Dominion Insurance Corporation vs.

Court of Appeals, et al,

GR No. 129919, February 6, 2002

FACTS.

On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for
sum of money against defendant Dominion Insurance Corporation. Plaintiff sought to
recover thereunder the sum of P156, 473.90 which he claimed to have advanced in his
capacity as manager of defendant to satisfy certain claims filed by defendant's clients
but was denied by Dominion and instead filed a counterclaim and a party complaint
against Fernando Austria;

However, the defendant failed to appear during the pre-trial conference.

Defendant moved for reconsideration which the trial court denied. The court rendered a
judgment ordering Dominion Insurance Corporation to pay plaintiff the sum of
P156,473.90 representing the total amount advanced by plaintiff in the payment of the
claims of defendant's clients, P10,000.00 by way of attorney's fees, dismissal of the
counterclaim of the defendant and the third-party complaint, and the defendant to pay
the costs of suit. The CA further affirmed the trial court’s decision.
ISSUE: Whether or not respondent Guevarra acted within his authority as agent for
petitioner.
HELD:
No. Guevarra acted beyond his authority as agent for petitioner. 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 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. Furthermore, the terms
in the agreement provides for various authority but is limited only to acts of
administration and according to such, the payment of claims is not an act of
administration.
Thus, his acting is beyond his authority as agent for petitioner for the instruction of
petitioner as the principal could not be any clearer. 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. This conclusion is in accord with Article
1918, Civil Code, which states that: "The principal is not liable for the expenses incurred
by the agent in the following cases: "(1) 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. Hence, the law on agency prohibits respondent Guevarra
from obtaining reimbursement. However, his right to recover may still be justified under
the general law on obligations and contracts.
Pilipinas Bank v. Alfredo T. Ong, GR No. 133176 (August 8, 2002)
FACTS: Baliwag Mahogany Corporation (BMC), through its president, Alfredo T. Ong,
applied for a domestic commercial letter credit with petitioner Pilipinas Bank (the bank)
to finance the purchase of “Air Dried, Dark Lauan” sawn lumber. The bank approved the
application and issued a Letter of Credit. To secure payment of the amount, BMC,
through respondent Ong, executed two (2) trust receipts providing that it shall turn over
the proceeds of the goods to the bank, if sold, or return the goods, if unsold, upon
maturity on July 28, 1991 and August 4, 1981. On due dates, BMC failed to comply with
the trust receipt agreement. On November 22, 1991, it filed with the Securities and
Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a
State of Suspension of Payments. On January 8, 1992, the SEC issued an order
creating a Management Committee wherein the bank is represented.
On October 13, 1992, BMC and a consortium of 14 of its creditor banks entered into a
Memorandum of Agreement (MOA) rescheduling the payment of BMC’s existing debts.
On November 27, 1992, the SEC rendered a Decision approving the Rehabilitation Plan
of BMC as contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of the obligations under
the rescheduled payment scheme provided in the MOA. On April 1994, the bank filed a
complaint charging respondents Ong and Leoncia Lim (as president and treasurer of
BMC) with violation of the Trust Receipts Law (PD 115). The bank alleged that both
respondents failed to pay their obligation under the trust receipt despite demand.
ISSUE: Whether or not the MOA novates the trust agreement between the parties.
HELD: Yes. As provided in the case of Quinto vs. People, the Court held that there are
two ways which could indicate the presence of novation, thereby producing the effect of
extinguishing an obligation by another which substitutes the same. The first is when
novation has been stated and declared in unequivocal terms. The second is when the
old and the new obligations are incompatible on every point. The test of incompatibility
is whether or not the two obligations can stand together. If they cannot, they are
incompatible and the latter obligation novates the first.
Contrary to petitioner's contention, the MOA did not only reschedule BMC's debts, but
has also provided principal conditions which are incompatible with the trust agreement.
Hence, applying the pronouncement in Quinto, it can be concluded that the MOA
novated and effectively extinguished BMC's obligations under the trust receipt
agreement and thus the contention that non-compliance with the MOA revived
respondents' original liabilities under the trust receipt agreement is completely
unmeritorious.
Siredy Enterprises v. Court of Appeals, GR No. 129039 (Sept. 17, 2002)

FACTS:
 Conrado De Guzman is an architect-contractor doing business under the name
and style of Jigscon Construction. On the other hand, Siredy Enterprises, Inc. (Siredy) is
the owner and developer of Ysmael Village, a subdivision in Sta. Cruz,Marilao, Bulacan,
whose president is Ismael E. Yanga. Yanga executed an undated Letter of Authority,
authorizing Mr. Hermogenes B. Santos to negotiate and enter into contract to build
Housing Unit in Ysmael Village, among others. Santos entered into a Deed of
Agreement with De Guzman for the construction. The deed expressly stated that Santos
was "representing Siredy Enterprises, Inc." and that Private respondent was referred to
as "contractor" while petitioner Siredy was cited as "principal".
De Guzman constructed 26 residential units at Ysmael Village. Thirteen (13) of
these were fully paid but the other 13 remained unpaid. De Guzman tried but failed to
collect the unpaid account from the petitioner. Thus, he instituted the action below for
specific performance against Siredy, Yanga, and Santos who all denied liability.
In its defense, petitioner presented testimonial evidence to the effect that Siredy
had no contract with De Guzman and had not authorized Santos to enter into a contract
with anyone for the construction of housing units at Ysmael Village.
ISSUE: Whether or not Hermogenes B. Santos was a duly constituted agent of Siredy,
with authority to enter into contracts for the construction of residential units in Ysmael
Village and thus the capacity to bind Siredy to the Deed of Agreement.
HELD: Yes. By the relationship of agency, one party called the principal authorizes
another called agent to act for and in his behalf in transactions with third persons. The
authority of the agent to act emanates from the powers granted to him by his principal;
his act is the act of the principal if done within the scope of authority.
In the case at bar, the instrument executed by Yang clearly and unequivocally
constituted Santos “to do and execute”, among other things, the act of negotiating and
entering into “contract or contracts to build housing units on our subdivision lots in
Ysmael Village”. It was upon this document that De Guzman transacted business with
Santos that resulted in the construction contract dominated as the Deed of Agreement.
There is absolutely no question that the Letter of Authority executed by appellee Yanga
constituted defendant Santos as his and appellee Siredy's agent. As agent, he was
empowered inter alia to enter into a contract to build housing units in the Ysmael
Village. This is what gives rise to the juridical relation.