1. PHILIPPINE NATIONAL BANK, petitioner, vs. MANILA attempted to do so.

It must not be forgotten that the Bank's power to

SURETY and FIDELITY CO., INC. and THE COURT OF
APPEALS (Second Division), respondents.
G.R. No. L-20567 July 30, 1965
FACTS: The Philippine National Bank had opened a letter of credit
and advanced thereon $120,000.00 to Edgington Oil Refinery for
8,000 tons of hot asphalt. Of this amount, 2,000 tons worth
P279,000.00 were released and delivered to Adams & Taguba
Corporation (known as ATACO) under a trust receipt guaranteed by
Manila Surety & Fidelity Co. up to the amount of P75,000.00. To pay
for the asphalt, ATACO constituted the Bank its assignee and
attorney-in-fact to receive and collect from the Bureau of Public
Works the amount aforesaid out of funds payable to the assignor
under Purchase Order No. 71947.
collect was expressly made irrevocable, so that the Bureau of Public
Works could very well refuse to make payments to the principal
debtor itself, and a fortiori reject any demands by the surety.
The fact remains that because of the Bank's inactivity the other
creditors were enabled to collect P173,870.31, when the balance due
to appellant Bank was only P158,563.18. The finding of negligence
made by the Court of Appeals is thus not only conclusive on us but
fully supported by the evidence.
2. CONSOLACION L. RAMOS, administratrix-appellant,
vs. BENIGNO A. CAOIBES, attorney-in-fact-appellee.
G.R. No. L-5142 February 26, 1954

FACTS: Concepcion Ramos died on August 19, 1948, leaving a will

ATACO delivered to the Bureau of Public Works, and the latter
dated January 7, 1927 admitted to probate on October 4, 1948, in
accepted, asphalt to the total value of P431,466.52. Of this amount
which she ordered that the credits due to her be distributed among the
the Bank regularly collected, from April 21, 1948 to November 18,
children of the deceased Antonino Ramos, namely, Consolacion,
1948, P106,382.01. Thereafter, for unexplained reasons, the Bank
Ramon, Socorro and Cirila.
ceased to collect, until in 1952 its investigators found that more
moneys were payable to ATACO from the Public Works office,
One year before she died, Concepcion Ramos filed with the War
because the latter had allowed mother creditor to collect funds due to
Damage Commission a claim and on August 31, 1948, the
ATACO under the same purchase order to a total of P311,230.41.
Commission issued check in the amount of P501.62, payable to the
deceased Concepcion Ramos. This check was returned to the
Its demands on the principal debtor and the Surety having been
Commission and substituted by the latter which check No. 564614,
refused, the Bank sued both in the Court of First Instance of Manila
on November 10, 1948, for the same amount, but payable to Benigno
to recover the balance of P158,563.18 as of February 15, 1950, plus
A. Caoibes, who had presented to said entity a power of attorney and
interests and costs.
1 a document
AGENCY: of donation bothof the
Obligations executed
Agentby Concepcion
(Arts. Ramos
1884 to 1909)
Dipusoy in order to exchange the first check No. 564614, which he
CA: found the Bank to have been negligent in having stopped
cashed for himself.
collecting from the Bureau of Public Works the moneys falling due in
favor of the principal debtor, ATACO, from and after November 18,
The said documents were presented to the Commission by Caoibes
1948, before the debt was fully collected, thereby allowing such
after the death of Concepcion. The administratrix, Consolacion L.
funds to be taken and exhausted by other creditors to the prejudice of
Ramos, the appellant herein, discovered the collection made by
the surety, and held that the Bank's negligence resulted in exoneration
Caoibes when she saw the note "previous payment" which appeared
of respondent Manila Surety & Fidelity Company.
in the account sent to her by the Commission on October 13, 1950.
She filed a motion with the court asking that Caoibes be ordered to
Bank: It contends the power of attorney obtained from ATACO was
deposit the sum of P501.62 with the clerk of court. Caoibes answered
merely in additional security in its favor, and that it was the duty of
the motion admitting that after the death of Concepcion, he presented
the surety, and not that of the creditor, owed see to it that the obligor
the documents to the Commission and received in cash the sum of
fulfills his obligation, and that the creditor owed the surety no duty of
P501.62, amount of the second check, above mentioned, but stating
active diligence to collect any, sum from the principal debtor.
that he was willing to deliver to the clerk the sum of P250.81. He
contended that, by virtue of the said documents, he had the right to
ISSUE: Bank liable for neglect in collecting sums due its debtor.
retain, for himself, half of the sum of P501.62.
RULING: Yes.
ISSUE: WON Caoibes, as an agent has the obligation to deliver the
amount collected by him by virtue of said power to the administratrix
The Court of Appeals did not hold the Bank answerable for
of the estate of his principal.
negligence in failing to collect from the principal debtor but for its
neglect in collecting the sums due to the debtor from the Bureau of
RULING: Yes.
Public Works, contrary to its duty as holder of an exclusive and
irrevocable power of attorney to make such collections, since an
Caoibes, as agent, had the obligation to deliver the amount collected
agent is required to act with the care of a good father of a family
by virtue of said power to his principal, Concepcion, or, after her
(Civ. Code, Art. 1887) and becomes liable for the damages which the
death, to the administratrix of her estate, Consolacion. There is
principal may suffer through his non-performance (Civ. Code, Art.
absolutely no cession of rights made in favor of Caoibes in the
1884). Certainly, the Bank could not expect that the Bank would
execured power of attorney, and under Article 1711 of the old Civil
diligently perform its duty under its power of attorney, but because
Code (which was in force at the time of the transaction), the contract
they could not have collected from the Bureau even if they had
of agency is presumed to be gratuitous, unless the agent is a

Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino

 professional agent. There is no proof that Caoibes was such.
Furthermore, according to Article 1732 of said Code, an agency is
terminated, among other causes, by the death of the principal or of
the agent. When Caoibes made use of the power of attorney, his
principal, Concepcion was already dead.
Coming now to the affidavit, the alleged document of donation The
alleged donation was made in writing but it has not been accepted in
the same form, and consequently, has no validity. It cannot be
considered a donation upon valuable consideration, for no services
nor any valuable consideration had passed from the donees to the
donor. The mere fact that Caoibes collected the claim from the War
Damage Commission is not such a service as to require
compensation. Caoibes did not even prepare the claim.
In view of the foregoing, the order appealed from is hereby reversed
and Benigno A. Caoibes is ordered to deposit with the Clerk of Court
of Batangas the sum of P501.62 to be at the disposal of the
administratrix in her capacity as such, without pronouncement as to
costs.
3. GUTIERREZ HERMANOS, Plaintiffs-Appellees, v. ORIA
2 HERMANOS, Defendants-Appellants.
G.R. No. L-6485 March 17, 1911
Moreland, J.:
FACTS: Two vessels known as Serantes and Comillas were owned
by defendant Oria Hermanos. Herein Plaintifff Gutierrez Hermanos
acting on or behalf of defendant obtained insurance from an
insurance from Paris, France on two vessels, through its agents in
Paris. And the insurance was continued on behalf of the defendant
Oria Hermanos. Plaintiff Gutierrez Hermanos faithfully paid the
insurance and charged the same against the defendant.
Plaintiff now seeks to recover the amount no reference being made in
the complaint in that action to the sum sued for in the action at bar.
What the status of that action is we do not know. Later, and on the
18th of March, 1910, the plaintiff began this action for the recovery
of premiums paid during the years 1907, 1908, and 1909. During
these three years one of the vessels in question, the Serantes, was
insured in the name of the plaintiff.
The defendant argued that after closing of the account and the
commencement of the action severed all relations of every kind
between the parties and the plaintiff had no authority to act for the
defendant.
ISSUE: Whether or not the plaintiff is the agent of the defendant?
RULING: Yes.
The whole case as presented, both by the oral testimony and the
exhibits, demonstrates beyond shadow of doubt that the plaintiff was
acting as the agent of the defendant in placing the insurance upon the
vessels in question and that such act redounded to its benefit. The
idea presented in argument of counsel for appellant, that all relations
were broken off and terminated by the commencement of the action
upon the account current by the plaintiff in March, 1909, and that,
therefore, the plaintiff could do nothing whatever on behalf of the
defendant thereafter, wholly loses its force when we observe that, in
reality, the plaintiff did not do anything on behalf of the defendant
after that time. What it did and all it did was to fulfill a contract
which it had made with the insurance company prior to the beginning
of that action. The plaintiff had secured the insurance of the two
vessels during the years 1907, 1908, and 1909, and had agreed to pay
the insurance company the premiums thereon. The three contracts for
those years had been made by the plaintiff and it had become liable to
fulfill the same on its part prior to the commencement of the action
on the 30th of March, 1909. The payment thereafter of the insurance
premiums for those three years is no proof that the plaintiff was still
exercising a relation which existed after the commencement of that
action, but indicates simply that it was completing an obligation
which it had made when that relation was admittedly in force.
4. VICENTE M. DOMINGO, represented by his heirs,
ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO,
CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and
JOSELITO, all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P.
PURISIMA, intervenor-respondent.
G.R. No. L-30573 October 29, 1971
AGENCY: Obligations of the Agent (Arts. 1884 to 1909)
Makasiar, J.:
FACTS: Vicente Domingo granted to Gregorio Domingo, a real
estate broker, the exclusive agency to sell his lot, Piedad Estate in a
document. According to the document, the said lot must be sold for
P2 per sq. m. Greg sq. m. and Gregorio is entitled to 5% commission
on the total price of the property. Gregorio Domingo authorized
Teofilo Purisima to look for a buyer without notifying Vicente.
Gregorio promised teofilo ½ of the 5% commission. Teofilo
introduced Oscar de Leon to Gregorio as the prospective buyer.
Oscar submitted a written offer for which was very much lower than
the P2 per sq. m. price. Vicente directed Gregorio to tell Oscar to
raise his offer. After several conferences, Oscar raised his offer to
P1.20 per sq. m. or P190,000 in total and Gregorio agreed to the said
offer. Upon Vicente’s demand, Oscar issued a P1,000 as earnest
money. Vicente advanced P300 to Gregorio. Vicente asked for an
additional P1000 earnest money, which Oscar promised to deliver to
Vicente.
Oscar gave gregorio P1000 as a gift for succeeding in persuading
Viente to sell his lot, but Gregorio did not disclose said gift to
Vicente.
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 Gregorio did not see Oscar for several weeks thus sensing that
something fishy might be going on. So, he went to Vicente’s house
where he read a portion of the agreement that vicente was still willing
to pay 5% commission. Gregorio went to the ROD where he
discovered that a Deed of Sale was executed by Amparo de Leon,
Oscar’s wife, in favour of Vicente.
Vicente stated that Gregorio is not entitled to the 5% commission
because he sold the property not to Gregorio's buyer, Oscar de Leon,
but to another buyer, Amparo Diaz, wife of Oscar de Leon.
ISSUE: Whether or not the failure on the part of Gregorio to disclose
of the gift given to him by Oscar constitutes fraud as to cause a
forfeiture of his commission on the sale price?
RULING: Yes.
The duties and liabilities of a broker to his employer are essentially
those which an agent owes to his principal.
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing to
the principal.
Every stipulation exempting the agent from the obligation to render
an account shall be void.
Art. 1909. The agent is responsible not only for fraud but also for
negligence, which shall be judged with more less rigor by the courts,
3 according to whether the agency was or was not for a compensation.
The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real estate
broker in this case, to his principal, the vendor. The law imposes
upon the agent the absolute obligation to make a full disclosure or
complete account to his principal of all his transactions and other
material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent
from such an obligation and considers such an exemption as void.
The duty of an agent is likened to that of a trustee. This is not a
technical or arbitrary rule but a rule founded on the highest and truest
principle of morality as well as of the strictest justice.2
Hence, an agent who takes a secret profit in the nature of a bonus,
gratuity or personal benefit from the vendee, without revealing the
same to his principal, the vendor, is guilty of a breach of his loyalty
to the principal and forfeits his right to collect the commission from
his principal, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or
that the agency is a gratuitous one, or that usage or custom allows it;
because the rule is to prevent the possibility of any wrong, not to
remedy or repair an actual damage.3 By taking such profit or bonus
or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his commission is
concerned, as if no agency had existed. The fact that the principal
may have been benefited by the valuable services of the said agent
does not exculpate the agent who has only himself to blame for such
a result by reason of his treachery or perfidy.
Here, defendant-appellee Gregorio Domingo as the broker, received a
gift or propina in the amount of One Thousand Pesos (P1,000.00)
from the prospective buyer Oscar de Leon, without the knowledge
and consent of his principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial monetary gift corrupted
his duty to serve the interests only of his principal and undermined
his loyalty to his principal, who gave him partial advance of Three
Hundred Pesos (P300.00) on his commission. As a consequence,
instead of exerting his best to persuade his prospective buyer to
purchase the property on the most advantageous terms desired by his
principal, the broker, herein defendant-appellee Gregorio Domingo,
succeeded in persuading his principal to accept the counter-offer of
the prospective buyer to purchase the property at P1.20 per square
meter or One Hundred Nine Thousand Pesos (P109,000.00) in round
figure for the lot of 88,477 square meters, which is very much lower
the the price of P2.00 per square meter or One Hundred Seventy-Six
Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot
originally offered by his principal.
5. THE UNITED STATES vs. DOMINGO REYES
G.R. No. L-12743 August 25, 1917
ESTAFA; AGENCY.—The right to a commission does not make one
a joint owner with a right to money collected, but establishes the
relation of principal and agent. The agent is under obligation to turn
over to the principal the amount collected minus his commission. But
the agent, having unlawfully retained more than his commission, is
AGENCY:
guilty of estafa. Obligations of the Agent (Arts. 1884 to 1909)
FACTS:
RB Blackman is a surveyor in Pangasinan. He employed respondent
Domingo Reyes to collect funds due from 12 persons for Blackman’s
work in the survey of their lands. The total amount to be collected
was P860, however, Reyes only collected P540, P368 of which he
delivered to Blackman, and the remainder he retained.
Since the contract was merely oral, Blackman claims to have agreed
to pay Reyes a 10% commission, while Reyes claims 20%.
The trial court, in its decision, accepted Blackman’s claim of 10% -
thus Reyes was entitled to P54 out of the P540 collected. If the claim
of Reyes was to be accepted, then the P172 he retained Is exactly
20% of the P860 he was to collect.
RTC: Reyes guilty of estafa, thus the appeal.
ISSUE:
WON Reyes is guilty of estafa.
HELD: Yes. Under the contract, Reyes was an AGENT who was
bound to pay the principal all that he had received by virtue of the
agency. Conceding that Reyes was to receive 20% (or whatever
amount for that matter), it did not, unless some contrary stipulation
was included, automatically entitle him in advance to his
commission, and allow him to hold on to the same. Since the agency
had been terminated, Reyes, as agent, was bound to turn over to the
principal the amount collected, minus his commission on that
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 amount. Since all the requisites of estafa as punished by Art 535 of
the Penal Code (old), Reyes is thus guilty.
6. ROSA VILLA MONNA vs.
GUILLERMO GARCIA BOSQUE, ET AL., GUILLERMO
GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE
G.R. No. L-24543             July 12, 1926
PRINCIPAL AND AGENT; ATTORNEY IN FACT
UNDER SUBSTITUTED POWER; LACK OF
AUTHORITY TO RELEASE SURETIES.—A sale of
property was made by the attorney in fact for a stated
consideration, part of which was paid in cash and the
balance made payable in deferred instalments. The
attorney in fact then executed a substituted power of
attorney in favor of a third person to enable the latter to
collect the deferred instalments. Held, That under this
power the substituted attorney in fact had no authority to
enter into a new contract with a transferee of the original
purchasers modifying the terms of the sale and releasing
two individuals who had joined as solidary sureties in the
original contract.
PRINCIPAL AND SURETY ; EXTENSION OF TIME BY
CREDITOR TO PRINCIPAL DEBTOR; EFFECT ON
LIABILITY OF SURETIES.—Where the purchase price of
property is payable in various instalments, an extension of
time granted by the creditor to the debtor with respect to
one instalment will discharge the sureties, whether simple
or solidary, from all liability as to such instalment but it
does not affect their liability for other instalments
4 unconnected with the extension of time
PRINCIPAL AND AGENT; ATTORNEY IN FACT
UNDER SUBSTITUTED POWER; LACK OF
AUTHORITY TO RELEASE SURETIES.—A sale of
property was made by the attorney in fact for a stated
consideration, part of which was paid in cash and the
balance made payable in deferred instalments. The
attorney in fact then executed a substituted power of
attorney in favor of a third person to enable the latter to
collect the deferred instalments. Held, That under this
power the substituted attorney in fact had no authority to
enter into a new contract with a transferee of the original
purchasers modifying the terms of the sale and releasing
two individuals who had joined as solidary sureties in the
original contract.
PRINCIPAL AND SURETY ; EXTENSION OF TIME BY
CREDITOR TO PRINCIPAL DEBTOR; EFFECT ON
LIABILITY OF SURETIES.—Where the purchase price of
property is payable in various instalments, an extension of
time granted by the creditor to the debtor with respect to
one instalment will discharge the sureties, whether simple
or solidary, from all liability as to such instalment but it
does not affect their liability for other instalments
unconnected with the extension of time
PRINCIPAL AND AGENT; ATTORNEY IN FACTUNDER
SUBSTITUTED POWER; LACK OF AUTHORITY TO RELEASE
SURETIES.—A sale of property was made by the attorney in fact for
a stated consideration, part of which was paid in cash and the
balance made payable in deferred instalments. The attorney in fact
then executed a substituted power of attorney in favor of a third
person to enable the latter to collect the deferred instalments. Held,
That under this power the substituted attorney in fact had no
authority to enter into a new contract with a transferee of the
original purchasers modifying the terms of the sale and releasing two
individuals who had joined as solidary sureties in the original
contract.
PRINCIPAL AND SURETY ; EXTENSION OF TIME BY
CREDITOR TO PRINCIPAL DEBTOR; EFFECT ONLIABILITY
OF SURETIES.—Where the purchase price of property is payable in
various instalments, an extension of time granted by the creditor to
the debtor with respect to one instalment will discharge the sureties,
whether simple or solidary, from all liability as to such instalment
but it does not affect their liability for other instalments unconnected
with the extension of time.
FACTS:
Plaintiff Rosa Villa owned a printing establishment and bookstore in
Escolta, Manila. Now a resident of Barcelona, Spain, Rosa Villa,
through attorney-in-fact Manuel Pirretas, sold the establishment to
defendants Guillermo Garcia Bosque and Jose Pomar Ruiz, for P55k,
payable in FOUR installments in THREE years with interest of 7%
per annum. Defendants France and Goulette obligated themselves
solidarily as sureties with Bosque and Ruiz. The first installment of
P15k was paid as per agreement.
Manuel Pirretas, the attorney-in-fact, due to a prolonged visit to
Spain, made a partial substitution of agency, transferring the powers
conferred to him to Figueras Hermanos, in order for the latter to
effect the collection of the installments due from Bosque and Ruiz.
For the 2nd installment, defendants were not able to comply, and came
to an agreement with Alfredo Rocha,, Figueras Hermanos’
AGENCY:
representative for aObligations of theofAgent
reduced payment P5.8k(Arts. 1884
from the to 1909)
required
P10k. The deficit was to be paid in a staggered fashion with 5
promissory notes, and a 9% interest was set, instead of 7%. The
balance was paid in full by Bosque.
Due to a conversion of the business into a limited partnership, and to
a corporation under the name “Bota Printing Company”, M.T.
Figueras entered into an agreement with Bosque, assigning the debt
to the new stockholders, and releasing sureties France and Goulette.
Rosa Villa sued for collection from Bosque and Ruiz as well as
France and Goulette as sureties.
Trial Court: ruled in favor of the plaintiff, requiring all of the
defendants, jointly and severally, to pay to the plaintiff the sum of
P19,230.01, as capital, with stipulated interest at the rate of 7 per
centum per annum, plus the further sum of P1,279.70 as interest
already accrued and unpaid upon the date of the institution of the
action, with interest upon the latter amount at the rate of 6 per centum
per annum. From this judgment Guillermo Garcia Bosque, as
principal, and R. G. France and F.H. Goulette, as sureties. appealed.
ISSUE:
WON Rosa Villa is bound by the contract of release entered into by
Figueras Hermanos as the agent of her attorney-in-fact Manuel
Pirretas?
HELD:
NO. The partial substitution of agency purports to confer on Figueras
Hermanos or the person or persons exercising legal representation of
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 the same all of the powers that had been conferred on Pirretas by the
plaintiff in the original power of attorney. The power of attorney is
assumed to confer a general power to Pirretas to sell the business
known as La Flor de Cataluña upon conditions to be fixed by him and
power to collect money due to the plaintiff upon any account, with a
further power of substitution, yet it is obvious upon the face of the act
of substitution (Exhibit B) that the sole purpose was to authorize
Figueras Hermanos to collect the balance due to the plaintiff upon the
price of La Flor de Cataluña, the sale of which had already been
affected by Pirretas.
There is nothing here that can be construed to authorize Figueras
Hermanos to discharge any of the debtors without payment or to
novate the contract by which their obligation was created. On the
contrary the terms of the substitution shows the limited extent of the
power.
Furthermore, In the actual execution of the release, M. T. Figueras
intervenes as purpoted attorney in fact without anything whatever to
show that he is in fact the legal representative of Figueras Hermanos
or that he is there acting in such capacity. The act of substitution
conferred no authority whatever on M. T. Figueras as an individual.
In view of these defects in the granting and exercise of the substituted
power, we agree with the trial judge that the Exhibit 1 is not binding
on the plaintiff. Figueras had no authority to execute the contract of
release and novation in the manner attempted; and apart from this it is
shown that in releasing the sureties Figueras acted contrary to
instructions.
5 7. DEVELOPMENT BANK OF THE PHILIPPINES 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
G.R. No. L-109937, March 21, 1994
FACTS: In May 1987, Juan B. Dans, together with his wife Candida,
his son and daughter-in-law, applied for a loan of P500,000.00 with
the DBP. As the principal mortgagor, Dans, then 76 years of age, was
advised by DBP to obtain a mortgage redemption insurance (MRI)
with the DBP Mortgage Redemption Insurance Pool (DBP MRI
Pool).
A loan, in the reduced amount of P300,000.00, was approved and
released by DBP. From the proceeds of the loan, DBP deducted the
amount of P1,476.00 as payment for the MRI premium. The MRI
premium of Dans, less the DBP service fee of 10 percent, was
credited by DBP to the savings account of the DBP MRI Pool.
Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon
notice, relayed this information to the DBP MRI Pool. On September
23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible
for MRI coverage, being over the acceptance age limit of 60 years at
the time of application.
DBP apprised Candida Dans of the disapproval of her late husband's
MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to
accept the same, demanding payment of the face value of the MRI or
an amount equivalent to the loan. She, likewise, refused to accept an
ex gratia settlement of P30,000.00, which the DBP later offered.
ISSUES:
1. WON DBP MRI Pool be held liable for the
transaction.
2. WON DBP is liable for the transaction.
RULING:
1. NO. DBP MRI Pool cannot be held liable on a
contract that does not exist.
The power to approve MRI applications is lodged
with the DBP MRI Pool. The pool, however, did
not approve the application of Dans. There is
also no showing that it accepted the sum of
P1,476.00, which DBP credited to its account
with full knowledge that it was payment for
Dan's premium. There was, as a result, no
perfected contract of insurance.
2. YES. DBP is liable.
In dealing with Dans, DBP was wearing two
legal hats: the first as a lender, and the second as
an insurance agent.
AGENCY: Obligations of the Agent (Arts. 1884 to 1909)
As an insurance agent, DBP made Dans go
through the motion of applying for said
insurance, thereby leading him and his family to
believe that they had already fulfilled all the
requirements for the MRI and that the issuance of
their policy was forthcoming. Apparently, DBP
had full knowledge that Dan's application was
never going to be approved.
The DBP is not authorized to accept applications
for MRI when its clients are more than 60 years
of age. Knowing all the while that Dans was
ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its
authority when it accepted Dan's application for
MRI by collecting the insurance premium, and
deducting its agent's commission and service fee.
The liability of an agent who exceeds the scope
of his authority depends upon whether the third
person is aware of the limits of the agent's
powers. There is no showing that Dans knew of
the limitation on DBP's authority to solicit
applications for MRI.
If the third person dealing with an agent is
unaware of the limits of the authority conferred
by the principal on the agent and he (third
person) has been deceived by the non-disclosure
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 thereof by the agent, then the latter is liable for
damages to him. The rule that the agent is liable
when he acts without authority is founded upon
the supposition that there has been some wrong
or omission on his part either in misrepresenting,
or in affirming, or concealing the authority under
which he assumes to act. Inasmuch as the non-
disclosure of the limits of the agency carries with
it the implication that a deception was perpetrated
on the unsuspecting client, the provisions of
Articles 19, 20 and 21 of the Civil Code of the
Philippines come into play.
8. PHILIPPINE PRODUCTS COMPANY vs. PRIMATERIA
SOCIETE ANONYME POUR LE COMMERCE EXTERIEUR:
PRIMATERIA (PHILIPPINES) INC., ALEXANDER G.
BAYLIN and JOSE M. CRAME
G.R. No. L-17160, November 29, 1965
FACTS: Defendant Primateria Societe Anonyme Pour Le Commerce
Exterieur (hereinafter referred to as Primateria Zurich) is a foreign
juridical entity and, at the time of the transactions involved herein,
had its main office at Zurich, Switzerland. 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
6 Alexander B. Baylin, entered into an agreement with plaintiff
Philippine Products Company, whereby the latter undertook to buy
copra in the Philippines for the account of Primateria Zurich. Plaintiff
caused the shipment of copra to foreign countries, pursuant to
instructions from defendant Primateria Zurich, thru Primateria (Phil.)
Inc., acting by defendant Alexander G. Baylin and Jose M. Crame,
officers of said corporation. As a result, the total amount due to the
plaintiff as of May 30, 1955, was P33,009.71.
There is no question that Alexander G. Baylin and Primateria
Philippines acted as the duly authorized agents of Primateria Zurich
in the Philippines. It is likewise undisputed that Primateria Zurich
had no license to transact business in the Philippines.
The trial court held that defendant Primateria Zurich is liable for the
whole amount, with legal interest and attorney’s fees. It also absolved
defendants Primateria (Phil.), Inc., Alexander G. Baylin, and Jose M.
Crame from any and all liability.
Plaintiff alleges that the appellees as agents of Primateria Zurich are
liable to it under Art. 1897 of the New 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.
ISSUE: WON its agents may be held personally liable on contracts
made in the name of the entity with third persons in the Philippines.
RULING: NO. The agents cannot be held personally liable.
We do not see how the plaintiff could recover from both the principal
(Primateria Zurich) and its agents. It has been given judgment against
the principal for the whole amount. It asked for such judgment, and
did not appeal from it. It clearly stated that its appeal concerned the
other three defendants.
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, Article 1897 does not hold
that in cases of excess of authority, both the agent and the principal
are liable to the other contracting party.
9. NATIONAL POWER CORPORATION (NAPOCOR) vs.
NATIONAL MERCHANDISING CORPORATION
(NAMERCO) and DOMESTIC INSURANCE COMPANY OF
THE PHILIPPINES
Nos. L-33819 and L-33897. October 23, 1982
ESCRA:
An agent which does not disclose to a third person wishing to
purchase crude sulfur from its principal, that the principal told it
AGENCY:
via cable Obligations
that it should not signofthe
thesales
Agent (Arts. 1884
contract unlesstoit 1909)
wish to
assume sole responsibility for the shipment, exceeds the limits of its
authority in subsequently signing the contract.—We agree with the
trial court that Namerco is liable for damages because under article
1897 of the Civil Code the agent who exceeds the limits of his
authority without giving the party with whom he contracts sufficient
notice of his powers is personally liable to such party. The truth is
that even before the contract of sale was signed Namerco was already
aware that its principal was having difficulties in booking shipping
space. In a cable dated October 16, 1956, or one day before the
contract of sale was signed, the New York supplier advised Namerco
that the latter should not sign the contract unless it (Namerco) wished
to assume sole responsibility for the shipment.
Same; Same; Same; Same.—Sycip, Namerco's president, replied in
his letter to the seller dated also October 16, 1956, that he had no
choice but to finalize the contract of sale because the NPC would
forfeit Namerco's bidder's bond in the sum of P45,100 posted by the
Domestic Insurance Company if the contract was not formalized.
Three days later, or on October 19, the New York firm cabled
Namerco that the firm did not consider itself bound by the contract of
sale and that Namerco signed the contract on its own responsibility.
Same; Same; Same; The rule that a person dealing with an agent
must inquire into the limits of the agent's authority does not apply
where the agent is being held directly responsible for taking
chances in exceeding its authority.—That is not so in this case.
Here, it is the agent that is sought to be held liable on a contract of
sale which was expressly repudiated by the principal because the
agent took chances, it exceeded its authority, and, in effect, it acted in
its own name. As observed by Castan Tobeñas, an agent "que haya
traspasado los limites del mandato, lo que equivale a obrar sin
mandato" (4 Derecho Civil Español, 8th Ed., 1956, p. 520).
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 Same; Same; Same; An agent who exceeds his authority is
personally liable for damages.—Manresa says that the agent who
exceeds the limits of his authority is personally liable "porque
realmente obra sin poderes" and the third person who contracts with
the agent in such a case would be defrauded if he would not be
allowed to sue the agent (11 Codigo Civil, 6th Ed., 1972, p. 725).
Same; Same; Same; The rule in Art. 1403 of the Civil Code that a
contract entered into by an agent beyond his authority is
unenforceable does not apply where the contract is being enforced
as to damages against the agent itself for doing what it did without
authority.—We hold that defendants' contention is untenable because
article 1403 refers to the unenforceability of the contract against the
principal. In the instant case, the contract containing the stipulation
for liquidated damages is not being enforced against its principal but
against the agent and its surety.
Same; Same; Same; Same.—It is being enforced against the agent
because article 1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he contracted.
And that rule is complemented by article 1898 of the Civil Code
which provides that "if the agent contracts in the name of the
principal, exceeding the scope of his authority, and the principal does
not ratify the contract, it shall be void if the party with whom the
agent contracted is aware of the limits of the powers granted by the
principal".
Same; Same; Same; An agent must disclose the limits of its
authority to avoid personal liability for ultra vires contracts.—
Namerco never disclosed to the NPC 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. If, as
7 contemplated in articles 1897 and 1898, Namerco is bound under the
contract of sale, then it follows that it is bound by the stipulation for
liquidated damages in that contract.
Agency; Bonds; Contracts; A surety company which guaranteed
performance of foreign principal of a domestic agent is liable on its
guarantee to the party with which the local agent dealt with in
excess of its authority, as said agent virtually acted as its own
principal.—Another contention of the defendants is that the
Domestic Insurance Company is not liable to the NPC because its
bond was posted, not for Namerco, the agent, but for the New York
firm which is not liable on the contract of sale. That contention
cannot be sustained because it was Namerco that actually solicited
the bond from the Domestic Insurance Company and, as explained
already, Namerco is being held liable under the contract of sale
because it virtually acted in its own name. It became the principal in
the performance bond. In the last analysis, the Domestic Insurance
Company acted as surety for Namerco.
Same; Same; Same; Same.—The rule is that "want of authority of
the person who executes an obligation as the agent or representative
of the principal will not, as a general rule, affect the surety's liability
thereon, especially in the absence of fraud, even though the
obligation is not binding on the principal" (72 C.J.S. 525).
AQUINO, J.:
FACTS:
Plaintiff: National Power Corporation (NAPOCOR, for brevity)
Defendant: National Merchandising Corporation (NAMERCO, for
brevity) and Domestic Insurance Company
Case: recovery of liquidated damages from a seller's agent that
allegedly exceeded its authority in negotiating the sale.
Timeline:
October 17, 1956 – A contract of sale was executed.
Parties:
NAPOCOR – buyer; and
NAMERCO (as PH Representative of New York, USA-based
International Commodities Corporation) – seller
Subject Matter of the Sale: four thousand long tons of crude
sulfur for its Maria Cristina Fertilizer Plant in Iligan City
Contract Price: Php 450,716.00
Performance Bond: P90,143.20 executed by Domestic
Insurance Company, in favor of NAPOCOR to guarantee
NAMERCO obligations.
Stipulations:
NAMERCO would deliver the sulfur at Iligan City within sixty
days from notice of the establishment in its favor of a letter of
credit for $212,120
Failure to effect delivery would subject NAMERCO and its
surety (Domestic Insurance) to the payment of liquidated
damages at the rate of two-fifth of one percent of the full
contract price for the first thirty days of default and four-fifth of
one percent for every day thereafter until complete delivery is
made.
November 12, 1956 – Via letter, NAPOCOR advised NAMERCO’s
AGENCY:
President, John Z. Obligations
Sycip, of the of the Agent
opening (Arts. 1884
on November 8 oftoa 1909)
letter of
credit for $212,120, in favor of International Commodities
Corporation and would expire on January 31, 1957.
November 15, 1956 - Notice of that letter of credit was received by
cable by the New York firm. Deadline for the delivery of the sulfur
was January 15, 1957.
January 20 to 26, 1957 - There was a shutdown of the NPC's
fertilizer plant because there was no sulfur. No fertilizer was
produced. The New York supplier was not able to deliver the sulfur
due to its inability to secure shipping space.
February 27, 1957 – Via letter, NAPOCOR General Manager
advised NAMERCO and Domestic Insurance Company that it would
resort to legal remedies to enforce its rights. Under Article 9 of their
contract of sale "nonavailability of bottom or vessel" was not a
fortuitous event that would excuse nonperformance.
May 8, 1957 – Via letter to NAMERCO President Sycip, the
Government Corporate Counsel rescinded the contract of sale due to
the New York supplier's nonperformance of its obligations.
June 8, 1957 - Via letter to NAMERCO President Sycip, the
Government Corporate Counsel demanded from Namerco the
payment of P360,572.80 as liquidated damages. He explained that
time was of the essence of the contract. A similar demand was made
upon the surety.
Computation of the Liquidated Damages & Basis: The 115-
day period between January 15, 1957 (delivery deadline)
and May 9, 1957 (when Namerco was notified of the
rescission of the contract)
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 First 30 days: Contract price x 0.01, then divide by 5, then
multiply by 2, then multiply by 30. (TOTAL: P54,085.92)
Remaining 85 days: Contract price x 0.01, then divide by
5, then multiply by 4, then multiply by 85. (TOTAL:
P306,486.88)
GRAND TOTAL: P360,572.80.
November 5, 1957 – NAPOCOR sued the New York firm, Namerco
and the Domestic Insurance Company for the recovery of the
stipulated liquidated damages. (Civil Case No. 33114)
January 17, 1958 – Trial court dismissed the case as to the New
York firm for lack of jurisdiction because it was not doing business in
the Philippines. After the International Commodities Corporation
(NYC corporation) was dropped as a defendant in Civil Case No.
33114, Melvin Wallick (NYC Corpo assignee) sued NAMERCO for
damages in connection with the same sulfur transaction (Civil Case
No. 37019).
Trial Court’s Decision:
Civil Case No. 37019 - dismissed Wallick's action for damages
against NAMERCO because the assignment in favor of Wallick was
champertous in character.
● Wallick appealed to this Court. The appeal was dismissed
because the record on appeal did not disclose that the
appeal was perfected on time.
Civil Case No. 33114 - although the records on appeal were
approved in 1967, inexplicably, they were elevated to this Court in
8 1971. That anomaly initially contributed to the delay in the
adjudication of this case.
October 10, 1966 - NAPOCOR appealed on questions of law from
the decision of CFI of Manila, ordering NAMERCO and Domestic
Insurance Company of the Philippines to pay:
- solidarity to the NAPOCOR reduced liquidated
damages in the sum of P72,114.56
- legal rate of interest from the filing of the complaint
- costs of the suit.
NAMERCO and Domestic Insurance Company of the Philippines
appealed from the same decision because it is contrary to law and the
evidence.
MAIN CONTENTIONS:
NAMERCO & Domestic Insurance: it was incumbent upon
NAPOCOR to inquire into the extent of the agent's authority and, for
its failure to do so, it could not claim any liquidated damages which,
according to the defendants, were provided for merely to make the
seller more diligent in looking for a steamer to transport the sulfur.
NAMERCO appealed and they contend that the delivery of the
sulfur was conditioned on the availability of a vessel to carry the
shipment and that Namerco acted within the scope of its
authority as agent in signing the contract of sale.
NAPOCOR: NAMERCO should have advised NAPOCOR of the
limitations on its authority to negotiate the sale.
ISSUE:
1. WON NAMERCO acted beyond the bounds of its
authority, thus liable for damages.
2. WON Article 1403 of the Civil Code which provides that a
contract entered into in the name of another person by one
who has acted beyond his powers is unenforceable.
RULING:
Issue 1: YES, acted beyond powers.
NAMERCO (agent) violated and did not follow ICC’s (principal)
cabled instructions, dated August 9, 1956, to wit:
● sale must be subject to availability of a steamer
(NAMERCO did not disclose to NPC that the NYC-based
ICC is having difficulties in booking shipping space)
● Namerco should not sign the contract unless it (Namerco)
wished to assume sole responsibility for the shipment
● Contrary to ICC’s instruction, NAMERCO agreed that
nonavailability of a steamer was not a justification for
nonpayment of the liquidated damages.
● delivery of the sulfur should be "C & F Manila", not "C &
F Iligan City"
● the seller should be allowed to withdraw right away the full
amount of the letter of credit and not merely eighty percent
thereof
NAMERCO is liable for damages. Under Art. 1897 of the Civil
Code, the agent who exceeds the limits of his authority without
giving the party with whom he contracts sufficient notice of his
powers is personally liable to such party. Despite constant
AGENCY:
reminders, Obligationspresident,
Sycip, Namerco's of the Agent (Arts.
replied that 1884
he hadtono1909)
choice
but to finalize the contract of sale because the NPC would forfeit
Namerco's bidder's bond in the sum of P45,100 posted by the
Domestic Insurance Company if the contract was not formalized.
As a result, the New York firm cabled Namerco that the firm did not
consider itself bound by the contract of sale and that Namerco signed
the contract on its own responsibility, because it acted contrary to
the former's repeated cabled instructions.
The New York firm disclaimed responsibility for the contract and
that the responsibility for the sale rested on Namerco. "As we have
pointed out to you before, you have acted strictly contrary to our
repeated instructions and, however regretfully, you have no one
but yourselves to blame."
NAMERCO cannot say that NAPOCOR should have exercised
diligence as to finding out the authority of the agent. It is the agent
that it sought to be held liable on a contract of sale which was
expressly repudiated by the principal because the agent took
chances, it exceeded its authority, and, in effect, it acted in its
own name.
Manresa says that the agent who exceeds the limits of his authority is
personally liable "porque realmente obra sin poderes (because he
really acted without power)" and the third person who contracts
with the agent in such a case would be defrauded if he would not
be allowed to sue the agent.
ISSUE 2: No, Article 1403 is not applicable.
Article 1403 refers to the unenforceability of the contract against the
principal. Here, the contract containing the stipulation for liquidated
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 damages is not being enforced against its principal but against the
agent and its surety.
It is being enforced against the agent because:
● Article 1897 - agent who acts in excess of his authority is
personally liable to the party with whom he contracted.
● 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".
Agent here acted in excess of his authority. The NPC was unaware
of the limitations on the powers granted by the New York firm to
Namerco. Namerco never disclosed to the NPC 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.
Therefore, NAMERCO is personally liable to the party with whom
he contracted.
Resolutory Portion: Lower court's judgment is modified and
defendants National Merchandising Corporation and Domestic
Insurance Company of the Philippines are ordered to pay solidarity to
the National Power Corporation the sum of P45,100.00 as liquidated
damages. No costs.
9 AGENCY: Obligations of the Agent (Arts. 1884 to 1909)
10. MARIANO A. ALBERT vs. UNIVERSITY PUBLISHING
CO., INC.
GR No. L-19118. January 30, 1965.
BENGZON, J.P., J.:
ESCRA:
Corporations; Principle of corporation by estoppel; Not
invokable by one who misrepresented corporation as duly
organized against his victim.—One who has induced another to act
upon his wilful misrepresentation that a corporation was duly
organized and existing under the law, cannot thereafter set up against
his victim the principle of corporation by estoppel.
Same; Person acting for corporation with no valid existence
is personally liable for contracts entered into as such agent.—A
person acting or purporting to act on behalf of a corporation which
has no valid existence assumes such privileges and obligations and
becomes personally liable for contracts entered into or for other acts
performed as such agent.
Parties to Action; Suit against corporation with no valid
existence; Real defendant is person who has control of its
proceedings.—In a suit against a corporation with no valid existence
the person who had and exercised the rights to control the
proceedings, to make defense, to adduce and cross-examine
witnesses, and to appeal from a decision, is the real defendant, and
.the enforcement of a judgment against the corporation upon him is
substantial observance of due process of law.
Same; Real party in interest; Person who acted as
representative of non-existent principal and who reaped benefits
from its contracts.—A person who acted as representative of a non-
existent principal, who reaped the benefits resulting from a contract
entered into by him as such, and who violated its terms, thereby
precipitating a suit, is the real party to the contract sued upon.
FACTS:
Plaintiff: Mariano Albert (to be substituted by Justo R. Albert, estate
administrator because plaintiff died before trial)
Defendant: University Publishing Co., Inc. (a corporation duly
organized and existing under the laws of the Philippines)
Case: claim for damages; unpaid rights and share on sales made in
Albert’s RPC Commentaries
Timeline:
July 19, 1948 – Contract was executed.
Parties: University Publishing Co., Inc., through Jose M.
Aruego (President) & Mariano A. Albert
Stipulations:
● Publisher agreed to pay Albert P30,000 for the
exclusive right to publish his revised
Commentaries on the Revised Penal Code and for
his share in previous sales of the book’s, first
edition;
● Publisher undertaken to pay Albert, in eight
quarterly installments of P3,750.00, starting July
15, 1948;
● Failure to pay one installment would render the
rest due;
Contingent Event: University Publishing Co., Inc. had
failed to pay the second installment.
September 24, 1949 – Albert filed for damages against University
Publishing Co., Inc.
Publishing admitted:
● The corporate existence of the Univ. Publishing;
● the execution and terms of the contract dated July
19, 1948;
but alleged that it was Albert who breached their contract by failing
to deliver his manuscript. The corporation counterclaimed for
damages.
Plaintiff died before trial. Justo R. Albert, his estate’s administrator,
was substituted for him.
April 26, 1954 – CFI Manila renders judgment in favor of Albert and
against University Publishing Co., Inc. Counterclaim by Univ.
Publishing was dismissed for lack of evidence. It ordered the
publishing house to pay Albert’s administrator:
● P23,000.00 with legal [rate] of interest from the date of the
filing of this complaint until the whole amount shall have
been fully paid
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino

● Costs of suit
April 18, 1958 – SC, in Albert vs. University Publishing Co., Inc.,
GR L-9300, found Mariano Albert entitled to damages (for breach of
contract) but reduced the amount from P23,000.00 to P15,000.00, to
be executed in full.
October 24, 1960 – SC, in Albert vs. University Publishing Co., Inc.,
GR L-15275, has ruled that the P15,000 as damages has become final
and executory. It should be executed to its full amount, since in fixing
it, payment already made had been considered.
July 22, 1961 – CFI Manila ordered issuance of an execution writ
against University Publishing Co., Inc.
August 10, 1961 – Albert’s estate administrator petitioned for a writ
of execution against Jose M. Aruego, as the real defendant, stating,
“plaintiff’s counsel and the Sheriff of Manila discovered that
there is no such entity as University Publishing Co., Inc.
Annex: Certification from the Securities and Exchange
Commission dated July 31, 1961, attesting: “The records of
this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership.”
University Publishing Co., Inc., through counsel (Jose M. Aruego’s
own law firm), filed a manifestation stating that Jose M. Aruego is
not a party to this case and that Albert’s petition should be denied.
September 9, 1961 - CFI Manila denied the petition by order of, and
from this, Albert has appealed.
10 ISSUE: WON the judgment may be executed against Jose M.
Aruego, supposed President of University Publishing Co., Inc., as the
real defendant.
RULING: Judgment must be executed against Jose M. Aruego as
the real defendant, because the corporation was inexistent.
It is not hard to decipher why “University Publishing Co., Inc.,”
through counsel, would not want Jose M. Aruego to be considered a
party to the present case: should a separate action be now
instituted against Jose M. Aruego, the plaintiff will have to
reckon with the statute of limitations.
The fact of non-registration of University Publishing Co., Inc. in the
Securities and Exchange Commission has not been disputed.
Defendant would only raise the point that the publishing house and
not Jose M. Aruego is the party defendant because of the separate
juridical personality of the alleged corporation.
However, on account of the non-registration it cannot be considered a
corporation, not even a corporation de facto (Hall vs. Piccio, 86 Phil.
603). It has therefore no personality separate from Jose M. Aruego; it
cannot be sued independently.
The corporation-by-estoppel doctrine has not been invoked, but is
inapplicable in this case.
Aruego represented a non-existent entity and induced not only the
plaintiff but even the court to believe in such representation. He
signed the contract as “President” of “University Publishing Co.,
Inc.,” stating that this was “a corporation duly organized and existing
under the laws of the Philippines,” and obviously misled plaintiff
(Mariano A. Albert) into believing the same. One who has induced
another to act upon his wilful misrepresentation that a corporation
was duly organized and existing under the law, cannot thereafter set
up against his victim the principle of corporation by estoppel
(Salvatiera vs. Garlitos, 56 O.G. 3069).
“University Publishing Co., Inc.” even went to court and answering
the complaint and litigating upon the merits. However, “University
Publishing Co., Inc.” has no independent personality; it is just a
name. Jose M. Aruego was, in reality, the one who answered and
litigated, through his own law firm as counsel. He was in fact, if
not in name, the defendant.
“A person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and obligations
and becomes personally liable for contracts entered into or for other
acts performed as such agent.” (Salvatiera vs. Garlitos, 56 O.G.
3069).
SC cannot outrightly hold Aruego for damages because of the due
process clause.
Had Jose M. Aruego been named as party defendant instead of, or
together with, “University Publishing Co., Inc.,” there would be no
room for debate as to his personal liability. Since he was not so
named, the matters of “day in court” and “due process” have
arisen.
PartiesAGENCY:
to a suit Obligations
are “personsof who
the Agent
have (Arts.
a right1884 to 1909)
to control the
proceedings, to make defense, to adduce and cross-examine
witnesses, and to appeal from a decision” (67 C.J.S. 887)—and
Aruego was, in reality, the person who had and exercised these
rights. He had his day in court as the real defendant; and due process
of law has been substantially observed.
Albeit the contention of due process, substance must prevail over
form.
It is clear that Jose M. Aruego, acting as representative of a non-
existent principal, was the real party to the contract sued upon;
that he was the one who reaped the benefits resulting from it, so
much so that partial payments of the consideration were made by
him; that he violated its terms, thereby precipitating the suit in
question; and that in the litigation he was the real defendant.
Perforce, in line with the ends of justice, responsibility under the
judgment falls on him.
We need hardly state that should there be persons who under the law
are liable to Aruego for reimbursement or contribution with respect to
the payment he makes under the judgment in question, he may, of
course, proceed against them through proper remedial measures.
Resolutory portion: Set aside the case and remand this to CFI
Manila, ordering the lower court to hold supplementary proceedings
for the purpose of carrying the judgment into effect against
University Publishing Co., Inc. and/or Jose M. Aruego.
Note.—This case went to the Supreme Court five times. The first was
on April 18, 1958 (L-9300), then on October 24, 1960 (L-15275), and
again on May 17, 1961 (L-18350). It was again brought up to the
Supreme court by certiorari on January 30, 1965 (L-19118) which is
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 the decision reported in this volume. The last time the case was
elevated to the Supreme Court was on May 29, 1968 (L-26364). The
contest in this case was called by the Supreme Court a “legal
marathon”.
11. NORA S. EUGENIO and ALFREDO Y. EUGENIO,
petitioners, vs. HON. COURT OF APPEALS and PEPSI-COLA
BOTTLING COMPANY OF THE PHILIPPINES, INC.,
respondents.
G.R. No. 103737 December 15, 1994
REGALADO, J.:
FACTS: Private respondent Pepsi-Cola Bottling Company of the
Philippines, Inc. is engaged in the business of manufacturing, making
bottling and selling soft drinks and beverages to the general public.
Petitioner Nora S. Eugenio was a dealer of the soft drink products of
private respondent corporation.
On March 17, 1982, private respondent filed a complaint for a sum of
money against petitioners Nora S. Eugenio and Alfredo Y. Eugenio
petitioners had an outstanding account of P94,651.00 from the
transactions in both Queszon City and Muntinlupa plant, which, so
the complaint alleged, they failed to pay despite oral and written
demands.
In their defense, petitioners presented four trade provisional receipts
11
(TPRs) allegedly issued to and received by them from private
respondent's Route Manager Jovencio Estrada of its Malate
Warehouse (Division 57), showing payments in the total sum of
P80,500.00 made by Abigail's Store. Petitioners contended that had
the amounts in the TPRs been credited in their favor, they would not
be indebted to Pepsi-Cola.
Further, petitioners maintain that the signature purporting to be that
of petitioner Nora S. Eugenio in Sales Invoice No. 85366 is a
falsification. In sum, petitioners argue that if the aforementioned
amounts were credited in their favor, it would be respondent
corporation which would be indebted to them in the sum of
P3,546.02 representing overpayment.
The lower court rendered a second decision on September 29, 1989
after the CA remanded the records. In this decision, petitioners were
ordered to pay, jointly and severally, the reduced amount of
P64,188.60, plus legal interest.6 On appeal therefrom, the Court of
Appeals affirmed the judgment of the trial court.
According to respondent court, “the questioned TPR’s are merely
‘provisional’ and were, as printed at the bottom of said receipts, to be
officially confirmed by plaintiff within fifteen (15) days by delivering
the original copy thereof stamped paid and signed by its cashier to the
customer. x x x Defendants-appellants (herein petitioners) failed to
present the original copies of the TPRs in question, showing that they
were never confirmed by the plaintiff, nor did they demand from
plaintiff the confirmed original copies thereof.”
ISSUE: Whether or not the amounts in the aforementioned trade
provisional receipts should be credited in favor of herein petitioner
spouses.
RULING: Yes.
From the ruling of the respondent court, we do not agree with the
strained implication intended to be adversed to petitioners. The TPRs
presented in evidence by petitioners are disputably presumed as
evidentiary of payments made on the account of petitioners. There
are presumptions juris tantum in law that private transactions have
been fair and regular and that the ordinary course of business has
been followed. The role of presumptions in the law on evidence is to
relieve the party enjoying the same of the evidential burden to prove
the proposition that he contends for, and to shift the burden of
evidence to the adverse party. Private respondent having failed to
rebut the aforestated presumptions in favor of valid payment by
petitioners, these would necessarily continue to stand in their favor in
this case.
Besides, even assuming arguendo that herein private respondent’s
cashier never received the amounts reflected in the TPRs, still private
respondent failed to prove that Estrada, who is its duly authorized
agent with respect to petitioners, did not receive those amounts from
the latter. As correctly explained by petitioners, “in so far as the
private respondent’s customers are concerned, for as long as they pay
their obligations to the sales representative of the private respondent
using the latter’s official receipt, said payment extinguishes their
obligations.” Otherwise, it would unreasonably cast the burden of
supervision over its
AGENCY: employeesoffrom
Obligations respondent
the Agent (Arts.corporation to its
1884 to 1909)
customers.
The substantive law is that payment shall be made to the person in
whose favor the obligation has been constituted, or his successor-in-
interest or any person authorized to receive it. As far as third persons
are concerned, an act is deemed to have been performed within the
scope of the agent’s authority, if such is within the terms of the power
of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the
principal and his agent. In fact, Atty. Rosario, private respondent’s
own witness, admitted that “it is the responsibility of the collector to
turn over the collection.”
Other exhaustive discussions in this case pertain to the Rules on
Evidence.
12. GREEN VALLEY POULTRY & ALLIED PRODUCTS,
INC., petitioner vs. THE INTERMEDIATE APPELLATE
COURT and E.R. SQUIBB & SONS PHILIPPINE
CORPORATION, respondents.
G.R. No. L-49395 December 26, 1984
FACTS: On November 3, 1969, Squibb and Green Valley entered
into a letter agreement the text of which reads as follows:
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 “E.R. Squibb & Sons Philippine Corporation is pleased to appoint
Green Valley Poultry & Allied Products, Inc. as a non-exclusive
distributor for Squibb Veterinary Products, as recommended by Dr.
Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division
Sales Supervisor.”
As a distributor, Green Valley Poultry & Allied Products, Inc. will be
entitled to a discount.
Payment for Purchases of Squibb Products will be due 60 days from
date of invoice or the nearest business day thereto. No payment win
be accepted in the form of post-dated checks. Payment by check must
be on current dating.
It is also mutually agreed that this non-exclusive distribution
agreement can be terminated by either Green Valley Poultry & Allied
Products, Inc. or Squibb Philippines on 30 days notice.
For goods delivered to Green Valley but unpaid, Squibb filed suit to
collect. The trial court as aforesaid gave judgment in favor of Squibb
which was affirmed by the Court of Appeals.
Green Valley claimed that the contract with Squibb was a mere
agency to sell; that it never purchased goods from Squibb; that the
goods received were on consignment only with the obligation to turn
over the proceeds, less its commission, or to return the goods if not
sold, and since it had sold the goods but had not been able to collect
from the purchasers thereof, the action was premature. Upon the
other hand, Squibb claimed that the contract was one of sale so that
Green Valley was obligated to pay for the goods received upon the
12 expiration of the 60-day credit period.
Both courts below upheld the claim of Squibb that the agreement
between the parties was a sales contract.
ISSUE: Whether or not the agreement signed by the parties was a
sales contract and thus Green Valley is liable for its unpaid
obligations
RULING: The Supreme Court upheld the ruling of CA; the
agreement was a sales contract. Nonetheless, the court also stated that
Whether viewed as an agency to sell or as a contract of sale, the
liability of Green Valley is indubitable. Adopting Green Valley's
theory that the contract is an agency to sell, it is liable because it sold
on credit without authority from its principal. The Civil Code has a
provision exactly in point. It reads:
Art. 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.
13. METROBANK vs. CA
G.R. No. 88866, February 18, 1991
CRUZ, J.:
FACTS: The Metropolitan Bank and Trust Co. is a commercial bank
with branches throughout the Philippines and even abroad. Golden
Savings and Loan Association was, at the time these events
happened, operating in Calapan, Mindoro, with the other private
respondents as its principal officers.
Controversy arose when Eduardo Gomez opened an account with
Golden Savings and deposited over a period of two months 38
treasury warrants with a total value of P1,755,228.37. They were all
drawn by the Philippine Fish Marketing Authority and purportedly
signed by its General Manager and countersigned by its Auditor. Six
of these were directly payable to Gomez while the others appeared to
have been indorsed by their respective payees, followed by Gomez as
second indorser.
On various dates between June 25 and July 16, 1979, all these
warrants were subsequently indorsed by Gloria Castillo as Cashier of
Golden Savings and deposited to its Savings Account No. 2498 in the
Metrobank branch in Calapan, Mindoro. They were then sent for
clearing by the branch office to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for special clearing.
More than two weeks after the deposits, Gloria Castillo went to the
Calapan branch several times to ask whether the warrants had been
cleared. She was told to wait. Accordingly, Gomez was meanwhile
not allowed to withdraw from his account. Later, however,
"exasperated" over Gloria's repeated inquiries and also as an
accommodation for a "valued client," the petitioner says it finally
decided to allow Golden Savings to withdraw from the proceeds of
the warrants.
However, 32 of the warrants had been dishonored by the Bureau of
Treasury on July 19, 1979, and demanded the refund by Golden
AGENCY: Obligations of the Agent (Arts. 1884 to 1909)
Savings of the amount it had previously withdrawn, to make up the
deficit in its account.
The demand was rejected. Metrobank then sued Golden Savings.
Judgment as rendered for in favor of Golden Savings.
Aggrieved, Petitioner bank appealed the case before the CA but the
latter court affirmed the lower court’s decision.
ISSUE: Whether or not CA erred in affirming the RTC’s decision.
RULING: No, the CA did not commit error in affirming the RTC’s
decision.
In stressing that it was acting only as a collecting agent for Golden
Savings, Metrobank seems to be suggesting that as a mere agent it
cannot be liable to the principal. This is not exactly true. Article 1909
of the Civil Code clearly provides that —
Art. 1909. — The agent is responsible not only for fraud, but also for
negligence, which shall be judged 'with more or less rigor by the
courts, according to whether the agency was or was not for a
compensation.
The negligence of Metrobank 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
Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino
 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.

Metrobank's argument that it may recover the disputed amount if the

warrants are not paid for any reason is not acceptable. Any reason
does not mean no reason at all. Otherwise, there would have been no
need at all for Golden Savings to deposit the treasury warrants with it
for clearance. There would have been no need for it to wait until the
warrants had been cleared before paying the proceeds thereof to
Gomez. Such a condition, if interpreted in the way the petitioner
suggests, is not binding for being arbitrary and unconscionable. And
it becomes more so in the case at bar when it is considered that the
supposed dishonor of the warrants was not communicated to Golden
Savings before it made its own payment to Gomez.

WHEREFORE, the challenged decision is AFFIRMED

13 AGENCY: Obligations of the Agent (Arts. 1884 to 1909)

Cases from the discussions of Atty. Princess Claudin C. Omelio-Balino