THE LAW ON AGENCY

POWERS AND OBLIGATIONS OF AN AGENT

I. RIGHTS OF AGENTS

A. Compensation – Articles 1875, 1909

Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n)
Article 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726)

B. Lend Money To/Borrow Money from Agency – 1890

Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current
rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of
the principal. (n)

C. Appoint a substitute – 1892, 1893

Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he
shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person appointed was
notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be void. (1721)
Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore
bring an action against the substitute with respect to the obligations which the latter has contracted under the
substitution. (1722a)

D. Retain in Pledge the Object of Agency – 1912, 1913, 1914

Article 1912. The principal must advance to the agent, should the latter so request, the sums necessary for
the execution of the agency.
Should the agent have advanced them, the principal must reimburse him therefor, even if the business or
undertaking was not successful, provided the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from the day on which the advance was
made. (1728)
Article 1913. The principal must also indemnify the agent for all the damages which the execution of the
agency may have caused the latter, without fault or negligence on his part. (1729)
Article 1914. The agent may retain in pledge the things which are the object of the agency until the principal
effects the reimbursement and pays the indemnity set forth in the two preceding articles. (1730)

II. OBLIGATIONS OF AGENTS

A. Act within scope of authority – 1879-1882, 1887, 1900

Article 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does
not include the power to sell. (n)
Article 1880. A special power to compromise does not authorize submission to arbitration. (1713a)
Article 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive
to the accomplishment of the purpose of the agency. (1714a)
Article 1882. The limits of the agent's authority shall not be considered exceeded should it have been
performed in a manner more advantageous to the principal than that specified by him. (1715)
Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the
principal.
In default thereof, he shall do all that a good father of a family would do, as required by the nature of the
business. (1719)
Article 1900. So far as third persons are concerned, an act is deemed to have been performed within the
scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his authority according to an understanding between the principal and
the agent. (n)

B. Act in accordance with instructions – 1887, 1885, 1899

Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the
principal.
In default thereof, he shall do all that a good father of a family would do, as required by the nature of the
business. (1719)
Article 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a
family in the custody and preservation of the goods forwarded to him by the owner until the latter should
appoint an agent or take charge of the goods. (n)
Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set
up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n)

C. Carry-out the agency – 1884, 1928, 1929, 1888

Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages
which, through his non-performance, the principal may suffer.
He must also finish the business already begun on the death of the principal, should delay entail any danger.
(1718)
Article 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should
suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent
should base his withdrawal upon the impossibility of continuing the performance of the agency without grave
detriment to himself. (1736a)
Article 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act
until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (1737a)
Article 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage
to the principal. (n)

D. Diligence – 1885, 1887, 1909

Article 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a
family in the custody and preservation of the goods forwarded to him by the owner until the latter should
appoint an agent or take charge of the goods. (n)
Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the
principal.
In default thereof, he shall do all that a good father of a family would do, as required by the nature of the
business. (1719)
Article 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726)

E. Advance Funds – 1886

Article 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be
bound to do so except when the principal is insolvent. (n)

F. Solidarity Liability – 1894, 1895

Article 1894. The responsibility of two or more agents, even though they have been appointed simultaneously,
is not solidary, if solidarity has not been expressly stipulated. (1723)
Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of
agency, and for the fault or negligence of his fellows agents, except in the latter case when the fellow agents
acted beyond the scope of their authority. (n)

G. Prefer the principal’s interest over his own – 1889, 1890, 1491, 1544

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of
the principal, he should prefer his own. (n)
Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current
rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of
the principal. (n)

............................

Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of
the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government-owned or controlled corporation, or institution, the administration of which has been intrusted to
them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in
the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon an
execution before the court within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law. (1459a)
Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith. (1473)

H. Render account – 1891

Article 1891. Every agent is bound to render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may not be owing to the principal.

I. Pay Interest – 1896

Article 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did
so, and on those which he still owes after the extinguishment of the agency. (1724a)

J. Liability for fraud or negligence – 1909

Article 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726)

K. Specific obligations of commission agents – 1903-1908

Article 1903. The commission agent shall be responsible for the goods received by him in the terms and
conditions and as described in the consignment, unless upon receiving them he should make a written
statement of the damage and deterioration suffered by the same. (n)
Article 1904. The commission agent who handles goods of the same kind and mark, which belong to different
owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to
each principal. (n)
Article 1905. The commission agent cannot, without the express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall
be entitled to any interest or benefit, which may result from such sale. (n)
Article 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the
principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to
have been made for cash insofar as the principal is concerned. (n)
Article 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another
called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of
the sale on the same terms agreed upon with the purchaser. (n)
Article 1908. The commission agent who does not collect the credits of his principal at the time when they
become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for
that purpose. (n)

III. OBLIGATIONS AND LIABILITY OF AGENTS TO THIRD PERSONS

Articles 1883, 1894, 1897, 1898, 1899, 1901, 1911

Article 1883. If an agent acts in his own name, the principal has no right of action against the persons with
whom the agent has contracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the
transaction were his own, except when the contract involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the actions between the principal
and agent. (1717)
Article 1894. The responsibility of two or more agents, even though they have been appointed simultaneously,
is not solidary, if solidarity has not been expressly stipulated. (1723)
Article 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. (1725)
Article 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure
the principal's ratification. (n)
Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set
up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n)
Article 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has
ratified, or has signified his willingness to ratify the agent's acts. (n)
Article 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full powers. (n)

Cases:

1. Beaumont vs. Prieto, GR No. L-8988, 1916

2. Jimenez v. Rabot, 38 Phil. 378, 1918

Doctrine: There is ample authority to the effect that a person may by a general power of attorney authorize an agent
to sell "all" the land possessed by the principal, or all that he possesses in a particular city, county, or state. The
power authorized the agent to sell or convey "any or all tracts, lots, or parcels" of land belonging to the plaintiff. It
was held that this was adequate.

Additional(if tinanong) : Where the owner of real property desires to confer upon an attorney in fact authority to sell
the same, it is necessary that the authority should be expressed in writing; but it is not necessary that the property to
be sold should be precisely described. It is sufficient if the authority is so expressed as to determine without doubt the
limits of the agent's authority.

Facts: the plaintiff, Gregorio Jimenez, being the owner of three parcels of land, left the same in the care of his sister,
Nicolasa Jimenez, as his agent and went to live in another province. While so absent, he wrote her to sell one of his
parcels and to send him the money. The sister found a purchaser and sold one of the parcels but failed to forward the
proceeds to her brother. Afterwards the plaintiff returned and.instituted an action to recover the parcel which had been
sold.

Issue: whether or not the agent performed within the scope of his authority.

Held: Yes. There is ample authority to the effect that a person may by a general power of attorney authorize an agent to
sell "all" the land possessed by the principal, or all that he possesses in a particular city, county, or state. The power
authorized the agent to sell or convey "any or all tracts, lots, or parcels" of land belonging to the plaintiff. It was held
that this was adequate.

In the present case the agent was given the power to sell either of the parcels of land belonging to the plaintiff. There is
no reason why the performance of an act within the scope of this authority should not bind the plaintiff to the same
extent as if he had given the agent authority to sell "any or all" and she had conveyed only one'.

3. Sy-Juco v. Sy-Juco, 40 Phil. 634, 1920

4. Severino vs. Severino, GR No. L-18058, 1923

Facts: Deceased Melecio Severino owns a parcel of land. During his lifetime, the said land was worked by the
defendant, Guillermo Severino, his brother, as administrator for and on behalf of Severino. After Melecio's death, the
defendant Guillermo Severino continued to occupy the land. Thereafter, a parcel survey was made of the lands in the
municipality of Silay, including the land here in question, and cadastral proceedings were instituted for the
registration of the land titles within the surveyed area. The issue arises when an action brought by the plaintiff as the
alleged natural daughter and sole heir of one Melecio Severino, to compel the defendant Guillermo Severino to
convey to her four parcels of land described. The lawyer of Guillermo Severino, filed answers in behalf of the latter
claiming the lots mentioned as the property of his client that no opposition was presented in the proceedings to the
claims of Guillermo Severino.

Issue: Whether or not Guillerno Severino, as agent, may acquire the lands under dispute

Ruling: No. The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in
regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse
to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of
good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. Hence,
the defendant, as an agent of Melecio Severino, may not acquire the the lands under dispute.

Additional(kapag tinanong) : Even though the agent acquired legal title over the lands, already shown that before the
issuance of the decree of registration it was the undoubted duty of the defendant to restore the property committed
to his custody to his principal, or to the latter's estate, and that the principal had a right of action in personam to
enforce the performance of this duty and to compel the defendant to execute the necessary conveyance to that
effect.

5. Domingo vs. Domingo, GR L-30573, 1971

6. Bay View Hotel v. Ker & Co., 116 SCRA 327, 1982

Doctrine: Same. Same.—Moreover, since an agent may do such acts as may be conducive to the accomplishment of
the purpose of the agency admissions secured by the agent within the scope of the agency ought to favor the
principal. This has to be the rule, for the act or declarations of an agent of the party within the scope of the agency
and during its existence are considered and treated in turn as the declarations, acts and representations of his
principal and may be given in evidence against such party.
Facts: Bay View Hotel, Inc., then the lessee and operator of the Manila Hotel, secured a fidelity guarantee bond from
Ker & Co., Ltd., for its accountable employees against acts of fraud and dishonesty. Ker & Co., Ltd., is the Philippine
general agent of Phoenix Assurance Co., Ltd., a foreign corporation duly licensed to do insurance business in the
Philippines. The plaintiff filed claims for payments on the said fidelity guarantee bond but Ker & Co. denied and
refused indemnification and payment averring that it was merely an agent.

Counsel for Ker & Co. filed a request for admission of fact that the claim filed was denied on behalf of Pheonix.
Considering the failure of Bay View to make an answer, it impliedly admitted the matter in the request for admission.
Hence, Ker & Co. filed a Motion to Dismiss. Bay View opposed that the proper remedy, under the circumstances was
not to dismiss the complaint but to amend it in order to bring the necessary or indispensable parties to the suit. The
court dismissed the case.

Bay View argues that since the implied admission was made before the amendment of its complaint so as to include
Phoenix, it follows that Phoenix has no right to avail of these admissions, and that the trial court committed a grave
abuse of discretion in extending to Phoenix the legal effects of the request for admission filed solely by Ker & Co.

Issue: Whether or not the legal effects of request for admission by the agent Ker extends to principal Pheonix

Ruling: Yes. an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency,
admissions secured by the agent within the scope of the agency ought to favor the principal. This has to be the rule,
for the act or declarations of an agent of the party within the scope of the agency and during its existence are
considered and treated in turn as the declarations, acts and representations of his principal and may be given in
evidence against such party.

7. Metrobank vs. CA, GR No. 88166, 1991

Doctrine: Civil Law; Obligations and Contracts; Agency; The agent is responsible not only for fraud, but also for
negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was
not for a compensation.—The negligence of Metro-bank has been sufficiently established. To repeat for emphasis, it
was the clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the
proceeds of the treasury Warrants he had deposited. Metrobank misled Golden Savings. There may have been no
express clearance, as Metrobank insists (although this is refuted by Golden Savings) but in any case that clearance
could be implied from its allowing Golden Savings to withdraw from its account not only once or even twice but three
times. The total withdrawal was in excess of its original balance before the treasury warrants were deposited, which
only added to its belief that the treasury warrants had indeed been cleared.

De leon Discussion

Bank allowed a depositor to withdraw from the proceeds of the treasury warrants deposited with the former, even
before the said warrants had been declared cleared.

Facts: Eduardo Gomez opened an account with Golden Savings (a savings and loan association) and deposited over a
period of two months 38 treasury warrants drawn by a government agency with a total value of more than P1.7 million.
Six of these were directly payable to Gomez while the others appear to have been indorsed by their respective payees
followed by Gomez as second indorser. The warrants were subsequently indorsed by Gloria Castillo, Cashier of Golden
Savings, and deposited to its savings account with a branch of MBTC (bank) which forwarded them to the Bureau of
Treasury for special clearing. In the meantime, Gomez was not allowed to withdraw from his account.

After more than two weeks, “exasperated” over Castillo’s repeated inquiries as to whether the warrants had been
cleared, and also as an accommodation for a “valued client,” MBTC finally decided to allow Golden Savings to withdraw
from the proceeds of the warrants. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his
own account. Later, MBTC informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of
Treasury and demanded the refund of the amount Golden Aavings had previously withdrawn, to make up for the defi cit
in its account.

Issue: Was MBTC negligent in giving Golden Savings the impression that the treasury warrants had been cleared and
that consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it?

Held: Yes. (1) MBTC not entitled to refund of amounts withdrawn by Golden Savings. — The argument of MBTC that
Golden Savings would have exercised more care in checking the personal circumstances of Gomez before accepting his
deposit does not hold water. It was Gomez who was entrusting the warrants, not Golden Savings that was extending
him a loan. And moreover, the treasury warrants were subject to clearing pending which the depositor could not
withdraw its proceeds. x x x In stressing that it was acting only as a collecting agent for Golden Savings, MBTC seems to
be suggesting that as mere agent it cannot be held liable to the principal. This is not exactly true. On the contrary, Article
1909 clearly provides that x x x.

Article 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726)

(2) MBTC exhibited extraordinary carelessness. — The amount involved was not trifl ing (and this was in 1979). Despite
the lack of clearance — and notwithstanding that it had not received a single centavo from the proceeds of the treasury
warrants — it allowed Golden Savings to withdraw — not once, not twice, but thrice — from the uncleared treasury
warrants in the total amount of P968,000.00. It “presumed” that the warrants had been cleared. For a bank with its long
experience, this explanation is unbelievably naive.

MBTC misled Golden Savings. There may have been no clearance but that clearance could be implied from MBTC
allowing Golden Savings to withdraw from its account three times. The total withdrawal was in excess of its original
balance before the treasury warrants were deposited, which only added to its beliefs that they had indeed been cleared.
(Metropolitan Bank Trust Co. vs. Court of Appeals, 194 SCRA 169 [1991].)

Court Ruling: Yes. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more
or less rigor by the courts, according to whether the agency was or was not for a compensation.—The negligence of
Metro-bank has been sufficiently established. To repeat for emphasis, it was the clearance given by it that assured
Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury Warrants he had
deposited. Metrobank misled Golden Savings. There may have been no express clearance, as Metrobank insists
(although this is refuted by Golden Savings) but in any case that clearance could be implied from its allowing Golden
Savings to withdraw from its account not only once or even twice but three times. The total withdrawal was in excess
of its original balance before the treasury warrants were deposited, which only added to its belief that the treasury
warrants had indeed been cleared.

8. Cosmic Lumber v. Court of Appeals, 265 SCRA 168, 1996

Doctrine: Agency; Fraud; Equity; When an agent is engaged in the perpetration of a fraud upon his principal for his
own extrinsic benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope
of his agency—the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an
agent will not be permitted to pervert his authority to his own personal advantage.—It may be argued that petitioner
knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice
to his agent received while the agent was acting as such. But the general rule is intended to protect those who
exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general
rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not
communicate to the principal the facts in controversy. The logical reason for this exception is that where the agent is
committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the
facts to the principal. Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his own
exclusive benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of
his agency. Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and
an agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret hostility to
the interests of his principal trascends the power afforded him.

Additional doctrines: Same; Same; Same; Same; Same; Same; Extrinsic fraud refers to any fraudulent act of the
prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has
been prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent.—
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which
prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it
operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that
there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the
prevailing party in the litigation which is committed
Agency; Special Powers of Attorney; Compromise Agreements; Sales; Pre-Trial; Ejectment; A special power of attorney
for an agent to institute any action in court to eject all persons in the principal's lots so that the principal could take
material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts
and/or compromise agreement but only insofar as this is protective of the rights and interests of the principal in the
property, does not grant any power to the agent to sell the subject property nor a portion thereof.

Same; Same; Same; Same; The express mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of
the action mentioned.

Same; Same; Same; Courts; Jurisdiction; The nullity of the settlement between an agent and a third person impairs
the jurisdiction of the trial court to render its decision based on the compromise agreement

Facts: Cosmic Lumber Corporation through its General Manager executed a Special Power of Attorney appointing Paz G.
Villamil-Estrada as attorney-in-fact to initiate, institute and file any court action for the ejectment of third persons
and/or squatters, to appear at the pre-trial conference and enter into any stipulation of facts and or compromise
agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Subsequently,
Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an ejectment case against private respondent
Isidro Perez. Villamil-Estrada entered into a Compromise Agreement with respondent Perez and it was approved by the
trial court and judgment was rendered in accordance the terms. Although the decision became final and executory, it
was not executed within the 5-year period from date of its finality. Thus, respondent Isidro Perez filed a complaint to
revive the judgment.

Cosmic Lumber asserts that it was only when the summons for the revival of judgment was served upon it that it came
to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez. Upon
learning of the fraudulent transaction, Cosmic Lumber sought annulment of the decision of the trial court before
respondent Court of Appeals on the ground that the compromise agreement was void.

Issue: Whether or not the fraudulent act (entering compromise agreement) of the agent(Estrada) binds the
principal(Cosmic Lamber)

Ruling : Yes.When an agent is engaged in the perpetration of a fraud upon his principal for his own extrinsic benefit, he
is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency the basic
tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be permitted to
pervert his authority to his own personal advantage.—It may be argued that petitioner knew of the compromise
agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while
the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as a
shield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and
dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in
controversy. The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to
common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is
engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for the
principal but is really acting for himself, entirely outside the scope of his agency. Indeed, the basic tenets of agency rest
on the highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority
to his own personal advantage, and his act in secret hostility to the interests of his principal trascends the power
afforded him.

9. British Airways vs. CA, GR No. 121824, 1998

Doctrine: Air Transportation; Agency; Damages; An agent is also responsible for any negligence in the performance of
its function and is liable for damages which the principal may suffer by reason of its negligent act.— Parenthetically,
the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any
negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its
negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action
against PAL, its agent or subcontractor.
Facts: Mahtani decided to visit his relatives in Bombay, India. He obtained services of Mr. Gumar to prepare his travel
plans. The latter purchased a ticket from British Airways (BA). Since BA had no direct flights from Manila to Bombay,
Mahtani flight to Hongkong via PAL, and upon arrival in HK he had to take a connecting had to take a flight to Bombay on
board BA. Mahtani checked in at the PAL counter in Manila his 2 pieces of luggage. When Mahtani arrived in Bombay, he
discovered that his luggage was missing. Mahtani filed his claim for damages against BA and Mr. Gumar.

BA filed a third party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the
latter's late arrival in HK, thus leaving hardly any time for the proper transfer of Mahtani luggage to the BA aircraft
bound for Bombay.

Trial court rendered its decision in favor of Mahtani. The third party complaint against PAL was dismissed for lack of
cause of action. CA affirmed in toto. Hence, the petition.

Issue: a. Whether or not PAL is an agent of BA

b. Whether or not the agent PAL is responsible for his negligent act to his principal BA.

Ruling: a. The contract of air transportation in this case pursuant to the ticket issued by BA was exclusively between
Mahtani and BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a
subcontractor or agent of BA. The rule that carriage by plane although performed by successive carriers is regarded as a
single operation

b. it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal,
had no cause of action against PAL, its agent or sub-contractor

It is true that Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However,
this is not to say that PAL is relieved from any liability due to any of its negligent acts. However, we recognized that a
carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.

10. Cervantes v. Court of Appeals, 304 SCRA 25, 1999

11. Chua-Burce v. Court of Appeals, 331 SCRA 1, 2000

Doctrine: The agent has the right to retain, hence he has juridical possession over the object. Unlike the cash
custodian who has no right to retain. (char hahaha)

Facts: Ramon Rocamora, manager of Metrobank, requested his Assistant Cashier to conduct a physical cash count
inside the vault, which should total to P4 million. They found out that there was a shortage of P150,000. After 4
investigations conducted by the bank and NBI, the reports concluded that petitioner Cristeta Chua-Burce, Cash
Custodian, was primary responsible for the shortage.

Chua, were charged with the crime of estafa and the court found her guilty. Hence, the the petition.

Issue: Whether or not the petitioner chua has judicial possession over the cash she received as a custodian.
(Necessary issue to determine whether she is liable for estafa)
Ruling: No. There is an essential distinction between the possession by a receiving teller of funds received from third
persons paid to the bank, and an agent who receives the proceeds of sales of merchandise delivered to him in agency
by his principal. In the former case, payment by third persons to the teller is payment to the bank itself; the teller is a
mere custodian or keeper of the funds received, and has no independent right or title to retain or possess the same as
against the bank. An agent, on the other hand, can even assert, as against his own principal, an independent,
autonomous, right to retain money or goods received in consequence of the agency; as when the principal fails to
reimburse him for advances he has made, and indemnify him for damages suffered without his fault

Juridical possession means a possession which gives the transferee a right over the thing which the transferee may set
up even against the owner. In this case, petitioner was a cash custodian who was primarily responsible for the cash-
invault. Her possession of the cash belonging to the bank is akin to that of a bank teller, both being mere bank
employees.

12. Serona v. Court of Appeals, 392 SCRA 35, 2002

13. Woodchild vs. Roxas, GR No. 140667, 2004

14. Guinhawa vs. People, GR No. 162822, 2005

Doctrine: Case law has it that wherever the doing of a certain act, or the transaction of a given affair, or the
performance of certain business is confided to an agent, the authority to so act will generally carry with it by implication
the authority to do all the collateral acts which are the natural and ordinary incidents of the main act or business
authorized. (Guinnawa vs. People, 468 SCRA 278 [2005], citing Park vs. Moorman Manufacturing Co., 40 A.L.R. 2d 273
[1952].)

It will be seen that the power of the agent to subject his principal to liability at the instance of third persons is much
wider than his authority. Of course, it is to authority that we must look in determining (a) the nature of the relationship,
i.e., whether it be that of master and servant, principal and agent, or principal and independent contractor, and (b) the
agent’s ability normally to subject his principal to liability in contract. (Teller, op. cit., p. 6.)

Same; Same; Same; Agency; Where the doing of a certain act or the transaction of a given affair, of the performance of
certain business is confided to an agent, the authority to so act will carry with it by implication the authority to do all the
collateral acts which are natural and ordinary incidents of the main act or business authorized.—The petitioner cannot
pin criminal liability for his fraudulent omission on his general manager, Azotea. The two are equally liable for their
collective fraudulent silence. Case law has it that wherever the doing of a certain act or the transaction of a given affair,
or the performance of certain business is confided to an agent, the authority to so act will, in accordance with a general
rule often referred to, carry with it by implication the authority to do all of the collateral acts which are the natural and
ordinary incidents of the main act or business authorized.

Facts:

Issue:

Ruling:

15. Olaguer v. Purugganan, Jr., 515 SCRA 460, 2007

Doctrine: Construction of powers of attorney. — Powers of attorney are generally construed strictly and courts will not
infer or presume broad powers from deeds which do not suffi ciently include property or subject under which the agent
is to deal. The act done must be legally identical with that authorized to be done. (Woodchild Holdings, Inc. vs. Roxas
Electric & Construction Co., Inc., 436 SCRA 235 [2004].) However, the rule is not absolute and should not be applied to
the extent of destroying the very purpose of the power. Furthermore, the instrument should always be deemed to give
such powers as are essential or usual in effectuating the express powers. (Olaguer vs. Purugganan, Jr., 575 SCRA 460
[2007].)

Facts:

Issue:
Ruling:

16. Escueta v. Lim, 512 SCRA 411, 2007

17. Sargasso Construction & Development Corporation/Pick & Shovel, Inc. vs.

Philippine Ports Authority, 623 SCRA 260, 2010

18. Hernandez v. Hernandez, 645 SCRA 24, 2011

Doctrine:

Facts:

Issue:

Ruling:

19. Municipal Council of Iloilo vs. Evangelista, 55 Phil 290

Doctrine: An attorney-in-fact empowered to pay the debts of the principal and to employ attorneys to defend the
latter’s interests is impliedly empowered to pay attorney’s fees for services rendered in the interests of the principal.
(Municipal Council of Iloilo vs. Evangelista, 55 Phil. 290 [1930].)

Facts:

Issue:

Ruling:

20. Oliver v. Philippine Savings Bank and Castro, GR No. 214567, April 4, 2016