Art.

1882 Civil Code

- The limits of the agent’s authority shall not be considered exceed should
it have been performed in a manner more advantageous to the principal than that
specified by him.

Virata v. Ng Wee

PARTIES:

Petitioner: Luis Juan L. Virata and Uemmara Philippines Corporation

Respondent: Alejandro Ng Wee

FACTS:

Ng Wee was a valued client of Westmont Bank. He was enticed by the

bank manager to make money placements with Westmont Investment
Corporation (Wincorp), a domestic corporation organized and licensed to operate
as an investment house, and one of the bank's affiliates

Lured by representations that the "sans recourse" transactions are safe,

stable, high-yielding, and involve little to no risk Ng Wee, sometime in 1998,
placed investments thereon ( A corporate borrower who needs financial
assistance or funding to run its business or to serve as working capital is
screened by Wincorp. Once it qualifies as an accredited borrower, Wincorp
enters into a Credit Line Agreement for a specific amount with the corporation
which the latter can draw upon in a series of availments over a period of time. )

In exchange, Wincorp issued Ng Wee and his trustees Confirmation

Advices informing them of the identity of the borrower with whom they were
matched, and the terms under which the said borrower would repay them.
Special Power of Attorneys (SPAs) are also prepared for the signature of the
lender investor.

Wincorp extended a credit line to Power Merge and allowed the latter to
make drawdowns despite signs that would show Power Merge’s inability to pay.
To secure the Credit Line Agreement and the Amendment to Credit Line
Agreement, Power Merge executed promissory notes obliging itself to pay
Wincorp, for itself or as agent for and on behalf of certain investors the amount of
the drawdowns with interest on the maturity of the promissory note. However,
unknown to Ng Wee, the promissory notes were rendered useless by the Side
Agreements, simultaneously executed by Ong and Reyes with the Credit Line
Agreement and the Amendment to Credit Line Agreement, which virtually
exonerated Power Merge of its liability on the promissory notes.

RTC

RTC rendered a Decision in favor of Ng Wee. The trial court explained that
there was no dispute on the factual circumstances of the case and that, based on
these facts, Wincorp and Power Merge colluded, if not connived, to defraud Ng
Wee of his investments. 
 CA

The CA upheld the finding of the RTC. The CA likewise found that
Wincorp and Power Merge perpetrated an elaborate scheme of fraud to
persuade Ng Wee into investing funds. Ng Wee would not have placed his
investments in the "sans recourse"  transactions had he not been deceived into
believing that Power Merge is financially capable of paying the returns on his
investments.

ISSUE:

WON Ng Wee is entitled to recover the investments he infused in Win

corp.

RULING:

YES.

Wincorp attempts to evade liability by hiding behind the  "sans

recourse"  nature of the transactions with Ng Wee . It argues that as a mere agent
or broker that matches an investor with a borrower, it cannot be held liable for the
invested amount in case of an unsuccessful or failed match. As evidenced by the
Confirmation Advices and SPAs signed by the investors, Wincorp is merely
tasked to deliver the amount to be loaned to the borrower, and does not
guarantee its borrowers' financial capacity.

 Even as an agent, Wincorp can still be held liable

The argument that Wincorp is a mere agent that could not be held liable
for Power Merge's unpaid loan is equally unavailing. For even if the Court were to
accede to the argument and undercut the significance of Wincorp's participation
from vendor of securities to purely attorney-in-fact, the investment house would
still not be immune. Agency, in Wincorp's case, is not a veritable defense.

Through the contract of agency, a person binds himself to render some

service or to do something in representation or on behalf of another, with the
consent or authority of the latter. 119 As the basis of agency is representation,
there must be, on the part of the principal, an actual intention to appoint, an
intention naturally inferable from the principal's words or actions. In the same
manner, there must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent, there is generally no
agency.120

There is no dearth of statutory provisions in the New Civil Code that aim to
preserve the fiduciary character of the relationship between principal and agent.
Of the established rules under the code, one cannot be more basic than the
obligation of the agent to carry out the purpose of the agency within the bounds
of his authority. Though he may perform acts in a manner more advantageous to
the principal than that specified by him, 122 in no case shall the agent carry out the
agency if its execution would manifestly result or damage to the principal. 123
 NEW CIVIL CODE, 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.

NEW CIVIL CODE, 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.

NEW CIVIL CODE, Article 1888: An agent shall not carry out an agency if
its execution would manifestly result in loss or damage to the principal cases:

In the instant case, the SPAs executed by Ng Wee constituted Wincorp as

agent relative to the borrowings of Power Merge, allegedly without risk of liability
on the part of Wincorp. However, the SPAs, as couched, do not specifically
include a provision empowering Wincorp to excuse Power Merge from repaying
the amounts it had drawn from its credit line via the Side Agreements. They
merely authorize Wincorp "to agree, deliver, sign, execute loan documents"
relative to the borrowing of a corporate borrower. Otherwise stated, Wincorp had
no authority to absolve Power Merge from the latter's indebtedness to its lenders.
Doing so therefore violated the express terms of the SPAs that limited Wincorp's
authority to contracting the loan.

In no way can the execution of the Side Agreements be considered as

part and parcel of Wincorp's authority since it was not mentioned with specificity
in the SP As. As far as the investors are concerned, the Side Agreements
amounted to a gratuitous waiver of Power Merge's obligation, which authority is
required under the law to be contained in an SP A for its accomplishment.

Finally, the benefit from the Side Agreements, if any, redounded instead to
the agent itself, Wincorp, which was able to hold Power Merge papers that are
more valuable than the outstanding Hottick obligations that it exchanged. In
discharging its duties as an alleged agent, Wincorp then elected to put primacy
over its own interest than that of its principal, in clear contravention of the law.
And when Wincorp thereafter concealed from the investors the existence of the
Side Agreements, the company became liable for fraud even as an agent.

International Exchange Bank (Now Union Bank) v. Briones

PRINCIPLE:

Upon accepting an agency, the agent becomes bound to carry out the
agency and shall be held liable for the damages, which the principal may incur
due to the agent's non-performance. (Art. 1884 civil code)

PARTIES:

International Exchange Bank (Petitoners) attorney-in-fact

Spouses Jerome and Quinnie Briones (Defendants) Principal, client of I.E.

Bank
FACTS:

Spouses Briones took out a loan which was executed though a promissory
note which appointed the bank as attorney-in-fact of the spouse with the
obligation among others to file an insurance claim in case of loss or damage to
the vehicle of the car.

The vehicle was subsequently carnapped. iBank instead of filing for

insurance filed in behalf of Spouses it collected from former (for the amount
loaned). Now respondents were forced to claim for insurance. iBank filed a
complaint for replevin and/or sum of money against the Spouses Briones and a
person named John Doe alleging that the Spouses Briones defaulted in paying
the monthly amortizations of the mortgaged vehicle.

RTC

The RTC dismissed iBank's complaint ruling that as the duly constituted
attorney-in- fact of the Spouses Briones, iBank had the obligation to facilitate the
filing of the notice of claim and then to pursue the release of the insurance
proceeds.

CA

The CA upheld the decision of the RTC, ruling that iBank was bound by its
acceptance to carry out the agency. However, instead of filing an insurance
claim, iBank opted to collect the balance of Spouses Briones' loan. By not looking
after the interests of its principal, the Court of Appeals ruled that iBank should be
held liable for the damages suffered by Spouses Briones.

ISSUES:

1) Whether an agency relationship existed between the parties.

2) Whether the agency relationship was revoked or terminated when Spouses

Briones themselves claimed for insurance.

3) Whether petitioner is entitled to the return of the mortgaged vehicle or, in the
alternative, payment of the outstanding balance of the loan taken out for the
mortgaged vehicle.

RULING:

The SC affirmed the lower court’s decisions.

1) The essential elements of agency are: (1) there is consent, express or implied,
of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agent acts as a representative
and not for himself; and (4) the agent acts within the scope of his authority. All
the elements of agency exist in this case.

2) Revocation as a form of extinguishing an agency under Article 1924 of the Civil

Code only applies in cases of incompatibility, such as when the principal
disregards or bypasses the agent in order to deal with a third person in a way
that excludes the agent.
The Spouses Briones' claim for loss cannot be seen as an implied revocation of
the agency or their way of excluding petitioner. They did not disregard or bypass
petitioner when they made an insurance claim; rather, they had no choice but to
personally do it because of their agent's negligence. This is not the implied
termination or revocation of an agency provided for under Article 1924 of the Civil
Code.

3) As the agent, petitioner was mandated to look after the interests of the
Spouses Briones. However, instead of going after the insurance proceeds, as
expected of it as the agent, petitioner opted to claim the full amount from the
Spouses Briones, disregard the established principal-agency relationship, and
put its own interests before those of its principal.

The facts show that the insurance policy was valid when the vehicle was lost,
and that the insurance claim was only denied because of the belated filing.

Having been negligent in its duties as the duly constituted agent, petitioner must
be held liable for the damages suffered by the Spouses Briones because of non-
performance of its obligation as the agent, and because it prioritized its interests
over that of its principal.

Villaluz vs. Land Bank of the Philippines

PRINCIPLE:

An agent may appoint a substitute if the principal has not prohibited him
from doing so. (Art. 1892 civil code)

PARTIES:

Spouses May and Johnny Villaluz; (petitioners) Prinicipal

Paula Agbisit; (agent) mother of petitioner May,

Milflores Cooperatives; (Sub-agent)

Land Bank of the Philippines; (defendant) mortgagee

FACTS:

Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May),

requested the latter to provide her with collateral for a loan needed for the
expansion of her backyard cut flowers business. May convinced her husband,
Johnny Villaluz to allow Agbisit to use their land as collateral. Spouses Villaluz
executed a Special Power of Attorney in favor of Agbisit authorizing her to,
among others, "negotiate for the sale, mortgage, or other forms of disposition a
parcel of land covered by TCT, The one-page power of attorney neither specified
the conditions under which the special powers may be exercised nor stated the
amounts for which the subject land may be sold or mortgaged.
 Agbisit executed her own Special Power of Attorney, appointing Milflores
Cooperative as attorney-in-fact in obtaining a loan from and executing a real
mortgage in favor of Land Bank of the Philippines (Land Bank).

Unfortunately, Milflores Cooperative was unable to pay its obligations to

Land Bank. Thus, Land Bank filed a petition for extra-judicial foreclosure sale
with the Office of the Clerk of Court of Davao City. The Spouses Villaluz filed a
complaint with the RTC seeking the annulment of the foreclosure sale.

RTC

The RTC held that the delegation was valid since the Special Power of
Attorney executed by the Spouses Villaluz had no specific prohibition against
Agbisit appointing a substitute.

CA

On appeal, the CA affirmed the RTC Decision. According to the CA, the
rule is that an agent is allowed to appoint a sub-agent in the absence of an
express agreement to the contrary and that "a scrutiny of the Special Power of
Attorney executed by appellants in favor of [Agbisit] contained no prohibition for
the latter to appoint a sub-agent." Therefore, Agbisit was allowed to appoint
Milflores Cooperative as her sub-agent.

ISSUE:

WO/N the agent has the power to appoint a sub-agent.

RULING:

Although the law presumes that the agent is authorized to appoint a

substitute, it also imposes an obligation upon the agent to exercise this power
conscientiously. To protect the principal, Article 1892 allocates responsibility to
the agent for the acts of the substitute when the agent was not expressly
authorized by the principal to appoint a substitute; and, if so authorized but a
specific person is not designated, the agent appoints a substitute who is
notoriously incompetent or insolvent. In these instances, the principal has a right
of action against both the agent and the substitute if the latter commits acts
prejudicial to the principal.

In the present case, the Special Power of Attorney executed by the

Spouses Villaluz contains no restrictive language indicative of an intention to
prohibit Agbisit from appointing a substitute or sub-agent. Thus, we agree with
the findings of the CA and the RTC that Agbisit's appointment of Milflores
Cooperative was valid.

The Spouses Villaluz understandably feel shorthanded because their

property was foreclosed by reason of another person's inability to pay. However,
they were not coerced to grant a special power of attorney in favor of Agbisit. Nor
were they prohibited from prescribing conditions on how such power may be
exercised. Absent such express limitations, the law recognizes Land Bank's right
to rely on the terms of the power of attorney as written.
 The remedy afforded by the Civil Code to the Spouses Villaluz is to
proceed against the agent and the substitute in accordance with Articles 1892
and 1893.

Calubad vs. Ricarcen Development Corporation

PRINCIPLE:

When a corporation intentionally or negligently clothes its agent with

apparent authority to act in its behalf, it is estopped from denying its agent's
apparent authority as to innocent third parties who dealt with this agent in good
faith.

PARTIES:

Ricarcen Development Corporation (Ricarcen) was a domestic corporation

engaged in renting out real estate.

Marilyn R. Soliman (Marilyn) was its president, acting on behalf of Ricarcen

Arturo C. Calubad the person who extended the loan in favor to the defendant

FACTS:

Marilyn, acting on Ricarcen's behalf as its president, executed three (3)

mortgage contracts (4M, 1M, 2M) with Calubad. However, after Ricarcen failed to
pay its loan, Calubad initiated extrajudicial foreclosure proceedings on the real
estate mortgage.

Ricarcen claimed that it only learned of Marilyn's transactions with

Calubad sometime in July 2003. Ricarcen filed its Complaint for Annulment of
Real Estate Mortgage and Extrajudicial Foreclosure of Mortgage and Sale with
Damages against Marilyn, Calubad, and employees of the Registry of Deeds of
Quezon City and of the Regional Trial Court of Quezon City.

RTC

The RTC granted Ricarcen's complaint and annulled the mortgage

contracts, extrajudicial foreclosure, and sale by public auction holding that
Marilyn failed to present a special power of attorney as evidence of her authority
from Ricarcen. The lack of a special power of attorney should have been enough
for Calubad to be put on guard and to require further evidence of Marilyn's
authority from Ricarcen.

CA

The CA dismissed Calubad's appeal and affirmed the Regional Trial Court
Decision holding that since Ricarcen did not know about the existence of the
contracts of mortgage between Caluband and Marilyn, it could not have ratified
them or knowingly accepted any benefits from the loan proceeds.

ISSUE:
 Whether or not Ricarcen Development Corporation is estopped from
denying or disowning the authority of Marilyn R. Soliman, its former President,
from entering into a contract of loan and mortgage with Arturo C. Calubad.

RULING:

The SC granted the petition in favor of Calubad

As the former president of Ricarcen, it was within Marilyn's scope of

authority to act for and enter into contracts in Ricarcen's behalf. Her broad
authority from Ricarcen can be seen with how the corporate secretary entrusted
her with blank yet signed sheets of paper to be used at her discretion. She also
had possession of the owner's duplicate copy of the land title covering the
property mortgaged to Calubad, further proving her authority from Ricarcen.

Calubad could not be faulted for continuing to transact with Marilyn, even
agreeing to give out additional loans, because Ricarcen clearly clothed her with
apparent authority.

Calubad, as an innocent third party dealing in good faith with Marilyn,

should not be made to suffer because of Ricarcen's negligence in conducting its
own business affairs.

“if a private corporation intentionally or negligently clothes its officers or

agents with apparent power to perform acts for it, the corporation will be
estopped to deny that such apparent authority is real, as to innocent third
persons dealing in good faith with such officers or agents."