context of the letter as a
whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those
in furtherance of the agency relation that he had
established for the withdrawal of the rails.
At any rate, any doubt as to the intent of Romualdez
generated by the way his letter was couched could be
clarified by the acts of the main players themselves.
Article 1371 of the Civil Code provides that to judge the
intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered. In other words, in case of doubt, resort may
be made to the situation, surroundings, and relations of
the parties
The fact of agency was, as the trial court aptly observed,
confirmed in subsequent letters from the Angeles spouses
in which they themselves refer to Lizette as authorized
representative of San Juanico Enterprises. Mention may
also be made that the withdrawal receipt which Lizette had
signed indicated that she was doing so in a representative
capacity. One professing to act as agent for another is
estopped to deny his agency both as against his asserted
principal and third persons interested in the transaction
which he engaged in. Lizette, with respect to the
withdrawal of the scrap in question, was acting for
Romualdez. And with the view we take of this case, there
were substantial pieces of evidence adduced to support
this determination.
A power of attorney is only but an instrument in writing
by which a person, as principal, appoints another as his
agent and confers upon him the authority to perform
certain specified acts on behalf of the principal. The
written authorization itself is the power of attorney, and
this is clearly indicated by the fact that it has also been
called a letter of attorney. Its primary purpose is not to
define the authority of the agent as between himself and
his principal but to evidence the authority of the agent to
third parties with whom the agent deals. The letter under
consideration is sufficient to constitute a power of
attorney. Except as may be required by statute, a power
of attorney is valid although no notary public intervened
in its execution.
All that Lizette was authorized to do was to withdraw the
unserviceable/scrap railings. Allowing her authority to sue
therefor, especially in her own name, would be to read
something not intended, let alone written in the
Romualdez letter.
Finally, the petitioner's claim that Lizette paid the amount
of P96,000.00 to the PNR appears to be a mere
afterthought; it ought to be dismissed outright under the
estoppel principle. In earlier proceedings, petitioner
himself admitted in his complaint that it was Romualdez
who paid this amount.
16. Victorias Milling v. CA
FACTS:
Principal - St. Therese Merchandising
Agent - Consolidated Sugar Corporation
St. Therese Merchandising (STM) regularly bought sugar
from Victorias Milling Co., Inc. (petitioner), (VMC). In the
course of their dealings, Victoria Milling Co (petitioner)
issued several Shipping List/Delivery Receipts (SLDRs) to
STM as proof of purchases.
Among these was SLDR No. 1214M. SLDR No. 1214M
covers 25,000 bags of sugar."
STM sold to private respondent Consolidated Sugar
Corporation (CSC) its rights in SLDR No. 1214M.
CSC(respondent) issued one check and three postdated
checks in payment.
CSC wrote petitioner that it had been authorized by STM
to withdraw the sugar covered by SLDR No. 1214M.
Enclosed in the letter were a copy of SLDR No. 1214M and
a letter of authority from STM authorizing CSC "to
withdraw for and in our behalf the refined sugar covered
by Shipping List/Delivery Receipt-Refined Sugar (SDR)
No. 1214 dated October 16, 1989 in the total quantity of
25,000 bags."
STM then issued 16 checks with VMC (petitioner) as
payee. VMC, in turn, issued Official Receipt No. 33743
acknowledging receipt of the said checks in payment of
50,000 bags. Aside from SLDR No. 1214M, said checks
also covered SLDR No. 1213.
CSC (private respondent) surrendered SLDR No. 1214M
to the petitioner's NAWACO warehouse and was allowed
to withdraw sugar. However, after 2,000 bags had been
released, petitioner refused to allow further withdrawals
of sugar against SLDR No. 1214M.
CSC then sent petitioner a letter, informing that SLDR No.
1214M had been "sold and endorsed" to it but that it
had been refused further withdrawals of sugar from
petitioner's warehouse despite the fact that only 2,000
bags had been withdrawn. CSC thus inquired when it
would be allowed to withdraw the remaining 23,000 bags.
Petitioner replied that it could not allow any further
withdrawals of sugar against SLDR No. 1214M because
STM had already withdrawn all the sugar covered by the
cleared checks.
VMC reiterated that all the sugar corresponding to the
amount of STM's cleared checks had been fully withdrawn
and hence, there would be no more deliveries of the
commodity to STM's account. Petitioner also noted that
CSC had represented itself to be STM's agent as it
had withdrawn the 2,000 bags against SLDR No. 1214M
"for and in behalf" of STM.
CSC filed a complaint for specific performance.
Defendants were Teresita Ng Sy (doing business under
the name of St. Therese Merchandising) and herein
petitioner. Since the former could not be served with
summons, the case proceeded only against the latter.
During the trial, it was discovered that Teresita Ng Go who
testified for CSC was the same Teresita Ng Sy who could
not be reached through summons. CSC, however, did not
bother to pursue its case against her, but instead used her
as its witness.
RTC: Ordered VMC to deliver to plaintiff the 23,000 bags
of refined sugar sugar.
CA: Modified the trial court’s judgment. Ordered VMC to
deliver 12,586 bags of sugar covered by SLDR No. 1214M.
Appellate court modified its decision. Ordered VMC to
deliver to plaintiff-appellee 23,000 bags of refined sugar
under SLDR No. 1214M.
Ration behind the modification:
The rationale for this is to afford the party against whom
the evidence is presented to object thereto if he deems it
necessary. Plaintiff-appellee is, therefore, correct in its
argument that Exhibit F' which was offered to prove that
checks in the total amount of P15,950,000.00 had been
cleared. (Formal Offer of Evidence for Plaintiff, Records p.
58) cannot be used to prove the proposition that 12,586
bags of sugar remained undelivered.
The testimonial evidence, by Teresita and Marianito,
presented by plaintiff-appellee was to the effect that it had
withdrawn only 2,000 bags of sugar from SLDR after
which it was not allowed to withdraw anymore.
Documentary evidence show that plaintiff-appellee had
sent demand letters to defendant-appellant asking the
latter to allow it to withdraw the remaining 23,000 bags
of sugar from SLDR 1214M. Defendant-appellant, on the
other hand, alleged that sugar delivery to the STM
corresponded only to the value of cleared checks; and that
all sugar corresponded to cleared checks had been
withdrawn. Defendant-appellant did not rebut plaintiff-
appellee's assertions. It did not present evidence to show
how many bags of sugar had been withdrawn against
SLDR No. 1214M, precisely because of its theory that all
sales in question were a series of one single transaction
and withdrawal of sugar depended on the clearing of
checks paid therefor.
ISSUE: Whether CSC was an agent of STM and hence,
estopped to sue upon SLDR No. 1214M as an assignee.
HELD: No, CSC was not an agent of STM.
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. One
factor which most clearly distinguishes agency from other
legal concepts is control; one person - the agent - agrees
to act under the control or direction of another - the
principal.
In the instant case, it appears plain to us that private
respondent CSC was a buyer of the SLDFR form, and not
an agent of STM. Private respondent CSC was not subject
to STM's control. The question of whether a contract is
one of sale or agency depends on the intention of the
parties as gathered from the whole scope and effect of the
language employed. That the authorization given to CSC
contained the phrase "for and in our (STM's) behalf" did
not establish an agency. Ultimately, what is decisive is the
intention of the parties. That no agency was meant to be
established by the CSC and STM is clearly shown by CSC's
communication to petitioner that SLDR No. 1214M had
been "sold and endorsed" to it. The use of the words "sold
and endorsed" means that STM and CSC intended a
contract of sale, and not an agency.
IV. Obligation to Determine Existence and
Scope of Agency
Cases:
17. Keeler Electric Co. v. Rodriguez
FACTS:
Harry Keeler is engaged in the electrical business and is
selling the “Matthews” plant in the Philippine Islands. One
day, A.C Montelibano went to the office of Harry Keeler
and told him that he could find purchasers of the
“Matthews” plant.
Keeler agreed with the understanding that for every
customer that he could find or any plant that he could sell,
he would be given a 10% commission if the sale was
consummated. Pursuant to this agreement, Montelibano
was able to negotiate the sale of the Matthews plant
between Keeler and Rodriguez. After the machine had
been installed, Rodriguez paid the purchase price of
₱2,513.55 to Montelibano, without the knowledge of
Keeler.
Keeler alleged that it was his employee Cenar who
installed the equipment in defendant’s premises.
Moreover, Keeler also claimed that it was Cenar who gave
him the statement of account totaling ₱2,563.95. Cenar
did not make any effort to collect the money since he was
assured by Rodriguez that he will pay it in Manila.
On the other hand, Rodriguez alleged that he paid the
purchase price to Montelibano, since he was the one who
sold, delivered and installed the electrical plant; that he
was the one who presented the account; that he was
assured by Montelibano that he was authorized to collect
the value of the plant.
The lower court decided in favor of Rodriguez, holding that
Montelibano was an agent authorized to collect the
purchase price.
ISSUE: WON the payment made by Rodriguez to
Montelibano discharged his obligation to Harry Keeler.
HELD:
No. According to the Court, there is nothing in the receipt
issued by Montelibano that would indicate that he was
authorized by Keeler to collect the money. Accordingly,
what was contained therein were his personal receipt and
personal signature. There were no more indications of his
authority.
Moreover, the Court also ruled that the receipt presented
in evidence by Rodriguez actually shows that it was Cenar
who gave the statement of accounts to him; otherwise,
there would have been no need to incur shipping costs of
P81.60 if it was Montelibano who installed the plant in his
premises.
In sum, there was no evidence that Keeler ever delivered
any statement to Montelibano or that he was ever
authorized to receive the money.
It is a settled principle in agency that a person dealing
with an agent must be careful in ascertaining the fact of
the agency and the nature and extent of authority of the
agent. Accordingly, “In approaching the consideration of
the inquiry whether an assumed authority exists in a given
case, there are certain fundamental principles which must
not be overlooked. Among these are, as has been seen,
(1) that the law indulges in no bare presumptions that an
agency exists: it must be proved or presumed from facts;
(2) that the agent cannot establish his own authority,
either by the representations or by assuming to exercise
it;
(3) that an authority cannot be established by mere rumor
or general reputation;
(4) that even a general authority is not an unlimited one;
and
(5) that every authority must find its ultimate source in
some act or omission of the principal.
Thus, when Rodriguez paid to Montelibano, he did so at
his own peril. He is therefore, still liable to pay Keeler the
amount of the electric plant.
18. Yu Eng Cho v. Pan American
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) for the destinations Hongkong, Tokyo, San
Francisco, USA
On said date, only the passage from Manila to Hongkong,
then to Tokyo, were confirmed. Flight from Tokyo to San
Francisco was on “RQ” status, meaning “on request.”
Per instruction of defendant Claudia Tagunicar, plaintiffs
returned after a few days for the confirmation of the Tokyo-
San Francisco segment of the trip. 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.
Upon arrival in Tokyo, the plaintiffs called up Pan-Am office
for reconfirmation of their flight to San Francisco. However,
they were informed that their names are not in the manifest.
They were not allowed to stay in Japan for more than 72
hours so the officials advised them to go to Taipei instead.
There were no flights available for plaintiffs, thus, they were
forced to return back to Manila instead of proceeding to the
United States.
Defendant Tagunicar alleges that it was only in the first
week of August, 1978 that she learned that the plaintiffs
were not able to take the flight from Tokyo to San Francisco,
USA. She claims that plaintiffs asked for her help so they
can file an action against Pan-Am, hence, she was asked to
sign an affidavit stating that she was an agent of TWSI.
RTC - ordered defendants Pan-Am, TWSI, and Claudia
Tagunicar solidarily liable for damages to plaintiffs.
CA - modified the amount of damages awarded, and held
Tagunicar solely liable, and absolved Pan-Am and TWSI
from any liability.
ISSUE: WON the declaration of Tagunicar in the affidavit
that she is an agent of TWSI is sufficient to establish fact or
existence of her authority.
HELD: No. The declarations of the agent alone are
generally insufficient to establish the fact or extent of his
authority.
RATIO: Tagunicar was prevailed upon by the petitioners’
son and their lawyer to sign the affidavit despite her
objection to the statement therein that she was an agent of
TWSI. They assured her that “it is immaterial” and that “if
we file a suit against you we cannot get anything from you.”
This purported admission of respondent Tagunicar cannot
be used by petitioners to prove their agency relationship. 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
are generally insufficient to establish the fact or extent of his
authority. 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.
V. Obligations and Liabilities of Agents to Third
Parties
Cases:
19. Austria v. CA
FACTS:
On January 30, 1961, Maria G. Abad acknowledged that
she received from Guillermo Austria one (1) pendant with
diamonds to be sold on a commission basis or to be
returned on demand. However, on February 1, 1961,
while walking home to her residence, Abad was said to
have been accosted by two men, one of whom hit her on
the face, while the other snatched her purse containing
jewelry and cash, and ran away.
Since Abad failed to return the jewelry or pay for its value
notwithstanding demands, Austria brought in the Court of
First Instance of Manila an action against her and her
husband for recovery of the pendant or of its value, and
damages. On their answer, the defendant spouses set
up the defense that the alleged robbery had extinguished
their obligation.
CFI: The trial court rendered judgment in favor for the
plaintiff which is Austria. It held that defendant sps Abad
failed to prove the fact of robbery, or, if indeed it was
committed, the defendant was guilty of negligence.
CA: The defendants appealed to the Court of Appeals
and secured a reversal of judgment. It declared
respondents not responsible for the loss of the jewelry on
account of fortuitous event, and relieved them from
liability for damages to the owner.
Hence, this case contending that for robbery to fall under
the category of fortuitous event and relieve the obligor
form his obligation under a contract, there ought to be
prior judgment on the guilt of the persons responsible
therefor.
ISSUE:
Whether in a contract of agency (consignment of goods
for sale) it is necessary that there be prior conviction for
robbery before the loss of the article shall exempt the
consignee from liability for such loss.
RULING:
NO, the law provides that except in case expressly
specified by law, or when it is otherwise declared by
stipulation, or when the nature of the obligation require
the assumption of risk, no person shall be responsible for
those events which could not be foreseen, or which,
though foreseen, were inevitable.
It must be noted that to avail of the exemption granted in
the law, it is not necessary that the persons responsible
for the occurrence should be punished; it would only be
sufficient to establish that the enforceable event, the
robbery in this case did take place without any concurrent
fault on the debtor`s part, and this can be done by
preponderant evidence.
It must also be noted that a court finding that a robbery
has happened would not necessarily mean that those
accused in the criminal action should be found guilty of
the crime; nor would be a ruling that those actually
accused did not commit the robbery be inconsistent with
a finding that a robbery did take place. The evidence to
establish these facts would not necessarily be the same.
20. PNB v. Manila Surety
FACTS:
● ATACO - Principal; PNB - Agent
● The Philippine National Bank had opened a
letter of credit and advanced thereon
$120,000.00 to Edgington Oil Refinery for
8,000 tons of hot asphalt.
● Of this amount, 2,000 tons worth P279,000.00
were released and delivered to Adams &
Taguba Corporation (known as ATACO)
under a trust receipt guaranteed by Manila
Surety & Fidelity Co. up to the amount of
P75,000.00.
 ● To pay for the asphalt, ATACO constituted
the PNB as its assignee and attorney-in-fact
to receive and collect from the Bureau of
Public Works the amount aforesaid out of
funds payable to the assignor under Purchase
Order No. 71947. This assignment stipulated
that the power of attorney shall also remain
irrevocable until ATACO’s total indebtedness
to PNB have been fully liquidated.
● ATACO delivered to the Bureau of Public
Works, and the latter accepted, asphalt to the
total value of P431,466.52. Of this amount the
Bank regularly collected, from April 1948 to
November 1948, P106,382.01.
● For unexplained reasons, the Bank ceased to
collect, until in 1952 its investigators found
that more moneys were payable to ATACO
from the Public Works office, because the
latter had allowed mother creditor to collect
funds due to ATACO under the same
purchase order to a total of P311,230.41.
● Its demands on the principal debtor and the
Surety having been refused, the PNB sued
ATACO and Manila Surety in the Court of
First Instance of Manila to recover the
balance plus interests and costs.
CFI (RTC):
● Ruled in favor of PNB ordering ATACO and
Manila Surety to pay PNB.
● CFI also ordered ATACO and 3rd party
defendant Pedro Taguba, jointly and
severally, to pay Manila Surety, whatever
amount the latter has paid or shall pay under
this judgement.
Manila Surety appealed to CA
CA:
● Rendered a decision adverse to PNB and
modified the judgment of CFI as to the
surety’s liability.
● CA found PNB to have been negligent in
having stopped collecting from the Bureau of
Public Works the moneys falling due in favor
of principal debtor, ATACO before the debt
was fully collected, thereby allowing such
funds to be taken and exhausted by other
creditors to the prejudice of the surety, and
held that PNB’s negligence resulted in
exoneration of Manila Surety.
The bank contends the power of attorney obtained
from ATACO was merely in additional security in its
favor, and it was the duty of the surety, and not of the
creditor owed to see to it that the obligor fulfills his
obligation, and that the creditor owed the surety no
duty of active diligence to collect any, sum from the
principal debtor.
ISSUE: Whether PNB has exercised due diligence in
collecting from the Bureau of Public Works. (No)
RULING:
● CA found PNB to be negligent in collecting
the sums due to ATACO from the Bureau of
Public Works, contrary to its duty as holder of
an exclusive and irrevocable power of
attorney to make such collections, since an
agent is required to act with the care of a
good father of a family (CC Art 1887) and
becomes liable for the damages which the
principal may suffer through his non-
performance (CC Art 1884)
● Even if the assignment with power of attorney
from the principal debtor were considered as
mere additional security, still, by allowing the
assigned funds to be exhausted without
notifying the surety, the bank deprived the
former of any possibility of recoursing against
that security.
● Because of the Bank’s inactivity, the other
creditors were enabled to collect
P173,870.31, when the balance due to
appellant Bank was only P158,563.18. The
finding of negligence by CA is thus not only
conclusive but fully supported by the
evidence.
WHEREFORE, the appealed decision is affirmed,
with costs against appellant Philippine National Bank.
21. Domingo v. Domingo (1971)
• Principal: Vicente M. Domingo ; Agent: Gregorio
Domingo (real estate broker)
Facts:
• Vicente granted Gregorio an exclusive agency to
sell his lot No. 883 with an area of about 88,477 square
meters at the rate of P2.00 per square meter (or for
P176,954.00) with a commission of 5% on the total price,
if the property is sold by Vicente or by anyone else during
the 30-day duration of the agency or if the property is sold
by Vicente within three months from the termination of
the agency to a purchaser to whom it was submitted by
Gregorio during the continuance of the agency with notice
to Vicente. The said agency contract was in triplicate, one
copy was given to Vicente, while the original and another
copy were retained by Gregorio.
• On June 3, 1956, Gregorio authorized the
intervenor Teofilo P. Purisima to look for a buyer,
promising him one-half of the 5% commission.
• Thereafter, Teofilo Purisima introduced Oscar de
Leon to Gregorio as a prospective buyer.
• Oscar de Leon offered a price much lower than
provided, thus, Vicente directed Gregorio to tell Oscar to
raise the offer. It was then raised to (P109,000.00) which
was agreed by both parties during a conference.
• Upon demand by Vicente, Oscar de Leon issued
P1000 as earnest money which Vicente advanced P300 to
Gregorio.
• Oscar gave Gregorio a gift or propina of
P1000 for succeeding in persuading Vicente to sell
his lot for a lower price. This gift was not disclosed
by Gregorio to Vicente. (root of the issue)
• Oscar told Gregorio that he will give up the
negotiation and earnest money because his brother did
not send the money.
• Gregorio was suspicious so he went to Vicente
and reminded him that Vicente was still committed to pay
him 5% commission, if the sale is consummated within
three months. Vicente tore the original copy of the
agreement document.
• Gregorio went to the Register of Deeds and found
out that the sale was consummated between Vicente
and Oscario’s wife.
• He also conferred with Oscar de Leon, who told
him that Vicente went to him and asked him to eliminate
Gregorio in the transaction and that he would sell his
property to him for One Hundred Four Thousand Pesos
(P104,000). (cheaper)
(A complaint was filed not mentioned what. Recovery plus
damages?)
Trial Court: In favor of Gregorio.
CA: Affirmed. Sentenced the said Vicente M. Domingo to
pay Gregorio M. Domingo P2,307.50 and the intervenor
Teofilo P. Purisima P2,607.50 with interest on both
amounts from the date of the filing of the complaint, to
pay Gregorio Domingo P1,000.00 as moral and exemplary
damages and P500.00 as attorney's fees plus costs.
Issue:
• Whether the gift or propina given by Oscar to
Gregorio constitutes fraud as to cause a forfeiture of his
commission on the sale price.
Ruling: Yes. WHEREFORE, the judgment is hereby
rendered, reversing the decision of the Court of Appeals
and directing defendant-appellee Gregorio Domingo: (1)
to pay to the heirs of Vicente Domingo the sum of One
Thousand Pesos (P1,000.00) as moral damages and One
Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay
Teofilo Purisima the sum of Six Hundred Fifty Pesos
(P650.00); and (3) to pay the costs.
Held:
• Yes. An agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit from
the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his
loyalty to the principal and forfeits his right to
collect the commission from his principal, even if
the principal does not suffer any injury by reason of
such breach of fidelity, or that he obtained better
results or that the agency is a gratuitous one, or
that usage or custom allows it; because the rule is
to prevent the possibility of any wrong, not to
remedy or repair an actual damage. By taking such
profit or bonus or gift or propina from the vendee, the
agent thereby assumes a position wholly inconsistent with
that of being an agent for his principal, who has a right to
treat him, insofar as his commission is concerned, as if no
agency had existed. The fact that the principal may have
been benefited by the valuable services of the said agent
does not exculpate the agent who has only himself to
blame for such a result by reason of his treachery or
perfidy.
• Art. 1720. Every agent is bound to give an
account of his transaction and to pay to the principal
whatever he may have received by virtue of the
agency, even though what he has received is not
due to the principal.
• The law imposes upon the agent the absolute
obligation to make a full disclosure or complete account
to his principal of all his transactions and other material
facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting
the agent from such an obligation and considers such an
exemption as void. The duty of an agent is likened to that
of a trustee. This is not a technical or arbitrary rule but a
rule founded on the highest and truest principle of
morality as well as of the strictest justice.
• In the case at bar, defendant-appellee Gregorio
Domingo as the broker, received a gift or propina in the
amount of One Thousand Pesos (P1,000.00) from the
prospective buyer Oscar de Leon, without the knowledge
and consent of his principal, herein petitioner-appellant
Vicente Domingo. His acceptance of said substantial
monetary gift corrupted his duty to serve the
interests only of his principal and undermined his
loyalty to his principal, who gave him partial
advance of Three Hundred Pesos (P300.00) on his
commission. As a consequence, instead of exerting his
best to persuade his prospective buyer to purchase the
property on the most advantageous terms desired by his
principal, the broker, herein defendant-appellee Gregorio
Domingo, succeeded in persuading his principal to accept
the counter-offer of the prospective buyer to purchase the
property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot
of 88,477 square meters, which is very much lower the
the price of P2.00 per square meter or One Hundred
Seventy-Six Thousand Nine Hundred Fifty-Four Pesos
(P176,954.00) for said lot originally offered by his
principal.
• The duty embodied in Article 1891 of the New Civil
Code will not apply if the agent or broker acted only as a
middleman with the task of merely bringing together the
vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction.
Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not
object therto. 11 Herein defendant-appellee Gregorio
Domingo was not merely a middleman of the petitioner-
appellant Vicente Domingo and the buyer Oscar de Leon.
He was the broker and agent of said petitioner-appellant
only. And therein petitioner-appellant was not aware of
the gift of One Thousand Pesos (P1,000.00) received by
Gregorio Domingo from the prospective buyer; much less
did he consent to his agent's accepting such a gift.
• The fact that the buyer appearing in the deed of
sale is Amparo Diaz, the wife of Oscar de Leon, does not
materially alter the situation; because the transaction, to
be valid, must necessarily be with the consent of the
husband Oscar de Leon, who is the administrator of their
conjugal assets including their house and lot at No. 40
Denver Street, Cubao, Quezon City, which were given as
part of and constituted the down payment on, the
purchase price of herein petitioner-appellant's lot No. 883
of Piedad Estate. Hence, both in law and in fact, it was still
Oscar de Leon who was the buyer.
• As a necessary consequence of such breach of
trust, defendant-appellee Gregorio Domingo must forfeit
his right to the commission and must return the part of
the commission he received from his principal.
Relevant provisions: (extra, for review)
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing
to the principal.
Every stipulation exempting the agent from the obligation to
render an account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but
also for negligence, which shall be judged with more less rigor by
the courts, according to whether the agency was or was not for a
compensation.
Article 1891 of the New Civil Code amends Article 17 of the old
Spanish Civil Code which provides that:
Art. 1720.Every agent is bound to give an account of his
transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has
received is not due to the principal.
The modification contained in the first paragraph Article 1891
consists in changing the phrase "to pay" to "to deliver", which
latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress
the highest loyalty that is required to an agent — condemning as
void any stipulation exempting the agent from the duty and
liability imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement
of Article 1726 of the old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for
negligence, which shall be judged with more or less severity by
the courts, according to whether the agency was gratuitous or for
a price or reward.
22. Severino v. Severino
Agent: Defendant Guillermo Severino
Principal: Melecio Severino
FACTS:
Melecio Severino owned 428 hectares of land in Silay,
Occidental Negros. During Melecio’s lifetime, his brother,
Guillermo (D), worked to administer the land for Melecio’s
behalf. When Melecio died in 1915, D continued to occupy the
said land.
In 1916, a parcel survey was made of the lands in the
municipality of Silay, including the land here in question, and
cadastral proceedings were instituted for the registration of the
land titles within the surveyed area. In the cadastral
proceedings, Roque Hofileña, as lawyer for D, filed answers in
D’s behalf, claiming the lots mentioned as the property of his
client. No opposition was presented in the proceedings,
therefore, the court decreed the title in D’s favor in 1917.
It may be further observed that at the time of the cadastral
proceedings, P-Fabiola was a minor; that D did not appear
personally in the proceedings and did not there testify; that the
only testimony in support of his claim was that of his attorney
Hofileña, who swore that he knew the land and that he also
knew that Guillermo Severino inherited the land from his father
and that he, by himself, and through his predecessors in
interest, had possessed the land for thirty years.
Thus, this action brought by P, alleged natural daughter and
sole heir of Melecio to compel D to convey to her four parcels
of land described in the complaint, or in default thereof to pay
her the sum of P800,000 in damages for wrongfully causing
said land to be registered in his own name. Felicitas Villanueva,
in her capacity as administratrix of the estate of Melecio
Severino, has filed a complaint in intervention claiming the
same relief as P, except in so far as she prays that the
conveyance be made, or damages paid, to the estate.
LC: recognized P as the natural child of Melecio; ordered D to
convey the land to the administratrix of the estate. The court
did not allow D to present evidence to the effect that the land
was owned in common by all heirs of Ramon Severino (father
of the Severino brothers), and not by Melencio alone. The court
also said that D was already stopped from denying
Melencio’s title (in the Ratio, there was a previous case
Montelibano vs Severino wherein D himself admitted that he
was Melencio’s mere agent and that the land was Melencio’s)
ISSUES:
W/N the acts of Guillermo Severino as administrator in
registering his name valid?
HELD:
SC: This is not an action under Section 38 of the LRA to reopen or set
aside a decree; it is an action in personam against an agent to compel him
to return, or retransfer, to the heirs or the estate of its principal, the property
committed to his custody as such agent, to execute the necessary
documents thereof, to pay damages.
Proof of Agency
D’s testimony in the case of Montelibano v. Severino (which forms a part
of the evidence in the present case) is, in fact, conclusive in this respect.
He there stated under oath that from the year 1902 up to the time the
testimony was given, in the year 1913, he had been continuously in charge
and occupation of the land as the encargado or administrator of Melecio
Severino; that he had always known the land as the property of Melecio
Severino; and that the possession of the latter had been peaceful,
continuous, and exclusive. In his answer filed in the same case, the same
defendant, through his attorney, disclaimed all personal interest in the land
and averred that it was wholly the property of this brother Melecio.
Neither is it disputed that the possession enjoyed by the defendant at the
time of obtaining his decree was of the same character as that held during
the lifetime of his brother, except in so far as shortly before the trial of the
cadastral case the defendant had secured from his brothers and sisters a
relinquishment in his favor of such rights as they might have in the land.
Agent-Principal Relationship is Fiduciary
It is an elementary and very old rule that in regard to property Squibb filed suit to collect.
forming the subject-matter of the agency, an agent is estopped
from acquiring or asserting a title adverse to that of the 4. Green Valley claimed that the contract with
principal. His position is analogous to that of a trustee and he Squibb was a mere agency to sell; that it never purchased
cannot consistently, with the principles of good faith, be goods from Squibb; that the goods received were on
allowed to create in himself an interest in opposition to that of consignment only with the obligation to turn over the
his principal or cestui que trust. The Court then cited several proceeds, less its commission, or to return the goods if
US cases to this effect. not sold, and since it had sold the goods but had not been
An agent is not only estopped from denying his principal’s title able to collect from the purchasers thereof, the action was
to the property, but he is also disabled from acquiring interests premature.
therein adverse to those of his principal during the term of the
agency. 5. Squibb claimed that the contract was one of sale
so that Green Valley was obligated to pay for the goods
Conveyance by Agent To Principal received upon the expiration of the 60-day credit period.
An action in personam will lie against an agent to compel
him to return or transfer to his principal, or the latter’s 6. RTC gave judgment in favor of Squibb - that the
estate, the real property committed to his custody as such agreement between the parties was a sales contract.
agent and also it execute the necessary documents of
conveyance to effect such transfer. 7. CA affirmed RTC decision.

8. SC affirmed CA’s judgement.

23. Green Valley Poultry v. IAC ISSUE

FACTS Whether or not agreement between Green Valley and

Squibb is a sales contract or an agency to sell.
1. Principal - Squibb & Sons Philippine Corporation,
respondent. Agent - Green Valley Poultry & Allied HELD
Products, Inc., petitioner.
Yes. The agreement between Green Valley and Squibb is
2. Contract: On November 3, 1969, Squibb and one of a sales contract.
Green Valley entered into a letter agreement which
appointed Green Valley Poultry as a non-exclusive “We do not have to categorize the contract. Whether
distributor for Squibb veterinary products. Contained in viewed as an agency to sell or as a contract of sale, the
the letter of agreement were liability of Green Valley is indubitable. Adopting Green
• the discounts (10%) in price entitled to Green Valley’s theory that the contract is an agency to sell, it is
Valley; liable because it sold on credit without authority from its
• Exempted products from the discount; principal. The Civil Code has a provision exactly in point.
• Distributor commission at 5% for every sale of It reads:
completed deal to a feedstor, drugstore or other accounts;
• A stipulation which contains advise on price “Art. 1905. The commission agent cannot, without the
changed will be communicated; express or implied consent of the principal, sell on credit.
• That Green Valley Poultry will accept turn-over Should he do so, the principal may demand from him
orders from Squibb representatives for delivery to payment in cash, but the commission agent shall be
customers in his area. If for credit or other valid reasons entitled to any interest or benefit, which may result from
a turnover order is not served, the Squibb representative such sale.”
will be notified within 48 hours and hold why the order will
not be served. WHEREFORE, petition is hereby dismissed; the judgment
• The distributorship area of the respondent which of the defunct Court of Appeals is affirmed with costs
is only for Central and Northern Luzon including Cagayan against the petitioner.
Valley areas;
• Stipulations on the maximum discount Green
Valley can give to direct and turnover accounts no to go 24. Municipal Council of Iloilo v. Evangelista
beyond 10%; FACTS:
• Bond of 20,000; * Tan Ong Sze Vda. De Tan Taco, respondent,
• An indication on the payment of purchases of wanted to recover from the Municipality of Iloilo,
Squibb products to be due 60 days from date of invoice or petitioner, the value of the strip of land belonging to the
nearest business day thereto; former taken by the latter to widen a public street
• And that “It is mutually agreed that this non- * Atty. Jose Evangelista, in his own behalf and as
exclusive distribution agreement can be terminated by counsel for the administratrix of Jose Ma. Arroyo’s
either Green Valley Poultry & Allied Products, Inc. or intestate estate, filed a claim in the same case for
Squibb Philippines on 30 days notice of mutual professional services rendered by him which the court,
satisfaction. acting within the widow of respondent, fixed at 15% of the
amount of the judgment
3. For goods delivered to Green Valley but unpaid, *Aside from other claiamants and PNB, Antero
Soriano also appeared claiming the amount of the
judgment as it had been assigned to him, and by him, in
turn, assigned to Mauricio Cruz and Co, Inc.
* After hearing all the claims on the amount of the
judgment, the court ordered that the attorney’s lien in the
amount of 15% of the judgment be recorded in favor of
Atty. Evangelista, in his own behalf and as counsel for the
administratrix of deceased Jose Arroyo and directed the
municipality of Iloilo to file an action of interpleading
against adverse claimants including, PNB, Soriano etc.
* The municipal treasurer of Iloilo, with the
approval of the auditor, of the provincial treasurer of
Iloilo, and the Executive Bureau, paid the late Antero
Soriano the amount of P6,000 in part payment of the
judgment assigned to him by Tan Boon Tiong, acting as
atty-in-fact of Tan Toco which she then deposited with the
clerk of CFI of Iloilo
* In pursuance of the court ordering that the
atty’s lien of 15% in favor of Atty. Evangelista, in his own
behalf and as counsel for the late Jose Arroyo, the said
clerk of court delivered on the said date to said Atty.
Evangelista the said amount of P6,000
* This case is confined to the claim of Mauricio as
alleged assignee of the rights of the late Atty Soriano by
virtue of said judgment in payment of professional
services rendered by him to the said widow and her
coheirs
CFI: declared valid and binding the deed of assignment of
the credit executed by Tan Toco's widow, through her
attorney-in-fact Tan Buntiong, in favor of late Antero
Soriano; likewise the assignment executed by the latter
during his lifetime in favor of the defendant Mauricio Cruz
& Co., Inc.
ISSUE: 1. W/N there was a contract of agency between
Tan Toco, principal, and Tan Boon Tiong, atty-in-
fact/agent
2. W.N the assignment made by Tan Boon Tiong,
as atty-in-fact of Tan Toco, to Atty Soriano, of all the
credits, rights and interests belonging to Tan Toco by
virtue of a judgment was legal
HELD: Yes to both
It does not appear that Atty. Soriano was counsel
for Tan Toco in his case which she instituted against the
municipality of Iloilo for the recovery of a the value of a
strip of land expropriated by said municipality for the
widening of a public street. The only lawyers who appear
to have represented her in that case were Arroyo and
Evangelista, who filed a claim for their professional fees
When Tan Toco’s credit, right, and interests were
assigned by her attorney-in-fact Tan Boon Tiong, to Atty
Soriano in payment of professional services rendered by
the latter to Tan Toco and her coheirs in connection with
other cases, that particular case had been decided, and
the only thing left to do was to collect the judgment
There was no relation of attorney and client, then,
between Soriano and Tan Toco thus the assignment of her
credit, right and interest to said lawyer did not violate
prohibition against ”lawyers and solicitors with respect to
any property or rights involved in any litigation in which
they may take part by virtue of their profession and
office.”
As to whether Tan Boon Tiong, as atty-in-
fact/agent of Tan Toco was empowered by his principal to
make an assignment of credits, rights, and interests, in
payment of debts for professional services rendered by
lawyers, the former is authorized to employ and contract
for the services of lawyers upon such conditions as he may
deem convenient, to take charge of any actions necessary
or expedient for the interests of his principal, and to
defend suits brought against her.
This power necessarily implies the authority to
pay for the professional servicers thus engaged. The
assignment made by Tan Boon Tiong, in favor of Atty.
Soriano for professional services rendered in other cases
in the interests of Tan Toco and her coheirs, was that
credit which she had against the municipality, and such
assignment was equivalent to the payment of the amount
of said credit to Soriano for professional services
SC: (1) That an agent or atty-in-fact empowered to pay
the debts of a principal, and to employ lawyers to defend
the latter’s interests, is impliedly empowered to pay the
lawyer’s fees for services rendered in the interests of said
principal, and may satisfy them by an assignment of a
judgment rendered in favor of said principal; (2) that
when a person appoints two attys-in—fact independently,
the consent of one will not be required to validate the acts
of the other unless that appears positively to have been
the principal’s intention and (2) that the assignment of the
amount of a judgment made by a person to his attorney,
who has not taken any part in the case wherein said
judgment was rendered, made in payment of professional
services in other cases does not contravene the
prohibition
25. Del Rosario v. La Badenia
DOCTRINE: An agent may lawfully appoint a substitute
if the principal has not prohibited him from doing such.
The principal shall be bound by the acts of the sub-agent
if it is shown that the agent who appointed such sub-agent
did not act in excess of his authority in doing so.
FACTS:
Principal – La Badenia General Agent – Celestino
Aragon Sub-agent – Teofila del Rosario de Costa
Plaintiffs, Spouses Teofila del Rosario de Costa and
Bernardino Costa are residents of Legaspi, Albay and
sought to recover from the defendant corporation the sum
of P1,795.25, a balance alleged to be due Teofila del
Rosario de Costa as the agent of the defendant
corporation for services rendered and expenses incurred
in the sale of its products.
Defendant corporation is engaged in the manufacture and
sale of tobacco products with its head office in the city of
Manila. In year 1911, the defendant corporation, a new
concern, inaugurated an extensive selling campaign for
the purpose of introducing its products to the retail trade.
Celestino Aragon, a general agent of the defendant
corporation, was in charge of this campaign in Albay,
Sorsogon, and other provinces in the southern end of
Luzon. He established a central distributing agency
or depot at Legaspi (he established his headquarters there
and took up his residence with the plaintiffs, using the
lower part of their house as a store room or depository for
large quantities of cigarettes and cigars) with the plaintiff,
Teofila del Rosario de Costa, nominally in charge, though
her husband, Bernardino de Costa appears to have been
the actual manager of the agency.
The business relations between the plaintiffs and the
defendant extended from February 1, 1911, to March 24,
1912. All goods sent to Legaspi were charged by the head
office at Manila against the general agent, Aragon, while
on the books kept by Aragon these goods were charged
against the plaintiffs, and as goods were withdrawn by
himself, he credited the amount of the withdrawals to the
account of the plaintiffs.
The business at Legaspi appears to have been that of a
distributing agency actively in charge of the plaintiffs but
over which the general agent maintained a close
supervision. Goods were withdrawn from the depository
at Legaspi from time to time by the general agent for
shipment to other points; goods were likewise withdrawn
by plaintiffs and shipped to neighboring towns without any
intervention on the part of the general agent.
All accounts incident to the business were carried on the
books of Aragon. The account as carried on the books of
Aragon, the general agent, was between Teofila del
Rosario de Costa and La Badenia, the defendant
corporation. On March 24, 1912, the general agent had a
settlement with the plaintiffs and acknowledged over his
signature that these books showed a balance in favor of
the plaintiffs amounting to P1,795.25.
When this final settlement of accounts was had on the
24th of March, 1912, both Aragon and the plaintiff, Teofila
del Rosario de Costa, confirmed it as a true statement of
the account. The defendant corporation however, refused
to pay over to plaintiffs the balance of P1,795.25.
It is the contention of the defendant corporation that the
plaintiffs were simply merchants who purchased the goods
at fixed wholesale prices and sold them on their own
account, and that they were never employed as their
agents. On the other hand plaintiffs contend that they
were the agents of the defendant corporation; that they
received commissions on the sales made by the agency;
and that they were authorized to extend a reasonable
credit under the supervision of the general agent.
RTC: in favor of the defendants - The lower court was of
the opinion that the specific goods sold to the delinquent
debtors, whose unpaid accounts form the basis of this
litigation, had already been paid for by the plaintiffs and
that this was conclusive evidence that the plaintiffs were
not acting as the agents of the defendant corporation, and
that in effect, the purpose of this suit was to recover back
money already paid for the goods purchased and sold by
the plaintiffs.
ISSUE:
Whether or not plaintiffs are agents of the
defendant corporation
RULING:
Yes, plaintiffs are agents by the defendant
corporation.
It is not clear from the record just what were the precise
terms of the arrangement made by Aragon with the
plaintiffs. It is not denied however, that Aragon was
acting as the general agent of the defendant corporation
and that as such he was invested with authority to
inaugurate and carry out a selling campaign with a
view of interesting the sale of the defendant's products in
the territory assigned to him. The record does not show
what limitations, if any, were placed upon his powers to
act for the corporation. The general conduct of the selling
campaign intrusted to him was approved and commended
by the head office, and judging from the amount of the
sales the business appears to have been a very
prosperous one for the corporation.
It appears further that the head office at Manila was
fully informed of plaintiffs' relations with the
general agent in extending the sales of its products.
Plaintiffs made direct remittances to the head office in
Manila and these remittances were credited to the account
of the agency at Legaspi, and acknowledgment was made
directly to the plaintiffs. Neither the head office nor
Aragon appear to have made any distinction between the
business done by Aragon and that done by the plaintiffs.
The purchases, sales and remittances made by the
plaintiffs do not seem to have been considered as those
of an independent business concern, but rather as a part
of the work of the Legaspi agency under the control and
supervision of Aragon. The fact that the defendant
corporation carried the Legaspi account in the name
of the general agent, Aragon, and carried no
account with the plaintiffs, would seem to negative
the contention that plaintiffs were simply
merchants purchasing their goods in Manila at
wholesale and selling them locally on their own
account.
The active management and participation of the plaintiffs
in the conduct of the business at Legaspi are fully
recognized in the following letters (exhibits A & B) written
by the assistant manager of the defendant corporation to
one of the plaintiffs and are sufficient enough to show that
the defendant was fully aware of plaintiffs' connection with
the agency at Legaspi, and recognized them as agents of
the company, and clearly did not consider them as
independent merchants buying solely on their own
account, but rather as subagents working under the
supervision of the general agent, Aragon.
The general agent who was in control of the Legaspi
business, and who was fully conversant with all of its
details, clearly recognized the right of the plaintiffs
to have credit on their account for the amount of these
unpaid claims. This agent had employed the plaintiffs to
assist him in extending the sale of the defendant's
products, and the defendant was well aware of this fact.
Certainly the only reliable source of information as to what
plaintiffs' account with the defendant corporation was, is
to be found in the books kept by the general agent,
Aragon. The defendant carried no account whatever with
the plaintiffs, and having intrusted the entire management
of the Legaspi business to Aragon, it can not now come
into court and repudiate the account confirmed by him,
unless it can show that he acted beyond the scope of his
authority in making the arrangement he did with the
plaintiffs. Aragon's powers as a selling agent appear
to have been very broad, and there is no evidence
in the record to indicate that he acted beyond his
powers in conducting the business at Legaspi as he did;
and there can be no doubt that plaintiffs had been
authorized by him to extend credit on behalf of the
agency. There is no other reasonable explanation of the
entries made by Aragon in his books of account, and his
approval of the balance in favor of the plaintiffs.
As already stated, the record does not disclose what were
the precise terms of arrangement made with the plaintiffs.
The record does show however, that in many instances
the plaintiffs were allowed commissions on sales
made by them, but whether or not these were in addition
to other profits allowed them the record does not show.
Upon a careful examination of the whole record we
are satisfied that plaintiffs were not conducting an
independent business but were the agents of the
defendant corporation operating under the
supervision of the general agent, Aragon.
The Supreme Court reversed the decision.
26. International Films v. Lyric Film
FACTS:
Bernard Gabelman was the Philippine agent for the
plaintiff company, International Films. Starting June 2,
1933, petitioner, through said agent, leased a couple of
films (including “Monte Carlo Madness” ) to defendant
company Lyric Film Exchange Inc. Defendant would then
show these films while petitioner would get a percentage
of the receipts. One of the conditions of the contract was
that defendant would answer for the loss of the film in
question whatever the cause.
On June 23, 1933, after the last showing of the film and
question and when defendant was set to return the same,
Bernard Gabelman asked defendant whether the same
could he deposited in the vault of Lyric Film as
International Films did not yet have a safety vault as per
regulations of the fire department. Lyric Film’s then Chief
Vicente Albo, after consultation from O’Malley (his chief),
stated that the same cannot be done as they don't have
insurance for the film. Bernard then requested that the
film be kept in defendant's vault under his responsibility.
Defendant agreed.
Subsequently, Gabelman severed his connection with
plaintiff and briefed his replacement, Lazarus Joseph the
film “ Monte Carlo Madness” was in the vault of defendant
company and that defendant would act as a sub-agent of
plaintiff company. That defendant would exhibit said film
after the original contract between the parties. Thereafter,
Lazarus demanded the return of 3 films but “Monte Carlo
Madness” could not be returned as the same ws still being
shown in Cebu. On August 19, 1933, the bodega were the
film was stored burned down without insurance for said
film.
Petitioner filed a complaint with the Court of First Instance
of Manila. Said court dismissed the complaint, hence the
appeal to the Supreme Court.
ISSUE:
Whether or not Lyric Film Exchange is responsible to the
plaintiff for the destruction of the film without securing
insurance.
RULING:
No, Lyric Film Exchange is not responsible to the plaintiff
for the destruction of the film without securing insurance.
RATIO:
An agent or sub-agent is not obliged to fulfill more than
the contents of the mandate and to answer for the
damages caused to the principal by his failure to do so
(art. 1718 of the then Civil Code)
By virtue of the verbal contract between the plaintiff,
represented by Bernard Gabelman, and defendant
company, the latter was to be the sub-agent of the former
in keeping and showing the film in question. The court
held that defendant is not civilly liable as it was not obliged
to fulfill more than the contents of the mandate, which
was to store the film and exhibit. Nowhere in the verbal
agreement shows that defendant should secure an
insurance for the film. Neither negligence nor fraud
occurred.
27. Thomas v. Pineda
Facts:
- Plaintiff owns the bar and restaurant known as
Silver Dollar Café located in Plaza Santa Cruz, Manila. In
the course of time, the defendant became successively
cashier and manager of the business.
- On the onset of war, plaintiff made a fictitious sale
of the business to defendant to prevent the business and
its property from falling into enemy hands.
Simultaneously, the plaintiff and defendant signed a
secret document stating that the deed of sale conveying
the restaurant was fictitious and upon the restoration of
peace, the sale automatically becomes null and void.
- In 1945, the building was destroyed by fire but
defendant had been able to remove some furniture which
according to defendant, were all accounted for and turned
over to the plaintiff.
- On May 8 1945, a bar was opened on Calle
Bambang under the same name and then on the same
year it was transferred to its original location in Plaza
Santa Cruz.
- After liberation, plaintiff brought a CPA to the café
for the purpose of examining the books of the business
but the defendant resisted, and even pointed a gun at
them. He avers that a third verbal agreement was entered
into, the import of which was that he was to operate the
business with no liability other than to turn it over to the
plaintiff as the he would find it after the war and that he
was relieved of any duty to make an accounting.
- Also, on September 27, 1945, defendant registered
the business and its name as his own alleging that the
plaintiff has abandoned his rights.
- Lower court summarily rendered a decision in favor
of defendant.
Issue:
W/N the defendant is obliged to render an accounting to
the plaintiff.
W/N defendant may register the business and its name as
his own.
Held:
- 1st issue Yes;2nd issue No
- The defendant’s contention is at war with the care
and precaution which the plaintiff took to insure his rights
in the business and its assets. Unless Thomas was willing
to give away his property and its profits, no man in his
right senses would have given his manager an outright
license such as defendant claims to have gotten from his
employer.
- The exact legal character of the defendant’s relation
to the plaintiff matters not a bit. It was enough to show
that he had been entrusted with the possession and
management of the plaintiff’s business and property for
the owner’s benefit and had not made an accounting.
- Neither did the defendant’s sweeping statement
at the trial that all the proceeds from the business had
been used to support the plaintiff and his daughters and
to entertain and bribe the Japanese officers dispense with
his duty to render an account.
- That defendant was only a manager is evidenced
by the fact that a written contract of lease with the owner
of the Santa Cruz location was under the name of Thomas
as its proprietor and that the defendant had cause the
printing business cards to the same effect.
- The relations of an agent to his principal are
fiduciary and it is an elementary and very old rule that in
regard to property forming the subject matter of the
agency, he is estopped from acquiring or asserting a title
adverse to that of the principal. His position is analogous
to that of a trustee and he cannot consistently, with the
principles of good faith, be allowed to create in himself an
interest in opposition to that of his principal. A receiver,
trustee, attorney, agent, or any other person occupying
fiduciary relations respecting property or persons are
utterly disabled from acquiring for his own benefit the
property committed to his custody for management. The
rule stands on moral obligation to refrain from placing
one’s self in position which ordinarily excite conflicts
between self-interest at the expense of one’s integrity and
duty to another, making it possible to profit by yielding to
temptation.
28. Palma v. Cristobal
● FACTS:
•1909 - after registration proceedings under ACT
496, the original certificate of title was issued
in the names of Palma and his wife (Luisa
Cristobal).
• 1923 - said certificate was cancelled by virtue of
CFI decree, but was later substituted by
another certificate of title also in the name of
Palma and his wife.
• 1928 - Because of his wife's death, a new
certificate was issued in Palma's name only
• Palma sought at first to eject Cristobal from a
parcel of land in Tondo (TCT of w/c registered to
Palma). Cristobal raised the question of ownership
and the case was dismissed. Palma filed w/ CFI
Manila praying he be declared owner of the land
and for Cristobal to be ordered to restore its
possession to him and remove his house
therefrom.
• The CFI dismissed the case, and when the case
was brought to the CA it was similarly
dismissed.
• CA concluded that:
1. the parcel of land in question is a
community property held by Palma in
trust for the real owners (respondent
Cristobal being an heir of one of them),
the registration having been made in
accordance with an understanding
between the co-owners, by reason of the
confidence they had in Palma and his wife.
2. This confidence, close relationship, and
the fact that co-owners were receiving
their shares in the rentals, were the
reasons why no step had been taken to
partition the property.
3. CA, in dismissing the case, invoked SC
rulings w/c declared that the registration
of the property in the name of the trustees
in possession thereof, must be deemed to
have been effected for the benefit of the
principal/cestui que trust.
● Thus this appeal by certiorari.
ISSUE: Whether or not a trustee has the right to acquire
by prescription the ownership of a property entrusted to
him.
HELD: NO,
Palma's claimed that even granting the property was
owned by several co-owners he now owns it because of
prescription. This theory holds no water because,
according to the pronouncement of the CA, Palma held the
property and secured its the registration in his name in a
fiduciary capacity, and it is elementary that a trustee
cannot acquire by prescription the ownership of a property
entrusted to him.
The position of a trustee is of representative nature. His
position is the position of a cestui que trust. It is logical
that all benefits derived by the possession and acts of the
agent, as such agent, should accrue to the benefit of his
principal.
29. BPI v. Laingo
FACTS: On 7/20/1999, Rheozel Laingo (Rheozel), son of
Yolanda Laingo (Laingo), opened an account with BPI in
Davao. The account was a Platinum 2-in-1 Savings and
Insurance account, which is a savings account where
depositors are automatically covered by an insurance
policy against disability or death issued by FGU Insurance
Corporation (FGU), now BPI/MS Insurance Corporation.
BPI issued a passbook to Rheozel for the account. A
personal Accident Insurance Coverage Certificate (PAICC)
was also issued by FGU in the name of Rheozel with Laingo
as beneficiary,
On 9/25/2000, Rheozel died via car accident. Rheozel's
story was headlined in the Daily Mirror, a newspaper, on
9/26/2000. On 9/27/2000, Liago instructed her secretary,
Alice Torbanos (Alice) to go to BPI and inquire about
Rheozel's savings account. The money in the account was
to be used for burial and funeral expenses.
Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's
Manager re Laingo's request. BPI accommodated Laingo
allowing the withdrawal of P995,000. However, BPI did
not notify her of the attached insurance policy. A
certain Laura Cabico, employee of BPI, went to Rheozel's
wake to verify some information from Alice and brought
documents for Laingo to sign for the withdrawal. Over two
years later on 1/21/2003, Rheozel's sister, Rhealyn
Laingo-Concepcion, while arranging Rheozel's personal
things in his room found the PAICC and conveyed the
information to Laingo.
Laingo sent two letters 9/11 and 11/7/2003 to BPI and
FGU claiming on the PAICC. On 2/19/2004 in a letter sent,
FGU denied her claim, stating that the claim should have
been filed within 3 calendar months from the death as
required by par 15 of the PAICC:
15. Written notice of claim shall be given to and filed at FGU
Insurance Corporation within three calendar months of death or
disability.
CoA - Specific Performance with Damages and Attorney's
Fees
RTC - in favor of respondents, dismissing both claim and
counterclaim. claim was filed beyond the 3 month period.
CA - Reversed. Laingo could not be expected to do an
obligation she didn't know existed, not being a party to
the insurance contract. BPI and FGU to bear the loss and
compensate Liago.
Petitioners contend that the words or language used in the
insurance contract, particularly under paragraph 15, is clear and
plain or readily understandable by any reader which leaves no
room for construction. Petitioners also maintain that ignorance
about the insurance policy does not exempt respondent from
abiding by the deadline and petitioners cannot be faulted for
respondent's failure to comply.
Respondent, on the other hand, insists that the insurance
contract is ambiguous since there is no provision indicating how
the beneficiary is to be informed of the three calendar month
claim period. Since petitioners did not notify her of the insurance
coverage of her son where she was named as beneficiary in case
of his death, then her lack of knowledge made it impossible for
her to fulfill the condition set forth in the insurance contract.
ISSUE: Whether or not Laingo, as beneficiary without
knowledge, is bound by the 3 month deadline for filing a
notice of claim upon the death of the insured. (Considering
BPI as an agent of FGU)
RULING: Denied. CA Affirmed.
RATIO: The account was a marketing strategy promoted
by BPI to entice clients to invest their money with BPI with
the added benefit of insurance.
As the main proponent of the 2-in-1 deposit account, BPI
tied up with its affiliate, FGU Insurance, as its partner. Any
customer interested to open a deposit account under this
2-in-1 product, after submitting all the required
documents to BPI and obtaining BPI's approval, will
automatically be given insurance coverage. Thus, BPI
acted as agent of FGU Insurance with respect to the
insurance feature of its own marketed product.
Under the law, an agent is one who binds himself to render
some service or to do something in representation of
another. The basis of an agency is representation. The
question of whether an agency has been created is
ordinarily a question which may be established in the
same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of
intention. Agency may even be implied from the words
and conduct of the parties and the circumstances of the
particular case. For an agency to arise, it is not
necessary that the principal personally encounter
the third person with whom the agent interacts. The
law in fact contemplates impersonal dealings where
the principal need not personally know or meet the
third person with whom the agent transacts:
precisely, the purpose of agency is to extend the
personality of the principal through the facility of
the agent.
In this case, since the Platinum 2-in-1 Savings and
Insurance account was BPI's commercial product, offering
the insurance coverage for free for every deposit account
opened, Rheozel directly communicated with BPI, the
agent of FGU Insurance. BPI not only facilitated the
processing of the deposit account and the collection of
necessary documents but also the necessary endorsement
for the prompt approval of the insurance coverage without
any other action on Rheozel's part. Rheozel did not
interact with FGU Insurance directly and every transaction
was coursed through BPI.
BPI, as agent of FGU Insurance, had the primary
responsibility to ensure that the 2-in-1 account be
reasonably carried out with full disclosure to the parties
concerned, particularly the beneficiaries. Thus, it was
incumbent upon BPI to give proper notice of the existence
of the insurance coverage and the stipulation in the
insurance contract for filing a claim to Laingo, as Rheozel's
beneficiary, upon the latter's death.
Articles 1884 and 1887 of the Civil Code state:
Art. 1884. The agent is bound by his acceptance to carry out the
agency and is liable for the damages which, through his non-
performance, the principal may suffer.
He must also finish the business already begun on the death of
the principal, should delay entail any danger.
Art. 1887. In the execution of the agency, the agent shall act in
accordance with the instructions of the principal.
In default, thereof, he shall do all that a good father of a family
would do, as required by the nature of the business.
An agent is bound to carry out the agency. The
relationship existing between principal and agent is a
fiduciary one, demanding conditions of trust and
confidence. It is the duty of the agent to act in good faith
for the advancement of the interests of the principal. In
this case, BPI had the obligation to carry out the agency
by informing the beneficiary, who appeared before BPI to
withdraw funds of the insured who was BPI's depositor,
not only of the existence of the insurance contract but also
the accompanying terms and conditions of the insurance
policy in order for the beneficiary to be able to properly
and timely claim the benefit.
Upon Rheozel's death, which was properly communicated
to BPI by his mother Laingo, BPI, in turn, should have
fulfilled its duty, as agent of FGU Insurance, of advising
Laingo that there was an added benefit of insurance
coverage in Rheozel's savings account. An insurance
company has the duty to communicate with the
beneficiary upon receipt of notice of the death of the
insured. This notification is how a good father of a family
should have acted within the scope of its business dealings
with its clients. BPI is expected not only to provide utmost
customer satisfaction in terms of its own products and
services but also to give assurance that its business
concerns with its partner entities are implemented
accordingly.
There is a rationale in the contract of agency, which flows
from the "doctrine of representation," that notice to the
agent is notice to the principal, Here, BPI had been
informed of Rheozel's death by the latter's family. Since
BPI is the agent of FGU Insurance, then such notice of
death to BPI is considered as notice to FGU Insurance as
well. FGU Insurance cannot now justify the denial of a
beneficiary's insurance claim for being filed out of time
when notice of death had been communicated to its agent
within a few days after the death of the depositor-insured.
In short, there was timely notice of Rheozel's death given
to FGU Insurance within three months from Rheozel's
death as required by the insurance company.
BPI had 3 opportunities of inform Laingo: 1) when the
death was headlined in a newspaper; 2) when Laingo
through Alice inquired about the account, was allowed to
withdraw money from Rheozel's account; 3) When an
employee of BPI went to the wake to have documents
signed. Despite the opportunities to inform Laingo, BPI
neglected to do so.
As agent of FGU, BPI fell short in notifying Laingo of the
insurance policy, Laingo having no means to know of such.
30. HSBC v. National Steel Corporation and City
Trust Banking Corporation (Now BPI) [and
CityTrust]
FACTS: Respondent NSC entered into an Export Sales
Contract (the Contract) with Klockner East Asia Limited
(Klockner) on 10/12/1993. NSC sold 1,200 metric tons of
prime cold rolled coils to Klockner, FOB ST Iligan terms.
As required by the Contract, Klockner applied for an
irrevocable letter of credit (LoC) with HSBC in favor of NSC
for $468,000. On 10/22/1993, HSBC issued an irrevocable
and onsight LoC #HKH 239409 in favor of NSC. The LOC
stated that it is governed by the International Chamber of
Commerce Uniform Customs and Practice for
Documentary Credits (UCP 400). Under UCP 400, HSBC
has the obligation to immediately pay NSC upon
presentment of the documents listed in the LoC.
The LoC was amended twice to reflect changes in the
terms of delivery. First, on 11/2/1993 - FOB ST Iligan >
FOB ST Manila & increase amount to $484,400. Second,
on 11/18/1993 - extended expiry and shipment date to
12/8/1993. On 11/21/1993, NSC, through Emerald
Forwarding Corporation, loaded and shipped the cargo on
board MV Sea Dragon under China Ocean Shipping
Company Bill of Lading #HKG 266001 and arrived in
Hongkong on 11/25/1993.
NSC coursed the collection from Klockner through
CityTrust Banking Corporation (CityTrust). NSC obtained
a loan earlier from CityTrus secured by the LoC.
On 11/29/1993, CityTrust sent a collection order (CO) to
HSBC. The CO contained, among others, the following
statement: "Subject to Uniform Rules for the Collection of
Commercial Paper Publication No. 322." (UCP 322)
Furthermore that the proceeds should be remitted ti
Standard Chartered Bank of Australia, Ltd., Offshore
Branch Manila (SCB-M) which was, in turn, in charge of
remitting the amount to CityTrust.
On 11/2/1993, HSBC sent a cablegram to CityTrust
acknowledging the CO. It also stated that the documents
will be presented to "the drawee against payment subject
to UCP 322 (URC - Uniform Rules for Collection 322) as
instructed..." SCB-M then sent a cablegram to HSBC
requesting the latter to urgently remit the proceeds, and
further asked that HSBC inform it "if unable to pay" and
of the “reasons thereof." Neither CityTrust nor SCB-M
objected to HSBC's statement that the collection will be
handled under URC 322.
On 12/7/1993, HSBC responded to SCB-M where it
repeated that "this bill is being handled subject to URC
322 as instructed by collecting bank." The next day the
LoC expired.
On 12/10/1993, HSBC advised SCB-M that Klockner had
refused payment, and that it intends to return the
documents to NSC with all the banking charges for its
account. On 12/14/1993 CityTrust requested HSBC to
inform of Klockner's reason for refusing. HSBC did not
respond and CityTrust sent a follow up cablegram on
12/17/1993 insisting that a demand payment must be
made from Klockner since the documents "were found in
compliance with LC terms and conditions." HSBC replied
on the same day stating that HSBC treated the transaction
under URC 322. THus, demanded payment from Klockner
who refused to pay for unspecified reasons noting that
under URC 322, Klockner has no duty to provide reason
for the refusal. HSBC requested for further instruction as
to where it should continue to press for payment or return
of the documents. CityTrust responded that as advised by
its client, HSBC should continue to press for payment.
Klockner continued to refuse payment and HSBC notified
CityTrust in a cablegram dated 1/7/1994, that should
Klockner still refuse to accept the bill by 1/12/1994, it will
return the full set of documents to CityTrust with all the
charges for the account of the drawer.
Meanwhile, on 1/12/1994, CityTrust sent a letter to NSC
stating that it executed NSC's instructions "to send, ON
COLLECTION BASIS (URC 322), the export documents ...
" CityTrust also explained that its act of sending the export
documents on collection basis has been its usual practice
in response to NSC's instructions in its transactions.
Ultimately Klockner refused to pay and HSBC and
CityTrust kept arguing on whether UCP 400 or URC 322
should be applied.
CoA - Collection of sum of money against HSBC.
NSC: NSC coursed the collection of the LoC through
CityTrust and despite the latter's complete compliance of
the requirements in the LoC, HSBC unreasonably refused
to pay the obligation of $485,767.93.
HSBC: Denied liability under LoC, CityTrust having
modified the obligation from UCP 400 to URC 322. Filed a
Motion to Admit Attached Third-Party Complaint against
CityTrust, claiming CityTrust instructed collection under
URC 322 and never raised the intention to collect under
the LoC, and in the event HSBC is found liable, HSBC is to
be subrogated by CityTrust. RTC Makati granted the
motion to which CityTrust answered denying modifying
the obligation acting as a mere agent, it cannot modify
the terms without the consent of all the parties. That the
instruction to subject the transaction to 322 was merely
in fine print in a pro forma document.
RTC - Dismissed. HSBC not liable, applicable law is URC
322 as it was the law which CityTrust intended to apply to
the transaction. Under URC 322, HSBC has no liability
when Klockner refused payment.
CA - NSC and CityTrust appealed, found that UCP 400 and
not URC 322 governs the transaction. Further, even if the
LoC did not state UCP 400 governs, it nevertheless finds
application as this Court has consistently recognized it
under PH jurisdiction. Applying UCP 400, the obligation of
the issuing bank is to pay the seller or beneficiary once
the draft and required documents are properly presented.
Independence principle - the issuing bank's obligation to
pay under the LoC is separate from the compliance of the
parties in the main contract.
Motion for Reconsideration - Denied.
ISSUE: Whether or not CityTrust, as agent, is liable to
NSC its principal.
RULING: No. Since NSC has not raised any claim against
CityTrust.
RATIO: When NSC obtained the services of CityTrust in
collecting under the Letter of Credit, it constituted
CityTrust as its agent. Article 1868 of the Civil Code states
that a contract of agency exists when a person binds
himself or herself "to render some service or to do
something in representation or on behalf of another, with
the consent or authority of the latter." In this case,
CityTrust bound itself to collect under the Letter of Credit
in behalf of NSC.
One of the obligations of an agent is to carry out the
agency in accordance with the instructions of the
principal. 127 In ascertaining NSC's instructions to
CityTrust, its letter dated January 18, 1994 is
determinative. In this letter, NSC clearly stated that it
"negotiated with CityTrust the export documents
pertaining to LC No. HKH 239409 of HSBC and it was
CityTrust which wrongfully treated the negotiation as 'on
collection basis."' 128 HSBC persistently communicated
with CityTrust and consistently repeated that it will
proceed with collection under URC 322. At no point did
CityTrust correct HSBC or seek clarification from NSC. In
insisting upon its course of action, CityTrust failed to act
in accordance with the instructions given by NSC, its
principal. Nevertheless while this Court recognizes that
CityTrust committed a breach of its obligation to NSC, this
carries no implications on the clear liability of HSBC. As
this Court already mentioned, HSBC had a separate
obligation that it failed to perform by reason of acts
independent of CityTrust's breach of its obligation under
its contract of agency. If CityTrust has incurred any
liability, it is to its principal NSC. However, NSC has not
raised any claim against CityTrust at any point in these
proceedings. Thus, this Court cannot make any finding of
liability against CityTrust in favor of NSC.
Note: On the main issue WON HSBC is liable, HSBC is indeed
liable. It was unable to prove that URC 322 is the norm in
transacting with LoCs. The testimony of the witness attesting to
this contention was not considered an expert witness.
Furthermore, URC 322 is more lenient compared to UCP 400 in
terms of liability to the client. In the former the issuing bank is a
mere collecting agent who assumes no liability, while the latter
recognizes two liabilities of the issuing bank: 1) Liability to pay
the obligation in behalf of its client; 2) Liability to pay the
beneficiary of the LoC upon fulfillment of its terms. UCP 400 was
the law between the parties and NSC, as the beneficiary, did not
consent to the change to URC 322. UCP 400 is also in accordance
with the norm in the Philippines and the courts have upheld so,
on the ground that to apply URC 322, instead of UCP 400 would
render LoCs mere pieces of paper and would defeat their very
purpose of assuring payment as a commercial paper used in
commerce as a reliable form of payment.
31. Ramos v. Caoibes
Facts:
This is an appeal by Consolacion L. Ramos as
administratrix of the estate of Concepcion Ramos from an
order issued by the Court of First Instance of Batangas on
June 15, 1951.

On August 16, 1948, Concepcion Ramos Dipusoy executed
before a notary public two documents which have been
marked as Annex "A" and Annex "B".
Annex A is a power of attorney which includes:
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
KNOW ALL MEN BY THESE PRESENTS:
That I, Concepcion Ramos Dipusoy……. have made,
constituted and appointed, and by these presents do
make, constitute and appoint Mr. Benigno A. Caoibes,….
my true and lawful attorney-in-fact, for me and in my
name, place and stead, to collect any amount due me
from the Philippine War Damage Commission, regarding
my claim filed for my properties that were lost during the
last war in Balayan, Batangas, to cash checks, warrants
and to sign receipts, vouchers, documents which shall be
necessary to the said purpose.
That I am giving and granting unto my said attorney-in-
fact Benigno A. Caoibes, full and absolute power and
authority to do and perform all any every act or thing
whatsoever to be done necessary in and about the
premises, as fully to all intents and purposes as I might or
could myself do if I were personally present, and hereby
confirming and ratifying all that my said attorney-in-fact
shall lawfully do or cause to be done and by virtue of these
presents.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Annex B is an affidavit of the following tenor:
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
REPUBLIC OF THE PHILIPPINES}
CITY OF MANILA } s.s.
AFFIDAVIT
That I, CONCEPCION RAMOS DIPUSOY,.......
That in case payment of any amount or amounts collected
from the Philippine War Damage Commission, my nephew
and at the same time attorney-in-fact, shall give my sister
Teopista Vda. de Basa one-half (½), of the corresponding
amount and the other half (½) shall be given to my
nephew and niece Mr. and Mrs. Benigno A. Caoibes.
IN WITNESS WHEREOF, I have hereunto set my hand this
16th day of August, 1948, in the City of Manila.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Concepcion Ramos died on August 19, 1948, leaving a will
dated January 7, 1927 admitted to probate on October 4,
1948, in which she ordered that the credits due to her be
distributed among the children of the deceased Antonino
Ramos, namely, Consolacion, Ramon, Socorro and Cirila.
One year before she died, Concepcion Ramos filed with
the War Damage Commission a claim which was identified
as No. 411773. On August 31, 1948, the Commission
issued check No. 348444, in the amount of P501.62,
payable to the deceased Concepcion Ramos. This check
was returned to the Commission and substituted by the
latter which check No. 564614, on November 10, 1948,
for the same amount, but payable to Benigno A. Caoibes
(Appellee), who had presented to said entity Annexes
"A" and "B", above mentioned, in order to exchange the
first check No. 564614, which he cashed for himself.
Annexes "A" and "B" were presented to the Commission
by Caoibes after the death of Concepcion.
Consolacion L. Ramos (Appellant), the appellant herein,
discovered the collection made by Caoibes when she saw
the note "previous payment" which appeared in the
account sent to her by the Commission on October 13,
1950. She filed a motion with the court asking that
Caoibes be ordered to deposit the sum of P501.62 with
the clerk of court. Caoibes answered the motion admitting
that after the death of Concepcion, he presented Annexes
"A" and "B" to the Commission and received in cash the
sum of P501.62, amount of the second check, above
mentioned, but stating that he was willing to deliver to the
clerk the sum of P250.81. He contended that, by virtue of
Annex "A", and Annex "B", he had the right to retain, for
himself, half of the sum of P501.62.
Court Ruled in Favor of appellee and issued the following
order:
Atty. Caoibes being agreeable to turn over the amount of
P250.81 to the Clerk of this Court in final settlement of
this matter — it is ordered that the said Atty. Caoibes
deposit the said amount to be at the disposal of the
administratrix and the other parties in this intestate
proceedings. With this order, the matter before this Court
is deemed closed.
Appellant’s motion for reconsideration was denied, hence
this appeal to the supreme court.
Issue:
Whether or not Caoibes is correct with his contention that
he had the right to retain the money by virtue of the power
of attorney granted him by Cooncepcion.
Held:
Annex A is only a power of attorney. Caoibes, as agent,
had the obligation to deliver the amount collected by
virtue of said power to his principal, Concepcion, or, after
her death, to the administratrix of her estate,
Consolacion. There is absolutely no cession of rights made
in favor of Caoibes in Annex "A", and under Article 1711
of the old Civil Code (which was in force at the time of the
transaction), the contract of agency is presumed to be
gratuitous, unless the agent is a professional agent. There
is no proof that Caoibes was such. Furthermore, according
to Article 1732 of said Code, an agency is terminated,
among other causes, by the death of the principal or of
the agent. When Caoibes made use of the power of
attorney, his principal, Concepcion was already dead.
Donations of personal property may be made verbally or
in writing.
Verbal donation requires the simultaneous delivery of the
gift. In the absence of this requisite the donation shall
produce no effect, unless made in writing and accepted in
the same form.
The alleged donation was made in writing but it has not
been accepted in the same form, and consequently, has
no validity. It cannot be considered a donation upon
valuable consideration, for no services nor any valuable
consideration had passed from the donees to the donor.
The mere fact that Caoibes collected the claim from the
War Damage Commission is not such a service as to
require compensation. Caoibes did not even prepare the
claim.
In view of the foregoing, the order appealed from is
hereby reversed and Benigno A. Caoibes is ordered to
deposit with the Clerk of Court of Batangas the sum of
P501.62 to be at the disposal of the administratrix in her
capacity as such, without pronouncement as to costs. So
ordered.
32. People v. Chowdury
Facts:
In November 1995, Bulu Chowdury and Josephine Ong
were charged before the Regional Trial Court of Manila
with the crime of illegal recruitment in large scale
committed as follows:
"That sometime between the period from August 1994 to
October 1994 in the City of Manila, Philippines and within
the jurisdiction of this Honorable Court, the above-named
accused, representing themselves to have the capacity to
contract, enlist and transport workers for employment
abroad, conspiring, confederating and mutually helping
one another, did then and there willfully, unlawfully and
feloniously recruit the herein complainants: Estrella B.
Calleja, Melvin C. Miranda and Aser S. Sasis, individually
or as a group for employment in Korea without first
obtaining the required license and/or authority from the
Philippine Overseas Employment Administration."
They were likewise charged with three counts of estafa
committed against private complainants. The State
Prosecutor, however, later dismissed the estafa charges
against Chowdury and filed an amended information
indicting only Ong for the offense.
Chowdury was arraigned on April 16, 1996 while Ong
remained at large. He pleaded "not guilty" to the charge
of illegal recruitment in large scale.
The prosecution presented four witnesses: private complainants
Aser Sasis, Estrella Calleja and Melvin Miranda, and Labor
Employment Officer Abbelyn Caguitla.
The first three private complainants in their testimony said that they
were interviewed by Chowdury who informed them about the
requirements for employment. He told them to submit their
passport, NBI clearance, passport size picture and medical
certificates. They all filed a complaint with the Philippine Overseas
Employment Administration (POEA) a case for illegal recruitment
against Chowdury, when they were informed that they would no
longer be deployed for employment abroad. pon verification with
the POEA, he learned that Craftrade's license had already expired
and has not been renewed and that Chowdury, in his personal
capacity, was not a licensed recruiter.
The trial court found Chowdury guilty beyond reasonable
doubt of the crime of illegal recruitment in large scale. It
sentenced him to life imprisonment and to pay a fine of
P100,000.00. It further ordered him to pay Aser Sasis the
amount of P16,000.00, Estrella Calleja, P20,000.00 and
Melvin Miranda, P25,000.00. The dispositive portion of the
decision reads:
"WHEREFORE, in view of the foregoing considerations, the
prosecution having proved the guilt of the accused Bulu
Chowdury beyond reasonable doubt of the crime of Illegal
Recruitment in large scale, he is hereby sentenced to
suffer the penalty of life imprisonment and a fine of
P100,000.00 under Art. 39 (b) of the New Labor Code of
the Philippines. The accused is ordered to pay the
complainants Aser Sasis the amount of P16,000.00;
Estrella Calleja the amount of P20,000.00; Melvin Miranda
the amount of P25,000.00.".
Chowdury Appealed the trial courts decision.
This court finds
Evidence shows that accused-appellant interviewed
private complainants in the months of June, August and
September in 1994 at Craftrade's office. At that time, he
was employed as interviewer of Craftrade which was then
operating under a temporary authority given by the POEA
pending renewal of its license.[29] The temporary license
included the authority to recruit workers.[30] He was
convicted based on the fact that he was not registered
with the POEA as employee of Craftrade. Neither was he,
in his personal capacity, licensed to recruit overseas
workers. Section 10 Rule II Book II of the Rules and
Regulation Governing Overseas Employment (1991)
requires that every change, termination or appointment
of officers, representatives and personnel of licensed
agencies be registered with the POEA. Agents or
representatives appointed by a licensed recruitment
agency whose appointments are not previously approved
by the POEA are considered "non-licensee " or "non-holder
of authority" and therefore not authorized to engage in
recruitment activity.[31]
Upon examination of the records, however, we find that
the prosecution failed to prove that accused-appellant was
aware of Craftrade's failure to register his name with the
POEA and that he actively engaged in recruitment despite
this knowledge. The obligation to register its personnel
with the POEA belongs to the officers of the agency.[32]
A mere employee of the agency cannot be expected to
know the legal requirements for its operation. The
evidence at hand shows that accused-appellant carried
out his duties as interviewer of Craftrade believing that
the agency was duly licensed by the POEA and he, in turn,
was duly authorized by his agency to deal with the
applicants in its behalf. Accused-appellant in fact confined
his actions to his job description. He merely interviewed
the applicants and informed them of the requirements for
deployment but he never received money from them.
Their payments were received by the agency's cashier,
Josephine Ong. Furthermore, he performed his tasks
under the supervision of its president and managing
director.
Issue:
Whether or not an employee or agent can be held liable
for the offenses of their principles.
Held:
As stated in the first sentence of Section 6 of RA 8042, the persons
who may be held liable for illegal recruitment are the principals,
accomplices and accessories. An employee of a company or
corporation engaged in illegal recruitment may be held liable as
principal, together with his employer, if it is shown that he actively
and consciously participated in illegal recruitment. It has been
held that the existence of the corporate entity does not shield from
prosecution the corporate agent who knowingly and intentionally
causes the corporation to commit a crime. The corporation
obviously acts, and can act, only by and through its human agents,
and it is their conduct which the law must deter. The employee or
agent of a corporation engaged in unlawful business naturally
aids and abets in the carrying on of such business and will be
prosecuted as principal if, with knowledge of the business, its
purpose and effect, he consciously contributes his efforts to
its conduct and promotion, however slight his contribution
may be. The law of agency, as applied in civil cases, has no
application in criminal cases, and no man can escape punishment
when he participates in the commission of a crime upon the ground
that he simply acted as an agent of any party. The culpability of
the employee therefore hinges on his knowledge of the
offense and his active participation in its commission. Where
it is shown that the employee was merely acting under the
direction of his superiors and was unaware that his acts
constituted a crime, he may not be held criminally liable for
an act done for and in behalf of his employer.
Hence, we hold that the prosecution failed to prove
beyond reasonable doubt accused-appellant's conscious
and active participation in the commission of the crime of
illegal recruitment. His conviction, therefore, is without
basis.
This is not to say that private complainants are left with
no remedy for the wrong committed against them. The
Department of Justice may still file a complaint against the
officers having control, management or direction of the
business of Craftrade Overseas Developers (Craftrade), so
long as the offense has not yet prescribed. Illegal
recruitment is a crime of economic sabotage which need
to be curbed by the strong arm of the law. It is important,
however, to stress that the government's action must be
directed to the real offenders, those who perpetrate the
crime and benefit from it.
IN VIEW WHEREOF, the assailed decision of the Regional
Trial Court is REVERSED and SET ASIDE. Accused-
appellant is hereby ACQUITTED. The Director of the
Bureau of Corrections is ordered to RELEASE accused-
appellant unless he is being held for some other cause,
and to REPORT to this Court compliance with this order
within ten (10) days from receipt of this decision. Let a
copy of this Decision be furnished the Secretary of the
Department of Justice for his information and appropriate
action.
SO ORDERED.
33. Olaguer v. Purugganan
FACTS:
Petitioner Eduardo B. Olaguer alleges that he was the
owner of 60,000 shares of stock of Businessday
Corporation (Businessday) with a total par value of
₱600,000.00.
Petitioner, together with respondent Raul Locsin (Locsin)
and Enrique Joaquin (Joaquin), was active in the political
opposition against the Marcos dictatorship.3 Anticipating
the possibility that petitioner would be arrested and
detained by the Marcos military, Locsin, Joaquin, and
Hector Holifeña had an unwritten agreement that, in the
event that petitioner was arrested, they would support the
petitioner’s family by the continued payment of his salary.
Petitioner also executed a Special Power of Attorney
(SPA), on 26 May 1979, appointing as his attorneys-in-
fact Locsin, Joaquin and Hofileña for the purpose of selling
or transferring petitioner’s shares of stock with
Businessday.
On 24 December 1979, petitioner was arrested by the
Marcos military by virtue of an Arrest, Search and Seizure
Order and detained for allegedly committing arson. During
the petitioner’s detention, respondent Locsin ordered
fellow respondent Purugganan to cancel the petitioner’s
shares in the books of the corporation and to transfer
them to respondent Locsin’s name.
On 16 January 1986, petitioner was finally released from
detention. He then discovered that he was no longer
registered as stockholder of Businessday in its corporate
books. He also learned that Purugganan, as the Corporate
Secretary of Businessday, had already recorded the
transfer of shares in favor of respondent Locsin, while
petitioner was detained. When petitioner demanded that
respondents restore to him full ownership of his shares of
stock, they refused to do so.
On 29 July 1986, petitioner filed a Complaint before the
trial court against respondents Purugganan and Locsin to
declare as illegal the sale of the shares of stock, to restore
to the petitioner full ownership of the shares, and payment
of damages.
TRIAL COURT: DISMISSED THE COMPLAINT
COURT OF APPEALS: AFFIRMED
ISSUE : WON respondent Locsin exceeded his authority
under the SPA.
HELD : NO.
It is a general rule that a power of attorney must be
strictly construed; the instrument will be held to grant
only those powers that are specified, and the agent may
neither go beyond nor deviate from the power of attorney.
However, the rule is not absolute and should not be
applied to the extent of destroying the very purpose of the
power. If the language will permit, the construction that
should be adopted is that which will carry out instead of
defeat the purpose of the appointment. Clauses in a power
of attorney that are repugnant to each other should be
reconciled so as to give effect to the instrument in
accordance with its general intent or predominant
purpose. Furthermore, the instrument should always be
deemed to give such powers as essential or usual in
effectuating the express powers. The language of the SPA
clearly enumerates, as among those acts that the agents
were authorized to do, the act of applying the proceeds of
the sale of the shares to any obligations petitioner might
have against the Businessday group of companies. This
interpretation is supported by the use of the word "and"
in enumerating the authorized acts, instead of phrases
such as "only for," "for the purpose of," "in order to" or
any similar terms to indicate that the petitioner intended
that the SPA be used only for a limited purpose, that of
paying any liabilities with the Businessday group of
companies.
34. Escueta v. Lim
FACTS :
Respondent Rufina Lim filed an action to remove cloud on,
or quiet title to, real property, with preliminary injunction
and issuance of [a hold-departure order] from the
Philippines against Ignacio E. Rubio. Respondent amended
her complaint to include specific performance and
damages.
Respondent averred inter alia that she bought the
hereditary shares (consisting of 10 lots) of Ignacio Rubio
[and] the heirs of Luz Baloloy, namely: Alejandrino,
Bayani, and other co-heirs; that said vendors executed a
contract of sale dated April 10, 1990 in her favor; that
Ignacio Rubio and the heirs of Luz Baloloy received [a
down payment] or earnest money in the amount of
P102,169.86 and P450,000, respectively.
It was agreed in the contract of sale that the vendors
would secure certificates of title covering their respective
hereditary shares; that the balance of the purchase price
would be paid to each heir upon presentation of their
individual certificates of title.
Ignacio Rubio refused to receive the other half of the down
payment which is P100, 000 and to deliver to respondent
the certificates of title covering his share on the two lots
For petitioners Ignacio Rubio (Rubio for brevity) and
Corazon Escueta (Escueta for brevity):
Respondent has no cause of action, because Rubio has not
entered into a contract of sale with her; that he has
appointed his daughter Patricia Llamas to be his attorney-
in-fact and not in favor of Virginia Rubio Laygo Lim (Lim
for brevity) who was the one who represented him in the
sale of the disputed lots in favor of respondent.
RTC: rendered in favor of respondent and against
petitioners.
CA: Affirmed
ISSUE: WON the contract of sale between petitioners and
respondent is valid.
HELD: YES
Art. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he
shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one.
Applying the above-quoted provision to the special power
of attorney executed by Ignacio Rubio in favor of his
daughter Patricia Llamas, it is clear that she is not
prohibited from appointing a substitute. By authorizing
Virginia Lim to sell the subject properties, Patricia merely
acted within the limits of the authority given by her father,
but she will have to be "responsible for the acts of the sub-
agent,"19 among which is precisely the sale of the subject
properties in favor of respondent. Even assuming that
Virginia Lim has no authority to sell the subject properties,
the contract she executed in favor of respondent is not
void, but simply unenforceable, under the second
paragraph of Article 1317 of the Civil Code.
35.Baltazar v. Ombudsman
Doctrine: An agent cannot delegate to another the same
agency. The legal maxim potestas delegata non delegare
potest; a power once delegated cannot be re-delegated.
For another, a re-delegation of the agency would be
detrimental to the principal as the second agent has no
privity of contract with the former.
FACTS:
1. Paciencia Regala owns a 7-hectare fishpond located at
Sasmuan, Pampanga. Her attorney-in-fact Faustino R.
Mercado leased the fishpond to Eduardo Lapid who in turn
sub-leased the fishpond to Rafael Lopez during the last
seven months of the original lease. Lapid hired Ernesto
Salenga as fishpond watchman (bante-encargado). In the
sub-lease, Lopez rehired respondent Salenga.
2. Salenga filed a complaint in the Provincial Agrarian
Reform Adjudication Board (PARAB) against Lopez and
Lapid for unpaid salaries and non-payment of the 10%
share in the harvest. The board ruled in his favor of
Salenga and granted the TRO requested.
3. On November 24, 1994, pending resolution of the
agrarian case, the instant case was instituted by petitioner
Antonio Baltazar, an alleged nephew of Faustino Mercado,
through a Complaint-Affidavit against private respondents
before the Office of the Ombudsman for violation of Sec 3
(e) RA 3019. Petitioner charged private respondents of
conspiracy through the issuance of the TRO in allowing
respondent Salenga to retain possession of the fishpond,
operate it, harvest the produce, and keep the sales under
the safekeeping of other private respondents.
Office of the Ombudsman:
- On May 10, 1996 - Omb issued a Resolution
finding cause to bring respondents to court, denying the
motion to dismiss of respondent Ilao, Jr., and
recommending the filing of an Information for violation of
Section 3 (e) of RA 3019. Respondent Ilao filed MR and
2nd MR.
- On August 21, 1998. Omb approved an Order
issued by OSP which recommended the dismissal of the
complaint against all private respondents.
ISSUE: WON Baltazar has the authority to act in behalf
of Faustino Mercado
HELD:
No. Baltazar has no authority to act in behalf of Faustino
Mercado.
Petitioner asserts that he is duly authorized by Faustino
Mercado to institute the suit and presented a Special
Power of Attorney (SPA) from Faustino Mercado. However,
such SPA is unavailing for petitioner. For one, petitioner’s
principal, Faustino Mercado, is an agent himself and as
such cannot further delegate his agency to another.
Otherwise put, an agent cannot delegate to another the
same agency. The legal maxim potestas delegata non
delegare potest; a power once delegated cannot be re-
delegated, while applied primarily in political law to the
exercise of legislative power, is a principle of agency. For
another, a re-delegation of the agency would be
detrimental to the principal as the second agent has no
privity of contract with the former. In the instant case,
petitioner has no privity of contract with Paciencia Regala,
owner of the fishpond and principal of Faustino Mercado.
Moreover, while the Civil Code under Article 1892 allows
the agent to appoint a substitute, such is not the situation
in the instant case. The SPA clearly delegates the agency
to petitioner to pursue the case and not merely as a
substitute. Besides, it is clear in the aforecited Article that
what is allowed is a substitute and not a delegation of the
agency.
Petition DISMISSED.
36. MBTC v. CA
FACTS:
● Gomez opened an account with Golden
Savings bank and deposited 38 treasury
warrants.
● All these warrants were endorsed by the
cashier of Golden Savings, and deposited it to
the savings account in a Metrobank branch
since the former has no clearing facilities of its
own. They were sent later on for clearing by
the branch office to the principal office of
Metrobank, which forwarded them to the
Bureau of Treasury for special clearing.
● On persistent inquiries on whether the warrants
have been cleared, the branch manager of
Metrobank branch allowed Golden Savings to
withdraw the warrants.
● Subsequently, relying on the go-signal given by
Metrobank, Golden Savings allowed Gomez also to
make withdrawals from his own account, only to
find out later on that the treasury warrants
have been dishonored by Bureau of Treasury
because of the alleged forgery of the signatures of
the drawers, not of Gomez as payee or indorsee.
● Metrobank demanded refund from Golden Savings
for the amount withdrawn by the latter but Golden
Savings rejected. Metrobank sued Golden Savings
and argued that latter should have exercised more
care in checking the personal circumstances of
Gomez before accepting his deposit. It further
argued that Metrobank is just a collecting agent of
Golden Savings, and as a mere agent it cannot be
liable to the principal. RTC first rendered
judgment in favor of Golden Savings. When
Metrobank filed motion for reconsideration, it only
modified the judgment but still in favor of Golden
Savings. CA affirmed the RTC's decision.
ISSUE: WON Metrobank can hold Golden Savings liable
for the dishonored treasury warrants.
HELD: No. In stressing that it was acting only as a
collecting agent for Golden Savings, Metrobank seems to
be suggesting that as a mere agent it cannot be liable to
the principal. This is not exactly true. On the contrary,
Article 1909 of the Civil Code clearly provides that — Art.
1909. — The agent is responsible not only for fraud, but
also for negligence, which shall be judged 'with more or
less rigor by the courts, according to whether the agency
was or was not for a compensation. In this case, the
negligence of Metrobank has been sufficiently established,
be it noted that it misled Golden Savings when the former
assured the latter that it was already safe to allow Gomez
to withdraw the proceeds of the treasury warrants. SC
finds that Metrobank exhibited extraordinary carelessness
and that Golden Savings have acted with due care and
diligence and cannot be faulted for the withdrawals it
allowed Gomez to make.
VI. OBLIGATIONS AND LIABILITIES OF
AGENTS TO THIRD PARTIES
37. PNB v AGUDELO
AGENT- Mauro A. Garrucho
PRINCIPAL- Paz Agudelo y Gonzaga
THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
PAZ AGUDELO Y GONZAGA, appellant.
Defendant-appellant Paz Agudelo y Gonzaga
executed in favor of her nephew, Mauro A.
Garrucho, a special power of attorney sufficiently
broad in scope to enable him to sell, alienate and
mortgage, all her real estate situated in the
municipalities of Murcia and Bacolod, Occidental
Negros, consisting in lots Nos. 61 and 207 of
Bacolod, Occidental Negros.
Also, Amparo A. Garrucho executed the document
whereby she conferred upon her brother Mauro A
Garrucho a special power of attorney sufficiently
broad in scope to enable him to sell, alienate,
mortgage or otherwise encumber, all her real estate
situated in the municipalities of Murcia and Bago,
Occidental Negros.
Nothing in the aforesaid powers of attorney
expressly authorized Mauro A. Garrucho to contract
any loan nor to constitute a mortgage on the
properties belonging to the respective principals, to
secure his obligations.
Garrucho executed in the favor of Philippine National
bank, the document, whereby he constituted a
mortgage on lot of Amparo A. Garrucho, in the
amount not exceeding P6,000, issuing the
corresponding promissory note to that effect.
Again, Garrucho executed in favor of the Philippine
National Bank, the document whereby he
constituted a mortgage on lots of Paz Agudelo y
Gonzaga, in the amount of P16,000, payable on
August 24, 1922, executing the corresponding
promissory note to that effect.
The mortgage deeds as well as the corresponding
promissory notes for P6,000 and P16,000,
respectively, were executed in Mauro A. Garrucho's
own name and signed by him in his personal
capacity, authorizing the mortgage creditor, the
Philippine National Bank, to take possession of the
mortgaged properties, by means of force if
necessary, in case he failed to comply with any of
the conditions stipulated therein.
Garrucho, executed in favor of PNB the deed
whereby he constituted a mortgage on lots of Paz
Agudelo y Gonzaga and that of Amparo A. Garrucho.
In connection of the credits, loans, and commercial
overdrafts amounting to P21,000 Mauro A.
Garrucho, executed the promissory note for P21,000
as a novation of the former promissory notes for
P6,000 and P16,000, respectively.
Philippine National Bank, then, cancelled the
mortgages constituted on lots Nos. 61, 207 and 878-
Lots of Amparo and Paz.
Amparo A. Garrucho, then, sold lot No. 878 to Paz
Agudelo y Gonzaga.
CFI- Absolving the defendant Mauro A. Garrucho
from the complaint and ordering the defendant Paz
Agudelo y Gonzaga to pay to the plaintiff, PNB.
ISSUE:
WON Paz is liable for the payment of the loans
obtained by his agent, Mauro A. Garrucho from the
Philippine National Bank for the security of which he
constituted a mortgage on the aforesaid real estate
belonging to Paz.
SC. NO.
In view of the foregoing consideration, when an
agent negotiates a loan in his personal capacity and
executes a promissory note under his own
signature, without express authority from his
principal, giving as security therefor real estate
belonging to the letter, also in his own name and not
in the name and representation of the said principal,
the obligation do constructed by him is personal and
does not bind his aforesaid principal.
Aside from the phrases "attorney in fact of his sister,
Amparo and of her aunt Paz written after the name
of Garrucho in the mortgage deeds, there is nothing
in the said mortgage deeds to show that Garrucho
is attorney in fact of them.
The above-quoted phrases which simply described
his legal personality, did not mean that Mauro A.
Garrucho obtained the said loans and constituted
the mortgages in question for the account, and at
the request, of his principals. From the titles as well
as from the signatures therein, Garrucho, appears
to have acted in his personal capacity.
There is absolutely no mention of Mauro A. Garrucho
being attorney in fact of anybody, and which shows
that he obtained such credit for himself in his
personal capacity and secured the payment thereof
by mortgage constituted by him in his personal
capacity.
38. PHILIPPINE PRODUCTS v PRIMATERIA
Principal- Premateria Zurich
Agent-Alexander G. Baylin and Jose Crame (
Primateria Phil)
FACTS: Primateria is a foreign juridical entity and had
its main office at Zurich, Switzerland. It was engaged
in international trade with agricultural products.
On Oct. 24, 1951, Primateria Zurich, through
Alexander Baylin, entered into an agreement with
plaintiff Philippine Products Company, whereby the
latter took to buy copra for the former. During the
period of the contract, plaintiff caused the shipment of
copra to foreign countries, pursuant to instructions
from defendant Primateria Zurich, thru Primateria Phil.
acting by Alexander Baylin and Jose Crame. As a
result, the total amount due to the plaintiff as of May
30, 1955, was Php 33,009.71.
Alexander Baylin acted in the dual capacities of agent
of the Zurich firm and executive vice-president of
Primateria Phil. which also acted as agent of
Primateria Zurich. Primateria Zurich had no license to
transact business in the Philippines.
An action to recover from the defendants was filed.
Lower court rendered judgment holding Primateria
Zurich liable to the plaintiff absolving defendants
Primateria Phil, Alexander Baylin and Jose Crame.
Plaintiff appealed the portion of the judgment
dismissing its complaint as regards the three
defendants.
Plaintiff alleges that the appelles as agents are liable
to it under art. 1897 of the NCC.
ISSUE: Whether or not Agents may be held liable on
contracts made in the name of the entity with third
persons in the Philippines.
HELD:
 No, There is no proof that, as agents, they
exceeded the limits of their authority. At any rate, art
1897 does not hold that in cases of excess of authority,
both the agent and the principal are liable to the other
contracting party. In the absence of express
legislation, the liability of the agent of a foreign
corporation doing business, but not licensed in the
Philippines, is premised on the inability to sue the
principal or non-liability thereof.
39. NPC v. NATIONAL MERCHANDISING
Principal – New York based International Commodities
Corporation
Agent - NAMERCO
FACTS:
This case is about the recovery of liquidated damages
from a seller’s agent that allegedly exceeded its authority
in negotiating the sale.
National Power Corporation (plaintiff) and National
Merchandising Corporation (Namerco), as the
representative of the International Commodities
Corporation based in New York , executed in Manila a
contract for the purchase by the NPC from the New York
firm of four thousand long tons of crude sulfur for its Maria
Cristina Fertilizer Plant in Iligan City.
On that same date, a performance bond was executed by
the Domestic Insurance Company in favor of the NPC to
guarantee the seller’s obligations.
It was stipulated in the contract of sale that the seller
would deliver the sulfur at Iligan City within sixty days
from notice of the establishment in its favor of a letter of
credit and that failure to effect delivery would subject the
seller and its surety to the payment of liquidated
damages.
NPC advised John Z. Sycip, the president of Namerco, of
the opening of a letter of credit in favor of International
Commodities Corporation. Notice of that letter of credit
was, received by cable by the New York firm.
The New York supplier was not able to deliver the sulfur
due to its inability to secure shipping space. There was a
shutdown of the NPC’s fertilizer plant because there was
no sulfur. No fertilizer was produced.
In a letter, the general manager of the NPC advised
Namerco and the Domestic Insurance Company that
under Article 9 of the contract of sale "non-availability of
bottom or vessel" was not a fortuitous event that would
excuse non-performance and that the NPC would resort to
legal remedies to enforce its rights.
The Government Corporate Counsel in his letter to Sycip
(Pres of Namerco) rescinded the contract of sale due to
the New York supplier’s non-performance of its
obligations. The same counsel in his letter demanded from
Namerco payment as liquidated damages. He explained
that time was of the essence of the contract. A similar
demand was made upon the surety.
NPC sued the New York firm, Namerco and the Domestic
Insurance Company for the recovery of the stipulated
liquidated damages (Civil Case No. 33114).
TC – Civil Case No.33114 – Dismissed the case as to the
New York firm for lack of jurisdiction because it was not
doing business in the Philippines
Civil Case 37019 - Dismissed Wallick’s (allegedly an
assignee of the NY corporation but was later dropped as
defendant in the other case) action for damages against
Namerco because the assignment in favor of Wallick was
champertous in character (sharing in the proceeds of
litigation by one who agrees with either the plaintiff or
defendant to help promote it or carry it on). Wallick
appealed to this Court. The appeal was dismissed because
the record on appeal did not disclose that the appeal was
perfected on time.
ISSUE: Whether Namerco acted within the scope of his
authority as agent in signing the contract of sale.
HELD: No, he did not act within the scope of his authority
Under Article 1897 of the Civil Code the agent who
exceeds the limits of his authority without giving the party
with whom he contracts sufficient notice of his powers is
personally liable to such party.
In the present case, Namerco, the agent of a New York-
based principal, entered into a contract of sale with the
National Power Corporation without disclosing to the NPC
the limits of its powers and, contrary to its principal’s prior
cabled instructions that the sale should be subject to
availability of a steamer, it agreed that non-availability of
a steamer was not a justification for nonpayment of the
liquidated damages. Namerco. therefore, is liable for
damages since he exceeded his scope of authority.
***Supplemental***
The rule relied upon by NAMERCO (defendants-
appellants) that every person dealing with an agent is put
upon inquiry and must discover upon his peril the
authority of the agent would apply in this case if the
principal is sought to be held liable on the contract entered
into by the agent.
That is not so in this case. Here, it is the agent that it
sought to be held liable on a contract of sale which was
expressly repudiated by the principal because the agent
took chances, it exceeded its authority, and, in effect, it
acted in its own name.
The defendants also contend that the trial court erred in
holding as enforceable the stipulation for liquidated
damages despite its finding that the contract was
executed by the agent in excess of its authority and is,
therefore, allegedly unenforceable. The defendants cite
article 1403 of the Civil Code which provides that a
contract entered into in the name of another person by
one who has acted beyond his powers is unenforceable.

Defendants’ contention is untenable because article 1403
refers to the unenforceability of the contract against
the principal. In the instant case, the contract containing
the stipulation for liquidated damages is not being
enforced against it principal but against the agent and its
surety.
It is being enforced against the agent because article
1807 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he
contracted.
And that rule is complemented by article 1898 of the
Civil Code which provides that "if the agent contracts in
the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it
shall be void if the party with whom the agent contracted
is aware of the limits of the powers granted by the
principal."
It is being enforced against the agent because article
1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he
contracted.
And the rule is complemented by article 1898 of the Civil
Code which provides that "if the agent contracts in the
name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it
shall be void if the party with whom the agent contracted
is aware of the limits of the powers granted by the
principal."
40. NATIONAL BANK v WELCH FAIRCHILD
(PNB v Welch Fairchild & Co. 44 phil 780)
FACTS:
La Compañia Naviera applied to the Philippine
National Bank for a loan of $125,000, with which to
purchase a boat called Benito Juarez, which had been
found on the market in the United States. Through the
efforts Mr. Fairchild, president of Welch Fairchild and
Co. Inc. that the consent of the proper authorities in
Washington, D.C. was obtained for the transfer of the
ship to Philippine registry. While the ship was being
delivered to the agent of the buyer in San Francisco, it
was found out that it needed repairs be it could be
transported to the Philippines.
Defendant wrote a letter to PNB to request them to
cable Anglo-London (agent of PNB in San Francisco)
to release the money and make payment for the ship
upon Welch and Co.s application without requiring the
delivery of the bill of sale or insurance policy which
became impracticable to deliver. The latter stated that
“the Compania Naviera will deliver to you here the bill
of sale also the insurance policy covering the voyage
to Manila”. La Compania also addressed a letter to
PNB confirming the request and authorizing the bank
to send the necessary cablegram. PNB sent the
cablegram authorizing payment without the production
of the bill of sale or insurance policy. The ship was
then delivered. After the repair of the ship, it was
insured by Welch & Co to the value of $150,000 and
was dispatched on its voyage to the Phils.
However, the vessel encountered a storm off the
Island in Hawaii and was lost. When the insurance was
taken out to cover the voyage to Manila, no policy was
issued by any insurer; but the insurance was placed
by Welch & Co. of San Francisco, upon the
instructions of Welch, Fairchild & Co., as agents of the
Compaña Naviera, and it was taken out in the ordinary
course of business to protect the interests of all
parties concerned.
The amount of $13,000 was mistakenly remitted to
PNB in New York, and it was only a month after this
that PNB Manila received authority to pay defendant
the said amount. This drew the attention of the bank
to the fact that the transfer was related to the proceeds
of the insurance on Benito Juarez. PNB Manila first
determined to intercept the transfer and withhold the
credit from the defendant.
The lower court ruled in favor of the defendants.
ISSUE: WON the agent ( Welch, Fairchild and Co.
Inc.) is liable.
HELD:
While it is true that an agent who acts for a revealed
principal in the making of a contract does not become
personally bound to the other party in the sense that
an action can ordinarily be maintained upon such
contract directly against the agent (art. 1725, Civ.
Code), yet that rule clearly does not control this case;
for even conceding that the obligation created by the
letter of August 8, 1918, was directly binding only on
the principal, and that in law the agent may stand apart
therefrom, yet it is manifest upon the simplest
principles of jurisprudence that one who has
intervened in the making of a contract in the character
of agent cannot be permitted to intercept and
appropriate the thing which the principal is bound to
deliver, and thereby make performance by the
principal impossible. The agent in any event must be
precluded from doing any positive act that could
prevent performance on the part of his principal. This
much, ordinary good faith towards the other
contracting party requires.
By virtue of the promise contained in the letter of
August 8, 1918, the bank became the equitable owner
of the insurance effected on the Benito Juarez to the
extent necessary to indemnify the bank for the money
advanced by it, in reliance upon that promise, for the (3) in order to render judgment against the mortgaged
purchase of said vessel; and this right of the bank must property it would be necessary that the minor children of
Juan de Vargas be made parties defendant in this action,
be respected by all persons having due notice thereof,
they having an interest in the property.
and most of all by the defendant which took out the
insurance itself in the interest of the parties then “Court Below” (CFI? assumed decision) decided in favour
concerned, including of course the bank. The of Tuason and held Orozco personally liable to the loan.
defendant therefore cannot now be permitted to ignore Issues:
the right of the bank and appropriate the insurance to (1) WON Vargas, as principal, is liable to the loan
the prejudice of the bank, even though the act be done obtained by Grupe.
(2) WON Vargas is relieved from obligation when
with the consent of its principal.
Grupe bound himself personally to the payment of
debt.
(3) WON the judgment may be rendered against the
41. TUAZON v OROSCO
property of the now deceased principal.
HELD:
Principal: Juan de Vargas
Agent: Enrique Grupe
(1) Yes. Under the provision of article 1727 of the
FACTS: Juan de Vargas y Amaya, the defendant's
Civil Code the principal directly liable to the creditor
husband, executed a power of attorney to Enrique Grupe,
for the payment of a debt incurred by his agent acting
authorizing him, among other things, to dispose of all his
within the scope of his authority.
property, and particularly of a certain house and lot known
The judgment of the court below should be modified in so
as No. 24 Calle Nueva, Malate, in the city of Manila, for
far as it holds the defendant personally liable for the
the price at which it was actually sold. He was also
payment of the debt.
authorized to mortgage the house for the purpose of
The agreement, so far as that amount is concerned, was
securing the payment of any amount advanced to his wife,
signed by Grupe as attorney in fact for Vargas. Pursuant
Dolores Orozco de Rivero, who, inasmuch as the property
to instructions contained in the power of attorney the
had been acquired with funds belonging to the conjugal
money was delivered to Varga's wife, the defendant in this
partnership, was a necessary party to its sale or
case. To secure the payment of the debt, Varga's property
incumbrance.
was mortgaged. His wife took part in the execution of the
Grupe and Orozco obtained a loan from the plaintiff
mortgage as required in the power of attorney. A debt
secured by a mortgage on the property referred to in the
thus incurred by the agent is binding directly upon the
power of attorney. In the caption of the instrument
principal, provided the former acted, as in the present
evidencing the debt it is stated that Grupe and Orozco
case, within the scope of his authority
appeared as the parties of the first part and Gonzalo
Tuason, the plaintiff, as the party of the second part.
(2) No. Irrespective of such liability on the part of the
Grupe acted for himself and also in behalf of Juan Vargas
principal, the agent may bind himself personally to the
by virtue of the power granted him by the latter, and
payment of the debt incurred for the benefit and in
Orozco appeared merely for the purpose of complying with
behalf of the principal. In such a case the liability
the requirement contained in the power of attorney.
expressly incurred by the agent does not preclude the
This instrument was duly recorded in the Registry of
personal liability of the principal but constitutes
Property, and it appears therefrom that Enrique Grupe, as
further security in favour of the creditor.
attorney in fact for Vargas, received from the plaintiff a
The individual liability of the agent constitutes in the
loan of 2,200 pesos and delivered the same to the
present case a further security in favor of the creditor and
defendant; that to secure its payment he mortgaged the
does not affect or preclude the liability of the principal. In
property of his principal with defendant's consent as
the present case the latter's liability was further
required in the power of attorney. He also received 1,300
guaranteed by a mortgage upon his property. The law
pesos. This amount he borrowed for his own use. In the
does not provide that the agent can not bind himself
instrument, Grupe bound himself liable for the whole
personally to the fulfillment of an obligation incurred by
amount of 3,500 and pledged his 13 shares of stock in the
him in the name and on behalf of his principal. On the
"Compañia de los Tranvias de Filipinas" as security, and
contrary, it provides that such act on the part of an agent
mortgaged the property of Vargas to secure the 2,200
would be valid.
loan.
The defendant denies having received this sum.
(3) Yes. Where a debt is secured by a mortgage
Contention of the defendant:
upon property belonging to the principal, duly
(1)The appellant claims that the instrument is evidence of
recorded in the Registry of Property, the creditor may
a debt personally incurred by Enrique Grupe for his own
bring his action directly against the mortgaged
benefit, and not incurred for the benefit of his principal,
property notwithstanding the liability incurred by
Vargas, as alleged in the complaint.
himself. A mortgage directly subjects the encumbered
(2) Enrique Grupe pledged to the plaintiff thirteen shares
property, whoever its possessor may be, to the
of stock in the "Compañia de los Tranvias de Filipinas" to
fulfilment of the obligation for the security of which it
secure the payment of the entire debt, and contends that
was created.
it must be shown what has become of these shares, the
value of which might be amply sufficient to pay the debt,
before proceeding to foreclose the mortgage.
 42. CERVANTES v. CA
FACTS:
PAL issued to Cervantes a round trip ticket for Manila-
Honolulu-Los Angeles-Honolulu-Manila. This ticket
expressly provides an expiry date of 1 year from issuance
or until March 27, 1990.The ticket was issued in
compliance w/ a Compromise Agreement entered
between PAL & Cervantes in 2 previous suits between
them.
On March 3, 1990, Cervantes used it. Upon his arrival in
LA, he immediately booked his LA-Manila return ticket w/
PAL office which was confirmed for April 2, 1990.
Cervantes learned that the same PAL plane would make a
stop-over in San Francisco and because he would be in
San Francisco on April 2, 1990, he made arrangements w/
PAL for him to board the flight in San Francisco instead of
boarding it in LA.
When Cervantes checked in at the PAL counter in San
Francisco he was not allowed to board and PAL personnel
made a notation on his ticket that read “TICKET NOT
ACCEPTED DUE TO EXPIRATION OF VALIDITY”.
Aggrieved, Cervantes filed a complaint for damages for
Breach of Contract of Carriage.
RTC: dismissed the complaint
CA: affirmed RTC
ISSUE: WON the act of the PAL agents in confirming the
ticket of Cervantes extended the period of validity.
RULING: No.
The plane ticket itself provides that it is not valid after
March 27, 1990. It is also stipulated in paragraph 8 of the
Conditions of Contract that "8. This ticket is good for
carriage for one year from date of issue, except as
otherwise provided in this ticket, in carrier's tariffs,
conditions of carriage, or related regulations.
The fare for carriage hereunder is subject to change prior
to commencement of carriage. Carrier may refuse
transportation if the applicable fare has not been paid."
In the case of Lufthansa vs. Court of Appeals, the SC held
that the "ticket constitute the contract between the
parties. It is axiomatic that when the terms are clear and
leave no doubt as to the intention of the contracting
parties, contracts are to be interpreted according to their
literal meaning."
In his effort to evade this inevitable conclusion, petitioner
theorized that the confirmation by the PAL's agents in Los
Angeles and San Francisco changed the compromise
agreement between the parties. The 2 personnel from PAL
did not have authority to extend the validity of the ticket.
Cervantes knew this from the start when he called up the
Legal Department of appellee in the Philippines before he
left for the United States of America. He had first hand
knowledge that the ticket in question would expire on
March 27, 1990 and that to secure an extension, he would
have to file a written request for extension at the PAL's
office in the Philippines. ). Despite this knowledge, he
persisted to use the ticket in question. Since the PAL
agents are not privy to the said Agreement and Cervantes
knew that a written request to the legal counsel of PAL
was necessary, he cannot use what the PAL agents did to
his advantage. The said agents, according to the Court of
Appeals, acted without authority when they confirmed the
flights of the petitioner. Under Article 1989 of the New
Civil Code, the acts an agent beyond the scope of his
authority do not bind the principal, unless the latter
ratifies the same expressly or impliedly.
Furthermore, when the third person (herein petitioner)
knows that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts
of the agent. If the said third person is aware of such limits
of authority, he is to blame, and is not entitled to recover
damages from the agent, unless the latter undertook to
secure the principal's ratification.
43. SMITH BELL v SOTELO
FACTS:
● Principal - Manila Oil; Agent - Sotelo
● On August 1918, Smith, Bell and Co. (Smith Bell),
and Vicente Sotelo (Sotelo), entered into a
contract where the Company obligated itself
to sell and Sotelo to buy 2 steel tanks (P21,000
total), 2 expellers (P25,000 each), and two
electric motors (P2,000 each). With respect to
delivery dates, the stipulations were:
○ 2 tanks Within 3 or 4 mos., no obligation
on the Smith Bell’s part
○ 2 expellers September 1918 or as soon as
possible
○ 2 electric motors Within 90 days, not
guaranteed
Arrival dates:
■ 2 tanks April 27, 1919 (8 mos.
after signing)
■ 2 expellers October 26, 1918 (1
mo. “late”)
■ 2 electric motors February 27,
1919 (3 mos. “late”)
● Sotelo refused to receive and pay. The Smith Bell
sued him. Sotelo countered that the deliveries
were late and made counterclaims against Smith
Bell.
● The lower court absolved Sotelo with regards to
the tanks and the motors, but ordered him to
receive and pay for the expellers. Both parties
appealed.
ISSUE: Whether Smith Bell has fulfilled its obligation to
deliver in due time
RULING:
● Yes. There really was no fixed date for delivery,
as can be seen from the qualifiers in the contract
and the final clause providing that the sellers
would not be responsible for any delay due to
fortuitous events and the will of third persons. The
contract was made during war time when
restrictions on exports from the US were in force,
 hence there were many dilatory factors beyond
the control of the Company. At best the obligation
may be regarded as conditional. The Company did
all that it could to deliver, in spite of the
restrictions, and thus fulfilled its obligation in due
and reasonable time. There was no delay as there
was no fixed date, and Sotelo must pay for the
equipment.
AGENCY-RELEVANT:
● Moreover, the contracts were signed by Sotelo on
his own individual capacity and not for his own
company. Hence his company had no cause of
action against the plaintiff.Manila Oil doesn’t seem
to have taken part in the contracts. Mr Vicente
Sotelo signed the contracts in his individual
capacity and under his own name. If Mr Vicente
Sotelo was agent, he is still liable since he entered
the contract under his own name, and did not
represent that he was under commission to
represent Manila Oil (Art. 1717 of the Old Civil
Code, Art. 1883 in the NCC). The Code of
Commerce holds Mr Vicente Sotelo since
he transacted the business under his own name,
and therefore directly liable. Intervenor has no
right of action, so the Court in its disposition only
directed the acceptance and payment of the
ordered goods under Mr Vicente Sotelo’s name,
without prejudice to actions he could invoke
against his principal.
How did Manila Oil Co. impleaded as party:
● Manila Oil = INTERVENOR alleging that Mr. Sotelo
had made the contracts in question as manager of
the intervenor, the Manila Oil Refining and By-
Products Co., Inc which fact was known to the
plaintiff, and that "it was only in May, 1919, that
it notified the intervenor that said tanks had
arrived, the motors and the expellers having
arrived incomplete and long after the date
stipulated." As a counterclaim or set-off, they also
allege that, as a consequence of the plaintiff's
delay in making delivery of the goods, which the
intervenor intended to use in the manufacture of
coconut oil, the intervenor suffered damages in
the sums of one hundred sixteen thousand seven
hundred eighty-three pesos and ninety-one
centavos (P116,783.91) for the non delivery of
the tanks, and twenty-one thousand two hundred
and fifty pesos (P21,250) on account of the
expellers and the motors not having arrived in due
time.
44. RURAL BANK OF BOMBON v CA
Alleged Agent: Aquino
Alleged Principal: Gallardo
FACTS:
-Ederlinda M. Gallardo, married to Daniel Manzo
executed a special power of attorney in favor of Rufina
S. Aquino authorizing him:
1. To secure a loan from any bank or lending institution for
any amount or otherwise mortgage the property covered by
Transfer Certificate of Title No. S-79238 situated at Las Piñas,
Rizal, the same being my paraphernal property, and in that
connection, to sign, or execute any deed of mortgage and sign
other document requisite and necessary in securing said loan and
to receive the proceeds thereof in cash or in check and to sign the
receipt therefor and thereafter endorse the check representing the
proceeds of loan.
-A Deed of Real Estate Mortgage was executed by
Rufino S. Aquino in favor of the Rural Bank of Bombon
(Camarines Sur), Inc. for (P350,000.00), plus interest
at the rate of fourteen (14%) per annum.
-Plaintiffs were surprised to discover that the property
was mortgaged to pay personal loans of Aquino and
for his for personal use and benefit; that the
mortgagor in the deed was defendant Aquino instead
of plaintiff Gallardo and in the deed vesting power of
attorney to Aquino; that correspondence relative to the
mortgage was sent to Aquino's address at "Sta.
Isabel, Calabanga, Camarines Sur" instead of
Gallardo's postal address at Las Piñas, Metro Manila;
and that defendant Aquino, in the real estate
mortgage, appointed defendant Rural Bank as
attorney in fact, and in case of judicial foreclosure as
receiver with corresponding power to sell and that
although without any express authority from
Gallardo, defendant Aquino waived Gallardo's
rights under Section 12, Rule 39, of the Rules of Court
and the proper venue of the foreclosure suit.
-The Spouses filed an action (annulment of mortgage)
against Aquino and the Bank. The trial court
temporarily restrained the Rural Bank "from
enforcing the real estate mortgage and from
foreclosing it either judicially or extrajudicially until
further orders from the court"
-The Bank filed a complaint against Ederlinda Gallardo
and Rufino Aquino for "Foreclosure of Mortgage". On
motion of the plaintiff, the foreclosure case and the
annulment case (Civil Case No. 6062) were
consolidated.
-RTC: rendered a summary judgment in Civil Case No.
6062, dismissing the complaint for annulment of
mortgage and declaring the Rural Bank entitled to
damages the amount of which will be determined in
appropriate proceedings. The court lifted the writ of
preliminary injunction it previously issued.
-CA: reversed the trial court. The deed of real estate
mortgage executed between Rufino S. Aquino with the
appellee Rural Bank of Bombon, Camarines Sur,
unauthorized, void and unenforceable against
plaintiff Ederlinda Gallardo; ordering the
reinstatement of the preliminary injunction issued at
the onset of the case and at the same time, ordering
said injunction made permanent.
SC: Affirmed CA in toto
Issue:
Whether the Deed of Real Estate Mortgage executed
by Rufino S. Aquino, purportedly as an agent of
Gallardo, but actually acted in his personal capacity,
in favor of the Rural Bank of Bombon (Cam. Sur), Inc.
is valid.
Held:
No.
-The Special Power of Attorney above quoted shows
the extent of authority given by the plaintiff to
defendant Aquino. But defendant Aquino in executing
the deed of Real Estate Mortgage in favor of the rural
bank over the three parcels of land covered by
Gallardo's title named himself as the mortgagor
without stating that his signature on the deed was
for and in behalf of Ederlinda Gallardo in his
capacity as her attorney-in-fact.
-It is a general rule in the law of agency that, in order
to bind the principal by a mortgage on real
property executed by an agent, it must upon its
face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent
only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted
in the name of the principal. Neither is it ordinarily
sufficient that in the mortgage the agent describes
himself as acting by virtue of a power of attorney, if in
fact the agent has acted in his own name and has set
his own hand and seal to the mortgage. This is
especially true where the agent himself is a party to
the instrument. However clearly the body of the
mortgage may show and intend that it shall be the act
of the principal, yet, unless in fact it is executed by the
agent for and on behalf of his principal and as the act
and deed of the principal, it is not valid as to the
principal.
-In view of this rule, Aquino's act of signing the Deed
of Real Estate Mortgage in his name alone as
mortgagor, without any indication that he was
signing for and in behalf of the property owner,
Ederlinda Gallardo, bound himself alone in his
personal capacity as a debtor of the petitioner
Bank and not as the agent or attorney-in-fact of
Gallardo.
-Herein respondent Aquino acted purportedly as an
agent of Gallardo, but actually acted in his personal
capacity. Involved herein are properties titled in the
name of respondent Gallardo against which the Bank
proposes to foreclose the mortgage constituted by an
agent (Aquino) acting in his personal capacity. Under
these circumstances, we hold, as we did in Philippine
Sugar Estates Development Co. vs. Poizat, supra, that
Gallardo's property is not liable on the real estate
mortgage:
-There is no principle of law by which a person can
become liable on a real mortgage which she never
executed either in person or by attorney in fact. It
should be noted that this is a mortgage upon real
property, the title to which cannot be divested except
by sale on execution or the formalities of a will or deed.
For such reasons, the law requires that a power of
attorney to mortgage or sell real property should be
executed with all of the formalities required in a deed.
For the same reason that the personal signature of
Poizat, standing alone, would not convey the title of
his wife in her own real property, such a signature
would not bind her as a mortgagor in real property, the
title to which was in her name.
"Philippine Sugar Estates Development Co. vs. Poizat,”
45. SY-JUCO v SY-JUCO
Facts:
On 1902, defendant Santiago Sy-Juco was appointed by
herein plaintiffs Vicente and Cipriana Sy-Juco as
administrator of their property, and acted as such until
June 1916. Santiago is the son of plaintiffs.
Vicente and Cipriana alleged that during Santiago’s
administration, Santiago asquired the property claimed in
the complaint in his capacity as the plaintiff’s
administrator with their money and for their benefit.
TC: The trial court ordered Santiago to return to the
plaintiffs the launch (a large motorboat) Malabon, two
cascos (a flat-bottomed, square-ended boat), an
automobile, a typewriting machine, the house occupied by
Santiago and the price of the piano.
Both parties appealed from this judgment.
ISSUE: WON the properties bought by
Santiago in his own name, as an
administrator, belong to him
SC: no, except casco 2545.
As to launch MALABON:
In July 1914, defendnant bought iti n his
own name from Pacific Commercial Co.m and afterwards
registered it at the custom house. This transaction was
within the agency which he had received from the
plaintiffs. The fact that he has acted in his own name may
be only, as we believe it was, a violation of the agency.
The question is not in whose favour the document of sale
of the launch is executed nor in whose name the same
was registered, but with whose money was said launch
bought. The plaintiffs testimony that it was bought with
their money and for them is supported by the fact that,
immediately after it s purchase, the launch had to be
repaired at their expense although said expense was
collected from the defendant.
The defendant invokes Martinez vs Martinez:
Martinez Jr. Bought a vessel and in his
name registered it at the Custom House. This court then
said thal although the funds with which the vessel was
bought belonged to Martinez, Sr., Martinez Jr. Is its solo
and exclusive owner.
SC: Martinez vs Martinez not applicable in this case.
In the previous case, the relation of PR and AG exists
between the plaintiffs and the defendant. This however
does not exist in the present case. By this agency, the
plaintiffs herein clothed the defendant with their
representation in order to purchase the launch in
question.
However, the defendant acted without this representation
and bought the launch in his own name thereby violating
the agency.
But not only must the consequences of the violation of this
agency not be accepted, but the effects of the agency
itself must be sought.
o If the defendant contracted the obligation to but
the launch for the plaintiffs and in their representation,
but virtue of the agency, notwithstanding the fact that he
bought it in his own name, he is obliged to transfer to the
plaintiffs the rights he received from the vendor, and the
plaintiffs are entitled to be subrogated in these rights.
Case Doctrine:
From the rule established in Article 1717 of the Civil
Code that, when an agency acts in his own name,
the principal shall have no right of action against
the person with whom the agent has contracted,
cases involving things belonging to the principal are
excepted.
o According to this exception (when things
belonging to the principal 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.
o This means that in the case of this
exception 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; and, consequently, if the
obligations belong to the former, to him alone must
also belong the rights arising from the contract.
The money with which the launch was bought having
come from the plaintiff, the exception established in Art.
1717 is applicable in the instant case.
As to Casco no. 2584
Santiago’s allegation that it was constructed at his
instance and with his money is not supported by the
evidence.
In fact the only proof presented to support this allegation
is his own testimony contradicted, on the on hand, by the
plaintiffs' testimony and, on the other hand, rebutted by
the fact that, on the date this casco was constructed, he
did not have sufficient money with which to pay the
expense of this construction.
As to the automobile
There is sufficient evidence to show that its prices was
paid with plaintiffs' money. Defendant's adverse allegation
that it was paid with his own money is not supported by
the evidence.
As to Casco no. 2545
Upon examination of the evidence relative to this casco, it
was found that it belonged to the plaintiffs but sold it
afterwards to the defendant by means of a public
instrument.
The plaintiffs have not adduced sufficient proof of such
deceit (on the part of Santiago, when they signed) which
would destroy the presumption of truth which a public
document carries with it. Attorney Sevilla, who acted as
the notary in the execution of this instrument, testifying
as a witness in the case, said that he never verified any
document without first inquiring whether the parties knew
its content.
Our conclusion is that this casco was lawfully sold to the
defendant by the plaintiffs.
46. NATIONAL FOOD AUTHORITY v IAC
FACTS
1. Principal - Superior Shipping Corporation (SSC);
Commission Agent - Gil Medalla; Third Party - National
Food Authority then known as the National Grains
Authority or NGA
2. Gil Medalla, as commission agent of the Superior
Shipping Corporation, entered into a contract for hire of
ship known as "MV Sea Runner" with National Grains
Authority. Under the said contract Medalla obligated to
transport on the "MV Sea Runner" 8,550 sacks of rice
belonging to National Grains Authority from the port of
San Jose, Occidental Mindoro, to Malabon, Metro Manila.
3. October 17, 1979, Upon completion of the delivery of
rice at its destination, Superior Shipping
Corporation(SSC), wrote a letter requesting NGA that it
be allowed to collect the amount stated in its statement of
account (costs of freightage, demurrage and stevedoring
= P93,538.70)
4. November 5, 1979, SSC wrote again NGA, this time
specifically requesting that payment be made to it and not
to defendant Medalla because SSC (principal) was the
owner of the vessel "MV Sea Runner"
5. In a reply, NGA informed SSC that it could not grant it’s
request because the contract to transport the rice was
entered into by defendant NGA and Medalla who did not
disclose that he was acting as a mere agent of SSC.
6. Thereupon on NGA paid Medalla the sum of P25,974.90,
for freight services in connection with the shipment of
8,550 sacks of rice.
7. On December 4, 1979, SSC wrote Medalla demanding
that he turn over to plaintiff the amount paid to him by
NFA. Medalla, however, "ignored the demand.”
agent. Consequently, when things belonging to the
principal (Superior Shipping Corporation) 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. In 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

8. Thus SSC constrained to file complaint (not stated: for Corollarily, if the principal can be obliged to perform his
collection for sum of money) duties under the contract, then it can also demand the
enforcement of its rights arising from the contract.
9. RTC - Judgment was rendered in favor of the SSC

10. National Food Authority appealed to the sole issue as 47. GOLD STAR MINING v LIM JIMENEZ
to whether it is jointly and severally liable with defendant
Gil Medalla for freightage. FACTS: In 1937, Ananias Isaac Lincallo bound himself in
writing to turn to Victor Jimena half of the proceeds from
11. CA - affirmed judgement of RTC. Hence this petition all mining claims that he would purchase with the money
for certiorari. to be advanced by the latter. This agreement was later on
modified to include in the equal sharing agreement not
12. SC - affirmed CA decision., only the proceeds from several mining claims, but also the
lands constituting the same, and so as to being thereby
ISSUE their “heirs, assigns, or legal representatives.”

Whether or not the case falls within the exception of the Eventually, the mining rights over parts of the claims were
general rule provided for in Art. 1883 of the Civil Code of assigned by Lincallo to Gold Star Mining Co., Inc., while
the Philippines. others were assigned to Marinduque Iron Mines Agents.
Meanwhile, Jimena repeatedly apprised both mining
HELD corporations of his interests over the mining claims so
assigned and/or leased by Lincallo. However, both
Yes, the case falls within the exception of the general rule corporations ignored his demands. Jimena also demanded
provided for in Art. 1883 of the Civil Code of the Lincallo for the payment of the P5,800 he gave Lincallo as
Philippines. money to purchase the mining claims and the lands, but
to no avail. Lincallo did not only fail to settle his accounts
NFA’s contention is that it is not liable under the exception with Jimena, he even transferred about majority of his
to the rule (Art. 1883) since it had no knowledge of the share in the royalties due from Gold Star to Gregorio
fact of agency between respondent Superior Shipping and Tolentino, a salaried employee.
Medalla at the time when the contract was entered into
between them. Petitioner submits that "(A)n undisclosed Hence, on Sept. 2, 1954, Jimena filed a suit against
principal cannot maintain an action upon a contract made Lincallo for (CoA) recovery of his advances and his one-
by his agent unless such principal was disclosed in such half share in the royalties, and impleaded Gold Star and
contract. One who deals with an agent acquires no right Marinduque Iron Mines, as well as Tolentino, later on as
against the undisclosed principal." defendants. Two weeks later, the trial court issued a writ
of preliminary injunction, preventing both mining
Petitioner NFA's contention holds no water. companies from paying royalties during the pendency of
the case to Lincallo, his assigns or legal representatives.
It is an undisputed fact that Gil Medalla was a commission Despite of such injunction, Gold Star still paid P30, 691.92
agent of respondent Superior Shipping Corporation which to Lincallo and Tolentino (claiming that a writ of
owned the vessel "MV Sea Runner" that transported the preliminary attachment filed by Jimena supposedly
sacks of rice belonging to petitioner NFA. The context of superseded the injunction, but the condition to such
the law is clear. Art. 1883 provides: attachment - the filing of a bond - was not fulfilled, so it
cannot be said that the injunction was superseded).
Art. 1883. If an agent acts in his own name, the principal
has no right of action against the persons with whom the Jimena and Tolentino died successively during the
agent has contracted; neither have such persons against pendency of the case in the trial court and were,
the principal. accordingly, substituted by their respective widows and
In such case the agent is the one directly bound in favor children.
of the person with whom he has contracted, as if the
transaction were his own, except when the contract CFI decided in favor of Victor Jimena’s heirs, declaring
involves things belonging to the principal. among others that they be entitled to half of the shares of
the royalties of Lincallo in his contracts with Gold Star,
The provision of this article shall be understood to be Marinduque Iron Mines and Alejandro Marquez, that both
without prejudice to the actions between the principal and mining companies pay directly to the former half of the
shares of the royalties until said contracts were
terminated, that Lincallo pay the heirs the capital Victor
Jimena gave him to purchase the mining claims and the
latter’s shares with interest, and that Gold Star Mining
Co., Inc. pay them the sum of P30,691.92 solidarily with
Ananias Isaac Lincallo for violation of an injunction.
The defendants appealed to the CA, which affirmed CFI
Manila’s decision.
ISSUES:
1. Whether or not the CA erred in finding that the Jimenas
have a cause of action against Gold Star Mining Co., as
there is no privity of contract between Gold Star and
Jimena.
2. Whether or not the CA erred in condemning Gold Star
to pay the sum of P30,691.92 for violation of an allegedly
non-existent injunction.
RULING & RATIO:
1. NO. The existence of a common subject-matter supplies
the juridical link. Jimena repeatedly made demands upon
Gold Star for the payment of his ½ share of the royalties,
but all in vain, so he was forced to implead Gold Star for
having refused to recognize his right. From another
standpoint, equally valid and acceptable, it can be said
that Lincallo, in transferring the mining claims to Gold Star
(without disclosing that Jimena was a co-owner although
Gold Star had knowledge of the fact as shown by the
proofs heretofore mentioned) acted as Jimena's agent
with respect to Jimena's share of the claims. Furthermore,
under such conditions wherein Jimena was repeatedly
denied of his interests, Jimena has an action against Gold
Star, pursuant to Art. 1883, 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.’
2. NO. Said award is not so much a penalty against
petitioner as a decree of restitution. Said sum to be paid
by the company to Jimena is “to be imputed to Lincallo’s
liability under this judgment”. CA thus left the way
open for Gold Star to recover later the whole
amount from Lincallo.
48. FAR EAST BANK AND TRUST COMPANY AND
ROLANDO BORJA, DEPUTY SHERRIF v SPS.
ERNESTO AND LEONOR CAYETANO
Far East Bank and Trust Company (now Bank of the Philippine
Islands) vs Sps. Ernesto and Leonor C. Cayetano
FACTS:
Principal - Leonor C. Cayetano (Cayetano)
Agent - Teresita C. Tabing (Tabing)
Respondent Leonor C. Cayetano (Cayetano) executed a
special power of attorney in favor of her daughter Teresita C.
Tabing (Tabing) authorizing her to contract a loan from petitioner
in an amount not more than three hundred thousand pesos
(P300,000.00) and to mortgage her two (2) lots. Petitioner
loaned Tabing one hundred thousand pesos (P100,000.00)
secured by two (2) promissory notes and a real estate mortgage
over Cayetanos two (2) properties. The mortgage document was
signed by Tabing and her husband as mortgagors in their
individual capacities, without stating that Tabing was executing
the mortgage contract for and in behalf of the owner (Cayetano).
Respondents and the spouses Tabing failed to pay the
loan so petitioner foreclosed the mortgage. A notice of public
auction was sent to the respondents. The lawyer of the
respondents responded with a letterto petitioner requesting
that the public auction be postponed. Respondents letter went
unheeded and the public auction was held as scheduled wherein
the subject properties were sold to petitioner for one hundred
sixty thousand pesos (P160,000.00). Subsequently, petitioner
consolidated its title and obtained new titles in its name after the
redemption period lapsed without respondents taking any
action.
More than five (5) years later, Tabing, on behalf of
Cayetano, sent a letter dated September 10, 1996 to petitioner
expressing the intent to repurchase the properties for two
hundred fifty thousand pesos (P250,000.00) with proposed
terms of payment. Petitioner refused the offer stating that the
minimum asking price for the properties was five hundred
thousand pesos (P500,000.00) and it was not amenable to the
proposed terms of payment. Petitioner nevertheless gave
respondents the chance to buy back the properties by joining a
bidding to be set in some future date.However, respondents filed
on December 18, 1996 a complaint for annulment of mortgage
and extrajudicial foreclosure of the properties with damages in
the RTC of Naga City. Respondents sought nullification of the real
estate mortgage and extrajudicial foreclosure sale, as well as the
cancellation of petitioners title over the properties.
RTC - rendered judgment in favor of the respondents, holding
that the principal (Cayetano) cannot be bound by the real estate
mortgage executed by the agent (Tabing) unless it is shown that
the same was made and signed in the name of the principal;
hence, the mortgage will bind the agent only. The trial court also
found that there was no compliance with the requirement of
publication of the foreclosure sale in a newspaper of general
circulation as provided in Act No. 3135, as amended. Such
requisite must be strictly complied with as any slight deviation
therefrom will render the sale voidable.
CA - affirmed the RTCs ruling. It held that it must be shown that
the real estate mortgage was executed by the agent on-behalf of
the principal, otherwise the agent may be deemed to have acted
on his own and the mortgage is void. However, the appellate
court further declared that the principal loan agreement was not
affected, which had become an unsecured credit. The Court of
Appeals denied petitioners motion for reconsideration.
Hence, this petition
ISSUE:
Whether or not the principal is bound by the real estate
mortgage executed by the authorized agent in her own name
without indicating the principal.
RULING:
Yes. The issue is not novel. The RTC and the Court of Appeals are
both correct in holding that our decision in The Philippine Sugar
Estates Development Co., Ltd., Inc. v. Poizat, et al.(Poizat Case),
as reiterated in the case of Rural Bank of Bombon (Camarines
Sur), Inc. v. Court of Appeals (Bombon Case), finds application in
the instant case. The factual circumstances of said cases are
similar to the case at bar, where an authorized agent executed a
real estate mortgage on the principals property in her own name
without indicating that she was acting on behalf of the principal.
In the Poizat Case, the Court ruled:
It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it
must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is
not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the
principal. Neither is it ordinarily sufficient that in the mortgage
the agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name and has
set his own hand and seal to the mortgage. This is especially true
where the agent himself is a party to the instrument. However
clearly the body of the mortgage may show and intend that it
shall be the act of the principal, yet, unless in fact it is executed
by the agent for and on behalf of his principal and as the act
and deed of the principal, it is not valid as to the principal.
[EMPHASIS SUPPLIED].
HOWEVER, notwithstanding the nullity of the real estate
mortgage executed by Tabing and her husband, we find that the
equity principle of laches is applicable in the instant case.
Laches is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert
it. Its essential elements are: (1) conduct on the part of the
defendant, or of one under whom he claims, giving rise to the
situation complained of; (2) delay in asserting complainants right
after he had knowledge of the defendants conduct and after he
has an opportunity to sue; (3) lack of knowledge or notice on the
part of the defendant that the complainant would assert the
right on which he bases his suit; and (4) injury or prejudice to the
defendant in the event relief is accorded to the complainant.
There is no absolute rule on what constitutes laches. It
is a creation of equity and applied not really to penalize neglect
or sleeping upon ones rights but rather to avoid recognizing a
right when to do so would result in a clearly inequitable situation.
The question of laches, we said, is addressed to the sound
discretion of the court and each case must be decided according
to its particular circumstances. Verily, in a number of cases, it had
been held that laches, the essence of which is the neglect to
assert a right over a long period of time, may prevent recovery
of a titled property.
In the present case, records clearly show that
respondents could have filed an action to annul the mortgage on
their properties, but for unexplained reasons, they failed to do
so. They only questioned the loan and mortgage transactions in
December 1996, or after the lapse of more than five (5) years
from the date of the foreclosure sale. It bears noting that the real
estate mortgage was registered and annotated on the titles of
respondents, and the latter were even informed of the
extrajudicial foreclosure and the scheduled auction. Instead of
impugning the real estate mortgage and opposing the scheduled
public auction, respondents lawyer wrote a letter to petitioner
and merely asked that the scheduled auction be postponed to a
later date. Even after five (5) years, respondents still failed to
oppose the foreclosure and the subsequent transfer of titles to
petitioner when their agent, Tabing, acting in behalf of Cayetano,
sent a letter proposing to buy back the properties. It was only
when the negotiations failed that respondents filed the instant
case. Clearly, respondents slept on their rights.
SC granted the said petition.
49. ACE NAVIGATION CO., INC. v FGU INSURANCE
CORPORATION
PRINCIPAL: Cardia Limited
AGENT: Ace Navigation Company Inc. or ACENAV
FACTS:
On July 19, 1990, CARDIA shipped 165,200 bags of Grey
Portland Cement aboard M/V Pakarti Tiga at Shanghai Port
with the Port of Manila as the destination. It was to be
delivered to the consignee, HEINDRICH Trading Corp. and
the same was insured by FGU and Pioneer against all risk.
The vessel is owned by PAKARTI which chartered it to
SHINWA. Representing itself as the owner of the vessel,
the latter entered into a charter party contract with SKY
International (agent of KEE YEH), which further chartered
it to REGENCY Express. It was the latter that issued the
Clean Bill of Lading to HEINRICH.
Upon arrival of the vessel in Manila, petitioner ACE
NAVIGATION CO. (ACENAV) and HEINRICH discovered
that 43,905 out of the 165,200 bags if cement were in bad
order and condition. Unable to collect from CARDIA (as
shipper) and REGENCY (as charterer), the respondent
insurance companies paid HEINRICH and became
subrogated to all the rights causes of the latter. Thus on
August 8, 1991, respondents filed a complaint for
damages against REGENCY, PAKARTI TIGA, SKY
INTERNATIONAL,SHINWA AND ACE NAVIGATION
COMPANY.
One of the defendants, present petitioner ACENAV claimed
that it was not a real party-in-interest as it was the agent
if the shipper, CARDIA and it was not a local ship agent.
On November 26, 2001, RTC dismissed the complaint.
However, the Court of Appeals reversed the RTC and
found PAKARTI, SHINWA, KEE YEH and it's agent, SKY,
solidarily liable for 70% of respondents’ claim while
CARDIA and ACENAV are solidarily liable for the remaining
30%. PAKARTI'S, SHINWA’S, SKY’S and ACENAV’S
respective motions for reconsideration were also denied.
Subsequently, all four filed separate petitions for review
before the Supreme Court. After which PAKARTI, SHINWA
and SKY withdrew from the current case. Thus only the
petition of ACENAV remains.
ISSUE:
Whether or not ACENAV should be solidarily liable with
CARDIA for the 30% of respondents’ claim.
RULING:
No, ACENAV should not be solidarily liable with CARDIA
for the 30% of respondents’ claim.
RATIO:
Article 1887 of the Civil Code provides that an agent 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.
Both exceptions do not obtain in this case. The records
does not show that ACENAV exceeded its authority.
Neither was it alleged that ACENAV'S limited obligation as
an agent was unknown to HEINRICH. As a mere agent,
ACENAV cannot be made to be made responsible for the
damage done by its principal CARDIA as it was alleged
that improper packing (which was the responsibility of
CARDIA) was the cause of the damage.
NOTE: ACENAV is also not a ship agent as it was not
entrusted with provisioning the ship or represented
it. It's only responsibility was to take charge of the
goods after unloading.
50. DBP v CA
(RULES AND REGULATION OF THE DBP- The DBP is not
authorized to accept applications for MRI when its clients are
more than 60 years of age.)
AGENT-DBP
PRINCIPAL-DBP MRI POOL
3RD PARTY-JUAN DANS, ESTATE and wife, CANDIDA
DEVELOPMENT BANK OF THE PHILIPPINES,
petitioner,
vs.
COURT OF APPEALS and the ESTATE OF THE
LATE JUAN B. DANS, represented by CANDIDA
G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.
FACTS: In May 1987, Juan B. Dans, together with
his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the DBP,
Basilan Branch. As the principal mortgagor, Dans,
then 76 years of age, was advised by DBP to obtain
a mortgage redemption insurance (MRI) with the
DBP Mortgage Redemption Insurance Pool (DBP MRI
Pool).
A loan, in the reduced amount of P300,000.00, was
approved by DBP. From the proceeds of the loan,
DBP deducted the amount of P1,476.00 as payment
for the MRI premium.
The MRI premium of Dans, less the DBP service fee
of 10 percent, was credited to the savings account
of the DBP MRI Pool. Accordingly, the DBP MRI Pool
was advised of the credit.
Dans died of cardiac arrest. The DBP then relayed
this information to the DBP MRI Pool and the latter
notified DBP that Dans was not eligible for MRI
coverage, being over the acceptance age limit of 60
years at the time of application.
DBP then apprised Candida Dans of the disapproval
of her late husband's MRI application. The DBP
offered to refund the premium of P1,476.00 which
but Candida refused.
Respondent Estate, through Candida Dans as
administratrix, filed a complaint with the RTC
Basilan, against DBP and the insurance pool.
Respondent Estate alleged that Dans became
insured by the DBP MRI Pool when DBP, with full
knowledge of Dans' age at the time of application,
required him to apply for MRI, and later collected
the insurance premium thereon.
RTC- Trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI
Pool, however, was absolved from liability, after the
trial court found no privity of contract between it and
the deceased. The trial court declared DBP in
estoppel for having led Dans into applying for MRI
and actually collecting the premium and the service
fee, despite knowledge of his age ineligibility.
CA- The appellate court affirmed in toto the decision
of the trial court.
ISSUE: WON DBP has exceeded his authority as
agent (to the defendants) thereby absolving the
defendants of liability.
RULING: YES. DBP has exceeded his authority.
RATIO: Under Article 1897 of the Civil Code of the
Philippines, "the agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving
such party sufficient notice of his powers."
The DBP is not authorized to accept applications for
MRI when its clients are more than 60 years of age.
Knowing all the while that Dans was ineligible for
MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted
Dan's application for MRI by collecting the insurance
premium, and deducting its agent's commission and
service fee.
Moreover, the liability of an agent who exceeds the
scope of his authority depends upon whether the
third person is aware of the limits of the agent's
powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications
for MRI.
51. COUNTRY BANKERS INSURANCE
CORPORATION v KEPPEL CEBU SHIPYARD
Facts:
Unimarine Shipping Lines, Inc. is a corporation engaged
in the shipping industry. Unimarine contracted the
services of Keppel Cebu Shipyard for dry-docking and ship
repair works on its vessel, the MV Pacific Fortune. Cebu
Shipyard issued a bill to Unimarine in consideration for its
services. They negotiated to a reduction to P3.85 M and
terms of this agreement were embodied in Cebu
Shipyard’s letter to the President/GM of Unimarine. In
compliance with the agreement, Unimarine secured from
CBIC, through agent Bethoven Quinain, a Surety Bond of
P3M. The expiration of the Surety Bond was extended
through an endorsement attached to the surety bond.
Cebu Shipyard sent Unimarine letters, demanding it to
settle its account. Due to Unimarine’s nonpayment, Cebu
Shipyard asked the surety CBIC to fulfill their obligations
as sureties. However, CBIC alleged that the surety bond
was issued by its agent, Quinain, in excess of his
authority.
RTC: Judgment in favor of plaintiff Cebu Shipyard &
Engineering Works
CA: Affirmed judgment.
Issue:
W/N the provisions of Article 1911 of the Civil Code is
applicable in the present case to hold petitioner liable for
the acts done by its agent in excess of authority.
Held:
CBIC is liable for the surety bond. CBIC could not be
allowed to disclaim liability because Quinain’s actions were
within the terms of the special power of attorney given to
him. Our law mandates an agent to act within the scope
of his authority. The scope of an agent’s authority is what
appears in the written terms of the power of attorney
granted upon him.
Under Articles 1898 and 1910, an agent’s act, even if done
beyond the scope of his authority, may bind the principal
if he ratifies them, whether expressly or tacitly. It must
be stressed though that only the principal, and not the
agent, can ratify the unauthorized acts, which the
principal must have knowledge of. Neither Unimarine nor
Cebu Shipyard was able to repudiate CBIC’s testimony
that it was unaware of the existence of Surety Bond and
Endorsement. There were no allegations either that CBIC
should have been put on alert with regard to Quinain’s
business transactions done on its behalf. It is clear, and
undisputed therefore, that there can be no ratification in
this case, whether express or implied. Article 1911, on the
other hand, is based on the principle of estoppel, which is
necessary for the protection of third persons. It states that
the principal is solidarily liable with the agent even when
the latter has exceeded his authority, if the principal
allowed him to act as though he had full powers. However,
for an agency by estoppel to exist, the following must be
established:
1. The principal manifested a representation of the agent’s
authority or knowingly allowed the agent to assume such
authority;
2. The third person, in good faith, relied upon such
representation
3. Relying upon such representation, such third person
has changed his position to his detriment. An agency by
estoppel, which is similar to the doctrine of apparent
authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.
This Court cannot agree with the Court of Appeals’
pronouncement of negligence on CBIC’s part. CBIC not
only clearly stated the limits of its agents’ powers in their
contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties.
Moreover, its company procedures, such as reporting
requirements, show that it has designed a system to
monitor the insurance contracts issued by its agents. CBIC
cannot be faulted for Quinain’s deliberate failure to notify
it of his transactions with Unimarine. In fact, CBIC did not
even receive the premiums paid by Unimarine to Quinain.
52. CUISON v CA
PRINCIPAL-KUE CUISON
AGENT- TIAC
FACTS:
Kue Cuison is a sole proprietorship engaged in the
purchase and sale of newsprint, bond paper and scrap.
Valiant Investment Associates delivered various kinds of
paper products to a certain Tan. The deliveries were made
by Valiant pursuant to orders allegedly placed by Tiac who
was then employed as maneger in the Binondo office of
petitioner.
Upon delivery, Tan paid for the merchandise by issuing
several checks payable to cash at the specific request of
Tiac. In turn, Tiac issued nine (9) postdated checks to
Valiant as payment for the paper products. Unfortunately,
sad checks were later dishonored by the drawee bank.
Thereafter, Valiant made several demands upon petitioner
to pay for the merchandise in question, claiming that Tiac
was duly authorized by petitioner as the manager of his
Binondo office, to enter into the questioned transactions
with Valiant and Tan.
Petitioner denied any involvement in the transaction
entered into by Tiac and refused to pay Valiant.
Left with no recourse, private respondent filed an action
against petitioner for the collection of sum of money
representing the price of the merchandise.
After due hearing, the trial RTC dismissed the complaint
against petitioner(infavor of cuison) for lack of merit. On
appeal, however, the decision of the trial court was
modified,
CA reversed (infavor of viliant investment) ordered
petitioner to pay Valiant with the sum plus interest, AF
and costs.
ISSUE: WON Tiac was an agent of petitioner (Kue cuison)

HELD:
YES
As to the merits of the case, it is a well-established rule
that one who clothes another with apparent authority as
his agent and holds him out to the public as such cannot
be permitted to deny the authority of such person to act
as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the honest
belief that he is what he appears to be
“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.”
The above-quoted article is new. It is intended to protect
the rights of innocent persons. In such a situation, both
the principal and the agent may be considered as joint
tortfeasors whose liability is joint and solidary.
It is evident from the records that by his own acts and
admission, petitioner held out Tiac to the public as the
manager of his store in Binondo. More particularly,
petitioner explicitly introduced to Villanueva, Valiant’s
manager, as his (petitioner’s) branch manager as testified
to by Villanueva. Secondly, Tan, who has been doing
business with petitioner for quite a while, also testified
that she knew Tiac to be the manager of the Binondo
branch. Even petitioner admitted his close relationship
with Tiu Huy Tiac when he said that they are “like
brothers” There was thus no reason for anybody especially
those transacting business with petitioner to even doubt
the authority of Tiac as his manager in the Binondo
branch.
53. MANILA MEMORIAL PARK CEMETERY, INC. v.
LINSANGAN
Principal : MMPCI
Agent : Florencia BALUYOT
Buyer : Atty. Pedro L. LINSANGAN
Facts: BALUYOT offered Atty. LINSANGAN an interment
space (lot) for P95,000 under Contract No. 25012, located
at the Holy Cross Memorial Park owned by petitioner
(MMPCI). Atty. LINSANGAN was subsequently issued with
another contract, Contract No. 28660, which covers the
same subject lot of the original contract but with a listed
price of P132,250.00 (a higher price than the original
contract). At first, Atty. LINSANGAN protested but
BALUYOT assured him that he would still be paying for the
original price of P95,000. In order to convince Atty.
LINSANGAN, BALUYOT executed a separate document
confirming that agreement. Atty. LINSANGAN then signed
the Contract No. 28660 (note: with price P132,250, not
that of the original price). Atty. LINSANGAN issued post-
dated checks, amounting to P1,800 each, to MMPCI. But
unfortunately, MMPCI cancelled Contract No. 28660
because of Atty. LINSANGAN's alleged non-payment of
arrearages. It was found out that the arrearages actually
resulted from BALUYOT's failure to give her share of
P1,455 since based on the new contract, to total monthly
payment to be effected to MMPCI is actually amounting to
P3,255 (that is without the knowledge of MMPCI).
BALUYOT informed Atty. LINSANGAN about the
cancellation but did not inform him of the reason behind
the cancellation. So BALUYOT instead presented another
proposal to the Atty. LINSANGAN for the purchase of an
equivalent property to which the latter refused. Atty.
LINSANGAN insisted that BALUYOT and MMPCI should
honor their undertaking. Atty. LINSANGAN filed a
complaint for Breach of Contract and Damages against
BALUYOT and MMPCI. MMPCI argued that BALUYOT was
not its agent but the RTC ruled otherwise since MMPCI was
estopped from denying the agency. While MMPCI insisted
that BALUYOT was authorized to receive only the down
payment, it allowed her to continue to receive postdated
checks from Atty. LINSANGAN, which it in turn
consistently encashed. Based on CA's findings, even
though the authority of BALUYOT was not expressly
conferred upon her, the same may have been derived
impliedly by habit or custom which may have been
accepted practice in their company in a long period of
time.
RTC's decision : In favor of Atty. LINSANGAN; MMPCI is jointly
and severally liable with BALUYOT.
CA's decision : Affirmed the decision of the RTC.
SC's decision : Reversed CA's decision.
Issue: WON MMPCI should be jointly and severally liable
with BALUYOT to Atty. LINSANGAN.
WON MMPCI is bound to the acts of BALUYOT as
its agent.
Held: No, MMPCI should not be held jointly and severally
liable with BALUYOT, nor can it be held liable to Atty.
LINSANGAN for cancelling the contract. MMPCI cannot
also be bound to the acts of BALUYOT. SC Cited provisions
from NCC:
Art. 1898. If the agent contracts in the name of the
principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the
limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the
principal's ratification.
Art. 1910. The principal must comply with all the
obligations that the agent may have contracted within the
scope of his authority.
As for any obligation wherein the agent has exceeded his
power, the principal is not bound except when he ratifies
it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full
powers.
SC finds that the contract entered into by MMPCI and Atty.
LINSANGAN is valid since both parties assented to the
terms and conditions thereof. When Atty. LINSANGAN
incurred delinquencies in payment, MMPCI cancelled the
contract. Such action taken by MMPCI was only a valid
exercise of its rights under the said contract.
Although the real agreement that Atty. LINSANGAN
entered with BALUYOT showed that the former was only
to pay for P1,800 and the latter was to shoulder the
P1,455, such agreement does not bind MMPCI since Atty.
LINSANGAN cannot prove that MMPCI had knowledge of
the arrangement nor was there a ratification made.
There was even no indication that MMPCI led the public to
believe that BALUYOT had the authority to alter the
standard contracts of the company. The SC further stated
in its decision that Atty. LINSANGAN was clearly negligent
with his dealings with BALUYOT since he failed to
determine, as a prudent and cautious man should do,
whether the said agent was clothed with authority to
change the terms of the principal's written contract, most
especially he is a lawyer.
54. SAFIC ALCAN & CIE v IMPERIAL VEGETABLE
OIL CO., INC.
FACTS:
In July and September 1986 Safic placed purchase
orders with IVO for 2,000 long tons of crude coconut
oil, valued at US$222.50 per ton, covered by Purchase
Contract Nos. A601446 and A601655, respectively, to
be delivered within the month of January 1987. IVO,
however, failed to deliver the said coconut oil and,
instead, offered a wash out settlement, whereby the
coconut oil subject of the purchase contracts were to
be sold back to IVO at the prevailing price in the
international market at the time of wash out. Thus, IVO
bound itself to pay to Safic the difference between the
said prevailing price and the contract price of the 2,000
long tons of crude coconut oil, which amounted to
US$293,500.00. IVO failed to pay this amount despite
repeated oral and written demands.
Safic also alleged that on eight occasions between
April 24, 1986 and October 31, 1986, it placed
purchase orders with IVO for a total of 4,750 tons of
crude coconut oil. When IVO failed to honor its
obligation under the wash out settlement narrated
above, Safic demanded that IVO make marginal
deposits within forty-eight hours on the eight purchase
contracts in amounts equivalent to the difference
between the contract price and the market price of the
coconut oil, to compensate it for the damages it
suffered when it was forced to acquire coconut oil at a
higher price. IVO failed to make the prescribed
marginal deposits on the eight contracts, in the
aggregate amount of US$391,593.62, despite written
demand therefor.
In its answer, IVO raised the following special
affirmative defenses: Safic had no legal capacity to
sue because it was doing business in the Philippines
without the requisite license or authority; the subject
contracts were speculative contracts entered into by
IVOs then President, Dominador Monteverde, in
contravention of the prohibition by the Board of
Directors against engaging in speculative paper
trading, and despite IVOs lack of the necessary
license from Central Bank to engage in such kind of
trading activity.
Trial Court: ruled that Safic failed to substantiate its
claim for actual damages. Likewise, it rejected IVOs
counterclaim and supplemental counterclaim.
CA: rendered the assailed Decision dismissing the
appeals and affirming the judgment appealed from in
toto.
SC: Affirmed
ISSUE: WON President, Dominador Monteverde,
validly entered into the 1986 contracts for and on
behalf of IVO.
RULING: NO
Under the IVOs By-laws Monteverde had no blanket
authority to bind IVO to any contract. He must act
according to the instructions of the Board of Directors.
Even in instances when he was authorized to act
according to his discretion,that discretion must not
conflict with prior Board orders, resolutions and
instructions. The evidence shows that the IVO Board
knew nothing of the 1986 contracts and that it did not
authorize Monteverde to enter into speculative
contracts. In fact, Monteverde had earlier proposed
that the company engage in such transactions but the
IVO Board rejected his proposal. Since the 1986
contracts marked a sharp departure from past IVO
transactions, Safic should have obtained from
Monteverde the prior authorization of the IVO
Board.Safic cannot rely on the doctrine of implied
agency because before the controversial 1986
contracts, IVO did not enter into identical contracts
with Safic. The basis for agency is representation and
a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
The most prudent thing petitioner should have done
was to ascertain the extent of the authority of
Dominador Monteverde. Being remiss in this regard,
petitioner cannot seek relief on the basis of a
supposed agency.
Under Article 1898 of the Civil Code, the acts of an
agent beyond the scope of his authority do not bind
the principal unless the latter ratifies the same
expressly or impliedly. It also bears emphasizing that
when the third person knows that the agent was acting
beyond his power or authority, the principal cannot be
held liable for the acts of the agent. If the said third
person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the
agent, unless the latter undertook to secure the
principals ratification.
There was no such ratification in this case. When
Monteverde entered into the speculative contracts
with Safic, he did not secure the Boards approval. He
also did not submit the contracts to the Board after
their consummation so there was, in fact, no occasion
at all for ratification. The contracts were not reported
in IVOs export sales book and turn-out book. Neither
were they reflected in other books and records of the
corporation. It must be pointed out that the Board of
Directors, not Monteverde, exercises corporate power.
Clearly, Monteverdes speculative contracts with Safic
never bound IVO and Safic cannot therefore enforce which, in turn, determines the extent of Siredy’s
those contracts against IVO. participation in the Deed of Agreement.

On its face, the instrument executed by Yanga clearly and

unequivocally constituted Santos to do and execute,
among other things, the act of negotiating and entering
into contract or contracts to build Housing Units on our
55. SIREDY ENTERPRICES, INC. v CA
subdivision lots in Ysmael Village, Sta. Rosa, Marilao,
Bulacan. Nothing could be more express than the written
Conrado De Guzman is an architect-contractor doing
stipulations contained therein.
business under the name and style of Jigscon
It was upon the authority of this document that De
Construction. Herein petitioner Siredy Enterprises, Inc.
Guzman transacted business with Santos that resulted in
(hereafter Siredy) is the owner and developer of Ysmael
the construction contract denominated as the Deed of
Village, a subdivision in Sta. Cruz, Marilao, Bulacan. The
Agreement.
president of Siredy is Ismael E. Yanga
Aside from the Letter of Authority, Siredys Articles of
As stated in its Articles of Incorporation, the primary
Incorporation, duly approved by the Securities and
corporate purpose of Siredy is to acquire lands, subdivide
Exchange Commission, shows that Siredy may also
and develop them, erect buildings and houses thereon,
undertake to erect buildings and houses on the lots and
and sell, lease or otherwise dispose of said properties to
sell, lease, or otherwise dispose of said properties to
interested buyers.
interested buyers. Such Articles, coupled with the Letter
Sometime before October 1978, Yanga executed an
of Authority, is sufficient to have given De Guzman reason
undated Letter of Authority to one Hermogenes B. Santos.
to believe that Santos was duly authorized to represent
On October 15, 1978, Santos entered into a Deed of
Siredy for the purpose stated in the Deed of Agreement.
Agreement with De Guzman. The deed expressly stated
Petitioners theory that it merely sold lots is effectively
that Santos was representing Siredy Enterprises, Inc.
debunked.
Private respondent De Guzman was referred to as
CA Affirmed.
contractor while petitioner Siredy was cited as principal.
From October 1978 to April 1990, De Guzman constructed
26 residential units at Ysmael Village. Later, when
56. TOYOTA SHAW, INC., v CA
petitioner failed to pay for the 13 units, De Guzman filed
TOYOTA SHAW, INC., petitioner,
a case.
vs.
RTC: Ruled in favor of Siredy disregarding the Letter of
COURT OF APPEALS and LUNA L. SOSA, respondents.
Authority
CA: Reversed RTC. The appellate court held that the Letter
Principal: Toyota Shaw, Inc.
of Authority duly signed by Yanga clearly constituted
Agent: Popong Bernardo
Santos as Siredys agent, whose authority included
entering into a contract for the building of housing units
FACTS: In June 1989, Luna Sosa (Sosa) wanted to
at Ysmael Village
purchase a Toyota Lite Ace. It was then a seller's market
ISSUE: WON Hermogenes B. Santos was a duly
and Sosa had difficulty finding a dealer with an available
constituted agent of Siredy, with authority to enter into
unit. Sosa contacted Toyota Shaw, Inc. (Toyota) and was
contracts for the construction of residential units in
told that there was an available unit. On 6/14/1989, Sosa
Ysmael Village and thus the capacity to bind Siredy to the
and his son, Gilbert, went to Toyota's office where they
Deed of Agreement
met Popong Bernardo, as sales representative of Toyota.
RULING:
YES. The Court found that a valid agency was created
Sosa emphasized that the Lite Ace is needed not later than
between Siredy and Santos,
6/17/1989, for they will be using it for their guests the
The basis of agency is representation, that is, the agent
next day. Furthermore, should he fail to arrive in a new
acts for and in behalf of the principal on matters within
car in his home town on 6/19/1989, he would be a
the scope of his authority (Art, 1881) and said acts have
laughing stock. In turn, Bernardo assured Sosa that a unit
the same legal effect as if they were personally done by
would be ready at 10am on 6/17/1989, and an agreement
the principal. By this legal fiction of representation, the
in writing was made.
actual or legal absence of the principal is converted into
his legal or juridical presence.
4 June 1989
The scope of the agents authority is what appears in the
written terms of the power of attorney. While third AGREEMENTS BETWEEN MR. SOSA
persons are bound to inquire into the extent or scope of & POPONG BERNARDO OF TOYOTA
the agents authority, they are not required to go beyond SHAW, INC.
the terms of the written power of attorney. Third persons
cannot be adversely affected by an understanding 1. all necessary documents will be submitted to TOYOTA
between the principal and his agent as to the limits of the SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of
Mr. Sosa from the Province (Marinduque) where the unit will be
latter’s authority. In the same way, third persons need not
used on the 19th of June.
concern themselves with instructions given by the
principal to his agent outside of the written power of 2. the downpayment of P100,000.00 will be paid by Mr.
attorney. Sosa on June 15, 1989.
Within the terms of the Letter of Authority can be found
the nature and extent of the authority granted to Santos 3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-
up [sic] and released by TOYOTA SHAW, INC. on the 17th of June
at 10 a.m. RULING: No. The VSP did not lead to a contract of sale.
CA Reversed and set aside.
Very truly yours,

RATIO: The Agreement shows the absence of a meeting

(Sgd.) POPONG BERNARDO.
of minds between Toyota and Sosa. For one thing, Sosa
did not even sign it. For another, Sosa was well aware
from its title, written in bold letters, viz.,
On 6/15/1989, Sosa and Gilbert went to Toyota to deliver
the downpayment of P 100k. They met Bernardo who
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO
accomplished a printed Vehicle Sales Proposal (VSP) N.
OF TOYOTA SHAW, INC.
982, on which Gilbert signed under the subheading
CONFORME. This document shows Sosa as the customer,
that he was not dealing with Toyota but with Popong
with home address, the model of the car purchase, that
Bernardo and that the latter did not misrepresent that he
payment is by installment, the breakdown of the down
had the authority to sell any Toyota vehicle. He knew that
payment, and the balance to be financed with is P274,137.
Bernardo was only a sales representative of Toyota and
Spaces for "Delivery Terms" were not filled up. Under the
hence a mere agent of the latter. It was incumbent upon
conditions of sales:
Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an
"1. This sale is subject to availability of unit.
agent in respect of contracts to sell Toyota's vehicles. A
2. Stated Price is subject to change without prior notice, person dealing with an agent is put upon inquiry and must
Price prevailing and in effect at time of selling will apply. . . ." discover upon his peril the authority of the agent.

Rodrigo Quirante, the Sales Supervisor of Bernardo, At the most, Exhibit "A" may be considered as part of the
checked and approved the VSP. initial phase of the generation or negotiation stage of a
contract of sale. There are three stages in the contract of
On the promised date and time, Bernardo called Gilbert to sale, namely:
tell the latter that the release will be delayed to 2pm. Sosa
and Gilbert met Bernardo who informed the former two (a) preparation, conception, or generation, which is
that the car could not be delivered because the unit was the period of negotiation and bargaining, ending at the
released to a more prefered client instead. However, moment of agreement of the parties;
Toyota contends that the reason for non-release was the
disapproval by BA Finance of the loan application of Sosa. (b) perfection or birth of the contract, which is the
It being clear that the unit would not be delivered, Sosa moment when the parties come to agree on the terms of
ask that his down payment be refunded which Toyota did the contract; and
the same day in the form of a Far East Bank check for
P100k, the check voucher of Toyota was signed by Sosa (c) consummation or death, which is the fulfillment or
with the reservation, "without prejudice to our future performance of the terms agreed upon in the contract.
claims for damages."
Note:
Sosa sent two letters to Toyota the first by Sosa, Seller's market - an economic situation in which goods or shares
demanding for refund and interest from the time it was are scarce and sellers can keep prices high.

paid, with damages. The second by Sosa's counsel

demanding P 1m representing interest and damages. 57. Bacaltos Coal Mines v. CA
Toyota refused to accede to the demands of Sosa. Facts:

CoA - Complaint for damages. Toyota alleged that there Principal: Bacaltos Coal Mines
was no sale, and that Bernardo had no authority to sign Agent: Rene Savellon
the agreement in its behalf, and rather, Bernardo signed Third Party: San Miguel Corporation
in his personal capacity. Sosa has also not yet
accomplished the documentary requirement and as such, In an “Authorization”, petitioner Bacaltos authorized
the unit cannot be released. The P 100k was also return Savellon to use the coal operating contract of Bacaltos
and received by Sosa. Coal Mines of which Bacaltos is the proprietor, stating,
“
RTC - There was a valid sale. Ruling that agreement was
(1) To acquire purchase orders
a valid perfected contract of sale between Sosa and
(2) To engage in trading
Toyota which bound Toyota to deliver the vehicle to Sosa,
and further agreed with Sosa that Toyota acted in bad
(3) To collect all receivables due or in arrears
faith in selling to another the unit already reserved for (4) To extend to any person or company by
him. substitution the same extent of authority that is granted to
Rene Savellon;
CA - affirmed RTC in toto (5) In connection with the preceding paragraphs to
execute and sign documents, contracts, and other
ISSUE: Whether or not Bernardo had authority to bind pertinent papers.”
Toyota to the sale to Sosa of the Lite Ace)
In 1988, a Trip Charter Party was executed between
Bacaltos Coal Mines (represented by Savellon) and SMC.
The agreement was for Php 650,000 for three round trips
to Davao to be paid within 7 days. The vessel was able to
make one trip only. SMC filed an action for specific
performance.
Petitioners alleged that Savellon was not their Chief
Operating Officer and that the powers granted to him are
only those clearly expressed in the Authorization which do
not include the power to enter into any contract with SMC.
RTC: favored SMC
CA: affirmed in toto
Issues:
WON Savellon was duly authorized by petitioners to enter
into a Trip Charter Party.
WON SMC is liable for entering into a contract with
Savellon (having no authority).
Ruling:
No. The broadest scope of Savellon’s authority is limited to
the use of the coal operating contract and the clause
cannot contemplate any other power not included in the
enumeration or which are unrelated either to the power to
use the coal operating contract or to those already
enumerated. In short, while the clause allows some room
for flexibility, it can comprehend only additional
prerogatives falling within the primary power and within
the same class as those enumerated. There is no evidence
at all that Bacaltos Coal Mines as a coal mining company
owns and operates vessels, and even if it owned any such
vessels, that it was allowed to charter or lease them.
The Authorization is not a general power of attorney, it is a
special power of attorney for it refers to a clear mandate
specially authorizing the performance of a specific power
and of express acts subsumed therein.
SMC is liable for entering into a contract with Savellon
(having no authority). Had SMC exercised due diligence
and prudence, it should have known in no time that there
is absolutely nothing on the face of the Authorization that
confers upon Savellon the authority to enter into any Trip
Charter Party. Since the principal subject of the
Authorization is the coal operating contract, SMC should
have required its presentation to determine what it is and
how it may be used by Savellon. Such a determination is
indispensable to an inquiry into the extent or scope of his
authority.
Every person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. If
he does not make such inquiry, he is chargeable with
knowledge of the agent's authority, and his ignorance of
that authority will not be any excuse. Persons dealing with
an assumed agent, whether the assumed agency 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 also the nature and extent of the authority,
and in case either is controverted, the burden of proof is
upon them to establish it.
58. BA FINANCE CORPORATION v CA
Facts:
· Renato Gaytano under the name Gebbs
International, applied for and was granted a loan with
respondent Traders Royal Bank in the amount of
P60,000.00. As security for the payment of said loan,
the Gaytano spouses executed a deed of suretyship
whereby they agreed to pay jointly and severally to
respondent bank the amount of the loan including
interests, penalty and other bank charges.
Philip Wong as credit administrator of BA Finance
Corporation for and in behalf of the latter, undertook
to guarantee the loan of the Gaytano spouses.·
Gaytano spouses refused to pay their obligation,
respondent bank filed with the trial court complaint for
sum of money against the Gaytano spouses and
petitioner corporation as alternative defendant.
· BA finance raised the defense of lack of authority
of its credit administrator to bind the corporation
· The Trial court rendered a decision ordering the
Gaytano spouses latter to jointly and severally pay the
plaintiff, but dismissed the case against defendant BA
Finance Corporation
· Traders Royal Bank appealed, the CA ordered
the defendants Gaytano spouses and alternative
defendant BA Finance Corporation, jointly and
severally, to pay the plaintiff
· Based on the testimony of the credit administrator
and from the memorandum which allegedly authorized
Wong not only to approve and grant loans but also to
enter into contracts of guaranty in behalf of the
corporation
Issue: WON BA Finance can be jointly and severally
liable with the Gaytano spouses or they can be bound
by the action of the credit administrator
Ruling: NO
Petitioner contends that the letter guaranty is ultra
vires, and therefore unenforceable; that said letter-
guaranty was issued by an employee of petitioner
corporation beyond the scope of his authority since the
petitioner itself is not even empowered by its articles
of incorporation and by-laws to issue guaranties
· We find the petitioner's contentions meritorious.
It is a settled rule that persons dealing with an assumed
agent, whether the assumed agency be a general or
special one 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
· Hence, the burden is on respondent bank to
satisfactorily prove that the credit administrator with
whom they transacted acted within the authority given
to him by his principal, petitioner corporation. The
only evidence presented by respondent bank was the
testimony of Philip Wong, credit administrator, who
testified that he had authority to issue guarantees as can
be deduced from the wording of the memorandum
given to him by petitioner corporation on his lending
authority.
· Although Wong was clearly authorized to
approve loans even up to P350,000.00 without any
security requirement, which is far above the amount
subject of the guaranty in the amount of P60,000.00,
nothing in the said memorandum expressly vests on the
credit administrator power to issue guarantees. We
cannot agree with respondent's contention that the
phrase "contingent commitment" set forth in the
memorandum means guarantees. It has been held that
a power of attorney or authority 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
(Director v. Sing Juco, 53 Phil. 205). In one case,
where it appears that a wife gave her husband power of
attorney to loan money, this Court ruled that such fact
did not authorize him to make her liable as a surety for
the payment of the debt of a third person (Bank of
Philippine Islands v. Coster, 47 Phil. 594).
· The sole allegation of the credit administrator in
the absence of any other proof that he is authorized to
bind petitioner in a contract of guaranty with third
persons should not be given weight. The representation
of one who acts as agent cannot by itself serve as proof
of his authority to act as agent or of the extent of his
authority as agent (Velasco v. La Urbana, 58 Phil.
681). Wong's testimony that he had entered into similar
transactions of guaranty in the past for and in behalf of
the petitioner, lacks credence due to his failure to show
documents or records of the alleged past transactions.
The actuation of Wong in claiming and testifying that
he has the authority is understandable. He would
naturally take steps to save himself from personal
liability for damages to respondent bank considering
that he had exceeded his authority. The rule is clear that
an agent who exceeds his authority is personally liable
for damages (National Power Corporation v. National
Merchandising Corporation, Nos. L-33819 and
L-33897, October 23, 1982, 117 SCRA 789).
· Anent the conclusion of respondent appellate
court that petitioner is estopped from alleging lack of
authority due to its failure to cancel or disallow the
guaranty, We find that the said conclusion has no basis
in fact. Respondent bank had not shown any evidence
aside from the testimony of the credit administrator
that the disputed transaction of guaranty was in fact
entered into the official records or files of petitioner
corporation, which will show notice or knowledge on
the latter's part and its consequent ratification of the
said transaction. In the absence of clear proof, it would
be unfair to hold petitioner corporation guilty of
estoppel in allowing its credit administrator to act as
though the latter had power to guarantee.
59. EUGENIO v. CA
FACTS: Private respondent Pepsi-Cola Bottling
Company of the Philippines, Inc. is engaged in the
business of manufacturing, making bottling and selling
soft drinks and beverages to the general public.
Petitioner Nora S. Eugenio was a dealer of the soft
drink products of private respondent corporation. Her
husband and co-petitioner, Alfredo Y Eugenio, used to
be a route manager of private respondent in its
Quezon City plant.
Respondent corporation alleged that on several
occasions in 1979 and 1980, petitioners purchased
and received on credit various products from its
Quezon City plant. As of December 31, 1980,
petitioners allegedly had an outstanding balance of
P20,437.40 therein. Likewise, on various occasions in
1980, petitioners also purchased and received on
credit various products from respondent's Muntinlupa
plant and, as of December 31, 1989, petitioners
supposedly had an outstanding balance of P38,357.20
there. In addition, it was claimed that petitioners had
an unpaid obligation for the loaned "empties" from the
same plant in the amount of P35,856.40 as of July 11,
1980. Altogether, petitioners had an outstanding
account of P94,651.00, so the complaint filed by Pepsi
Cola alleged, they failed to pay despite oral and written
demands.
In their defense, petitioners presented four trade
provisional receipts (TPRs) allegedly issued to and
received by them from private respondent's Route
Manager Jovencio Estrada of its Malate Warehouse
(Division 57), showing payments in the total sum of
P80,500.00 made by Abigail's Store. Petitioners
contended that had the amounts in the TPRs been
credited in their favor, they would not be indebted to
Pepsi-Cola.
Lower court ordered herein petitioners to pay jointly
and severally.
On appeal, CA declared said decision a nullity for
failure to comply with the requirements of the
Constitution. CA accordingly remanded the records to
the trial court to render another decision. CA affirmed
the trial court's decision.
ISSUE: Whether or not route manager Estrada was
acting within its authority when he received the
payment, which consequently extinguishes the debt of
the petitioner.

HELD: Yes, TPRs presented in evidence by
petitioners are disputably presumed as evidentiary of
payments made on the account of petitioner. Even
assuming arguendo that herein private respondent's
cashier never received the amounts reflected in the
TPRs, still private respondent failed to prove that
Estrada, who is its duly authorized agent with respect
to petitioners, did not receive those amounts from the
latter. As correctly explained by petitioners, "in so far
as the private respondent's customers are concerned,
for as long as they pay their obligations to the sales
representative of the private respondent using the
latter's official receipt, said payment extinguishes their
obligations." Otherwise, it would unreasonably cast
the burden of supervision over its employees from
respondent corporation to its customers.
The substantive law is that payment shall be made to
the person in whose favor the obligation has been
constituted, or his successor-in-interest or any person
authorized to receive it. As far as third persons are
concerned, an act is deemed to have been performed
within the scope of the agent's authority, if such is
within the terms of the power of attorney, as written,
even if the agent has in fact exceeded the limits of his
authority according to an understanding between the
principal and his agent. In fact, Atty. Rosario, private
respondent's own witness, admitted that "it is the
responsibility of the collector to turn over the
collection."
VII. OBLIGATIONS AND LIABILITIES OF
PRINCIPALS TO AGENTS
60. WOODCHILD HOLDINGS INC v. ROXAS
ELECTRIC
FACTS:
Principal – ROXAS Electric & Construction Co
Agent – Roberto Roxas (President)
Roxas Electric and Construction Company (respondent)
owns two parcel of lands. The other lot which is the
subject property of the case is a dirt road accessing a
highway. Its Board of Directors approved a resolution
authorizing the corporation, through its president,
Roberto B. Roxas, to sell the second parcel of land on
behalf of the company. The said authorization contains the
price, terms and conditions of the sale which he deemed
most reasonable and advantageous to the corporation;
and to execute, sign and deliver the pertinent sales
documents and receive the proceeds of the sale.
Subsequently, petitioner (Woodchild Holdings) and
respondent (RECCI through Roberto Roxas) executed a
contract to sell in which RECCI bound and obliged itself to
sell to Dy (WHI President) the parcel of land in which a
deed of absolute sale was executed in favor of WHI to
have beneficial use of and a right of way from Sumulong
Highway to the property conveyed consisting of 25 sq. m.
wide to be used as the latter's egress from and ingress to
and an additional 25 sq. m. in the corner of the other lot,
as turning and/or maneuvering area for WHI's vehicles. In
the event that the right of way is insufficient, RECCI shall
sell additional sq. m. from its current adjacent property.
WHI (petitioner) then entered into a construction
agreement with Wimbeco Builders for the construction of
a warehouse and a lease agreement with Poderosa
Leather Goods Company. The building was finished and
Poderosa became the lessee.
WHI complained to Roberto Roxas that the vehicles of
RECCI were parked on a portion of the property over
which WHI had been granted a right of way. Roxas
promised to look into the matter. Dy and Roxas discussed
the need of the WHI to buy a 500-square-meter portion
of the lot as provided for in the deed of absolute sale.
However, Roxas died soon thereafter.
WHI wrote the RECCI, reiterating its verbal requests to
purchase a portion of the said lot as provided for in the
deed of absolute sale, and complained about the latters
failure to eject the squatters within the three-month
period agreed upon in the said deed. RECCI rejected the
demand of WHI prompting the latter to file for a complaint
against RECCI for specific performance and damages.
RTC: Rendered judgment in favor of WHI. Ordered RECCI
to allow WHI (plaintiff) for the beneficial use of the
existing right of way plus the stipulated 25sqm and 55
sqm, to sell to WHI the additional 500sqm to allow said
plaintiff full access and use of the purchased property
pursuant to the deed of absolute of sale, to cause
annotation on TCT the beneficial use and right of way
granted by their deed of absolute sale and pay plaintiff the
actual damages and unrealized income.
The trial court ruled that the RECCI was estopped
from disowning the apparent authority of Roxas under the
Resolution of its Board of Directors. The court reasoned
that to do so would prejudice the WHI which transacted
with Roxas in good faith, believing that he had the
authority to bind the WHI relating to the easement of right
of way, as well as the right to purchase a portion of the
lot.
CA: Reversed the decision.
The CA ruled that, under the resolution of the Board of
Directors of the RECCI, Roxas was merely authorized to
sell the lot, but not to grant right of way in favor of the
WHI over a portion of the lot, or to grant an option to the
petitioner to buy a portion thereof. The appellate court
also ruled that the grant of a right of way and an option
to the respondent were so lopsided in favor of the
respondent because the latter was authorized to fix the
location as well as the price of the portion of its property
to be sold to the respondent. Hence, such provisions
contained in the deed of absolute sale were not binding on
the RECCI. The appellate court ruled that the delay in the
construction of WHIs warehouse was due to its fault.
ISSUE: Whether the ROXAS Electric (respondent is
bound) by the provisions in the deed of absolute sale
granting WHI the beneficial use and right of way over the
adjacent lot of the lot they previously bought.

HELD: NO.
A corporation is a juridical person separate and distinct
from its stockholders or members. Accordingly, the
property of the corporation is not the property of its
stockholders or members and may not be sold by the
stockholders or members without express authorization
from the corporation’s board of directors. Indubitably, a
corporation may act only through its board of directors or,
when authorized either by its by-laws or by its board
resolution, through its officers or agents in the normal
course of business. 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.
Generally, the acts of the corporate officers within the
scope of their authority are binding on the corporation.
However, acts done by such officers beyond the
scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly,
or is estopped from denying them.
Thus, contracts entered into by corporate officers beyond
the scope of authority are unenforceable against the
corporation unless ratified by the corporation.
In BA Finance Corporation v. Court of Appeals, we also
ruled that persons dealing with an assumed agency,
whether the assumed agency be a general or special one,
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.
In this case, the respondent denied authorizing its then
president Roberto B. Roxas to sell a portion of its lot, to
create a lien or burden thereon. The petitioner was thus
burdened to prove that the respondent so authorized
Roxas to sell the same and to create a lien thereon.
Evidently, Roxas was not specifically authorized under the
said resolution to grant a right of way in favor of the
petitioner on a portion of the subjected lot or to agree to
sell to the petitioner a portion thereof. The authority of
Roxas, under the resolution, to sell the lot did not include
the authority to sell a portion of the adjacent lot, or to
create or convey real rights thereon. Neither may such
authority be implied from the authority granted to Roxas
to sell the adjacent lot to the petitioner on such terms and
conditions which he deems most reasonable and
advantageous.
Under paragraph 12, Article 1878 of the New Civil Code,
A special power of attorney is required to convey
real rights over immovable property.
Article 1358 of the New Civil Code
“ requires that contracts which have for their
object the creation of real rights over immovable property
must appear in a public document.”
The petitioner cannot feign ignorance of the need for
Roxas to have been specifically authorized in writing by
the Board of Directors to be able to validly grant a right of
way and agree to sell a portion of the adjacent lot. The
rule is that if the act of the agent is one which requires
authority in writing, those dealing with him are charged
with notice of that fact.
Powers of attorney are generally construed strictly and
courts will not infer or presume broad powers from deeds
which do not sufficiently include property or subject under
which the agent is to deal.
Generally, the power of attorney must be pursued within
legal strictures, and the agent can neither go beyond it;
nor beside it. The act done must be legally identical with
that authorized to be done. Hence, the consent of the
respondent to the assailed provisions in the deed of
absolute sale was not obtained; hence, the assailed
provisions are not binding on it.
***Apparent authority is based on estoppel and can arise
from two instances: first, the principal may knowingly
permit the agent to so hold himself out as having such
authority, and in this way, the principal becomes estopped
to claim that the agent does not have such authority;
second, the principal may so clothe the agent with the
indicia of authority as to lead a reasonably prudent person
to believe that he actually has such authority.
***There can be no apparent authority of an agent without
acts or conduct on the part of the principal and such acts
or conduct of the principal must have been known and
relied upon in good faith and as a result of the exercise of
reasonable prudence by a third person as claimant and
such must have produced a change of position to its
detriment. The apparent power of an agent is to be
determined by the acts of the principal and not by the acts
of the agent.
61. BEDIA v WHITE
FACTS:
Petitioner Sylvia H. Bedia entered into the subject
contract with private respondent Emily A. White. She
averred that Bedia had approached her and
persuaded her to participate in the State of Texas Fair,
and that she made a down payment of $500.00 to
Bedia on the agreed display space. In due time, she
enplaned for Dallas with her merchandise but was
dismayed to learn later that the defendants had not
paid for or registered any display space in her name,
nor were they authorized by the state fair director to
recruit participants.
On August 10, 1986, White and her husband filed a
complaint in the Regional Trial Court of Pasay City for
damages against Bedia and Hontiveros & Associated
Producers Phil. Yields, Inc. She said she incurred
losses as a result for which the defendants should be
held solidarily liable.
The defendants denied the plaintiff's allegation that
they had deceived her and explained that no display
space was registered in her name as she was only
supposed to share the space leased by Hontiveros in
its name. She was not allowed to display her goods in
that space because she had not paid her balance of
$1,750.00, in violation of their contract. Bedia also
made the particular averment that she did not sign the
Participation Contract on her own behalf but as an
agent of Hontiveros and that she had later returned the
advance payment of $500.00 to the plaintiff. The
defendants filed their own counterclaim and
complained of malice on the part of the plaintiffs.
In the course of the trial, the complaint against
Hontiveros was dismissed on motion of the White.
RTC: It found Bedia solely liable for fraud and awarded
the plaintiffs actual and moral damages plus attorney's
fees and the costs. The court said:
In claiming to be a mere agent of Hontiveros &
Associated Producers Phil. Yields, Inc., defendant
Sylvia H. Bedia evidently attempted to escape liability
for herself. Unfortunately for her, the "Participation
Contract" is not actually in representation or in the
name of said corporation. It is a covenant entered into
by her in her personal capacity, for no one may
contract in the name of another without being
authorized by the latter, or unless she has by law a
right to represent her. (Art. 1347, new Civil Code)
CA: Sustained RTC’s decision. The court said:
The evidence, on the whole, shows that she definitely
acted on her own. She represented herself as
authorized by the State of Texas to solicit and assign
booths at the Texas fair; she assured the appellee that
she could give her booth. Under Article 1883 of the
New Civil Code, if the agent acts in his own name, the
principal has no right of action against the persons with
whom the agent had contracted.
ISSUE:
WON principal Hontiveros & Associated Producers
Phil. Yields, Inc. is liable to its agent Sylvia H. Bedia.
HELD:
It has not been found that Bedia was acting beyond
the scope of her authority when she entered into the
Participation Contract on behalf of Hontiveros, it is the
latter that should be held answerable for any obligation
arising from that agreement.
Hontiveros itself has not repudiated Bedia's agency as
it would have if she had really not signed in its name.
In the answer it filed with Bedia, it did not deny the
latter's allegation that she was only acting as its agent
when she solicited White's participation. In fact, by
filing the answer jointly with Bedia through their
common counsel, Hontiveros affirmed this allegation.
The Participation Contract signed by Bedia was an
acknowledgment by White that Bedia was only acting
for Hontiveros when it recruited her as a participant in
the Texas State Fair and charged her a partial
payment of $500.00. This amount was to be fortified to
Hontiveros in case of cancellation by her of the
agreement. The fact that the contract was typewritten
on the letterhead stationery of Hontiveros bolsters this
conclusion in the absence of any showing that said
stationery had been illegally used by Bedia.
Furthermore, by moving to dismiss the complaint
against Hontiveros, the plaintiffs White virtually
disarmed themselves and forfeited whatever claims
they might have proved against the latter under the
contract signed for it by Bedia. It should be obvious
that having waived these claims against the principal,
they cannot now assert them against the agent.
62. PNB v RITRATTO GROUP, INC., et al
Principal: PNB-IFL
Agent: PNB
FACTS: Petitioner Philippine National Bank is a
domestic corporation organized and existing under
Philippine law. Meanwhile, respondents Ritratto
Group, Inc., Riatto International, Inc. and Dadasan
General Merchandise are domestic corporations,
likewise, organized and existing under Philippine
law.
PNB International Finance Ltd. (PNB-IFL) a
subsidiary company of PNB, organized and doing
business in Hong Kong, extended a letter of credit
in favor of the respondents in the amount of
US$300,000.00 secured by real estate mortgages
constituted over four (4) parcels of land in Makati
City. This credit facility was later increased
successively to US$1,140,000.00 in September
1996; to US$1,290,000.00 in November 1996; to
US$1,425,000.00 in February 1997; and decreased
to US$1,421,316.18 in April 1998. Respondents
made repayments of the loan incurred by remitting
those amounts to their loan account with PNB-IFL in
Hong Kong.
However, as of April 30, 1998, their outstanding
obligations stood at US$1,497,274.70. Pursuant to
the terms of the real estate mortgages, PNB-IFL,
through its attorney-in-fact PNB, notified the
respondents of the foreclosure of all the real estate
mortgages and that the properties subject thereof
were to be sold at a public auction on May 27, 1999
at the Makati City Hall.
Respondents filed a complaint for injunction with
prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order
before the Regional Trial Court of Makati.
RTC – ruled in favour of the respondents, and
dismissed petitioner’s motion to dismiss.
CA – dismissed the petition for certriorari by the
petitioner.
Petitioner prays, inter alia, that the CA’s decision
and the RTC’s Orders be set aside and the dismissal
of the complaint in the case.
Respondents argue that even assuming arguendo
that petitioner and PNB-IFL are two separate
entities, petitioner is still the party-in-interest in the
application for preliminary injunction because it is
tasked to commit acts of foreclosing respondents'
properties. In addition, respondents justified the act
of the court a quo in applying the doctrine of
"Piercing the Veil of Corporate Identity" by stating
that petitioner is merely an alter ego or a business
conduit of PNB-IFL.
ISSUES:
WON petitioner is merely an alter ego of PNB-IFL
WON the suit against PNB is a suit against PNB-IFL
HELD:
No. PNB was an attorney-in-fact of PNB-IFL. The
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.
No. A suit against an agent cannot without
compelling reasons be considered a suit against the
principal.
In any case, the parent-subsidiary relationship
between PNB and PNB-IFL is not significant legal
relationship involved in this case since petitioner
was not sued because it is the parent company of
PNB-IFL. Rather, the petitioner was sued because it
acted as an attorney-in-fact of PNB-IFL in initiating
the foreclosure proceedings. A suit against an agent
cannot without compelling reasons be considered a
suit against the principal.
63. MACONDRAY v SELLNER
Principal: Macondray & Co.
Agent: George Sellner
FACTS
1. Sellner, a real estate broker, sold a parcel of
land to the company Macondray & Co., Inc. for
P17,175. The land was flooded by high tides and
Macondray became highly dissatisfied with its
purchase.Macondray informed Sellner that the
land was not suited for use as a coal-yard, the
purpose for which it had been bought, and
requested the latter to find another buyer.The
land was to be sold at the price Macondray
purchased it for, and exceed proceeds would
serve as Sellner’s commission.
2. Sellner informed Macondray that he found a
buyer: Antonio Barretto, who was willing to pay
P18,892.50, or P2.75/sq. m.Macondray
executed a formal deed of conveyance and
delivered this together with the certificate of title
to Sellner on the understanding that the latter
would deliver these to Barretto, conclude the
sale, and receive the purchase price.
3. Barretto agreed to accept the land on the
condition that he finds the title and deed
satisfactory after inspection. Sellner left the
deed of conveyance with Barretto, with the
understanding that if the title and the deed of
conveyance were as represented, Barretto
would give him his check for the amount of the
purchase price.
4. Barretto retained possession of the TCT; but a
few days later, he was compelled to go to
Tayabas on business and was detained by a
typhoon which delayed his return. During
Barretto’s absence, Macondray advised Sellner
that he must consummate the sale without delay
upon Barretto’s return.
5. Aug. 31: Barretto returned; Sellner informed him
of the company’s desire to close up the
transaction; but the former requested for 1-2
more days to inspect the documents before
issuing the check.
6. Sept. 2: was reported to Young, Macondray’s
general manager. Young informed Sellner that
unless the purchase price was paid before 5PM
of the same day, the deal would be off.Sellner
called Barretto, and the latter told him that if the
TCT was sent, he would issue the check.Sellner
sent the TCT but received the check 36 hours
after.Upon receipt of the check from Barretto,
Sellner immediately tendered Macondray a
check for the agreed selling price of P17,175.
7. Macondray refused to accept the check and filed
this action to recover damages claiming that the
sale had been cancelled because Sellner failed
to turn over the purchase price on Sept. 2.
ISSUE :
W/N Macondray is entitled to damages?
HELD:
NO.
There appears to be no reason for the demand of
Macondray through its general manager, Young, for
the delivery of the purchase price at the specified
hour under threat that failure to do so would cancel
the agreement other than that the manger was
annoyed with the delays which occurred during the
negotiations and changed his mind as to the
purchase price agreed upon.
From the nature of the transaction, it was
understood that the purchaser should have a
reasonable time in which to examine the documents
of title, and that defendant exercising an authority
impliedly if not expressly conferred upon him, gave
the purchaser a reasonable time in which to satisfy
himself as to the legality and correctness of the
documents of title.
That the company through its manager Young,
acquiesced in and ratified what had been done by
defendant in this regard when, with full knowledge
of all the facts, Young advised the defendant, during
Barretto's absence in Tayabas, that the deal must
be closed up without delay on Barretto's return to
Manila.
Time does not appear to have been of the essence
of the contract. The agreement to sell was made
without any express stipulation as to the time within
which the purchase price was to be paid.
The commission agreed upon was all that was over
the purchase price P17,175 which the defendant
could secure from the property, and it is clear that
allowing the defendant this commission, and
offsetting it against the unpaid balance of the
market value of the land, the plaintiff company
is not entitled to a money judgment against
defendant.
The business of a real estate broker or agent,
generally, is only to find a purchaser, and the
settled rule as stated by the courts is that, in the
absence of an express contract between the
broker and his principal, the implication
generally is that the broker becomes entitled to
the usual commissions whenever he brings to
his principal a party who is able and willing to
take the property and enter into a valid contract
upon the terms then named by the principal,
although the particulars may be arranged and the
matter negotiated and completed between the
principal and the purchaser directly.
The rights of a real estate broker are to be protected
against the arbitrary revocation of his agency,
without remuneration for services rendered in
finding a suitable purchaser prior to the revocation.
Macondray’s letter demanding payment at 5PM on
the afternoon of Sept. 2 under penalty of
cancellation of the agreement to sell was an
arbitrary unreasonable attempt to deny to
Barretto the reasonable opportunity to inspect
the documents of title, to which he was entitled by
virtue of the express agreement with Sellner,
Macondray’s agent, before any attempt was made
to revoke his agency.
It follows that Barretto's right to enforce the
agreement to sell was in no wise affected by the
attempt of the plaintiff company to "cancel" the
agreement; and that Macondray suffered no
damage by the consummation of the agreement by
the acceptance of the stipulated purchase price by
the defendant real estate agent.
64. DANON v BRIM & CO.
FACTS:
● Principal - Brimo; Agent (broker) - Danon
● Antonio A. Brimo, manager of BRIMO & CO, in a
conversation with Julio DANON, informed the
latter that he (BRIMO) desired to sell his factory,
the Holland American Oil Co., for the sum of
P1.2M
● BRIMO agreed and promised to pay DANON a
commission of 5% of the stipulated price provided
the latter could sell said factory for that
amount. No definite period of time was fixed
within which DANON should effect the sale
● Meanwhile, another broker, a certain SELLNER,
was also negotiating the sale of the same factory
for BRIMO. The records are not clear but it
appears that DANON was aware that he was not
alone as broker. The records seem to point that
DANON exerted earnest effort to forestall his
competitor by being the first to find a purchaser
and effect the sale
● In time, DANON found a willing purchaser. It
appears that after having the conversation with
BRIMO, DANON went to see Mauro PRIETO,
president of the STA ANA Oil Mill, and offered to
sell to him BRIMO’s property at P1.2M
● STA ANA was at that time in need of such a
factory. As such, PRIETO, its president, eagerly
expressed interest in DANON’s offer. PRIETO
immediately sought to ascertain whether BRIMO
really wanted to sell said factory, and after getting
such confirmation from BRIMO, sought also to
inspect the factory (which he did)
● PRIETO then set for an appointment with BRIMO
to perfect the negotiation. However, such
appointment never pushed through because at
that time, the other broker, SELLNER, had already
found a purchaser for the same property who
ultimately bought it for P1.3M
● DANON filed the instant case to recover the sum
of P60,000, alleged to be the value of services
rendered by him to BRIMO as a broker
● DANON claimed that as compensation for his
services, a commission of 5% on the said sum of
P1.2M (P60,000) was promised to him by BRIMO
if the sale was consummated OR even if he should
merely find a purchaser ready, able and willing to
buy said factory for the stipulated price
● DANON averred that BRIMO refused to sell the
said factory without any justifiable motive or
reason and without having previously notifying
DANON of its desistance or variation in the price
and terms of the sale
● To that complaint the BRIMO interposed a general
denial
● The trial court ruled in favor of DANON and
ordered BRIMO to pay the sum prayed for plus
costs – hence this petition by BRIMO
ISSUE: Whether DANON is entitled to recover the sum of
P60,000 as compensation for his “services”
RULING:
NO. The judgment appealed from is hereby revoked and
BRIMO is hereby absolved from all liability under the
DANON’s complaint.
● Note that DANON's action here is not one for
damages for breach of contract; it is an action to
recover "the reasonable value" of services
rendered. Hence, to determine whether DANON is
entitled to recover the commission agreed upon,
the pivotal question to be resolved is whether
DANON had performed all that was required of
him under his contract with BRIMO
● As can be gleaned from the facts, the most that
can be said as to what DANON had accomplished
is that he had found a person (STA ANA Oil Mill)
who MIGHT have bought the subject factory had
BRIMO not sold it to someone else
● However, even this point is dubious as the
evidence does not show that the STA ANA had
definitely decided to buy the property in question
at the price of P1.2M. The board of directors of
STA ANA had not resolved to purchase said
property; and even if its president, PRIETO, could
legally make the purchase without board
authorization, yet PRIETO himself did not pretend
that he had definitely agreed to buy the factory on
behalf of his corporation at the price stated
● It must be emphasized the DANON himself (in his
complaint and testimony in open court) admitted
that BRIMO agreed to pay him a commission of
5% provided he could sell the factory at P1.2M
under the circumstances presented, it is difficult
to see how DANON can recover anything
● What benefit did DANON, by his "services,"
bestow upon BRIMO to entitle him to recover from
the latter the sum of P60,000? It is perfectly clear
and undisputed that his "services" did not any way
contribute towards bringing about the sale of the
factory in question.
He was not "the efficient agent or the procuring
cause of the sale."
● DOCTRINE: The broker must be the efficient agent
or the procuring cause of sale. The means
employed by him and his efforts must result in the
sale. He must find the purchaser, and the sale
must proceed from his efforts acting as broker
● DOCTRINE (restated): The duty assumed by the
broker is to bring the minds of the buyer and seller
to an agreement for a sale, and the price and
terms on which it is to be made, and until that is
done his right to commissions does not accrue. A
broker is never entitled to commissions for
unsuccessful efforts. The risk of a failure is wholly
his. The reward comes only with his success.
● The broker may devote his time and labor, and
expend his money with ever so much of devotion
to the interest of his employer, and yet if he fails,
if without effecting an agreement or
accomplishing a bargain, he abandons the effort,
or his authority is fairly and in good faith
terminated, he gains no right to commissions
● Simply put, a broker is never successful and never
becomes entitled to his commission until and
unless the sale is consummated. Even when he
has successfully brought the would be buyer and
seller together, or when his efforts have created
impressions favorable to seller, or when seller
otherwise benefited from broker’s labor – as long
as no sale has been consummated, he is not
entitled to commission
● Such a rule, however, has an exception: If the
efforts of the broker are rendered a failure by the
fault of the employer, then the broker does not
lose his commissions. For instance, when the
employer capriciously changes his mind after the
purchaser, ready, willing, and able has already
been produced by the broker; or when the
purchaser declines to complete a sale because of
some defect of title in the ownership of the seller,
which defect is the fault of the seller
● Usually the broker is entitled to a fair and
reasonable opportunity to perform his obligation,
subject of course to the right of the seller to sell
independently. But the right of the principal to
terminate broker’s authority is absolute and
unrestricted, except only that he may not do it in
bad faith, and as a mere device to escape the
payment of the broker's commissions
● Thus, if in the midst of negotiations instituted by
the broker, and which were approaching success,
the seller should revoke the authority of the
broker, with the view of concluding the bargain
without his aid, and avoiding the payment of
commission about to be earned, it might be well
said that the due performance his obligation by
the broker was purposely prevented by the
principal
● But if the seller acts in good faith, not seeking to
escape the payment of commissions, but moved
fairly by a view of his own interest, he has the
absolute right before a bargain is made while
negotiations remain unsuccessful, before
commissions are earned, to revoke the broker's
authority, and the latter cannot thereafter claim
compensation for a sale made by the principal,
even though it be to a customer with whom the
broker unsuccessfully negotiated, and even
though, to some extent, the seller might justly be
said to have availed himself of the fruits of the
broker's labor
 ● The obligation of a broker to procure a purchaser
requires of broker not simply to name or introduce
a person who may be willing to make any sort of
contract in reference to the property, but to
actually produce a party capable, and who
ultimately becomes the purchaser
● It is clear from the foregoing that although
DANON could probably have effected the sale of
the factory had BRIMO not sold it to someone else,
he is not entitled to the commissions agreed upon
because he had no intervention whatever in the
sale that transpired
● It must be borne in mind that no definite period
was fixed by BRIMO within which DANON might
effect the sale of its factory. Nor was DANON given
by BRIMO the exclusive agency of such sale.
Therefore, DANON cannot complaint of BRIMO's
conduct in selling the property through another
agent (SELLNER) before DANON's efforts were
crowned with success
● DOCTRINE: One who has employed a broker
can himself sell the property to a purchaser
whom he has procured, without any aid from
the broker.
65. ROCHA v PRATS
PRINCIPAL: Prats & Company
AGENT: Alfonso Rocha
FACTS:
On May 1919, Antonio Brimo, manager of defendant
company, verbally authorized Joaquin Mencarini to
negotiate the sale of a lot in Calle David, Manila. It
was to be sold for P 150,000 and the excess was to
be the commission. Plaintiff Rocha agreed to help
and received a similar authorization.
On July 30,1919, Rocha obtained an offer from
Vicente Madrigal for P 165,000. Upon Rocha’s
request, Brimo gave him a power in writing allowing
plaintiff to sell the land. At this point, Rocha alleged
that he protested because the document asked for
banking security from the buyer. Allegedly, Brimo told
the plaintiff that the latter can strike out said clause
upon sale. Brimo denied this allegation.
The following day, Rocha endeavored to close the
transaction but Madrigal (the buyer) declined to give
such banking security. This caused the sale to fail.
An action to recover sum (P15,000) was lodged by
plaintiff to the trial court. The trial court ruled in favor
of the defendant, hence the appeal to the Supreme
Court.
ISSUE:
Whether or not Rocha is entitled to have commission.
RULING:
No, Rocha is not entitled to have commission.
RATIO:
A broker not having quite succeeded in bringing the
minds of buyer and seller to an agreement in regards
to the terms of a sale is not entitled to commission.
The present case shows that Madrigal and Brimo
never agreed as to the terms of sale. It follows that
the broker, Rocha, never succeeded in bringing their
minds together. Furthermore, plaintiff did not adduce
sufficient evidence to back his claim that defendant
really agreed to strike out the aforementioned
banking security clause.
NOTE: Mencarini at first claimed compensation for
his services in connection with the negotiation for the
sale to Madrigal, but subsequently relinquished his
claim in favor of Rocha.
66. INLAND REALTY v CA
67. INFANTE v CUNANAN
FACTS
13. Principal: Consejo Infantem - owner of two parcels of
land with a house built thereon;
Agents: Jose Cunanan and Juan Mijares - for the sale of
the property of Consejo.
Third Party: Pio S. Noche - buyer of property
14. Consejo Infante, was the owner of two parcels of land,
together with a house built thereon, situated in the City of
Manila and covered by a Transfer Certificate of Title.
15. On or before November 30, 1948, she contracted the
services of Jose Cunanan and Juan Mijares to sell the
property for P30,000 subject to the condition that the
purchaser would assume the mortgage existing thereon in
the favor of the Rehabilitation Finance Corporation; in
return she would pay them a commission of 5% on the
purchase price plus whatever overprice they may obtain
for the property.
16. Agents found one Pio S. Noche who was willing to buy
the property under the terms agreed upon with principal
but when they introduced him, Consejo informed agents
that she was no longer interested in selling the property
and made them sign a document cancelling the written
authority she had given them.
17. However, on December 20, 1948, Consejo dealt
directly with Pio S. Noche selling to him the property for
P31,000.
18. Upon learning this transaction, Cunanan and Mijares
demanded from Consejo the payment of their
commission, but she refused and so they brought the
present action.
19. RTC rendered judgement in favor of Cunanan and
Mijares.
20. CA affirmed RTC decision. Hence this petition to
review.
21. Consejo’s contention:
• Admitted having contracted the services of the herein
Agents to sell her property but stated that she agreed to
pay them a commission of P1,200 only on condition that
they buy her a property somewhere in Taft Avenue to
where she might transfer after selling her property. After
Cunanan and Mijares sold the property at Taft Avenue to
another party, it was agreed that the authority she had
given them be cancelled.
• That the authority has already been withdrawn by the
voluntary act of respondents when petitioner sold the
property to Pio S. Noche; that she was already free from
her commitment with respondents and, therefore, was not
in duty bound to pay them any commission for the
transaction
22. Agents’ claim: While they agreed to cancel the written
authority given to them, they did so merely upon the
verbal assurance given by Consejo that, should the
property be sold to Pio S. Noche they would be given the
commission agreed upon.
23. SC affirmed CA’s decision.
ISSUE
Whether or not principal Consejo is bound to pay agents
Cunanan and Mijares commission for the sale of her
property to Pio Noche (with oral evidence as proof to
contract).
HELD
*On bad faith of the Principal*
The fact that petitioner had changed her mind even if
respondents had found a buyer who was willing to close
the deal, is a matter that would not give rise to a legal
consequence if respondents agree to call off the
transaction in deference to the request of the petitioner.
But the situation varies if one of the parties takes
advantage of the benevolence of the other and acts in a
manner that would promote his own selfish interest. This
act is unfair as would amount to bad faith. This act cannot
be sanctioned without according to the party prejudiced
the reward which is due him.
Petitioner took advantage of the services rendered by
respondents, but believing that she could evade payment
of their commission, she made use of a ruse/strategem by
inducing them to sign the deed of cancellation. This act of
subversion cannot be sanctioned and cannot serve as
basis for petitioner to escape payment of the commission
agreed upon.
*Supplemental infom - On Oral Evidence*
The plea that oral evidence should not have been allowed
to prove the alleged verbal assurance is well taken it
appearing that the written authority given to respondents
has been cancelled in a written statement.
Section 22, Rule 123, Rules of Court "When the terms of
an agreement have been reduced to writing, it is to be
considered as containing all those terms, and, therefore,
there can be, between parties and their successors in
interest, no evidence of the terms of the agreement other
than the contents of the writing, except (a) Where a
mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or
the validity of the agreement is put in issue by the
pleadings, and (b) where there is an intrinsic ambiguity in
the writing."
There is no doubt that the point raised does not come
under any of the cases excepted, for there is nothing
therein that has been put in issue by respondents in their
complaint. The terms of the document of cancellation
seem to be clear and they do not contain any reservation
which may in any way run counter to the clear intention
of the parties.
=>However the Court disregarded this rule and
considered the bad faith of the Principal in affirming CA’s
decision
68. PRATS v CA
FACTS:
-Private defendant Alfonso Doronilla was the registered
owner of 300 hectares of land located in Montalban Rizal.
-Doronilla has been trying to sell the said land for a time.
-On July 3, 1967, Doronilla offered to sell the land to the
Social Security System (SSS) at 4 pesos per square
meter.
-July 17, 1967, SSS replied, asking if there was any
possibility if the price could be reduced to 3.25 pesos per
square meter.
-July 19, 1967, Doronilla replied saying that he was
amenable to the decrease in price and would sell at 3.25.
-Aug. 10, 1967, SSS replied that it would study the sale,
and would reply after it finishes its studies.
-Feb. 14, 1968, Doronilla granted plaintiff Prats an
exclusive option and authority in writing to negotiate the
sale of the said property. The option would last for 60 days
and will be automatically extended until said negotiations
are terminated, but not more than 15 days.
-Feb 19, 1968, In view of his exclusive option, Prats asked
Doronilla if he could take immediate steps to withdraw any
and all papers pertaining to the property offered to the
SSS
-Feb 20, 1968, Doronilla wrote a letter to SSS requesting
for the return of all papers concerning the property.
-Feb. 27, 1968, SSS replies, asking for a meeting with
Doronilla on Mar 4, 1968
-Feb.28 1968, Doronilla replies to SSS, saying that Prats
has the exclusive option and authority to negotiate the
sale, thus SSS will have to communicate directly with
Prats.
-April 18, 1968, Doronilla extended Prats exclusive option
and authority to expire May 18, 1968.
-May 6, 1968, Prats made a formal letter to SSS offering
the said lot for 6 pesos per square meter.
-May 17, 1968, Doronilla receives a telegram from the
SSS, saying that the SSS was considering the purchase of
the land.
-May 18, 1968, the exclusive option was extended for 15
days, as per the option agreement that the option shall be
extended if there were negotiations.
-May 18, 1968, Prats writes again to SSS offering the
same land for4.50 pesos per square meter.
-May 30, 1968. Prats writes to Doronilla, stating that the
SSS had agreed to buy the said land and that the SSS
would contact Doronilla.
-June 6, 1968, Doronilla writes to prats saying that he had
not received any written offer from the SSS, and
reminding Prats that the exclusive authority had already
expired on June 3, 1968.
-June 19, 1968. Doronilla offers the land to SSS at 4
pesos.
-June 25, 1968, SSS makes a counter-offer of 3.25
-June 30, 1968, Doronilla executes the deed of sale to the
SSS
-September 17, 1968, Prats demands 1.38 million as his
fee for professional services as previously agreed upon in
the exclusive option and authority to negotiate.
TC: rendered in favor of plaintiff
CA: reversed the decision of the trial court and dismissed
the complaint because as per agreement a written offer
by the prospective buyer was required, and if no such
written offer is made until the las day of the authorization,
the option shall expire.
ISSUE:
WON Prats is entitled to the 1.38 million for the
professional services rendered.
HELD:
No he is not entitled to 1.38 million, the exclusive option
to negotiate had already elapsed when Doronilla and SSS
perfected their sale.
RATIO:
-Though Prats argues that he was instrumental in bringing
the two parties together, it can be seen from the facts that
Doronilla and SSS were already talking even before Prats
became the agent of Doronilla.
-However, the court notes that Prats had diligently taken
steps to bring back together Doronilla and SSS. He had
the two parties meet in various luncheons, he
communicated with the Office of the Presidential Housing
Commission, wrote follow up letters to the SSS. Thus the
Court grates in equity the sum of 100,000 pesos byway of
compensation for Prats' efforts and assistance in the
transaction.
69. UNILAND RESOURCES v DBP
Uniland Resources vs DBP
FACTS:
(Alleged) Principal – DBP
(Alleged) Agent – Uniland Resources
Petitioner Uniland Resources is a private
corporation engaged in real estate brokerage and licensed as
such, while respondent DBP, as we all know, is a government
corporation engaged in finance and banking in a proprietary
capacity.
Marinduque Mining Corporation obtained a loan from
the DBP and as security therefor, mortgaged certain real
properties to the latter, namely: (1) office building lot; and (2)
warehouse lot.
Said lots hadbeen previously mortgaged by Marinduque
Mining Corp., to Caltex, and the mortgage in favor of DBP was
entered on their titles as a second mortgage. The account of the
Marinduque Mining Corp., with the DBP was later transferred to
the Assets Privatization Trust (APT) pursuant to Proclamation No.
50.
Marinduque Mining Corp., failed to pay its obligations
so Caltex foreclosed its mortgage on the aforesaid two lots. APT
on the other hand, to recover its investment on the Marinduque
Account, offered for sale to the public through DBP its right of
redemption on said two lots by public bidding. Considering,
however, that Caltex had required that both lots be redeemed,
the bidding guidelines set by DBP provided that any bid to
purchase either of the two lots would be considered only should
there be two bids or a bid for the two items which, when
combined, would fully cover the sale of the two lots in question.
The bidding was held with only one bidder, the Counsel
Realty Corp. [an affiliate of Glaxo, Philippines, the client of
petitioner], which offered a bid only for the warehouse lot in the
amount of P23,900,000.00. Said bid was thus rejected by DBP.
Seeing, however, that it would make a profit if it
redeemed the two lots and then offer them for sale, and as its
right to redeem said lots from Caltex would expire on May 8,
1987, DBP retrieved the account from APT and, on the last day
for the exercise of its right of redemption, May 8, 1987,
redeemed said lots from Caltex for P33,096,321.62, thus
acquiring them as its physical assets.
In preparation for the sale of the two lots in question,
DBP called a pre-bidding conference wherein a new set of
bidding guidelines were formulated. Then, the public bidding for
the sale of the two lots was held and again, there was only one
bidder, the Charges Realty Corp. [another affiliate of Glaxo,
Philippines], for only the warehouse lot and for the amount of
P24,070,000.00, which is slightly higher than the amount
previously offered by Counsel Realty Corp. No bid was submitted
for the office building lot.
DBP still approved the sale of the warehouse lot to
Charges Realty Corp. even if there was no bidder for the office
building lot, the proper documentation of the sale was made.The
office building lot, it was later sold by DBP in a negotiated sale to
the Bank of P.I. as trustee for the "Perpetual Care Fund of the
Manila Memorial Park" for P17,460,000.00, and proper
documentation of the sale was made. The DBP admittedly paid
the (five percent) broker's fee on this sale to the DBP
Management Corporation, which acted as broker for said
negotiated sale.
After the aforesaid sale, petitioner, through its
President, wrote two letters to respondent DBP, the first through
its Senior Vice President, and, the second through its Vice
Chairman, asking for the payment of its broker's fee in
instrumenting the sale of its (DBP's) warehouse lot to Charges
Realty Corp. The claim was referred to the Bidding Committee
chaired by Amanda S. Guiam which met on November 9, 1987,
and which, on November 18, 1987, issued a decision denying
petitioner'sclaim. Hence, the instant case filed by petitioner to
recover from respondent DBP the aforesaid broker's fee.
RTC – rendered judgment in favor of petitioners ordering
respondent to pay petitioner the sum of P1,203,500,00 which is
the equivalent of five percent broker's fee plus legal interest
thereto from the filing of the complaint on until fully paid and
the sum of P50,000.00 as and for attorney's fees. costs against
respondent DBP.
CA - reversed the judgment of the lower court and dismissed the
complaint. The motion for reconsideration filed by petitioner
was also subsequently denied. Hence, this petition.
ISSUE:
Whether or not the petitioner is entitled to the five percent
broker’s fee though in the first place, had no authority, express
or implied, from the seller to broker the transaction
RULING:
No. It is obvious that petitioner was never able to secure
the required accreditation from respondent DBP to transact
business on behalf of the latter. The letters sent by petitioner to
the higher officers of the DBP and the APT are merely indicative
of petitioner's desire to secure such accreditation. At best these
missives are self-serving; the most that they prove is that they
were sent by petitioner and received by respondent DBP, which
clearly never agreed to be bound thereto. As declared by the trial
court even when it found in favor of petitioner, there was no
express reply from the DBP or the APT as to the accreditation
sought by petitioner. From the very beginning, therefore,
petitioner was aware that it had no express authority from DBP
to find buyers of its properties.
In its reply submitted pursuant to the resolution
requiring the same,petitioner also invokes Article 1869 of the
new Civil Code in contending that an implied agency existed.
Petitioner argues that it "should have been stopped,
disauthorized and outrightly prevented from dealing the 12,355
sq. m with warehouse by the DBP from the inception." On the
contrary, these steps were never necessary. In the course of
petitioner's dealings with the DBP, it was always made clear to
petitioner that only accredited brokers may look for buyers on
behalf of respondent DBP. This is not a situation wherein a third
party was prejudiced by the refusal of respondent DBP to
recognize petitioner as its broker. The controversy is only
between the DBP and petitioner, to whom it was emphasized in
no uncertain terms that the arrangement sought did not exist.
Article 1869, therefore, has no room for operation in this case.
Petitioner would also disparage the formality of
accreditation as merely a mechanical act, which requires not
much discretion, as long as a person or entity looks for a buyer
and initiate or promote the interests of the seller. Being engaged
in business, petitioner should do better to adopt the opposite
attitude and appreciate that formalities, such as the need for
accreditation, result from the evolution of sound business
practices for the protection and benefit of all parties concerned.
They are designed and adopted specifically to prevent the
occurrence of situations similar to that obtaining in this case.
More importantly, petitioner's stance goes against the
basic axiom in Civil Law that no one may contract in the name
of another without being authorized by the latter, unless the
former has by law a right to represent him. From this principle,
among others, springs the relationship of agency which, as with
other contracts, is one founded on mutual consent: the
principal agrees to be bound by the acts of the agent and the
latter in turn consents to render service on behalf or in
representation of the principal.
Petitioner, however, also invokes equity considerations,
and in equity, the Court recognizes the efforts of petitioner in
bringing together respondent DBP and an interested and
financially-able buyer. While not actively involved in the actual
bidding and transfer of ownership of the warehouse property,
petitioner may be said to have initiated, albeit without proper
authority, the transaction that eventually took place. The Court
is also aware that respondent DBP was able to realize a
substantial profit from the sale of its two properties. While
purely circumstantial, there is sufficient reason to believe that
the DBP became more confident to venture and redeem the
properties from the APT due to the presence of a ready and
willing buyer, as communicated and assured by petitioner.
It was petitioner who advised Glaxo, Philippines of the
availability of the warehouse property and aroused its interest
over the same. Through petitioner, respondent DBP was directly
informed of the existence of an interested buyer. Petitioner's
persistence in communicating with respondent DBP reinforced
the seriousness of the offer. This piece of information no doubt
had a bearing on the subsequent decisions made by respondent
DBP as regards the disposition of its properties.
Under the foregoing disquisition and following the
precedent, as well as roughly the proportion, set in Prats, the
Court in equity grants petitioner the sum of One Hundred
Thousand Pesos (Pl00,000.00) for the role it played in the
transaction between respondent DBP and buyer Glaxo,
Philippines. It is emphasized, however, that the circumstances
that came into play in this case do not meet the minimum legal
standards required for the existence of an agency relationship
and that the award is based purely on equity considerations.
Accordingly, petitioner's other arguments need not now be
discussed.
SC affirmed the decision of the CA with
modificationthat in equity respondent DBP is ordered to pay
petitioner the amount of One Hundred Thousand Pesos (A complaint was filed not mentioned what. Recovery
(P100,000.00). plus damages?)
Trial Court: In favor of Gregorio.
CA: Affirmed. Sentenced the said Vicente M.
Domingo to pay Gregorio M. Domingo P2,307.50 and
70. DOMINGO v DOMINGO
the intervenor Teofilo P. Purisima P2,607.50 with
21. Domingo v. Domingo (1971)
interest on both amounts from the date of the filing of
the complaint, to pay Gregorio Domingo P1,000.00
• Principal: Vicente M. Domingo ; Agent:
as moral and exemplary damages and P500.00 as
Gregorio Domingo (real estate broker)
attorney's fees plus costs.
Facts:
• Vicente granted Gregorio an exclusive
Issue:
agency to sell his lot No. 883 with an area of about
• Whether the gift or propina given by Oscar to
88,477 square meters at the rate of P2.00 per square
Gregorio constitutes fraud as to cause a forfeiture of
meter (or for P176,954.00) with a commission of 5%
his commission on the sale price.
on the total price, if the property is sold by Vicente or
Ruling: Yes. WHEREFORE, the judgment is hereby
by anyone else during the 30-day duration of the
rendered, reversing the decision of the Court of
agency or if the property is sold by Vicente within
Appeals and directing defendant-appellee Gregorio
three months from the termination of the agency to a
Domingo: (1) to pay to the heirs of Vicente Domingo
purchaser to whom it was submitted by Gregorio
the sum of One Thousand Pesos (P1,000.00) as
during the continuance of the agency with notice to
moral damages and One Thousand Pesos
Vicente. The said agency contract was in triplicate,
(P1,000.00) as attorney's fees; (2) to pay Teofilo
one copy was given to Vicente, while the original and
Purisima the sum of Six Hundred Fifty Pesos
another copy were retained by Gregorio.
(P650.00); and (3) to pay the costs.
• On June 3, 1956, Gregorio authorized the
intervenor Teofilo P. Purisima to look for a buyer,
Held:
promising him one-half of the 5% commission.
• Yes. An agent who takes a secret profit in the
• Thereafter, Teofilo Purisima introduced Oscar
nature of a bonus, gratuity or personal benefit from
de Leon to Gregorio as a prospective buyer.
the vendee, without revealing the same to his
• Oscar de Leon offered a price much lower
principal, the vendor, is guilty of a breach of his
than provided, thus, Vicente directed Gregorio to tell
loyalty to the principal and forfeits his right to collect
Oscar to raise the offer. It was then raised to
the commission from his principal, even if the
(P109,000.00) which was agreed by both parties
principal does not suffer any injury by reason of such
during a conference.
breach of fidelity, or that he obtained better results or
• Upon demand by Vicente, Oscar de Leon
that the agency is a gratuitous one, or that usage or
issued P1000 as earnest money which Vicente
custom allows it; because the rule is to prevent the
advanced P300 to Gregorio.
possibility of any wrong, not to remedy or repair an
• Oscar gave Gregorio a gift or propina of
actual damage. By taking such profit or bonus or gift
P1000 for succeeding in persuading Vicente to sell
or propina from the vendee, the agent thereby
his lot for a lower price. This gift was not disclosed by
assumes a position wholly inconsistent with that of
Gregorio to Vicente. (root of the issue)
being an agent for his principal, who has a right to
• Oscar told Gregorio that he will give up the
treat him, insofar as his commission is concerned, as
negotiation and earnest money because his brother
if no agency had existed. The fact that the principal
did not send the money.
may have been benefited by the valuable services of
• Gregorio was suspicious so he went to
the said agent does not exculpate the agent who has
Vicente and reminded him that Vicente was still
only himself to blame for such a result by reason of
committed to pay him 5% commission, if the sale is
his treachery or perfidy.
consummated within three months. Vicente tore the
original copy of the agreement document.
• Art. 1720. Every agent is bound to give an
• Gregorio went to the Register of Deeds and
account of his transaction and to pay to the principal
found out that the sale was consummated between
whatever he may have received by virtue of the
Vicente and Oscario’s wife.
agency, even though what he has received is not due
• He also conferred with Oscar de Leon, who
to the principal.
told him that Vicente went to him and asked him to
eliminate Gregorio in the transaction and that he
• The law imposes upon the agent the absolute
would sell his property to him for One Hundred Four
obligation to make a full disclosure or complete
Thousand Pesos (P104,000). (cheaper)
account to his principal of all his transactions and
other material facts relevant to the agency, so much
so that the law as amended does not countenance
any stipulation exempting the agent from such an
obligation and considers such an exemption as void.
The duty of an agent is likened to that of a trustee.
This is not a technical or arbitrary rule but a rule
founded on the highest and truest principle of
morality as well as of the strictest justice.
• In the case at bar, defendant-appellee
Gregorio Domingo as the broker, received a gift or
propina in the amount of One Thousand Pesos
(P1,000.00) from the prospective buyer Oscar de
Leon, without the knowledge and consent of his
principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial
monetary gift corrupted his duty to serve the interests
only of his principal and undermined his loyalty to his
principal, who gave him partial advance of Three
Hundred Pesos (P300.00) on his commission. As a
consequence, instead of exerting his best to
persuade his prospective buyer to purchase the
property on the most advantageous terms desired by
his principal, the broker, herein defendant-appellee
Gregorio Domingo, succeeded in persuading his
principal to accept the counter-offer of the
prospective buyer to purchase the property at P1.20
per square meter or One Hundred Nine Thousand
Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower the
the price of P2.00 per square meter or One Hundred
Seventy-Six Thousand Nine Hundred Fifty-Four
Pesos (P176,954.00) for said lot originally offered by
his principal.
• The duty embodied in Article 1891 of the New
Civil Code will not apply if the agent or broker acted
only as a middleman with the task of merely bringing
together the vendor and vendee, who themselves
thereafter will negotiate on the terms and conditions
of the transaction. Neither would the rule apply if the
agent or broker had informed the principal of the gift
or bonus or profit he received from the purchaser and
his principal did not object thereto. 11 Herein
defendant-appellee Gregorio Domingo was not
merely a middleman of the petitioner-appellant
Vicente Domingo and the buyer Oscar de Leon. He
was the broker and agent of said petitioner-appellant
only. And therein petitioner-appellant was not aware
of the gift of One Thousand Pesos (P1,000.00)
received by Gregorio Domingo from the prospective
buyer; much less did he consent to his agent's
accepting such a gift.
• The fact that the buyer appearing in the deed
of sale is Amparo Diaz, the wife of Oscar de Leon,
does not materially alter the situation; because the
transaction, to be valid, must necessarily be with the
consent of the husband Oscar de Leon, who is the
administrator of their conjugal assets including their
house and lot at No. 40 Denver Street, Cubao,
Quezon City, which were given as part of and
constituted the down payment on, the purchase price
of herein petitioner-appellant's lot No. 883 of Piedad
Estate. Hence, both in law and in fact, it was still
Oscar de Leon who was the buyer.
• As a necessary consequence of such breach
of trust, defendant-appellee Gregorio Domingo must
forfeit his right to the commission and must return the
part of the commission he received from his principal.
71. FORTIS v. GUTIERREZ HERMANOS
Facts:
· Plaintiff Fortis is an employee of defendant
Gutierrez Hermanos. The former brought an action to
recover a balance due him as salary for the year 1902.
He also alleged that he was entitled, as salary, to 5
percent of the net profits of the business of the
defendants for said year. The complaint also contained
a cause of action for the sum of 600pesos, money
expended by plaintiff for the defendants during the
year1903.
· The lower court ruled in favor of the plaintiff. The
total judgment rendered amounted to P13, 025.40,
which was reduced to Philippine currency.
· The defendants moved for new trial but were
denied. They brought the case in the SC thru bill of
exceptions;
· Gutierrez Hermanos alleged that that the contract
made the plaintiff a co-partner of the defendants in the
business, which they were carrying on.
Issue: WON the plaintiff is a co-partner of the
defendants in the business
Ruling: NO. It was a mere contract of employment.
The plaintiff had neither voice nor vote in the
management of the affairs of the company. The fact
that the compensation received by him was to be
determined with reference to the profits made by the
defendants in their business did not in any sense make
by a partner therein. The articles of partnership
between the defendants provided that the profits
should be divided among the partners named in a
certain proportion. The contract made between the
plaintiff and the then manager of the defendant
partnership did not in any way vary or modify this
provision of the articles of partnership
72. ALBALADEJO Y CIA v PHILIPPINE REFINING
CO.
FACTS:
Albaladejo y Cia is a limited partnership, which was
engaged in the buying and selling of copra in Legaspi,
and in the conduct of a general mercantile business.
Visayan Refining Co. [PRC’s successor] was engaged
in operating its extensive plant for the manufacture of
coconut oil. On August 1918, Albaladejo made a
contract with the Visayan Refining, wherein they
agreed that VRC will buy for a period of 1 year all the
copra that Albaladejo purchased in Albay. It was also
agreed upon that during the continuance of the
contract, VRC will not appoint any other agent for the
purchase of copra in Legaspi, nor buy copra from any
vendor in the same place. In addition, VRC would
provide transportation for the copra delivered to it by
Albaladejo.
At the end of said year, both parties found themselves
satisfied with the existing arrangement, and they
continued by tacit consent to govern their future
relations by the same agreement. On July 9, 1920,
VRC closed down its factory at Opon and withdrew
from the copra market. After VRC ceased to buy
copra, the copra supplies already purchased by
Albaladejo were gradually shipped out and accepted
by the VRC, and in the course of the next 8-10 months,
the accounts between the two parties were liquidated.
The last account rendered by VRC to Albaladejo
showed a balance of P288 in favor of VRC. Albaladejo
addressed a letter to the PRC (which had now
succeeded to the rights and liabilities of VRC),
expressing its approval of said account.
Albaladejo filed a complaint against PRC, seeking to
recover P110k, the alleged amount that Albaladejo
spent in maintaining and extending its organization.
Albaladejo alleges that such maintenance and
extension was made at the express request of PRC.
On the other hand, PRC contends that the contract
between them created the relation of principal and
agent; therefore, the principal should indemnify the
agent for damages incurring in carrying out the
agency. The lower court ruled in favor of Albaladejo,
but granted only 30% of the amount prayed for, in view
of the fact that Albaladejo’s transactions in copra
amounted in the past to only about 30% of the total
business it transacted.
CFI: ruled in favor of Albaladejo, but granted only 30%
of the amount prayed for.
SC: REVERSED. Defendant will be completely
absolved from the complaint.
ISSUE: WON the plaintiff's expense in maintaining
and extending its organization for the purchase of
copra in the period between July, 1920, to July, 1921,
were incurred at the instance and request of the
defendant.
RULING: NO. The relation between the parties was
not that of principal and agent in so far as relates to
the purchase of copra by Albaladejo. While VRC made
Albaladejo one of its instruments for the collection of
copra, in making its purchases from the producers,
Albaladejo was buying upon its own account. When
Albaladejo turned over the copra to VRC, a second
sale was effected.
In the contract, it is declared that during the
continuance of the agreement, VRC would not appoint
any other agent for the purchase of copra in Legaspi;
and this gives rise indirectly to the inference that
Albaladejo was considered its buying agent. However,
the use of this term in one clause of the contract
cannot dominate the real nature of the agreement as
revealed in other clauses, no less than in the caption
of the agreement itself. This designation was used for
convenience. The title to all of the copra purchased by
Albaladejo remained in it until it was delivered by way
of subsequent sale to VRC.
Lastly, the letters from VRC to Albaladejo that the
Court quoted did not indicate anything to the effect that
VRC is liable for the such expenses incurred by
Albaladejo, as the letters only noted the dire condition
of VRC’s copra business, as well as its hopes to enter
the market on a more extensive scale [which was
unfortunately unrealized].
73. CONSTANTE DE CASTRO v CA
Principals: De Castros
Agent: Artigo
FACTS:
Private respondent Artigo sued petitioners Constante and
Amor De Castro to collect the unpaid balance of his
broker’s commission from the De Castros.
The appellants, De Castros, were co-owners of 4 lots in
Cubao, Quezon City. The appellee, Artigo, was authorized
by appellants to act as real estate broker in the sale of
these properties for the amount of P23,000,000.00, 5%
of which will be given to the agent as commission.
Appellee(Aritgo) first found the Times Transit
Corporation and 2 lots were sold. In return, he received
P48,893.76 as commission. Appellee apparently felt short
changed because according to him, his total commission
should be P352,500.00 which is 5% of the agreed price of
P7,050,000.00 paid by Times Transit Corporation to
appellants for the 2 lots and that it was he who introduced
the buyer to appellants and unceasingly facilitated the
negotiation which ultimately led to the consummation of
the sale.
Hence, he sued to collect the balance of P303,606.24 after
having received P48,893.76 in advance.
De Castros argued that appellee is selfishly asking for
more than what he truly deserved as commission to the
prejudice of other agents who were more instrumental to
the consummation of the sale and that there were more
or less 18 others who took active efforts.
The De Castros argued that Artigo’s complaint should
have been dismissed for failure to implead all the co
owners of the 2 lots. . and others are not, only those interested in each
The De Castros contend that failure to implead such
indispensable parties is fatal to the complaint since Artigo,
as agent of all the four co-owners, would be paid with
funds co-owned by the four co-owners. It was shown also
that Constante Amor De Castro signed the authorization
of Artigo as owner and representative of the co-owners.
RTC: Ruled infavor of artigo ordering the De Castros
jointly and solidarily liable to pay Artigo
CA: Affirmed
ISSUE: Whether or not the complaint merits dismissal for
failure to implead other co-owners as indispensable
parties
HELD:
● entered into a contract of sale with E.J. Haberes. Gomez,
No. The De Castros’ contentions are devoid of
legal basis.
The CA explained that it is not necessary to
implead the co-owners since the action is
exclusively based on a contract of agency between
Artigo and Constante. The rule on mandatory
joinder of indispensable parties is not applicable
to the instant case. Constante signed the note as
owner and as representative of the other co-
owners. Under this note, a contract of agency was
clearly constituted between Constante and Artigo.
Whether Constante appointed Artigo as agent, in
Constante’s individual or representative capacity,
or both, the De Castros cannot seek the dismissal
of the case for failure to implead the other co-
owners as indispensable parties. The De Castros
admit that the other co-owners are solidarily liable
under the contract of agency, citing Article 1915
of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed
an agent for a common transaction or
undertaking, they shall be solidarily liable to the
agent for all the consequences of the agency.
The solidary liability of the four co-owners,
however, militates against the De Castros theory
that the other co-owners should be impleaded as
indispensable parties. A noted commentator
explained Article 1915 thus
The rule in this article applies even when the
appointments were made by the principals in
separate acts, provided that they are for the same
transaction. The solidarity arises from the
common interest of the principals, and not from
the act of constituting the agency. By virtue of this
solidarity, the agent can recover from any
principal the whole compensation and indemnity
owing to him by the others. The parties, however,
may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear
by the mere partition effected by the principals
after the accomplishment of the agency.
If the undertaking is one in which several are
interested, but only some create the agency, only
the latter are solidarily liable, without prejudice to
the effects of negotiorum gestio with respect to
the others. And if the power granted includes
various transactions some of which are common
transaction shall be liable for it.
When the law expressly provides for solidarity of
the obligation, as in the liability of co-principals in
a contract of agency, each obligor may be
compelled to pay the entire obligation. The agent
may recover the whole compensation from any
one of the co-principals, as in this case.
VIII. OBLIGATIONS OF PRINCIPALS TO THIRD
PARTIES
74. GONZALEZ v HABERES
Facts: A tract of land was acquired by Guadalupe
Gonzalez. Her husband, Luis Gomez, acting as her agent,
as written in the contract, granted his wife a "marital
license" to execute a deed of sale and other necessary
documents in order that the full ownership over the
aforesaid land will be transferred to E.J. Haberes, the
buyer. However, the application for the registration of the
said land was still pending at that time in the CFI. Habares
paid P30,000 as a downpayment, and agreed to pay the
unpaid balance within six (6) months. Conditions were set
in their contract; that Haberes shall have the right to take
possession of the aforesaid land and all its improvements,
and to pay for the expenses for the registration, and it
was also agreed that in case the court shall hold in the
application filed by Gonzalez that:
- she is not the owner of the land, she bind herself to
return the amount paid to her without interest; or
- she is adjudicated a part of the aforesaid land, she bind
herself to sell said portion adjudicated to her to Haberes
and to return all the amounts received in excess of the
price.
However, when Haberes found out that the land was in
the adverse possession of many others, he stopped paying
for the remaining balance. Thus, Gonzalez filed an action
against Haberes to recover the remaining balance plus
damages. Haberes filed a counterclaim. One of Haberes'
allegations was that at the time of entering into the
contract the plaintiffs through false representations
lead him to believe that they were in possession of the
land and that the title to the greater portion thereof was
not in dispute, and that the plaintiffs have made no efforts
to prosecute the proceedings for the registration of the
land. He asks for the rescission of the contract and to
return to him what he paid plus damages.
Issue: Whether or not Gonzales was free of the liabilities
that her husband incurred from the misrepresentations in
the sale of the land?
Held: No, Gonzalez shall be liable with the
misrepresentations made by her husband.
Under the NCC:
Art. 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.
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.
Art. 1900. So far as third persons are concerned, an act
is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the
power of attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to an
understanding between the principal and the agent.
As to the plaintiff’s contention that Gonzales cannot be
charged by her husband’s misrepresentation, it is
sufficient to say that the latter in negotiating for the sale
of the land acted as an agent and representative of his
wife; having accepted the benefit of the representations
of her agent, she cannot, of course, escape liability for
them. The latter cannot accept such benefits and at the
same time deny the responsibility for them.
75. TUAZON v OROSCO
Principal: Juan de Vargas
Agent: Enrique Grupe
FACTS: Juan de Vargas y Amaya, the defendant's
husband, executed a power of attorney to Enrique Grupe,
authorizing him, among other things, to dispose of all his
property, and particularly of a certain house and lot known
as No. 24 Calle Nueva, Malate, in the city of Manila, for
the price at which it was actually sold. He was also
authorized to mortgage the house for the purpose of
securing the payment of any amount advanced to his wife,
Dolores Orozco de Rivero, who, inasmuch as the property
had been acquired with funds belonging to the conjugal
partnership, was a necessary party to its sale or
incumbrance.
Grupe and Orozco obtained a loan from the plaintiff
secured by a mortgage on the property referred to in the
power of attorney. In the caption of the instrument
evidencing the debt it is stated that Grupe and Orozco
appeared as the parties of the first part and Gonzalo
Tuason, the plaintiff, as the party of the second part.
Grupe acted for himself and also in behalf of Juan Vargas
by virtue of the power granted him by the latter, and
Orozco appeared merely for the purpose of complying with
the requirement contained in the power of attorney.
This instrument was duly recorded in the Registry of
Property, and it appears therefrom that Enrique Grupe, as
attorney in fact for Vargas, received from the plaintiff a
loan of 2,200 pesos and delivered the same to the
defendant; that to secure its payment he mortgaged the
property of his principal with defendant's consent as
required in the power of attorney. He also received 1,300
pesos. This amount he borrowed for his own use. In the
instrument, Grupe bound himself liable for the whole
amount of 3,500 and pledged his 13 shares of stock in the
"Compañía de los Tranvías de Filipinas" as security, and
mortgaged the property of Vargas to secure the 2,200
loan.
The defendant denies having received this sum.
Contention of the defendant:
(1)The appellant claims that the instrument is evidence of
a debt personally incurred by Enrique Grupe for his own
benefit, and not incurred for the benefit of his principal,
Vargas, as alleged in the complaint.
(2) Enrique Grupe pledged to the plaintiff thirteen shares
of stock in the "Compañia de los Tranvías de Filipinas" to
secure the payment of the entire debt, and contends that
it must be shown what has become of these shares, the
value of which might be amply sufficient to pay the debt,
before proceeding to foreclose the mortgage.
(3) in order to render judgment against the mortgaged
property it would be necessary that the minor children of
Juan de Vargas be made parties defendant in this action,
they having an interest in the property.
“Court Below” (CFI? assumed decision) decided in favour
of Tuason and held Orozco personally liable to the loan.
Issues:
(1) WON Vargas, as principal, is liable to the loan
obtained by Grupe.
(2) WON Vargas is relieved from obligation when
Grupe bound himself personally to the payment of
debt.
(3) WON the judgment may be rendered against the
property of the now deceased principal.
HELD:
(1) Yes. Under the provision of article 1727 of the
Civil Code the principal directly liable to the creditor
for the payment of a debt incurred by his agent acting
within the scope of his authority.
The judgment of the court below should be modified in so
far as it holds the defendant personally liable for the
payment of the debt.
The agreement, so far as that amount is concerned, was
signed by Grupe as attorney in fact for Vargas. Pursuant
to instructions contained in the power of attorney the
money was delivered to Varga's wife, the defendant in this
case. To secure the payment of the debt, Varga's property
was mortgaged. His wife took part in the execution of the
mortgage as required in the power of attorney. A debt
thus incurred by the agent is binding directly upon the
principal, provided the former acted, as in the present
case, within the scope of his authority
(2) No. Irrespective of such liability on the part of the
principal, the agent may bind himself personally to the
payment of the debt incurred for the benefit and in
behalf of the principal. In such a case the liability
expressly incurred by the agent does not preclude the
personal liability of the principal but constitutes
further security in favour of the creditor.
The individual liability of the agent constitutes in the
present case a further security in favor of the creditor and
does not affect or preclude the liability of the principal. In
the present case the latter's liability was further
guaranteed by a mortgage upon his property. The law
does not provide that the agent can not bind himself
personally to the fulfillment of an obligation incurred by
him in the name and on behalf of his principal. On the
contrary, it provides that such act on the part of an agent
would be valid.
(3) Yes. Where a debt is secured by a mortgage
upon property belonging to the principal, duly
recorded in the Registry of Property, the creditor may
bring his action directly against the mortgaged
property notwithstanding the liability incurred by
himself. A mortgage directly subjects the encumbered
property, whoever its possessor may be, to the
fulfilment of the obligation for the security of which it
was created.
76. STA ROMANA v IMPERIO, et al
Diosdado Sta. Romana, appellant
Carlos Imperio, appellee
Silvio R. Viola, the Principal
Dr. Jose R. Viola, the Agent
FACTS:
On January 6, 1946, Silvio R. Viola, the Principal, executed
in favor of his brother, Dr. Jose R. Viola, the Agent, a
power of attorney, vesting in the latter the authority to
take charge of, manage and administer seven (7) parcels
of registered land situated in the municipality of San
Miguel, Province of Bulacan, to be converted into a
"subdivision" for residential purposes, until all of the
subdivision lots therein shall have been sold. It would
seem that some of these parcels of land, one of which was
known as Lot No. 622 of the Cadastral Survey of San
Miguel, Bulacan, were covered by Transfer Certificates of
Title Nos. 19556 and 19559 of said province.
On April 26, 1946, the Principal asked CFI Bulacan to order
the issuance of a second owner's duplicate of TCT No.
19556, upon the ground that his duplicate thereof had
been lost. CFI granted motion.
Meanwhile, or on June 18, 1946, the agent had executed,
in favor of Pablo Ignacio, a deed in to sell on installments
6 lots covered by said TCT No. 19556, with an aggregate
area of 3,804 square meters. This instrument and the
Agent's aforementioned power of attorney were filed with
the office of the register of deeds and annotated on said
TCT No. 19556 on July 2, 1946.
Notwithstanding, 4 months later, the Principal sold a land
of about 30 hectares, including said Lot No. 622, to
Diosdado Sta. Romana. A week later, Sta. Romana
conveyed said land to the Carlos Imperio, by virtue of a
deed which was filed with the office of the register of
deeds on November 4, 1946. TCT No. 19556 was
cancelled and, in lieu thereof, TCT No. 28946 was issued
in Imperio's name. About one month later, Imperio sold
portions of said lot No. 622 to 4 sets of occupants.
Having failed to take possession of the land sold to him by
the Agent, on April 22, 1947, Pablo Ignacio commenced
this action in the CFI Bulacan, against said occupants, as
well as against appellee, appellant, and the Principal, to
annul the sales made.
Appellees and the occupants allege that they acted in good
faith and for value in purchasing said land from appellant,
in whose name the title to said land was free from any lien
or encumbrance in favor of Ignacio; that the sale in favor
of Ignacio was fraudulent; and that Ignacio knew that said
occupants were in possession of said portions, and had a
right of pre-emption thereto.
CFI Bulacan: declared that Ignacio is the owner in fee
simple of the lots in question directing appellee to execute
the corresponding deed of final sale thereof to Ignacio
CA: CA affirmed CFI that Ignacio is the owner; sentenced
Sta. Romana to reimburse to Imperio, the sum of P8,463
ISSUE: Whether or not the Principal is bound by the act
of his agent in selling lots in question to Ignacio
RULING: Yes. it is an elementary principle of law (Articles
1495, 1547 and 1555, Civil Code of the Philippines), as
well as of justice and equity that, unless a contrary
intention appears, the vendor warrants his title to the
thing sold, and that, in the event of eviction, the vendee
shall be entitled to the return of the value which the thing
sold has at the time of the eviction, be it greater or less
than the price of the sale. In the case at bar, it has been
established that the land in dispute was, at the time of the
eviction, worth at least the sum of P8,463, which is the
aggregate amount charged by the appellee from said
occupants.
Appellant cites Article 1412 of the Civil Code of the
Philippines, in support of the view that appellee may not
recover said amount from appellant, upon the ground that
both are in pari delicto. This provision is part of Title II of
Book IV of the Civil Code, on contracts in general, and it
refers to contracts which are null and void ab initio,
pursuant to Article 1409 of the Civil Code. The contract
between appellant and appellee does not fall, however,
under this provision, and is, accordingly, beyond the
purview of the aforementioned Article 1412. Said contract
is governed by Title VI of the same Book, on Sales in
particular, specially by the aforesaid Articles 1495, 1547
and 1555, which are part of said Title VI, regarding breach
of the warranty arising from a valid contract of sale, due
to the application of Art. 1544 of the same title, regulating
the effects of double sales. Incidentally, these provisions
suggest, also, the remedies available to appellant herein.
WHEREFORE, the amended decision appealed from is
hereby affirmed, with costs against the appellant.