AGENCY

CASE DIGESTS

AIANNA BIANCA P. BIRAO

10/30/2020
Table of Contents

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES V. ................................................................................ 4

COURT OF APPEALS, G.R. NO. 76931, 76933, ............................................................................................. 4
[MAY 29, 1991], 274 PHIL 927-940 ............................................................................................................. 4
RALLOS V. FELIX GO CHAN & SONS REALTY CORP.,..................................................................................... 5
G.R. NO. L-24332, [JANUARY 31, 1978], 171 PHIL 222-236 ......................................................................... 5
AIR FRANCE V. COURT OF APPEALS, ........................................................................................................... 6
G.R. NO. L-57339, [DECEMBER 29, 1983], 211 PHIL 601-610 ...................................................................... 6
IN RE: SANTOS Y DIAZ V. BUENCONSEJO, G.R. NO. L-20136, ...................................................................... 9
[JUNE 23, 1965], 121 PHIL 1194-1196......................................................................................................... 9
ALBALADEJO V. PHILIPPINE REFINING CO., G.R. NO. 20726, [DECEMBER 20, 1923], 45 PHIL 556-573 ..... 10
NIELSON & CO., INC. V. LEPANTO CONSOLIDATED MINING CO., .............................................................. 12
G.R. NO. L-21601, [DECEMBER 17, 1966], 125 PHIL 204-235 .................................................................... 12
SEVILLA V. COURT OF APPEALS, G.R. NOS. L-41182-3, .............................................................................. 15
[APRIL 15, 1988], 243 PHIL 340-354 .......................................................................................................... 15
LIM V. PEOPLE, G.R. NO. L-34338,............................................................................................................. 17
[NOVEMBER 21, 1984], 218 PHIL 303-307 ................................................................................................ 17
SAN DIEGO, SR. V. NOMBRE, G.R. NO. L-19265, ....................................................................................... 18
[MAY 29, 1964], 120 PHIL 162-167 ........................................................................................................... 18
DE LA PEÑA Y DE RAMON V. HIDALGO, G.R. NO. 5486, ............................................................................ 20
[AUGUST 17, 1910], 16 PHIL 450-481 ....................................................................................................... 20
CONDE V. COURT OF APPEALS, G.R. NO. L-40242,.................................................................................... 22
[DECEMBER 15, 1982], 204 PHIL 589-598 ................................................................................................. 22
HARRY E. KEELER ELECTRIC CO., INC. V. RODRIGUEZ, ............................................................................... 23
G.R. NO. 19001, [NOVEMBER 11, 1922], 44 PHIL 19-27............................................................................ 23
MANOTOK BROTHERS, INC. V. COURT OF APPEALS, ................................................................................. 25
G.R. NO. 94753, [APRIL 7, 1993] ............................................................................................................... 25
DOMINGO V. DOMINGO, G.R. NO. L-30573, ............................................................................................. 26
[OCTOBER 29, 1971], 149 PHIL 183-196 ................................................................................................... 26
SIASAT V. INTERMEDIATE APPELLATE COURT, .......................................................................................... 29
G.R. NO. L-67889, [OCTOBER 10, 1985], 223 PHIL 450-464 ...................................................................... 29
CABALLERO V. DEIPARINE, G.R. NO. L-39059, ........................................................................................... 32
[SEPTEMBER 30, 1974], 158 PHIL 353-367 ................................................................................................ 32
PHILIPPINE NATIONAL BANK V. STA. MARIA, G.R. NO. L-24765, [AUGUST 29, 1969], 139 PHIL 781-790 . 34
BA FINANCE CORP. V. COURT OF APPEALS, G.R. NO. 82040, .................................................................... 35
[AUGUST 27, 1991], 278 PHIL 176-184 ..................................................................................................... 35
Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals, G.R. No. 95703, [August 3, 1992], 287
PHIL 26-34 ................................................................................................................................................. 37

1
Commercial Bank & Trust Co. of the Phils. v. ............................................................................................ 39
Republic Armored Car Service Corp., ........................................................................................................ 39
G.R. Nos. L-18223-24, [June 29, 1963], 118 PHIL 436-443 ........................................................................ 39
NATIONAL FOOD AUTHORITY V. INTERMEDIATE APPELLATE COURT, G.R. NO. 75640, [APRIL 5, 1990], 263
PHIL 46-50 ................................................................................................................................................. 41
BORDADOR V. LUZ, G.R. NO. 130148, ....................................................................................................... 42
[DECEMBER 15, 1997], 347 PHIL 654-667 ................................................................................................. 42
HAHN V. COURT OF APPEALS, G.R. NO. 113074, ...................................................................................... 43
[JANUARY 22, 1997], 334 PHIL 491-507 .................................................................................................... 43
TAN V. SPOUSES GULLAS, G.R. NO. 143978, ............................................................................................. 45
[DECEMBER 3, 2002], 441 PHIL 622-634 ................................................................................................... 45
QUIROGA V. PARSONS HARDWARE CO., G.R. NO. 11491, ........................................................................ 47
[AUGUST 23, 1918], 38 PHIL 501-507 ....................................................................................................... 47
PHILIPPINE NATIONAL BANK V. STA. MARIA, G.R. NO. L-24765, [AUGUST 29, 1969], 139 PHIL 781-790 . 48
Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals, G.R. No. 95703, [August 3, 1992], 287
PHIL 26-34 ................................................................................................................................................. 50
DOMINION INSURANCE CORP. V. COURT OF APPEALS, G.R. NO. 129919, [FEBRUARY 6, 2002], 426 PHIL
620-631..................................................................................................................................................... 52
Victorias Milling Co. v. Court of Appeals, G.R. No. 117356, [June 19, 2000], 389 PHIL 184-199 ............... 53
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. V. CUIZON, G.R. NO. 167552, [APRIL 23, 2007], 550 PHIL
165-175..................................................................................................................................................... 55
LIM V. PEOPLE, G.R. NO. L-34338, [NOVEMBER 21, 1984], 218 PHIL 303-307 .......................................... 57
Mactan Cebu International Airport Authority v. Heirs of Ijordan, G.R. No. 173140, [January 11, 2016],
776 PHIL 222-232 ...................................................................................................................................... 59
Bank of the Philippine Islands v. Laingo, G.R. No. 205206, [March 16, 2016] ........................................... 61
Oliver v. Philippine Savings Bank, G.R. No. 214567, [April 4, 2016] .......................................................... 63
Mactan-Cebu International Airport Authority v. Unchuan, G.R. No. 182537, [June 1, 2016] ................... 65
Georg v. Holy Trinity College, Inc., G.R. No. 190408, [July 20, 2016], 790 PHIL 631-666 .......................... 67
AFP Retirement and Separation Benefits System v. Sanvictores, G.R. No. 207586, [August 17, 2016]..... 69
Litonjua Jr. v. Eternit Corp., G.R. No. 144805, [June 8, 2006], 523 PHIL 588-612...................................... 71
Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, [April 23, 2007], 550 PHIL 165-175... 73
Country Bankers Insurance Corp. v. Keppel Cebu Shipyard, G.R. No. 166044, [June 18, 2012], 688 PHIL
78-104....................................................................................................................................................... 75
Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288, [January 16, 2012], 679 PHIL 61-97 ......... 77
Orbeta v. Sendiong, G.R. No. 155236, [July 8, 2005], 501 PHIL 478-498 ................................................... 78
DOMINION INSURANCE CORP. V. COURT OF APPEALS, G.R. NO. 129919, [FEBRUARY 6, 2002], 426 PHIL
620-631..................................................................................................................................................... 80
Tuazon v. Heirs of Ramos, G.R. No. 156262, [July 14, 2005], 501 PHIL 695-704 ....................................... 81
Siy v. Tomlin, G.R. No. 205998, [April 24, 2017], 809 PHIL 262-278 .......................................................... 82
Medrano v. Court of Appeals, G.R. No. 150678, [February 18, 2005], 492 PHIL 222-237 ......................... 84

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Bacaling v. Muya, G.R. Nos. 148404-05, [April 11, 2002], 430 PHIL 531-554 ............................................ 86
Wheelers Club International, Inc. v. Bonifacio, G.R. No. 139540, [June 29, 2005], 500 PHIL 497-513 ...... 88
Lim v. Saban, G.R. No. 163720, [December 16, 2004], 488 PHIL 236-249 ................................................. 92
Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp., G.R. No. 179446, [January 10, 2011],
654 PHIL 67-82 ...................................................................................................................................... 93
Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288, [January 16, 2012], 679 PHIL 61-97 ......... 95
Victorias Milling Co. v. Court of Appeals, G.R. No. 117356, [June 19, 2000], 389 PHIL 184-199 ............... 96
Doles v. Angeles, G.R. No. 149353, [June 26, 2006], 525 PHIL 673-693 .................................................... 98
Sanchez v. Medicard Philippines, Inc., G.R. No. 141525, [September 2, 2005], 506 PHIL 332-338 ........... 99
Tan v. Spouses Gullas, G.R. No. 143978, [December 3, 2002], 441 PHIL 622-634................................... 101
Philippine Health-Care Providers, Inc. v. Estrada, G.R. No. 171052, [January 28, 2008], 566 PHIL 603-616
................................................................................................................................................................ 103
Professional Services, Inc. v. Court of Appeals, G.R. Nos. 126297, 126467 & 127590 (Resolution),
[February 11, 2008], 568 PHIL 158-171................................................................................................... 105
Agana vs. Court of Appeals, G.R. Nos. 126297, 126467 & 127590, [January 31, 2007], 542 PHIL 464-496
................................................................................................................................................................ 107
MIGUEL AMPIL, petitioner, vs. NATIVIDAD AGANA and ENRIQUE AGANA, respondents.||| (Professional
Services, Inc. v. Natividad, G.R. Nos. 126297, 126467 & 127590, [January 31, 2007], 542 PHIL 464-496)
................................................................................................................................................................ 111
Victorias Milling Co., Inc. vs. CA 333 SCRA 663 ....................................................................................... 113
Dominion vs. CA, et.al. G.R. No. 129919, February 6, 2002 .................................................................... 115
Sps. Alcantara v. Nido G.R. No. 165133, 19 April 2010 ........................................................................... 117
San Juan Structural and Steel Fabricators, Inc. v. CA, 357 Phil 631 ......................................................... 120
Florentino Bautista-Spille v. Nicorp Management & Dev. Corp., et.al., G.R. no. 124507, 9 October 2015
................................................................................................................................................................ 124
Claudio delos Reyes, et.al. vs. CA, et.al., G.R. No. 129103; September 3, 1999 ...................................... 128
Gozun v. Mercado, G.R. No. 167812; December 19, 2006 ...................................................................... 131
FEBTC (now BPI) et.al. v. Sps. Cayetano, G.R. No. 179909; January 25, 2010 ......................................... 133
Alvin Patrimono v. Napoleon Gutierrez, et.al., G.R. No. 187769; June 4, 2014....................................... 134
Bucton v. Rural Bank of El Salvador, Inc., G.R. No. 179625, 24 February 2014. ...................................... 136
Cuison v. CA., G.R. No. 88539; 26 October 1993 ..................................................................................... 138
Bicol Savings and Loans Association vs. CA, G.R. No. 85302; 31 March 1989 ......................................... 140
V-Gent, Inc. v. Morning Star Travel & Tours, Inc. G.R. No. 186305; July 22, 2015 .................................. 141
China Air Lines v. CA, G.R. No. 45985; May 18, 1990 .............................................................................. 144
PAL vs. CA, G.R. No. 46036; May 18, 1990 .............................................................................................. 144

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ORIENT AIR SERVICES & HOTEL REPRESENTATIVES V.
COURT OF APPEALS, G.R. NO. 76931, 76933,
[MAY 29, 1991], 274 PHIL 927-940

FACTS: American Air and Orient Air entered into a General Sales Agency
Agreement, whereby the former authorized the latter to act as its exclusive
general sales agent within the Philippines for the sale of air passenger
transportation.

AA undertook the collection of the proceeds of tickets sold since OA

failed to remit the net proceeds of the tickets sold for the months of January
to March 1981 in the amount of $254,400. Thus, AA terminated the
Agreement and instituted a suit against OA with the CFI of Manila for
Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order.

OA denied the material allegations and contended that after

application thereof to the commission due it under the Agreement, plaintiff
in fact still owed OA a balance in unpaid overriding commissions. The trial
court ruled in favor of defendant. On appeal, the IAC affirmed the findings of
the court a quo on material points but with some modifications with respect
to monetary awards granted.

ISSUE: the principal issue for resolution by the Court is the extent of OA’s
right to 3% overriding commission.

RULING: AA’s stand is that the commission of OA is based on “ticketed

sales” since OA was allowed to carry only the ticket stocks of AA, and the
former not having opted to appoint any sub-agents. On one hand, OA
contends that the contractual stipulation of a 3% overriding commission
covers the total revenue of AA and not merely that derived from ticketed
sales undertaken by OA, invoking its designation as the exclusive General
Sales Agent of AA, with corresponding obligations arising from such agency
the promotion and solicitation for the services of its principal.

It is a well settled legal principle that in the interpretation of a

contract, the entirety thereof must be taken into consideration to ascertain
the meaning of its provisions. The court finds merit in the contention of OA
that the Agreement, when interpreted in accordance with foregoing
principles, entitles it to 3% overriding commission based on total revenue, or
as referred by the parties, “total flown revenue”.

As the designated exclusive General Sales Agent of AA, OA was

responsible for the promotion and marketing of AA’s services for air
passenger transportation, and the solicitation of sales therefore. In return
for such efforts and services, OA was to be paid commission of 2 kinds: (1) a

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sales agency commission, ranging from 7-8% of tariff fares and charges
from sales by OA when made on AA ticket stock; and (2) an overriding
commission of 3% tariff fares and charges for all sales of passenger
transportation over AA services. It is immediately observed that the
precondition attached to the first type of commission does not obtain for the
second type of commissions. The latter type of commissions would accrue
for sales of AA services made not on its ticket stocks but on the ticket stock
of other air carriers sold by such carriers or other authorized ticketing
facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from AA ticket stock would erase any
distinction between two types of commissions and would lead to the absurd
conclusion that the parties had entered into a contract with meaningless
provisions. Such an interpretation must at all times be avoided with every
effort exerted to harmonized the entire Agreement.

RALLOS V. FELIX GO CHAN & SONS REALTY CORP.,

G.R. NO. L-24332, [JANUARY 31, 1978], 171 PHIL 222-236

FACTS: Concepcion and Gerundia Rallos were sisters and registered co-
owners of a parcel of land in Cebu. They executed a SPA in favor of their
brother, Simeon Rallos, authorizing him to sell for and in behalf of them, the
lot. After Concepcion died, Simeon sold the undivided shares of his sisters to
Felix Go Chan & Sons for Php10,686.90.

Ramon Rallos as administrator of the Intestate Estate of Concepcion

Rallos filed a complaint in CFI Cebu, praying (1) that the sale of undivided
share of deceased Concepcion be declared unenforceable, and said share be
reconveyed to her estate; (2) that the Certificate of Title issued in the name
of Felix Go Chan & Sons be cancelled and another title be issued in the
names of the corporation and the “Intestate Estate of Concepcion Rallos” in
equal undivided shares; and (3) that plaintiff be indemnified by way of
attorney’s fees and payment of costs of suit. While the case was pending in
the trial court, both Simeon and his sister Gerundia died.

ISSUE: is the sale of the undivided share of Concepcion valid although it

was executed by the agent after the death of his principal?

RULING: Agency is basically personal, representative and derivative in

nature. The authority of the agent to act emanated from the powers granted
to him by his principal; his act is the act of the principal if done within the
scope of authority. Qui facit per alium facit per se. “He who acts through
another acts himself.” By reason of the very nature of the relationship
between principal and agent, agency is extinguished by the death of the
principal or the agent. The death of the principal effects instantaneous and
absolute revocation of the authority of the agent unless the power be
coupled with an interest.

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 Article 1930 of the Civil Code is not involved because admittedly the
SPA executed in favor of Simeon was not coupled with an interest. Article
1931 is the applicable law. Under this provision, an act done by the agent
after the death of his principal is valid and effective only under two
conditions, viz: (1) that the agent acted without knowledge of death of
principal; and (2) that the third person who contracted with the agent
himself acted in good faith. These two requisites must concur, the absence
of one will render the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon,

knew of the death of his principal at the time he sold the latter’s share to
respondent corporation. On the basis of the established knowledge of
Simeon concerning the death of his principal, Article 1931 is inapplicable.
The law expressly requires for its application lack of knowledge on the part
of the agent of the death of his principal; it is enough that the third person
acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying
Article 1738 of old Civil Code now Article 1931 of NCC sustained the validity
of a sale made after the death of the principal because it was not shown that
the agent knew of his principal’s demise.

However, the principal rule explicitly states that death extinguished

the agency. That being the general rule, it follows a fortiori that any act of
an agent after the death of his principal is void ab initio unless the same falls
under the exceptions provided in Articles 1930 and 1931.

AIR FRANCE V. COURT OF APPEALS,

G.R. NO. L-57339, [DECEMBER 29, 1983], 211 PHIL 601-610

FACTS: Sometime in February, 1970, the late Jose G. Gana and his family,
purchased from AIR FRANCE through Imperial Travels, Incorporated, a duly
authorized travel agent, nine (9) "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route.

On April 1970, AIR FRANCE exchanged or substituted the

aforementioned tickets with other tickets for the same route. At this time,
the GANAS were booked for the Manila/Osaka segment on AIR FRANCE
Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip on AIR
FRANCE Flight 187 on 22 May 1970. The aforesaid tickets were valid until 8
May 1971, the date written under the printed words "Non valable apres de"
(meaning, "not valid after the")

The GANAS did not depart on 8 May 1970.

Sometime in January, 1971, Jose Gana sought the assistance of

Teresita Manucdoc, a Secretary of the Sta. Clara Lumber Company where

6
Jose Gana was the Director and Treasurer, for the extension of the validity
of their tickets, which were due to expire on 8 May 1971. Teresita enlisted
the help of Lee Ella, Manager of the Philippine Travel Bureau, who used to
handle travel arrangements for the personnel of the Sta. Clara Lumber
Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE.
The tickets were returned to Ella who was informed that extension was not
possible unless the fare differentials resulting from the increase in fares
triggered by an increase of the exchange rate of the US dollar to the
Philippine peso and the increased travel tax were first paid. Ella then
returned the tickets to Teresita and informed her of the impossibility of
extension.

In the meantime, the GANAS had scheduled their departure on 7 May

1971 or one day before the expiry date. In the morning of the very day of
their scheduled departure on the first leg of their trip, Teresita requested
travel agent Ella to arrange the revalidation of the tickets. Ella gave the
same negative answer and warned her that although the tickets could be
used by the GANAS if they left on 7 May 1971, the tickets would no longer
be valid for the rest of their trip because the tickets would then have expired
on 8 May 1971.

Notwithstanding the warnings, the GANAS departed from Manila in the

afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for Osaka, Japan.

However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines

refused to honor the tickets because of their expiration, and the GANAS had
to purchase new tickets. They encountered the same difficulty with respect
to their return trip to Manila as AIR FRANCE also refused to honor their
tickets. They were able to return only after pre-payment in Manila, through
their relatives, of the readjusted rates.

The GANAS commenced before the then Court of First Instance of

Manila, Branch III, Civil Case No. 84111 for damages arising from breach of
contract of carriage.

AIR FRANCE traversed the material allegations of the Complaint and

alleged that the GANAS brought upon themselves the predicament they
found themselves in and assumed the consequential risks; that travel agent
Ella's affixing of validating stickers on the tickets without the knowledge and
consent of AIR FRANCE, violated airline tariff rules and regulations and was
beyond the scope of his authority as a travel agent; and that AIR FRANCE
was not guilty of any fraudulent conduct or bad faith.

ISSUE: whether or not, under the environmental milieu, the GANAS have
made out a case for breach of contract of carriage entitling them to an
award of damages.

7
RULING: No. Pursuant to tariff rules and regulations of the International Air
Transportation Association (IATA), included in paragraphs 9, 10, and 11 of
the Stipulations of Fact between the parties in the Trial Court, dated 31
March 1973, an airplane ticket is valid for one year.

From the foregoing rules, it is clear that AIR FRANCE cannot be faulted
for breach of contract when it dishonored the tickets of the GANAS after 8
May 1971 since those tickets expired on said date; nor when it required the
GANAS to buy new tickets or have their tickets re-issued for the
Tokyo/Manila segment of their trip. Neither can it be said that, when upon
sale of the new tickets, it imposed additional charges representing fare
differentials, it was motivated by self-interest or unjust enrichment
considering that an increase of fares took effect, as authorized by the Civil
Aeronautics Board (CAB) in April, 1971. This procedure is well in accord with
the IATA tariff rules.

The GANAS cannot defend by contending lack of knowledge of those

rules since the evidence bears out that Teresita, who handled travel
arrangements for the GANAS, was duly informed by travel agent Ella of the
advice of Rillo, the Office Manager of Air France, that the tickets in question
could not be extended beyond the period of their validity without paying the
fare differentials and additional travel taxes brought about by the increased
fare rate and travel taxes.

The ruling relied on by respondent Appellate Court, therefore, in KLM

vs. Court of Appeals, 65 SCRA 237 (1975), holding that it would be unfair to
charge respondents therein with automatic knowledge or notice of conditions
in contracts of adhesion, is inapplicable. To all legal intents and purposes,
Teresita was the agent of the GANAS and notice to her of the rejection of the
request for extension of the validity of the tickets was notice to the GANAS,
her principals.

The SAS validating sticker for the Osaka/Tokyo flight affixed by Ella
showing reservations for JAL Flight 108 for 16 May 1971, without clearing
the same with AIR FRANCE allegedly because of the imminent departure of
the GANAS on the same day so that he could not get in touch with Air
France, was certainly in contravention of IATA rules although as he had
explained, he did so upon Teresita's assurance that for the onward flight
from Osaka and return, the GANAS would make other arrangements.

The circumstance that AIR FRANCE personnel at the ticket counter in

the airport allowed the GANAS to leave is not tantamount to an implied
ratification of travel agent Ella's irregular actuations. It should be recalled
that the GANAS left Manila the day before the expiry date of their tickets and
that "other arrangements" were to be made with respect to the remaining
segments. Besides, the validating stickers that Ella affixed on his own merely

8
reflect the status of reservations on the specified flight and could not legally
serve to extend the validity of a ticket or revive an expired one.

The conclusion is inevitable that the GANAS brought upon themselves

the predicament they were in for having insisted on using tickets that were
due to expire in an effort, perhaps, to beat the deadline and in the thought
that by commencing the trip the day before the expiry date, they could
complete the trip even thereafter. It should be recalled that AIR FRANCE was
even unaware of the validating SAS and JAL stickers that Ella had affixed
spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted
within their contractual rights when they dishonored the tickets on the
remaining segments of the trip and when AIR FRANCE demanded payment
of the adjusted fare rates and travel taxes for the Tokyo/Manila flight.

IN RE: SANTOS Y DIAZ V. BUENCONSEJO, G.R. NO. L-20136,

[JUNE 23, 1965], 121 PHIL 1194-1196

FACTS: The aforementioned Lot No. 1917 covered by Original Certificate of

Title No. RO-3848 (25322) was originally owned in common by Anatolio
Buenconsejo to the extent of 1/2 undivided portion and Lorenzo Bon and
Santiago Bon to the extent of the other ½; that Anatolio Buenconsejo's
rights, interests and participation over the portion above-mentioned were on
January 3, 1961 and by a Certificate of Sale executed by the Provincial
Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres Ziga,
awardee in the corresponding auction sale conducted by said Sheriff in
connection with the execution of the decision of the Juvenile Delinquency
and Domestic Relations Court in Civil Case No. 25267, entitled `Yolanda
Buencosejo, et al, vs. Anatolio Buenconsejo': that on December 26, 1961
and by a certificate of redemption issued by the Provincial Sheriff of Albay,
the rights, interest, claim and/or participation which Atty. Tecla San Andres
Ziga may have acquired over the property in question by reason of the
aforementioned auction sale award, were transferred and conveyed to the
herein petitioner in his capacity as Attorney-in-fact of the children of
Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena Buenconsejo
and Asucena Buenconsejo.

It would appear, also, that petitioner Santos had redeemed the

aforementioned share of Anatolio Buenconsejo, upon the authority of a
special power of attorney executed in his favor by the children of Anatolio
Buenconsejo; that relying upon this power of attorney and redemption made
by him, Santos now claims to have acquired the share of Anatolio
Buenconsejo in the aforementioned Lot No. 1917; that as the alleged
present owner of said share, Santos caused a subdivision plan of said Lot
No. 1917 to be made, in which the portion he claims as his share thereof has
been marked as Lot No. 1917-A; and that he wants said subdivision Lot No.

9
1917-A to be segregated from Lot No. 1917 and a certificate of title issued in
his name exclusively for said subdivision Lot No. 1917-A.

ISSUE: WON Santos, by virtue of the SPA executed in his favor by the
children of Anatolio Buenconsejo, has acquired the share of the latter in the
Lot No. 1917.

RULING: As correctly held by the lower court, petitioner's claim is clearly

untenable, for: (1) said special power of attorney authorized him to act on
behalf of the children of Anatolio Buenconsejo, and, hence, it could not have
possibly vested him any property right in his own name; (2) the children of
Anatolio Buenconsejo had no authority to execute said power of attorney,
because their father is still alive and, in fact, he and his wife opposed the
petition of Santos; (3) in consequence of said power of attorney (if valid)
and redemption, Santos could have acquired no more than the share pro
indiviso of Anatolio Buenconsejo in Lot No. 1917, so that petitioner cannot —
without the conformity of the other co-owners (Lorenzo and Santiago Bon),
or a judicial decree of partition issued pursuant to the provisions of Rule 69
of the new Rules of Court (Rule 71 of the old Rules of Court) which have not
been followed by Santos — adjudicate to himself in fee simple a determinate
portion of said Lot No. 1917, as his share therein, to the exclusion of the
other co-owners.

ALBALADEJO V. PHILIPPINE REFINING CO., G.R. NO. 20726, [DECEMBER 20, 1923], 45
PHIL 556-573

FACTS: Albaladejo Y Cia. is a limited partnership and during the transactions

which gave origin to this litigation said firm was engaged in the buying and
selling of the products of the country, especially copra, and in the conduct of
a general mercantile business in Legaspi and in other places where it
maintained agencies, or sub-agencies, for the prosecution of its commercial
enterprises. The Visayan Refining Co. is a corporation engaged in operating
its extensive plant at Opon, Cebu, for the manufacture of coconut oil.

The parties then entered into an agreement wherein the plaintiff,

during the year therein contemplated, bought copra extensively for the
Visayan Refining Co. At the end of said year both parties found themselves
satisfied with the existing arrangement, and they therefore continued by
tacit consent to govern their future relations by the same agreement. In this
situation affairs remained until July 9, 1920, when the Visayan Refining Co.
closed down its factory at Opon and withdrew from the copra market.

After the Visayan Refining Co. had ceased to buy copra, as above
stated, of which fact the plaintiff was duly notified, the supplies of copra
already purchased by the plaintiff were gradually shipped out and accepted

10
by the Visayan Refining Co., and in the course of the next eight or ten
months the accounts between the two parties were liquidated.

Upon reference to paragraph five of the contract reproduced above it

will be seen that the Visayan Refining Co. obligated itself to provide
transportation by sea to Opon, Cebu, for the copra which should be delivered
to it by the plaintiff; and the first cause of action set forth in the complaint is
planted upon the alleged negligent failure of the Visayan Refining Co. to
provide opportune transportation for the copra collected by the plaintiff and
deposited for shipment at various places.

ISSUE: whether the plaintiff's expenses in maintaining and extending its

organization for the purchase of copra in the period between July, 1920, to
July, 1921, were incurred at the instance and request of the defendant, or
upon any promise of the defendant to make that expenditure good.

RULING: The supposed liability does not exist. By recurring to paragraph

four of the contract between the plaintiff and the Visayan Refining Co. it will
be seen that the latter agreed to keep the plaintiff advised of the prevailing
prices paid for copra in the Cebu market. In compliance with this obligation
the Visayan Refining Co. was accustomed to send out "trade letters" from
time to time to its various clients in the southern provinces of whom the
plaintiff was one. In these letters the manager of the company was
accustomed to make comment upon the state of the market and to give
such information as might be of interest or value to the recipients of the
letters.

There is nothing in these letters on which to hold the defendant liable

for the expenses incurred by the plaintiff in keeping its organization intact
during the period now under consideration. Nor does the oral testimony
submitted by the plaintiff materially change the situation in any respect.
Furthermore, the allegation in the complaint that one agency in particular
(Gubat) had been opened on October 1, 1920, at the special instance and
request of the defendant, is not at all sustained by the evidence.

In the appellant's brief contention is advanced that the contract

between the plaintiff and the Visayan Refining Co. created the relation of
principal and agent between the parties, and reliance is placed upon article
1729 of the Civil Code which requires the principal to indemnify the agent for
damages incurred in carrying out the agency. Attentive perusal of the
contract is, however, convincing to the effect that the relation between the
parties was not that of principal and agent in so far as relates to the
purchase of copra by the plaintiff. It is true that the Visayan Refining Co.
made the plaintiff one of its instruments for the collection of copra; but it is
clear that in making its purchases from the producers the plaintiff was
buying upon its own account and that when it turned over the copra to the
Visayan Refining Co., pursuant to that agreement, a second sale was

11
effected. In paragraph three of the contract it is declared that during the
continuance of this contract the Visayan Refining Co. would not appoint any
other agent for the purchase of copra in Legaspi; and this gives rise
indirectly to the inference that the plaintiff was considered its buying agent.
But the use of this term in one clause of the contract cannot dominate the
real nature of the agreement as revealed in other clauses, no less than in
the caption of the agreement itself. In some of the trade letters also the
various instrumentalities used by the Visayan Refining Co. for the collection
of copra are spoken of as agents. But this designation was evidently used for
convenience; and it is very clear that in its activity as a buyer the plaintiff
was acting upon its own account and not as agent, in the legal sense, of the
Visayan Refining Co. The title to all of the copra purchased by the plaintiff
undoubtedly remained in it until it was delivered by way of subsequent sale
to said company.

For the reasons stated we are of the opinion that no liability on the
part of the defendant is shown upon the plaintiff's second cause of action,
and the judgment of the trial court on this part of the case is erroneous.

NIELSON & CO., INC. V. LEPANTO CONSOLIDATED MINING CO.,

G.R. NO. L-21601, [DECEMBER 17, 1966], 125 PHIL 204-235

FACTS: The contract in question was made by the parties on January 30,
1937 for a period of five (5) years. In the latter part of 1941, the parties
agreed to renew the contract for another period of five (5) years, but in the
meantime, the Pacific War broke out in December, 1941.

In January, 1942 operation of the mining properties was disrupted on

account of the war. In February of 1942, the mill, power plant, supplies on
hand, equipment, concentrates on hand and mines, were destroyed upon
orders of the United States Army, to prevent their utilization by the invading
Japanese Army. The Japanese forces thereafter occupied the mining
properties, operated the mines during the continuance of the war, and who
were ousted from the mining properties only in August of 1945.

After the mining properties were liberated from the Japanese forces,
LEPANTO took possession thereof and embarked in rebuilding and
reconstructing the mines and mill. On June 26, 1948 the mines resumed
operation under the exclusive management of LEPANTO.

Shortly after the mines were liberated from the Japanese invaders in
1945, a disagreement arose between NIELSON and LEPANTO over the status
of the operating contract in question which as renewed expired in 1947.
Under the terms thereof, the management contract shall remain in suspense

12
in case fortuitous event or force majeure, such as war or civil commotion,
adversely affects the work of mining and milling.

NIELSON hold the view that, on account of the war, the contract was
suspended during the war; hence the life of the contract should be
considered extended for such time of the period of suspension. On the other
hand, LEPANTO contended that the contract should expire in 1947 as
originally agreed upon because the period of suspension accorded by virtue
of the war did not operate to extend further the life of the contract.

ISSUES:

I. Whether the management agreement has been extended as a

result of the supervening war.
II. Whether such suspension had the effect of extending the period of
the management contract for the period of said suspension.

RULING:

I. A careful scrutiny of the clause will at once reveal that in order that
the management contract may be deemed suspended two events must take
place which must be brought in a satisfactory manner to the attention of
defendant within reasonable time, to wit: (1) the event constituting the force
majeure must be reasonably beyond the control of NIELSON, and (2) it must
adversely affect the work of mining and milling the company is called upon
to undertake. As long as these two conditions exist the agreement is
deemed suspended.

It is undeniable from the facts that beginning February, 1942 the

operation of the Lepanto mines stopped or became suspended as a result of
the destruction of the mill, power plant and other important equipment
necessary for such operation in view of a cause which was clearly beyond
the control of Nielson and that as a consequence such destruction adversely
affected the work of mining and milling which the latter was called upon to
undertake under the management contract. Consequently, by virtue of the
very terms of said contract the same may be deemed suspended from
February, 1942 and as of that month the contract still had 60 months to go.

On the other hand, the record shows that the defendant admitted that
the occupation forces operated its mining properties subject of the
management contract, and from the very report submitted by President
DeWitt it appears that the date of the liberation of the mine was August 1,
1945.

It is, therefore, clear from the foregoing that the Lepanto mines were
liberated on August 1, 1945, but because of the period of rehabilitation and
reconstruction that had to be made as a result of the destruction of the mill,

13
power plant and other necessary equipment for its operation it cannot be
said that the suspension of the contract ended on that date. Hence, the
contract must still be deemed suspended during the succeeding years of
reconstruction and rehabilitation, and this period can only be said to have
ended on June 26, 1948 when, as reported by the defendant, the company
officially resumed the mining operations of the Lepanto.

II. In holding that the suspension of the agreement meant the extension
of the same for a period equivalent to the suspension, We do not have the
least intention of overruling the cases cited by appellee. We simply want to
say that the ruling laid down in said cases does not apply here because the
material facts involved therein are not the same as those obtaining in the
present. The rule of stare decisis cannot be invoked where there is no
analogy between the material facts of the decision relied upon and those of
the instant case.

Thus, in Victorias Planters Association vs. Victorias Milling Company,

there was no evidence at all regarding the intention of the parties to extend
the contract equivalent to the period of suspension caused by the war.
Neither was there evidence that the parties understood the suspension to
mean extension; nor was there evidence of usage and custom in the
industry that the suspension meant the extension of the agreement. All
these matters, however, obtain in the instant case.

Again, in the case of Lacson vs. Diaz, the issue referred to the
interpretation of the pre-war contract of lease of sugar cane lands and the
liability of the lessee to pay rent during and immediately following the
Japanese occupation and where the defendant claimed the right of an
extension of the lease to make up for the time when no cane was planted.
This Court, in holding that the years which the lessee could not use the land
because of the war could not be discounted from the period agreed upon,
held that "Nowhere is there any insinuation that the defendant-lessee was to
have possession of lands for seven years excluding years on which he could
not harvest sugar." Clearly, this ratio decidendi is not applicable to the case
at bar wherein there is evidence that the parties understood the "suspension
clause by force majeure" to mean the extension of the period of agreement.

Lastly, in the case of Chong Co. vs. Court of Appeals, appellant leased
a building from appellee beginning September 13, 1940 for three years,
renewable for two years. The lessee's possession was interrupted in
February, 1942 when he was ousted by the Japanese who turned the same
over to German Otto Schulze, the latter occupying the same until January,
1945 upon the arrival of the liberation forces. Appellant contended that the
period during which he did not enjoy the leased premises because of his
dispossession by the Japanese had to be deducted from the period of the
lease, but this was overruled by this Court, reasoning that such
dispossession was merely a simple "perturbacion de mero hecho y de la cual

14
no responde el arrendador" under Article 1560 of the old Civil Code (now
Art. 1664). This ruling is also not applicable in the instant case because in
that case there was no evidence of the intention of the parties that any
suspension of the lease by force majeure would be understood to extend the
period of the agreement.

SEVILLA V. COURT OF APPEALS, G.R. NOS. L-41182-3,

[APRIL 15, 1988], 243 PHIL 340-354

FACTS: On the strength of a contract entered into on Oct. 19, 1960 by and
between Mrs. Segundina Noguera, party of the first part; the Tourist World
Service, Inc.,represented by Mr. Eliseo Canilao as party of the second part,
and hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini
St.,Manila for the former's use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the
second part for the prompt payment of the monthly rental agreed on. When
the branch office was opened, the same was run by the herein appellant Lina
O. Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
and 3% was to be withheld by the Tourist World Service, Inc. Cdpr

On or about November 24, 1961 the Tourist World Service, Inc.

appears to have been informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office. This was
firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961, the first abolishing the office of the
manager and vice-president of the Tourist World Service, Inc.,Ermita
Branch, and the second, authorizing the corporate secretary to receive the
properties of the Tourist World Service then located at the said branch office.
It further appears that on Jan. 3, 1962, the contract with the appellees for
the use of the Branch Office premises was terminated and while the
effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a
matter of fact appellants used it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the branch office, and, finding the
premises locked, and, being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the Tourist World
Service. When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint was filed by the herein
appellants against the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with counterclaims. For
apparent lack of interest of the parties therein, the trial court ordered the
dismissal of the case without prejudice.

15
ISSUE: WON the padlocking of the premises by the Tourist World Service,
Inc. without the knowledge and consent of the appellant Lina Sevilla entitled
the latter to the relief of damages prayed for.

WON the evidence for the said appellant supports the contention that the
appellee Tourist World Service, Inc. unilaterally and without the consent of
the appellant disconnected the telephone lines of the Ermita branch office of
the appellee Tourist World Service, Inc.

RULING: The records will show that the petitioner, Lina Sevilla, was not
subject to control by the private respondent Tourist World Service,
Inc.,either as to the result of the enterprise or as to the means used in
connection therewith. In the first place, under the contract of lease covering
the Tourist World's Ermita office, she had bound herself in solidum as and
for rental payments, an arrangement that would belie claims of a master-
servant relationship. True, the respondent Court would later minimize her
participation in the lease as one of mere guaranty, that does not make her
an employee of Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his employer's business,
or otherwise, assume any liability thereof. In that event, the parties must be
bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, "[w]hen the
branch office was opened, the same was run by the herein appellant Lina O.
Sevilla payable to Tourist World Service, Inc. by any airline for any fare
brought in on the effort of Mrs. Lina Sevilla." Under these circumstances, it
cannot be said that Sevilla was under the control of Tourist World Service,
Inc. "as to the means used." Sevilla in pursuing the business, obviously
relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For
her efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. The fact that Sevilla had been
designated "branch manager" does not make her, ergo, Tourist World's
employee.

It is the Court's considered opinion, that when the petitioner, Lina

Sevilla, agreed to (wo)man the private respondent, Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of agency.
It is the essence of this contract that the agent renders services "in
representation or on behalf of another." 18 In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself,
based on her letter of November 28, 1961, presumed her principal's
authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of

16
facts, that the parties had contemplated a principal-agent relationship,
rather than a joint management or a partnership.

But unlike simple grants of a power of attorney, the agency that we

hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for the mutual interest of the agent and the
principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself,
and as such, she had acquired an interest in the business entrusted to her.
Moreover, she had assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not limited to the commissions she
earned as a result of her business transactions, but one that extends to the
very subject matter of the power of management delegated to her. It is an
agency that, as we said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.

LIM V. PEOPLE, G.R. NO. L-34338,

[NOVEMBER 21, 1984], 218 PHIL 303-307

FACTS: On January 10, 1966, the appellant, who is a businesswoman, went

to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso
agreed to the proposition of the appellant to sell her tobacco consisting of
615 kilos at P1.30 a kilo. The appellant was to receive the overprice for
which she could sell the tobacco. This agreement was made in the presence
of plaintiff's sister, Salud G. Bantug.

Of the total value of P799.50, the appellant had paid to Ayroso only
P240.00, and this was paid on three different times. Demands for the
payment of the balance of the value of the tobacco were made upon the
appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud
Bantug further testified that she had gone to the house of the appellant
several times, but the appellant often eluded her; and that the 'camarin' of
the appellant was empty. Although the appellant denied that demands for
payment were made upon her, it is a fact that on October 19, 1966, she
wrote a letter to Salud Bantug.

Pursuant to this letter, the appellant sent a money order for P100.00
on October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated
April 18, 1967, or a total of P240.00. As no further amount was paid, the
complainant filed a complaint against the appellant for estafa.

17
ISSUE: WON petitioner was not an agent because Exhibit "A" does not say
that she would be paid the commission if the goods were sold.

RULING: It is clear in the agreement, Exhibit "A", that the proceeds of the
sale of the tobacco should be turned over to the complainant as soon as the
same was sold, or, that the obligation was immediately demandable as soon
as the tobacco was disposed of Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it
does not fix a period, does not apply.

The fact that appellant received the tobacco to be sold at P1.30 per
kilo and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The
agreement (Exhibit "A") constituted her as an agent with the obligation to
return the tobacco if the same was not sold.

SAN DIEGO, SR. V. NOMBRE, G.R. NO. L-19265,

[MAY 29, 1964], 120 PHIL 162-167

FACTS: On May 1, 1960, Nombre, in his capacity as judicial administrator of

the intestate estate subject of the Sp. Proc. No. 7279, leased one of the
properties of the estate (a fishpond identified as Lot No. 1617 of the
cadastral survey of Kabangkalan, Negros Occidental), to Pedro Escanlar, the
other respondent. The terms of the lease was for three (3) years, with a
yearly rental of P3,000.00 to expire on May 1, 1963, the transaction having
been done, admittedly, without previous authority of approval of the Court
where the proceedings was pending. On January 17, 1961, Nombre was
removed as administrator by Order of the court and one Sofronio
Campillanos was appointed in his stead. The appeal on the Order of
Nombre's removal is supposedly pending with the Court of Appeals.
Respondent Escanlar was cited for contempt, allegedly for his refusal to
surrender the fishpond to the newly appointed administrator.

On March 20, 1961, Campillanos filed a motion asking for authority to

execute a lease contract of the same fishpond, in favor of petitioner herein,
Moises San Diego, Sr., for 5 years from 1961, at a yearly rental of
P5,000.00. Escanlar was not notified of such motion. Nombre, the deposed
administrator, presented a written opposition to the motion of Campillanos
on April 11, 1961, pointing out that the fishpond had been leased by him to
Escanlar for 3 years, the period of which was going to expire on May 1,
1963. In a supplemental opposition, he also invited the attention of the
Court that to grant the motion of the new administrator would in effect
nullify the contract in favor of Escanlar, a person on whom the Court has no
jurisdiction. He also intimated that the validity of the lease contract entered
into by a judicial administrator, must be recognized unless so declared void
in a separate action. The opposition notwithstanding, the Court on April 8,

18
1951, in effect, declared that the contract in favor of Escanlar was null and
void, for want of judicial authority and that unless he would offer the same
as or better conditions than the prospective lessee, San Diego, there was no
good reason why the motion for authority to lease the property to San Diego
should not be granted. Nombre moved to reconsider the Order of April 8,
stating that Escanlar was willing to increase the rental to P5,000.00, but only
after the termination of his original contract. The motion for reconsideration
was denied on April 24, 1961, the trial judge stating that the contract in
favor of Escanlar was executed in bad faith and was fraudulent because of
the imminence of Nombre's removal as administrator, one of the causes of
which was his indiscriminate leasing of the property with inadequate rentals.

Petitioner contends, that No. 8, Art. 1878 is the limitation to the right
of a judicial administrator to lease real property without prior court authority
and approval, if it exceeds one year. The lease contract in favor of Escanlar
being for 3 years and without such court approval and authority is,
therefore, null and void. Upon the other hand, respondents maintain that
there is no limitation of such right; and that Article 1878 does not apply in
the instant case.

ISSUE: The controlling issue in this case is the legality of the contract of
lease entered into by the former administrator, Nombre, and Pedro Escanlar
on May 1, 1960.

RULING: We believe that the Court of Appeals was correct in sustaining the
validity of the contract of lease in favor of Escanlar, notwithstanding the lack
of prior authority and approval. The law and prevailing jurisprudence on the
matter militates in favor of this view. While it may be admitted that the
duties of a judicial administrator and an agent (petitioner alleges that both
act in representative capacity), are in some respects, identical, the
provisions on agency (Art. 1878, C.C.), should not apply to a judicial
administrator. A judicial administrator is appointed by the Court. He is not
only the representative of said Court, but also the heirs and creditors of the
estate (Chua Tan vs. del Rosario, 57 Phil., 411). A judicial administrator
before entering into his duties, is required to file a bond. These
circumstances are not true in case of agency. The agent is only answerable
to his principal. The protection which the law gives the principal, in limiting
the powers and rights of an agent, stems from the fact that control by the
principal can only be thru agreements, whereas the acts of a judicial
administrator are subject to specific provisions of law and orders of the
appointing court. The observation of former Chief Justice Moran, as quoted
in the decision of the Court of Appeals, is indeed sound, and we are not
prone to alter the same, at the moment.

19
DE LA PEÑA Y DE RAMON V. HIDALGO, G.R. NO. 5486,
[AUGUST 17, 1910], 16 PHIL 450-481

FACTS: On May 23, 1906, Jose de la Peña y de Ramon, and Vicenta de

Ramon, in her own behalf and as the legal guardian of her son Roberto de la
Peña, filed in the Court of First Instance of Manila a written complaint
against Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, and, after
the said complaint, already amended, had been answered by the defendants
Antonio and Francisco Hidalgo, and the other defendant, Federico Hidalgo,
had moved for the dismissal of this complaint, the plaintiff, Jose de la Peña y
de Ramon, as the judicial administrator of the estate of the deceased Jose
de la Peña Gomiz, with the consent of the court filed a second amended
complaint prosecuting his action solely against Fedirico Hidalgo.

On August 10, 1908, the plaintiff Peña y De Ramon filed a third

amended complaint, with the permission of the court, alleging, among other
things, as a first cause of action, that during the period of time from
November 12, 1887, to January 7, 1904, when Federico Hidalgo has
possession of and administered the following properties; to wit; one house
and lot at No. 48 Calle, San Luis; another house and lot at No. 6 Calle
Cortoda; another house and lot at No. 56 Calle San Luis, and a fenced lot on
the same street, all of the district of Ermita, and another house and lot at
No. 81 Calle Looban de Paco, belonging to his principal, Jose de la Peña y
Gomiz, according to the power of attorney executed in his favor and
exhibited with the complaint under letter A, the defendant, as such agent,
amounting to P50,244, which sum, collected in partial amounts and on
different dates, he should have deposited, in accordance with the verbal
agreement between the deceased and himself, the defendant, in the general
treasure of the Spanish Government at an interest of 5 per cent per annum,
which interest on accrual was likewise to be deposited in order that it also
might bear interest; that the defendant did not remit or pay to Jose de la
Peña y Gomiz, during the latter's lifetime, nor to any representative of the
said De la Peña Gomiz, the sum aforestated nor any part thereof, with the
sole exception of P1,289.03, nor has he deposited the unpaid balance of the
said sum in the treasury, according to agreement, wherefore he has become
liable to his principal and to the defendant-administrator for the said sum,
together with its interest, which amounts to P72,548.24 and that, whereas
the defendant has not paid over all nor any part for the last-mentioned sum,
he is liable for the same, as well as for the interest thereon at 6 per cent per
annum from the time of the filing of the complaint, and for the costs of the
suit.

ISSUE: WON there exists a contract of agency.

RULING: When the agent and administrator of property informs his principal
by letter that for reasons of health and medical treatment he is about to
depart from the place where he is executing his trust and wherein the said

20
property is situated, and abandons the property, turns it over to a third
party, renders accounts of its revenues up to the date on which he ceases to
hold his position and transmits to his principal a general statement which
summarizes and embraces all the balances of his accounts since he began
the administration to the date of the termination of his trust, and, without
stating when he may return to take charge of the administration of the said
property, asks his principal to execute a power of attorney in due form in
favor of and transmit the same to another person who took charge of the
administration of the said property, it is but reasonable and just to conclude
that the said agent had expressly and definitely renounced his agency and
that such agency was duly terminated, in accordance with the provisions of
article 1732 of the Civil Code, and, although the agent in his aforementioned
letter did not use the word "renouncing the agency," yet such words were
undoubty so understood and accepted by the principal, because of the lapse
of nearly nine years up to the time of the latter's death, without his having
interrogated either the renouncing agent, disapproving what he had done, or
the person who substituted the latter.

The person who took charge of the administration of property without

express authorization and without a power of attorney executed by the
owner thereof, and performed the duties of his office without opposition or
absolute prohibition on the owner's part, expressly communicated to the said
person, is concluded to have administered the said property by virtue of an
implied agency, in accordance with the provision of article 1710 of the Civil
Code, since the said owner of the property, knowing perfectly well that the
said person took charge of the administration of the same, through
designation by such owner's former agent who had to absent himself from
the place for well-founded reasons, remained silent for nearly nine years.
Although he did not sent a new power of attorney to the said person who
took charge of his property, the fact remains that, during the period stated,
he neither opposed nor prohibited the new agent with respect to the
administration, nor did he appoint another person in his confidence;
wherefore it must be concluded that this new agent acted by virtue of an
implied agency, equivalent to a legitimate agency, tacitly conferred by the
owner of the property administered.

It is improper to compare the case where the owner of the property is

unaware of the officious management of a third party in the former's
interest, with the case where, having perfect knowledge that his interests
and property were so being managed and administered, he did not object,
but in fact consented to such management and administration for many
years; for the reason that an administration by virtue of a implied agency
derives its origin from a contract, and the management of another's business
without the knowledge of the owner thereof, is based solely on a quasi-
contract —a distinction sanctioned by the jurisprudence established by the
supreme court of Spain in its decision of July 7, 1881.

21
 The agent and administrator who was obliged to leave his charge for a
legitimate cause and who duly informed his principal, is thenceforward
released and freed from the results and consequences of the management of
the person who substituted him with the consent, even tacit though it be, of
his principal. For this reason, the latter has no right to claim damages
against his former agent whose conduct was in accordance with the
provisions of article 1736 of the Civil Code, for the care of the property and
interests of another cannot require that the agent make the sacrifice of his
health, of his life, and of his own interests, it having been shown that it was
impossible for the latter to continue in the discharge of his duties.

CONDE V. COURT OF APPEALS, G.R. NO. L-40242,

[DECEMBER 15, 1982], 204 PHIL 589-598

FACTS: On April 7, 19311, Margarita, Bernardo and petitioner Dommga, all

surnamed Conde, (the vendors-a-retro) sold with right of repurchase within
ten years from said date, an unregistered parcel of agricultural land, to the
spouses Casimira Pasagui and Pio Altera (the vendees-a-retro). Three years
later, Original Certificate of Title No. N-534 covering the land was issued in
the name of the vendees-a-retro subject to the stipulated right of
redemption of the vendors-a-retro. Within the repurchase period,
particularly on November 28, 1943, Paciente Cordero, son-in-law of and
representing the vendees-a-retro signed a Memorandum of Repurchase
declaring therein that he received from Eusebio Amarille, a representative of
the vendors-a-retro, the full amount of the repurchase price. Petitioner
Domlaga, claimining that she redeemed the property with her own money,
immediately took possession of the land in 1945 and paid the land taxes
thereon since then. On June 30, 1965, however, the vendees-a-retro sold
the land to the private respondent spouses, the Condes, Consequently, in
1969, petitioner filed with the Court of First Instance a complaint for quieting
of title and declaration of ownership against all the private respondents. The
Trial Court dismissed the Complaint and ordered petitioner to vacate the
disputed property and to deliver its peaceful possession to the Conde
spouses. The Court of Appeals affirmed the decision and held that petitioner
failed to validly exercise her right of repurchase because the Memorandum
of Repurchase was not signed by the vendees-a-retro but by Cordero who
was not formally authorized to sign for said vendees-a-retro.

ISSUE: Whether or not there was an implied agency when Cordero signed
the Memorandum of Repurchase.

RULING: Of significance, however, is the fact that from the execution of the
repurchase document in 1945, possession, which heretofore had been with
the Alteras, has been in the hands of petitioner as stipulated therein. Land
taxes have also been paid for by petitioner yearly from 1947 to 1969
inclusive. If, as opined by both the Court a quo and the Appellate Court,

22
petitioner had done nothing to formalize her repurchase, by the same token,
neither have the vendees-a-retro done anything to clear their title of the
encumbrance therein regarding petitioner's right to repurchase. No new
agreement was entered into by the parties as stipulated in the deed of pacto
de retro, if the vendors a retro failed to exercise their right of redemption
after ten years. If, as alleged, petitioner exerted no effort to procure the
signature of Pio Altera after he had recovered from his illness, neither did
the Alteras repudiate the deed that their son-in-law had signed. Thus, an
implied agency must be held to have been created from their silence or lack
of action, or their failure to repudiate the agency. (Art. 1869, Civil Code.)

HARRY E. KEELER ELECTRIC CO., INC. V. RODRIGUEZ,

G.R. NO. 19001, [NOVEMBER 11, 1922], 44 PHIL 19-27

FACTS: The plaintiff is domestic corporation with its principal office in the
city of Manila and engaged in the electrical business, and among other
things in the sale of what is know, as the "Matthews" electric plant, and the
defendant is a resident of Talisay, Occidental Negros, and A. C. Montelibano
was a resident of Iloilo.

Having this information, Montelibano approached plaintiff at its Manila

office, claiming that he was from Iloilo and lived with Governor Yulo; that he
was from Iloilo and lived with Governor Yulo; that he could find purchasers
for the "Matthews" plant, and was told by the plaintiff that for any plant that
he could sell or any customer that he could find he would be paid a
commission of 10 percent for his services, if the sale was consummated.
Among other persons, Montelibano interviewed the defendant, and, through
his efforts, one of the "Matthews" plants was sold by the plaintiff to the
defendant, and was shipped from Manila to Iloilo, and later installed on
defendant's premises after which, without the knowledge of the plaintiff, the
defendant paid the purchase price to Montelibano. As a result, plaintiff
commenced this action against the defendant, alleging that about August 18,
1920 it sold and delivered to the defendant the electric plant at the agreed
price of P2,513.55 no part of which has been paid, and demands judgment
for the amount with interest from October 20, 1920.

For answer, the defendant admits the corporation of the plaintiff, and
denies all other material allegations of the complaint, and, as an affirmative
defense, alleges "that on or about the 18th of August, 1920, the plaintiff sold
and delivered to the defendant a certain electric plant and that the
defendant paid the plaintiff the value of said electric plant, to writ:
P2,513.55."

Upon such issues the testimony was taken, and the lower court
rendered the judgment for the defendant, from which the plaintiff appeals,
claiming that the court erred in holding that the payment to A. C.

23
Montelibano would discharge the debt of defendant, and in holding that the
bill was given to Montelibano for collection purposes, and that the plaintiff
had held out Montelibano to the defendant as an agent authorized to collect,
and in rendering judgment for the defendant, and in not rendering judgment
for the plaintiff.

ISSUE: WON Montelibano is authorized to receive the money from

defendant.

RULING: The only testimony on the part of the defendant is that of himself
in the form of a deposition in which he says that Montelibano sold and
delivered the plant to him, and "was the one who ordered the installation of
that electrical plant," and he introduced as part of his deposition a statement
and receipt which Montelibano signed to whom he paid the money. When
asked why he paid the money to Montelibano, the witness says:

"Because he was the one who sold, delivered, and installed the
electrical plant, and he presented to me the account, Exhibits A
and A-1, and he assured me that he was duly authorized to
collect the value to collect the value of the electrical plant."

There is nothing of the face of this receipt to show that Montelibano

was the agent of, or that he was acting for, the plaintiff. It is his own
personal receipt and his own personal signature. Outside of the fact that
Montelibano received the money and signed this receipt, there is no
evidence that he had any authority, real or apparent, to receive or receipt
for the money. Neither is there any evidence that the plaintiff ever delivered
the statement to Montelibano, or authorized anyone to deliver it to him, and
it is very apparent that the statement in question is the one which was
delivered by the plaintiff to Cenar, and is the one which Cenar delivered to
the defendant at the request of the defendant.

The evidence of the defendant that Montelibano was the one who sold
him the plant is in direct conflict with his own pleading and the receipted
statement which he offered in evidence. The testimony is conclusive that the
plaintiff never authorized Montelibano to receive or receipt for money in its
behalf, and that the defendant had no right to assume by any act or deed of
the plaintiff that Montelibano was authorized to receive the money, and that
the defendant made the payment at his own risk and on the sole
representations of Montelibano that he was authorized to receipt for the
money.

24
MANOTOK BROTHERS, INC. V. COURT OF APPEALS,
G.R. NO. 94753, [APRIL 7, 1993]

FACTS: Petitioner herein is the owner of a certain parcel of land and building
which were formerly leased by the City of Manila and used by the Claro M.
Recto High School, at M.F. Jhocson Street, Sampaloc Manila.

By means of a letter dated July 5, 1966, petitioner authorized herein

private respondent Salvador Saligumba to negotiate with the City of Manila
the sale of the aforementioned property for not less than P425,000.00. In
the same writing, petitioner agreed to pay private respondent a five percent
(5%) commission in the event the sale is finally consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the

authority of private respondent for 120 days. Thereafter, another extension
was granted to him for 120 more days, as evidenced by another letter dated
June 26, 1967.

Finally, through another letter dated November 16, 1967, the

corporation with Rufino Manotok, its President, as signatory, authorized
private respondent to finalize and consummate the sale of the property to
the City of Manila for not less than P410,000.00. With this letter came
another extension of 180 days.

The Municipal Board of the City of Manila eventually, on April 26,

1968, passed Ordinance No. 6603, appropriating the sum of P410,816.00 for
the purchase of the property which private respondent was authorized to
sell. Said ordinance however, was signed by the City Mayor only on May 17,
1968, one hundred eighty three (183) days after the last letter of
authorization.

On January 14, 1969, the parties signed the deed of sale of the
subject property. The initial payment of P200,000.00 having been made, the
purchase price was fully satisfied with a second payment on April 8, 1969 by
a check in the amount of P210,816.00.

Notwithstanding the realization of the sale, private respondent never

received any commission, which should have amounted to P20,554.50. This
was due to the refusal of petitioner to pay private respondent said amount
as the former does not recognize the latter's role as agent in the transaction.

Consequently, on June 29, 1969, private respondent filed a complaint

against petitioner, alleging that he had successfully negotiated the sale of
the property. He claimed that it was because of his efforts that the Municipal
Board of Manila passed Ordinance No. 6603 which appropriated the sum for
the payment of the property subject of the sale.

25
ISSUE: whether or not private respondent is entitled to the five percent
(5%) agent's commission.

RULING: Going deeper however into the case would reveal that it is within
the coverage of the exception rather than of the general rule, the exception
being that enunciated in the case of Prats vs. Court of Appeals. 14 In the
said case, this Court ruled in favor of claimant-agent, despite the expiration
of his authority, when a sale was finally consummated. LibLex

In its decision in the abovecited case, this Court said, that while it was
respondent court's (referring to the Court of Appeals) factual findings that
petitioner Prats (claimant-agent) was not the efficient procuring cause in
bringing about the sale (prescinding from the fact of expiration of his
exclusive authority), still petitioner was awarded compensation for his
services.

From the foregoing, it follows then that private respondent herein,

with more reason, should be paid his commission, While in Prats vs. Court of
Appeals, the agent was not even the efficient procuring cause in bringing
about the sale, unlike in the case at bar, it was still held therein that the
agent was entitled to compensation. In the case at bar, private respondent
is the efficient procuring cause for without his efforts, the municipality would
not have anything to pass and the Mayor would not have anything to
approve.

We agree with respondent Court that the City of Manila ultimately

became the purchaser of petitioner's property mainly through the efforts of
private respondent. Without discounting the fact that when Municipal
Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private
respondent's authority had already expired, it is to be noted that the
ordinance was approved on April 26, 1968 when private respondent's
authorization was still in force. Moreover, the approval by the City Mayor
came only three days after the expiration of private respondent's authority.
It is also worth emphasizing that from the records, the only party given a
written authority by petitioner to negotiate the sale from July 5, 1966 to May
14, 1968 was private respondent.

DOMINGO V. DOMINGO, G.R. NO. L-30573,

[OCTOBER 29, 1971], 149 PHIL 183-196

FACTS: Vicente M. Domingo granted Gregorio Domingo, a real estate

broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an
area of about 88,477 square meters at the rate of P2.00 per square meter
(or for P176,954.00) with a commission of 5% on the total price, if the
property is sold by Vicente or by anyone else during the 30-day duration of
the agency or if the property is sold by Vicente within three months from the

26
termination of the agency to a purchaser to whom it was submitted by
Gregorio during the continuance of the agency with notice to Vicente.

Teofilo Purisima, the authorized intervenor, introduced Oscar de Leon

to Gregorio as a prospective buyer.

Oscar de Leon submitted a written offer which was very much lower
than the price of P2.00 per square meter. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 to
which Vicente agreed. Upon demand of Vicente, Oscar de Leon issued to him
a check in the amount of P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his
former offer to pay for the property at P1.20 per square meter in another
letter. Subsequently, Vicente asked for an additional amount of P1,000.00 as
earnest money, which Oscar de Leon promised to deliver to him. Pursuant to
his promise to Gregorio, Oscar gave him as a gift or propina the sum of One
Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his
lot at P1.20 per square meter. This gift of One Thousand Pesos (P1,000.00)
was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the
additional amount of One Thousand Pesos (P1,000.00) by way of earnest
money. When the deed of sale was not executed, Oscar told Gregorio that
he did not receive his money from his brother in the United States, for which
reason he was giving up the negotiation including the amount of One
Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One
Thousand Pesos (P1,000.00) given to Gregorio as propina or gift.

Gregorio went to Vicente and opined that the latter was still committed
to pay him 5% commission, if the sale is consummated within three months
after the expiration of the 30-day period of the exclusive agency in his favor
from the execution of the agency contract on June 2, 1956 to a purchaser
brought by Gregorio to Vicente during the said 30-day period.

From his meeting with Vicente, Gregorio proceeded to the office of the
Register of Deeds of Quezon City, where he discovered a deed of sale
executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon,
over their house and lot at No. 40 Denver Street, Cubao, Quezon City, in
favor of Vicente as down payment by Oscar de Leon on the purchase price of
Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold
his property to the same buyer, Oscar de Leon and his wife, he demanded in
writing payment of his commission on the sale price of One Hundred Nine
Thousand Pesos (P109,000.00). He also conferred with Oscar de Leon, who
told him that Vicente went to him and asked him to eliminate Gregorio in the
transaction and that he would sell his property to him for One Hundred Four
Thousand Pesos (P104,000.00). In Vicente's reply to Gregorio's letter,
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.

27
ISSUE: whether the failure on the part of Gregorio to disclose to Vicente the
payment to him by Oscar de Leon of the amount of One Thousand Pesos
(P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the
purchase price from P2.00 to P1.20 per square meter, so constitutes fraud
as to cause a forfeiture of his 5% commission on the sale price.

RULING: The duties and liabilities of a broker to his employer are

essentially those which an agent owes to his principal. Consequently, the
decisive legal provisions are found in Articles 1891 and 1909 of the New Civil
Code. 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 duly 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.

An agent who takes a secret profit in the nature of a bonus, gratuity or

personal benefit from the vendee, without revealing the same to his
principal, the vendor, is guilty of a breach of his loyalty to the principal and
forfeits his right to collect the commission from his principal, even if the
principal does not suffer any injury by reason of such breach of fidelity, or
that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it, because the rule is to prevent the possibility of
any wrong, not to remedy or repair an actual damage.

By taking such profit or bonus or gift or propina from the vendee, the
agent thereby assumes a position wholly inconsistent with that of being an
agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the
principal may have been benefited by the valuable services of the said agent
does not exculpate the agent who has only himself to blame for such a result
by reason of his treachery or perfidy.

Because of his responsibility under the aforecited Article 1720, an

agent is likewise liable for estafa for failure to deliver to his principal the
total amount collected by him in behalf of his principal and cannot retain the
commission pertaining to him by subtracting the same from his collections.

Where a principal has paid an agent or broker a commission while

ignorant of the fact that the latter has been unfaithful, the principal may
recover back the commission paid, since an agent or broker who has been
unfaithful is not entitled to any compensation. If the agent does not conduct

28
himself with entire fidelity towards his principal, but is guilty of taking a
secret profit or commission in regard the matter in which he is employed, he
loses his right to compensation on the ground that he has taken a position
wholly inconsistent with that of agent for his employer, and which gives his
employer, upon discovering it, the right to treat him so far as compensation,
at least, is concerned as if no agency had existed. This may operate to give
to the principal the benefit of valuable services rendered by the agent, but
the agent has only himself to blame for that result.

As a general rule, it is a breach of good faith and loyalty to his

principal for an agent, while the agency exists, so to deal with the subject
matter thereof, or with information acquired during the course of the
agency, as to make a profit out of it for himself in excess of his lawful
compensation; and if he does so he may be held as a trustee and may be
compelled to account to his principal for all profits, advantages, rights, or
privileges acquired by him in such dealings, whether in performance or in
violation of his duties, and be required to transfer them to his principal upon
being reimbursed for his expenditures for the same, unless the principal has
consented to or ratified the transaction knowing that benefit or profit would
accrue, or had accrued, to the agent, or unless with such knowledge he has
allowed the agent so as to change his condition that he cannot be put in
status quo. The application of this rule is not affected by the fact that the
principal did not suffer any injury by reason of the agent's dealings, or that
he in fact obtained better results; nor is it affected by the fact that there is a
usage or custom to the contrary, or that the agency is a gratuitous one.

The duty embodied in Article 1891 of the New Civil Code will not apply
if the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction. Neither would the
rule apply if the agent or broker had informed the principal of the gift or
bonus or profit he received from the purchaser and his principal did not
object thereto. Herein defendant-appellee Gregorio Domingo was not merely
a middleman of the petitioner-appellant Vicente Domingo and the buyer
Oscar de Leon. He was the broker and agent of said petitioner-appellant
only. And herein petitioner-appellant was not aware of the gift of One
Thousand Pesos (P1,000.00) received by Gregorio Domingo form the
prospective buyer; much less did he consent to his agent's accepting such a
gift.

SIASAT V. INTERMEDIATE APPELLATE COURT,

G.R. NO. L-67889, [OCTOBER 10, 1985], 223 PHIL 450-464

FACTS: Respondent Teresita Nacianceno succeeded in convincing officials of

the then Department of Education and Culture, hereinafter called

29
Department, to purchase without public bidding, one million pesos worth of
national flags for the use of public schools throughout the country.

On October 16, 1974, the first delivery of 7,933 flags was made by the
United Flag Industry. The next day, on October 17, 1974, the respondent's
authority to represent the United Flag Industry was revoked by petitioner
Primitivo Siasat.

According to the findings of the courts below, Siasat, after receiving

the payment of P469,980.00 on October 23, 1974 for the first delivery,
tendered the amount of P23,900.00 or five percent (5%) of the amount
received, to the respondent as payment of her commission. The latter
allegedly protested. She refused to accept the said amount insisting on the
30% commission agreed upon. The respondent was prevailed upon to accept
the same, however, because of the assurance of the petitioners that they
would pay the commission in full after they delivered the other half of the
order. The respondent states that she later on learned that petitioner Siasat
had already received payment for the second delivery of 7,833 flags. When
she confronted the petitioners, they vehemently denied receipt of the
payment, at the same time claiming that the respondent had no participation
whatsoever with regard to the second delivery of flags and that the agency
had already been revoked.

The respondent originally filed a complaint with the Complaints and

Investigation Office in Malacañang but when nothing came of the complaint,
she filed an action in the Court of First Instance of Manila to recover the
following commissions: 25% as balance on the first delivery and 30% on the
second delivery.

The trial court decided in favor of the respondent. The decision was
affirmed in toto by the Intermediate Appellate Court. After their motion for
reconsideration was denied, the petitioners went to this Court on a petition
for review.

ISSUE:
I. WON respondent is incapacitated to represent petitioner in the
transaction with the Department.
II. that the contract of agency between the parties was entered into
under fraudulent representation.

RULING:
I. No. To quote a commentator on the matter:

"An agent may be (1) universal; (2) general, or (3) special. A

universal agent is one authorized to do all acts for his principal which
can lawfully be delegated to an agent. So far as such a condition is

30
 possible, such an agent may be said to have universal authority.
(Mec. Sec. 58).

"A general agent is one authorized to do all acts pertaining to a

business of a certain kind or at a particular place, or all acts
pertaining to a business of a particular class or series. He has usually
authority either expressly conferred in general terms or in effect made
general by the usages, customs or nature of the business which he is
authorized to transact.

"An agent, therefore, who is empowered to transact all the

business of his principal of a particular kind or in a particular place,
would, for this reason, be ordinarily deemed a general agent. (Mec.
Sec. 60).

"A special agent is one authorized to do some particular act or to

act upon some particular occasion. He acts usually in accordance with
specific instructions or under limitations necessarily implied from the
nature of the act to be done." (Mec. Sec. 61) (Padilla, Civil Law, The
Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).

One does not have to undertake a close scrutiny of the document

embodying the agreement between the petitioners and the respondent to
deduce that the latter was instituted as a general agent. Indeed, it can easily
be seen by the way general words were employed in the agreement that no
restrictions were intended as to the manner the agency was to be carried
out or in the place where it was to be executed. The power granted to the
respondent was so broad that it practically covers the negotiations leading
to, and the execution of, a contract of sale of petitioners' merchandise with
any entity or organization.

II. The petitioners' evidence does not necessarily prove that there were
two separate transactions. Exhibit "6" is a general indorsement made by
Secretary Manuel for the purchase of the national flags for public schools.
Exhibit "7" is a letter request for a "similar authority" to purchase flags from
the United Flag Industry.

If the contracts were separate and distinct from one another, the
whole or at least a substantial part of the government's supply procurement
process would have been repeated. In this case, what were issued were
mere indorsements for the release of funds and authorization for the next
purchase.

Since only one transaction was involved, we deny the petitioners'

contention that respondent Nacianceno is not entitled to the stipulated
commission on the second delivery because of the revocation of the agency
effected after the first delivery. The revocation of agency could not prevent

31
the respondent from earning her commission because as the trial court
opined, it came too late, the contract of sale having been already perfected
and partly executed.

The principal cannot deprive his agent of the commission agreed upon
by cancelling the agency and, thereafter, dealing directly with the buyer.

CABALLERO V. DEIPARINE, G.R. NO. L-39059,

[SEPTEMBER 30, 1974], 158 PHIL 353-367

FACTS: Plaintiffs Antonio Caballero and Concordia Caballero are the children
by the first marriage, and the defendants, Tomas Raga, Olimpio Raga,
Adriano Raga and Magdalena Raga, are the children by second marriage of
Vicenta Bucao, now deceased, who died sometime in February, 1943 in
Tabunoc, Talisay, Cebu.

Vicenta Bucao in her lifetime and Tomas Raga acquired by joint

purchase a parcel of land from the Talisay-Minglanilla Friar Lands Estate.
defendant Tomas Raga and Vicenta Bucao jointly sold 1/4 of said Lot 2072
to plaintiff Antonio Caballero, which sale was evidenced by a deed of sale;
and since the title to said lot at the time of the conveyance to him had not
yet been issued to them they held the subject portion in trust for said
Antonio Caballero until its title could be delivered to the latter.

On May 11, 1965, plaintiff Antonio Caballero received from defendant

Alma Deiparine a letter demanding that he vacate the portion of Lot 2072
which he was holding for she had bought it from defendant Tomas Raga, and
as the new owner she would like to construct a house thereon and would
further improve said lot.

That upon refusal of the plaintiff to vacate the portion in question

defendant Alma Deiparine brought an action for ejectment against him in the
Municipal Court of Talisay, and after trial said Court rendered judgment in
favor of Antonio Caballero, the plaintiff herein.

That defendant Alma Deiparine appealed the decision of the Municipal

Court in the ejectment case to the Court of First Instance of Cebu where she
again lost but she elevated the decision of the Court of First Instance to the
Court of Appeals where it is pending.

ISSUE: The issue revolves around the basic issue of the legality of the
Stipulation of Facts.

RULING: A reading of the stipulation of facts convinces Us that it is a

compromise agreement of the parties. The stipulation concludes with this
prayer: "WHEREFORE, it is most respectfully prayed that the foregoing

32
Stipulation of Facts be approved and that a decision be handed down on the
legal issues submitted on the basis of said Stipulation of Facts." Apparently it
is intended to terminate the case. Rule 138, Section 23 of the Rules of Court
specifically provides that:

"Authority of attorneys to bind clients. — Attorneys have

authority to bind their clients in any case by any agreement in relation
thereto made in writing, and in taking appeals, and in all matters of
ordinary judicial procedure. But they cannot, without special authority,
compromise their client's litigation, or receive anything in discharge of
a client's claim but the full amount in cash." (Emphasis supplied)

It may be true that during the pre-trial hearing held on February 3,

1968, the parties concerned agreed to execute a stipulation of facts but it
does not mean that the respective counsels of the contending parties can
prepare a stipulation of facts the contents of which is prejudicial to the
interest of their clients and sign it themselves without the intervention of
their clients. In the case at bar, the then counsel for plaintiffs-appellants,
Atty. Melecio C. Guba, agreed that defendant-appellee Alma Deiparine
bought the land in question in good faith and for a valuable consideration;
that during the lifetime of their mother Vicenta Bucao, she, with the
conformity of her husband, sold her undivided 1/2 of the land in question to
her co-owner and son, Tomas Raga. All these adverse facts were made the
basis of the appealed decision against the plaintiffs. No further evidence was
presented as there was no hearing. The attorney for the plaintiffs in making
such admission went beyond the scope of his authority as counsel and
practically gave away the plaintiffs' case. The admission does not refer to a
matter of judicial procedure related to the enforcement of the remedy. It
related to the very subject matter of the cause of action, or to a matter on
which the client alone can make the admission binding on him. In Belandres
vs. Lopez Sugar Central Mill Co., Inc., L-6869, May 27, 1955; 97 Phil. 100,
104, 105, it was held that:

"The broad implied or apparent powers of an attorney with

respect to the conduct or control of litigation are, however, limited to
matters which relate only to the procedure or remedy. The
employment of itself confers upon the attorney no implied or apparent
power or authority over the subject matter of the cause of action or
defense; and, unless the attorney has expressly been granted
authority with respect thereto, the power to deal with or surrender
these matters is regarded as remaining exclusively in the client."

"The line of demarcation between the respective rights and

powers of an attorney and his client is clearly defined. The cause of
action, the claim or demand sued upon, and the subject matter of the
litigation are all within the exclusive control of a client; and an
attorney may not impair, compromise, settle, surrender, or destroy

33
 them without his client's consent. But all the proceedings in court to
enforce the remedy, to bring the claim, demand, cause of action, or
subject matter of the suit to hearing, trial, determination, judgment,
and execution, are within the exclusive control of the attorney."

PHILIPPINE NATIONAL BANK V. STA. MARIA, G.R. NO. L-24765, [AUGUST

29, 1969], 139 PHIL 781-790

FACTS: Plaintiff bank filed this action on February 10, 1961 against
defendant Maximo Sta. Maria and his six brothers and sisters, defendants-
appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all
surnamed Sta. Maria, and the Associated Insurance & Surety Co., Inc. as
surety, for the collection of certain amounts representing unpaid balances on
two agricultural sugar crop loans due allegedly from defendants.

The said sugar crop loans were obtained by defendant Maximo Sta.
Maria from plaintiff bank under a special power of attorney, executed in his
favor by his six brothers and sisters, defendants- appellants herein, to
mortgage a 16-odd hectare parcel of land, jointly owned by all of them. In
addition, Valeriana Sta. Maria alone also executed in favor of her brother,
Maximo, a special power of attorney to borrow money and mortgage any
real estate owned by her.

By virtue of the two above powers, Maximo Sta. Maria applied for two
separate crop loans, for the 1952-1953 and 1953-1954 crop years, with
plaintiff bank, one in the amount of P15,000.00, of which only the sum of
P13,216.11 was actually extended by plaintiff, and the other in the amount
of P23,000.00, of which only the sum of P12,427.57 was actually extended
by plaintiff. As security for the two loans, Maximo Sta. Maria executed in his
own name in favor of plaintiff bank two chattel mortgages on the standing
crops, guaranteed by surety bonds for the full authorized amounts of the
loans executed by the Associated Insurance & Surety Co., Inc. as surety with
Maximo Sta. Maria as principal.

ISSUE: WON the special power of attorney that they executed had not given
Maximo, the authority to borrow money but only to mortgage the real estate
jointly owned by them.

RULING: A special power of attorney to mortgage real estate is limited to

such authority to mortgage and does not bind the grantor personally to
other obligations contracted by the grantee, in the absence of any
ratification or other similar act that would estop the grantor from questioning
or disowning such other obligations contracted by the grantee.

34
 The authority granted by defendants-appellants (except Valeriana)
unto their brother, Maximo, was merely to mortgage the property jointly
owned by them. They did not grant Maximo any authority to contract for any
loans in their names and behalf. Maximo alone, with Valeriana who
authorized him to borrow money, must answer for said loans and the other
defendants-appellants' only liability is that the real estate authorized by
them to be mortgaged would be subject to foreclosure and sale to respond
for the obligations contracted by Maximo. But they cannot be held personally
liable for the payment of such obligations, as erroneously held by the trial
court.

The fact that Maximo presented to the plaintiff bank Valeriana's

additional special power of attorney expressly authorizing him to borrow
money, aside from the authority to mortgage executed by Valeriana together
with the other defendants-appellants also in Maximo's favor, lends support
to our view that the bank was not satisfied with the authority to mortgage
alone. For otherwise, such authority to borrow would have been deemed
unnecessary and a surplusage.

Where there was no express ratification by defendants-appellants of

the loans incurred by Maximo from plaintiff bank, secured by the real
property owned by them and for which his only special power of attorney
was to mortgage, nor had they benefited from said loans, no estoppel can be
claimed by plaintiff bank as against defendants.

Where as in this case, Valeriana, one of the co-owners of the property

involved, granted Maximino not only the authority to mortgage said property
but also the special power of attorney to borrow money in connection
therewith, her liability is not only on the mortgage of her share in the
property, but also for the said loans which Maximo had obtained from
plaintiff bank, and is joint pursuant to the provisions of Article 1204 of the
Civil Code. It should be noted that in the additional power of attorney, Exh.
E-1, executed by Valeriana, she did not grant Maximo the authority to bind
her solidarity with him on any loans he might secure thereunder.

BA FINANCE CORP. V. COURT OF APPEALS, G.R. NO. 82040,

[AUGUST 27, 1991], 278 PHIL 176-184

FACTS: Private respondents Manuel Cuady and Lilia Cuady obtained from
Supercars, Inc. a credit of P39,574.80, which amount covered the cost of
one unit of Ford Escort 1300. Said obligation was evidenced by a promissory
note executed by private respondents in favor of Supercars, Inc., obligating
themselves to pay the latter or order the sum of P39,574.80, inclusive of
interest at 14% per annum, payable on monthly installments of P1,098.00.
On July 25, 1977, Supercars, Inc. assigned the promissory note, together

35
with the chattel mortgage, to B.A. Finance Corporation. The Cuadys paid a
total of P36,730.15 to the B.A. Finance Corporation, thus leaving an unpaid
balance of P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys'
owe B.A. Finance Corporation P460.00 representing penalties or surcharges
for tardy monthly installments.

Parenthetically, the B.A. Finance Corporation, as the assignee of the

mortgage lien, obtained the renewal of the insurance coverage over the
aforementioned motor vehicle for the year 1980 with Zenith Insurance
Corporation, when the Cuadys failed to renew said insurance coverage
themselves. Under the terms and conditions of the said insurance coverage,
any loss under the policy shall be payable to the B.A. Finance Corporation.

On April 18, 1980, the aforementioned motor vehicle figured in an

accident and was badly damaged. The unfortunate happening was reported
to the B.A. Finance Corporation and to the insurer, Zenith Insurance
Corporation. The Cuadys asked the B.A. Finance Corporation to consider the
same as a total loss, and to claim from the insurer the face value of the car
insurance policy and apply the same to the payment of their remaining
account and give them the surplus thereof, if any. But instead of heeding the
request of the Cuadys, B.A. Finance Corporation prevailed upon the former
to just have the car repaired. Not long thereafter, however, the car bogged
down. The Cuadys wrote B.A. Finance Corporation requesting the latter to
pursue their prior instruction of enforcing the total loss provision in the
insurance coverage. When B.A. Finance Corporation did not respond
favorably to their request, the Cuadys stopped paying their monthly
installments on the promissory note.

In view of the failure of the Cuadys to pay the remaining installments

on the note, B.A. Finance Corporation sued them in the Regional Trial Court
of Manila, Branch 43, for the recovery of the said remaining installments.

ISSUE: WON B.A. Finance Corporation has waived its right to collect the
unpaid balance of the Cuady spouses on the promissory note for failure of
the former to enforce the total loss provision in the insurance coverage of
the motor vehicle subject of the chattel mortgage.

RULING: B.A. Finance Corporation was deemed subrogated to the rights

and obligations of Supercars, Inc. when the latter assigned the promissory
note, together with the chattel mortgage constituted on the motor vehicle in
question, in favor of the former. Consequently, B.A. Finance Corporation is
bound by the terms and conditions of the chattel mortgage executed
between the Cuadys and Supercars, Inc.

Under the deed of chattel mortgage, B.A. Finance Corporation was

constituted attorney-in-fact with full power and authority to file, follow-up,
prosecute, compromise or settle insurance claims; to sign, execute and

36
deliver the corresponding papers, receipts and documents to the Insurance
Company as may be necessary to prove the claim, and to collect from the
latter the proceeds of insurance to the extent of its interests, in the event
that the mortgaged car suffers any loss or damage. In granting B.A. Finance
Corporation the aforementioned powers and prerogatives, the Cuady
spouses created in the former's favor an agency. Under Article 1884 of the
Civil Code of the Philippines, B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for damages which, through
its non-performance, the Cuadys, the principal in the case at bar, may
suffer.

Unquestionably, the Cuadys suffered pecuniary loss in the form of

salvage value of the motor vehicle in question, not to mention the amount
equivalent to the unpaid balance on the promissory note, when B.A. Finance
Corporation steadfastly refused and refrained from proceeding against the
insurer for the payment of a clearly valid insurance claim, and continued to
ignore the yearning of the Cuadys to enforce the total loss provision in the
insurance policy, despite the undeniable fact that Rea Auto Center, the auto
repair shop chosen by the insurer itself to repair the aforementioned motor
vehicle, misrepaired and rendered it completely useless and unserviceable.
Accordingly, there is no reason to depart from the ruling set down by the
respondent appellate court. In this connection, the Court of Appeals said: ". .
. Under the established facts and circumstances, it is unjust, unfair
inequitable to require the chattel mortgagors, appellees herein, to still pay
the unpaid balance of their mortgage debt on the said car, the non-payment
of which account was due to the stubborn refusal and failure of appellant
mortgagee to avail of the insurance money which became due and
demandable after the insured motor vehicle was badly damaged in a
vehicular accident covered by the insurance risk.

Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals, G.R. No.
95703, [August 3, 1992], 287 PHIL 26-34

FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a special

power of attorney in favor of Rufino S. Aquino authorizing him:

"1. To secure a loan from any bank or lending institution for any
amount or otherwise mortgage the property covered by Transfer
Certificate of Title No. S-79238 situated at Las Piñas, Rizal. the same
being my paraphernal property and in that connection, to sign, or
execute any deed of mortgage and sign other document requisite and
necessary in securing said loan and to receive the proceeds thereof in
cash or in check and to sign the receipt therefor and thereafter
endorse the check representing the proceeds of loan."

37
 A Deed of Real Estate Mortgage was executed by Rufino S. Aquino in
favor of the Rural Bank of Bombon Inc. over the three parcels of land
covered by TCT No. S-79238. The deed stated that the property was being
given as security for the payment of "certain loans, advances, or other
accommodations obtained by the mortgagor from the mortgagee in the total
sum of Three Hundred Fifty Thousand Pesos only (P350,000.00), plus
interest.

The spouses Ederlinda Gallardo and Daniel Manzo filed an action

against Rufino Aquino and the Bank because Aquino allegedly left his
residence at San Pascual, Hagonoy, Bulacan, and transferred to an unknown
place in Bicol and that they (plaintiffs) were allegedly surprised to discover
that the property was mortgaged to pay personal loans obtained by Aquino
from the Bank solely for personal use and benefit of Aquino.

Aquino in his answer said that the plaintiff authorized him to mortgage
her property to a bank so that he could use the proceeds to liquidate her
obligation of P350,000 to him. Meanwhile, on August 30, 1984, the Bank
filed a complaint against Ederlinda Gallardo and Rufino Aquino for
"Foreclosure of Mortgage".

ISSUE: The assignments of error boil down to the lone issue of the validity
of the Deed of Real Estate Mortgage dated August 26, 1981, executed by
Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the
Rural Bank of Bombon (Cam. Sur), Inc.

RULING: It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it must upon
its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the
name of the principal. Neither is it ordinarily sufficient that in the mortgage
the agent describes himself as acting by virtue of a power of attorney, if in
fact the agent has acted in his own name and has set his own hand and seal
to the mortgage. This is especially true where the agent himself is a party to
the instrument. However clearly the body of the mortgage may show and
intend that it shall be the act of the principal, yet, unless in fact it is
executed by the agent for and on behalf of his principal and as the act and
deed of the principal, it is not valid as to the principal. (Philippine Sugar
Estates Development Co. vs. Poizat, 48 Phil. 536)

In view of this rule, Aquino's act of signing the Deed of Real Estate
Mortgage in his name alone as mortgagor, without any indication that he
was signing for and in behalf of the property owner, Ederlinda Gallardo,
bound himself alone in his personal capacity as a debtor of the petitioner
Bank and not as the agent or attorney-in-fact of Gallardo.

38
 Article 1883 of the Civil Code relied upon by the petitioner Bank, is not
applicable to the case at bar. Herein respondent Aquino acted purportedly as
an agent of Gallardo, but actually acted in his personal capacity. Involved
herein are properties titled in the name of respondent Gallardo against which
the Bank proposes to foreclose the mortgage constituted by an agent
(Aquino) acting in his personal capacity. Under these circumstances, we
hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat,
supra, that Gallardo's property is not liable on the real estate mortgage:
"There is no principle of law by which a person can become liable on a real
mortgage which she never executed either in person or by attorney in fact.
It should be noted that this is a mortgage upon real property, the title to
which cannot be divested except by sale on execution or the formalities of a
will or deed. For such reasons, the law requires that a power of attorney to
mortgage or sell real property should be executed with all of the formalities
required in a deed.

Commercial Bank & Trust Co. of the Phils. v.

Republic Armored Car Service Corp.,
G.R. Nos. L-18223-24, [June 29, 1963], 118 PHIL 436-443

FACTS: In G.R. No. L-18223 plaintiff-appellee filed a complaint alleging that

the defendants-appellants were granted by it credit accommodations in the
form of an overdraft line for an amount not exceeding P80,000, with
interest; that defendants or either of them drew regularly upon the above
credit line and as of February 10, 1960, the total of their drawings and
interest due amounted to P79,943.80; that repeated demands were made
upon defendants to pay for the drawings but said demands were ignored. In
their answer to the complaint the defendants admit having drawn upon the
credit line extended to them as alleged in the complaint; claim they have not
ignored the demands for the payment of the sums demanded and have
instituted actions against the former officers of defendant corporation who
had defrauded the latter.

In G.R. No. L-18224 the complaint also alleges that the defendants
were given credit accommodation in the form of an overdraft line in an
amount not exceeding P150,000 and drew regularly upon said credit line
amounts which with their interest reach the sum of P133,453.17; that
demands were made for the payment of the drawings but defendants have
failed to pay the amounts demanded. Defendants in their answer admit the
opening of the credit line in their favor and that demands for the
indebtedness were made upon them, but allege an special defenses that the
directors and officers of the defendant corporation deliberately defrauded
and mismanaged the said corporation in breach of trust in order to deprive
Damaso Perez of his control and majority interest in the defendant
corporation, as a result of which fraud, mismanagement and breach of trust

39
the defendants suffered tremendous losses; that the amounts drawn by
defendant corporation upon the credit line were received and used by the
former directors and officers and same constitute part of the funds of the
defendant corporation misapplied and mismanaged by said former officers
and directors of said corporation.

ISSUE: The issue revolves on the alleged fact that the money borrowed
from the plaintiff was misappropriated or misapplied by some officers of the
defendant corporation is no defense against the liability of the defendants to
the plaintiff.

RULING: In G.R. No. L-18223, the defendants-appellants argue that the

admission made by the defendants in their answer that the amount
demanded was due, is qualified "in the sense that whatever amounts were
drawn from the overdraft line in question were part of those corporate funds
of Philippine Armored Car, Inc., misused and misapplied by Ramon Racelis,
et al., former directors and executive officers of said corporation." (p. 13,
Appellee's Brief) In answer to this argument we call attention to the fact that
in the agreement attached to the complaint Exhibit "A" the obligation of the
defendants-appellants to pay for the amount due under the overdraft line is
not in any way qualified; there is no statement that the responsibility of the
defendants-appellants for the amounts taken on overdraft would cease or be
defeated or reduced upon misappropriation or mismanagement of the funds
of the corporation by the directors and employees thereof. The special
defense is, therefore, a sham defense.

Furthermore, under general rules and principles of law the

mismanagement of the business of a party by his agents does not relieve
said party from the responsibility that he had contracted to third persons,
especially in the case at bar where the written agreement contains no
limitation to defendants-appellants' liability.

In G.R. No. L-18224, our ruling in the first case is also applicable. In
this second case, it is also alleged that at the time of the agreement for
credit in current account the defendant corporation was under the
management of Roman Racelis and others who defrauded and mismanaged
the corporation, in breach of trust, etc., etc. Again we declare that the
written agreement for credit in current account, Annex "A", contains no
limitation about the liability of the defendants-appellants, nor an express
agreement that the responsibility of the defendants-appellants, should be
conditioned upon the lawful management of the business of the defendant
corporation. The same rulings in the first case are applicable in this second
case.

40
NATIONAL FOOD AUTHORITY V. INTERMEDIATE APPELLATE COURT,
G.R. NO. 75640, [APRIL 5, 1990], 263 PHIL 46-50

FACTS: Gil Medalla, as commission agent of the plaintiff Superior Shipping

Corporation, entered into a contract for hire of ship known as "MV Sea
Runner" with defendant National Grains Authority. Under the said contract
Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice
belonging to defendant National Grains Authority from the port of San Jose,
Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, plaintiff

wrote a letter requesting defendant NGA that it be allowed to collect the
amount stated in its statement of account. plaintiff wrote again defendant
NGA, this time specifically requesting that the payment for freightage and
other charges be made to it and not to defendant Medalla because plaintiff
was the owner of the vessel "MV Sea Runner". In reply, defendant NGA on
November 16, 1979 informed plaintiff that it could not grant its request
because the contract to transport the rice was entered into by defendant
NGA and defendant Medalla who did not disclose that he was acting as a
mere agent of plaintiff. Thereupon on November 19, 1979, defendant NGA
paid defendant Medalla the sum of P25,974.90, for freight services in
connection with the shipment of 8,550 sacks of rice.

On December 4, 1979, plaintiff wrote defendant Medalla demanding

that he turn over to plaintiff the amount of P27,000.00 paid to him by
defendant NFA. Defendant Medalla, however, 'ignored the demand. Plaintiff
was therefore constrained to file the instant complaint.

ISSUE: WON NFA that it is not liable under the exception to the rule (Art.
1883) since it had no knowledge of the fact of agency between respondent
Superior Shipping and Medalla at the time when the contract was entered
into between NFA and Medalla.

RULING: It is an undisputed fact that Gil Medalla was a commission agent

of respondent Superior Shipping Corporation which owned the vessel "MV
Sea Runner" that transported the sacks of rice belonging to petitioner NFA.
The context of the law is clear. Art. 1883, which is the applicable law in the
case at bar provides:

"Art. 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.

41
 "The provision of this article shall be understood to be without
prejudice to the actions between the principal and agent."

Consequently, when things belonging to the principal (in this case, Superior
Shipping Corporation) are dealt with, the agent is bound to the principal
although he does not assume the character of such agent and appears
acting in his own name. In other words, the agent's apparent representation
yields to the principal's true representation and that, in reality and in effect,
the contract must be considered as entered into between the principal and
the third person. Corollarily, if the principal can be obliged to perform his
duties under the contract, then it can also demand the enforcement of its
rights arising from the contract.

BORDADOR V. LUZ, G.R. NO. 130148,

[DECEMBER 15, 1997], 347 PHIL 654-667

FACTS: Petitioners were engaged in the business of purchase and sale of

jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their
regular customer. On several occasions during the period from April 27,
1987 to September 4, 1987, respondent Narciso Deganos, the brother of
Brigida D. Luz, received several pieces of gold and jewelry from petitioners
amounting to P382,816.00. 1 These items and their prices were indicated in
seventeen receipts covering the same. Eleven of the receipts stated that
they were received for a certain Evelyn Aquino, a niece of Deganos, and the
remaining six indicated that they were received for Brigida D. Luz.

Deganos was supposed to sell the items at a profit and thereafter

remit the proceeds and return the unsold items to petitioners. Deganos
remitted only the sum of P53,207.00. He neither paid the balance of the
sales proceeds, nor did he return any unsold item to petitioners. By January
1990, the total of his unpaid account to petitioners, including interest,
reached the sum of P725,463.98. Petitioners eventually filed a complaint in
the barangay court against Deganos to recover said amount.

petitioners claimed that Deganos acted as the agent of Brigida D. Luz

when he received the subject items of jewelry and, because he failed to pay
for the same, Brigida, as principal, and her spouse are solidarily liable with
him therefor.

On the other hand, while Deganos admitted that he had an unpaid

obligation to petitioners, he claimed that the same was only in the sum of
P382,816.00 and not P725,463.98. He further asserted that it was he alone
who was involved in the transaction with the petitioners; that he neither
acted as agent for nor was he authorized to act as an agent by Brigida D.
Luz, notwithstanding the fact that six of the receipts indicated that the items

42
were received by him for the latter. He further claimed that he never
delivered any of the items he received from petitioners to Brigida.

Brigida, on her part, denied that she had anything to do with the
transactions between petitioners and Deganos. She claimed that she never
authorized Deganos to receive any item of jewelry in her behalf and, for that
matter, neither did she actually receive any of the articles in question.

ISSUE: WON herein respondent spouses are liable to petitioners for the
latter's claim for money and damages in the sum of P725,463.98, plus
interests and attorney's fees, despite the fact that the evidence does not
show that they signed any of the subject receipts or authorized Deganos to
receive the items of jewelry on their behalf.

RULING: The actual conclusion and ruling of the Court of Appeals

categorically stated that, "(Brigida Luz) never authorized her brother
(Deganos) to act for and in her behalf in any transaction with Petitioners x x
x." It is clear, therefore, that even assuming arguendo that Deganos acted
as an agent of Brigida, the latter never authorized him to act on her behalf
with regard to the transaction subject of this case. The basis for agency is
representation. Petitioners' attempt to foist liability on respondent spouses
through the supposed agency relation with Deganos is groundless and ill-
advised. It was grossly and inexcusably negligent of petitioners to entrust to
Deganos, on at least six occasions, several pieces of jewelry of substantial
value without requiring a written authorization from his alleged principal. A
person dealing with an agent is put upon inquiry and must discover upon his
peril the authority of the agent. Petitioners, who were negligent in their
transactions with Deganos, cannot seek relief from the effects of their
negligence by conjuring a supposed agency relation between the two
respondents where no evidence supports such claim.

HAHN V. COURT OF APPEALS, G.R. NO. 113074,

[JANUARY 22, 1997], 334 PHIL 491-507

FACTS: Petitioner Alfred Hahn is a Filipino citizen doing business under the
name and style "Hahn-Manila". On the other hand, private respondent BMW
is a nonresident foreign corporation existing under the laws of Germany.

On March 7, 1967, petitioner executed in favor of private respondent a

"Deed of Assignment with Special Power of Attorney,"

Per the agreement, the parties "continue[d] business relations as has

been usual in the past without a formal contract." But on February 16, 1993,
in a meeting with a BMW representative and the president of Columbia
Motors Corporation (CMC), Jose Alvarez, petitioner was informed that BMW

43
was arranging to grant the exclusive dealership of BMW cars and products to
CMC, which had expressed interest in acquiring the same. On February 24,
1993, petitioner received confirmation of the information from BMW which,
in a letter, expressed dissatisfaction with various aspects of petitioner's
business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and
petitioner's alleged failure to comply with the standards for an exclusive
BMW dealer. Nonetheless, BMW expressed willingness to continue business
relations with the petitioner on the basis of a "standard BMW importer"
contract, otherwise, it said, if this was not acceptable to petitioner, BMW
would have no alternative but to terminate petitioner's exclusive dealership
effective June 30, 1993.

Petitioner protested, claiming that the termination of his exclusive

dealership would be a breach of the Deed of Assignment. Because of Hahn's
insistence on the former business relations, BMW withdrew on March 26,
1993 its offer of a "standard importer contract" and terminated the exclusive
dealer relationship effective June 30, 1993. Hahn found the proposal
unacceptable. On May 14, 1993, he filed a complaint for specific
performance and damages against BMW to compel it to continue the
exclusive dealership.

ISSUE: whether petitioner Alfred Hahn is the agent or distributor in the

Philippines of private respondent BMW.

RULING: Contrary to the appellate court's conclusion, this arrangement

shows an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by
bringing the buyer and the seller together, even if no sale is eventually
made.

As to the service centers and showrooms which he said he had put up

at his own expense, Hahn said that he had to follow BMW specifications as
exclusive dealer of BMW in the Philippines. According to Hahn, BMW
periodically inspected the service centers to see to it that BMW standards
were maintained. Indeed, it would seem from BMW's letter to Hahn that it
was for Hahn's alleged failure to maintain BMW standards that BMW was
terminating Hahn's dealership.

The fact that Hahn invested his own money to put up these service
centers and showrooms does not necessarily prove that he is not an agent of
BMW. For as already noted, there are facts in the record which suggest that
BMW exercised control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with BMW standards
and specifications.

44
TAN V. SPOUSES GULLAS, G.R. NO. 143978,
[DECEMBER 3, 2002], 441 PHIL 622-634

FACTS: Private respondents, Spouses Eduardo R. Gullas and Norma S.

Gullas, were the registered owners of a parcel of land in the Municipality of
Minglanilla, Province of Cebu.

On June 29, 1992, they executed a special power of attorney

authorizing petitioners Manuel B. Tan, a licensed real estate broker, and his
associates Gregg M. Tecson and Alexander Saldaña, to negotiate for the sale
of the land at Five Hundred Fifty Pesos (P550.00) per square meter, at a
commission of 3% of the gross price. The power of attorney was non-
exclusive and effective for one month from June 29, 1992.

On the same date, petitioner Tan contacted Engineer Edsel Ledesma,

construction manager of the Sisters of Mary of Banneaux, Inc. (hereafter,
Sisters of Mary), a religious organization interested in acquiring a property in
the Minglanilla area.

On July 3, 1992, private respondents agreed to sell the property to the

Sisters of Mary, and subsequently executed a special power of attorney 9 in
favor of Eufemia Cañete, giving her the special authority to sell, transfer and
convey the land. On July 17, 1992, attorney-in-fact Eufemia Cañete
executed a deed of sale in favor of the Sisters of Mary

Private respondents refused to pay the broker's fee and alleged that
another group of agents was responsible for the sale of land to the Sisters of
Mary. On August 28, 1992, petitioners filed a complaint 13 against the
defendants for recovery of their broker's fee as well as moral and exemplary
damages and attorney’s fee.

ISSUE: WON petitioners are entitled to brokerage commission.

RULING: In Schmid and Oberly v. RJL Martinez Fishing Corporation, we

defined a "broker" as "one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has
no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him. . . . a broker is one
whose occupation is to bring the parties together, in matters of trade,
commerce or navigation."

During the trial, it was established that petitioners, as brokers, were

authorized by private respondents to negotiate for the sale of their land
within a period of one month reckoned from June 29, 1992. The authority
given to petitioners was non-exclusive, which meant that private
respondents were not precluded from granting the same authority to other
agents with respect to the sale of the same property. In fact, private

45
respondent authorized another agent in the person of Mr. Bobby Pacana to
sell the same property. There was nothing illegal or amiss in this
arrangement, per se, considering the non-exclusivity of petitioners' authority
to sell. The problem arose when it eventually turned out that these agents
were entertaining one and the same buyer, the Sisters of Mary.

It is readily apparent that private respondents are trying to evade

payment of the commission which rightfully belong to petitioners as brokers
with respect to the sale. There was no dispute as to the role that petitioners
played in the transaction. At the very least, petitioners set the sale in
motion. They were not able to participate in its consummation only because
they were prevented from doing so by the acts of the private respondents.
In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren
Werke Aktiengesellschaft (BMW) we ruled that, "An agent receives a
commission upon the successful conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the buyer and the seller together,
even if no sale is eventually made." Clearly, therefore, petitioners, as
brokers, should be entitled to the commission whether or not the sale of the
property subject matter of the contract was concluded through their efforts.

As correctly observed by the trial court, the argument of the private

respondents that Pacana was the one entitled to the stipulated 3%
commission is untenable, considering that it was the petitioners who were
responsible for the introduction of the representatives of the Sisters of Mary
to private respondent Eduardo Gullas. Private respondents, however,
maintain that they were not aware that their respective agents were
negotiating to sell said property to the same buyer. Private respondents
failed to prove their contention that Pacana began negotiations with private
respondent Norma Gullas way ahead of petitioners. They failed to present
witnesses to substantiate this claim. It is curious that Mrs. Gullas herself was
not presented in court to testify about her dealings with Pacana. Neither was
Atty. Nachura who was supposedly the one actively negotiating on behalf of
the Sisters of Mary, ever presented in court.

Private respondents' contention that Pacana was the one responsible

for the sale of the land is also unsubstantiated. There was nothing on record
which established the existence of a previous negotiation among Pacana,
Mrs. Gullas and the Sisters of Mary. The only piece of evidence that the
private respondents were able to present is an undated and unnotarized
Special Power of Attorney in favor of Pacana. While the lack of a date and an
oath do not necessarily render said Special Power of Attorney invalid, it
should be borne in mind that the contract involves a considerable amount of
money. Hence, it is inconsistent with sound business practice that the
authority to sell is contained in an undated and unnotarized Special Power of
Attorney. Petitioners, on the other hand, were given the written authority to
sell by the private respondents.

46
 The stipulation in the Special Power of Attorney, petitioners are
entitled to 3% commission for the sale of the land in question. Petitioners
maintain that their commission should be based on the price at which the
land was offered for sale, i.e., P530.00 per square meter. However, the
actual purchase price for which the land was sold was only P200.00 per
square meter. Therefore, equity considerations dictate that petitioners'
commission must be based on this price. To rule otherwise would constitute
unjust enrichment on the part of petitioners as brokers.

The trial court's evaluation of the witnesses is accorded great respect

and finality in the absence of any indication that it overlooked certain facts
or circumstances of weight and influence, which if reconsidered, would alter
the result of the case.

QUIROGA V. PARSONS HARDWARE CO., G.R. NO. 11491,

[AUGUST 23, 1918], 38 PHIL 501-507

FACTS: On Jan 24, 1911, plaintiff and the respondent entered into a
contract making the latter an “agent” of the former. The contract stipulates
that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell
his beds in the Visayan region to J. Parsons. The contract only stipulates that
J.Parsons should pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following
stipulations: not to sell the beds at higher prices than those of the invoices;
to have an open establishment in Iloilo; itself to conduct the agency; to keep
the beds on public exhibition, and to pay for the advertisement expenses for
the same; and to order the beds by the dozen and in no other manner. With
the exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his agent for the
sale of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.

ISSUE: Whether the contract is a contract of agency or of sale.

RULING: For the classification of contracts, due regard must be paid to their
essential clauses. In the contract in the instant case, what was essential,
constituting its cause and subject matter, was that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the
stipulated price, and that the defendant was to pay this price in the manner
agreed upon. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to

47
supply the beds, and, on that of the defendant, to pay their price. These
features exclude the legal conception of an agency or older to sell whereby
the mandatary or agent receives the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the
thing to a third person, and if he does not succeed in selling it, he returns it,
Held: That this contract is one of purchase and sale, and not of commercial
agency.

The testimony of the person who drafted this contract, to the effect
that his purpose was to be an agent for the beds and to collect a commission
on the sales, is of no importance to prove that the contract was one of
agency, inasmuch as the agreements contained in the contract constitute,
according to law, covenants of purchase and sale, and not of commercial
agency. It must be understood that a contract is what the law defines it to
be, and not what it is called by the contracting parties.

The fact that the contracting parties did not perform the contract in
accordance with its terms, only shows mutual tolerance and gives no right to
have the contract considered, not as the parties stipulated it, but as they
performed it.

Only the acts of the contracting parties, subsequent to and in

connection with, the performance of the contract must be considered in the
interpretation of the contract when such interpretation is necessary, but not
when, as in the instant case its essential agreements are clearly set forth
and plainly show that the contract belongs to a certain kind and not to
another

The defendant obligated itself to order the beds from the plaintiff by
the dozen. Held: That the effect of a breach of this clause by the defendant
would only entitle the plaintiff to disregard the orders which the defendant
might place under other conditions, but if the plaintiff consents to fill them,
he waives his right and cannot complain for having acted thus at his own
free will.

PHILIPPINE NATIONAL BANK V. STA. MARIA, G.R. NO. L-24765, [AUGUST

29, 1969], 139 PHIL 781-790

FACTS: Plaintiff bank filed this action on February 10, 1961 against
defendant Maximo Sta. Maria and his six brothers and sisters, defendants-
appellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all
surnamed Sta. Maria, and the Associated Insurance & Surety Co., Inc. as
surety, for the collection of certain amounts representing unpaid balances on
two agricultural sugar crop loans due allegedly from defendants.

48
 The said sugar crop loans were obtained by defendant Maximo Sta.
Maria from plaintiff bank under a special power of attorney, executed in his
favor by his six brothers and sisters, defendants- appellants herein, to
mortgage a 16-odd hectare parcel of land, jointly owned by all of them. In
addition, Valeriana Sta. Maria alone also executed in favor of her brother,
Maximo, a special power of attorney to borrow money and mortgage any
real estate owned by her.

By virtue of the two above powers, Maximo Sta. Maria applied for two
separate crop loans, for the 1952-1953 and 1953-1954 crop years, with
plaintiff bank, one in the amount of P15,000.00, of which only the sum of
P13,216.11 was actually extended by plaintiff, and the other in the amount
of P23,000.00, of which only the sum of P12,427.57 was actually extended
by plaintiff. As security for the two loans, Maximo Sta. Maria executed in his
own name in favor of plaintiff bank two chattel mortgages on the standing
crops, guaranteed by surety bonds for the full authorized amounts of the
loans executed by the Associated Insurance & Surety Co., Inc. as surety with
Maximo Sta. Maria as principal.

ISSUE: WON the special power of attorney that they executed had not given
Maximo, the authority to borrow money but only to mortgage the real estate
jointly owned by them.

RULING: A special power of attorney to mortgage real estate is limited to

such authority to mortgage and does not bind the grantor personally to
other obligations contracted by the grantee, in the absence of any
ratification or other similar act that would estop the grantor from questioning
or disowning such other obligations contracted by the grantee.

The authority granted by defendants-appellants (except Valeriana)

unto their brother, Maximo, was merely to mortgage the property jointly
owned by them. They did not grant Maximo any authority to contract for any
loans in their names and behalf. Maximo alone, with Valeriana who
authorized him to borrow money, must answer for said loans and the other
defendants-appellants' only liability is that the real estate authorized by
them to be mortgaged would be subject to foreclosure and sale to respond
for the obligations contracted by Maximo. But they cannot be held personally
liable for the payment of such obligations, as erroneously held by the trial
court.

The fact that Maximo presented to the plaintiff bank Valeriana's

additional special power of attorney expressly authorizing him to borrow
money, aside from the authority to mortgage executed by Valeriana together
with the other defendants-appellants also in Maximo's favor, lends support
to our view that the bank was not satisfied with the authority to mortgage
alone. For otherwise, such authority to borrow would have been deemed
unnecessary and a surplusage.

49
 Where there was no express ratification by defendants-appellants of
the loans incurred by Maximo from plaintiff bank, secured by the real
property owned by them and for which his only special power of attorney
was to mortgage, nor had they benefited from said loans, no estoppel can be
claimed by plaintiff bank as against defendants.

Where as in this case, Valeriana, one of the co-owners of the property

involved, granted Maximino not only the authority to mortgage said property
but also the special power of attorney to borrow money in connection
therewith, her liability is not only on the mortgage of her share in the
property, but also for the said loans which Maximo had obtained from
plaintiff bank, and is joint pursuant to the provisions of Article 1204 of the
Civil Code. It should be noted that in the additional power of attorney, Exh.
E-1, executed by Valeriana, she did not grant Maximo the authority to bind
her solidarity with him on any loans he might secure thereunder.

Rural Bank of Bombon (Camarines Sur), Inc. v. Court of Appeals, G.R. No.
95703, [August 3, 1992], 287 PHIL 26-34

FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a special

power of attorney in favor of Rufino S. Aquino authorizing him:

"1. To secure a loan from any bank or lending institution for any
amount or otherwise mortgage the property covered by Transfer
Certificate of Title No. S-79238 situated at Las Piñas, Rizal. the same
being my paraphernal property and in that connection, to sign, or
execute any deed of mortgage and sign other document requisite and
necessary in securing said loan and to receive the proceeds thereof in
cash or in check and to sign the receipt therefor and thereafter
endorse the check representing the proceeds of loan."

A Deed of Real Estate Mortgage was executed by Rufino S. Aquino in

favor of the Rural Bank of Bombon Inc. over the three parcels of land
covered by TCT No. S-79238. The deed stated that the property was being
given as security for the payment of "certain loans, advances, or other
accommodations obtained by the mortgagor from the mortgagee in the total
sum of Three Hundred Fifty Thousand Pesos only (P350,000.00), plus
interest.

The spouses Ederlinda Gallardo and Daniel Manzo filed an action

against Rufino Aquino and the Bank because Aquino allegedly left his
residence at San Pascual, Hagonoy, Bulacan, and transferred to an unknown
place in Bicol and that they (plaintiffs) were allegedly surprised to discover
that the property was mortgaged to pay personal loans obtained by Aquino
from the Bank solely for personal use and benefit of Aquino.

50
 Aquino in his answer said that the plaintiff authorized him to mortgage
her property to a bank so that he could use the proceeds to liquidate her
obligation of P350,000 to him. Meanwhile, on August 30, 1984, the Bank
filed a complaint against Ederlinda Gallardo and Rufino Aquino for
"Foreclosure of Mortgage".

ISSUE: The assignments of error boil down to the lone issue of the validity
of the Deed of Real Estate Mortgage dated August 26, 1981, executed by
Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the
Rural Bank of Bombon (Cam. Sur), Inc.

RULING: It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it must upon
its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the
name of the principal. Neither is it ordinarily sufficient that in the mortgage
the agent describes himself as acting by virtue of a power of attorney, if in
fact the agent has acted in his own name and has set his own hand and seal
to the mortgage. This is especially true where the agent himself is a party to
the instrument. However clearly the body of the mortgage may show and
intend that it shall be the act of the principal, yet, unless in fact it is
executed by the agent for and on behalf of his principal and as the act and
deed of the principal, it is not valid as to the principal. (Philippine Sugar
Estates Development Co. vs. Poizat, 48 Phil. 536)

In view of this rule, Aquino's act of signing the Deed of Real Estate
Mortgage in his name alone as mortgagor, without any indication that he
was signing for and in behalf of the property owner, Ederlinda Gallardo,
bound himself alone in his personal capacity as a debtor of the petitioner
Bank and not as the agent or attorney-in-fact of Gallardo.

Article 1883 of the Civil Code relied upon by the petitioner Bank, is not
applicable to the case at bar. Herein respondent Aquino acted purportedly as
an agent of Gallardo, but actually acted in his personal capacity. Involved
herein are properties titled in the name of respondent Gallardo against which
the Bank proposes to foreclose the mortgage constituted by an agent
(Aquino) acting in his personal capacity. Under these circumstances, we
hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat,
supra, that Gallardo's property is not liable on the real estate mortgage:
"There is no principle of law by which a person can become liable on a real
mortgage which she never executed either in person or by attorney in fact.
It should be noted that this is a mortgage upon real property, the title to
which cannot be divested except by sale on execution or the formalities of a
will or deed. For such reasons, the law requires that a power of attorney to

51
mortgage or sell real property should be executed with all of the formalities
required in a deed.

DOMINION INSURANCE CORP. V. COURT OF APPEALS, G.R. NO. 129919,

[FEBRUARY 6, 2002], 426 PHIL 620-631

FACTS: Rodolfo Guevarra instituted a civil case for the recovery of a sum
of money against Dominion Insurance. He sought to recover P156,473.90,
which he claimed to have advanced in his capacity as manager of Dominion
to satisfy claims filed by Dominion’s clients. Dominion denied any liability to
Guevarra and asserted a counterclaim for premiums allegedly unremitted by
the latter.

The pre-trial conference never pushed through despite being

scheduled and postponed nine times over the course of six months. Finally,
the case was called again for pre-trial and Dominion and counsel failed to
show up. The trial court declared Dominion in default and denied any
reconsideration.

On the merits of the case, the RTC ruled that Dominion was to pay
Guevarra the P156,473.90 claimed as the total amount advanced by the
latter in the payment of the claims of Dominion’s clients. The CA affirmed.

ISSUES:
1.WON Guevarra acted within his authority as agent for Dominion.
2. WON Guevarra is entitled to reimbursement of amounts.

RULING:
1. NO. A perusal of the “Special Power of Attorney” would show
that Dominion and Guevarra intended to enter into a principal-agent
relationship. Despite the word “special,” the contents of the document reveal
that what was constituted was a general agency. The agency comprises all
the business of the principal, but, couched in general terms, is limited only
to acts of administration. A general power permits the agent to do all acts
for which the law does not require a special power.

Art. 1878 enumerates the instances when a special power of attorney

is required, including (1) to make such payments as are not usually
considered as acts of administration; (15) any other act of strict dominion.

The payment of claims is not an act of administration. The settlement

of claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein.
A special power of attorney would have been required before Guevarra could
settle the insurance claims of the insured.

Guevarra’s authority to settle claims is embodied in the Memorandum

of Management Agreement which enumerated the scope of Guevarra’s
52
duties and responsibilities. However, the Memorandum showed the
instruction of Dominion that payment of claims shall come from a revolving
fund. Having deviated from the instructions of the principal, the expenses
that Guevarra incurred in the settlement of the claims of the insured may
not be reimbursed from Dominion.

2. Yes. However, while the law on agency prohibits respondent

Guevarra from obtaining reimbursement, his right to recover may still be
justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides;

"Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to
the debtor."

In this case, when the risk insured against occurred, petitioner’s liability
as insurer arose. This obligation was extinguished when respondent
Guevarra paid the claims and obtained Release of Claim Loss and
Subrogation Receipts from the insured who were paid.

Thus, to the extent that the obligation of the petitioner has been
extinguished, respondent Guevarra may demand for reimbursement from his
principal. To rule otherwise would result in unjust enrichment of petitioner.

Victorias Milling Co. v. Court of Appeals, G.R. No. 117356, [June 19, 2000],
389 PHIL 184-199

FACTS: St. Therese Merchandising (STM) regularly bought sugar from

Victoria’s Milling Co. As proof of their dealings, Victoria’s Milling issued
Shipping List/Delivery Receipts to STM. In October 1989, STM bought 25k
bags of sugar, as evidenced by Shipping List/Delivery Receipts # 1214M. All
the sugar was kept in Victoria’s Milling’s warehouse.

Later, STM sold their rights under the Shipping List/Delivery Receipts
1214M for 14m pesos to private respondent Consolidated Sugar Corporation
(CSC). CSC then wrote to inform Victoria’s Milling that it had been
authorized by STM to withdraw the sugar under the Shipping List/Delivery
Receipts 1214M. Enclosed in the letter was a copy of the said shipping list
and the letter of authority from STM, authorizing CSC to withdraw the sugar
for and in behalf of STM.

CSC was able to withdraw 2,000 bags, however VCM refused to

release any more sugar, claiming that STM had withdrawn all the sugar
under the shipping list. CSC then filed an action against Victoria’s Milling and
STM for specific performance.

53
 Victoria’s Milling’s defense: It alleged that STM sold the same rights to
several persons, and that the sugar depleted quickly as a result. Victoria’s
Milling also alleged that these assignees were agents of STM. Victoria’s
Milling alleged that these “agents” were precluded from suing for
enforcement because of estoppel by reason of being an assignee.

The lower court ruled against Victoria’s Milling. The CA affirmed the
decision of the lower court.

ISSUES: 1.W/N Consolidated Sugar Corporation was STM’s agent? (No)

2. What is the relationship between Consolidated Sugar and STM? (That of a

vendor/vendee in a contract of sale)

RULING:

Main distinction of agency: the element of control.

The basis of agency is representation. One factor which most clearly

distinguishes agency from other legal concepts is control: one person - the
agent- agrees to act under the control or direction of another - the principal.
Indeed, every word “agency” has come to connote control by the principal.
The controlling factor, more than any other, has caused the courts to put
contracts between principals and agents in a separate category.

Agency is not presumed. Here, the relation of agency is dependent

upon the acts of the parties, the law makes no presumption of agency, and
it is always a fact to be proved, with the burden of proof resting on the
persons alleging the agency, to show not only the fact of its existence but
also its nature and extent. The question of whether a contract is one of sale
or agency depends on the intention of the parties gathered from the whole
scope and effect of the language employed. Ultimately, what is decisive is
the intention of the parties.

In the case at bar, there was no agency because:

1. No element of control - Consolidated Sugar was a buyer of the

Shipping List/Delivery Receipts form, and not an agent of STM.
Consolidated Sugar was not subject to STM’s control.

2. The letter of authority - The phrase “for and in our behalf”

should not be eyed as pointing to the existence of agency. This
was also later clarified by Consolidated Sugar when it informed
Victoria’s Milling that the shipping list was “sold and indorsed” to
it.

3. Intent of the parties - the use of the words “sold and

endorsed” means that STM and CSC intended a contract of sale,
and not an agency.

54
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. V. CUIZON, G.R. NO.
167552, [APRIL 23, 2007], 550 PHIL 165-175

FACTS: Petitioner is engaged in the business of importation and distribution

of various European industrial equipment for customers here in the
Philippines. It has as one of its customers Impact Systems Sales ("Impact
Systems") which is a sole proprietorship owned by respondent ERWIN
Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various

products allegedly amounting to ninety-one thousand three hundred thirty-
eight (₱91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at ₱250,000.00 with respondents
making a down payment of fifty thousand pesos (₱50,000.00).4 When the
sludge pump arrived from the United Kingdom, petitioner refused to deliver
the same to respondents without their having fully settled their indebtedness
to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de
Jesus, general manager of petitioner, executed a Deed of Assignment of
receivables in favor of petitioner.

Allegedly unbeknownst to petitioner, respondents, despite the existence of

the Deed of Assignment, proceeded to collect from Toledo Power Company
the amount of ₱365,135.29 as evidenced by Check Voucher No.
09339prepared by said power company and an official receipt dated 15
August 1995 issued by Impact Systems.10Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations.
As a result, respondents were able to make partial payments to petitioner.
On 7 October 1996, petitioner’s counsel sent respondents a final demand
letter wherein it was stated that as of 11 June 1996, respondents’ total
obligations stood at ₱295,000.00 excluding interests and attorney’s
fees.11 Because of respondents’ failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with
application for preliminary attachment against herein respondents before the
Regional Trial Court of Cebu City.

Respondent EDWIN alleged that he is not a real party in interest in this case.
According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with petitioner and the latter was
very much aware of this fact.

ISSUE: WON respondent Edwin exceeded his authority when he signed the
Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner.

RULING: NO. The elements of the contract of agency are: (1) 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

55
acts as a representative and not for himself; (4) the agent acts within the
scope of his authority.34

In this case, the parties do not dispute the existence of the agency
relationship between respondents ERWIN as principal and EDWIN as agent.
The only cause of the present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of Assignment thereby
binding himself personally to pay the obligations to petitioner. Petitioner
firmly believes that respondent EDWIN acted beyond the authority granted
by his principal and he should therefore bear the effect of his deed pursuant
to Article 1897 of the New Civil Code.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such,
is not personally liable to the party with whom he contracts. The same
provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority. In
the last instance, the agent can be held liable if he does not give the third
party sufficient notice of his powers. We hold that respondent EDWIN does
not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed

thereon as the sales manager of Impact Systems. As discussed elsewhere,
the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a
general agent or manager; such a position presupposes a degree of
confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or
appurtenant to the business entrusted to his care and management. In the
absence of an agreement to the contrary, a managing agent may enter into
any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. x x
x.35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted
well-within his authority when he signed the Deed of Assignment. To recall,
petitioner refused to deliver the one unit of sludge pump unless it received,
in full, the payment for Impact Systems’ indebtedness.36 We may very well
assume that Impact Systems desperately needed the sludge pump for its
business since after it paid the amount of fifty thousand pesos (₱50,000.00)
as down payment on 3 March 1995,37 it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of its
receivables from Toledo Power Company on 28 June 1995.38 The significant
amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems’ perseverance to get hold of the said
equipment. There is, therefore, no doubt in our mind that respondent
EDWIN’s participation in the Deed of Assignment was "reasonably

56
necessary" or was required in order for him to protect the business of his
principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary
relation with his principal. As we declare that respondent EDWIN acted
within his authority as an agent, who did not acquire any right nor incur any
liability arising from the Deed of Assignment, it follows that he is not a real
party in interest who should be impleaded in this case. A real party in
interest is one who "stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit." 41 In this respect, we
sustain his exclusion as a defendant in the suit before the court a quo.

LIM V. PEOPLE, G.R. NO. L-34338, [NOVEMBER 21, 1984], 218 PHIL 303-
307

FACTS: Petitioner Lourdes Valerio Lim was found guilty of the crime of
estafa and was sentenced "to suffer an imprisonment of four (4) months and
one (1) day as minimum to two (2) years and four (4) months as maximum,
to indemnify the offended party in the amount of P559.50, with subsidize
imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo)

From this judgment, appeal was taken to the then Court of Appeals
which affirmed the decision of the lower court but modified the penalty
imposed by sentencing her "to suffer an indeterminate penalty of one (1)
month and one (1) day of arresto mayor as minimum to one (1) year and
one (1) day of prision correccional as maximum, to indemnify the
complainant in the amount of P550.50 without subsidiary imprisonment, and
to pay the costs of suit." (p. 24, Rollo)

The question involved in this case is whether the receipt, Exhibit "A", is
a contract of agency to sell or a contract of sale of the subject tobacco
between petitioner and the complainant, Maria de Guzman Vda. de Ayroso,
thereby precluding criminal liability of petitioner for the crime charged.

The findings of facts of the appellate court are as follows:

... The appellant is a businesswoman. On January 10, 1966, the

appellant went to the house of Maria Ayroso and proposed to sell Ayroso's
tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco
consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the
overprice for which she could sell the tobacco. This agreement was made in
the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew the
document, Exh. A, dated January 10, 1966, which reads:

To Whom It May Concern:

This is to certify that I have received from Mrs. Maria de Guzman Vda.
de Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to
be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred

57
Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it
was sold.

This was signed by the appellant and witnessed by the complainant's

sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant at
that time was bringing a jeep, and the tobacco was loaded in the jeep and
brought by the appellant. Of the total value of P799.50, the appellant had
paid to Ayroso only P240.00, and this was paid on three different times.
Demands for the payment of the balance of the value of the tobacco were
made upon the appellant by Ayroso, and particularly by her sister, Salud
Bantug. Salud Bantug further testified that she had gone to the house of the
appellant several times, but the appellant often eluded her; and that the
"camarin" the appellant was empty. Although the appellant denied that
demands for payment were made upon her, it is a fact that on October 19,
1966, she wrote a letter to Salud Bantug which reads as follows:

Dear Salud,

Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa

ang nasisingil kong pera, magintay ka hanggang dito sa linggo ito at tiak na
ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang ako ng
marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo ay
kahit konte muna ay bibigyan kita. Pupunta lang kami ni Mina sa Maynila
ngayon. Salud kung talagang kailangan mo ay bukas ay dadalhan kita ng
pera.

Medio mahirap ang maningil sa palengke ng Cabanatuan dahil

nagsisilipat ang mga suki ko ng puesto. Huwag kang mabahala at tiyak na
babayaran kita.

Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).

Ludy

Pursuant to this letter, the appellant sent a money order for P100.00
on October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated
April 18, 1967, or a total of P240.00. As no further amount was paid, the
complainant filed a complaint against the appellant for estafa. (pp. 14, 15,
16, Rollo)

In this petition for review by certiorari, Lourdes Valerio Lim poses the
following question of law.

ISSUE: WON the honorable Court of Appeals was legally right in holding
that the foregoing receipt is a contract of agency to sell as against the
theory of the petitioner that it is a contract of sale. (YES)

RULING: It is clear in the agreement, Exhibit "A", that the proceeds of the
sale of the tobacco should be turned over to the complainant as soon as the
same was sold, or, that the obligation was immediately demandable as soon
as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it
does not fix a period, does not apply.

58
 Anent the argument that petitioner was not an agent because Exhibit
"A" does not say that she would be paid the commission if the goods were
sold, the Court of Appeals correctly resolved the matter as follows:

... Aside from the fact that Maria Ayroso testified that the appellant
asked her to be her agent in selling Ayroso's tobacco, the appellant herself
admitted that there was an agreement that upon the sale of the tobacco she
would be given something. The appellant is a businesswoman, and it is
unbelievable that she would go to the extent of going to Ayroso's house and
take the tobacco with a jeep which she had brought if she did not intend to
make a profit out of the transaction. Certainly, if she was doing a favor to
Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it
would not have been the appellant who would have gone to the house of
Ayroso, but it would have been Ayroso who would have gone to the house of
the appellant and deliver the tobacco to the appellant. (p. 19, Rollo)

The fact that appellant received the tobacco to be sold at P1.30 per
kilo and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The
agreement (Exhibit "A') constituted her as an agent with the obligation to
return the tobacco if the same was not sold.

Mactan Cebu International Airport Authority v. Heirs of Ijordan, G.R. No.

173140, [January 11, 2016], 776 PHIL 222-232

FACTS: Julian Cuizon executed a Deed of Extrajudicial Settlement and Sale

covering Lot No. 4539 (subject lot) situated in Ibo, Municipality of Opon
(now Lapu-Lapu City) in favor of the Civil Aeronautics Administration ((CAA),
the predecessor-in-interest of petitioner Manila Cebu International Airport
Authority (MCIAA). The subject lot was transferred and conveyed to MCIAA
by virtue of Republic Act No. 6958.

In 1980, the respondents caused the judicial reconstitution of the original

certificate of title covering the subject lot. Consequently, Original Certificate
of Title (OCT) No. RO-2431 of the Register of Deeds of Cebu was
reconstituted for Lot No. 4539 in the names of the respondents'
predecessors-in-interest, namely, Gavina Ijordan, and Julian, Francisca,
Damasina, Marciana, Pastor, Angela, Mansueto, Bonifacia, Basilio, Moises
and Florencio, all surnamed Cuison. The respondents' ownership of the
subject lot was evidenced by OCT No. RO-2431. They asserted that they
had not sold their shares in the subject lot, and had not authorized
Julian to sell their shares to MCIAA's predecessor-in-interest.

The failure of the respondents to surrender the owner's copy of OCT No. RO-
2431 prompted MCIAA to sue them for the cancellation of title in the
RTC, alleging in its complaint that the certificate of title conferred no right in

59
favor of the respondents because the lot had already been sold to the
Government in 1957.

CA and the RTC concluded that the Deed was void as far as the
respondents' shares in the subject lot were concerned, but valid as to
Julian's share.

ISSUE: WON Julian was validly authorized to convey lot no. 4539.

RULING: NO. The conveyance by Julian of the entire property pursuant to

the Deed did not bind the respondents for lack of their consent and
authority in his favor. As such, the Deed had no legal effect as to their
shares in the property.

Article 1317 of the Civil Code provides that no person could contract
in the name of another without being authorized by the latter, or
unless he had by law a right to represent him; the contract entered into
in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, is unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party.

But the conveyance by Julian through the Deed had full force and effect with
respect to his share of 1/22 of the entire property consisting of 546 square
meters by virtue of its being a voluntary disposition of property on his part.

MCIAA's assertion of estoppel or ratification to bar the respondents' contrary

claim of ownership of their shares in the subject lot is bereft of substance.
The doctrine of estoppel applied only to those who were parties to the
contract and their privies or successors-in-interest. Moreover, the
respondents could not be held to ratify the contract that was declared to be
null and void with respect to their share, for there was nothing for them to
ratify. Verily, the Deed, being null and void, had no adverse effect on the
rights of the respondents in the subject lot.

Lastly, MCIAA's contention on acquisitive prescription in its favor must fail.

Aside from the absence of the satisfactory showing of MCIAA's supposed
possession of the subject lot, no acquisitive prescription could arise in view
of the indefeasibility of the respondents' Torrens title. Under the Torrens
System, no adverse possession could deprive the registered owners of their
title by prescription. The real purpose of the Torrens System is to quiet title
to land and to stop any question as to its legality forever. Thus, once title is
registered, the owner may rest secure, without the necessity of waiting in
the portals of the court, or sitting on the mirador su casa to avoid the
possibility of losing his land.

60
Bank of the Philippine Islands v. Laingo, G.R. No. 205206, [March 16,
2016]

FACTS: Rheozel Laingo (Rheozel), the son of respondent Yolanda Laingo

(Laingo), opened a "Platinum 2-in-1 Savings and Insurance" account with
petitioner Bank of the Philippine Islands (BPI) in its Claveria, Davao City
branch. The Platinum 2-in-1 Savings and Insurance account is a savings
account where depositors are automatically covered by an insurance policy
against disability or death issued by petitioner FGU Insurance Corporation
(FGU Insurance), now known as BPI/MS Insurance Corporation.

BPI issued Passbook No. 50298 to Rheozel corresponding to Savings Account

No. 2233-0251-11. A Personal Accident Insurance Coverage Certificate No.
043549 was also issued by FGU Insurance in the name of Rheozel with
Laingo as his named beneficiary.

Rheozel died due to a vehicular. Laingo instructed the family's personal

secretary, Alice Torbanos to go to BPI and inquire about the savings account
of Rheozel. Laingo wanted to use the money in the savings account for
Rheozel's burial and funeral expenses.

Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's Branch Manager
regarding Laingo's request. BPI accommodated Laingo who was allowed to
withdraw P995,000 from the account of Rheozel.

More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn
Laingo-Concepcion, found the Personal Accident Insurance Coverage
Certificate No. 043549 issued by FGU Insurance. Rhealyn immediately
conveyed the information to Laingo.

Laingo sent two letters dated 11 September 2003 and 7 November 2003 to
BPI and FGU Insurance requesting them to process her claim as beneficiary
of Rheozel's insurance policy.

On 19 February 2004, FGU Insurance sent a reply-letter to Laingo denying

her claim. FGU Insurance stated that Laingo should have filed the claim
within three calendar months from the death of Rheozel as required under
Paragraph 15 of the Personal Accident Certificate of Insurance.

ISSUE: WON Laingo, as named beneficiary who had no knowledge of the

existence of the insurance contract, is bound by the three calendar month
deadline for filing a written notice of claim upon the death of the insured.

RULING: NO. BPI, as agent of FGU Insurance, had the primary

responsibility to ensure that the 2-in-1 account be reasonably carried out
with full disclosure to the parties concerned, particularly the beneficiaries.
Thus, it was incumbent upon BPI to give proper notice of the existence of
the insurance coverage and the stipulation in the insurance contract for filing
a claim to Laingo, as Rheozel's beneficiary, upon the latter's death.

61
In Eurotech Industrial Technologies, Inc. v. Cuizon, we held that when an
agency relationship is established, the agent acts for the principal insofar as
the world is concerned. Consequently, the acts of the agent on behalf of the
principal within the scope of the delegated authority have the same legal
effect and consequence as though the principal had been the one so acting
in the given situation.

Articles 1884 and 1887 of the Civil Code state:

Art. 1884. The agent is bound by his acceptance to carry out the
agency and is liable for the damages which, through his non-
performance, the principal may suffer.

He must also finish the business already begun on the death of the
principal, should delay entail any danger.

Art. 1887. In the execution of the agency, the agent shall act in
accordance with the instructions of the principal.

There is a rationale in the contract of agency, which flows from the "doctrine
of representation," that notice to the agent is notice to the principal, Here,
BPI had been informed of Rheozel's death by the latter's family. Since BPI is
the agent of FGU Insurance, then such notice of death to BPI is considered
as notice to FGU Insurance as well. FGU Insurance cannot now justify the
denial of a beneficiary's insurance claim for being filed out of time when
notice of death had been communicated to its agent within a few days after
the death of the depositor-insured. In short, there was timely notice of
Rheozel's death given to FGU Insurance within three months from Rheozel's
death as required by the insurance company.

Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the
existence of the insurance policy, Laingo had no means to ascertain that she
was entitled to the insurance claim. It would be unfair for Laingo to shoulder
the burden of loss when BPI was remiss in its duty to properly notify her that
she was a beneficiary.

BPI and FGU Insurance shall bear the loss and must compensate Laingo for
the actual damages suffered by her family. Likewise, FGU Insurance has the
obligation to pay the insurance proceeds of Rheozel's personal accident
insurance coverage to Laingo, as Rheozel's named beneficiary.

62
Oliver v. Philippine Savings Bank, G.R. No. 214567, [April 4, 2016]

FACTS: Oliver alleged that sometime in 1997, she made an initial deposit of
P12 million into her PSBank account. During that time, Castro convinced her
to loan out her deposit as interim or bridge financing for the approved loans
of bank borrowers who were waiting for the actual release of their loan
proceeds.

Under this arrangement, Castro would first show the approved loan
documents to Oliver. Thereafter, Castro would withdraw the amount needed
from Oliver's account. Upon the actual release of the loan by PSBank to the
borrower, Castro would then charge the rate of 4% a month from the loan
proceeds as interim or bridge financing interest. Together with the interest
income, the principal amount previously withdrawn from Oliver's bank
account would be deposited back to her account. Meanwhile, Castro would
earn a commission of 10% from the interest.

Their arrangement went on smoothly for months. Due to the frequency of

bank transactions, Oliver even entrusted her passbook to Castro.

Castro stopped rendering an accounting for Oliver. The latter then demanded
the return of her passbook. When Castro showed her the passbook
sometime in late January or early February 1999, she noticed several
erasures and superimpositions therein. She became very suspicious of the
many erasures pertaining to the December 1998 entries so she requested a
copy of her transaction history register from PSBank.

When her transaction history register was shown to her, Oliver was
surprised to discover that the amount of P4,491,250.00 (estimated at P4.5
million) was entered into her account on December 21, 1998. While a total
of P7 million was withdrawn from her account on the same day, Oliver
asserted that she neither applied for an additional loan of P4.5 million nor
authorized the withdrawal of P7 million.

Castro asserted that, upon Oliver's instruction, a total of P7 million was

withdrawn from the latter's account and was then deposited to the account
of one Ben Lim (Lim) on the same date. Lim was a businessman who
borrowed money from Oliver. Castro knew him because he was also a
depositor and borrower of PSBank San Pedro Branch.

ISSUE: WON there was a contract of agency between Oliver and Castro.

RULING: YES. There was an implied agency between Oliver and Castro; the
loans were properly acquired

A contract of agency may be inferred from all the dealings between Oliver
and Castro. Agency can be express or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency
knowing that another, person is acting on his behalf without authority. The
question of whether an agency has been created is ordinarily a question
63
which may be established in the same way as any other fact, either by direct
or circumstantial evidence. The question is ultimately one of intention.

In this case, Oliver and Castro had a business agreement wherein Oliver
would obtain loans from the bank, through the help of Castro as its branch
manager; and after acquiring the loan proceeds, Castro would lend the
acquired amount to prospective borrowers who were waiting for the actual
release of their loan proceeds. Oliver would gain 4% to 5% interest per
month from the loan proceeds of her borrowers, while Castro would earn a
commission of 10% from the interests. Clearly, an agency was formed
because Castro bound herself to render some service in representation or on
behalf of Oliver, in the furtherance of their business pursuit.

For months, the agency between Oliver and Castro benefited both parties.
Oliver, through Castro's representations, was able to obtain loans, relend
them to borrowers, and earn interests; while Castro acquired commissions
from the transactions. Oliver even gave Castro her passbook to facilitate the
transactions.

Accordingly, the laws on, agency apply to their relationship. Article 1881 of
the New Civil Code provides that 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. Thus, as long as the agent acts within the
scope of the authority given by his principal, the actions of the former shall
bind the latter.

Oliver claims that the P4.5 million loan, released on December 21, 1998, and
the P1,396,310.45 loan, released on January 5, 1999, were not acquired
with her consent. Castro and PSBank, on the other hand, countered that
these loans were obtained with Oliver's full consent.

The Court finds that the said loans were acquired with Oliver's authority. The
promissory notes and the release tickets for the said loans bore her
signatures. She failed to prove that her signatures appearing on the loan
documents were forged. Hence, the loan documents were reliable and these
proved that the loans were processed by Castro within the scope of her
authority.

Although it was proven that Oliver authorized the loans, in the aggregate
amount of P5,888,149.33, there was nothing in the records which proved
that she also allowed the withdrawal of P7 million from her bank account.
Oliver vehemently denied that she gave any authority whatsoever to either
Castro or PSBank to withdraw the said amount.

Castro's lack of authority to withdraw the P7 million on behalf of Oliver

became more apparent when she altered the passbook to hide such
transaction. It must be remembered that Oliver entrusted her passbook to
Castro. In the transaction history register for her account, it was clear that
there was a series of dealings from December 17, 1998 to December 23,

64
1998. When compared with Oliver's passbook, the latter showed that the
next transaction from December 16, 1998 was on December 28, 1998. It
was also obvious to the naked eye that the December 28, 1998 entry in the
passbook was altered.

Mactan-Cebu International Airport Authority v. Unchuan, G.R. No.

182537, [June 1, 2016]

FACTS: Respondent Richard Unchuan (Unchuan) filed a complaint for Partial

Declaration of Nullity of the Deed of Absolute Sale with Plea for Partition,
Damages and Attorney's Fees before the RTC against MCIAA.

In his complaint, Unchuan alleged, among others, that he was the legal and
rightful owner of Lot No. 4810-A, and Lot No. 4810-B, both located in Barrio
Buaya, Lapu-Lapu City; that the title was registered under the names of the
heirs of Eugenio Godinez, specifically, Teodora Tampus, Fernanda Godinez
(the wife of Iscolastico Epe), Tomasa Godinez (the wife of Mateo Iba�ez),
Sotera Godinez (the wife of Guillermo Pino), Atanasio Godinez (married to
Florencia Pino), Juana Godinez (the wife of Catalino Cuison), and Ambrosio
Godinez (married to Mamerta Inot); and that he bought the two lots from
the surviving heirs of the registered owners through several deeds of
absolute sale.

Unchuan further alleged that he came to know that Atanacio Godinez

(Atanacio), the supposed attorney-in-fact of all the registered owners and
their heirs, already sold both lots to Civil Aeronautics Administration
(CAA), the predecessor of MCIAA; that the sale covered by the Deed of
Absolute Sale,dated April 3, 1958, was null and void because the registered
owners and their heirs did not authorize Atanacio to sell their undivided
shares in the subject lots in favor of CAA.

The RTC held that Atanacio was not legally authorized to act as the attorney-
in-fact of his brothers and sisters and to transact on their behalf because he
was not clothed with a special power of attorney granting him authority to
sell the disputed lots. "This lack of authority of Atanacio Godinez, therefore,
has an effect of making the contract of sale between the parties'
predecessors-in-interest as void except perhaps for the share of Atanacio
Godinez which he could very well alienate."

The CA affirmed the RTC decision. The CA explained that Atanacio had no
authority to act as an agent for the other registered owners and their heirs
absent the special power of attorney specifically executed for such purpose
as required in Article 1874 of the New Civil Code.

ISSUE: WON Atanacio was validly authorized to convey the lots.

65
RULING: NO. The Court finds that the sale transaction executed between
Atanacio, acting as an agent of his fellow registered owners, and the CAA
was indeed void insofar as the other registered owners were concerned.
They were represented without a written authority from them clearly in
violation of the requirement under Articles 1874 and 1878 of the Civil Code,
which provide:

Art. 1874. When a sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise, the sale
shall be void.

Art. 1878. Special powers of attorney are necessary in the following cases:

x x x
(5) To enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration;

The significance of requiring the authority of an agent to be put into writing

was amplified in Dizon v. Court of Appeals:

When the sale of a piece of land or any interest thereon is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be
void. Thus the authority of an agent to execute a contract for the sale of real
estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a
binding contract containing terms and conditions which are in the contract
he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration. 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 act mentioned. For the principal to
confer the right upon an agent to sell real estate, a power of attorney must
so express the powers of the agent in clear and unmistakable language.
When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document.

Without a special power of attorney specifying his authority to dispose of an

immovable, Atanacio could not be legally considered as the representative of
the other registered co-owners of the properties in question. Atanacio's act
of conveying Lot No. 4810-A and Lot No. 4810-B cannot be a valid source of
obligation to bind all the other registered co-owners and their heirs because
he was not clothed with any authority to enter into a contract with CAA. The
other heirs could not have given their consent as required under Article
1475 of the New Civil Code because there was no meeting of the minds
among the other registered co-owners who gave no written authority to
Atanacio to transact on their behalf. Therefore, no contract was perfected
insofar as the portions or shares of the other registered co-owners or their
heirs were concerned.

The transaction entered into by Atanacio and CAA, however, was not entirely
void because the lack of consent by the other co-owners in the sale was with
respect to their shares only.

66
In the case at bench, although the sale transaction insofar as the other heirs
of the registered owners was void, the sale insofar as the extent of
Atanacio's interest is concerned, remains valid. Atanacio was one of the
registered co-owners of the subject lots, but he was not clothed with
authority to transact for the other co-owners. By signing the deed of sale
with the CAA, Atanacio effectively sold his undivided share in the lots in
question. Thus, CAA became a co-owner of the undivided subject lots.
Accordingly, Atanacio's heirs could no longer alienate anything in favor of
Unchuan because he already conveyed his pro indiviso share to CAA.

Georg v. Holy Trinity College, Inc., G.R. No. 190408, [July 20, 2016], 790
PHIL 631-666

FACTS: The Holy Trinity College Grand Chorale and Dance Company was
organized in 1987 by Sister Teresita Medalle (Sr. Medalle), the President of
Holy Trinity College in Puerto Princesa City. The Group was composed of
students from Holy Trinity College.

In 2001, the Group was slated to perform in Greece, Italy, Spain and
Germany. Enriquez, who allegedly represented Sr. Medalle, contacted Benjie
B. Georg to seek assistance for payment of the Group’s international
airplane tickets.

On 24 April 2001, a Memorandum of Agreement with Deed of Assignment

(MOA) was executed between petitioner, represented by Atty. Belarmino, as
first party assignee; the Group, represented by Sr. Medalle, O.P. and/or its
Attorney-in-Fact Enriquez, as second party assignor and S.C. Roque Group
of Companies Holding Limited Corporation and S.C. Roque Foundation,
Incorporated, represented by Violeta P. Buenaventura, as foundation-
grantor.

Under the said Agreement, petitioner, through her travel agency, will
advance the payment of international airplane tickets amounting to
P4,624,705.00 in favor of the Group on the assurance of the Group
represented by Sr. Medalle through Enriquez that there is a confirmed
financial allocation of P4,624,705.00 from the foundation-grantor, S.C.
Roque Foundation (the Foundation). The second party assignor assigned said
amount in favor of petitioner.

Petitioner paid for the Group’s domestic and international airplane tickets.

In an Amended Complaint dated 15 August 2001 for a Sum of Money with

Damages filed petitioner, it claimed that the second party
assignor/respondent and the foundation-grantor have not paid and refused
to pay their obligation under the MOA. Petitioner prayed that they be
ordered to solidarily pay the amount of P4,624,705.00 representing the

67
principal amount mentioned in the Agreement, moral, exemplary, and actual
damages, legal fees, and cost of suit.

RTC ruled in favor of petitioner.

However, the Court of Appeals relieved respondent of any liability for

petitioner’s monetary claims.

ISSUE: WON Holy Trinity College is liable under the MOA.

RULING: Between the two parties, the Supreme Court is inclined to give
credence to petitioner.

Respondent claims that Sr. Medalle was not authorized by the corporation to
enter into any loan agreement thus the MOA executed was null and void for
being ultra vires.

Petitioner invokes, as refutation, the doctrine of apparent authority.

Respondent’s denial of privity to the loan contract was based on the

following reasons: 1) that respondent’s name does not appear on the MOA;
2) that Sr. Medalle was no longer the President of Holy Trinity College when
she affixed her thumbmark on the MOA; and 3) that Sr. Medalle was not
authorized by respondent through a board resolution to enter into such
agreement.

The trial court categorically ruled that Sr. Medalle affixed her thumbmark as
President of Holy Trinity College and therefore, respondent is a party to the
MOA.

Assuming arguendo that Sr. Medalle was not authorized by the Holy Trinity
College Board, the doctrine of apparent authority applies in this case.

The doctrine of apparent authority provides that a corporation will be

estopped from denying the agent’s authority if it knowingly permits one of
its officers or any other agent to act within the scope of an apparent
authority, and it holds him out to the public as possessing the power to do
those acts.25

The existence of apparent authority may be ascertained through

(1) the general manner in which the corporation holds out an officer or
agent as having the power to act or, in other words, the apparent authority
to act in general, with which it clothes him; or (2) the acquiescence in his
acts of a particular nature, with actual or constructive knowledge thereof,
whether within or beyond the scope of his ordinary powers.26

In this case, Sr. Medalle formed and organized the Group. She had been
giving financial support to the Group, in her capacity as President of Holy
Trinity College. Sr. Navarro admitted that the Board of Trustees never
questioned the existence and activities of the Group. Thus, any agreement
or contract entered into by Sr. Medalle as President of Holy Trinity College

68
relating to the Group bears the consent and approval of respondent. It is
through these dynamics that we cannot fault petitioner for relying on Sr.
Medalle’s authority to transact with petitioner.

Finding that Sr. Medalle possessed full mental faculty in affixing her
thumbmark in the MOA and that respondent is hereby bound by her actions,
we reverse the ruling of the Court of Appeals.

AFP Retirement and Separation Benefits System v. Sanvictores, G.R. No.

207586, [August 17, 2016]

FACTS: In 1994, PEPI, formerly Antipolo Properties, Inc., offered to Eduardo

Sanvictores for sale on instalment basis a parcel of land.

Sanvictores paid the required down payment of ₱81,949.04; that on June 9,

1994, a Contract to Sell was executed by and between PEPI and AFPRSBS,
as the seller, and Sanvictores, as the buyer; that on February 27, 1999,
Sanvictores paid in full the purchase price of the subject property in the
amount of ₱534,378.79; that despite the full payment, PEPI and AFPRSBS
failed to execute the corresponding deed of absolute sale on the subject
property and deliver the corresponding title thereto; that on September 6,
2000, Sanvictores demanded from PEPI the execution of the deed of sale
and the delivery of the transfer certificate of title; that PEPI claimed that the
title of the subject property was still with the Philippine National Bank (PNB)
and could not be released due to the economic crisis; that despite several
follow-ups with PEPI, the latter did not communicate with Sanvictores for a
period of four (4) years; and that, thereafter, Sanvictores filed a complaint
for rescission of the contract to sell, refund of payment, damages, and
attorney's fees against PEPI and AFPRSBS before the HLRUB.

For its part, AFPRSBS countered that it was not the owner and developer of
Village East Executive Homes but PEPI; that PEPI alone was the seller; and
that Norma Espina (Espina) was neither the treasurer nor the authorized
representative of AFPRSBS, but the Treasurer of PEPI.

The HLURB ruled that the PEPI and AFP shall pay jointly and severally the
complainant.

ISSUE: 1. WON PEPI and AFP are jointly and severally liable.

2. WON Espina and Mena are authorized representative of the said

entities.

RULING:

1. Yes. Art. 1207. The concurrence of two or more creditors or of two

or more debtors in one and the same obligation does not imply that each

69
one of the former has a right to demand, or that each one of the latter is
bound to render, entire compliance with the prestation. There is a solidary
liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.

As can be gleaned therefrom, Article 1207 does not presume solidary liability
unless: 1] the obligation expressly so states; or 2] the law or nature
requires solidarity.

Here, there is no doubt that the nature of the obligation of PEPI and
AFPRSBS under the subject contract to sell was solidary. The contract to sell
did not state "SELLERS" but "SELLER." This could only mean that PEPI and
AFPRSBS were considered as one seller in the contract. As correctly pointed
out by the administrative tribunals below and the CA, there was no
delineation as to their rights and obligations.

Also in the said contract, the signatories were Espina, representing PEPI;
Mena, representing AFPRSBS; and Sanvictores. Espina signed under PEPI as
seller while Mena signed under AFPRSBS also as seller.

Furthermore, the signatures of Espina and Mena were affixed again in the
last portion of the Deed of Restrictions under the word "OWNER" with Espina
signing for PEPI and Mena for AFPRSBS.

2. Even, AFPRSBS repeatedly argues that the contract was not signed
by any of its authorized representative and that Espina was not its treasurer
or authorized representative.

Conveniently, however, it remained silent as to Mena. It never denied that

Mena was its representative. Indeed, there could be no other conclusion
except that PEPI and AFPRSBS came to the contracting table with the
intention to be bound jointly and severally. AFPRSBS is estopped from
denying Mena's authority to represent it. It is quite obvious that
AFPRSBS clothed Mena with apparent authority to act on its behalf in the
execution of the contract to sell.

There is estoppel when the principal has clothed the agent with
indicia of authority as to lead a reasonably prudent person to believe
that the agent actually has such authority.

"In an agency by estoppel or apparent authority, "the principal is bound by

the acts of his agent with the apparent authority which he knowingly permits
the agent to assume, or which he holds the agent out to the public as
possessing."

"A corporation may be held in estoppel from denying as against innocent

third persons the authority of its officers or agents who have been clothed
by it with ostensible or apparent authority.

70
Litonjua Jr. v. Eternit Corp., G.R. No. 144805, [June 8, 2006], 523 PHIL
588-612

FACTS: Since 1950, Eternit Corporation had been engaged in the

manufacture of roofing materials and pipe products. Its manufacturing
operations were conducted on eight parcels of land. Ninety (90%) percent of
the shares of stocks of EC were owned by Eteroutremer S.A. Corporation
(ESAC), a corporation organized and registered under the laws of Belgium.3

The Committee for Asia of ESAC instructed Michael Adams, a member of

EC’s Board of Directors, to dispose of the eight parcels of land. Adams
engaged the services of realtor/broker Lauro G. Marquez so that the
properties could be offered for sale to prospective buyers. Marquez
thereafter offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc.

In a Letter dated September 12, 1986, Marquez declared that he was

authorized to sell the properties for P27,000,000.00 and that the terms of
the sale were subject to negotiation. Eduardo Litonjua, Jr. responded to the
offer and offered to buy the property for P20,000,000.00 cash.

Marquez apprised Glanville of the Litonjua siblings’ offer and relayed the
same to Delsaux in Belgium, but the latter did not respond.

On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his

position/ counterproposal to the offer of the Litonjua siblings. It was only on
February 12, 1987 that Delsaux sent a telex to Glanville stating that, based
on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00
and P2,500,000.00 to cover all existing obligations prior to final liquidation."

Meanwhile, with the assumption of Corazon C. Aquino as President of the

Republic of the Philippines, the political situation in the Philippines had
improved.

Marquez received a telephone call from Glanville, advising that the sale
would no longer proceed. Glanville followed it up with a Letter dated May 7,
1987, confirming that he had been instructed by his principal to inform
Marquez that "the decision has been taken at a Board Meeting not to sell the
properties on which Eternit Corporation is situated."

The Litonjuas then filed a complaint for specific performance and damages
against EC (now the Eterton Multi-Resources Corporation) and the Far East
Bank & Trust Company, and ESAC in the RTC of Pasig City.

The trial court declared that since the authority of the agents/realtors was
not in writing, the sale is void and not merely unenforceable, and as such,
could not have been ratified by the principal.

In any event, such ratification cannot be given any retroactive effect.

Plaintiffs could not assume that defendants had agreed to sell the property

71
without a clear authorization from the corporation concerned, that is,
through resolutions of the Board of Directors and stockholders.

ISSUE: WON Marquez, Glanville, and Delsaux were authorized by

respondent EC to act as its agents relative to the sale of the properties.

RULING: NO. In this case, the petitioners as plaintiffs, failed to adduce in

evidence any resolution of the Board of Directors of EC empowering
Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale,
for and in its behalf, the eight parcels of land owned by EC including the
improvements thereon.

The bare fact that Delsaux may have been authorized to sell to Ruperto Tan
the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as
basis for petitioners’ claim that he had likewise been authorized by
respondent EC to sell the parcels of land.

While Glanville was the President and General Manager of respondent EC,
and Adams and Delsaux were members of its Board of Directors, the three
acted for and in behalf of respondent ESAC, and not as duly authorized
agents of respondent EC; a board resolution evincing the grant of such
authority is needed to bind EC to any agreement regarding the sale of the
subject properties. Such board resolution is not a mere formality but is a
condition sine qua non to bind respondent EC.

Admittedly, respondent ESAC owned 90% of the shares of stocks of

respondent EC; however, the mere fact that a corporation owns a majority
of the shares of stocks of another, or even all of such shares of stocks, taken
alone, will not justify their being treated as one corporation.

It bears stressing that in an agent-principal relationship, the personality of

the principal is extended through the facility of the agent. In so doing, the
agent, by legal fiction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in any way, be compelled
by law or by any court.

It appears that Marquez acted not only as real estate broker for the
petitioners but also as their agent.

As gleaned from the letter of Marquez to Glanville, on February 26, 1987, he

confirmed, for and in behalf of the petitioners, that the latter had accepted
such offer to sell the land and the improvements thereon.

However, we agree with the ruling of the appellate court that Marquez had
no authority to bind respondent EC to sell the subject properties. A real
estate broker is one who negotiates the sale of real properties. His business,
generally speaking, is only to find a purchaser who is willing to buy the land
upon terms fixed by the owner. He has no authority to bind the principal by
signing a contract of sale. Indeed, an authority to find a purchaser of real

72
property does not include an authority to sell. Equally barren of merit is
petitioners’ contention that respondent EC is estopped to deny the existence
of a principal-agency relationship between it and Glanville or Delsaux.

For an agency by estoppel to exist, the following must be established: (1)

the principal manifested a representation of the agent’s authority or
knowlingly allowed the agent to assume such authority; (2) the third person,
in good faith, relied upon such representation; (3) relying upon such
representation, such third person has changed his position to his
detriment.48

An agency by estoppel, which is similar to the doctrine of apparent authority,

requires proof of reliance upon the representations, and that, in turn, needs
proof that the representations predated the action taken in reliance. 49 Such
proof is lacking in this case. In their communications to the petitioners,
Glanville and Delsaux positively and unequivocally declared that they were
acting for and in behalf of respondent ESAC.

Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, [April

23, 2007], 550 PHIL 165-175

FACTS: Petitioner is engaged in the business of importation and distribution

of various European industrial equipment for customers here in the
Philippines. It has as one of its customers Impact Systems Sales ("Impact
Systems") which is a sole proprietorship owned by respondent ERWIN
Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various

products allegedly amounting to ninety-one thousand three hundred thirty-
eight (₱91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at ₱250,000.00 with respondents
making a down payment of fifty thousand pesos (₱50,000.00).4 When the
sludge pump arrived from the United Kingdom, petitioner refused to deliver
the same to respondents without their having fully settled their indebtedness
to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de
Jesus, general manager of petitioner, executed a Deed of Assignment of
receivables in favor of petitioner.

Allegedly unbeknownst to petitioner, respondents, despite the existence of

the Deed of Assignment, proceeded to collect from Toledo Power Company
the amount of ₱365,135.29 as evidenced by Check Voucher No.
09339prepared by said power company and an official receipt dated 15
August 1995 issued by Impact Systems.10Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations.
As a result, respondents were able to make partial payments to petitioner.
73
On 7 October 1996, petitioner’s counsel sent respondents a final demand
letter wherein it was stated that as of 11 June 1996, respondents’ total
obligations stood at ₱295,000.00 excluding interests and attorney’s
fees.11 Because of respondents’ failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with
application for preliminary attachment against herein respondents before the
Regional Trial Court of Cebu City.

Respondent EDWIN alleged that he is not a real party in interest in this case.
According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with petitioner and the latter was
very much aware of this fact.

ISSUE: WON respondent EDWIN exceeded his authority when he signed the
Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner.

RULING: NO. The elements of the contract of agency are: (1) 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; (4) the agent acts within the
scope of his authority.

In this case, the parties do not dispute the existence of the agency
relationship between respondents ERWIN as principal and EDWIN as agent.
The only cause of the present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of Assignment thereby
binding himself personally to pay the obligations to petitioner. Petitioner
firmly believes that respondent EDWIN acted beyond the authority granted
by his principal and he should therefore bear the effect of his deed pursuant
to Article 1897 of the New Civil Code.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such,
is not personally liable to the party with whom he contracts. The same
provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority. In
the last instance, the agent can be held liable if he does not give the third
party sufficient notice of his powers. We hold that respondent EDWIN does
not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed

thereon as the sales manager of Impact Systems. As discussed elsewhere,
the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a
general agent or manager; such a position presupposes a degree of
confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or

74
appurtenant to the business entrusted to his care and management. In the
absence of an agreement to the contrary, a managing agent may enter into
any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. x x
x.

Applying the foregoing to the present case, we hold that Edwin Cuizon acted
well-within his authority when he signed the Deed of Assignment. To recall,
petitioner refused to deliver the one unit of sludge pump unless it received,
in full, the payment for Impact Systems’ indebtedness. We may very well
assume that Impact Systems desperately needed the sludge pump for its
business since after it paid the amount of fifty thousand pesos (₱50,000.00)
as down payment on 3 March 1995, it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of its
receivables from Toledo Power Company on 28 June 1995. The significant
amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems’ perseverance to get hold of the said
equipment. There is, therefore, no doubt in our mind that respondent
EDWIN’s participation in the Deed of Assignment was "reasonably
necessary" or was required in order for him to protect the business of his
principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary
relation with his principal. As we declare that respondent EDWIN acted
within his authority as an agent, who did not acquire any right nor incur any
liability arising from the Deed of Assignment, it follows that he is not a real
party in interest who should be impleaded in this case. A real party in
interest is one who "stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit." In this respect, we
sustain his exclusion as a defendant in the suit before the court a quo.

Country Bankers Insurance Corp. v. Keppel Cebu Shipyard, G.R. No.

166044, [June 18, 2012], 688 PHIL 78-104

FACTS: On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a

corporation engaged in the shipping industry, contracted the services of
Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering
Works, Inc. (Cebu Shipyard) for dry docking and ship repair works on its
vessel, the M/V Pacific Fortune.

In compliance with the agreement, Unimarine secured from Country Bankers

Insurance Corp. (CBIC), through the latter’s agent, Bethoven Quinain.
Unimarine failed to settle its obligations so Cebu Shipyard, wrote the
sureties CBIC[to inform them of Unimarine’s nonpayment, and to ask them
to fulfill their obligations as sureties.

75
However, even the sureties failed to discharge their obligations, and so Cebu
Shipyard filed a Complaint RTC. CBIC, in its Answer ] said that Cebu
Shipyard’s complaint states no cause of action. CBIC alleged that the surety
bond was issued by its agent, Quinain, in excess of his authority.

The RTC applied Articles 1900 and 1911 of the Civil Code in holding CBIC
liable for the surety bond. It held that CBIC could not be allowed to disclaim
liability because Quinain’s actions were within the terms of the special power
of attorney given to him. The Court of Appeals agreed that CBIC could not
be permitted to abandon its obligation especially since third persons had
relied on Quinain’s representations. It based its decision on Article 1911 of
the Civil Code and found CBIC to have been negligent and less than prudent
in conducting its insurance business for its failure to supervise and monitor
the acts of its agents, to regulate the distribution of its insurance forms, and
to devise schemes to prevent fraudulent misrepresentations of its agents.

ISSUE: WON CBIC is liable for the unauthorized acts of its agent.

RULING: No. Under Articles 1898 and 1910, an agent’s act, even if done
beyond the scope of his authority, may bind the principal if he ratifies them,
whether expressly or tacitly. It must be stressed though that only the
principal, and not the agent, can ratify the unauthorized acts, which the
principal must have knowledge of.

Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s

testimony that it was unaware of the existence of Surety Bond No. G (16)
29419 and Endorsement No. 33152. There were no allegations either that
CBIC should have been put on alert with regard to Quinain’s business
transactions done on its behalf. It is clear, and undisputed therefore, that
there can be no ratification in this case, whether express or implied.

Article 1911, on the other hand, is based on the principle of estoppel, which
is necessary for the protection of third persons. It states that the principal is
solidarily liable with the agent even when the latter has exceeded his
authority, if the principal allowed him to act as though he had full powers.
However, for an agency by estoppel to exist, the following must be
established:

The principal manifested a representation of the agent’s authority or

knowingly allowed the agent to assume such authority;

The third person, in good faith, relied upon such representation; and

Relying upon such representation, such third person has changed his
position to his detriment.

In Litonjua, Jr. v. Eternit Corp., this Court said that “[a]n agency by
estoppel, which is similar to the doctrine of apparent authority, requires
proof of reliance upon the representations, and that, in turn, needs proof
that the representations predated the action taken in reliance.”

76
This Court cannot agree with the Court of Appeals’ pronouncement of
negligence on CBIC’s part. CBIC not only clearly stated the limits of its
agents’ powers in their contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties. Moreover, its company
procedures, such as reporting requirements, show that it has designed a
system to monitor the insurance contracts issued by its agents. CBIC cannot
be faulted for Quinain’s deliberate failure to notify it of his transactions with
Unimarine. In fact, CBIC did not even receive the premiums paid by
Unimarine to Quinain.

Furthermore, nowhere in the decisions of the lower courts was it stated that
CBIC let the public, or specifically Unimarine, believe that Quinain had the
authority to issue a surety bond in favor of companies other than the
Department of Public Works and Highways, the National Power Corporation,
and other government agencies. Neither was it shown that CBIC knew of the
existence of the surety bond before the endorsement extending the life of
the bond, was issued to Unimarine. For one to successfully claim the benefit
of estoppel on the ground that he has been misled by the representations of
another, he must show that he was not misled through his own want of
reasonable care and circumspection.

Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288, [January 16,
2012], 679 PHIL 61-97

FACTS: In 1997, while the spouses Viloria were in the United States, they
approached Holiday Travel, a travel agency working for Continental Airlines,
to purchase tickets from Newark to San Diego. The travel agent, Margaret
Mager, advised the couple that they cannot travel by train because it was
already fully booked; that they must purchase plane tickets for Continental
Airlines; that if they won’t purchase plane tickets; they’ll never reach their
destination in time. The couple believed Mager’s representations and so they
purchased two plane tickets worth $800.00.

Later however, the spouses found out that the train trip wasn’t really fully
booked and so they purchased train tickets and went to their destination by
train instead. Then they called up Mager to request for a refund for the plane
tickets. Mager referred the couple to Continental Airlines. As the couple were
now in the Philippines, they filed their request with Continental Airline’s
office in Ayala. The spouses Viloria alleged that Mager misled them into
believing that the only way to travel was by plane and so they were fooled
into buying expensive plane tickets.

Continental Airlines refused to refund the amount of the tickets and so the
spouses sued the airline company. In its defense, Continental Airlines
claimed that the tickets sold to them by Mager were non-refundable; that, if

77
any, they were not bound by the misrepresentations of Mager because
there’s no contract of agency existing between Continental Airlines and
Mager.

The trial court ruled in favor of spouses Viloria but the Court of Appeals
reversed the ruling of the RTC.

ISSUE: WON a contract of agency exists between Continental Airlines and

Mager.

RULING: Yes. All the elements of agency are present, to wit:

a) there is consent, express or implied of the parties to establish the

relationship;
b) the object is the execution of a juridical act in relation to a third
person;
c) the agent acts as a representative and not for himself, and
d) the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not
deny that it concluded an agreement with Holiday Travel to which Mager is
part of, whereby Holiday Travel would enter into contracts of carriage with
third persons on the airlines’ behalf. The third element is also present as it is
undisputed that Holiday Travel merely acted in a representative capacity and
it is Continental Airlines and not Holiday Travel who is bound by the
contracts of carriage entered into by Holiday Travel on its behalf. The fourth
element is also present considering that Continental Airlines has not made
any allegation that Holiday Travel exceeded the authority that was granted
to it.

Continental Airlines also never questioned the validity of the transaction

between Mager and the spouses. Continental Airlines is therefore in
estoppel. Continental Airlines cannot be allowed to take an altogether
different position and deny that Holiday Travel is its agent without condoning
or giving imprimatur to whatever damage or prejudice that may result from
such denial or retraction to Spouses Viloria, who relied on good faith on
Continental Airlines’ acts in recognition of Holiday Travel’s authority.
Estoppel is primarily based on the doctrine of good faith and the avoidance
of harm that will befall an innocent party due to its injurious reliance, the
failure to apply it in this case would result in gross travesty of justice.

Orbeta v. Sendiong, G.R. No. 155236, [July 8, 2005], 501 PHIL 478-498

FACTS: Maximo Orbeta sold to the spouses Juan Sendiong and Exequila
Castellanes a parcel of land, with all the improvements existing thereon.
Thereafter, a complaint for for recovery of possession, quieting of title and

78
damages, with a prayer for the issuance of a writ of preliminary injunction
was filed by the heirs of Orbeta.

In the course of the proceedings, the trial court declared null and void the
sale made by Maximo Orbeta with respect to the conjugal share of his
spouse, and ordered the spouses Pretzylou and Genosa Sendiong to restore
to petitioners the title to and possession of their respective shares in the
subject land.

The respondent, represented by his attorney-in-fact and daughter Mae A.

Sendiong, filed a Petition for Annulment of Decision with a Prayer for a
Temporary Restraining Order and Writ of Preliminary Injunction with the
Court of Appeals. Before the Court of Appeals, petitioners argued that the
petition for annulment of judgment was fatally infirm as the certification on
non-forum shopping was signed by the attorney-in-fact by virtue of a
General Power of Attorney. Despite the argument of the petitioner, the Court
of Appeals granted the petition of the respondent.

The petitioners herein assail the validity of the decision of the Court of
Appeals in granting a petition for the annulment of a judgment rendered by
a Dumaguete City Regional Trial Court (RTC).

ISSUE: Whether the attorney-in-fact had the power to sign the verification
and certification? - YES

RULING: The Court ruled that the agent's signing therein of the verification
and certification is already covered by the provisions of the general power of
attorney issued by the principal.

Petitioners assert that respondent submitted a "false certification" on non-

forum shopping, primarily on the ground that the said certification was
signed not by respondent, but by his daughter, Mae Sendiong, by authority
of a General Power of Attorney, which petitioners claim was not specified for
the purpose of filing the petition. However, a perusal of the General Power
of Attorney shows that Mae Sendiong is empowered, among others, "to
execute, sign, authenticate, and enter into any and all contracts and
agreements for me and in my name with any person or entity," and "to bring
suit, defend and enter into compromises in my name and stead, in
connection with actions brought for or against me, of whatever nature and
kind."

The signing of the verification and certification of non-forum shopping are

covered under the said provisions of the General Power of Attorney. A
special power of attorney simply refers to a clear mandate specifically
authorizing the performance of a specific power and of express acts
subsumed therein, and there is a specific authority given to Mae Sendiong
to sign her name in behalf of Paul Sendiong in contracts and agreements
and to institute suits in behalf of her father. Neither would the fact that
the document is captioned "General Power of Attorney" militate against
its construction as granting specific powers to the agent pertaining to the
petition for annulment of judgment she instituted in behalf of her father.
79
 As Justice Paras has noted, a general power of attorney may include a
special power if such special power is mentioned or referred to in the
general power.

DOMINION INSURANCE CORP. V. COURT OF APPEALS, G.R. NO. 129919,

[FEBRUARY 6, 2002], 426 PHIL 620-631

FACTS: Rodolfo Guevarra instituted a civil case for the recovery of a sum
of money against Dominion Insurance. He sought to recover P156,473.90,
which he claimed to have advanced in his capacity as manager of Dominion
to satisfy claims filed by Dominion’s clients. Dominion denied any liability to
Guevarra and asserted a counterclaim for premiums allegedly unremitted by
the latter.

The pre-trial conference never pushed through despite being scheduled and
postponed nine times over the course of six months. Finally, the case was
called again for pre-trial and Dominion and counsel failed to show up. The
trial court declared Dominion in default and denied any reconsideration.

On the merits of the case, the RTC ruled that Dominion was to pay Guevarra
the P156,473.90 claimed as the total amount advanced by the latter in the
payment of the claims of Dominion’s clients. The CA affirmed.

ISSUES: 1.WON Guevarra acted within his authority as agent for Dominion.

2. WON Guevarra is entitled to reimbursement of amounts.

RULING: NO. A perusal of the “Special Power of Attorney” would show that
Dominion and Guevarra intended to enter into a principal-agent relationship.
Despite the word “special,” the contents of the document reveal that what
was constituted was a general agency. The agency comprises all the
business of the principal, but, couched in general terms, is limited only to
acts of administration. A general power permits the agent to do all acts for
which the law does not require a special power.

Art. 1878 enumerates the instances when a special power of attorney is

required, including (1) to make such payments as are not usually considered
as acts of administration; (15) any other act of strict dominion.

The payment of claims is not an act of administration. The settlement of

claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein.
A special power of attorney would have been required before Guevarra could
settle the insurance claims of the insured.

80
Guevarra’s authority to settle claims is embodied in the Memorandum of
Management Agreement which enumerated the scope of Guevarra’s duties
and responsibilities. However, the Memorandum showed the instruction of
Dominion that payment of claims shall come from a revolving fund. Having
deviated from the instructions of the principal, the expenses that Guevarra
incurred in the settlement of the claims of the insured may not be
reimbursed from Dominion.

2. YES. However, while the law on agency prohibits Guevarra from

obtaining reimbursement, his right to recovery may still be justified under
the general law on Obligations and Contracts, particularly, Art. 1236. (Art.
1236. The creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there is
a stipulation to the contrary)

In this case, when the risk insured against occurred, Dominion’s liability as
insurer arose. This obligation was extinguished when Guevarra paid such
claims. Thus, to the extent that the obligation of Dominion had been
extinguished, Guevarra may demand reimbursement from his principal. To
rule otherwise would result in unjust enrichment of Dominion.

Dominion is ordered to pay Guevarra P112,6762.11, representing the

total amount advanced by the latter in the payment of the claims of the
former’s clients, minus the amount in the revolving fund and the
outstanding balance and remittance.

Tuazon v. Heirs of Ramos, G.R. No. 156262, [July 14, 2005], 501 PHIL
695-704

FACTS: The case involves the collection of a sum of money which arose
from the bouncing check issued by one Evangeline Santos, indorsed by the
spouses Leonilo and Maria Tuazon in payment of the remaining unpaid 3,889
cavans amounting to P1,211,919.00. Despite demand from the heirs of
Ramos, spouses Tuazon failed to pay and instead claimed that they are
merely acting as agents and should not be held liable.

Further, spouses Tuazon instituted a civil case against Evangeline Santos for
collection of the amounts represented by the unfunded checks, in a separate
civil case which they now sought to be consolidated with the instant case.

ISSUE: WON the spouses Tuazon are agents of Ramos.

RULING: No. In a contract of agency, one binds oneself to render some

service or to do something in representation or on behalf of another, with
the latters consent or authority. The following are the elements of agency:
(1) the parties consent, express or implied, to establish the relationship; (2)
the object, which is the execution of a juridical act in relation to a third
81
person; (3) the representation, by which the one who acts as an agent does
so, not for oneself, but as a representative; (4) the limitation that the agent
acts within the scope of his or her authority. 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 principals
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.

This Court finds no reversible error in the findings of the courts a quo that
petitioners were the rice buyers themselves; they were not mere agents of
respondents in their rice dealership. The question of whether a contract is
one of sale or of agency depends on the intention of the parties.

The declarations of agents alone are generally insufficient to establish the

fact or extent of their authority. The law makes no presumption of agency;
proving its existence, nature and extent is incumbent upon the person
alleging it. In the present case, petitioners raise the fact of agency as an
affirmative defense, yet fail to prove its existence.

The Court notes that petitioners, on their own behalf, sued Evangeline
Santos for collection of the amounts represented by the bounced checks, in
a separate civil case that they sought to be consolidated with the current
one. If, as they claim, they were mere agents of respondents, petitioners
should have brought the suit against Santos for and on behalf of their
alleged principal, in accordance with Section 2 of Rule 3 of the Rules on Civil
Procedure. Their filing a suit against her in their own names negates their
claim that they acted as mere agents in selling the rice obtained from
Bartolome Ramos.

Siy v. Tomlin, G.R. No. 205998, [April 24, 2017], 809 PHIL 262-278

FACTS: In July, 2011, William Anghian Siy filed before the RTC of Quezon
City a Complaint for Recovery of Possession with Prayer for Replevin against
Frankie Domanog Ong, Chris Centeno, John Co Chua, and Alvin Tomlin.

In his Complaint, he alleged that he is the owner of a 2007 model Range

Rover (Plate Number ZMG 272) which he purchased from Alberto Lopez III
(Lopez) on July 22, 2009. In 2010, he entrusted the said vehicle to Ong, a
businessman who owned a second-hand car sales showroom (“Motortrend”)
after the latter claimed that he had a prospective buyer therefor. Ong failed
to remit the proceeds of the purported sale nor return the vehicle; that Siy
later found out that the vehicle had been transferred to Chua; that in
December, 2010, he filed a complaint before the Quezon City Police District’s

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Anti-Camapping Section; that Ong, upon learning of the complaint, met with
petitioner to arrange the return of the vehicle.

RTC issued the writ of replevin after posting a bond of 8 million.

Tomlin filed an Omnibus Motion seeking to quash the Writ of Replevin,

dismiss the Complaint, and turn over or return the vehicle to him. He
claimed that he is the lawful and registered owner of the subject vehicle,
having bought the same and caused registration thereof in his name on
March 7, 2011 and that the implementation of the writ was attended by
procedural irregularities.

RTC Denied the Motion so Respondent filed a Petition for Certiorari

CA Granted the Petition.

Siy retorts that the Petition is grounded on questions of law; that even
though Tomlin was able to register the vehicle in his name, he is nonetheless
a buyer and possessor in bad faith, and thus, the transfer of ownership over
the subject vehicle in his favor is illegal.

Tomlin essentially counters that petitioner failed to show that he is the

owner of the vehicle or that he is entitled to its possession.

ISSUE: WON Ong is still the owner or clearly entitled to the possession
of the object sought to be recovered.

RULING: NO. In many cases as well, busy vehicle owners selling their
vehicles actually leave them, together with all the documents of title, spare
keys, and deeds of sale signed in blank, with second-hand car traders they
know and trust, in order for the latter to display these vehicles for actual
viewing and inspection by prospective buyers at their lots, warehouses,
garages, or showrooms, and to enable the traders to facilitate sales on-the-
spot, as-is-where-is, without having to inconvenience the owners with
random viewings and inspections of their vehicles.

For this kind of arrangement, an agency relationship is created between the

vehicle owners, as principals, and the car traders, as agents. The agent
takes payment under the obligation to remit the same, minus the agreed
commission or other compensation.

Siy constituted and appointed Ong as his agent to sell the vehicle,
surrendering to the latter the vehicle, all documents of title pertaining
thereto, and a deed of sale signed in blank, with full understanding that Ong
would offer and sell the same to his clients or to the public. In return, Ong
accepted the agency by his receipt of the vehicle, the blank deed of sale,
and documents of title, and when he gave bond in the form of two guarantee
checks worth ₱4.95 million. All these gave Ong the authority to act for and in
behalf of petitioner.

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Under the Civil Code on agency, Art. 1869. Agency may be express, or
implied from the acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.

Agency may be oral, unless the law requires a specific form.

Art. 1870. Acceptance by the agent may also be express or implied from his
acts which carry out the agency, or from his silence or inaction according to
the circumstances.

"The basis of agency is representation and the same may be constituted

expressly or impliedly. In an implied agency, the principal can be bound by
the acts of the implied agent. " The same is true with an oral agency.

Acting for and in Siy's behalf by virtue of the implied or oral agency, Ong
was thus able to sell the vehicle to Chua, but he failed to remit the proceeds
thereof to Siy; his guarantee checks bounced as well. This entitled petitioner
to sue for estafa through abuse of confidence. This is exactly what petitioner
did: on May 18, 2011, he filed a complaint for estafa and carnapping against
Ong before the Quezon City Prosecutor's Office.

Since Ong was able to sell the subject vehicle to Chua, petitioner thus
ceased to be the owner thereof. Nor is he entitled to the possession of the
vehicle; together with his ownership, petitioner lost his right of possession
over the vehicle.

Considering that he was no longer the owner or rightful possessor of the

subject vehicle at the time he filed Civil Case No. Q-11-69644 in July, 2011,
petitioner may not seek a return of the same through replevin. Quite the
contrary, respondent, who obtained the vehicle from Chua and registered
the transfer with the Land Transportation Office, is the rightful owner
thereof, and as such, he is entitled to its possession.

Medrano v. Court of Appeals, G.R. No. 150678, [February 18, 2005], 492
PHIL 222-237

FACTS: Bienvenido Medrano was the Vice-Chairman of Ibaan Rural Bank. He

asked Mrs. Estela Flor (a cousin), to look for a buyer of a foreclosed asset of
the bank (17-hectare mango plantation with 720 trees priced at P2.2M).

Dominador Lee, a Makati businessman was a client of Pacita Borbon, a

licensed real estate broker. Borbon relayed to her business associates and
friends that she had a ready buyer for a mango orchard. Flor then advised
her that her cousin-in-law owned a mango plantation which was up for sale.
She told Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property. Medrano issued the Letter of Authority to

84
Borbon and Antonio to negotiate with any prospective buyer for the sale of
the mango plantation. He promised Borbon to pay a commission of 5% of
the total purchase price to be agreed upon by the buyer and seller.

An ocular inspection was held by Lee. Lee informed Antonio that he already
purchased the property and had made a down payment ofP1M. The
remaining balance of P1.2M was to be paid upon the approval of the
incorporation papers of the corporation he was organizing by the SEC.

According to Antonio, Lee asked her if they had already received their
commission. She answered "no," and Lee expressed surprise over this. Since
the sale of the property was consummated, the respondents asked from the
petitioners their commission, or 5% of the purchase price. The petitioners
refused to pay and offered a measly sum of P5,000.00 each. Hence, the
present action.

Medrano’s defense: Borbon and Antonio did not perform any act to
consummate the sale. The petitioners pointed out that the respondents (1)
did not verify the real owner of the property; (2) never saw the property in
question; (3) never got in touch with the registered owner of the property;
and (4) neither did they perform any act of assisting their buyer in having
the property inspected and verified.

The CA promulgated the assailed decision affirming the finding of the trial
court that the letter of authority was valid and binding. Applying the
principle of agency, the appellate court ruled that Bienvenido Medrano
constituted the respondents as his agents, granting them authority to
represent and act on behalf of the former in the sale of the 17-hectare
mango plantation. The CA also ruled that the trial court did not err in finding
that the respondents were the procuring cause of the sale. Suffice it to state
that were it not for the respondents, Lee would not have known that there
was a mango orchard offered for sale.

ISSUE: WON the plaintiffs are entitled to any commission for the sale of the
subject property?

RULING: YES. The respondents are indeed the procuring cause of the sale.
If not for the respondents, Lee would not have known about the mango
plantation being sold by the petitioners. The sale was consummated. The
bank had profited from such transaction. It would certainly be iniquitous if
the respondents would not be rewarded their commission pursuant to the
letter of authority.

“Procuring cause” = the proximate cause. The term "procuring cause," in

describing a broker’s activity, refers to a cause originating a series of events
which, without break in their continuity, result in accomplishment of prime
objective of the employment of the broker – producing a purchaser ready,
willing and able to buy real estate on the owner’s terms. The evidence on
record shows that the respondents were instrumental in the sale of the
property to Lee. Without their intervention, no sale could have been

85
consummated. They were the ones who set the sale of the subject land in
motion. While the letter-authority issued in favor of the respondents was
non-exclusive, no evidence was adduced to show that there were other
persons, aside from the respondents, who informed Lee about the property
for sale. When there is a close, proximate and causal connection between
the broker’s efforts and the principal’s sale of his property, the broker is
entitled to a commission. In the absence of fraud, irregularity or illegality in
its execution, such letter-authority serves as a contract, and is considered as
the law between the parties. The clear intention is to reward the respondents
for procuring a buyer for the property.

Bacaling v. Muya, G.R. Nos. 148404-05, [April 11, 2002], 430 PHIL 531-
554

FACTS: Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were
the owners of three (3) parcels of land in Iloilo City. In 1955 the landholding
was subdivided into one hundred ten (110) sub-lots covered and was
processed and approved as "residential" or "subdivision" by the National
Urban Planning Commission (NUPC). On May 24, 1955 the Bureau of Lands
approved the corresponding subdivision plan for purposes of developing the
said property into a low-cost residential community which the spouses
referred to as the Bacaling-Moreno Subdivision.

In 1957, a real estate was granted to the spouses Bacaling by the

Government Service Insurance System (GSIS) for the development of the
subdivision secured by a real estate mortgage over their parcels of land
including the 110 sub-lots. The Bacalings failed to pay and the mortgage was
foreclosed by the GSIS. Nelita Bacaling in 1989 was able to restore to herself
ownership of the sub-lots. According to the findings of the Office of the
President, in 1972 and thereafter, respondents Felomino Muya, Crispin
Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante clandestinely
entered and occupied the entire one hundred ten (110) sub-lots and sowed
the lots as if the same were their own, and altered the roads, drainage,
boundaries and monuments established thereon. Respondents, on the other
hand, claim that in 1964 they were legally instituted by Bacaling's
administrator/overseer as tenant-tillers of the subject parcels of land on
sharing basis. In 1974, their relationship with the landowner was changed to
one of leasehold. They religiously delivered their rental payments to Bacaling
as agricultural lessor. In 1980, they secured certificates of land transfer in
their names for the 110 sub-lots. They have made various payments to the
Land Bank of the Philippines as amortizing owners-cultivators of their
respective tillage.

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In 1977, the City Council of Iloilo enacted Zoning Ordinance No. 212
declaring the one hundred ten (110) sub-lots as "residential" and
"nonagricultural," which was consistent with the conversion effected in 1955
by the NUPC and the Bureau of Lands. In 1978, Nelita Bacaling was able to
register the subject property as the Bacaling-Moreno Subdivision with the
National Housing Authority and to obtain therefrom a license to sell the
subject 110 sub-lots comprising the said subdivision to consummate the
original and abiding design to develop a low-cost residential community. In
August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and
Victoria Siady, bought from Nelita Bacaling the subject 110 sub- lots. The
said sale was effected after Bacaling has repurchased the subject property
from the GSIS. To secure performance of the contract of absolute sale and
facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling
appointed him in 1992 as her attorney-in-fact, under an irrevocable special
power of attorney.

Following the sale, petitioner Tong (together with Bacaling) filed an action
against respondents for allegedly entering and occupying the lots.
Respondents in their answer alleged that they were instituted as tenant-
tillers before the property was subdivided into 110 sub-lots and that they
have in their possession certificates of land transfer. The DAR dismissed the
petition on the ground that there had been no legitimate conversion of the
classification of the 110 sub-lots from agricultural to residential prior to
October 21, 1972 when Operation Land Transfer under P.D. No. 72 took
effect. Bacaling and Tong appealed to the DAR Central Office but their
appeal was similarly rejected. Bacaling and Tong appealed to the Office of
the President (OP) which reversed them in toto. The order of the Regional
Director, DAR Region VI, as well as the orders of the DAR Secretary were
REVERSED AND SET ASIDE and subject landholdings declared exempt from
coverage of the CARL. The Certificates of Land Transfer (CLTs) issued to the
appellees are hereby cancelled. Respondents elevated the OP Decision to the
Court of Appeals on a petition for review. During the pendency of the appeal
with the Court of Appeals, Bacaling revoked the special power of attorney
and admitted the status of respondents as her tenants. The appellate court,
without ruling on the lack of material interest in the case, reversed the OP
Decision and validated the certificates of land transfer of respondents.
Motion for its reconsideration was denied. Hence this petition for review on
certiorari. After 10 years, petitioner Nelita Bacaling resurrected her
manifestation with the Court of Appeals and moved to withdraw/dismiss the
present petition on the ground that the irrevocable power of attorney in
favor of petitioner Jose Juan Tong had been nullified by her, that Tong
lacked the authority to appear before this Court and that respondents were
tenants of the one hundred ten (110) sub-lots which were allegedly
agricultural and not residential pieces of realty.

ISSUE: Does petitioner Tong have the requisite interest to litigate this
petition for review on certiorari?

87
RULING: Yes, there should be no doubt that as transferee through a
contract of sale and as the attorney-in-fact of Nelita Bacaling under an
irrevocable special power of attorney, petitioner Tong stands to be benefited
or injured by the judgment in the instant case as well as the orders and
decisions in the proceedings a quo. The deed of sale states that petitioner
Tong and his co-sellers have fully paid for the subject parcels of land. The
said payment has been duly received by Bacaling.

When a party adopts a certain theory in the court below, he will not be
permitted to change his theory on appeal, for to permit him to do so would
not only be unfair to the other party but it would also be offensive to the
basic rules of fair play, justice and due process.

Bacaling cannot revoke at will the irrevocable special power of attorney

which she had duly executed in favor of petitioner Jose Juan Tong and duly
acknowledged before a notary public.

The agency is one coupled with interest which is explicitly irrevocable since
the deed of agency was prepared and signed and/or accepted by petitioner
Tong and Bacaling with a view to completing the performance of the contract
of sale of the 110 sub-lots. It is for this reason that the mandate of the
agency constituted Tong as the real party-in-interest to remove all clouds on
the title of Bacaling and to effect the transfer of the aforesaid lots in the
name of the vendees. The fiduciary relationship inherent in ordinary
contracts of agency is replaced by material consideration which in the type
of agency herein established bars the removal or dismissal of petitioner Tong
as Bacaling's attorney-in-fact on the ground of alleged fraud in the
performance of the contract of agency. Bacaling cannot vest in herself just
like in ordinary contracts the unilateral authority of determining the
existence and gravity of grounds to justify the rescission of the irrevocable
special power of attorney.

The reason is that it is one coupled with an interest, the agency having been
created for the mutual interest of the agent and the principal.

Wheelers Club International, Inc. v. Bonifacio, G.R. No. 139540, [June 29,
2005], 500 PHIL 497-513

FACTS: Rosario, Romeo, Virgilio, Generoso, Andres, Jovito, Jose (all

surnamed Bonifacio), Zenaida B. Lafiguera, Corazon B. Calub, and Ma.
Cristina B. De Guzman are the registered co-owners of a parcel of land with
improvement. The co-owners comprised the Board of Directors of J & R
Bonifacio Development Corporation (JRBDC).

88
 Bonifacio Development Associates, Inc. (BDAI), represented by Jaime C.
Bonifacio, Sr. (Jaime) entered into a Contract of Lease with Wheelers for a
term of five years from 1 June 1994 to 31 May 1999.
On 31 May 1994, JRBDC entered into a Lease Development Agreement
with BDAI. Under the Lease Development Agreement, BDAI was authorized
to renovate, manage, develop, and sublease the Property. The term of the
agreement was also for five years from 31 May 1994 to 31 May 1999.
On the same day, the co-owners (JRBDC) executed a General Power of
Attorney (power of attorney) in favor of Jaime granting him the authority to
administer the Property, renovate the building, introduce improvements and
lease the Property to any person.
On 16 June 1996, the JRBDC demanded that BDAI submit accounting
records of all income from the Property. BDAI, in turn, demanded that the
co-owners furnish it with receipts and records of cash and check advances
made by BDAI to the co-owners.
On 18 August 1996, the co-owners, as directors of JRBDC, approved a
Resolution terminating the authority of Jaime C. Bonifacio to manage and
administer the Property for BDAIs failure to submit an accounting of the
income from the Property.
On 20 August 1996, Rosario Bonifacio (Rosario), wrote Jaime,a letter
terminating the agreement with JRBDC for non-payment of whatever was
due to JRBDC under the agreement.
On 26 January 1997, the co-owners as members of the Board of
Directors of JRBDC approved a Resolution appointing Jovito as the new
administrator of the Property. Rosario wrote a letter informing Wheelers
about the appointment and the termination of Jaimes authority to manage
the Property.
On 11 February 1997, BDAI, through Jaime, wrote a letter to Rosario
insisting that there was no valid reason for the termination of BDAI or
Jaimes management of the Property. BDAI claimed that Rosarios failure to
furnish receipts hindered its submission of complete accounting records.
On 4 March 1997, Jovito wrote to Wheelers claiming that the co-owners
did not authorize the Contract of Lease between BDAI and Wheelers. Jovito
gave Wheelers ten days to vacate the Property.
Meanwhile, Wheelers continued to pay BDAI the monthly rentals from
February to September 1997.
On 9 October 1997, Jovito and the other co-owners, through counsel,
sent a letter to Wheelers demanding payment of rentals in arrears from
February to October 1997. The letter also demanded that Wheelers vacate
the Property within five days from receipt of the letter.
On 21 October 1997, Jovito, as a co-owner of the Property, filed with the
MTC a complaint for unlawful detainer against Wheelers, docketed as Civil
Case No. 15760.
Jovito claimed that Wheelers refused to pay him, as the new
administrator of the Property, the rentals due from February to October
1997.

89
In its Answer dated 19 November 1997, Wheelers countered that it paid to
BDAI the rentals from February to September 1997. Wheelers, however,
held in abeyance payment of the rental for October 1997 because of Jovitos
demand letter and Wheelers plan to consign the rental in Court.

ISSSUE: 1. WON the co-owners have a cause of action for unlawful detainer
against wheelers for non-payment of rentals and expiration of the term of
the lease agreement.

2. WON BDAI is an agent of the co-owners

RULING:
1. YES. In unlawful detainer, the possession of the defendant is
inceptively lawful but it becomes illegal because of the termination of his
right to possess the property under his contract with the plaintiff. [27]
Hence, by instituting the unlawful detainer action, Jovito and the other
co-owners admit that Wheelers possession of the Property was lawful at the
beginning. In other words, Jovito and the other co-owners recognize the
legality of Wheelers occupation of the Property beginning 1 June 1994 by
virtue of the Contract of Lease it had with BDAI. In the absence of any proof
to the contrary, such recognition necessarily debunks Jovitos claim that the
co-owners did not authorize BDAI to lease the Property to Wheelers. This
fact likewise negates Jovitos contention that the Contract of Lease between
BDAI and Wheelers is void and inexistent.
The question now is, when did Wheelers possession of the
Property become without legal basis to justify the complaint for
unlawful detainer?
In his complaint for unlawful detainer, Jovito claimed that Wheelers
disregarded its obligation to pay rentals to the co-owners from February to
October 1997. However, Wheelers obligation to pay the rentals arose from
its Contract of Lease with BDAI. Wheelers did not have a separate lease
agreement with Jovito or the other co-owners. Wheelers continued
possession of the Property was by virtue of the Contract of Lease it executed
with BDAI. There is no privity of contract between Wheelers and Jovito or
the other co-owners. Since there was neither a written nor verbal lease
agreement between the co-owners and Wheelers, Jovito is mistaken in
claiming that the lease contract between the co-owners and Wheelers is on a
month-to-month basis.
What is clear from the records is that the present case involves a
sublease arrangement. In a sublease arrangement, there are two distinct
leases: the principal lease and the sublease. These two juridical relationships
co-exist and are intimately related to each other but nonetheless distinct
from one another. The lessees rights and obligations vis--vis the lessor are
not passed on to the sublessee.
A careful review of the Lease Development Agreement between JRBDC
and BDAI reveals that the co-owners are the actual lessors of the Property,
not JRBDC. In addition, the co-owners are the registered owners of Property.
BDAI, in turn, subleased the Property to Wheelers. Therefore, the co-
owners, except only in the instances specified in the Civil Code, are
strangers to the Contract of Lease between BDAI and Wheelers.

90
 Since the co-owners are strangers to the Contract of Lease between
BDAI and Wheelers, Wheelers has no right or authority to pay the sublease
rentals to the co-owners as lessors since the rentals are payable to BDAI as
lessee-sublessor. Wheelers was, therefore, under no obligation to pay Jovito
or the co-owners the rentals.
Moreover, although Article 1652 of the Civil Code permits the lessor to
proceed against the sublessee for rent due from the lessee, this is only on
a subsidiary liability basis. There must be a judgment cancelling the lessees
principal lease contract or ousting the lessee from the premises before the
sub-lessee becomes subsidiarily liable.
The sub-lessee is not liable to the lessor under Article 1652 upon mere
demand by the lessor on the sub-lessee. The sub-lessee is primarily liable to
his sub-lessor and only a court order can extinguish or modify this primary
liability if the sub-lessor contests the pre-termination of the principal lease
by the lessor. In the present case, there is no judgment cancelling BDAIs
Lease Development Contract or ousting BDAI from the Property.

2. NO, because a sub-lessor is not an agent of the lessor.[34] Hence,

BDAI is not an agent of the co-owners.
HOWEVER, even assuming that BDAI is an agent of the co-owners, BDAI
would have an interest in such agency sufficient to deprive the co-owners
the power to revoke the agency at will.
Under the Lease Development Agreement, BDAI had the authority to
construct, and BDAI did construct, improvements on the Property at its
expense. The Court of Appeals found that BDAI was also the developer of
the vacant space of the parcel of land for the construction of permanent
improvements thereon at the cost of BDAI.
As developer of the permanent improvement on the Property, BDAI has
an interest in the Property that is the subject matter of the agency,
assuming such agency exists. An agency coupled with interest is not
revocable at the will of the principal.
In Sevilla v. Court of Appeals, this Court held:

But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an interest, the agency having
been created for the mutual interest of the agent and the principal.

Thus, the Court of Appeals erred in holding that the co-owners had the
right to revoke at will their Lease Development Agreement with BDAI.
There is no showing that BDAI and Jaime comprise a single entity. The
parties in this case confused Jaime with BDAI and erroneously considered
Jaimes acts as those of BDAIs. Following well-settled principles in
Corporation Law, Jaime and BDAI are distinct persons. Since Jaime acted as
the President of BDAI when the latter entered into the Contract of Lease with
Wheelers, such contract is binding between BDAI and Wheelers.
Consequently, the revocation by the co-owners of Jaimes authority to
administer the Property did not automatically cancel or terminate the
Contract of Lease between BDAI and Wheelers.

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 In sum, the Lease Development Agreement between the co-owners and
BDAI, and the Contract of Lease between BDAI and Wheelers, remain valid,
in the absence of any judicial declaration of their nullity. Jovito and the other
co-owners cannot merely assume and allege that these agreements are
void.
The Contract of Lease between BDAI and Wheelers had a term running
from 1 June 1994 to 31 May 1999. This term is within the five-year period of
BDAIs Lease Development Agreement with the co-owners. Jovito filed the
unlawful detainer case against Wheelers on 21 October 1997. Clearly, the
Contract of Lease between BDAI and Wheelers was still valid and subsisting
when Jovito filed the unlawful detainer case. Thus, at the time of filing of the
unlawful detainer complaint, Jovito and the other co-owners did not have a
cause of action to eject Wheelers from the Property.
As things stand, BDAI is the sub-lessor of the Property. BDAIs sub-lease
agreement with Wheelers is within the five-year term of BDAIs principal
lease with the co-owners. Until the expiration of the five-year term of BDAIs
principal lease, the sub-lease agreement between BDAI and Wheeler
remains valid, unless the sub-lease agreement is judicially annulled in the
proper case, or unless there is a judgment cancelling BDAIs principal lease
with the co-owners or ousting BDAI from the Property. Moreover, no lease
agreement exists between the co-owners and Wheelers. Therefore, Jovitos
claim that the term of the alleged lease agreement between the co-owners
and Wheelers has expired has no legal basis.

Lim v. Saban, G.R. No. 163720, [December 16, 2004], 488 PHIL 236-249

FACTS: Under an Agency Agreement, Ybañez authorized Saban to look for a

buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and to
mark up the selling price to include the amounts needed for payment of
taxes, transfer of title and other expenses incident to the sale, as well as
Saban's commission for the sale.

Through Saban's efforts, Ybañez and his wife were able to sell the lot to the
petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim
(the Spouses Lim) on March 10, 1994. The price of the lot as indicated in the
Deed of Absolute Sale is Two Hundred Thousand Pesos (P200,000.00). It
appears, however, that the vendees agreed to purchase the lot at the price
of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other
incidental expenses of the sale.

After the sale, Lim remitted to Saban the amounts of P113,257 for payment
of taxes due on the transaction as well as P50,000.00 as broker's
commission. Lim also issued in the name of Saban four postdated checks in
the aggregate amount of P236,743.00. Subsequently, Ybañez sent a letter
dated June 10, 1994 addressed to Lim. In the letter Ybañez asked Lim to
cancel all the checks issued by her in Saban's favor and to "extend another
partial payment" for the lot in his (Ybañez's) favor.

92
After the four checks in his favor were dishonored upon presentment, Saban
filed a complaint for collection of sum of money and damages against Ybañez
and Lim Saban alleged that Ybañez told Lim that he (Saban) was not entitled
to any commission for the sale since he concealed the actual selling price of
the lot from Ybañez and because he was not a licensed real estate broker.
Ybañez was able to convince Lim to cancel all four checks. In his Answer,
Ybañez claimed that Saban was not entitled to any commission because he
concealed the actual selling price from him and because he was not a
licensed real estate broker.

ISSUE: WON Saban is entitled to receive his commission from the sale

RULING: Yes, Saban is entitled to receive his commission from the sale.

The Supreme Court held that to deprive Saban of his commission

subsequent to the sale which was consummated through his efforts would be
a breach of his contract of agency with Ybañez which expressly states that
Saban would be entitled to any excess in the purchase price after deducting
the P200,000.00 due to Ybañez and the transfer taxes and other incidental
expenses of the sale.

Moreover, the Court has already decided in earlier cases that would
be in the height of injustice to permit the principal to terminate the contract
of agency to the prejudice of the broker when he had already reaped the
benefits of the broker's efforts.

Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp., G.R. No.

179446, [January 10, 2011], 654 PHIL 67-82

FACTS: On August 28, 2001, R&B Insurance issued an insurance policy in

favor of Columbia to insure the shipment of 132 bundles of electric copper
cathodes against All Risks. The cargoes were shipped on board the vessel
“Richard Rey” from Isabela, Leyte, to Pier 10, North Harbor, Manila. They
arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of
the cargoes from the pier and the subsequent delivery to its
warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for
the use of its delivery trucks to transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck

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helpers. Six (6) truckloads of copper cathodes were to be delivered to
Balagtas, Bulacan, while the other six (6) truckloads were destined for
Lawang Bato, Valenzuela City.

Of the six (6) trucks en route to Balagtas, Bulacan, however, only five (5)
reached the destination. One (1) truck, loaded with 11 bundles or 232
pieces of copper cathodes, failed to deliver its cargo. This missing truck was
evetually recovered but without the copper cathodes

This prompted Columbia to file with R&B Insurance a claim for insurance
indemnity in the amount of P1,903,335.39. Columbia paid P1,896,789.62.

R&B Insurance, thereafter, filed a complaint for damages against both

Loadmasters and Glodel before the Regional Trial Court. It sought
reimbursement of the amount it had paid to Columbia for the loss of the
subject cargo. It claimed that it had been subrogated “to the right of the
consignee to recover from the party/parties who may be held legally liable
for the loss.”

Loadmasters argues that it cannot be considered an agent of Glodel because

it never represented the latter in its dealings with the consignee.

Glodel argues that its relationship with Loadmasters is that of Charter

wherein the transporter (Loadmasters) is only hired for the specific job of
delivering the merchandise. Thus, the diligence required in this case is
merely ordinary diligence or that of a good father of the family, not the
extraordinary diligence required of common carriers.

R&B Insurance argues, finally, that as to the relationship between

Loadmasters and Glodel, it contends that a contract of agency existed
between the two corporations

ISSUE: WON loadmaster was an agent of Glodel

RULING: No, it was not. Article 1868 of the Civil Code provides: “By the
contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or
authority of the latter.”

The elements of a contract of agency are: (1) 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; (4) the agent acts within the scope of his
authority.

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In the case at bar, it is clear that there was no contract of agency between
the parties. Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation.

It is a settled rule that the basis for agency is representation, that is, the
agent acts for and on behalf of the principal on matters within the scope of
his authority and said acts have the same legal effect as if they were
personally executed by the principal. On the part of the principal, there
must be an actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it. Such mutual intent is not
obtaining in this case.

Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288, [January 16,
2012], 679 PHIL 61-97

FACTS: In 1997, while the spouses Viloria were in the United States, they
approached Holiday Travel, a travel agency working for Continental Airlines,
to purchase tickets from Newark to San Diego. The travel agent, Margaret
Mager, advised the couple that they cannot travel by train because it was
already fully booked; that they must purchase plane tickets for Continental
Airlines; that if they won’t purchase plane tickets; they’ll never reach their
destination in time. The couple believed Mager’s representations and so they
purchased two plane tickets worth $800.00.

Later however, the spouses found out that the train trip wasn’t really fully
booked and so they purchased train tickets and went to their destination by
train instead. Then they called up Mager to request for a refund for the plane
tickets. Mager referred the couple to Continental Airlines. As the couple were
now in the Philippines, they filed their request with Continental Airline’s
office in Ayala. The spouses Viloria alleged that Mager misled them into
believing that the only way to travel was by plane and so they were fooled
into buying expensive plane tickets.

Continental Airlines refused to refund the amount of the tickets and so the
spouses sued the airline company. In its defense, Continental Airlines
claimed that the tickets sold to them by Mager were non-refundable; that, if
any, they were not bound by the misrepresentations of Mager because
there’s no contract of agency existing between Continental Airlines and
Mager.

The trial court ruled in favor of spouses Viloria but the Court of Appeals
reversed the ruling of the RTC.

ISSUE: Whether or not a contract of agency exists between Continental

Airlines and Mager.

RULING: Yes. All the elements of agency are present, to wit:

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a. There is consent, express or implied of the parties to establish the
relationship;
b. The object is the execution of a juridical act in relation to a third person;
c. The agent acts as a representative and not for himself, and
d. The agent acts within the scope of his authority.

Agency is basically personal, representative, and derivative in nature. The

authority of the agent to act emanates from the powers granted to him by
his principal; his act is the act of the principal if done within the scope of the
authority. Qui facit per alium facit se. "He who acts through another acts
himself.

The first and second elements are present as Continental Airlines does not
deny that it concluded an agreement with Holiday Travel to which Mager is
part of, whereby Holiday Travel would enter into contracts of carriage with
third persons on the airlines’ behalf. The third element is also present as it is
undisputed that Holiday Travel merely acted in a representative capacity and
it is Continental Airlines and not Holiday Travel who is bound by the
contracts of carriage entered into by Holiday Travel on its behalf. The fourth
element is also present considering that Continental Airlines has not made
any allegation that Holiday Travel exceeded the authority that was granted
to it.

Continental Airlines also never questioned the validity of the transaction

between Mager and the spouses. Continental Airlines is therefore in
estoppel. Continental Airlines cannot be allowed to take an altogether
different position and deny that Holiday Travel is its agent without condoning
or giving imprimatur to whatever damage or prejudice that may result from
such denial or retraction to Spouses Viloria, who relied on good faith on
Continental Airlines’ acts in recognition of Holiday Travel’s authority.
Estoppel is primarily based on the doctrine of good faith and the avoidance
of harm that will befall an innocent party due to its injurious reliance, the
failure to apply it in this case would result in gross travesty of justice.

Victorias Milling Co. v. Court of Appeals, G.R. No. 117356, [June 19, 2000],
389 PHIL 184-199

FACTS: St. Therese Merchandising (STM) regularly bought sugar from

Victoria’s Milling Co. As proof of their dealings, Victoria’s Milling issued
Shipping List/Delivery Receipts to STM. In October 1989, STM bought 25k
bags of sugar, as evidenced by Shipping List/Delivery Receipts # 1214M. All
the sugar was kept in Victoria’s Milling’s warehouse.

Later, STM sold their rights under the Shipping List/Delivery Receipts 1214M
for 14m pesos to private respondent Consolidated Sugar Corporation (CSC).
CSC then wrote to inform Victoria’s Milling that it had been authorized by
STM to withdraw the sugar under the Shipping List/Delivery Receipts 1214M.
Enclosed in the letter was a copy of the said shipping list and the letter of
authority from STM, authorizing CSC to withdraw the sugar for and in behalf
of STM.

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CSC was able to withdraw 2k bags, however VCM refused to release any
more sugar, claiming that STm had withdrawn all the sugar under the
shipping list. CSC then filed an action against Victoria’s Milling and STM for
specific performance.

Victoria’s Milling’s defense: It alleged that STM sold the same rights to
several persons, and that the sugar depleted quickly as a result. Victoria’s
Milling also alleged that these assignees were agents of STM. Victoria’s
Milling alleged that these “agents” were precluded from suing for
enforcement because of estoppel by reason of being an assignee.

The lower court ruled against Victoria’s Milling. The CA affirmed the decision
of the lower court.

ISSUES: 1.WON Consolidated Sugar Corporation was STM’s agent? (No)

2. What is the relationship between Consolidated Sugar and STM? (That of a

vendor/vendee in a contract of sale)

RULING: Main distinction of agency: the element of control.

The basis of agency is representation. One factor which most clearly

distinguishes agency from other legal concepts is control: one person - the
agent- agrees to act under the control or direction of another - the principal.
Indeed, every word “agency” has come to connote control by the principal.
The controlling factor, more than any other, has caused the courts to put
contracts between principals and agents in a separate category.

Agency is not presumed. Here, the relation if agency is dependent upon the
acts of the parties, the law makes no presumption of agency, and it is
always a fact to be proved, with the burden of proof resting on the persons
alleging the agency, to show not only the fact of its existence but also its
nature and extent. The question of whether a contract is one of sale or
agency depends on the intention of the parties gathered from the whole
scope and effect of the language employed. Ultimately, what is decisive is
the intention of the parties.

In the case at bar, there was no agency because:

1. No element of control - Consolidated Sugar was a buyer of the Shipping
List/Delivery Receipts form, an d not an agent of STM. Consolidated Sugar
was not subject to STM’s control.

2. The letter of authority - The phrase “for and in our behalf” should not be
eyed as pointing to the existence of agency. This was also later clarified by
Consolidated Sugar when it informed Victoria’s Milling that the shipping list
was “sold and indorsed” to it.
3. Intent of the parties - the use of the words “sold and endorsed” means
that STM and CSC intended a contract of sale, and not an agency.

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Doles v. Angeles, G.R. No. 149353, [June 26, 2006], 525 PHIL 673-693

FACTS: Petitioner executed a Deed of Absolute Sale ceding a parcel of land

in favor of respondent to satisfy the alleged indebtedness of the former in
the amount of P405,430.00. Since the said land was mortgaged to the
National Home Mortgage Finance Corporation, they further agreed that
respondent assume the remaining balance of the loan. Learning that the
petitioner still has arrearages, respondent demanded that the arrearages be
paid first. Petitioner did not heed, thus a case was filed by the respondent.

In answer, the petitioner alleged that sale was void for lack of consideration
and that she was not indebted to the respondent as she only referred her
friends to respondent whom she knew to be engaged in the business of
lending money in exchange for personal checks through her capitalist
Arsenio Pua. Further, petitioner contended that since the respondent is also
an agent, she does not have the capacity to sue her.

It is an admitted fact by both petitioner and defendant, based on their

testimonies, that respondent knew that the money will be used by the
friends of the petitioner; that the respondent was merely representing
Arsenio Pua; and that before the supposed friends of the petitioner defaulted
in payment, each issued their personal checks in the name of Arsenio Pua
for the payment of their debt.

ISSUE: Whether or not Doles (petitioner)and respondent were acting on

their personal capacities or as mere agents.

RULING: Agents. Respondent is estopped to deny that she herself acted as

agent of a certain Arsenio Pua, her disclosed principal. She is also estopped
to deny that petitioner acted as agent for the alleged debtors, the friends
whom she (petitioner) referred.

This Court has affirmed that, under Article 1868 of the Civil Code, the basis
of agency is representation. The question of whether an agency has been
created is ordinarily a question which may be established in the same way as
any other fact, either by direct or circumstantial evidence. The question is
ultimately one of intention. Agency may even be implied from the words and
conduct of the parties and the circumstances of the particular case. Though
the fact or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one professes to act
as agent for another, she may be estopped to deny her agency both as
against the asserted principal and the third persons interested in the
transaction in which he or she is engaged. In this case, petitioner knew that
the financier of respondent is Pua; and respondent knew that the borrowers
are friends of petitioner.

The CA is incorrect when it considered the fact that the "supposed friends of
[petitioner], the actual borrowers, did not present themselves to
[respondent]" as evidence that negates the agency relationship — it is
sufficient that petitioner disclosed to respondent that the former was acting
in behalf of her principals, her friends whom she referred to respondent. For
an agency to arise, it is not necessary that the principal personally encounter
the third person with whom the agent interacts.

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The law in fact contemplates, and to a great degree, impersonal dealings
where the principal need not personally know or meet the third person with
whom her agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent. In the case at
bar, both petitioner and respondent have undeniably disclosed to each other
that they are representing someone else, and so both of them are estopped
to deny the same.

It is evident from the record that petitioner merely refers actual borrowers
and then collects and disburses the amounts of the loan upon which she
received a commission; and that respondent transacts on behalf of her
"principal financier", a certain Arsenio Pua. If their respective principals do
not actually and personally know each other, such ignorance does not affect
their juridical standing as agents, especially since the very purpose of
agency is to extend the personality of the principal through the facility of the
agent. With respect to the admission of petitioner that she is "re-lending"
the money loaned from respondent to other individuals for profit, it must be
stressed that the manner in which the parties designate the relationship is
not controlling. If an act done by one person in behalf of another is in its
essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called.

The question is to be determined by the fact that one represents and is

acting for another, and if relations exist which will constitute an agency, it
will be an agency whether the parties understood the exact nature of the
relation or not.

That both parties acted as mere agents is shown by the undisputed fact that
the friends of petitioner issued checks in payment of the loan in the name of
Pua. If it is true that petitioner was "re-lending", then the checks should
have been drawn in her name and not directly paid to Pua. With respect to
the second point, particularly, the finding of the CA that the disbursements
and payments for the loan were made through the bank accounts of
petitioner and respondent, suffice it to say that in the normal course of
commercial dealings and for reasons of convenience and practical utility it
can be reasonably expected that the facilities of the agent, such as a bank
account, may be employed, and that a sub-agent be appointed, such as the
bank itself, to carry out the task, especially where there is no stipulation to
the contrary.

Sanchez v. Medicard Philippines, Inc., G.R. No. 141525, [September 2,

2005], 506 PHIL 332-338

FACTS: Medicard Philippines, Inc. (Medicard), respondent, appointed

petitioner as its special corporate agent. As such agent, Medicard gave him a
commission based on the cash brought in.

Through petitioner’s efforts, Medicard and United Laboratories Group of

Companies (Unilab) executed a Health Care Program Contract. Medicard
handed Sanchez his commission.

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Again through petitioner’s initiative, the agency contract between Medicard
and Unilab was renewed for another year. Medicard paid Sanchez his
commission.

Prior to the expiration of the renewed contract, Medicard proposed to Unilab,

through petitioner, an increase of the premium for the next year. Unilab
rejected the proposal for the reason that it was too high, prompting Dr.
Nicanor Montoya (Medicards president and general manager), also a
respondent, to request petitioner to reduce his commission, but the latter
refused.

Unilab confirmed its decision not to renew the health program contract with
Medicard. Meanwhile Unilab negotiated with Dr. Montoya and other officers
of Medicard, to discuss ways in order to continue the insurance coverage of
those personnel. Later Medicard and Unilab agreed on a new scheme.
Medicard did not give petitioner any commission under the new scheme.

Petitioner filed with RTC a complaint for sum of money (as his claim for his
commission on the new scheme) against Medicard, Dr. Nicanor Montoya and
Carlos Ejercito, herein respondents.

RTC – Dismissed
CA – Affirmed RTC. The contract of agency has been revoked by Medicard,
hence, petitioner is not entitled to a commission.

ISSUE: Whether or not the contract of agency has been revoked.

RULING: Yes. Medicard already revoked the agency contract with petitioner
when Medicard directly negotiated with Unilab (such negotiation resulted to
the agreement on the new scheme)

It is clear that since petitioner refused to reduce his commission, Medicard

directly negotiated with Unilab, thus revoking its agency contract with
petitioner. We hold that such revocation is authorized by Article 1924 of the
Civil Code which provides:

Art. 1924. The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons.

Petitioner did not render services to Medicard to entitle him to a commission

Moreover, as found by the lower courts, petitioner did not render services to
Medicard, his principal, to entitle him to a commission. There is no indication
from the records that he exerted any effort in order that Unilab and
Medicard, after the expiration of the Health Care Program Contract, can
renew it for the third time. In fact, his refusal to reduce his commission
constrained Medicard to negotiate directly with Unilab. We find no reason in
law or in equity to rule that he is entitled to a commission. Obviously, he
was not the agent or the procuring cause of the third Health Care Program
Contract between Medicard and Unilab.

In order for an agent to be entitled to a commission, he must be the

procuring cause of the sale, which simply means that the measures
employed by him and the efforts he exerted must result in a sale. In other

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words, an agent receives his commission only upon the successful conclusion
of a sale. Conversely, it follows that where his efforts are unsuccessful, or
there was no effort on his part, he is not entitled to a commission.

In Prats vs. Court of Appeals, this Court held that for the purpose of equity,
an agent who is not the efficient procuring cause is nonetheless entitled to
his commission, where said agent, notwithstanding the expiration of his
authority, nonetheless, took diligent steps to bring back together the parties,
such that a sale was finalized and consummated between them.)

Tan v. Spouses Gullas, G.R. No. 143978, [December 3, 2002], 441 PHIL
622-634

FACTS: Private respondents, Spouses Eduardo R. Gullas and Norma S.

Gullas, were the registered owners of a parcel of land in the Municipality of
Minglanilla, Province of Cebu, measuring 104,114 sq. m., with Transfer
Certificate of Title No. 31465. On June 29, 1992, they executed a special
power of attorney authorizing petitioners Manuel B. Tan, a licensed real
estate broker, and his associates Gregg M. Tecson and Alexander Saldaa, to
negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per
square meter, at a commission of 3% of the gross price. The power of
attorney was non-exclusive and effective for one month from June 29, 1992.

On the same date, Tan contacted Engineer Edsel Ledesma, construction

manager of Sisters of Mary interested in acquiring a property in the
Minglanilla area.

In the morning of July 1, 1992, petitioner Tan visited the property with
Engineer Ledesma. Thereafter, the two men accompanied Sisters Michaela
Kim and Azucena Gaviola, representing the Sisters of Mary, to see private
respondent Eduardo Gullas in his office at the University of Visayas. The
Sisters, who had already seen and inspected the land, found the same
suitable for their purpose and expressed their desire to buy it. However,
they requested that the selling price be reduced to Five Hundred Thirty
Pesos (P530.00) per square meter instead of Five Hundred Fifty Pesos
(P550.00) per square meter. Private respondent Eduardo Gullas referred the
prospective buyers to his wife.

On July 3, 1992, private respondents agreed to sell the property to the

Sisters of Mary, and subsequently executed a special power of attorney in
favor of Eufemia Caete, giving her the special authority to sell, transfer and
convey the land at a fixed price of Two Hundred Pesos (P200.00) per square
meter.

July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in

favor of the Sisters of Mary for the price of Twenty Million Eight Hundred
Twenty Two Thousand Eight Hundred Pesos (P20,822,800.00), or at the rate
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of Two Hundred Pesos (P200.00) per square meter. The buyers subsequently
paid the corresponding taxes. Thereafter, the Register of Deeds of Cebu
Province issued TCT No. 75981 in the name of the Sisters of Mary of
Banneaux, Inc

Earlier, on July 3, 1992, in the afternoon, petitioners went to see private

respondent Eduardo Gullas to claim their commission, but the latter told
them that he and his wife have already agreed to sell the property to the
Sisters of Mary. Private respondents refused to pay the brokers fee and
alleged that another group of agents was responsible for the sale of land to
the Sisters of Mary.

On August 28, 1992, petitioners filed a complaint against the defendants for
recovery of their brokers fee in the sum of One Million Six Hundred Fifty Five
Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well
as moral and exemplary damages and attorneys fees. They alleged that they
were the efficient procuring cause in bringing about the sale of the property
to the Sisters of Mary, but that their efforts in consummating the sale were
frustrated by the private respondents who, in evident bad faith, malice and
in order to evade payment of brokers fee, dealt directly with the buyer
whom petitioners introduced to them. They further pointed out that the deed
of sale was undervalued obviously to evade payment of the correct amount
of capital gains tax, documentary stamps and other internal revenue taxes.

Private respondents countered that, contrary to petitioners claim, they were

not the efficient procuring cause in bringing about the consummation of the
sale because another broker, Roberto Pacana, introduced the property to the
Sisters of Mary ahead of the petitioners. Private respondents maintained that
when petitioners introduced the buyers to private respondent Eduardo
Gullas, the former were already decided in buying the property through
Pacana, who had been paid his commission. Private respondent Eduardo
Gullas admitted that petitioners were in his office on July 3, 1992, but only
to ask for the reimbursement of their cellular phone expenses.

Lower court rendered judgment in favor of petitioners. Court of Appeals

reversed and set aside the lower courts decision and rendered another
judgment dismissing the complaint.

ISSUE: WON the petitioner are entitled to the brokerage commission.

RULING: The records show that petitioner Manuel B. Tan is a licensed real
estate broker, and petitioners Gregg M. Tecson and Alexander Saldaa are his
associates. In Schmid and Oberly v. RJL Martinez Fishing Corporation, [20] we
defined a broker as one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has
no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him. x x x a broker is one

102
whose occupation is to bring the parties together, in matters of trade,
commerce or navigation.

Private respondents contention that Pacana was the one responsible for the
sale of the land is also unsubstantiated. There was nothing on record which
established the existence of a previous negotiation among Pacana, Mrs.
Gullas and the Sisters of Mary. The only piece of evidence that the private
respondents were able to present is an undated and unnotarized Special
Power of Attorney in favor of Pacana. While the lack of a date and an oath
do not necessarily render said Special Power of Attorney invalid, it should be
borne in mind that the contract involves a considerable amount of money.
Hence, it is inconsistent with sound business practice that the authority to
sell is contained in an undated and unnotarized Special Power of Attorney.
Petitioners, on the other hand, were given the written authority to sell by the
private respondents.

Indeed, it is readily apparent that private respondents are trying to evade

payment of the commission which rightfully belong to petitioners as brokers
with respect to the sale. There was no dispute as to the role that petitioners
played in the transaction. At the very least, petitioners set the sale in
motion. They were not able to participate in its consummation only because
they were prevented from doing so by the acts of the private respondents

There was no dispute as to the role that petitioners played in the

transaction. "An agent receives a commission upon the successful conclusion
of a sale. On the other hand a
broker earns his pay merely by bringing the buyer and the seller together, e
ven if no sale iseventually made." Clearly, therefore, petitioners, as brokers,
should be entitled to the commission whether or not the sale of the property
subject matter of the contract was concluded through their efforts.

Philippine Health-Care Providers, Inc. v. Estrada, G.R. No. 171052,

[January 28, 2008], 566 PHIL 603-616

FACTS: Maxicare is a domestic corporation engaged in selling health

insurance plans whose Chairman Dr. Roberto K. Macasaet, Chief Operating
Officer Virgilio del Valle, and Sales/Marketing Manager Josephine Cabrera
were impleaded as defendants-appellants. On September 15, 1990, Maxicare
allegedly engaged the services of Carmela Estrada who was doing business
under the name of CARA HEALTH SERVICES.to promote and sell the prepaid
group practice health care delivery program called MAXICARE Plan with the
position of Independent Account Executive. Maxicare formally appointed
Estrada as its “General Agent,” evidenced by a letter-agreement dated
February 16, 1991. The letter agreement provided for plaintiff-appellee’s
Estrada’s compensation in the form of commission. Maxicare alleged that it
followed a “franchising system” in dealing with its agents whereby an agent

103
had to first secure permission from Maxicare to list a prospective company
as client. Estrada alleged that it did apply with Maxicare for the MERALCO
account and other accounts, and in fact, its franchise to solicit corporate
accounts, MERALCO account included, was renewed on February 11, 1991.
Plaintiff-appellee Estrada submitted proposals and made representations to
the officers of MERALCO regarding the MAXICARE Plan but when MERALCO
decided to subscribe to the MAXICARE Plan, Maxicare directly negotiated
with MERALCO regarding the terms and conditions of the agreement and left
plaintiff-appellee Estrada out of the discussions on the terms and
conditions.

ISSUE: WON Estrada is entitled to the commission despite her admission

that the negotiation between her and meralco failed.

RULING: Yes. The statement in Annex “F” amounted to an admission,

provides a contrary answer to Maxicare’s ridiculous contention. We intoned
therein that in spite of the presence of judicial admissions in a party’s
pleading, the trial court is still given leeway to consider other evidence
presented.

As provided for in Section 4 of Rule 129 of the Rules of Court, the general
rule that a judicial admission is conclusive upon the party making it and does
not require proof admits of two exceptions: 1) when it is shown that the
admission was made through palpable mistake, and 2) when it is shown that
no such admission was in fact made. The latter exception allows one to
contradict an admission by denying that he made such an admission.

For instance, if a party invokes an “admission” by an adverse party, but cites

the admission “out of context,” then the one making the admission may
show that he made no “such” admission, or that his admission was taken out
of context.

This may be interpreted as to mean “not in the sense in which the admission
is made to appear.” That is the reason for the modifier “such.”

In this case, the letter, although part of Estrada’s Complaint, is not, ipso
facto, an admission of the statements contained therein, especially since the
bone of contention relates to Estrada’s entitlement to commissions for the
sale of health plans she claims to have brokered. It is more than obvious
from the entirety of the records that Estrada has unequivocally and
consistently declared that her involvement as broker is the proximate cause
which consummated the sale between Meralco and Maxicare.

Moreover, Section 34, Rule 132 of the Rules of Court requires the purpose
for which the evidence is offered to be specified. Undeniably, the letter was

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attached to the Complaint, and offered in evidence, to demonstrate
Maxicare’s bad faith and ill will towards Estrada.

Professional Services, Inc. v. Court of Appeals, G.R. Nos. 126297, 126467

& 127590 (Resolution), [February 11, 2008], 568 PHIL 158-171

FACTS: Natividad Agana was rushed to Medical City because of difficulty of

bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be
suffering from cancer of the sigmoid. Dr. Ampil performed an anterior
resection surgery on her, and finding that the malignancy spread on her left
ovary, he obtained the consent of her husband, Enrique, to permit Dr.
Fuentes to perform hysterectomy on her. After the hysterectomy, Dr.
Fuentes showed his work to Dr. Ampil, who examined it and found it in
order, so he allowed Dr. Fuentes to leave the operating room. Dr. Ampil was
about to complete the procedure when the attending nurses made some
remarks on the Record of Operation: “sponge count lacking 2; announced to
surgeon search done but to no avail continue for closure” (two pieces of
gauze were missing). A “diligent search” was conducted but they could not
be found. Dr. Ampil then directed that the incision be closed.

A couple of days after, she complained of pain in her anal region, but the
doctors told her that it was just a natural consequence of the surgery. Dr.
Ampil recommended that she consult an oncologist to examine the
cancerous nodes which were not removed during the operation. After
months of consultations and examinations in the US, she was told that she
was free of cancer. Weeks after coming back, her daughter found a piece of
gauze (1.5 in) protruding from her vagina, so Dr. Ampil manually extracted
this, assuring Natividad that the pains will go away. However, the pain
worsened, so she sought treatment at a hospital, where another 1.5 in piece
of gauze was found in her vagina. She underwent another surgery.

Sps. Agana filed a complaint for damages against PSI (owner of Medical
City), Dr. Ampil, and Dr. Fuentes, alleging that the latter are liable
for negligence for leaving 2 pieces of gauze in Natividad’s body,
and malpractice for concealing their acts of negligence. Enrique Agana also
filed an administrative complaint for gross negligence and malpractice
against the two doctors with the PRC (although only the case against Dr.
Fuentes was heard since Dr. Ampil was abroad). Pending the outcome of the
cases, Natividad died (now substituted by her children). RTC found PSI and
the two doctors liable for negligence and malpractice. PRC dismissed the
case against Dr. Fuentes. CA dismissed only the case against Fuentes.

105
ISSUES: WON the Professional Services, Inc. Is liable to the heirs of the
deceased patient, natividad agana, on the basis of an ostensible agency
existing between the hospital and the negligent surgeon.

RULING: As earlier mentioned, the First Division, in its assailed Decision,

ruled that an employer-employee relationship "in effect" exists between the
Medical City and Dr. Ampil. Consequently, both are jointly and severally
liable to the Aganas.

In the first place, hospitals exercise significant control in the hiring and firing
of consultants and in the conduct of their work within the hospital premises.
In other words, private hospitals hire, fire and exercise real control over
their attending and visiting "consultant" staff. While "consultants" are not,
technically employees, a point which respondent hospital asserts in denying
all responsibility for the patient's condition, the control exercised, the hiring,
and the right to terminate consultants all fulfill the important hallmarks of an
employer-employee relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the control
test is determining. Accordingly, on the basis of the foregoing, we rule that
for the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. This being the case, the question now
arises as to whether or not respondent hospital is solidarily liable with
respondent doctors for petitioner's condition.

The basis for holding an employer solidarily responsible for the negligence of
its employee is found in Article 2180 of the Civil Code which considers a
person accountable not only for his own acts but also for those of others
based on the former's responsibility under a relationship of partia ptetas.

Actually, contrary to PSI's contention, the Court did not reverse its ruling in
Ramos. What it clarified was that the De Los Santos Medical Clinic did not
exercise control over its consultant, hence, there is no employer-employee
relationship between them. Thus, despite the granting of the said hospital's
motion for reconsideration, the doctrine in Ramos stays, i.e., for the purpose
of allocating responsibility in medical negligence cases, an employer-
employee relationship exists between hospitals and their consultants.

In the instant cases, PSI merely offered a general denial of responsibility,

maintaining that consultants, like Dr. Ampil, are "independent contractors,"
not employees of the hospital. Even assuming that Dr. Ampil is not an
employee of Medical City, but an independent contractor, still the said
hospital is liable to the Aganas.

106
Agana vs. Court of Appeals, G.R. Nos. 126297, 126467 & 127590, [January
31, 2007], 542 PHIL 464-496

FACTS: On April 4, 1984, Natividad Agana was rushed to the Medical City
General Hospital (Medical City Hospital) because of difficulty of bowel
movement and bloody anal discharge. After a series of medical
examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed
her to be suffering from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical staff 4 of the Medical
City Hospital, performed an anterior resection surgery on Natividad. He
found that the malignancy in her sigmoid area had spread on her left ovary,
necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained
the consent of Natividad's husband, Enrique Agana, to permit Dr. Juan
Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over,
completed the operation and closed the incision. However, the operation
appeared to be flawed.

On April 24, 1984, Natividad was released from the hospital. Her hospital
and medical bills, including the doctors' fees, amounted to P60,000.00.

After a couple of days, Natividad complained of excruciating pain in her anal

region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her
that the pain was the natural consequence of the surgery. Dr. Ampil then
recommended that she consult an oncologist to examine the cancerous
nodes which were not removed during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the

United States to seek further treatment. After four months of consultations
and laboratory examinations, Natividad was told she was free of cancer.
Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering
from pains. Two weeks thereafter, her daughter found a piece of gauze
protruding from her vagina. Upon being informed about it, Dr. Ampil
proceeded to her house where he managed to extract by hand a piece of
gauze measuring 1.5 inches in width. He then assured her that the pains
would soon vanish.

Dr. Ampil's assurance did not come true. Instead, the pains intensified,
prompting Natividad to seek treatment at the Polymedic General Hospital.
While confined there, Dr. Ramon Gutierrez detected the presence of another
foreign object in her vagina — a foul-smelling gauze measuring 1.5 inches in
width which badly infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organs which forced stool to excrete through the
vagina. Another surgical operation was needed to remedy the damage. Thus,
in October 1984, Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the RTC,
Branch 96, Quezon City a complaint for damages against the Professional

107
Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr.
Fuentes, docketed as Civil Case No. Q-43322. They alleged that the latter
are liable for negligence for leaving two pieces of gauze inside Natividad's
body and malpractice for concealing their acts of negligence.

ISSUES:

1. whether the Court of Appeals erred in holding Dr. Ampil liable for
negligence and malpractice;
2. whether the Court of Appeals erred in absolving Dr. Fuentes of any
liability;
3. whether PSI may be held solidarily liable for the negligence of Dr.
Ampil.

RULING:

1. Records show that he did not present any evidence to prove that the
American doctors were the ones who put or left the gauzes in Natividad's
body. Neither did he submit evidence to rebut the correctness of the record
of operation, particularly the number of gauzes used. As to the alleged
negligence of Dr. Fuentes, we are mindful that Dr. Ampil examined his (Dr.
Fuentes') work and found it in order.

The glaring truth is that all the major circumstances, taken together, as
specified by the Court of Appeals, directly point to Dr. Ampil as the negligent
party.

An operation requiring the placing of sponges in the incision is not complete

until the sponges are properly removed, and it is settled that the leaving of
sponges or other foreign substances in the wound after the incision has been
closed is at least prima facie negligence by the operating surgeon.

Of course, the Court is not blind to the reality that there are times when
danger to a patient's life precludes a surgeon from further searching missing
sponges or foreign objects left in the body. But this does not leave him free
from any obligation. Even if it has been shown that a surgeon was required
by the urgent necessities of the case to leave a sponge in his patient's
abdomen, because of the dangers attendant upon delay, still, it is his legal
duty to so inform his patient within a reasonable time thereafter by advising
her of what he had been compelled to do. This is in order that she might
seek relief from the effects of the foreign object left in her body as her
condition might permit.

Here, Dr. Ampil did not inform Natividad about the missing two pieces of
gauze. Worse, he even misled her that the pain she was experiencing was
the ordinary consequence of her operation. Had he been more candid,
Natividad could have taken the immediate and appropriate medical remedy
to remove the gauzes from her body. To our mind, what was initially an act
of negligence by Dr. Ampil has ripened into a deliberate wrongful act of
deceiving his patient.

108
This is a clear case of medical malpractice or more appropriately, medical
negligence. To successfully pursue this kind of case, a patient must only
prove that a health care provider either failed to do something which a
reasonably prudent health care provider would have done, or that he did
something that a reasonably prudent provider would not have done; and
that failure or action caused injury to the patient. 11 Simply put, the
elements are duty, breach, injury and proximate causation. Dr. Ampil, as the
lead surgeon, had the duty to remove all foreign objects, such as gauzes,
from Natividad's body before closure of the incision. When he failed to do so,
it was his duty to inform Natividad about it. Dr. Ampil breached both duties.
Such breach caused injury to Natividad, necessitating her further
examination by American doctors and another surgery. That Dr. Ampil's
negligence is the proximate cause 12 of Natividad's injury could be traced
from his act of closing the incision despite the information given by the
attending nurses that two pieces of gauze were still missing. That they were
later on extracted from Natividad's vagina established the causal link
between Dr. Ampil's negligence and the injury. And what further aggravated
such injury was his deliberate concealment of the missing gauzes from the
knowledge of Natividad and her family.

2. We find the element of "control and management of the thing which

caused the injury" to be wanting. Hence, the doctrine of res ipsa loquitur will
not lie.

It was duly established that Dr. Ampil was the lead surgeon during the
operation of Natividad. He requested the assistance of Dr. Fuentes only to
perform hysterectomy when he (Dr. Ampil) found that the malignancy in her
sigmoid area had spread to her left ovary. Dr. Fuentes performed the
surgery and thereafter reported and showed his work to Dr. Ampil. The
latter examined it and finding everything to be in order, allowed Dr. Fuentes
to leave the operating room. Dr. Ampil then resumed operating on
Natividad. He was about to finish the procedure when the attending nurses
informed him that two pieces of gauze were missing. A "diligent search" was
conducted, but the misplaced gauzes were not found. Dr. Ampil then
directed that the incision be closed. During this entire period, Dr. Fuentes
was no longer in the operating room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the person in
complete charge of the surgery room and all personnel connected with the
operation. Their duty is to obey his orders. 16 As stated before, Dr. Ampil
was the lead surgeon. In other words, he was the "Captain of the Ship." That
he discharged such role is evident from his following conduct: (1) calling Dr.
Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes
and finding it in order; (3) granting Dr. Fuentes' permission to leave; and
(4) ordering the closure of the incision. To our mind, it was this act of
ordering the closure of the incision notwithstanding that two pieces of gauze
remained unaccounted for, that caused injury to Natividad's body. Clearly,
the control and management of the thing which caused the injury was in the
hands of Dr. Ampil, not Dr. Fuentes.

In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence,
does not per se create or constitute an independent or separate ground of
liability, being a mere evidentiary rule. 17 In other words, mere invocation
and application of the doctrine does not dispense with the requirement of

109
proof of negligence. Here, the negligence was proven to have been
committed by Dr. Ampil and not by Dr. Fuentes.

3. he nature of the relationship between the hospital and the physicians is

rendered inconsequential in view of our categorical pronouncement in Ramos
v. Court of Appeals 28 that for purposes of apportioning responsibility in
medical negligence cases, an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians.

“In the first place, hospitals exercise significant control in the hiring
and firing of consultants and in the conduct of their work within the
hospital premises. Doctors who apply for 'consultant' slots, visiting or
attending, are required to submit proof of completion of residency,
their educational qualifications, generally, evidence of accreditation by
the appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully scrutinized by
members of the hospital administration or by a review committee set
up by the hospital who either accept or reject the application. . . .

After a physician is accepted, either as a visiting or attending

consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks
and responsibilities, for the privilege of being able to maintain a clinic
in the hospital, and/or for the privilege of admitting patients into the
hospital. In addition to these, the physician's performance as a
specialist is generally evaluated by a peer review committee on the
basis of mortality and morbidity statistics, and feedback from patients,
nurses, interns and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum standards
acceptable to the hospital or its peer review committee, is normally
politely terminated.

In other words, private hospitals, hire, fire and exercise real control
over their attending and visiting 'consultant' staff. While 'consultants'
are not, technically employees, . . . , the control exercised, the hiring,
and the right to terminate consultants all fulfill the important hallmarks
of an employer-employee relationship, with the exception of the
payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of the
foregoing, we rule that for the purpose of allocating responsibility in
medical negligence cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting physicians."

But the Ramos pronouncement is not our only basis in sustaining PSI's
liability. Its liability is also anchored upon the agency principle of apparent
authority or agency by estoppel and the doctrine of corporate negligence
which have gained acceptance in the determination of a hospital's liability for
negligent acts of health professionals. The present case serves as a perfect
platform to test the applicability of these doctrines, thus, enriching our
jurisprudence.

Apparent authority, or what is sometimes referred to as the "holding out"

theory, or doctrine of ostensible agency or agency by estoppel, has its origin

110
from the law of agency. It imposes liability, not as the result of the reality of
a contractual relationship, but rather because of the actions of a principal or
an employer in somehow misleading the public into believing that the
relationship or the authority exists. 30 The concept is essentially one of
estoppel and has been explained in this manner:

"The principal is bound by the acts of his agent with the apparent authority
which he knowingly permits the agent to assume, or which he holds the
agent out to the public as possessing. The question in every case is whether
the principal has by his voluntary act placed the agent in such a situation
that a person of ordinary prudence, conversant with business usages and the
nature of the particular business, is justified in presuming that such agent
has authority to perform the particular act in question.

Our jurisdiction recognizes the concept of an agency by implication or

estoppel. Article 1869 of the Civil Code reads:

ART. 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate
the agency, knowing that another person is acting on his behalf
without authority.

In this case, PSI publicly displays in the lobby of the Medical City Hospital
the names and specializations of the physicians associated or accredited by
it, including those of Dr. Ampil and Dr. Fuentes. We concur with the Court of
Appeals' conclusion that it "is now estopped from passing all the blame to
the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence."
Indeed, PSI's act is tantamount to holding out to the public that Medical City
Hospital, through its accredited physicians, offers quality health care
services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising
their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As
expected, these patients, Natividad being one of them, accepted the services
on the reasonable belief that such were being rendered by the hospital or its
employees, agents, or servants.

MIGUEL AMPIL, petitioner, vs. NATIVIDAD AGANA and ENRIQUE AGANA,

respondents.||| (Professional Services, Inc. v. Natividad, G.R. Nos.
126297, 126467 & 127590, [January 31, 2007], 542 PHIL 464-496)

FACTS: Natividad Agana was rushed to Medical City because of difficulty of

bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be
suffering from cancer of the sigmoid. Dr. Ampil performed an anterior
resection surgery on her, and finding that the malignancy spread on her left
ovary, he obtained the consent of her husband, Enrique, to permit Dr.
Fuentes to perform hysterectomy on her. After the hysterectomy, Dr.
Fuentes showed his work to Dr. Ampil, who examined it and found it in
order, so he allowed Dr. Fuentes to leave the operating room. Dr. Ampil was

111
about to complete the procedure when the attending nurses made some
remarks on the Record of Operation: “sponge count lacking 2; announced to
surgeon search done but to no avail continue for closure” (two pieces of
gauze were missing). A “diligent search” was conducted but they could not
be found. Dr. Ampil then directed that the incision be closed. A couple of
days after, she complained of pain in her anal region, but the doctors told
her that it was just a natural consequence of the surgery. Dr. Ampil
recommended that she consult an oncologist to examine the cancerous
nodes which were not removed during the operation. After months of
consultations and examinations in the US, she was told that she was free of
cancer. Weeks after coming back, her daughter found a piece of gauze (1.5
in) protruding from her vagina, so Dr. Ampil manually extracted this,
assuring Natividad that the pains will go away. However, the pain worsened,
so she sought treatment at a hospital, where another 1.5 in piece of gauze
was found in her vagina. She underwent another surgery.

Sps. Agana filed a complaint for damages against PSI (owner of Medical
City), Dr. Ampil, and Dr. Fuentes, alleging that the latter are liable
for negligence for leaving 2 pieces of gauze in Natividad’s body,
and malpractice for concealing their acts of negligence. Enrique Agana also
filed an administrative complaint for gross negligence and malpractice
against the two doctors with the PRC (although only the case against Dr.
Fuentes was heard since Dr. Ampil was abroad). Pending the outcome of the
cases, Natividad died (now substituted by her children). RTC found PSI and
the two doctors liable for negligence and malpractice. PRC dismissed the
case against Dr. Fuentes. CA dismissed only the case against Fuentes.

ISSUE: WON PSI may be held solidarily liable for Dr. Ampil’s negligence.

RULING: Yes. HOSPITAL OWNER PSI SOLIDARILY LIABLE WITH DR.

AMPIL [NCC 2180], AND DIRECTLY LIABLE TO SPS. AGANAS [NCC
2176]

Previously, employers cannot be held liable for the fault or negligence of its
professionals. However, this doctrine has weakened since courts came to
realize that modern hospitals are taking a more active role in supplying and
regulating medical care to its patients, by employing staff of physicians,
among others. Hence, there is no reason to exempt hospitals from the
universal rule of respondeat superior. For purposes of apportioning
responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and
visiting physicians. [LABOR LESSON: power to hire, fire, power of control]

Agency principle of apparent authority / agency by estoppel.

Imposes liability because of the actions of a principal or employer in

somehow misleading the public into believing that the relationship or the
authority exists [see NCC 1869]. PSI publicly displays in the Medical City
lobby the names and specializations of their physicians. Hence, PSI is now
estopped from passing all the blame to the physicians whose names it
proudly paraded in the public directory, leading the public to believe that it
vouched for their skill and competence. If doctors do well, hospital profits
financially, so when negligence mars the quality of its services, the hospital
should not be allowed to escape liability for its agents’ acts. Doctrine

112
of corporate negligence / corporate responsibility. This is the judicial answer
to the problem of allocating hospital’s liability for the negligent acts of health
practitioners, absent facts to support the application of respondeat superior.
This provides for the duties expected [from hospitals]. In this case, PSI
failed to perform the duty of exercising reasonable care to protect from harm
all patients admitted into its facility for medical treatment. PSI failed to
conduct an investigation of the matter reported in the note of the
count nurse, and this established PSI’s part in the dark conspiracy of
silence and concealment about the gauzes. PSI has actual / constructive
knowledge of the matter, through the report of the attending nurses + the
fact that the operation was carried on with the assistance of various hospital
staff. It also breached its duties to oversee or supervise all persons who
practice medicine within its walls and take an active step in fixing the
negligence committed. PSI also liable under NCC 2180. It failed to adduce
evidence to show that it exercised the diligence of a good father of the
family in the accreditation and supervision of Dr. Ampil.

Victorias Milling Co., Inc. vs. CA 333 SCRA 663

FACTS: St. Therese Merchandising (STM) regularly bought sugar from

Victorias Milling Co (VMC). In the course of their dealings, VMC issued
several Shipping List/Delivery Receipts (SLDRs) to STM as proof of
purchases. Among these was SLDR No. 1214M.SLDR No. 1214M, dated
October 16, 1989, covers 25,000 bags of sugar. Each bag contained 50 kg
and priced at P638.00 per bag. The transaction covered was a “direct sale”.

On October 25, 1989, STM sold to private respondent Consolidated Sugar

Corporation (CSC) its rights in the same SLDR for P14,750,000.00. CSC
issued checks in payment. That same day, CSC wrote petitioner that it had
been authorized by STM to withdraw the sugar covered by the said SLDR.
Enclosed in the letter were a copy of SLDR No. 1214M and a letter of
authority from STM authorizing CSC to “withdraw for and in our behalf the
refined sugar covered by the SLDR” 
On Oct. 27, 1989, STM issued checks
to VMC as payment for 50,000 bags, covering SLDR No. 1214M.
CSC
surrendered the SLDR No. 1214M and to VMC’s NAWACO Warehouse and
was allowed to withdraw sugar. But only 2,000 bags had been released
because VMC refused to release the other 23,000 bags.

Therefore, CSC informed VMC that SLDR No. 1214M had been “sold and
endorsed” to it. But VMC replied that it could not allow any further
withdrawals of sugar against SLDR No. 1214M because STM had already
withdrawn all the sugar covered by the cleared checks. VMC also claimed
that CSC was only representing itself as STM’s agent as it had withdrawn the
2,000 bags against SLDR No. 1214M “for and in behalf” of STM. Hence, CSC
filed a complaint for specific performance against Teresita Ng Sy (doing
business under STM's name) and VMC. However, the suit against Sy was
discontinued because later became a witness. RTC ruled in favor of CSC and
ordered VMC to deliver the 23,000 bags left. CA concurred. Hence this
appeal.

113
ISSUES: W/N CA erred in not ruling that CSC was an agent of STM and
hence, estopped to sue upon SLDR No. 1214M as assignee.

RULING: NO. CSC was not an agent of STM. VMC heavily relies on STM’s
letter of authority that said CSC is authorized to withdraw sugar “for and in
our behalf”. It is clear from Art. 1868 that the: basis of agency is
representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or
actions, and on the part of the agent, there must be an intention to accept
the appointment and act on it, and in the absence of such intent, there is
generally NO agency. One factor, which most clearly distinguishes agency
from other legal concepts, is control; one person – the agent – agrees to act
under the control or direction of another – the principal. Indeed, the very
word “agency” has come to connote control by the principal. The control
factor, more than any other, has caused the courts to put contracts between
principal and agent in a separate category. Where the relation of agency is
dependent upon the acts of the parties, the law makes no presumption of
agency and it is always a fact to be proved, with the burden of proof resting
upon the persons alleging the agency, to show not only the fact of its
existence but also its nature and extent. It appears that CSC was a buyer
and not an agent of STM. CSC was not subject to STM’s control. The terms
“for and in our behalf” should not be eyed as pointing to the existence of an
agency relation. Whether or not a contract is one of sale or agency depends
on the intention of the parties as gathered from the whole scope and effect
of the language employed. Ultimately, what is decisive is the intention of the
parties. (In fact, CSC even informed VMC that the SLDR was sold and
endorsed to it.)

Agency distinguished from sale.

In an agency to sell, the agent, in dealing with the thing received, is

bound to act according to the instructions of his principal, while in a sale,
the buyer can deal with the thing as he pleases, being the owner. The
elementary notion of sale is the transfer of title to a thing from one to
another, while the essence of agency involves the idea of an appointment
of one to act for another. Agency is a relationship which often results in a
sale, but the sale is a subsequent step in the transaction. (Teller, op. cit.,
p. 26; see Commissioner of Internal Revenue vs. Manila Machinery &
Supply Co., 135 SCRA 8 [1985].) An authorization given to another
containing the phrase “for and in our behalf’’ does not necessarily
establish an agency, as ultimately what is decisive is the intention of the
parties. Thus, the use of the words “sold and endorsed’’ may mean that
the parties intended a contract of sale, and not a contract of agency

114
Dominion vs. CA, et.al. G.R. No. 129919, February 6, 2002

FACTS: The respondent, Rodolfo S. Guevarra instituted Civil Case for sum of
money against Petitioner Corporation.

The former sought to recover sums of money which he claimed to have

advanced in his capacity as manager of the latter to satisfy certain claims.
Later respondent corporation, filed a third-party complaint against Fernando
Austria, Regional Manager for Central Luzon area.

TERMS OF AGREEMENT:

“That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a corporation

duly organized and existing under and by virtue of the laws of the Republic
of the Philippines, x x x represented by the undersigned as Regional
Manager, x x x do hereby appoint RSG Guevarra Insurance Services
represented by Mr. Rodolfo Guevarra x x x to be our Agency Manager in
San Fernando and to do the following acts:

“1. To conduct, sign, manager, carry on and transact Bonding and Insurance
business as usually pertain to Agency Office, or FIRE, MARINE, MOTOR CAR,
PERSONAL ACCIDENT, and BONDING with the right, upon our prior written
consent, to appoint agents and sub-agents.

“2.To accept, underwrite and subscribed cover notes or Policies of Insurance

and Bonds for and on our behalf.

“3. To demand, sue, for collect, deposit, enforce payment, deliver and
transfer for and receive and give effectual receipts and discharge for all
money to which the FIRST CONTINENTAL ASSURANCE COMPANY, INC.,18
may hereafter become due, owing payable or transferable to said
Corporation by reason of or in connection with the above-mentioned
appointment.

“4. To receive notices, summons, and legal processes for and in behalf of the
FIRST CONTINENTAL ASSURANCE COMPANY, INC., in connection with
actions and all legal proceedings against the said Corporation.”

Respondent Guevarra’s authority to settle claims is embodied in the

Memorandum of Management Agreement dated February 18, 1987
which enumerates the scope of respondent Guevarra’s duties and
responsibilities as agency manager for San Fernando, Pampanga, as follows:
“x x x x x x x x x

“1. You are hereby given authority to settle and dispose of all motor car
claims in the amount of P5,000.00 with prior approval of the Regional Office.
“2.Full authority is given you on TPPI claims settlement.

“x x x x x x x x x” In settling the claims mentioned above, respondent

Guevarra’s authority is further limited by the written standard authority to
pay, which states that the payment shall come from respondent
Guevarra’s revolving fund or collection.

115
ISSUE: WON respondent guevarra is entitled to reimbursement of amounts
he paid out of his personal money in settling the claims of several insured
under the memorandum of management agreement.

RULING: NO. Respondent Guevarra was authorized to pay the claim of the
insured, but the payment shall come from the revolving fund or collection in
his possession. Having deviated from the instructions of the principal, the
expenses that respondent Guevarra incurred in the settlement of the claims
of the insured may not be reimbursed from petitioner Dominion. This
conclusion is in accord with Article 1918 (1) : “The principal is not liable
for the expenses incurred by the agent, If the agent acted in contravention
of the principal’s instructions, unless the latter should wish to avail himself of
the benefits derived from the contract.” However, while the law on agency
prohibits respondent Guevarra from obtaining reimbursement, his
right to recover may still be justified under the general law on obligations
and contracts.

Article 1236, second paragraph, Civil Code, provides: “Whoever pays for
another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the debtor.”

In this case, when the risk insured against occurred, petitioner’s liability as
insurer arose. This obligation was extinguished when respondent Guevarra
paid the claims and obtained Release of Claim Loss and Subrogation
Receipts from the insured who were paid. Thus, to the extent that the
obligation of the petitioner has been extinguished, respondent Guevarra may
demand for reimbursement from his principal. To rule otherwise would result
in unjust enrichment of petitioner. The extent to which petitioner was
benefited by the settlement of the insurance claims could best be proven by
the Release of Claim Loss and Subrogation Receipts.

By the contract of agency, a person binds himself to render some service or

to do something in representation or on behalf of another, with the consent
or authority of the latter. The basis for agency is representation. On the part
of the principal, there must be an actual intention to appoint or an intention
naturally inferrable from his words or actions; and on the part of the agent,
there must be an intention to accept the appointment and act on it, and in
the absence of such intent, there is generally no agency.

A perusal of the Special Power of Attorney would show that petitioner

(represented by third-party defendant Austria) and respondent Guevarra
intended to enter into a principal-agent relationship. Despite the word
“special” in the title of the document, the contents reveal that what was
constituted was actually a general agency.
The agency comprises all the business of the principal, but, couched in
general terms, it is limited only to acts of administration. A general power
permits the agent to do all acts for which the law does not require a special
power. Thus, the acts enumerated in or similar to those enumerated in the
Special Power of Attorney do not require a special power of attorney.

Article 1878, Civil Code, enumerates the instances when a special power
of attorney is required. The pertinent portion that applies to this case
provides that:

116
“Article 1878. Special powers of attorney are necessary in the following
cases:
“(1) To make such payments as are not usually considered as acts of
administration;
“x x x x x x x x x
“(15) Any other act of strict dominion.”
The payment of claims is not an act of administration. The settlement of
claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein.
A special power of attorney is required before respondent Guevarra could
settle the insurance claims of the insured.

Sps. Alcantara v. Nido G.R. No. 165133, 19 April 2010

FACTS: Revelen Srivastava, respondent's daughter and of legal age, is the

owner of an unregistered land with an area of 1,939 square meters located
in Cardona, Rizal. Sometime in March 1984, respondent accepted the offer
of petitioners to purchase a 200-square meter portion of Revelen's lot
(subject lot). Petitioners paid P3,000.00 as down payment and the balance
was payable on installment. Petitioners constructed their houses in 1985. In
1986, with respondent's consent, petitioners occupied an additional 150
square meters of the lot. By 1987, petitioners had already paid
P17,500.00 before petitioners defaulted on their installment payments. On
11 May 1994, respondent, acting as administrator and attorney-in-fact of
Revelen, filed a complaint for recovery of possession with damages and
prayer for preliminary injunction against petitioners with the RTC.

The RTC ruled that Revelen owns the lot and respondent was verbally
authorized to sell 200 square meters to petitioners. The RTC ruled that since
respondent's authority to sell the land was not in writing, the sale was void
under Article 1874 of the Civil Code. The RTC ruled that rescission is the
proper remedy.

The appellate court reversed the RTC decision and dismissed the civil case.
The appellate court explained that this is an unlawful detainer case. Even if
the complaint involves a question of ownership, it does not deprive the
Municipal Trial Court (MTC) of its jurisdiction over the ejectment case. The
appellate court added that even if respondent's complaint is for recovery of
possession or accion publiciana, the RTC still has no jurisdiction to decide the
case. At bench, the complaint alleges that the assessed value of the whole
lot is P4,890.00. Such assessed value falls within the exclusive original
prerogative or jurisdiction of the first level court and, therefore, the Regional
Trial Court a quo has no jurisdiction to try and decided the same. The
appellate court also held that respondent, as Revelen's agent, did not have a
written authority to enter into such contract of sale; hence, the contract
entered into between petitioners and respondent is void. A void contract
creates no rights or obligations or any juridical relations. Therefore, the void
contract cannot be the subject of rescission. Hence, this petition.

117
Petitioners submit that the sale of land by an agent who has no written
authority is not void but merely voidable given the spirit and intent of the
law. Being only voidable, the contract may be ratified, expressly or
impliedly.

ISSUE: WON the respondent was authorized to enter into a contract to sell.

RULING: NO, there was no written proof of authority to sell.

Sale of Land through an Agent

Articles 1874 and 1878 of the Civil Code provide:

Art. 1874. When a sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise, the sale
shall be void.

Art. 1878. Special powers of attorney are necessary in the following cases:

(5) To enter into any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;

xxx
Article 1874 of the Civil Code explicitly requires a written authority before an
agent can sell an immovable property. Based on a review of the records,
there is absolutely no proof of respondent's written authority to sell the lot
to petitioners. In fact, during the pre-trial conference, petitioners admitted
that at the time of the negotiation for the sale of the lot, petitioners were of
the belief that respondent was the owner of lot. Petitioners only knew that
Revelen was the owner of the lot during the hearing of this case.
Consequently, the sale of the lot by respondent who did not have a written
authority from Revelen is void. A void contract produces no effect either
against or in favor of anyone and cannot be ratified.

A special power of attorney is also necessary to enter into any contract by

which the ownership of an immovable is transmitted or acquired for a
valuable consideration. Without an authority in writing, respondent cannot
validly sell the lot to petitioners. Hence, any "sale" in favor of the petitioners
is void.

Further, Article 1318 of the Civil Code enumerates the requisites for a valid
contract, namely:

1. consent of the contracting parties;

2. object certain which is the subject matter of the contract;
3. cause of the obligation which is established.

Respondent did not have the written authority to enter into a contract to sell
the lot. As the consent of Revelen, the real owner of the lot, was not
obtained in writing as required by law, no contract was perfected.
Consequently, petitioners failed to validly acquire the lot.

General Power of Attorney

118
On 25 March 1994, Revelen executed a General Power of Attorney
constituting respondent as her attorney-in-fact and authorizing her to
enter into any and all contracts and agreements on Revelen's behalf.
The General Power of Attorney was notarized by Larry A. Reid, Notary Public
in California, U.S.A.

Unfortunately, the General Power of Attorney presented as "Exhibit C" in the

RTC cannot also be the basis of respondent's written authority to sell the lot.

Section 25, Rule 132 of the Rules of Court provides:

Sec. 25. Proof of public or official record. -- An official record or an entry

therein, when admissible for any purpose, may be evidenced by an official
publication thereof or by a copy attested by the officer having the legal
custody of the record, or by his deputy, and accompanied, if the record is
not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of embassy or legation consul
general, consul, vice consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which
the record is kept, and authenticated by the seal of his office.

Since the General Power of Attorney was executed and acknowledged in the
United States of America, it cannot be admitted in evidence unless it is
certified as such in accordance with the Rules of Court by an officer in the
foreign service of the Philippines stationed in the United States of America.
Hence, this document has no probative value.

Specific Performance

Petitioners are not entitled to claim for specific performance. It must be

stressed that when specific performance is sought of a contract made with
an agent, the agency must be established by clear, certain and specific
proof. To reiterate, there is a clear absence of proof that Revelen authorized
respondent to sell her lot.

Jurisdiction

The appellate court correctly ruled that even if the complaint filed with the
RTC involves a question of ownership, the MTC still has jurisdiction because
the assessed value of the whole lot as stated in Tax Declaration No. 09-0742
is P4,890. The MTC cannot be deprived of jurisdiction over an ejectment
case based merely on the assertion of ownership over the litigated property,
and the underlying reason for this rule is to prevent any party from trifling
with the summary nature of an ejectment suit.

119
San Juan Structural and Steel Fabricators, Inc. v. CA, 357 Phil 631

FACTS: Petitioner San Juan Structural and Steel Fabricators, Inc. alleged
that on February 14, 1989, it entered through its president, Andres Co, into
the disputed Agreement with Respondent Motorich Sales Corporation, which
was in turn allegedly represented by its treasurer, Nenita Lee Gruenberg for
the transfer to it of a parcel of land. Petitioner insists that "[w]hen
Gruenberg and Co affixed their signatures on the contract they both
consented to be bound by the terms thereof." As stipulated in the
Agreement, plaintiff paid the down payment in the sum of One Hundred
Thousand (P100,000.00) Pesos and the balance to be paid on or before
March 2, 1989. On March 2, 1989, plaintiff was ready to pay to the balance
but defendant’s treasurer, Nenita Lee Gruenberg, did not appear and that
despite repeated demands defendant had refused to execute the Transfer of
Rights/Deed of Assignment which is necessary to transfer the certificate of
title. Plaintiff further alleged that defendant ACL Development Corporation
and Motorich Sales Corporation entered into a Deed of Absolute Sale
whereby the former transferred to the latter the subject property and a TCT
was issued in the name of Motorich Sales Corporation, represented by
defendant-appellee Nenita Lee Gruenberg and Reynaldo L. Gruenberg.

Defendants Motorich Sales Corporation and Nenita Lee Gruenberg claimed

that the President and Chairman of Motorich did not sign the agreement. It
alleged that Mrs. Gruenberg's signature on the agreement is inadequate to
bind Motorich. The other signature, that of Mr. Reynaldo Gruenberg,
President and Chairman of Motorich, is required.

The RTC dismissed both the Complaint and the Counterclaim filed by the
parties. On the other hand, the Court of Appeals affirmed with modification
ordering defendant Nenita Lee Gruenberg to refund or return to plaintiff the
downpayment of P100,000.00 which she received from plaintiff.

Petitioner further contends that Respondent Motorich has ratified said

contract of sale because of its "acceptance of benefits," as evidenced by the
receipt issued by Respondent Gruenberg.

Petitioner also argues that the veil of corporate fiction of Motorich should be
pierced, because the latter is a close corporation. Petitioner argued that
since Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or
almost all or 99.866% of the subscribed capital stock" of Motorich, Nenita
Gruenberg needed no authorization from the board to enter into the subject
contract.

ISSUE:

1.) May corporate treasurer, by herself and without any authorization from
the board of directors, validly sell a parcel of land owned by the
corporation?NO

2.) Did Respondent Corporation ratified the contract of sale. NO

3.) May the veil of corporate fiction be pierced on the mere ground that
almost all of the shares of stock of the corporation are owned by said
treasurer and her husband? NO

120
RULING:

1.) The contract entered by Nenita Lee Gruenberg and Andres Co covering
the lot owned by Motorich Sales Corporation cannot bind the latter, because
it never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders

or members. Accordingly, the property of the corporation is not the property
of its stockholders or members and may not be sold by the stockholders or
members without express authorization from the corporation's board of
directors. Section 23 of BP 68, otherwise known as the Corporation Code of
the Philippines, provides;

Sec. 23. The Board of Directors or Trustees. — Unless otherwise provided in

this Code, the corporate powers of all corporations formed under this Code
shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified.

Indubitably, a corporation may act only through its board of directors or,
when authorized either by its bylaws or by its board resolution, through its
officers or agents in the normal course of business. The general principles of
agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, bylaws, or relevant
provisions of law. Thus, this Court has held that "a corporate officer or agent
may represent and bind the corporation in transactions with third persons to
the extent that the authority to do so has been conferred upon him, and this
includes powers which have been intentionally conferred, and also such
powers as, in the usual course of the particular business, are incidental to,
or may be implied from, the powers intentionally conferred, powers added
by custom and usage, as usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has caused persons dealing
with the officer or agent to believe that it has conferred."

Furthermore, the Court has also recognized the rule that "persons dealing
with an assumed agent, whether the assumed agency be a general or
special one bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon
them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19)." Unless duly
authorized, a treasurer, whose powers are limited, cannot bind the
corporation in a sale of its assets.

In the case at bar, Respondent Motorich categorically denies that it ever

authorized Nenita Gruenberg, its treasurer, to sell the subject parcel of
land. Consequently, petitioner had the burden of proving that Nenita
Gruenberg was in fact authorized to represent and bind Motorich in the
transaction. Petitioner failed to discharge this burden. Its offer of evidence
before the trial court contained no proof of such authority. It has not shown
any provision of said respondent's articles of incorporation, bylaws or board
resolution to prove that Nenita Gruenberg possessed such power.

121
That Nenita Gruenberg is the treasurer of Motorich does not free petitioner
from the responsibility of ascertaining the extent of her authority to
represent the corporation. Petitioner cannot assume that she, by virtue of
her position, was authorized to sell the property of the corporation. Selling is
obviously foreign to a corporate treasurer's function, which generally has
been described as "to receive and keep the funds of the corporation, and to
disburse them in accordance with the authority given him by the board or
the properly authorized officers."

Neither was such real estate sale shown to be a normal business activity of
Motorich. The primary purpose of Motorich is marketing, distribution, export
and import in relation to a general merchandising business. Unmistakably,
its treasurer is not cloaked with actual or apparent authority to buy or sell
real property, an activity which falls way beyond the scope of her general
authority.

Art. 1874 and 1878 of the Civil Code of the Philippines provides:

Art. 1874. When a sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing: otherwise, the sale
shall be void.

Art. 1878. Special powers of attorney are necessary in the following case:

xxx xxx xxx

(5) To enter any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;

xxx xxx xxx.

2.) As a general rule, the acts of corporate officers within the scope of their
authority are binding on the corporation. But when these officers exceed
their authority, their actions "cannot bind the corporation, unless it has
ratified such acts or is estopped from disclaiming them."

In this case, there is a clear absence of proof that Motorich ever authorized
Nenita Gruenberg, or made it appear to any third person that she had the
authority, to sell its land or to receive the earnest money. Neither was there
any proof that Motorich ratified, expressly or impliedly, the contract.
Petitioner rests its argument on the receipt which, however, does not prove
the fact of ratification. The document is a hand-written one, not a corporate
receipt, and it bears only Nenita Gruenberg's signature. Certainly, this
document alone does not prove that her acts were authorized or ratified by
Motorich.

Art. 1318 of the Civil Code lists the requisites of a valid and perfected
contract: "(1) consent of the contracting parties; (2) object certain which is
the subject matter of the contract; (3) cause of the obligation which is
established." As found by the trial court and affirmed by the Court of
Appeals, there is no evidence that Gruenberg was authorized to enter into
the contract of sale, or that the said contract was ratified by Motorich. This
factual finding of the two courts is binding on this Court. As the consent of
the seller was not obtained, no contract to bind the obligor was perfected.

122
Therefore, there can be no valid contract of sale between petitioner and
Motorich.

Because Motorich had never given a written authorization to Respondent

Gruenberg to sell its parcel of land, we hold that the February 14, 1989
Agreement entered into by the latter with petitioner is void under Article
1874 of the Civil Code. Being inexistent and void from the beginning, said
contract cannot be ratified.

3.) Piercing the Corporate Veil Not Justified

One of the advantages of a corporate form of business organization is the

limitation of an investor's liability to the amount of the investment. This
feature flows from the legal theory that a corporate entity is separate and
distinct from its stockholders. However, the statutorily granted privilege of a
corporate veil may be used only for legitimate purposes. On equitable
considerations, the veil can be disregarded when it is utilized as a shield to
commit fraud, illegality or inequity; defeat public convenience; confuse
legitimate issues; or serve as a mere alter ego or business conduit of a
person or an instrumentality, agency or adjunct of another corporation.

In the present case, however, the Court finds no reason to pierce the
corporate veil of Respondent Motorich. Petitioner utterly failed to establish
that said corporation was formed, or that it is operated, for the purpose of
shielding any alleged fraudulent or illegal activities of its officers or
stockholders; or that the said veil was used to conceal fraud, illegality or
inequity at the expense of third persons like petitioner.

Petitioner claims that Motorich is a close corporation. We rule that it is not.

Section 96 of the Corporation Code defines a close corporation as follows:

Sec. 96. Definition and Applicability of Title. — A close corporation, within

the meaning of this Code, is one whose articles of incorporation provide
that: (1) All of the corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a specified number
of persons, not exceeding twenty (20); (2) All of the issued stock of all
classes shall be subject to one or more specified restrictions on transfer
permitted by this Title; and (3) The corporation shall not list in any stock
exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall be deemed not a close
corporation when at least two-thirds (2/3) of its voting stock or voting rights
is owned or controlled by another corporation which is not a close
corporation within the meaning of this Code. . . . .

The articles of incorporation of Motorich Sales Corporation does not contain

any provision stating that (1) the number of stockholders shall not exceed
20, or (2) a preemption of shares is restricted in favor of any stockholder or
of the corporation, or (3) listing its stocks in any stock exchange or making a
public offering of such stocks is prohibited. From its articles, it is clear that
Respondent Motorich is not a close corporation. Motorich does not become
one either, just because Spouses Reynaldo and Nenita Gruenberg owned
99.866% of its subscribed capital stock. The "[m]ere ownership by a single
stockholder or by another corporation of all or capital stock of a corporation
is not of itself sufficient ground for disregarding the separate corporate

123
personalities." So, too, a narrow distribution of ownership does not, by itself,
make a close corporation.

In the present case, Motorich is not a close corporation, as previously

discussed, and the agreement was entered into by the corporate treasurer
without the knowledge of the board of directors.

The Court is not unaware that there are exceptional cases where "an action
by a director, who singly is the controlling stockholder, may be considered
as a binding corporate act and a board action as nothing more than a mere
formality." The present case, however, is not one of them.

Spouses Reynaldo and Nenita Gruenberg own "almost 99.866%" of

Respondent Motorich. Since Nenita is not the sole controlling stockholder of
Motorich, the aforementioned exception does not apply.
Granting arguendo that the corporate veil of Motorich is to be disregarded,
the subject parcel of land would then be treated as conjugal property of
Spouses Gruenberg, because the same was acquired during their marriage.
Neither spouse can alienate in favor of another his or interest in the
partnership or in any property belonging to it; neither spouse can ask for a
partition of the properties before the partnership has been legally dissolved."

Assuming further, for the sake of argument, that the spouses' property
regime is the absolute community of property, the sale would still be invalid.
Under this regime, "alienation of community property must have the written
consent of the other spouse or he authority of the court without which the
disposition or encumbrance is void." Both requirements are manifestly
absent in the instant case.

Nenita Gruenberg should be ordered to return to petitioner the amount she

received as earnest money, as "no one shall enrich himself at the expense of
another." a principle embodied in Article 2154 of Civil Code.

Florentino Bautista-Spille v. Nicorp Management & Dev. Corp., et.al., G.R.

no. 124507, 9 October 2015

FACTS: Petitioner Florentina Bautista-Spille is the registered owner of a

parcel of land with an area of more or less 33,052 square meters (subject
property). On June 20, 1996, petitioner and her spouse, Harold E. Spille,
executed a document denominated as General Power of Attorney in favor of
her brother, respondent Benjamin Bautista, authorizing the latter to
administer all her businesses and properties in the Philippines. The said
document was notarized before the Consulate General of the Philippines,
New York, United States of America.

On August 13, 2004, Benjamin and NICORP Management and Development

Corporation entered into a contract to sell over the subject property with
agreed amount of P15,000,000.00. In the said contract, NICORP agreed to
give a down payment equivalent to 20% of the purchase price and pay the
remaining balance in eight (8) months. It was also agreed that upon receipt

124
of the down payment, the TCT of the subject property would be deposited
with the International Exchange Bank (IE Bank) and placed in escrow. It
would only be released upon full payment of the agreed amount.
Furthermore, Benjamin was required to submit a special power of attorney
(SPA) covering the sale transaction, otherwise, the payment of the balance
would be suspended and a penalty of P150,000.00 every month would be
imposed.

An Escrow Agreement, dated October 13, 2004, was executed designating IE

Bank as the Escrow Agent, obliging the latter to hold and take custody of
TCT No. T-197 (title of the subject property), and to release the said title to
NICORP upon full payment of the subject property.

NICORP issued a check in the amount of P2,250,000.00, representing the

down payment of the subject property. Thereafter, the TCT was deposited
with IE Bank and placed in escrow.

When petitioner discovered the sale, her lawyer immediately sent demand
letters to NICORP, Benjamin, and to IE bank, informing them that she was
opposing the sale of the subject property and that Benjamin was not clothed
with authority to enter into a contract to sell and demanding the return of
the owner's copy of the certificate of title to her true and lawful attorney-in-
fact, Manujel B. Flores, Jr. (Flores). NICORP, Benjamin and IE Bank,
however, failed and refused to return the title of the subject property.

Consequently, petitioner filed a complaint against Benjamin, NICORP and IE

Bank for declaration of nullity of the contract to sell, injunction, recovery of
possession and damages with prayer for the issuance of a temporary
restraining order and/or preliminary injunction because NICORP was starting
the development of the subject property into a residential subdivision and
was planning to sell the lots to prospective buyers. Petitioner denied
receiving the down payment for the subject property.

NICORP averred that Benjamin was empowered to enter into a contract to

sell by virtue of the general power of attorney; that the said authority was
valid and subsisting as there was no specific instrument that specifically
revoked his authority; that assuming Bautista exceeded his authority when
he executed the contract to sell, the agreement was still valid and
enforceable as the agency was already "coupled with interest" because of
the partial payment in the amount of P3,000,000.00; and that the contract
could not just be revoked without NICORP being reimbursed of its down
payment and the costs for the initial development it had incurred in
developing the subject property into a residential subdivision. IE Bank
asserted that at the time of its constitution as an escrow agent, Benjamin
possessed the necessary authority from petitioner; that because the contract
to sell remained valid, it was duty-bound to observe its duties and
obligations under the Escrow Agreement; and that in the absence of any
order from the court, it was proper for the bank not to comply with
petitioner's demand for the surrender of the certificate of title. Benjamin, on
the other hand, did not file any responsive pleading. Hence, he was declared
in default in the RTC Order.

The RTC rendered its judgment, declaring the contract to sell null and
void. It explained that the general power of authority only pertained to acts

125
of administration over petitioner's businesses and properties in the
Philippines and did not include authority to sell the subject property. It
pointed out that NICORP was well aware of Benjamin's lack of authority to
sell the subject property as gleaned from the contract to sell which required
the latter to procure the SPA from petitioner and even imposed a penalty of
P150,000.00 per month if he would be delayed in securing the SPA.

The CA reversed the RTC decision, explaining that the general power of
attorney executed by petitioner in favor of Benjamin authorized the latter
not only to perform acts of administration over her properties but also to
perform acts of dominion which included, among others, the power to
dispose the subject property. Hence, this petition.

Petitioner argues that the general power of attorney did not clothe Benjamin
with the authority to enter into a contract to sell the subject property. She
contends that the general power of attorney pertained to the power to buy,
sell, negotiate and contract over the business and personal property but did
not specifically authorize the sale of the subject property.

NICORP counters that the general power of attorney sufficiently conferred

authority on Benjamin to enter into the contract to sell. It asserts that the
written authority, while denominated as a general power of attorney,
expressly authorized him to sell the subject property. NICORP insists that it
was a buyer in good faith and was never negligent in ascertaining the extent
of his authority to sell the property. It explains that though the general
power of attorney sufficiently clothed Bautista with authority to sell the
subject property, it nonetheless required him to submit the SPA in order to
comply with the requirements of the Register of Deeds and the Bureau of
Internal Revenue.

ISSUE: WON Benjamin Bautista was authorized to enter into the contract to
sell with respondent.

RULING: NO. The well-established rule is when a sale of a parcel of land or

any interest therein is through an agent, the authority of the latter shall be
in writing, otherwise the sale shall be void.

Articles 1874 and 1878 of the Civil Code explicitly provide:

Art. 1874. When a sale of a piece of land or any interest therein is

through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void.

Art. 1878. Special powers of attorney are necessary in the following

cases:
(1) x xx

(5) To enter into any contract by which the ownership of an

immovable is transmitted or acquired either gratuitously or for
a valuable consideration;

xxx. [Emphasis Supplied]

From the foregoing, it is clear that an SPA in the conveyance of real rights
over immovable property is necessary.

126
To reiterate, such authority must be conferred in writing and must express
the powers of the agent in clear and unmistakable language in order for the
principal to confer the right upon an agent to sell the real property. It is a
general rule that a power of attorney must be strictly construed, and courts
will not infer or presume broad powers from deeds which do not sufficiently
include property or subject under which the agent is to deal. Thus, when the
authority is couched in general terms, without mentioning any specific power
to sell or mortgage or to do other specific acts of strict dominion, then only
acts of administration are deemed conferred.

In the case at bench, the only evidence adduced by NICORP to prove

Benjamin's authority to sell petitioner's property was the document
denominated as General Power of Attorney, dated June 20, 1996. The
pertinent portions of the said document reads:

KNOW ALL MEN BY THESE PRESENTS:chanRoblesvirtualLawlibrary

THAT I/WE FLORENTINA B. SPILLE, of legal age, single/married to

HAROLD E. SPILLE and residents of x x x do hereby appoint, name and
constitute BENJAMIN G. BAUTISTA resident(s) of x x x to be my/our
true and lawful attorney(s), to administer and conduct all my/our
affairs and for that purpose in my/our name(s) and on my/our behalf,
to do and execute any or all of the following acts, deeds and things to
wit:
1. To exercise administration, general control and supervision over
my/our business and property in the Philippines, and to act as
my/our general representative(s) and agent(s) with full authority
to buy, sell, negotiate and contract for me/us and my/our
behalf;
2. To ask, demand, sue for, recover and receive all sums of money,
debts, dues, goods, wares, merchandise, chattels, effects and
thing of whatsoever nature or description, which now or
hereafter shall be or become due, owing, payable or belonging to
me/us in or by any right, title, ways or means howsoever, and
upon receipt thereof or any part thereof, to make, sign, execute
and deliver such receipts, releases or other discharges;

xxx
Doubtless, there was no perfected contract to sell between petitioner and
NICORP. Nowhere in the General Power of Attorney was Benjamin granted,
expressly or impliedly, any power to sell the subject property or a portion
thereof. The authority expressed in the General Power of Attorney was
couched in very broad terms covering petitioner's businesses and properties.
Time and again, this Court has stressed that the power of administration
does not include acts of disposition, which are acts of strict ownership. As
such, an authority to dispose cannot proceed from an authority to
administer, and vice versa, for the two powers may only be exercised by an
agent by following the provisions on agency of the Civil Code.

In the same vein, NICORP cannot be considered a purchaser in good faith.

The well-settled rule is that a person dealing with an assumed agent is
bound to ascertain not only the fact of agency but also the nature and extent
of the agent's authority. The law requires a higher degree of prudence from

127
one who buys from a person who is not the registered owner. He is expected
to examine all factual circumstances necessary for him to determine if there
are any flaws in the title of the transferor, or in his capacity to transfer the
land. In ascertaining good faith, or the lack of it, which is a question of
intention, courts are necessarily controlled by the evidence as to the conduct
and outward acts by which alone the inward motive may, with safety, be
determined. Good faith, or want of it, is not a visible, tangible fact that can
be seen or touched, but rather a state or condition of mind which can only
be judged by actual or fancied token or signs.

Here, the Court agrees with the RTC that NICORP was fully aware that
Benjamin was not properly authorized to enter into any transaction
regarding the sale of petitioner's property. In fact, in the contract to sell,
NICORP required Benjamin to secure the SPA from petitioner within ninety
(90) days from the execution of the contract and even imposed a substantial
amount of penalty in the amount of P150,000.00 a month in case of non-
compliance plus suspension of payment of the balance of the contract price.

In sum, the Court agrees with the findings and conclusion of the RTC. The
consent of petitioner in the contract to sell was not obtained, hence, not
enforceable. Furthermore, because NICORP is considered a builder in bad
faith, it has no right to be refunded the value of whatever improvements it
introduced on the subject property.

Claudio delos Reyes, et.al. vs. CA, et.al., G.R. No. 129103; September 3,
1999

FACTS: Private respondent Daluyong Gabriel, (who died on September 14,

1995 and was substituted herein by his children RENATO GABRIEL, MARIA
LUISA B. ESTEBAN and MARIA RITA G. BARTOLOME) was the registered
owner parcel of land situated in Barrio Magugpo, Tagum, Davao del
Norte, having acquired the same by hereditary succession sometime in 1974
as one of the children and heirs of the late Maximo Gabriel.

Since Daluyong Gabriel together with his family was then residing in
Mandaluyong, Metro Manila, his sister Maria Rita Gabriel de Rey acted as
administratrix of the said parcel of land and took charge of collecting the
rentals for those portions which have been leased to certain tenants/lessees.
One of these lessees is LYDIA DE LOS REYES. LYDIA leased a portion of One
Hundred Seventy Six (176) square meters for a term of one year beginning
June 15, 1985 renewable upon agreement of the parties at the rental rate of
Two Hundred (P200.00) pesos, per month.

Sometime in 1985 Daluyong Gabriel sent his son Renato Gabriel to Tagum
reportedly with instructions to take over from Maria Rita G. de Rey as
administrator of the said parcel of land. Upon agreement of the parties, the
Contract of Lease between LYDIA DE LOS REYES and Maria Rita Gabriel de
Rey was novated and replaced by a Contract of Lease executed on
September 26, 1985 by and between RENATO GABRIEL as Lessor and Lydia
de los Reyes as Lessee. The term of the lease was changed to six (6) years

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from and after June 15, 1985 or up to June 15, 1991; receipt of the
payment in advance of the total rental amount of Fourteen Thousand Four
Hundred (P14,400.00) Pesos was acknowledged by Lessor Renato Gabriel.

Sometime in November 1987, Lydia de los Reyes verbally agreed to buy two
hundred fifty (250) square meters (including the 176 square meters leased
by her), and thereafter an additional fifty (50) square meters or a total of
three hundred (300) square meters of Daluyong Gabriel's registered
property for a total amount of P90,000.00. Receipt of the payment of the
purchase price made in several installments by Lydia de los Reyes was
acknowledged by Renato Gabriel as evidenced by official receipts issued and
signed by him all bearing the letter head "Gabriel Building." No deed of sale
was executed covering the transaction. Purchaser Lydia de los Reyes
however proceeded with the construction of a two-storey commercial
building on the said 300 square meter lot after obtaining a building permit
from the Engineer's Office in Tagum.

Acting on the information given by his daughter Maria Luisa Gabriel Esteban
upon the latter's return from a trip to Tagum that spouses Claudio and Lydia
de los Reyes were constructing a two-storey building on a portion of his
land, Daluyong Gabriel, through his lawyer, sent a letter to the De los Reyes
couple demanding that they cease and desist from continuing with their
construction and to immediately vacate the premises, asserting that the
construction was unauthorized and that their occupancy of the subject
portion was not covered by any lease agreement.

Spouses Claudio and Lydia de los Reyes through counsel sent their letter
reply explaining that the De los Reyeses are the innocent party who entered
into the lease agreement and subsequent sale of subject portion of land in
good faith and upon the assurance made by the former administratrix, Maria
Rita G. Rey, her nephew Tony Rey, Mrs. Fe S. Gabriel and Mr. Daluyong
Gabriel himself that Renato Gabriel is the new administrator authorized to
enter into such agreements involving the subject property.

Daluyong Gabriel commenced an action against spouses Claudio and Lydia

de los Reyes for the recovery of the subject portion of land. In his complaint
Daluyong maintained that his son Renato was never given the authority to
lease nor to sell any portion of his land as his instruction to him (Renato)
was merely to collect rentals.

Spouses Claudio and Lydia delos Reyes countered that the sale to them of
the subject portion of land by Renato Gabriel was with the consent and
knowledge of Daluyong, his wife Fe and their other children, and filed a
complaint for specific performance against Daluyong and his children.

The two Civil Cases were heard jointly and the trial court rendered a
consolidated decision and ordered Daluyong to execute a Deed of
Conveyance and other necessary documents in favor of Claudio delos Reyes
and Lydia delos Reyes.

The Court of Appeals reversed and set aside the decision of the Regional
Trial Court and rendered a new one "ORDERING appellee spouses Claudio
and Lydia delos Reyes to immediately vacate the 300 square meter portion
of that land. Hence, this appeal.

129
Petitioners allege further that even if Renato Gabriel was not (yet) the owner
of the subject portion of land when he sold the same to petitioners, after the
death of his parents Daluyong and Fe Gabriel, he, as heir, inherited and
succeeded to the ownership of said portion of land by operation of law
thereby rendering valid and effective the sale he executed in favor of
petitioners. Petitioners also maintain that on the basis of the facts proven
and admitted during the trial, Daluyong Gabriel appears to have not only
authorized his son Renato Gabriel to sell the subject portion of land but also
ratified the transaction by his contemporaneous conduct and actuations
shown during his lifetime.

ISSUE:

1. WON the verbal agreement which petitioners entered into with private
respondent Renato Gabriel involving the sale of the portion of land
registered in the name of Renato's late father Daluyong Gabriel is a valid
and enforceable – NO

2. WON Petitioners is entitled to reimbursement. –YES but only as to

payment of purchase price.

RULING: By law a contract of sale is perfected at the moment there is a

meeting of minds upon the thing which is the object of the contract and
upon the price. It is a consensual contract which is perfected by mere
consent. Once perfected, the contract is generally binding in whatever form
(i.e. written or oral) it may have been entered into provided the three (3)
essential requisites for its validity prescribed under Article 1318 supra, are
present. Foremost of these requisites is the consent and the capacity to give
consent of the parties to the contract.

The legal capacity of the parties is an essential element for the existence of
the contract because it is an indispensable condition for the existence of
consent. There is no effective consent in law without the capacity to give
such consent. In other words, legal consent presupposes capacity. Thus,
there is said to be no consent, and consequently, no contract when the
agreement is entered into by one in behalf of another who has never given
him authorization therefor unless he has by law a right to represent the
latter.

It has also been held that if the vendor is not the owner of the property at
the time of the sale, the sale is null and void, because a person can sell only
what he owns or is authorized to sell. One exception is when a contract
entered into in behalf of another who has not authorized it, subsequently
confirmed or ratified the same in which case, the transaction becomes valid
and binding against him and he is estopped to question its legality.

Renato Gabriel was neither the owner of the subject property nor a duly
designated agent of the registered owner (Daluyong Gabriel) authorized to
sell subject property in his behalf, and there was also no sufficient evidence
adduced to show that Daluyong Gabriel subsequently ratified Renato's act.
In this connection it must be pointed out that pursuant to Article 1874 of
the Civil Code, when the sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing; otherwise
the sale shall be void. In other words, for want of capacity (to give consent)

130
on the part of Renato Gabriel, the oral contract of sale lacks one of the
essential requisites for its validity prescribed under Article 1318, supra and
is therefore null and void ab initio.

Petitioners' contention that although at the time of the alleged sale, Renato
Gabriel was not yet the owner of the subject portion of land, after the death
of Daluyong Gabriel, he (Renato) became the owner and acquired title
thereto by way of hereditary succession which title passed by operation of
law to petitioners pursuant to Article 1434 of the Civil Code 32 is not tenable.

Records show that on October 1, 1990 Daluyong Gabriel donated the entire
lot to his daughter Maria Rita G. Bartolome and the property is now in her
name. This means that when Daluyong Gabriel died on September 14, 1995,
he was no longer the owner of the subject property. Accordingly, Renato
Gabriel never acquired ownership or title over any portion of said property
as one of the heirs of Daluyong Gabriel.

However, respondent Court of Appeals failed to consider the undisputed fact

pointed out by the trial court that petitioners had already performed their
obligation under subject oral contract of sale, i.e. completing their payment
of P90,000.00 representing the purchase price of the 300 square meter
portion of land. Hence, for the sake of justice and equity, and in consonance
with the salutary principle of non-enrichment at another's expense, private
respondent Renato Gabriel, should be ordered to refund to petitioners the
amount of P90,000.00 which they have paid to and receipt of which was duly
acknowledged by him.

However, petitioners' claim for the refund to them of P1,000,000.00

representing the alleged value and cost of the two-storey commercial
building they constructed on subject portion of land cannot be favorably
considered as no sufficient evidence was adduced to prove and establish the
same.

Gozun v. Mercado, G.R. No. 167812; December 19, 2006

FACTS: In the local elections of 1995, respondent vied for the gubernatorial
post in Pampanga. Upon respondents request, petitioner, owner of JMG
Publishing House, a printing shop, submitted to respondent draft samples
and price quotation of campaign materials.

By petitioners claim, respondents wife had told him that respondent

already approved his price quotation and that he could start printing the
campaign materials, hence, he did print campaign materials and delivered
the same to respondents headquarters.

Meanwhile, on March 31, 1995, respondents sister-in-

law, Lilian Soriano (Lilian) obtained from petitioner cash advance
of P253,000 allegedly for the allowances of poll watchers who were

131
attending a seminar and for other related expenses. Lilian acknowledged on
petitioners 1995 diary receipt of the amount.

Petitioner later sent respondent a Statement of Account in the total

amount of P2,177,906 itemized as follows: P640,310 for JMG Publishing
House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph
Printing Press; and P253,000, the cash advance obtained by Lilian.

Respondents wife partially paid P1,000,000 to petitioner. However,

despite repeated, respondent failed to settle the balance of his account to
petitioner.

Petitioner thus filed with the Regional Trial Court of Angeles City on
November 25, 1998 a complaint against respondent to collect the remaining
amount of P1,177,906 plus inflationary adjustment and attorney’s fees.

RTC- in favor of petitioner; ordered respondent to pay

CA-dismissed the complaint for lack of cause of action; it held that there was
no evidence to support the claim that Lilian was authorized by respondent to
borrow money on his behalf.

ISSUE: WON Lilian was authorized to obtain the loan.

RULING: NO. By the contract of agency a person binds himself to render

some service or to do something in representation or on behalf of another,
with the consent or authority of the latter. Contracts entered into in the
name of another person by one who has been given no authority or legal
representation or who has acted beyond his powers are classified as
unauthorized contracts and are declared unenforceable, unless they are
ratified.

Generally, the agency may be oral, unless the law requires a specific
form. However, a special power of attorney is necessary for an agent to, as
in this case, borrow money, unless it be urgent and indispensable for the
preservation of the things which are under administration. Since nothing in
this case involves the preservation of things under administration, a
determination of whether Soriano had the special authority to borrow money
on behalf of respondent is in order.

It bears noting that Lilian signed in the receipt in her name alone,
without indicating therein that she was acting for and in behalf of
respondent. She thus bound herself in her personal capacity and not as an
agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the

principal by a mortgage on real property executed by an agent, it must upon
its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the
name of the principal. x x x (Emphasis and underscoring supplied)

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FEBTC (now BPI) et.al. v. Sps. Cayetano, G.R. No. 179909; January 25,
2010

FACTS: Respondent Leonor C. Cayetano (Cayetano) executed a special

power of attorney in favor of her daughter Teresita C. Tabing (Tabing)
authorizing her to contract a loan from petitioner in an amount not more
than three hundred thousand pesos (P300,000.00) and to mortgage her two
(2) lots.

Petitioner loaned Tabing one hundred thousand pesos (P100,000.00)

secured by two (2) promissory notes and a real estate mortgage over
Cayetanos two (2) properties. The mortgage document was signed by
Tabing and her husband as mortgagors in their individual capacities, without
stating that Tabing was executing the mortgage contract for and in behalf of
the owner (Cayetano).

Petitioner foreclosed the mortgage for failure of the respondents and

the spouses Tabing to pay the loan. The subject properties were sold to
petitioner for one hundred sixty thousand pesos (P160,000.00).

More than five (5) years later, Tabing, on behalf of Cayetano, sent a
letter dated September 10, 1996 to petitioner expressing the intent to
repurchase the properties for two hundred fifty thousand pesos
(P250,000.00) with proposed terms of payment.[12] Petitioner refused the
offer.

Respondents then filed on December 18, 1996 a complaint for

annulment of mortgage and extrajudicial foreclosure of the properties with
damages in the RTC of Naga City. Respondents sought nullification of the
real estate mortgage and extrajudicial foreclosure sale, as well as the
cancellation of petitioners title over the properties.

RTC- rendered judgment in favor of the respondents, holding that the

principal (Cayetano) cannot be bound by the real estate mortgage executed
by the agent (Tabing) unless it is shown that the same was made and signed
in the name of the principal; hence, the mortgage will bind the agent only.

CA- affirmed; It held that it must be shown that the real estate
mortgage was executed by the agent on-behalf of the principal, otherwise
the agent may be deemed to have acted on his own and the mortgage is
void.

ISSUE: WON the principal is bound by the real estate mortgage executed
by the authorized agent in her own name without indicating the principal.

RULING: Citing the case of The Philippine Sugar Estates Development Co.,
Ltd., Inc. v. Poizat, et al., the SC held that

It is a general rule in the law of agency that, in order to bind the

principal by a mortgage on real property executed by an agent, it must upon
its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the

133
agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. Neither is it ordinarily sufficient that
in the mortgage the agent describes himself as acting by virtue of a power of
attorney, if in fact the agent has acted in his own name and has set his own
hand and seal to the mortgage. This is especially true where the agent
himself is a party to the instrument. However clearly the body of the
mortgage may show and intend that it shall be the act of the
principal, yet, unless in fact it is executed by the agent for and on
behalf of his principal and as the act and deed of the principal, it is
not valid as to the principal. [EMPHASIS SUPPLIED]

Notwithstanding the nullity of the real estate mortgage executed by

Tabing and her husband, we find that the equity principle of laches is
applicable in the instant case. Laches is negligence or omission to assert a
right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it. Its
essential elements are: (1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation complained of; (2) delay
in asserting complainants right after he had knowledge of the defendants
conduct and after he has an opportunity to sue; (3) lack of knowledge or
notice on the part of the defendant that the complainant would assert the
right on which he bases his suit; and (4) injury or prejudice to the defendant
in the event relief is accorded to the complainant.

In the present case, records clearly show that respondents could have
filed an action to annul the mortgage on their properties, but for unexplained
reasons, they failed to do so. They only questioned the loan and mortgage
transactions in December 1996, or after the lapse of more than five (5)
years from the date of the foreclosure sale. It bears noting that the real
estate mortgage was registered and annotated on the titles of respondents,
and the latter were even informed of the extrajudicial foreclosure and the
scheduled auction. Instead of impugning the real estate mortgage and
opposing the scheduled public auction, respondents lawyer wrote a letter to
petitioner and merely asked that the scheduled auction be postponed to a
later date. Even after five (5) years, respondents still failed to oppose the
foreclosure and the subsequent transfer of titles to petitioner when their
agent, Tabing, acting in behalf of Cayetano, sent a letter proposing to buy
back the properties. It was only when the negotiations failed that
respondents filed the instant case. Clearly, respondents slept on their rights.

Alvin Patrimono v. Napoleon Gutierrez, et.al., G.R. No. 187769; June 4,

2014

FACTS: The petitioner and the respondent Napoleon Gutierrez (Gutierrez)

entered into a business venture under the name of Slam Dunk Corporation
(Slum Dunk), a production outfit that produced mini-concerts and shows
related to basketball.

In the course of their business, the petitioner pre-signed several

checks to answer for the expenses of Slam Dunk. Although signed, these
134
checks had no payee’s name, date or amount. The blank checks were
entrusted to Gutierrez with the specific instruction not to fill them out
without previous notification to and approval by the petitioner. According to
petitioner, the arrangement was made so that he could verify the validity of
the payment and make the proper arrangements to fund the account.

In the middle of 1993, without the petitioner’s knowledge and consent,

Gutierrez went to Marasigan (the petitioner’s former teammate), to secure a
loan in the amount of ₱200,000.00 on the excuse that the petitioner needed
the money for the construction of his house.

Marasigan acceded to Gutierrez’ request and gave him ₱200,000.00

sometime in February 1994 simultaneous with the handing of the check with
the blank portions already filled.

On May 24, 1994, Marasigan deposited the check but it was

dishonored for the reason "ACCOUNT CLOSED." Marasigan sought recovery
from Gutierrez, to no avail. Consequently, he filed a criminal case for
violation of B.P. 22.

On September 10, 1997, the petitioner filed before the Regional Trial
Court (RTC) a Complaint for Declaration of Nullity of Loan and Recovery of
Damages against Gutierrez and co-respondent Marasigan.

ISSUE: WON petitioner authorized the borrowing? No

RULING:

Contracts of Agency May be Oral Unless The Law Requires a Specific

Form

Article 1868 of the Civil Code defines a contract of agency as a contract

whereby 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." Agency may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral. 6 However, it must be

written when the law requires a specific form, for example, in a sale of a
piece of land or any interest therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power
of authority before an agent can loan or borrow money in behalf of the
principal.

Article 1878 does not state that the authority be in writing. As long as the
mandate is express, such authority may be either oral or written. We
unequivocably declared in Lim Pin v. Liao Tian, et al., 7 that the requirement
under Article 1878 of the Civil Code refers to the nature of the authorization
and not to its form. Be that as it may, the authority must be duly established
by competent and convincing evidence other than the self serving assertion
of the party claiming that such authority was verbally given.

135
The Contract of Loan Entered Into by Gutierrez in Behalf of the
Petitioner Should be Nullified for Being Void; Petitioner is Not Bound
by the Contract of Loan.

A review of the records reveals that Gutierrez did not have any authority to
borrow money in behalf of the petitioner.1âwphi1Records do not show that
the petitioner executed any special power of attorney (SPA) in favor of
Gutierrez. In fact, the petitioner’s testimony confirmed that he never
authorized Gutierrez (or anyone for that matter), whether verbally or in
writing, to borrow money in his behalf, nor was he aware of any such
transaction.

In the absence of any showing of any agency relations or special authority to

act for and in behalf of the petitioner, the loan agreement Gutierrez entered
into with Marasigan is null and void. Thus, the petitioner is not bound by the
parties’ loan agreement.

Furthermore, that the petitioner entrusted the blank pre-signed checks to

Gutierrez is not legally sufficient because the authority to enter into a loan
can never be presumed. The contract of agency and the special fiduciary
relationship inherent in this contract must exist as a matter of fact. The
person alleging it has the burden of proof to show, not only the fact of
agency, but also its nature and extent.11

The records show that Marasigan merely relied on the words of Gutierrez
without securing a copy of the SPA in favor of the latter and without
verifying from the petitioner whether he had authorized the borrowing of
money or release of the check. He was thus bound by the risk accompanying
his trust on the mere assurances of Gutierrez.

Bucton v. Rural Bank of El Salvador, Inc., G.R. No. 179625, 24 February

2014.

FACTS: On April 29, 1988, petitioner Nicanora G. Bucton filed with the RTC
of Cagayan de Oro a case for Annulment of Mortgage, Foreclosure, and
Special Power of Attorney (SPA) against Erlinda Concepcion (Concepcion)
and respondents Rural Bank of El Salvador, Misamis Oriental, and Sheriff
Reynaldo Cuyong.

Petitioner alleged that she is the owner of a parcel of land, covered by

Transfer Certificate of Title (TCT) No. T-3838, located in Cagayan de Oro
City; that on June 6, 1982, Concepcion borrowed the title on the pretext that
she was going to show it to an interested buyer; that Concepcion obtained a
loan in the amount of P30,000.00 from respondent bank; that as security for
the loan, Concepcion mortgaged petitioner’s house and lot to respondent
bank using a SPA allegedly executed by petitioner in favor of
Concepcion; that Concepcion failed to pay the loan; that petitioner’s house
and lot were foreclosed by respondent sheriff

136
During the trial, petitioner testified that a representative of respondent bank
went to her house to inform her that the loan secured by her house and lot
was long overdue. Since she did not mortgage any of her properties nor did
she obtain a loan from respondent bank, she decided to go to respondent
bank on June 22, 1987 to inquire about the matter. It was only then that
she discovered that her house and lot was mortgaged by virtue of a forged
SPA. She insisted that her signature and her husband’s signature on the SPA
were forged and that ever since she got married, she no longer used her
maiden name, Nicanora Gabar, in signing documents. Petitioner also denied
appearing before the notary public, who notarized the SPA. She also testified
that the property referred to in the SPA, TCT No. 3838, is a vacant lot and
that the house, which was mortgaged and foreclosed, is covered by a
different title, TCT No. 3839.

To support her claim of forgery, petitioner presented Emma Nagac who

testified that when she was at Concepcion’s boutique, she was asked by the
latter to sign as a witness to the SPA; that when she signed the SPA, the
signatures of petitioner and her husband had already been affixed; and that
Lugod instructed her not to tell petitioner about the SPA. On February 23,
1998, the RTC issued a Decision sustaining the claim of petitioner that the
SPA was forged as the signatures appearing on the SPA are different from
the genuine signatures presented by petitioner. The RTC opined that the
respondent bank should have conducted a thorough inquiry on the
authenticity of the SPA considering that petitioner’s residence certificate was
not indicated in the acknowledgement of the SPA. It declared void the SPA
and the Mortgage.

Dissatisfied, respondent bank elevated the case to the CA. On August 17,
2005, the CA reversed the findings of the RTC. Hence this petition.

ISSUE: whether or not a mortgage executed by an agent who signed it

under his own name and failed to indicate that he did so in behalf of another
is binding upon the principal

RULING: The Petition is meritorious. The Real Estate Mortgage was entered
into by Concepcion in her own personal capacity.

As early as the case of Philippine Sugar Estates Development Co. v.

Poizat, we already ruled that "in order to bind the principal by a deed
executed by an agent, the deed must upon its face purport to be made,
signed and sealed in the name of the principal." In other words, the mere
fact that the agent was authorized to mortgage the property is not sufficient
to bind the principal, unless the deed was executed and signed by the agent
for and on behalf of his principal. This ruling was adhered to and reiterated
with consistency in the cases of Rural Bank of Bombon (Camarines Sur), Inc.
v. Court of Appeals, Gozun v. Mercado, and Far East Bank and Trust
Company (Now Bank of the Philippine Island) v. Cayetano.

137
Similarly, in this case, the authorized agent failed to indicate in the
mortgage that she was acting for and on behalf of her principal. The Real
Estate Mortgage, explicitly shows on its face, that it was signed by
Concepcion in her own name and in her own personal capacity. In fact, there
is nothing in the document to show that she was acting or signing as an
agent of petitioner. Thus, consistent with the law on agency and established
jurisprudence, petitioner cannot be bound by the acts of Concepcion.

In light of the foregoing, there is no need to delve on the issues of forgery of

the SPA and the nullity of the foreclosure sale. For even if the SPA was valid,
the Real Estate Mortgage would still not bind petitioner as it was signed by
Concepcion in her personal capacity and not as an agent of petitioner.
Simply put, the Real Estate Mortgage is void and unenforceable against
petitioner.

Respondent bank was negligent.

At this point, we find it significant to mention that respondent bank has no

one to blame but itself.1âwphi1 Not only did it act with undue haste when it
granted and released the loan in less than three days, it also acted
negligently in preparing the Real Estate Mortgage as it failed to indicate that
Concepcion was signing it for and on behalf of petitioner. We need not
belabor that the words "as attorney-in-fact of," "as agent of," or "for and on
behalf of," are vital in order for the principal to be bound by the acts of his
agent. Without these words, any mortgage, although signed by the agent,
cannot bind the principal as it is considered to have been signed by the
agent in his personal capacity.

A mortgage executed by an authorized agent who signed in his own name

without indicating that he acted for and on behalf of his principal binds only
the agent and not the principal.

Cuison v. CA., G.R. No. 88539; 26 October 1993

FACTS: Petitioner Kue Cuison is a sole proprietorship engaged in the

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

From December 4, 1979 to February 15, 1980, Valiant delivered various

kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of
LT Trading. The deliveries were made by Valiant pursuant to orders allegedly
placed by Tiu Huy Tiac who was then employed in the Binondo office of Kue

138
Cuison. It was likewise pursuant to Tiac's instructions that the merchandise
was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the
merchandise by issuing several checks payable to cash at the specific
request of Tiu Huy Tiac. In turn, Tiac issued 9 postdated checks to Valiant as
payment for the paper products. Unfortunately, said checks were later
dishonored by the drawee bank.

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

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

ISSUE: whether or not Tiu Huy Tiac possessed the required authority
from petitioner sufficient to hold the latter liable for the disputed transaction.

RULING: YES. Tiu Huy Tiac possessed the authority because he is an agent
of Kue Cuison. As to the merits of the case, it is a well-established rule that
one who clothes another with apparent authority as his agent and holds him
out to the public as such cannot be permitted to deny the authority of such
person to act as his agent, to the prejudice of innocent third parties dealing
with such person in good faith and in the honest belief that he is what he
appears to be.

It is evident from the records that by his own acts and admission, petitioner
held out Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo,
Binondo, Manila. More particularly, petitioner explicitly introduced Tiu Huy
Tiac to Bernardino Villanueva, respondent's manager, as his (petitioner's)
branch manager as testified to by Bernardino Villanueva. Secondly, Lilian
Tan, who has been doing business with Cuison for quite a while, also
testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto.
Cristo, Binondo branch.This general perception of Tiu Huy Tiac as the
manager of petitioner's Sto. Cristo store is even made manifest by the fact
that Tiu Huy Tiac is known in the community to be the "kinakapatid"
(godbrother) of petitioner. In fact, even petitioner admitted his close
relationship with Tiu Huy Tiac when he said that they are "like brothers".
There was thus no reason for anybody especially those transacting business
with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in
the Sto. Cristo Binondo branch.

By his representations, petitioner is now estopped from disclaiming liability

for the transaction entered by Tiu Huy Tiac on his behalf. It matters not
whether the representations are intentional or merely negligent so long as

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innocent, third persons relied upon such representations in good faith and
for value.

Moreover Article 1911 of the Civil Code provides:

"Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he
had full powers."

Bicol Savings and Loans Association vs. CA, G.R. No. 85302; 31 March
1989

FACTS: Juan de Jesus was the owner of a parcel of land in Naga City. He
executed a Special Power of Attorney in favor of Jose de Jesus, his son,
wherein the latter could negotiate and mortgage the former’s property in
any bank preferably in the Bicol Savings and Loan Association. By virtue of
such document, Jose was able to obtain P20,000 from Bicol Savings. To
secure payment, he executed a deed of mortgage wherein it was stipulated
that upon the mortgagor’s failure or refusal to pay the obligation, the
mortgagee may immediately foreclose the property. Juan de Jesus died and
the loan obligation was not paid. As a result, Bicol Savings extrajudicially
foreclosed the mortgaged property. The bank won as the highest bidder
during the auction sale. Jose and the other heirs failed to redeem the
property. Thereafter, they tried to negotiate with Bicol Savings but the
parties did not come up to an agreement. Bicol Savings sold the property to
another person. Hence, Jose filed for annulment of the foreclosure sale. The
lower court dismissed the case. On appeal, the CA reversed RTC’s decision.
Hence, this appeal.

ISSUE: whether or not the extrajudicial foreclosure sale of the property

was valid.

RULING: The sale proscribed by a special power to mortgage under Article

1879 is a voluntary and independent contract, and not an auction sale
resulting from extrajudicial foreclosure, which is precipitated by the default
of a mortgagor. Absent that default, no foreclosure results.

The stipulation granting an authority to extrajudicially foreclose a mortgage

is an ancillary stipulation supported by the same cause or consideration for
the mortgage and forms an essential or inseparable part of that bilateral
agreement.

The power to foreclose is not an ordinary agency that contemplates

exclusively the representation of the principal by the agent but is primarily
an authority conferred upon the mortgagee for the latter's own protection.
That power survives the death of the mortgagor (Perez vs. PNB, supra).

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Section 7, Rule 86 of the Rules of Court, which grants to a mortgagee three
remedies that can be alternatively pursued in case the mortgagor dies, to
wit: (1) to waive the mortgage and claim the entire debt from the estate of
the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially
and prove any deficiency as an ordinary claim; and (3) to rely on the
mortgage exclusively, foreclosing the same at any time before it is barred by
prescription, without right to file a claim for any deficiency.

V-Gent, Inc. v. Morning Star Travel & Tours, Inc. G.R. No. 186305; July 22,
2015

FACTS: After buying 26 two-way plane tickets from Morning Star Travel and
Tours, Inc (respondent), V-Gent Inc (petitioner) returned 15 unused tickets
worth $8,747.50 to the respondent, which refunded only the six tickets
worth $3,445.63. Despite demand, Morning Star refused to refund the nine
remaining tickets, hence it filed money claim against the respondent before
the MeTC of Manila. Aside from countering that V-Gent is not entitled to a
refund, Morning Star questioned the personality of V-Gent to file the action
as it is the passengers who bought the tickets who are the real parties in
interest. Ruling, the MeTC dismissed the complaint for lack of cause of
action. While it declared V-Gent as agent of the ticket buyers, it failed to
prove its case by preponderance of evidence. On appeal to the RTC, the
latter court reversed the MeTC judgment, holding that V-Gent proved its
case by preponderance of evidence. Morning Star elevated the case to the
Court of Appeals. The appellate court granted the petition for review filed by
Morning Star, by ruling that V-Gent is not the real party in interest because
it merely acted as an agent of the passengers who bought the tickets from
Morning Star with their own money. Its motion for reconsideration denied
by the CA, V-Gent sought recourse with the Supreme Court. It argues that
since Morning Star did not appeal this specific finding with the RTC, then the
MeTC’s ruling on this point had already become final and conclusive;
therefore, Morning Star can no longer revive the issue before the CA.

ISSUE: whether or not v-gent is a real party in interest in the case.

RULING: The Court disagree with V-Gent.

The MeTC dismissed V-Gent’s complaint against Morning Starrer for failure
to prove its claim. This dismissal meant that the plaintiff did not prove a
violation of its right for which the defendant should be held liable. This ruling
was plainly a judgment in Morning Star’s favor and one that it had no cause
to question. Indeed, it would be legally illogical for Morning Star to file an
appeal to question a ruling of dismissal in its favor.

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V-Gent also argues that it is a real party-in-interest with legal standing to
institute the complaint against Morning Star. In the present petition, it
states:

1. The Court of Appeals chose to ignore the fact that while the plane
tickets bore the names of the individual passengers, the
respondent admitted that it was the petitioner that transacted
business with it concerning the purchase of these plane tickets. Both
the purchase order and receipt of payments were under the name of
the petitioner. Thus, since it was the petitioner who purchased
these plane tickets on behalf of the passengers, the respondent
voluntarily refunded to the former the value of six (6) unused return
tickets in the total amount of US$3,445.62. Though, for reasons it did
not reveal to petitioner, it refused to refund the rest. ⁠1 (Emphasis
supplied.)
V-Gent admits that it purchased the plane tickets on behalf of the
passengers as the latter’s agent.⁠2 The tickets were issued in the name of the
passengers and paid for with the passengers’ money. No dispute or
conclusion in the lower courts’ minds on this point; hence, both the
MeTC⁠3 and the CA⁠4 commonly found that V-Gent acted as an agent of the
passengers when it purchased the passengers’ plane tickets.

However, while the MeTC held that V-Gent could sue as an agent acting in
his own name on behalf of an undisclosed principal, the CA held that it could
not because the requirements for such a suit by the agent had not been
satisfied.

Every action must be prosecuted or defended in the name of the real party-
in-interest – the party who stands to be benefited or injured by the
judgment in the suit⁠5. In suits where an agent represents a party, the
principal is the real party-in-interest; an agent cannot file a suit in his own
name on behalf of the principal.

Rule 3, Section 3 of the Rules of Court provides the exception when an

agent may sue or be sued without joining the principal.

Section 3. Representatives as parties. – Where the action is allowed to be

prosecuted and defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real party-in-interest. A representative may
be a trustee of an express trust, a guardian, an executor or administrator, or
a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be
sued without joining the principal except when the contract involves
things belonging to the principal. (Emphasis supplied.)

Thus an agent may sue or be sued solely in its own name and without
joining the principal when the following elements concur: (1) the agent
acted in his own name during the transaction; (2) the agent acted for the

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benefit of an undisclosed principal; and (3) the transaction did not involve
the property of the principal.

When these elements are present, the agent becomes bound as if the
transaction were its own. This rule is consistent with Article 1883 of the Civil
Code which says:

Art. 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.

In the present case, only the first element is present; the purchase order
and the receipt were in the name of V-Gent. However, the remaining
elements are absent because: (1) V-Gent disclosed the names of the
passengers to Morning Star — in fact the tickets were in their names; and
(2) the transaction was paid using the passengers’ money. Therefore, Rule
3, Section 3 of the Rules of Court cannot apply.

To define the actual factual situation, V-Gent, the agent, is suing to recover
the money of its principals — the passengers — who are the real parties-in-
interest because they stand to be injured or benefited in case Morning Star
refuses or agrees to grant the refund because the money belongs to them.
From this perspective, V-Gent evidently does not have a legal standing to
file the complaint.

Finally, V-Gent argues that by making a partial refund, Morning Star was
already estopped from refusing to make a full refund on the ground that V-
Gent is not the real party-in-interest to demand reimbursement.⁠6

We find no merit in this argument.

The power to collect and receive payments on behalf of the principal is an

ordinary act of administration covered by the general powers of an
agent.⁠7 On the other hand, the filing of suits is an act of strict dominion.

Under Article 1878 (15) of the Civil Code, a duly appointed agent has no
power to exercise any act of strict dominion on behalf of the principal unless
authorized by a special power of attorney. An agent’s authority to file suit
cannot be inferred from his authority to collect or receive payments; the
grant of special powers cannot be presumed from the grant of general
powers. Moreover, the authority to exercise special powers must be duly
established by evidence, even though it need not be in writing.

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By granting the initial refund, Morning Star recognized V-Gent’s authority to
buy the tickets and collect refunds on behalf of the passengers. However,
Morning Star’s recognition of V-Gent’s authority to collect a refund for the
passengers is not equivalent to recognition of V-Gent’s authority to initiate a
suit on behalf of the passengers. Morning Star therefore, is not estopped
from questioning V-Gent’s legal standing to initiate the suit.

China Air Lines v. CA, G.R. No. 45985; May 18, 1990

PAL vs. CA, G.R. No. 46036; May 18, 1990

FACTS: Jose Pagsibigan purchased a plane ticket for a Manila-Taipei-

Hongkong-Manila flight from the Transaire Travel Agency. The said agency
contacted Philippine Airlines (PAL) which at that time was a sales and
ticketing agent of China Airlines (CAL).PAL, through its ticketing agent
Roberto Espiritu, issued to Pagsibigan the plane ticket which showed that the
latter had been booked at the June 10, 1968 5:20 PM flight of China Airlines,
departing from Manila for Taipei. When Pagsibigan showed up at the airport
an hour before the supposed scheduled time of departure, he was informed
that the CAL plane he was supposed to take for Taipei had left at 10:20 AM
that day. The PAL employees then made appropriate arrangements so that
he could take the PAL’s flight to Taipei the following day. Pagsibigan took the
re-scheduled flight.

A few months after, he filed a complaint for moral damages and attorney’s
fees against PAL. He alleged that Espiritu had been grossly negligent in his
duties.

In its defense, PAL alleged that: (1) the departure time indicated on
Pagsibigan’s plane ticket was furnished and confirmed by CAL; and (2) CAL
did not inform the issuing PAL branch of the revised timetable of CAL flights.
Hence, PAL asserted a cross-claim against CAL.

CAL, for its part, averred that: (1) all airlines, including PAL, were informed
of the revised schedule of flights; (2) notices of these revised schedule were
furnished to all sales agent; and (3) the issuing PAL branch had in fact been
issuing and selling tickets based on the revised time schedule. Thus, CAL
also asserted a cross claim against PAL.

The trial court found PAL and Roberto Espiritu jointly and severally liable by
way of exemplary damages. It did not award moral damages. CAL
was exonerated.CA ruled out the claim for moral and exemplary damages,
and instead awarded nominal damages.

ISSUE: whether or not pal is liable for the acts of Espiritu.

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RULING: YES. The SC noted that Pagsibigan has opted to seek redress
by pursuing two remedies at the same time, that is, to enforce the civil
liability of CAL for breach of contract and, likewise, to recover from PAL and
Espiritu for tort or culpa aquiliana.

A perusal of the complaint of Pagisbigan will disclose that the allegations

therein make out a case for a quasi-delict. Had Pagisibigan intended to
maintain an action based on breach of contract, he could have sued CAL
alone considering that PAL is not a real party to the contract. It is thus
evident that when Pagsibigan sensed that he cannot hold CAL liable on a
quasi-delict, he made a detour on appeal, by claiming that his action against
CAL is based on breach of contract of carriage.

SC did not allow Pagsibigan to change his theory at this stage because
it would be unfair for CAL as it would have no opportunity to present further
evidence material to the new theory. But there is no basis to hold CAL liable
on a quasi-delict, hence its exoneration from any liability for fault
or negligence.

With respect to PAL and Espiritu, PAL’s main defense is that is only
an agent. As a general proposition, an agent who duly acts as such is not
personally liable to third persons. However, there are admitted exceptions,
as in this case where the agent is being sued for damages arising from a tort
committed by his employee.

In an action premised on the employee’s negligence, whereby Pagsibigan

seeks recovery for the damages from both PAL and Espiritu without
qualification, what is sought to be imposed is the direct and primary liability
of PAL as an employer.

When an injury is caused by the negligence of an employee, there instantly

arises a presumption of law that there was negligence on the part of
the employer. This presumption, however, may be rebutted by clear showing
on the part of the employer that it has exercised the care and diligence of
a good father of a family in the selection and supervision of his employee.
PAL failed to overcome such presumption.

As found by CA, PAL was duly informed of CAL’s revised schedule, and in
fact, PAL had been issuing and selling ticket based on said revised time
schedule.

For his negligence, Espiritu is primarily liable to Pagsibigan under Article

2176 of the CC.

For the failure of PAL to rebut the legal presumption of negligence, it is also
primarily liable under Article 2180 of CC.

Under Article 2180 all that is required is that the employee, by his
negligence, committed a quasi-delict which caused damage to another, and

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this suffices to hold the employer primarily and solidarily liable for the
tortious act of the employee. PAL, however, can demand from Espiritu
reimbursement of the amount which it will have to pay the offended party’s
claim.

The decision of respondent Court of Appeals is MODIFIED accordingly.

China Air Lines, Ltd. is hereby absolved from liability. Philippine Air Lines,
Inc. and Roberto Espiritu are declared jointly and severally liable to pay
the sum of P10,000.00 by way of nominal damages, without prejudice to
the right of Philippine Air Lines, Inc. to recover from Roberto Espiritu
reimbursement of the damages that it may pay respondent Jose
Pagsibigan.

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