Phil. National Bank vs.

Agudelo y Gonzaga
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.

Facts
1. The defendant Mauro A. Garrucho’s sister, Amparo A. Garrucho, and aunt, Paz Agudelo y Gonzaga, executed
a Special Power of Attorney in his favour, authorizing him to sell, alienate and mortgage in the manner
and form he might deem convenient several of their (his sister’s and aunt’s) real properties, though no
without mention that he may use these properties to secure his own personal obligations.
2. Mauro then used some of these properties to secure his obligations with the plaintiff in the amounts of
P6,000 and P16,000.
3. These obligations were later novated with Mauro issuing a promissory note in favour of the bank for 21,000.
4. In the meanwhile, Amparo sold her property (which Mauro had mortgaged to the plaintiff) to Paz.

Issue
Whether or not Paz is liable for the obligations of Mauro to the plaintiff as her properties were used to secure
said obligations.

Held
The court held that Paz is not liable.

Ratio
1. Nowhere in the mortgage deeds was it mentioned that Mauro obtained the loans on behalf of his aunt or
sister which means that he was acting in his personal capacity.
2. In the same mortgage deeds, Mauro appointed the plaintiff as attorney-in-fact allowing it to enter into the
subject properties in violation of the legal principle of "delegata potestas delegare non potest" (a
delegated power cannot be delegated).
3. The promissory note issued by Mauro in the amount of P16,000 was done without express authority from
his sister or aunt.
4. Mauro’s act of mortgaging the said properties to secure his own personal obligations were not provided for
in the Special Powers of Attorney granted to him, meaning he was acting in excess of his authority.
5. The case at bar is not an exception under Article 1717 of the Civil Code as Mauro Mauro A. Garrucho was
not authorized to execute promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor
to constitute a mortgage on her real properties to secure such promissory notes.
6. Paz’s liability is only limited to the lien and not to the principal obligation secured by the mortgage
acknowledged by her to have been constituted on said lot No. 878 of the cadastral survey of Murcia,
Occidental Negros. Such liability is not direct but a subsidiary one.
7. The plaintiff failed to appeal the absolution of the defendants by the lower court.
Philippine Products Company vs Primateria Inc., Alexan

FACTS: The defendant is a foreign juridical entity. It was then engaged in 'Transactions in
international trade with agricultural products, particularly
in oils, fats and oil-seeds and related products."
On October 24, 1951, Primateria Zurich, through defendant Alexander B. Baylin, entered into an
agreement with plaintiff Philippine Products Company, whereby the latter undertook to buy
copra in the Philippines f or the account of Primateria Zurich, during "a tentative experimental
period of one month from date."
The contract was renewed by mutual agreement of the parties up to 1953.
During such period, plaintiff caused the shipment of copra to foreign countries, pursuant to
instructions from defendant ·acting by defendant Alexander G. Baylin and Jose M. Crame,
officers of said corporation.
After trial, judgment was rendered by the lower court holding defendant Primateria Zurich liable
to the plaintiff and absolving defendants Primateria (Phil.), lnc., Alexander G. Baylin, and Jose
M. Crame from any and all liability. Plaintiff appealed from that portion of the judgment
dismissing its complaint as regards the three defendants.
It is plaintiff's is theory that Primateria Zurich is a foreign corporation within the meaning of
Sections 68 and 69 of the Corporation Law, and since it has transacted business in the
Philippines without the necessary license, as required by said provisions, its agents here are
personally liable for contracts made in its behalf.

ISSUE:
1. Whether the defendant Primateria Zurich may be considered a foreign corporation within
the meaning of Sections 68 and 69 of the Corporation Law?
2. Assuming arguendo that said entity is a foreign corporation, whether it may be
considered as having transacted business in the Philippines within the meaning of
Sections 68 and 69 of the Corporation Law?
3. If yes, whether its agents may be held personally liable on contracts made in the name
of the entity with third persons?

RULING:
1. No, defendant Primateria Zurich cannot be considered a foreign corporation within the
meaning of Sections 68 and 69 of the Corporation Law.
It was not duly proven that defendant Primateria Zurich is a foreign corporation not that
a societe anonyme is a corporation and such failure, a corporation cannot be deemed to
fall within the prescription of Section 68 of the Corporation Law. In fact, under the
Corporation Law, it recognized the difference between sociedades anonimas and
corporations.
2. This view of the cause dispenses with the necessity of deciding the other issues.
3. The plaintiff invoked that the appellees as agents of Primateria Zurich are liable to it
under Article 1897 of the Civil Code which reads as follows:
"Art. 1897. The agent who acts as such is not personally liable to
the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers."
But there is no proof that, as agents, they exceeded the limits of their authority. In fact, the
principal, Primateria Zurich, who should be the one to raise the point, never raised it, denied its
liability on the ground of excess of authority. At any rate, the article does not hold that in cases
of excess of authority, both the agent and the principal are liable to the other contracting party.
ln 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.

NAPOCOR v. NATIONAL MERCHANDISING Corp.

NAPOCOR v. NATIONAL MERCHANDISING Corp.
G.R. Nos. L-33819 and L-33897; October 23, 1982
Ponente: J. Aquino

FACTS:
Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National Merchandising
Corporation (NAMERCO), the Philippine representative of New York-based International Commodities Corporation,
executed a contract of sale of sulfur with a stipulation for liquidated damages in case of breach.

Defendant-appellant Domestic Insurance Company executed a performance bond in favor of NPC to guarantee the
seller's obligation. In entering into the contract, Namerco, however, did not disclose to NPC that Namerco's
principal, in a cabled instruction, stated that the sale was subject to availability of a steamer, and contrary to its
principal's instruction, Namerco agreed that non-availability of a steamer was not a justification for non-payment
of liquidated damages.

The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. Consequently,
the Government Corporate Counsel rescinded the contract of sale due to the supplier's non-performance of its
obligations, and demanded payment of liquidated damages from both Namerco and the surety. Thereafter, NPC
sued for recovery of the stipulated liquidated damages. After trial, the Court of First Instance rendered judgment
ordering defendants-appellants to pay solidarity to the NPC reduced liquidated damages with interest.

ISSUE:
Whether NaMerCo exceeded their authority

HELD:
Yes, NaMerCo exceeded their authority.

The Supreme Court held that before the contract of sale was signed Namerco was already aware that its principal
was having difficulties in booking shipping space. 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.
Moreover, 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". Namerco never disclosed to the Napocor the cabled or written instructions of its principal. For that
reason and because Namerco exceeded the limits of its authority, it virtually acted in its own name and not as
agent and it is, therefore, bound by the contract of sale which, however, is not enforceable against its principal.

PHILIPPINE NATIONAL BANK, vs . WELCH,FAIRCHILD & CO., INC.,

G.R. No. 19689
April 4, 1923

PNB – Plaintiff (Money lender)

Welch, Fairchild & Co. – Defendant (Owner of 325 shares of La Compania) (Agent who borrowed money
for the principal)
La Compania Naviera Inc. – Principal (not a party, buyer of the ship, Benito Suarez)

FACTS:

La Compania purchased the ship, Benito Juarez. It was through the efforts of Mr. Fairchild (President of
WFC) 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 before 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 & 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.

ISSUE:

Whether PNB could collect from Welch, Fairchild & Co.

DECISION:

YES. 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. The
situation before us in effect is one where, notwithstanding the promise held out jointly by principal and
agent in the letters of August 8 and 10, 1918, the two have conspired to make an application of the
proceeds of the insurance entirely contrary to the tenor of said letters. This cannot be permitted.
The idea on which we here proceed can perhaps be made more readily apprehensible from another point
of view, which is this: 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 purchase of said vessel; and
this right of the bank must be respected by all persons having due notice thereof, and most of all by the
defendant which took out the insurance itself in the interest of the parties then concerned, including of
course the bank. The defendant therefore cannot now be permitted to ignore the right of the bank and
appropriate the insurance to the prejudice of the bank, even though the act be done with the consent of its
principal.

As to the argument founded upon the delay of the bank in asserting its right to the insurance money, it is
enough to say that mere delay unaccompanied by acts sufficient to create an equitable estoppel does not
destroy legal rights, but such delay as occurred here is in part explained by the fact that the loan to La
Compaña Naviera did not mature till May 17, 1919, and a demand for the surrender of the proceeds of
the insurance before that date would have seemed premature. Besides, it is to be borne in mind that most
of the insurance was not in fact collected until in June of 1919. x x x the bank was not slow in asserting its
right to the remittance that came through the bank in June to Welch, Fairchild & Co., consisting of
$13,000 of the proceeds of this insurance.
TUASON vs. OROZCO

GR No. 2344 | Feb. 10, 1906 | Mapa | Appeal

Plaintiff:Gonzalo Tuason

Defendant: Dolores Orozco

Quick Summary:

Facts: Juan de Vargas executed a power of attorney to Enrique Grupe, authorizing him to dispose of all his property, particularly his house and
lot in Malate, Manila, and to mortgage the house to secure the payment of any amount advanced to his wife, Orozco. Grupe and Orozco
obtained a loan for P3,500 from Tuason. Grupe gave P2,200 to Orozco while he retained the P1,300 for himself, which he will use for his
business. Grupe assumed liability for the loan and pledged his 18 shares of stock as special security.

Held: A debt thus incurred by the agent is binding directly upon the principal, provided the agent acted within the scope of his authority. The
fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred.
The individual liability of the agent constitutes a further security in favor of the creditor and does not affect or preclude the liability of the
principal. The law does not provide that the agent cannot 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.

Facts:

 Juan de Vargas, Dolores Orozco’s husband, executed a power of attorney to Enrique Grupe. Vargas
authorized Grupe to dispose of all his property, particularly his house and lot in 24 Calle Nueva, Malate,
Manila for the price at which it was actually sold.
 Grupe was also authorized to mortgage the house for the purpose of securing the payment of any amount
advanced to Orozco.
  Thereafter, Grupe and Orozco obtained a loan from Gonzalo Tuason secured by a mortgage on the said
house. In said instrument, Grupe appeared for himself and in behalf of Juan de Vargas.
 As evidenced by the instrument1 which was duly recorded in the Registry of Property, Grupe received
P3,500 in cash which he promises to pay within 1 year. Of said amount, he delivered 2,200 to Orozco while
retaining the 1,300 for his use in his business.
 Grupe also assumed liability for the whole sum of P3,500, which he promises to pay in current gold or silver
coin, without discount. Aside from this, he pledged as special security for the debt’s payment his 18 shares
of stock in the Compania de los Tranvias de Filipinas.
 Tuason filed a case for the recovery of the debt, which refers only to the P2,200 delivered to Orozco.
However, she denied having received said amount.
 CFI: ordered Orozco to pay Tuason the said amount

Issue:

WON the debt was incurred by Grupe for his own benefit as evidenced by his assumption of paying the whole loan
and his act of pledging his shares of stock as special security[NO]

Ratio:

 The mortgage agreement was signed by Grupe as the attorney-in-fact of Juan de Vargas.
 A debt thus incurred by the agent is binding directly upon the principal, provided the agent acted within the
scope of his authority.
 The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal
for whose benefit the debt was incurred. The individual liability of the agent constitutes a further security in
favor of the creditor and does not affect or preclude the liability of the principal.
 The law does not provide that the agent cannot 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 [Article 1725 CC].

On whether Orozco received the money

1
1. Enrique Grupe acknowledges to have this day received from Gonzalo Tuason as a loan, after deducting therefrom the interest agreed upon,
the sum of 3,500 pesos in cash, to his entire satisfaction, which sum he promises to pay within one year from the date hereof.

2. Grupe also declares that of the 3,500 pesos, he has delivered to Dolores Orozco the sum of 2,200 pesos, having retained the remaining 1,300
pesos for use in his business; that notwithstanding this distribution of the amount borrowed, he assumes liability for the whole sum of 3,500
pesos, which he promises to repay in current gold or silver coin, without discount, in this city on the date of the maturity of the loan, he
otherwise to be liable for all expenses incurred and damages suffered by his creditor by reason of his failure to comply with any or all of the
conditions stipulated herein, and to pay further interest at the rate of 1 per cent per month from the date of default until the debt is fully paid.

3. Grupe pledges as special security for the payment of the debt 13 shares of stock in the "Compañia de los Tranvias de Filipinas," which shares
he has delivered to his creditor duly indorsed so that the latter in case of his insolvency may dispose of the same without any further
formalities.

4. To secure the payment of the 2,200 pesos delivered to Dolores Orozco as aforesaid he specially mortgages the house and lot No. 24, Calle
Nueva, Malate, in the city of Manila (the same house referred to in the power at attorney executed by Vargas to Grupe).

5. Dolores Orozco states that, in accordance with the requirement contained in the power of attorney executed by Vargas to Grupe, she
appears for the purpose of confirming the mortgage created upon the property in question.

6. Gonzalo Tuason does hereby accept all rights and actions accruing to him under his contract.
  Orozco’s assertion that she did not receive the money is belied by the following:
 she was one of the parties to the instrument and she correspondingly signed it
 she personally intervened in the execution of the mortgage
 she stated in the deed that the mortgage had been created with her knowledge and consent
 she wrote a letter to Tuason’s lawyers promising to pay the debt on or before November 5, which she
admitted as valid
 Thirteen years had elapsed since she signed the mortgage deed. During all this time she never denied
having received the money. On the contrary, she promised to settle within a short time.

Validity of the Mortgage

 The fact that Orozco received the money from Grupe and not from Tuason does not affect the validity of
the mortgage in view of the conditions contained in the power of attorney under which the mortgage was
created. Nowhere does it appear in this power that the money was to be delivered to her by the creditor
himself and not through the agent or any other person. The important thing was that she should have
received the money.
 The mortgage being valid and having been duly recorded in the Register of Property, directly subjects the
property thus encumbered, whoever its possessor may be, to the fulfillment of the obligation for the
security of which it was created. [Article 1876 CC & Article 105, Mortgage Law]

Whether Grupe’s shares of stock that he has pledged should be accounted for to satisfy the debt before
proceeding to foreclose the mortgage

 A mortgage directly subjects the property encumbered, whoever its possessor may be, to the fulfillment of
the obligation for the security of which it was created.
 Moreover, it was incumbent upon Orozco to show that the debt had been paid with those shares. Payment
is not presumed but must be proved. It is a defense, which the Orozco may interpose. It was therefore her
duty to show this fact affirmatively.
 However, she failed to do so.

Final Note

 Said debt having been incurred by Vargas during his marriage, it should not be paid out of property
belonging to Orozco exclusively but from that pertaining to the conjugal partnership.

Dispositive: Judgment affirmed.

Cervantes v. CA
Facts:

On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to
the herein petitioner, Nicholas Cervantes (Cervantes), a round trip plane ticket for Manila-
Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of
one year from issuance, i.e., until March 27, 1990.

On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used
it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-
Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. On
April 2, 1990 when petitioner tried to board the plane, he was denied by PAL for the reason that
the said ticket had expired. As a result petitioner filed a complaint against PAL.

The trial court dismissed the complaint and upon appeal to the CA, the dismissal was
affirmed and hence this appeal.

Issue:
Whether or not the act of the PAL agents in confirming subject ticket extended the period
of validity of petitioners ticket

Held:
The Court ruled in favor of PAL. The court held that the ticket issued by PAL constituted
the contract between the parties. It was clear and undisputed as to the expiration date of the
ticket. The main issue is whether the validity became extended by the act of the PAL agents. The
court ruled in the negative.
Under Article 1898[11] of the New 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. 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 principals
ratification.
From appellants own testimony, it is clear that he knew from the start that said agents had
no authority to extend the validity of the tickets. He himself testified that he was informed by the
Legal Department of PAL before he left the Philippines that to secure an extension, he would
have to file a written request at the PAL’s office. Despite this knowledge, he still persisted to use
the ticket in question.
Since the PAL agents are not privy to the said Agreement and petitioner 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, [10] acted without authority when
they confirmed the flights of the petitioner.
 SMITH BELL v. SOTELO MATTI

March 9, 1922 | Romualdez, J. | Agent acting in his own name; exception

Digester: Yee, Jenine

SUMMARY: Smith Bell and Mr. Sotelo entered into a contact to sell steel tanks, expellers, and motors within a
specified period of time. When the goods arrived, Mr. Sotelo refused to accept and pay for them as they were
allegedly delivered beyond the periods stipulated. Smith Bell then filed a complaint against Mr. Sotelo and Manila
Oil Refining and By Products intervened saying that Mr. Sotelo had made the contracts as manager of the company
and that it had suffered due to the belated delivery of the goods. The SC said that Manila Oil has no cause of action
against Smith Bell since Sotelo, in entering into the subject contracts, acting in his own name.

DOCTRINE: When an agent acts in his own name, the principal shall have no right of action against the persons
with whom the agent has contracted, or such persons against the principal. In such case, the agent is directly liable to
the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the
principal are excepted.

FACTS:

 In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby
the former obligated itself to sell, and the latter to purchase from it the following:
o two steel tanks for P21,000, the same to be shipped from New York and delivered at Manila "within
three or four months;"
o two expellers at the price of P25,000 each which were to be shipped from San Francisco in the month
of September 1918 or as soon as possible; and
o two electric motors at the price of P2,000 each, as to the delivery of which stipulation was made,
couched in these words: "Approximate delivery within ninety days.·This is not guaranteed."
 The tanks arrived at Manila on the 27th of April, 1919 (way beyond the 3-4 month period); the expellers on the
26th of October, 1918 (beyond Sept 1918); and the motors on the 27th of February, 1919 (beyond ninety days).
 When the goods arrived, Mr. Sotelo refused to receive them and to pay the prices stipulated.
 The plaintiff brought suit against the defendant. In their answer, the defendant. Mr. Sotelo, and the intervenor,
the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations. Morever, they allege that
Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and
ByProducts 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 cocoanut oil, the
 intervenor suffered for the nondelivery of the tanks and on account of the expellers and the motors not
having arrived in due time.
 Lower Court: Ordered Mr. Sotelo and Manila Oil Refining to "receive the aforesaid expellers and pay the
plaintiff.

RULING: Wherefore, the judgment appealed from is modified, and the defendant, Mr. Vicente Sotelo Matti,
sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors in question, and to pay the
plaintiff

Whether Manila Oil Refining and By-Products Co has a right of action against Smith Bell due to the alleged
damage it has suffered – NO.

 Manila Oil Refining and By-Products Co., Inc., has not in any way taken part in these contracts.
 "When an agent acts in his own name, the principal shall have no right of action against the persons with
whom the agent has contracted, or such persons against the principal.
 "In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction
were his own. Cases involving things belonging to the principal are excepted.
 "The provisions of this article shall be understood to be without prejudice to actions between principal and
agent." (Civil Code, art. 1717.) "When the agent transacts business in his own name, it shall not be necessary
for him to state who is the principal and he shall be directly liable, as if the business were for his own account,
to the persons with whom he transacts the same, said persons not having any right of action against the
principal, nor the latter against the former, the liabilities of the principal and of the agent to each other always
being reserved." (Code of Com., art. 246.)
 "If the agent transacts business in the name of the principal, he must state that fact; and if the contract is in
writing, he must state it therein or in the subscribing clause, giving the name, surname, and domicile of said
principal.
 "In the case prescribed in the foregoing paragraph, the contract and the actions arising therefrom shall be
effective between the principal and the persons or person who may have transacted business with the agent; but
the latter shall be liable to the persons with whom he transacted business during the time he does not prove the
commission, if the principal should deny it, without prejudice to the obligation and proper actions between the
principal and agent." (Code of Com., art. 247.)

As applied
 These contracts were signed by the defendant, Mr. Vicente Sotelo, in his individual capacity and own name. If
he was then acting as agent of the intervenor, the latter has no right of action against the herein plaintiff.
 The foregoing provisions lead us to the conclusion that the plaintiff is entitled to the relief prayed for in its
complaint, and that the intervenor has no right of action, the damages alleged to have been sustained by it not
being imputable to the plaintiff the sum of ninety-six thousand pesos (P96,000

Whether under the contracts entered into and the circumstances established in the record, the plaintiff has
fulfilled, in due time, its obligation to bring the goods in question to Manila – YES

 To solve this question, it is necessary to determine what period was fixed for the delivery of the goods.
 As regards the tanks, it has been stipulated that they are:
o "To be delivered within 3 or 4 months·The promise or indication of shipment carries with it
absolutely no obligation on our part·Government regulations, railroad embargoes, lack of vessel
space, the exigencies of the requirements of the United States Government, or a number of
causes may act to entirely vitiate the indication of shipment as stated. In other words, the order
 is accepted on the basis of shipment at Mill's convenience, time of shipment being merely an
indication of what we hope to accomplish."
 With reference to the expellers, the following stipulation appears:
o "The following articles, hereinbelow more particularly described, to be shipped at San Francisco
within the month of September /18, or as soon as possible.·Two Anderson oil expellers * * *."
 In the contract relative to the motors the following appears:
o "Approximate delivery within ninety days.·This is not guaranteed.·This sale is subject to our being
able to obtain Priority Certificate, subject to the United States Government requirements and also
subject to confirmation of manufacturers."
 In all these contracts, there is a final clause as follows: "The sellers are not responsible for delays caused by
fires, riots on land or on the sea, strikes or other causes known as 'Force Majeure' entirely beyond the control of
the sellers or their representatives."
 Under these stipulations, there is no definite date fixed for the delivery of the goods. As to the tanks, the
agreement was that the delivery was to be made "within 3 or 4 months," but that period was subject to the
contingencies referred to in a subsequent clause. With regard to the expellers, the contract says "within the
month of September, 1918," but to this is added "or as soon as possible." And with reference to the motors,
the contract contains this expression, "Approximate delivery within ninety days," but right after this, it is noted
that "this is not guaranteed."
 The oral evidence falls short of fixing such period.
 From the record it appears that these contracts were executed at the time of the world war when there existed
rigid restrictions on the export from the United States of articles like the machinery in question, and maritime,
as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were
inserted in the contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the
exigencies of the requirements of the United States Government," in connection with the tanks and "Priority
Certificate, subject to the United -States Government requirements," with respect to the motors. At the time of
the execution of the contracts, the parties were not unmindful of the contingency of the United States
Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein
stated might prevent it.
 The Court said that the terms used by the parties are so uncertain that one can not tell whether the goods could
be delivered to Manila. If that is the case, as we think it is, the obligation must be regarded as conditional.2
 "When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of
the contract.
 In such cases, the delivery must be made within a reasonable time."The law implies, however, that if no time is
fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate
delivery is intended."
 "When the contract provides for delivery 'as soon as possible' the seller is entitled to a reasonable time, in view
of all the circumstances, such as the necessities of manufacture, or of putting the goods in condition for
delivery. The term does not mean immediately or that the seller must stop all his other work and devote himself
to that particular order. But the seller must nevertheless act with all reasonable diligence or without
unreasonable delay. It has been held that a requirement that the shipment of goods should be the 'earliest
possible' must be construed as meaning that the goods should be sent as soon as the seller could possibly send
them, and that it signified rather more than that the goods should be sent within a reasonable time.
 "Delivery 'Shortly.'·In a contract for the sale of personal property to be delivered 'shortly,' it is the duty of the
seller to tender delivery within a reasonable time and if he tenders delivery after such time the buyer may reject.
 "The question as to what is a reasonable time for the delivery of the goods by the seller is to be determined by
the circumstances attending the particular transaction, such as the character of the goods, and the purpose for
which they are intended, the ability of the seller to produce the goods if they are to be manufactured, the
facilities available for transportation, and the distance the goods must be carried, and the usual course of
business in the particular trade."
 Whether or not the delivery of the machinery in litigation was offered to the defendant within a reasonable time,
is a question to be determined by the court.
2
ARTICLE 1215. Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives A day
certain is understood to be one which must necessarily arrive, even though its date be unknown. If the uncertainty should consist in the arrival
or non-arrival of the day, the obligation is conditional and shall be governed by the rules of the next preceding section
 The record shows, as we have stated, that the plaintiff did all within its power to have the machinery arrive at
Manila as soon as possible, and immediately upon its arrival it notified the purchaser of the fact and offered to
deliver it to him. Taking these circumstances into account, we hold that the said machinery was brought to
Manila by the plaintiff within a reasonable time.
 Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and, consequently, it
could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim or set-off.

SY-JUCO and VIARDO v. SY-JUCO

January 12, 1920 | Avancena, J. | Agent acting in his own name; exception

Digester: K Bernardo

SUMMARY: Santiago was appointed by the plaintiffs, his parents, as administrator of their property and acted as
such from 1902-1916. The Syjucos allege that during Santiago’s administration, he acquired a launch, two cascos,
and and automobile in his capacity as administrator with their (Syjucos’) money and for their benefit. TC ruled in
favor of the Syjuco and ordered Santiago to return the properties. SC affirmed the TC, with the exception of casco
no. 2545, which was lawfully sold to Santiago.

DOCTRINE: 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.

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

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.

FACTS:

 1902: Defendant Santiago Sy-juco was appointed by plaintiffs Vicente and Cipriana as administrator of their
property, and acted as such until June 30, 1916, when his authority was cancelled.
o Santiago is the son of Vicente and Cipriana.
 Vicente and Cipriana allege that during Santiago’s administration, Santiago acquired the property claimed in the
complaint in his capacity as the plaintiff’s administrator with their money and for their benefit.
 TC → Ordered Santiago to return to the plaintiffs: the launch 3 Malabon, two cascos4, an automobile, a
typewriting machine, the house occupied by Santiago, and the price of the piano.
 Both parties appealed from this judgment.

3
launch, n. A large motorboat, used especially for short trips.
4
casco, n. A flat-bottomed, square-ended boat once used in the Philippines as a lighter to ferry goods between ship and shore
WON the properties bought by Santiago in his own name, as an administrator, belong to him. (NO, except the
second casco.)

RULING: Judgment appealed from affirmed except in so far as casco no. 2545 is concerned.

As to the launch Malabon

 Santiago bought it in his own name from the Pacific Commercial Co., and afterwards registered it at the Custom
House.
 But this does not necessarily show that he bought it for himself and with his own money.
 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 on his part.
 The question is not in whose favor the document of sale of the launch is executed nor in whose name 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 its purchase, the launch had to be repaired at their expense, although said expense was
collected from the defendant.
 Santiago invoked the case of Martinez v. Martinez.
o Martinez, Jr., bought a vessel in his own name and in his name registered it at the Custom House. This
court then said that although the funds with which the vessel was bought belonged to Martinez Sr.,
Martinez Jr. is its sole and exclusive owner.
 But the Court ruled that this is not applicable to the case at bar.
o In said case the relation of principal and agent, which exists between the plaintiffs and the defendant in the
present case, did not exist between Martinez, Sr., and Martinez, Jr. By this agency the plaintiffs herein
clothed the defendant with their representation in order to purchase the launch in question.
o However, the defendant acted without this representation and bought the launch in his own name thereby
violating the agency. If the result of this transaction should be that the defendant has acquired for himself
the ownership of the launch, it would be equivalent to sanctioning this violation and accepting its
consequences.
o 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.
 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 bough having come from the plaintiff, the exception established in
article 1717 is applicable to 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.
 (Fun fact: This casco had been leased and was sunk while in the lessee’s hands before the complaint in this case
was filed. As such, the issue of ownership is determinative of who may enforce the responsibility of damages
for losses on the lessee.)

National Food Authority (NFA) v. IAC

Facts:

Medalla, as a commission agent of plaintiff Superior Shipping Corporation,entered into a contract for hire
of ship (MV Sea Runner) with defendant NFA.The contract obligated Medalla to transport on the MV Sea
Runner 8,550 sacksof rice belonging to NFA from Occidental Mindoro to Malabon, Metro Manila.Upon
completion of the delivery, plaintiff wrote a letter around October 1979,requesting NFA that it be allowed
to collect the amount for freightage andother charges. Plaintiff wrote again around November 1979, this
timespecifically requesting that payment be made to it and not to Medalla becauseplaintiff was the owner
of the vessel.On November 16, 1979, NFA informed plaintiff that it could not grant itsrequest because the
contract to transport the rice was entered into by NFAand defendant Medalla who did not disclose that he
was acting as a mereagent of plaintiff. Thereupon on November 19, 1979, defendant NGA paiddefendant
Medalla the sum of P25,974.90, for freight services.On December 4, 1979, plaintiff wrote defendant
Medalla demanding that heturn over to plaintiff the amount of P27,000.00 paid to him by defendant
NFA.Defendant Medalla, however, "ignored the demand."

Issue:

Whether NFA is jointly and severally liable with defendant Medalla.

Held:
Yes, NFA is solidarily liable with defendant Medalla.

Ratio:

It is an undisputed fact that Gil Medalla was a commission agent ofrespondent Superior Shipping
Corporation which owned the vessel "MV SeaRunner" that transported the sacks of rice belonging to
petitioner NFA. Thecontext of the law is clear. Art. 1883, which is the applicable law in the case atbar
provides:

 Art. 1883.

If an agent acts in his own name, the principal has noright of action against the persons with whom the
agent hascontracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of theperson with whom he has contracted, as if
the transaction werehis own,

except when the contract involves things belongingto the principal.

The provision of this article shall be understood to be withoutprejudice to the actions between the
principal and agent.

Consequently, when things belonging to the principal (in this case, 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 inhis own name

. In other words, the agent's apparent representation yields to theprincipal's true

representation and that, in reality and in effect, the contractmust be considered as entered
into between the principal and the third person

Corollarily, if the principal can be obliged to perform his duties under the

contract, then it can also demand the enforcement of its rights arising from

the contract

 Far East Bank and Trust Company (Now Bank of the Philippine Islands) and Rolando   Borja,
Deputy  Sherrif  vs.  Sps. Ernesto and Leonor C.  Cayetano,  G.R. No. 179909, January 25, 2010,

the principal executed a special power of attorney in favor of her daughter authorizing her to contract
a loan from a bank and to mortgage the principal’s two lots. The principal also executed an affidavit
of non-tenancy for the approval of the loan. The bank granted a loan secured by two promissory
notes and a real estate mortgage over the principal’s two lots. The mortgage document was signed
by the agent and her husband as mortgagors in their individual capacities, without stating that the
agent was executing the mortgage contract for and in behalf of the principal.
The bank foreclosed the mortgage due to non-payment of the loan. A notice of public auction sale
was sent to principal. The latter’s lawyer responded with a letter to the bank requesting that the
public auction be postponed. The letter went unheeded and the public auction was held as
scheduled wherein the mortgaged properties were sold to the bank. Subsequently, the bank
consolidated its title and obtained new titles in its name after the redemption period lapsed without
the principal taking any action.

Around five years later, the principal filed a complaint for annulment of mortgage and extrajudicial
foreclosure of the properties with damages with the regional trial court (RTC) of Naga City. The
principal sought nullification of the real estate mortgage and extrajudicial foreclosure sale, as well as
the cancellation of the bank’s title over the properties.

The RTC rendered judgment in favor of the principal, holding that the principal cannot be bound by
the real estate mortgage executed by the agent 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 Court of Appeals (CA) affirmed the RTC’s 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 CA further declared that
the principal loan agreement was not affected, which had become an unsecured credit.

The Supreme Court held that the principal is not bound by the real estate mortgage executed by the
authorized agent in her own name without indicating the principal. It is not sufficient for the principal
to have authorized the agent through a special power of attorney to execute the mortgage on behalf
of the principal; the mortgage contract itself must clealy state that the agent was executing the
mortgage contract for and on behalf of the principal.
The Supreme Court cited three earlier rulings in support of its finding:

(1) The Philippine Sugar Estates Development Co., Ltd., Inc. vs.  Poizat, et al, 48 Phil. 536 (1925), where
Gabriela Andrea de Coster (Coster) executed a general power of attorney authorizing her husband,
Juan Poizat (Poizat), to obtain a loan and to secure the same with mortgage, pledge or personal
securities. Although the real estate mortgage mentioned that it was entered also in Poizat’s capacity
as attorney-in-fact of Coster, Poizat signed the contract in his own name without any indication that
he also signed it as the attorney-in-fact of his wife. The Supreme Court ruled that while Poizat may
have had the authority to borrow money and mortgage the real property of his wife, the law specifies
how and in what manner it must be done, and the stubborn fact remains that, as to the transaction in
question, that power was never exercised;
(2) Rural Bank of Bombon  (Camarines Sur), Inc. vs. Court of Appeals, 212 SCRA 25 (1992), where the
Supreme Court held that “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 M. 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”;
(3) Gozun vs. Mercado, 511 SCRA 305 (2006), where the Supreme Court held that the principal was
not liable for the “cash advance” given to the agent who signed the receipt in her name alone,
without indicating therein that she was acting for and in behalf of respondent. Thus, the Supreme
Court ruled that the agent bound herself in her personal capacity and not as an agent of the principal
or anyone for that matter.
From the foregoing, it is not sufficient that the principal executed a power of attorney authorizing the
agent to execute the mortgage contract or that the mortgage contract mention that it was entered
into by the agent as attorney-in-fact of the principal. It is essential that the agent must sign the
contract on behalf of the principal.

While the Supreme Court held in Cayetano that the principal is not bound by the real estate mortgage
executed by the agent, the Supreme Court ruled that laches prevent the principal from questioning
the validity of the mortgage:
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 complainant’s right after he had
knowledge of the defendant’s 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 one’s 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.

Ace Navigation Co. Inc., petitioner v. FGU Insurance Corporation and Pioneer Insurance
and Surety Corporation, respondents

Facts:

Cardia Limited shipped on board the vessel M/V Pakarti Tiga at Shanghai Port, China,
8260 metric tons (or 165,200 bags) of Grey Portland Cement to be discharged at the Port of
Manila and delivered to its consignee, Heindrich Trading Corp. The subject shipment was
insured with respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. against
all risks for the amount of Php 18,048,421.00. Regency Express Lines S.A., chartered by Sky
International, Inc. having entered into a contract with Shinwa Kaiun Kaisha Ltd. to which the
subject vessel was chartered by the owner Pakarti Tata, was the one which directly dealt with
Heindrich and accordingly issued Clean Bill of Lading No. SM-1.
The vessel arrived at the Port of Manila and the shipment was discharged. Upon inspection by
Heindrich and Ace Navigation Co. Inc, agent of Cardia Limited, it was found that out of the
165,200 bags of cement, 43,905 bags were in bad order and condition. The respondents, unable
to collect the sustained damages from Cardia Limited and Regency Express Lines S.A., each
paid Heindrich separately totaling to Php 711,727.34 and became sub rated to all the rights and
causes of action accruing to Heindrich. Respondents filed a complaint for damages. Ace
Navigation Co. Inc. claimed it was not a real party-in-interest from whom the respondents can
demand compensation. The respondents maintain that Ace Navigation Co. Inc is a ship agent and
not a mere agent of Cardia, as found by both the CA and the RTC.

Issue:

Whether or not Ace Navigation Co. Inc. be held liable for damages sought by FGU Insurance
Corporation and Pioneer Insurance and Surety Corporation.

Decision:

Article 586 of the Code of Commerce provides that “the ship owner and the ship agent shall be
civilly liable for the acts of the captain and for the obligations contracted by the latter to repair,
equip and provision the vessel, provided the creditor proves the amount claimed was invested
therein. By ship agent is understood the person entrusted with the provisioning of a vessel, or
who represents her in the port in which she may be found.” Due to the above provision, the Court
disagreed with respondents’ contention. Thus, Ace Navigation Co. Inc. cannot be held liable for
damages sought by the respondents.

DBP vs. CA 449 SCRA 57

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: Juan B. Dans, 76 years of age, together with his family, applied for a loan worth Php 500,
000 at the Development Bank of the Philipppines on May 1987. The loan was approved by the
bank dated August 4, 1987 but in the reduced amount of Php 300, 000. Mr. Dans was advised
by DBP to obtain a mortgage redemption insurance at DBP MRI pool. DBP deducted the amount
to be paid for MRI Premium that is worth Php 1476.00. The insurance of Mr. Dans, less the DBP
service fee of 10%, was credited by DBP to the savings account of DBP MRI-Pool. Accordingly,
the DBP MRI Pool was advised of the credit.
                On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified DBP was not
eligible for the coverage of insurance for he was beyond the maximum age of 60. The wife,
Candida, filed a complaint to the Regional Trial Court Branch I Basilan against DBP and DBP MRI
pool for ‘Collection of Sum of Money with Damages’. Prior to that, DBP offered the
administratrix (Mrs. Dans)  a refund of the MRI payment but she refused for insisting that the
family of the deceased must receive the amount equivalent of the loan. DBP also offered
and ex gratia for settlement worth Php 30, 000. Mrs. Dans refused to take the offer. The
decision of the RTC rendered in favor of the family of the deceased and against DBP.  However,
DBP appealed to the court.

ISSUE: Whether or not the DBP MRI Pool should be held liable on the ground that the contract
was already perfected.

HELD: No. DBP MRI Pool is not liable. Though the power to approve the insurance is lodged to
the pool, the DBP MRI Pool did not approve the application of the deceased. There was no
perfected contract between the insurance pool and Mr. Dans.
                DBP was wearing two legal hats: as a lender and insurance agent. As an insurance
agent, DBP made believed that the family already fulfilled the requirements for the said
insurance although DBP had a full knowledge that the application would never be approved.
DBP acted beyond the scope of its authority for accepting applications for MRI.  If the third
person who contracted is unaware of the authority conferred by the principal on the agent and
he has been deceived, the latter is liable for damages. The limits of the agency carries with it
the implication that a deception was perpetrated—Articles 19-21 come into play.

                However, DBP is not entitled to compensate the family of the deceased with the entire
value of the insurance policy. Speculative damages are too remote to be included in the cost of
damages. Mr. Dans is entitled only to moral damages. Such damages do not need a proof of
pecuniary loss for assessment. The court granted only moral damages (Php 50, 000) plus
attorney fees’s (Php 10, 000) and the reimbursement of the MRI fees with legal interest from
the date of the filing of the complaint until fully paid. 

Case Name: Country Bankers Insurance v. Keppel Cebu Shipyard

Petitioner: Country Bankers Insurance Corporation

Respondent: Keppel Cebu Shipyard, Unimarine Shipping Lines, Inc., Paul Rodriguez

SCRA: 673 SCRA 427

G.R. No: 166044

Date: June 18, 2012

FACTS:

Unimarine Shipping Lines, Inc. (Unimarine) 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 P3.85M
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 Country Bankers Insurance Corp. (CBIC), through it’s
agent, Bethoven Quinain (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.

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. YES

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.
DISPOSITION:

WHEREFORE, this petition is hereby GRANTED and the complaint against CBIC is DISMISSED for lack of
merit.

Bureau of Customs vs. Sherman

G.R. No. 190487 April 13, 2011 29, 2005 Carpo-Morales

PETITIONER: Bureau of Customs

RESPONDENT: Peter Sherman, Michael Whelan, Teodoro Lingan, Atty. Ofelia Cajigal, and the Court
of Tax Appeals

Cuison vs. CA

G.R. No. 88539October 26, 1993 Bidin

PETITIONER: KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER
SUPPLY,"

RESPONDENT: THE COURT OF APPEALS, VALIANT INVESTMENT

SUMMARY: Kue Cuison’s Binondo branch Manager Tiu Huy Tiac ordered various kinds of paper
products amounting to P297,486.30 from Valiant and had it delivered to Lilian Tan of LT Trading. Upon
delivery, Lilian Tan paid for the merchandise and Tiu Huy Tiac issued 9 postdated checks to Valiant as
payment for the paper products but the checks bounced. Upon demand by Valiant, Kue Cuison denies
having any involvement with Tiu Huy Tiac’s business with Valiant.

FACTS:

Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint,
bond paper and scrap, under the name of "Kue Cuison Paper Supply" with places of business
at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant
Investment Associates, on the other hand, is a partnership with business address at Kalookan
City.

From December 4, 1979 to February 15, 1980, Valiant delivered various kinds of paper products
amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by
Valiant pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed in the
Binondo office of Kue Cuison. It was likewise pursuant to Tiac's instructions that the
merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by
issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac
issued 9 postdated checks to Valiant as payment for the paper products. Unfortunately, said
checks were later dishonored by the drawee bank.

Thereafter, Valiant made several demands upon Kue Cuison to pay for the merchandise in
question, claiming that Tiu Huy Tiac was duly authorized by Cuison as the manager of his
Binondo office, to enter into the questioned transactions with Valiant and Lilian Tan. Cuison
denied any involvement in the transaction entered into by Tiu Huy Tiac and refused to pay
Valiant the amount of P297,487.30 for the selling price of the subject merchandise.

Valiant then went to court to recover the sum of money but the trial court dismissed the
complaint against Cuison for lack of merit. On appeal, however, the decision of the trial court
was reversed by the Court of Appeals.

ISSUE:

Whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold
the latter liable for the disputed transaction?

HELD:

YES. Tiu Huy Tiac possessed the authority because he is an agent of Kue Cuison. 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.

It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy
Tiac to the public as the manager of his store in Sto. Cristo, Binondo, Manila. More particularly,
petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's manager, as
his (petitioner's) branch manager as testified to by Bernardino Villanueva. Secondly, Lilian Tan,
who has been doing business with Cuison for quite a while, also testified that she knew Tiu Huy
Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This general perception of
Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact
that Tiu Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner.
In fact, 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 Tiu Huy Tiac as his manager in the Sto. Cristo
Binondo branch.

By his representations, petitioner is now estopped from disclaiming liability for the transaction
entered by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional
or merely negligent so long as innocent, third persons relied upon such representations in good
faith and for value.

Moreover Article 1911 of the Civil Code provides:

"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."

MANILA MEMORIAL PARK CEMETERY, INC. V. LINSANGAN

G.R. No. 94050

TINGA, November 21. 1991

NATURE
Petition for Review under Rule 45 of the ROC

FACTS

-Florencia Baluyot, an Agency Manager of MMPCI, offered to Atty. Pedro Linsangan a lot at the Holy Cross Memorial Park owned by MMPCI for P95,000. The
lot’s former owner was not interested on the lot anymore and so agreed to sell the lot after he has been reimbursed. Atty. Linsangan agreed to the offer, gave
Baluyot the reimbursement that would be given to the former owner and down payment that would be paid to MMPCI, with Baluyot only handing him handwritten
and typewritten receipts (not O.R.).

-However, instead of the old contract with the old owner reformed so that Atty. Linsangan would become the new owner of the lot, Baluyot offered a new contract
covering the same lot. Atty. Linsangan protested, but Baluyot assured him that that Atty. Linsangan would still be paying P95,000 instead of the P132,250 price
under the new contract. Baluyot even executed a document confirming the previous arrangement between her and Atty. Linsangan so that even if the purchase
price under the new contract has increased, Atty. Linsangan would still be paying the old purchase price. Atty. Linsangan signed the new contract with MMPCI
and tendered payment in checks in accordance with the old agreement between him and Baluyot.

-It turns out that MMPCI was not aware of the arrangement between Baluyot and Atty. Linsangan, and that Baluyot was only authorized under her Agency
Management contract to solicit and remit to MMPCI offers to purchase interment spaces belonging to and sold by MMPCI. So, even if Atty. Linsangan had
complied with the agreed payment, MMPCI cancelled the new contract for non-payment of arrearages.

-Atty. Linsangan filed complaint for Breach of Contract and Damages against Baluyot and MMPCI.

LC: Baluyot was an agent of MMPCI; MMPCI was estopped from denying the agency after having received and encashed the checks issued by Atty. Linsangan
and given it by Baluyot.

CA: affirmed LC + Baluyot’s authority was conferred upon her by habit and custom
ISSUES

1. WON the SC could review the findings of fact of CA

2. WON Baluyot was an agent of MMPCI

3. WON MMPCI was bound by the contract procured by Atty. Linsangan and solicited by Baluyot

4. WON MMPCI was estopped from denying liability to Atty. Linsangan

HELD

1. YES

Ratio. There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed by the Supreme Court, such as (1) when the
conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;
(7) when the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents; and (10) the findings of
fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.

2. YES

Ratio. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or
authority of the latter. Thus, the elements of agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the execution
of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for himself; and (iv) the agent acts within the scope of his authority.
Reasoning. Baluyot was an agent of MMPCI, having represented the interest of the latter, and having been allowed by MMPCI to represent it in her dealings with
its clients/prospective buyers.

3. NO

Ratio. The acts of the agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same. It also bears emphasis that when the
third person knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person
was aware of such limits of authority, he is to blame and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s
ratification.

-on RATIFICATION: Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The
substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the
time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent. Thus, if material facts
were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of the
parties between whom the question of ratification may arise. Nevertheless, this principle does not apply if the principal’s ignorance of the material facts and
circumstances was willful, or that the principal chooses to act in ignorance of the facts. However, in the absence of circumstances putting a reasonably prudent
man on inquiry, ratification cannot be implied as against the principal who is ignorant of the facts.

Reasoning. Baluyot acted in excess of the authority granted to her by MMPCI. The original agreement between her and Atty. Linsangan was unknown to MMPCI
and thus, MMPCI was not bound by their agreement. As far as they were concerned, the contract price was P132,250 and not P95, 000. As for the ratification,
see estoppel.

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

-One who claims the benefit of an estoppel on the ground that he has been misled by the representations of another must not have been misled through his
own want of reasonable care and circumspection.

-Estoppel must be intentional and unequivocal, for when misapplied, it can easily become a most convenient and effective means of injustice.

Reasoning. There is no indication that MMPCI let the public nor Atty. Linsangan to believe that Baluyot had the authority to alter the standard contracts of the
company. Neither is there any showing that prior to signing of the new contract, MMPCI had any knowledge of Baluyot’s commitment to Atty. Linsangan.

-Even assuming that Atty. Linsangan was misled by MMPCI’s actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent in his
dealings with Baluyot, and could have easily determined, had he only been cautious and prudent, whether said agent was clothed with the authority to change
the terms of the principal’s written contract.

Disposition. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June 2001 and its Resolution dated 12 December
2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby REVERSED
and SET ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to costs.

SALFIC ALCAN Inc. vs. IMPERIAL VEGETABLE OIL, Inc.

Here’s a landmark case on the Doctrine of APPARENT AUTHORITY. President of IVO entered into Speculative
Contracts with SALFIC (take note) without securing the Board of Director’s approval.

I got no diagram, let’s see… so to illustrate you just picture an inverted triangle in your head. The acute angle on
your left is the AGENT, which is the president of IVO. The angle on the right is your PRINCIPAL, the IVO’s board of
directors. You go downward and you have the 3RD PARTY, Salfic.

Now here’s the basic rule in the Doctrine of Apparent Authority. If a corporation knowingly permits its
officers/agent to act within the scope of apparent authority, then it holds him out to the public as possessing the
power to do those acts, (gets? It’s simply giving him the capacity to act or perform all acts necessary in order to see
the transaction be brought into its completion. Kunyare you sent your agent to close a deal therefore it is
understood that you are not only giving him the power and authority to negotiate and to transact but also it is
apparent that you are also giving him the authority to sign for how could he bring the transaction to its completion
e kung di nya pipirmahan yun kontrata). So therefore since this is the case then it is understood that the
corporation will be estopped from denying the agent’s authority pag nagkabulilyaso diba?

Now here’s what happened here…

Salfic is a French corporation engaged in international purchase, sale and trading of coconut oil. So apparently IVO
sells coconut oil. Safic then placed purchase orders with IVO for 2,000 tons of crude coconut oil, valued at
US$222.50 per ton, so roughly that would amount to what US$444.00+?

IVO however failed to deliver and, instead, offered a "wash out" settlement. Washout settlement meaning the
coconut oil subject of the purchase contracts were to be "sold back" to IVO. Yet IVO wanted it to be sold at the
prevailing price in the international market at the time of wash out. And IVO bound itself to pay to Safic the
difference between the said prevailing price and the contract price of the 2,000 tons which amounted to
US$293,500.00.
IVO however failed to pay this amount despite repeated oral and written demands. Salfic then goes to court and
alleged that on eight occasions, it placed purchase orders with IVO for a total of 4,750 tons and prayed to collect
from IVO an aggregate amount of US$391,593.62 and the US$293,500.00 difference between the contract price
and the international market value, plus attorney's fees and litigation expenses.

So to make the long story short, nagkabulilyaso. E speculative contract eh. Parang stocks, di ka pa naglalabas ng
pera nalulugi ka na, or the other way around, di ka pa nagdedeliver kumikita ka na. Biro mo laway lang puhunan
mo, wala pa sayo products bayad na yung buyer, it’s like sort of a pre-selling thingie. And this is precisely the
reason why the board of directors of IVO disapproved the president’s proposal in an earlier board meeting that
the company engage in said practice. Sabi seguro ng board “patay tayo dyan mr. president pag di tayo nakadeliver
dyan asunto aabutin naten for collection and damages” So yun nga nangyare, Salfic went to court for collection
and damages.

Ang depensa ng IVO “Salfic has no legal capacity to sue since it is doing business in the Philippines without the
required licenses”. And when pushed further IVO reveals that the subject contracts were speculative contracts
entered into by IVO's President in contravention of the prohibition by the Board of Directors against engaging in
speculative paper trading.

So nagkalaglagan ngayon.. sabi ng board “Wala namang board approval yang kontrata na yan eh, ni hindi nga
dumaan sa minutes ng board ya eh!” (hahaha! may dialogue… LOL… ginagaya ko lang naman si Kim Wong, the
junket operator of Soler Casino sa senate inquiry on the recent money laundering case… “Yes your honor.. O sabi ni
Ms. Deguito boss okay na… 25 million papasok this morning… o sabi ko naman a ganun ba? O ipasok mo sa Soler...
mga tanghali tumawag ule… o.. boss may papasok 55milliion… o sabe ko naman ule ah ganon? O ipasok sa Soler”
HA HA HA!!! WTF) Boy.. if dialogues within dialogues are somehow construed as presumptions of regularity and
the spontaneity in relaying facts in the witness stands are deemed evidence of accuracy I don’t know what would,
LOL.

E kaso totoo. Evidence shows the board is actually oblivious, clueless about the said contract. And even truth to
the matter is IVO doesn’t even have license from the Central Bank to engage in speculative contracts. And why
didn’t they know? Because the president who was signatory to the contract never even submitted it to the board
hence never recorded into the company’s books of corporation.

So this is a question of whether the act of the agent which is the president binds the principal which is the
corporation against third party which is Salfic.

ISSUE:

So the question is can the corporation be held liable for the losses sustained on such contracts or would it be the
president that should be held solidarily liable?

RULING:

Court held NO.

1. It is the Board and not the Officer that exercises corporate power. So the officer is merely an agent who acted
beyond the scope of his authority.

Actually to tell you frankly the By-laws of IVO specifically stated that the president would have direct and active
management of the business. A provision in the by-laws stated “conducting the same according to the orders,
resolutions and instructions of the Board of Directors and according to his own discretion whenever and wherever
the same is not expressly limited by such orders, resolutions and instructions”
But regarding this th court said that IVO president 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.

2. There is no evidence that the board ratified the contracts.

Under Art. 1898 of the Civil Code:

“Acts of an agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same
expressly or impliedly.”

BTW TAKE NOTE: The Doctrine of Apparent Authority favors only those who deal in good faith. Meaning if 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 principal's ratification.

So the court deemed Salfic has knowledge of the IVO president’s act of ultra vires since there were much ample
time for Salfic to have obtained from the president prior authorization from the IVO board yet it didn’t do so.

Question therefore, is the Doctrine of Ratification applicable in this case? Answer, NO, because when the agent
entered into speculative contracts the principal did not know, he did not secure the IVO board’s approval. He did
not even submit the contracts to the board, hence there was nothing to be ratified.

Question, can Salfic rely on the Doctrine of Implied Agency? Answer, NO, because before the said controversial
contract IVO did not enter into identical contracts with Salfic. So it’s a fairly new dealing. And if you deal with
someone who just knocked on your door one sunny day, especially when it pertains to cash outlay it’s only logical
that you investigate the agent’s background (not the personal background WTF are you talkin’ about!!.. you
investigate if he is really being backed by the company he is saying he is.. otherwise you end up crying looted of
your remaining money in your bank account watching the latest pyramid scam news on t.v.) You see the basis for
agency is representation. This is what Villanueva is saying in his book “must discover upon his peril the authority of
the agent”.

You see these doctrines are all under the Ultra Vires Doctrine. And if we say ultra vires then it presupposes that
there is irregularity.

Question: Is there a way where an act of an agent in excess of his authority can bind the corporation?
Answer: Yes there is.

I think the teacher have clearly stated the remedies to ultra vires acts in this case. Stating 3 Doctrines that could
override Art. 1898, where the agent may act without the authority of the board of directors and still may be
considered binding the corporation. 1. The Doctrine of Estoppel, 2. The Doctrine of Ratification, and 3. The
Doctrine of Apparent Authority.

I wonder if Implied Actual Authority can be considered remedy along prefecture of this 3 doctrines. Well if it’s
Express Actual Authority then there’s no question with that right?, but let’s be reminded that implied actual
authority is also in need of ratification. And if something is in need of ratification then it presupposes that there is
presence of an irregularity. Therefore it is also based on prior acts which could be ratified or approved by the
board right?. The mere acceptance of the benefits by the principal which was irregularly brought in by the agent is
tacit proof of ratification. So in a way it could be a remedy right? I dunno it may come under the Doctrine of
Ratification or.. looks like its probably the Doctrine of Implied Agency. Semantics always play the culprit to a lot of
things.

So IVO wins this case.

Posted by Chip Clavecilla at 1:27 PM
Labels: CORPORATION LAW

SIREDY ENTERPRISES, INC. petitioner, vs. HON. COURT OF APPEALS and CONRADO DE GUZMAN, respondents.

DECISION

QUISUMBING, J.:

Before us is a petition for review seeking to annul the decision[1] dated April 26, 1996 of the Court of Appeals in
CA-G.R. CV No. 30374, reversing the decision of the Regional Trial Court of Malolos, Bulacan, and the resolution[2]
dated April 22, 1997, denying petitioners motion for reconsideration.

The following are the facts as found by the Court of Appeals,[3] undisputed by the parties and adopted by
petitioner:[4]

Private respondent Conrado De Guzman is an architect-contractor doing business under the name and style of
Jigscon Construction. Herein petitioner Siredy Enterprises, Inc. (hereafter Siredy) is the owner and developer of
Ysmael Village, a subdivision in Sta. Cruz, Marilao, Bulacan.[5] The president of Siredy is Ismael E. Yanga.[6]

As stated in its Articles of Incorporation,[7] the primary corporate purpose of Siredy is to acquire lands, subdivide
and develop them, erect buildings and houses thereon, and sell, lease or otherwise dispose of said properties to
interested buyers.[8]

Sometime before October 1978, Yanga executed an undated Letter of Authority,[9] hereunder reproduced
verbatim:

KNOW ALL MEN BY THESE PRESENTS:

That I, DR. ISMAEL E. YANGA, SR., of legal age, Filipino, married, resident of and with Postal address at Poblacion,
Bocaue, Bulacan and duly authorized to execute this LETTER OF AUTHORITY, do hereby authorize MR.
HERMOGENES B. SANTOS of legal age, Filipino, married, resident of and with Postal Address at 955 Banawe St.,
Quezon City to do and execute all or any of the following acts:

1. To negotiate and enter into contract or contracts to build Housing Units on our subdivision lots in Ysmael Village,
Sta. Rosa, Marilao, Bulacan. However, all proceeds from said contract or contracts shall be deposited in my name,
payments of all obligation in connection with the said contract or contracts should be made and the remainder will
be paid to MR. HERMOGENES B. SANTOS.

2. To sell lots on our subdivisions and;

3. To represent us, intercede and agree for or make agreements for all payments in our favor, provided that actual
receipts thereof shall be made by the undersigned.

(SGD) DR. ISMAEL E. YANGA, SR.

For myself and in my capacity as President

of SIREDY ENTERPRISE, INCORPORATED

PRINCIPAL

On October 15, 1978, Santos entered into a Deed of Agreement[10] with De Guzman. The deed expressly stated
that Santos was representing Siredy Enterprises, Inc. Private respondent was referred to as contractor while
petitioner Siredy was cited as principal.

In said Deed of Agreement we find the following stipulations:

1.) That, the PRINCIPAL has contracts with different SSS members employed with different domestic entities to
build for them 2-bedroom single housing units and 4-bedroom duplex housing units;

2.) That, the site of the said housing project is at YSMAEL VILLAGE, Bo. Sta. Rosa, Marilao, Bulacan owned and
developed by SIREDY ENTERPRISES and Mr. Ismael E. Yanga, Sr.;

3.) That, the PRINCIPAL has contracted to build the said units at the amount of FORTY FIVE THOUSAND
(P45,000.00) PESOS for the 2-bedroom single and SIXTY NINE THOUSAND (P69,000.00) PESOS, Philippine Currency
for the duplex residences;

4.) That, the CONTRACTOR intends to build for the PRINCIPAL eighty (80) units singles and eighteen (18) units
duplex residences at the cost above mentioned or a lump sum total of FOUR MILLION, EIGHT HUNDRED FORTY
TWO THOUSAND (P4,842,000.00) PESOS, Philippine Currency;

5.) That, the CONTRACTOR agrees to supply all Construction Materials, labor, tools and equipments necessary for
the completion of the said housing units;

6.) That, the PRINCIPAL agrees to pay all necessary permits and papers in accordance with Government rules and
regulations;

7.) That, the PRINCIPAL agrees to supply water and electrical facilities needed during the time of construction;

8.) That, the manner of payment shall be in accordance with SSS releases. Should the SSS fail to pay the PRINCIPAL,
the PRINCIPAL is still in obligation to pay the CONTRACTOR for whatever accomplishments the CONTRACTOR have
finished provided, that the failure of the SSS to pay is not due to defective work of the CONTRACTOR;

9.) That, the CONTRACTOR promises to finish the project at the rate of TEN (10) units in THIRTY (30) days or a total
of THREE HUNDRED (300) working days;

10.) That, the integral part of this CONTRACT are:

a. Plans and Specifications

b. Subdivision Plan indicating the Lot location of each unit

c. Authority of the National Housing Authority;

11.) That, the CONTRACTOR agree[s] to start work on the housing units thirty (30) days after signing of this
CONTRACT.

NOW THEREFORE, for and in consideration of the amount of FOUR MILLION, EIGHT HUNDRED FORTY TWO
THOUSAND (P4,842,000.00) PESOS, Philippine Currency, the PARTIES agree and herein set their hands on the date
and place above-mentioned.

xxx
From October 1978 to April 1990, De Guzman constructed 26 residential units at Ysmael Village. Thirteen (13) of
these were fully paid but the other 13 remained unpaid. The total contractual price of these 13 unpaid houses is
P412,154.93 which was verified and confirmed to be correct by Santos, per an Accomplishment Billing[11] that the
latter signed.

De Guzman tried but failed to collect the unpaid account from petitioner. Thus, he instituted the action below for
specific performance against Siredy, Yanga, and Santos who all denied liability.

During the trial, Santos disappeared and his whereabouts remain unknown.

In its defense, petitioner presented testimonial evidence to the effect that Siredy had no contract with De Guzman
and had not authorized Santos to enter into a contract with anyone for the construction of housing units at Ysmael
Village.

The trial court agreed with petitioner based on the doctrine of privity of contract and gave the following rationale:
[12]

The Deed of Agreement (Exh. A and A-1) clearly reflects that the said contract was entered into by and between
plaintiff De Guzman, on one hand, and defendant Hermogenes B. Santos as purported authorized representative of
defendant Siredy Enterprises, on the other. Plainly and clearly enough, defendants Siredy Enterprises and Ismael
Yanga, Sr. were neither parties nor signatories to the same. It does not bear any legal significance that Dr. Yanga
appears to have signed the Letter of Authority (Exh. B) designating defendant Santos as the authorized
representative for myself and as president of the Siredy Enterprises, Inc. For the evidentiary fact remains that
Siredy Enterprises and Dr. Yanga had absolutely had nothing to do with the fulfillment of the terms and conditions
stipulated in the Deed of Agreement, much less had they benefited in any perceptible degree therefrom.

In the light of the foregoing circumstances, Siredy Enterprises and Dr. Yanga cannot be held liable in favor of the
plaintiff in any manner whatsoever respecting the unpaid residential units constructed by the plaintiff. This is as it
should be, because contracts take effect only between the parties, their assigns and heirs, except only in the cases
provided for by law. (Art. 1311, Civil Code of the Philippines). Not one of the exceptions obtains in this case.[13]

Thus, the trial court disposed of the case as follows:

WHEREFORE, premises considered, judgment is hereby rendered:

a) directing defendant Hermogenes B. Santos to pay unto plaintiff Conrado de Guzman the amount of P412,154.93
as actual damages with legal interest thereon from the filing of the complaint on July 29, 1982 until the same shall
have been fully paid, and P25,000.00 as attorneys fees, plus costs;

b) dismissing the above-entitled case as against defendants Siredy Enterprises, Inc. and Dr. Ismael Yanga, Sr.

SO ORDERED.[14]

On appeal, De Guzman obtained a favorable judgment from the Court of Appeals. The appellate court held that the
Letter of Authority duly signed by Yanga clearly constituted Santos as Siredys agent,[15] whose authority included
entering into a contract for the building of housing units at Ysmael Village. Consequently, Siredy cannot deny
liability for the Deed of Agreement with private respondent De Guzman, since the same contract was entered into
by Siredys duly designated agent, Santos. There was no need for Yanga himself to be a signatory to the contract,
for him and Siredy to be bound by the terms thereof.

Hence, the Court of Appeals held:

WHEREFORE, We find merit in the appeal and We hereby REVERSE the appealed Decision. In its stead, we render
the following verdict: Appellee Siredy Enterprises. Inc. is ordered to pay appellant Conrado de Guzman cost (sic)
and P412,154.93 as actual damage plus legal interest thereon from the filing of the Complaint on July 29, 1982
until full payment thereof. All other claims and counterclaims are dismissed.

SO ORDERED.[16]

Petitioner Siredy Enterprises, Inc. now comes to us via a petition for review on certiorari[17] under Rule 45 of the
Rules of Court, on the following grounds:

I. RESPONDENT COURT ERRED IN HOLDING THAT A VALID AGENCY WAS CONSTITUTED DESPITE THE FACT THAT
PETITIONER WAS NOT INVOLVED IN THE CONSTRUCTION BUSINESS;

II. RESPONDENT COURT ERRED IN FAILING TO CONSIDER A VITAL PROVISION IN THE DEED OF AGREEMENT (PAR.
8), WHEN IT RENDERED ITS DECISION; and

III. RESPONDENT COURT ERRED IN FAILING TO CONSIDER THAT PRIVATE RESPONDENT WAS NOT ENTITLED TO HIS
CLAIM AS HE WAS THE PARTY WHO VIOLATED THE CONTRACT.[18]

We find two main issues presented for resolution: First, whether or not Hermogenes B. Santos was a duly
constituted agent of Siredy, with authority to enter into contracts for the construction of residential units in
Ysmael Village and thus the capacity to bind Siredy to the Deed of Agreement; and Second, assuming arguendo
that Siredy was bound by the acts of Santos, whether or not under the terms of the Deed of Agreement, Siredy can
be held liable for the amount sought to be collected by private respondent De Guzman.

By the relationship of agency, one party called the principal authorizes another called the agent to act for and in
his behalf in transactions with third persons. The authority of the agent to act emanates from the powers granted
to him by his principal; his act is the act of the principal if done within the scope of the authority. He who acts
through another acts himself.[19]

Was Santos then an agent of Siredy? Was he acting within the scope of his authority?

Resolution of the first issue necessitates a review of the Letter of Authority executed by Ismael E. Yanga as
president of Siredy in favor of Santos. Within its terms can be found the nature and extent of the authority granted
to Santos which, in turn, determines the extent of Siredys 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
subdivision lots in Ysmael Village, Sta. Rosa, Marilao, Bulacan.[20] Nothing could be more express than the written
stipulations contained therein.

It was upon the authority of this document that De Guzman transacted business with Santos that resulted in the
construction contract denominated as the Deed of Agreement.

However, petitioner denies any liability by stating that: (1) the nature of Siredys business did not involve the
construction of housing units since it was merely engaged in the selling of empty lots; (2) the Letter of Authority is
defective, and hence needed reformation; (3) Santos entering into the Deed of Agreement was invalid because the
same was in excess of his authority; and (4) there is now implied revocation of such Letter of Authority.

Testifying on the nature of the business and the business practices of Siredy, its owner Yanga testified[21] that
Siredy was interested only in the sale of lots. It was up to the buyers, as owners, to construct their houses in the
particular style they prefer. It was allegedly never the practice of the company to sell lots with houses already
erected thereon. On the basis of the foregoing testimony, petitioner states that despite the letter of authority, it is
quite certain that such provision would go against the nature of the business of Siredy as the same has absolutely
no capability of undertaking such a task as constructing houses.

However, the self-serving contention of petitioner cannot stand against the documentary evidence clearly showing
the companys liability to De Guzman. As we stated in the case of Cuizon vs. Court of Appeals:[22]

As it is, the mere denial of petitioner cannot outweigh the strength of the documentary evidence presented by and
the positive testimony of private respondents. As a jurist once said, I would sooner trust the smallest slip of paper
for truth than the strongest and most retentive memory ever bestowed on moral man.[23]

Aside from the Letter of Authority, Siredys Articles of Incorporation, duly approved by the Securities and Exchange
Commission, shows that Siredy may also undertake to erect buildings and houses on the lots and sell, lease, or
otherwise dispose of said properties to interested buyers.[24] Such Articles, coupled with the Letter of Authority, is
sufficient to have given De Guzman reason to believe that Santos was duly authorized to represent Siredy for the
purpose stated in the Deed of Agreement. Petitioners theory that it merely sold lots is effectively debunked.

Thus, it was error for the trial court to have ignored the Letter of Authority. As correctly held by the Court of
Appeals:

There is absolutely no question that the Letter of Authority (Exhibit B) executed by appellee Yanga constituted
defendant Santos as his and appellee Siredys agent. As agent, he was empowered inter alia to enter into a contract
to build housing units in the Ysmael Village. This was in furtherance of appellees business of developing and
subdividing lands, erecting houses thereon, and selling them to the public.

x x x [25]

We find that a valid agency was created between Siredy and Santos, and the authority conferred upon the latter
includes the power to enter into a construction contract to build houses such as the Deed of Agreement between
Santos and De Guzmans Jigscon Construction. Hence, the inescapable conclusion is that Siredy is bound by the
contract through the representation of its agent Santos.

The basis of agency is representation, that is, the agent acts for and in behalf of the principal on matters within the
scope of his authority (Art, 1881) and said acts have the same legal effect as if they were personally done by the
principal. By this legal fiction of representation, the actual or legal absence of the principal is converted into his
legal or juridical presence.[26]

Moreover, even if arguendo Santos mandate was only to sell subdivision lots as Siredy asserts, the latter is still
bound to pay De Guzman. De Guzman is considered a third party to the agency agreement who had no knowledge
of the specific instructions or agreements between Siredy and its agent. What De Guzman only saw was the
written Letter of Authority where Santos appears to be duly authorized. Article 1900 of the Civil Code provides:

Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the
agents 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.

The scope of the agents authority is what appears in the written terms of the power of attorney. While third
persons are bound to inquire into the extent or scope of the agents authority, they are not required to go beyond
the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding
between the principal and his agent as to the limits of the latters authority. In the same way, third persons need
not concern themselves with instructions given by the principal to his agent outside of the written power of
attorney.
The essence of agency being the representation of another, it is evident that the obligations contracted are for and
on behalf of the principal. This is what gives rise to the juridical relation. A consequence of this representation is
the liability of the principal for the acts of his agent performed within the limits of his authority that is equivalent
to the performance by the principal himself who should answer therefor.[27]

Petitioner belatedly asserts, however, that the Letter of Authority was defective as it allegedly failed to reduce into
writing the real intentions of the parties, and insists on its reformation.

Such an argument deserves scant consideration. As found by the Court of Appeals, being a doctor of medicine and
a businessman, Yanga knew the meaning and import of this document and had in fact admitted having signed it. As
aptly observed by the Court of Appeals, there is no evidence that ante litem, he abrogated the Letter of Authority
and withdrew the power conferred on Santos.

Siredys contention that the present case is in effect a revocation of the Letter of Authority also deserves scant
consideration. This is a patently erroneous claim considering that it was, in fact, private respondent De Guzman
who instituted the civil case before the RTC.

With regard to the second issue put forth by petitioner, this Court notes that this issue is being raised for the first
time on appeal. From the trial in the RTC to the appeal before the Court of Appeals, the alleged violation of the
Deed of Agreement by Conrado de Guzman was never put in issue. Heretofore, the substance of petitioners
defense before the courts a quo consisted of its denial of any liability under the Deed of Agreement.

As we held in the case of Safic Alcan & Cie vs. Imperial Vegetable Oil Co., Inc.:[28]

It must be borne in mind that a question that was never raised in the courts below cannot be allowed to be raised
for the first time on appeal without offending basic rules of fair play, justice and due process. Such an issue was not
brought to the fore either in the trial court or the appellate court, and would have been disregarded by the latter
tribunal for the reasons previously stated. With more reason, the same does not deserve consideration by this
Court.[29]

WHEREFORE, this petition is DENIED for lack of merit. The Decision of the Court of Appeals dated April 26, 1996, in
CA-G.R. CV No. 30374, is hereby AFFIRMED. Petitioner Siredy Enterprises, Inc. is ordered to pay Conrado de
Guzman actual damages in the amount of P412,154.93, with legal interest thereon from the time the case was
filed until its full payment. Costs against petitioner.

SO ORDERED.
Toyota Shaw Inc. vs. Court of Appeals, and Sosa

Toyota Shaw Inc. vs. Court of Appeals, and Sosa

244 SCRA 320
May 1995

FACTS:

Luna L. Sosa and his son, Gilbert, went to purchase a yellow Toyota Lite Ace from the Toyota office at Shaw
Boulevard, Pasig (petitioner Toyota) on June 14, 1989 where they met Popong Bernardo who was a sales
representative of said branch. Sosa emphasized that he needed the car not later than June 17, 1989 because he,
his family, and a balikbayan guest would be using it on June 18 to go home to Marinduque where he will celebrate
his birthday on June 19. Bernardo assured Sosa that a unit would be ready for pick up on June 17 at 10:00 in the
morning, and signed the "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” a document
which did not mention anything about the full purchase price and the manner the installments were to be paid.
Sosa and Gilbert delivered the down payment of P100,000.00 on June 15, 1989 and Bernardo accomplished a
printed Vehicle Sales Proposal (VSP) No. 928 which showed Sosa’s full name and home address, that payment is by
"installment," to be financed by "B.A.," and that the "BALANCE TO BE FINANCED" is "P274,137.00", but the spaces
provided for "Delivery Terms" were not filled-up.

When June 17 came, however, petitioner Toyota did not deliver the Lite Ace. Hence, Sosa asked that his down
payment be refunded and petitioner Toyota issued also on June 17 a Far East Bank check for the full amount of
P100,000.00, the receipt of which was shown by a check voucher of Toyota, which Sosa signed with the
reservation, "without prejudice to our future claims for damages." Petitioner Toyota contended that the B.A.
Finance disapproved Sosa’s the credit financing application and further alleged that a particular unit had already
been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance
of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in
cash but Sosa refused.

The trial court found that there was a valid perfected contract of sale between Sosa and Toyota which bound the
latter to deliver the vehicle and that Toyota acted in bad faith in selling to another the unit already reserved for
Sosa, and the Court of Appeals affirmed the said decision.

ISSUE:

Was there a perfected contract of sale between respondent Sosa and petitioner Toyota?

COURT RULING:

The Supreme Court granted Toyota’s petition and dismissed Sosa’s complaint for damages because the document
entitled “Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.,” was not a perfected contract of
sale, but merely an agreement between Mr. Sosa and Bernardo as private individuals and not between Mr. Sosa
and Toyota as parties to a contract.

There was no indication in the said document of any obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and neither was there a correlative obligation on the part of the latter to pay therefor a
price certain. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle.
If it was intended for a contract of sale, it could only refer to a sale on installment basis, as VSP No.928 executed on
June 15, 1989 confirmed. The VSP also created no demandable right in favor of Sosa for the delivery of the vehicle
to him, and its non-delivery did not cause any legally indemnifiable injury.

ESPERACION, ANGELICA MARIE

BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and ROBERTO M. REYES, respondents.
G.R. No. 102998
July 5, 1996

FACTS:

The spouses Reynaldo and Florencia Manahan executed a promissory note secured by a deed
of chattel mortgage over a motor vehicle, in favor of Carmasters, Inc. who later assigned the
same to petitioner BA Finance Corporation with the conformity of the Manahans. Subsequently,
Petitioner filed a filed a complaint for replevin with damages against the spouses after the latter
defaulted in payments, as well as against a John Doe(Robert Reyes), praying for the recovery
of the vehicle with an alternative prayer for the payment of a sum of money should the vehicle
not be returned. Upon petitioner's motion and the filing of a bond, the lower court issued a writ
of replevin. The court, however, cautioned petitioner that should summons be not served on the
defendants within thirty (30) days from the writ's issuance, the case would be dismissed for
failure to prosecute. The warning was based on what the court perceived to be the deplorable
practice of some mortgagees of "freezing (the) foreclosure or replevin cases" which they would
so "conveniently utilize as a leverage for the collection of unpaid installments on mortgaged
chattels." The original of the summons had the name and the signature of private respondent
Roberto M. Reyes indicating that he received a copy of the summons and the complaint. The
vehicle was seized and brought to the custody of Plaintiff. After a few months, the case was
dismissed for failure to prosecute (failure to serve summons to Spouses Manahan as principal
defendants). The court granted petitioner's motion for reconsideration and accordingly recalled
the order directing the return of the vehicle to Reyes, set aside the order dismissing the case,
directed petitioner "to cause the service of summons together with a copy of the complaint on
the principal defendants within five (5) days from receipt" thereof at petitioner's expense, and
ordered private respondent to answer the complaint. Private respondents were declared in
default for failing to file an answer and plaintiff presented the case ex parte.
RTC: dismissed the complaint against Spouses Manahans for failure to prosecute and
dismissed complaint against Reyes for failure to show any legal basis for the latter’s liability.
CA: Affirmed Trial court’s decision and denied Petitioner’s MR. Hence this appeal with the
petitioner insisting that a mortgagee can maintain an action for replevin against any possessor
of the object of a chattel mortgage even if the latter were not a party to the mortgage.

ISSUE:
WON A SUIT FOR REPLEVIN IS AN ACTION QUASI IN REM WHICH DOES NOT
NECESSITATE THE PRESENCE OF THE PRINCIPAL OBLIGORS AS LONG AS THE
COURT DOES NOT RENDER ANY PERSONAL JUDGMENT AGAINST THEM

WON ONE CAN FILE ACTION FOR REPLEVIN AGAINST ANY POSSESSOR OF THE
OBJECT OF A CHATTEL MORTGAGE EVEN IF THE LATTER WERE NOT A PARTY TO
THE MORTGAGE

HELD:
Decision of the CA AFFIRMED.

I. THE COURT NEEDS TO HAVE JUSRISDICTION OF THE PRINCIPAL OBLIGORS

BECAUSE THE PURPOSE OF REPLEVIN, A PROCEEDING IN REM, IS TO SUBJECT THE
DEFENDANTS/OBLIGORS INTEREST TO THE OBLIGATION OR LIEN BURDENING THE
PROPERTY.
Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It
may refer either to the action itself, i.e., to regain the possession of personal chattels being
wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow
the plaintiff to retain the thing during the pendency of the action and hold it pendente lite. The
action is primarily possessory in nature and generally determines nothing more than the right of
possession. Replevin is so usually described as a mixed action, being partly in rem and partly in
personam-in rem insofar as the recovery of specific property is concerned, and in personam as
regards to damages involved. Hence, the Court finds that the CA rationated correctly when it
stated that, “In action quasi in rem an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien burdening the property, such
as proceedings having for their sole object the sale or disposition of the property of the
defendant, whether by attachment, foreclosure, or other form of remedy” (Sandejas vs. Robles,
81 Phil. 421). 
In the case at bar, the court cannot render any judgment binding on the defendants spouses for
having allegedly violated the terms and conditions of the promissory note and the contract of
chattel mortgage on the ground that the court has no jurisdiction over their persons, no
summons having been served on them. Consequently, because the principal debtors were not
brought before the jurisdiction of the court for failure to serve summons, there can be no cause
of action against Reyes who is merely an ancillary debtor.

 
II. AN ADVERSE POSSESSOR, WHO IS NOT THE MORTGAGOR, CANNOT JUST BE
DEPRIVED OF HIS POSSESSION, LET ALONE BE BOUND BY THE TERMS OF THE
CHATTEL MORTGAGE CONTRACT, SIMPLY BECAUSE THE MORTGAGEE BRINGS UP
AN ACTION FOR REPLEVIN.
GENERAL RULE: The person in possession of the property sought to be replevied is ordinarily
the proper and only necessary party defendant, and the plaintiff is not required to so join as
defendants other persons claiming a right on the property but not in possession thereof. Rule 60
of the Rules of Court allows an application for the immediate possession of the property but the
plaintiff must show that he has a good legal basis, i.e., a clear title thereto, for seeking
such interim possession.
XPN: In case the right of possession on the part of the plaintiff, or his authority to claim such
possession or that of his principal, is put to great doubt (a contending party might contest the
legal bases for plaintiff's cause of action or an adverse and independent claim of ownership or
right of possession is raised by that party), it could become essential to have other persons
involved and accordingly impleaded for a complete determination and resolution of the
controversy

Reyes as an adverse possessor cannot just be deprived of is possession until the court rules
otherwise. He needs to be properly impleaded for a complete determination and resolution of
the controversy.

Bacaltos Coal Mines v. CA

G.R. No. 114091 June 29, 1995

FACTS:

In an “Authorization,” petitioner Bacaltos authorized Savellon, to use the coal operating contract of
Bacaltos Coal Mine of which he is the proprietor, “For any legitimate purpose that it may serve” and
particularly: (1) to acquire purchase orders; (2) to engage in trading; (3) to collect all receivables due or
in arrears; (4) to extend to any person or company by substitution the same extent of authority that is
granted to Rene Savellon; (5) in connection with the preceding paragraphs to execute and sign
documents, contracts, and other pertinent papers.

In 1988, a Trip Charter Party was executed between Bacaltos Coal Mines (represented by Savellon)
and San Miguel. The agreement was that For Php 650,000 to be paid within seven days after the
execution of the contract, it "lets, demises" the vessel to charterer SMC "For three round trips to
Davao." The vessel was able to make only one trip, so 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.

ISSUE:

WON Savellon was duly authorized by the petitioners to enter into the Trip Charter Party.

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. Also, 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.

Furthermore, 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

EUGENIO VS COURT OF APPEALS 239 SCRA 207

FACTS: Nora Eugenio was a dealer of Pepsi Cola. Her husband used to be a route manager of Pepsi Cola. Pepsi Cola
filed a complaint for a sum of money against the Eugenio couple alleging that on several occasions, the couple
purchased and received on credit various products from two of Pepsi Cola’s plants and they had an outstanding
balance on each plant and that the couple failed to pay despite oral and written demands. In their defense, the
couple presented receipts issued to and received by them from Pepsi Cola’s route manager, Estrada. The court
rendered decision in favour of Pepsi Cola asking the couple to pay the company.

ISSUE:

RULING: Pepsi Cola 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.” [Eugenio vs.
Court of Appeals, 239 SCRA 207(1994)]
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.39 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.40 In fact, Atty. Rosario, private respondent’s own witness, admitted that “it is the
responsibility of the collector to turn over the collection. [Eugenio vs. Court of Appeals, 239 SCRA 207(1994)]
G.R. No. 140667; WOODCHILD HOLDINGS, INC., vs. ROXAS ELECTRIC AND CONSTRUCTION
COMPANY, INC.; August 12, 2004; CALLEJO, SR., J.:

Putative Principal: Roxas Electric and Construction Company, Inc. (RECCI)

Putative Agent: Roberto B. Roxas
Third Party: Woodchild Holdings

FACTS:
Roxas Electric and Construction Company, Inc. (RECCI) authorized its President Roberto B. Roxas
through a resolution to sell a parcel of land owned by the corporation, and to execute, sign and deliver for
and on behalf of the company.

            RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any interested
buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal, covered by Transfer Certificate of
Title No. N-78086, at a price and on terms and conditions which he deems most reasonable and advantageous
to the corporation;
 
            FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as he is
hereby authorized to execute, sign and deliver the pertinent sales documents and receive the proceeds of sale
for and on behalf of the company.
 

Petitioner Woodchild Holdings, Inc. (WHI) through its President Jonathan Y. Dy, offered to buy the land
from RECCI. The offer to purchase stated that it is made on the representation and warranty of the
OWNER/SELLER, that he holds a good and registrable title to the property, which shall be conveyed
CLEAR and FREE of all liens and encumbrances (inc. squatters), and that in the event that the right
of way is insufficient for the buyer’s purpose, the seller agrees to sell additional square meter from his
current adjacent property to allow the buyer full access and full use of the property.

Roxas accepted the offer and indicated his acceptance on Page 2 of the Deed. The sale was
consummated. WHI subsequently entered into a construction agreement with Wimbeco Builder’s Inc.
(WBI) for the construction of a warehouse, and a lease agreement with Poderosa Leather Goods
Company, Inc. with a condition that the warehouse be ready by April 1, 1992. 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 the adjacent 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 latter’s failure to eject the squatters within the
three-month period agreed upon in the said deed. RECCI rejected the demand of WHI, so WHI filed a
case for Specific Performance and Damages in the RTC of Makati.

RTC: in favor of WHI. CA: reversed the RTC decision and dismissed the complaint. The CA ruled that,
under the resolution of the Board of Directors of the RECCI, Roxas was merely authorized to sell the first
lot, but not to grant right of way in favor of the WHI over a portion of the second lot, or to grant an option
to the petitioner to buy a portion thereof.
ISSUES:

1. WON RECCI is bound by the provisions of the deed of sale granting to WHI the beneficial use
and right of way over the adjacent lot of the lot they previously bought
2. WON such provision is enforceable

HELD:

NO. SC agreed with CA.

San Juan Structural and Steel Fabricators, Inc. v. CA using Sec. 23 of BP 68 or the Corporation Code
held that: 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, under NCC 1910, 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 (aka principle of apparent authority).

In BA Finance Corporation v. CA, it was held 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.

Here, the respondent denied authorizing its then president Roberto B. Roxas to sell a portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085, and 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 second lot or to agree to sell to the petitioner a portion thereof based
on the aforementioned board resolution. (SEE EXCERPT ABOVE)

Under paragraph 12, NCC 1878, a special power of attorney is required to convey real rights over
immovable property. NCC 1358 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 Lot No. 491-A-3-B-1.  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. In sum, then, 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

Absent estoppel or ratification, apparent authority cannot remedy the lack of the written power required
under the statute of frauds. It bears stressing that 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

For the principle of apparent authority to apply, the petitioner was burdened to prove the
following: (a) the acts of the respondent justifying belief in the agency by the petitioner; (b) knowledge
thereof by the respondent which is sought to be held; and, (c) reliance thereon by the petitioner consistent
with ordinary care and prudence. In this case, there is no evidence on record of specific acts made by the
respondent showing or indicating that it had full knowledge of any representations made by Roxas to the
petitioner that the respondent had authorized him to grant to the respondent an option to buy a portion of
Lot No. 491-A-3-B-1 covered by TCT No. 78085, or to create a burden or lien thereon, or that the
respondent allowed him to do so.

EXTRA: RECCI liable to pay WHI for the difference between the original cost of construction and the
increase thereon because it failed to respondent’s failure to cause the eviction of the squatters as agreed
upon, WHI lost money and expected profit.

CA AFFIRMED WITH MODIFICATIONS.

Corporate Case Digest: PNB V. Ritratto Group,

Inc. (2001)
G.R. No. 142616            July 31, 2001
Lessons Applicable: Dealings with Corp. and Stockholders (Corporate Law)

FACTS:
 May 29, 1996: 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 Ritratto Group, Inc. (Ritartto) in the amount of US$300K secured by
real estate mortgages constituted over 4 parcels of land in Makati City

 September 1996: increased successively to US$1,140,000.00 

 November 1996: to US$1,290,000.00 

 February 1997: US$1,425,000.00 

 April 1998: decreased to US$1,421,316.18

 Ritratto Group, Inc. made repayments of the loan incurred by remitting those

amounts to their loan account with PNB-IFL in Hong Kong.

 April 30, 1998: outstanding amounted to US$1,497,274.70

 PNB-IFL, through its attorney-in-fact PNB, notified them of the foreclosure

of all the real estate mortgages and that the properties subjected

 May 25, 1999:  Ritratto Group, Inc filed a complaint for injunction with prayer for
the issuance of a writ of preliminary injunction and/or temporary restraining order
before the RTC. -granted 72-hour TRO

 RTC and CA: dismissed motion to dismiss

 PNB-IFL, is a wholly owned subsidiary of defendant Philippine National

Bank, the suit against the defendant PNB is a suit against PNB-IFL

 Rittratto: entire credit facility is void as it contains stipulations in

violation of the principle of mutuality of contracts 

ISSUE: W/N PNB is an alter ego of PNB-IFL

HELD: NO. Petition is granted

 PNB is an agent with limited authority and specific duties under a special power
of attorney incorporated in the real estate mortgage. 

 not privy to the loan contracts entered into by PNB-IFL.

 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. 

 If used to perform legitimate functions, a subsidiary's separate existence may be

respected, and the liability of the parent corporation as well as the subsidiary will be
confined to those arising in their respective business. 

 general rule the stock ownership alone by one corporation of the stock of
another does not thereby render the dominant corporation liable for the torts of the
subsidiary unless the separate corporate existence of the subsidiary is a mere sham,
or unless the control of the subsidiary is such that it is but an instrumentality or
adjunct of the dominant corporation. 

 The Circumstance rendering the subsidiary an

instrumentality (common circumstances)

(a) The parent corporation owns all or most of the capital stock of the subsidiary.
(b) The parent and subsidiary corporations have common directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the subsidiary or
otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses of the
subsidiary.
(g) The subsidiary has substantially no business except with the parent corporation or
no assets except those conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the statements of its officers, the
subsidiary is described as a department or division of the parent corporation, or its
business or financial responsibility is referred to as the parent corporation's own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently in the interest
of the subsidiary but take their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
 
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