CASE DOCTRINE RULING

I. NATURE, OBJECTIVE, & KINDS OF AGENCIES

• GR: CC. 1919 [3]. Agency is extinguished • In the instant case, it cannot be questioned that
by the DEATH of the principal or agent the agent, Simeon Rallos, knew of the death of
• XPN: his principal at the time he sold the latter's share
o CC. 1930. Agency shall remain in full in Lot No. 5983 to respondent corporation. On
force and effect after death of the the basis of the established knowledge of Simeon
principal is it has been constituted in Rallos concerning the death of his principal,
the COMMON INTEREST both parties Concepcion Rallos, Article 1931 of the Civil Code
or interest of third person is inapplicable.
o CC. 1931. Anything done by the
agent WITHOUT KNOWLEDGE of the
death of the principal is valid and
Rallos v. Go Chan
effective with respect to third
persons who contracted in good faith
• CC 1931 has 2 requisites, otherwise, act of
agent is invalid
o [1] agent acted without knowledge
of death of principal
o [2] third person contracted in good
faith
• [quiz question] qui facit per alium facit per
se – “he who acts through another acts
himself”
• In an agent-principal relationship, the • By affirming the ruling of the trial court
personality of the principal is extended [reinstating the agent], would compel American
Orient Air Services v. through the facility of the agent. Such a Air to extend its personality to Orient Air. Such
CA relationship can only be effected with the would be violative of the principles and essence
consent of the principal, which MUST NOT, of agency.
be compelled by law or by any court.
• BROKER – earns his pay by merely bringing • Tan, as broker, should be entitled to the
the buyer and the seller together, even if no commission whether or not the sale of the
Tan v. Gullas sale is eventually made property subject matter of the contract was
• AGENT – receives commission upon the concluded through their efforts.
successful conclusion of a sale
• Principal can revoke the authority of his • At the time fixed by the manager of the plaintiff
Macondray v. Sellner
agent AT WILL in the absence of a contract company for the termination of the negotiations,

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 fixing the duration of the agency subject to
well-defined exceptions.
• The business of a real estate broker,
generally is only to find a purchase and in
the absence of an express contract between
the broker and his principal, the implication
is that the broker becomes entitled to the
usual commissions whenever he bring to his
principal a party who is able and willing to
take the property and enter into a valid
contract upon the terms named by the
principal
• Broker’s/ commissioner’s fees depend on
the stipulation of the contract
Guardex v. NLRC • Be mindful of the relationship. NLRC has no
jurisdiction over principal-agent
relationship; only employer-employee.
• Broker’s/commissioner’s fees can be
awarded by virtue of EQUITY.
• As a rule, the services for which the broker
or agent can claim compensation for as the
basis for the application of “efficient
Prats v. CA procuring cause” doctrine was those
rendered when the brokerage or agency
relationship EXISTED. AFTER the
termination of the contractual relationship,
there is no basis by which agents are to be
paid [book doctrine]
• When there is a close, proximate and causal
connection between the agent’s efforts and
Manotok Bros. v. CA labor and the principal’s sale of his
property, the agent is entitled to a
commission
• When there is a close, proximate and causal
connection between the agent’s efforts and
Inland Realty v. CA labor and the principal’s sale of his
property, the agent is entitled to a
commission
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the defendant real estate agent had already
earned the commissions agreed upon.
• Under the circumstances surrounding the
negotiations, the plaintiff company cold NOT
lawfully terminate the negotiations because third
person has already accepted the offer made to
him by the agent and third person is ready to pay
the purchase price upon delivery of the deed of
conveyance.
• The revocation of agent’s authority COULD NOT
RELIEF plaintiff company of its obligation to sell
the land to third person.
• Nothing in the record tends to prove that Orbeta
succeeded in carrying out it terms or even
attempted to do so. He had nothing to do with th
sale of the fire truck
• Here, broker was not efficient procuring cause
but the Court grants 100,000 in EQUITY by way
of compensation for agent’s efforts and
assistance in the transaction which however was
finalized AFTER the expiration of his exclusive
authority.
• City of Manila became the purchaser mainly
through efforts of Saligumba while his
authorization was still in force.
• Inland Realty was not the efficient procuring
cause. 1 year and 5 months have passed from
Inland’s authority to sell and the consummation
of sale. Inland did nothing but submit
Standford’s name as prospective buyer.
 • PROCURING CAUSE – refers to a broker’s • Evidence on record shows that Borbon et al were
activity to cause the originating of series of instrumental in the sale of the property to Lee.
events which without break in their Without their intervention, no sale could have
continuity result in accomplishment of been consummated.
Medrano v. CA
prime objective of the employment of the
broker which is to produce a purchaser
ready, willing and able to buy real estate in
the owner’s items.
• When there is a close, proximate and causal • Circumstances led the Court to conlude that the
connection between the agent’s efforts and respondent’s actions indeed constituted the
Ticong v. Malim
the sale of the property, the agents are procuring cause of the sale.
entitled to their commission
II. FORMALITIES OF AGENCY
Lim v. CA • There are provisions in the CC which require • The parties did not execute a notarial will but a
certain formalities for particular contracts simple contract of agency to sell on commission
o FIRST, when form required for the bases, thus making the position of petitioner’s
validity of contract signature thereto immaterial.
o SECOND, when form required as
against third parties (eg. 1357 &
1358)
o THIRD, the form is required for the
purpose of proving the existence of
contract (eg. 1403)
• CONTRACT OF AGENCY TO SELL DOES NOT
BELONG TO ANY OF THE THREE
CATEGORIES, hence, it is VALID and
ENFORCEABLE in whatever form it may be
entered into.
Bordador v. Luz • The basis of agency is REPRESENTATION • Luz never authorized her brother Deganos to act
for and in her behalf in any transaction with
Bordador. It is clear therefore that even
assuming arguendo that Deganos acted as an
agent of Brigida, the latter never authorize him
to act on her behalf with regard to the
transaction subject of this case.
Salvador v. Rabaja • Persons dealing with an agent must • Sps. Rabaj did not recklessly enter into a
ascertain not only the fact of agency, but contract to sell with Gonzales. They required her
also the nature and extent of the agent’s

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 authority. A third person with whom the presentation of the power of attorney before
agent wishes to contract on behalf of the they transacted with her principal.
principal may require the the presentation
of the power of attorney or the instructions
as regards the agency. The basis of agency
is representation and a person dealing with
an agent is put ipon inquiry and must
discover on his own peril the authority of
the agent.
Country Bankers v. • CC. 1878 (11). An SPA is necessary to • CBIC [principal] should be held liable even if
Keppel Cebu obligate the principal as a guarantor or Quinain exceeded the scope of his authority only
Shipyard surety if Quinain’s act of issuing Surety Bond is deemed
• RATIFICATION – the adoption or to have been performed within the written terms
confirmation by one person of an act of the SPA he was granted
performed on his behalf by another without • Neither Unimarine nor Cebu Shipyard was able
authority. to repudiate CBIC’s testimony that it was
o Principal must have FULL knowledge unaware of the existence of Surety Bond. It is
at the time of ratification of all the clear that there can be no ratification in this case.
material facts and circumstances
relating to the unauthorized act of
the person who assumed to act as
agent
o THUS if material facts were
SUPPRESSED or UNKNOWN, there
can be NO VALID RATIFICATION.
o In the absence of circumstances
putting a reasonably prudent man
on inquiry, ratification cannot be
implied as against the principal who
is ignorant of the facts
• Requisites for AGENCY BY ESTOPPEL
(MRD):
o [1] Principal MANIFESTED A
REPRESENTATION of the agent’s
authority or knowingly allowed the
agent to assume such authority
o [2] The third person in good faith
RELIED upon such representation

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 o [3] Relying upon such
representation, such third person
has changed his position to his
DETRIMENT
Republic v. Banez • In an agency by estoppel or apparent • Banez’s acquiescence of Hojilla’s acts was made
authority, the principal is bound by the acts when they failed to repudiate the latter’s acts.
of his agent with the apparent authority They knowingly permitted Hojilla to represent
which he knowingly permits the agent to them and petitioners Republic were clearly
assume, or which he holds the agent out to misled into believing Hojilla’s authority.
the public as possessing. • Nowhere in the SPA was Hojilla authorized as
• SPA is strictly construed. administrator or agent of Banez with respect
with the execution of the Contract of Sale. As no
one was authorized to represent Banez,
petitioner Republic cannot enforce the Contract.
Dominion Insurance • CC 1878 [1]. SPA is needed to make such • Agency comprises all the business of the
v. CA payments as are not usually considered as principal but couched in general terms. SPA is
acts of administration required before respondent Guevarra could
o Payment of CLAIMS is not an act settle the insurance claims of the insured
administration. Setlement of claims
is NOT INCLUDED among the acts
enumeratied in the SPA, neither is it
of a character similar to acts
enumerated therein.
Patrimonio v. • GR: contract of agency may be ORAL • Gutierrez did not have any authority to borrow
Gutierrez • XPN: must be written when the law requires money in behalf of Patrimonio. Records do not
a specific form (eg. sale of a piece of land show any execution of SPA. Loan agreement
or any interest therein through an agent) entered into with Marasigan is VOID.
• CC. 1878 [7] requires that SPA is needed to
loan or borrow money unless the latter act
be urgent and indispensable for the
preservation of the things which are under
administration.
o 1878 DOES NOT state that the
authority be writing. It refers to the
nature of the authorization and not
to its form.
Virata v. Ng Wee • Execution of side agreements should be • SPAs do not specifically include a provision
mentioned in SPA empowering Wincorp to excuse Power Merge

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Gutierrez Hermanos • Ratification through court litigation. The
v. Orense repeated and successive statements made
by the defendant Orense in two [legal]
actions, wherein he affirmed that he had
given his consent to the sale of his property
[a parcel of land], meet the requirements of
the law and legally excuse the lack of
written authority and as they are a full
ratification of the acts executed by the
agent, they produce the effects of an
express power of agency.
City-Lite Realty v. CA • CC 1874. 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.
Escueta v. Lim • Acceptance and encashment of check
constitute RATIFICATION of the contract of
sale and produce the effects of an express
power of agency. His action necessarily
implies that he waived his right of action to
avoid the contract and consequently, it also
implies the tacit, if not express confirmation
of the said sale.
• The doctrine of estoppel applicable in this
case is not only that which prohibits a party
from assuming inconsistent positions, but
that which precludes him from repudiating
an obligation voluntarily assumed after
having accepted benefits therefrom. To
countenance such repudiation would be
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from repaying the amounts it had drawn from its
credit line via Side Agreements. They merely
authorized Wincorp to agree, deliver, sign,
execute loan documents. Wincorp had no
authority to absolve Power Merge from latter’s
indebtedness to lenders.
• If defendant Orense acknowledged and admitted
under oath that he had consented to Jose
Duran’s selling the property in litigation to
Gutierrez Hermanos, it is not just nor permissible
for him to deny that admission, to the prejudice
of the purchaser who gave P1500 for the said
property. The consent was proven in the criminal
action by the sworn testimony of the principal
and by other evidence which principal made no
objection. Therefore, the principal is bound to
abide by the consequences of his agency as
though it had been given in writing.
• Meldin Roy and/or Metro Drug was only a contact
person with no authority to conclude sale of the
property. The lack of a written authority to sell
the Violago Property should have the sale be
declared VOID.
• Baloloys have ratified the contract of sale when
they accepted and enjoyed its benefits
 CONTRARY to EQUITY and would put a
premium on fraud or misrepresentation.
Pahud v. CA • Absence of written authority to sell a piece
of land is ipso jure VOID, precisely to
protect the interest of an unsuspecting
owner from being prejudiced by the
unwarranted act of another
• [quiz question] What are the instances
when the principal is subject to liability for
loss caused to a 3rd person by the latter’s
reliance upon a deceitful representation by
an agent in the course of his employment?
o [1] if the representation is
authorized
o [2] If it is within the implied
authority of the agent to make for
the principal
o [3] if it is apparently authorized,
regardless of whether agent was
authorized by him or not to make
the representation.
Yoshizaki v. Joy • GR: Agency may be oral
Training • XPN: Must be written when law requires a
specific form. (eg. 1874)
• The above rule applies to SPA which
EXPRESSLY mentions a SALE or that
includes a SALE as a necessary ingredient
of the authorized act.
• SPA must express the powers of the agent
in CLEAR AND UNMISTAKABLE language for
the principal to confer the right upon an
agent to sell real estate
7 RM
• The sale with respect to 3/8 portion is void
because Eufemia could not dispose of the
interest of her co-heirs (Zenaida, Milagros and
Minerva) in the said lot absent any written
authority from the latter as explicitly required by
law.
• Interestingly, in no instance did Zenaida,
Milagros and Minerva assail the validity of the
transaction made by Eufemia to the Pahuds on
the basis of want of authority to sell. They could
have easily filed a case for annulment of the sale
of their respective shares. By their continued
silence, the 3 have caused the Pahuds to believe
that they have clothed Eufemia with the
authority to transact on their behalf. They are
now estopped from umpugning the validity of the
sale.
• Reconcile: This case declared the sale VOID by
want of authority but how were the 3 co-heirs
ratify the sale?
o CLV: Void in CC 1874 should be
interpreted to be UNENFORCEABLE. Sale
would be basically void only as to the
principal since there was no authority,
however, it still can be ratified ultimately.
• The documents do not convince us of the
existence of the contract of agency to sell the
real properties. TCT merely states that Joy
Training is represented by the Sps Johnson. It
does not explicitly confer to the Sps. Johnson the
authority to sell the parcel of land.
• The authority granted was merely GPA and not
SPAs
• This case ruled that the want of the written
contract of agency is UNENFORCEABLE.
 o Purpose of the law in requiring
written SPA is to protect the interest
of an unsuspecting owner from
being prejudiced by the
unwarranted act of another and to
caution the buyer to assure himself
of the specific authorization of the
putative agent.
• [recit question] Should the terms of the sale
be stated clearly and in detail? Yes. (basis
this case)
• [minor issue] In determining the
composition of board of trustees, base on
what is mentioned in the articles of
incorporation and NOT the actual members
on the board.
Pineda v. CA • In a contract of insurance between • PMSI through its official Mr. Urbano acted as
employers and employees, the relationship agent of Insular Life. PMSI is thus bound by the
is an agency where: misconduct of its agent.
o Insurer – principal
o Employer – agent
III. POWER & AUTHORITY, DUTIES & OBLIGATIONS, RIGHTS OF THE AGENT
BPI v. Laingo • Agent is bound to carry out the agency. The • In this case, BPI had the obligation to carry out
relationship existing between principal and the agency by informing the beneficiary who
agent is a fiduciary one, demanding appeared before BPI to withdraw funds of the
conditions of trust and confidence. It is the insured who was BPI’s depositor, not only of the
duty of the agent to act in GOOD FAITH for existence of the insurance contract but also the
the advancement of interests of the accompanying terms and conditions of the
principal. insurance policy in order for the beneficiary to be
• In an insurance commercial product by able to properly and timely claim the benefit.
banks (eg. 2-in-1 savings and insurance Upon Rheozel’s death, BPI should have fulfilled
account), the relationship is an agemcy its duty as agent of FGU of advising Laingo that
where: there is an added benefit of the insurance
o Insurance company – principal coverage in Rheozel’s savings account.
o Bank – agent
• The law contemplates impersonal dealings
where the principal need not personally
know or meet the third person with whom

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 the agent transacts; precisely embodying
the purpose of agency which is to EXTEND
the personality of the principal through the
facility of the agent.
Cervantes v. CA • The acts of an agent beyond the scope of
his authority DO NOT BIND the principal
UNLESS the latter ratifies the same
expressly or impliedly. When the third
person KNOWS that an agent was acting
BEYOND his power/authority, the principal
cannot be held liable for the acts of the
agent. If said third person is aware of such
limits, he is to blame and is NOT entitled to
recover damages from the agent UNLESS
the latter undertook to secure the
principal’s ratification.
BA Finance v. CA • CC 1884. The agent is bound by his
acceptance to carry out the agency and is
liable for damages which, through his non-
performance, the principal may suffer.
British Airways v. CA • Agent is also responsible for any negligence
in the performance of its function and is
liable for damages which the principal may
suffer by reason of its negligent act.
• Member airlines of International Air
Transport Association (IATA) are regarded
as agents of each other in the issuance of
tickets and other matters pertaining to their
relationship.
Virata v. Ng Wee • Agent has the obligation to carry out the
purpose of the agency within the bounds of
9 RM
• Cervantes was aware that there was a need to
send a letter to the legal counsel of PAL for the
extension of the period of validity of his ticket.
Since PAL agents are not privy to the said
agreement and petitioner knew that a written
request was necessary, he cannot use what PAL
agents did to his advantage. The said agents
acted without authority when they confirmed the
flights of the petitioner.
• BA Finance was granted the power as agent of
mortgagors. When mortgaged motor figured in
an accident, it opted to have the motor vehicle
repaired instead of allowing recovery for total
loss on insurance claim which was an outright
refusal to comply with the instructions of the
principal and rendered it liable for damages.
• PAL, in transporting Mahtani from Manila to HK
acted as the agent of British Airways. Mahtani
can only sue British Airways and not PAL since
the latter was not a party to the contract of
carriage. However, that is not to say that PAL is
relieved from any liability due to any of its
negligent acts. To deny British Airlines from filing
a third-party complaint against PAL is without
legal basis.
• Contractual relationship between British Airlines
& PAL is one of agency where British Airlines is
the principal since it was the one which issued
the confirmed ticket.
• The benefit from the Side Agreements, if any,
redounded to the agent itself, Wincorp, which
 his authority. Though he may perform acts
in a manner more advantageous to the
principal than that specified by him, in NO
case shall the agent carry out the agency if
its execution would manifestly result
DAMAGE to the principal.
Domingo v. Domingo • 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 so
that any STIPULATION exempting the agent
this obligation is VOID
• The duty embodied in CC. 1891 will not
apply if the agent/broker:
o 1. Acted only as 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; OR
o 2. If the agent/ broker informs the
principal of any gift/bonus/profit he
receives and the principal did not
object thereto.
• [recit quesiton] How can agent commit
estafa?
o Because of responsibility in 1720, an
agent is 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
Cosmic Lumber v. CA • An SPA 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.
10
was able to hold Power Merge papers are more
valuable than the outstanding Hottick obligations
that it exchanged. When Wincorp thereafter
concealed from the investors the existence of the
Side Agreements, the company became liable for
fraud even as an agent.
• In this case, G. Domingo as broker received a
gift of P1,000 from the prospective buyer Oscar
De Leon without the knowledge and consent of
his principal V. Domingo. His acceptance
corrupted his duty to serve the interests only of
his principal and undermined his loyalty to his
principal.
• In this case, G. Domingo was not merely a
middle man of v. Domingo. He was the broker
and agent.
• As a consequence of the breach of trust, G.
Domingo must forfeit his right to the commission
and must return the part of the commission he
received from his principal.
• It is therefore clear that by selling to respondent
Perez a portion of petitioner’s land through a
compromise agreement, Villamil-Estrada acted
RM
 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.
Villaluz v. Land Bank • The law creates a presumption that an
agent has the power to appoint a substitute.
The consequence of the presumption is that
upon valid appointment between the
principal and substitute, there ipso jure
arises an agency relationship between the
principal and substitute. Concomitantly, the
substitute assumes an agent’s obligations
to act within the scope of authority, to act
in accordance with the principal’s
instructions and to carry out the agency,
among others.
Escueta v. Lim • CC. 1892. The agent may appoint a
substitute if the principal has not prohibited
him from doing so; but he shall be
responsible for the acts of the substitute:
(1) when he was not given the power to
appoint one; (2) When he was given such
power but without designating the person
and the person appointed was notoriously
incompetent or insolvent.
Municipal Council of • An agent of attorney-in-fact empowered to
Iloilo v. Evangelista pay the debts of the principal and to employ
11
without or in obvious authority. The sale is ipso
jure VOID, so is the compromise agreement.
• In this case, the SPA executed by the Sps.
Villaluz contains no restrictive language
indicative of an intention to prohibit Agsibit from
appointin a substitute. Agsibit’s appointment of
Milflores Cooperative was valid.
• SPA executed by Rubio in favor of his daughter
Patricia Llamas is clear that she is not prohibited
from appointing a substitute. By authorizing
Virginia Lim to sell the subject properties,
Patricia merely acted within the limits of the
authority given by her father but she will have to
be responsible for the acts of the sub-agent.
• [not main syllabus topic] Even assuming that
Virginia Lim has no authority to sell the subject
properties, the contract she executed in favor of
respondent is NOT void but merely
unenforceable.
• Rubio’s acceptance and encashment of the check
constitute ratification of the contract of sale and
produced the effects of an express power of
attorney. His action necessarily implies that he
waived his right of action to void the contract and
also implies the tacit confirmation of the sale.
• Attorney-in-fact Tan Boon Tiong is authorized to
employ and contract for the services of lawyers
RM
 lawyers to defend the latter’s interests is upon such conditions as he may deem
impliedly empowered to pay the lawyer’s convenient to take charge of any actions
fees for services rendered in the interests of necessary or expedient for the interests of his
said principal principal and to defend suits brought against her.
• Then a person appoints two attorneys-in- This power implies the authority to pay for the
fact independently, the consent of the one professional services thus engaged.
will not be required to validate the acts of
the other UNLESS that appears positively to
have been the principal’s intention.
Eurotech Industrial • CC. 1897. An agent is not personally libale o Edwin does not fall under any of the
v. Cuizon to the party with whom he contracts. exceptions. He acted well within his
However, he is personally liable to a third authority as sales manager when he
person when: signed the Deed of Assignment.
o 1. He expressly binds himself to the o Edwin’s participation in the Deed of
obligation Assignment was reasonably necessary or
o 2. When he exceeds his authority. was required in order for him to protect
Agent can be held liable if he does the business of his principal.
not give third party sufficient notice o In this case, because Edwin acted within
of his powers. his authority, he is absolved of liability
• Powers of an agent are particularly BROAD
in the case of one acting as 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 to the business entrusted to his
care and management. In the absence of
agreement to the contrary, a managing
agent may enter in to contracts that he
deems reasonably necessary for the
protection of the interests of his principal
entrusted to his management.
National Power Corp • CC. 1897. Agent who exceeds the limits of • NAMERCO acted beyond the bounds of his
v. NAMARCO his authority without giving the party with authority because it violated it’s principal’s
whom he contracts sufficient NOTICE of his cabled instructions
powers is PERSONALLY LIABLE. • [Second bullet on the left] is NOT applicable
because in this case, it is the agent that it sought

12 RM
 • Third persons dealing with an agent is put
upon inquiry and must discover upon his
peril the authority of the agent would apply
in he case IF PRINCIPAL is sought to be held
liable
DBP v. CA • CC. 1897. The agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself
or exceeds the limits of his authority
without giving such party sufficient notice of
his powers.
• If the third person dealing with an agent is
UNAWARE of the limits of the authority
conferred by the principal on the agent and
the third person has been DECEIVED by the
non-disclosure thereof by the agent, the
latter is LIABLE for damages.
Pahud v. CA • [quiz question] What are the instances
when the principal is subject to liability for
loss caused to a 3rd person by the latter’s
reliance upon a deceitful representation by
an agent in the course of his employment?
o [1] if the representation is
authorized
o [2] If it is within the implied
authority of the agent to make for
the principal
o [3] if it is apparently authorized,
regardless of whether agent was
authorized by him or not to make
the representation.
Green Valley v. IAC • Article 1905. The commission agent cannot,
without the express or implied consent of
the principal, sell on credit. Should he do
so, the principal may demand from him
payment in cash, but the commission agent
shall be entitled to any interest or benefit,
which may result from such sale. (n)
13
to be held liable on a contract of sale. The
principal has repudiated because the agent has
acted beyond its authority and in effect ACTED
IN ITS OWN NAME
• DBP is not authorized to accept applications for
MRI when its clients are more than 60 years old.
Knowing all the while that Dans was ineligible for
MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it
accepted Dan’s application.
• There is no showing that Dans knew of the
limitation on DBP’s authority to solicit
applications for MRI
• Interestingly, in no instance did Zenaida,
Milagros and Minerva assail the validity of the
transaction made by Eufemia to the Pahuds on
the basis of want of authority to sell. They could
have easily filed a case for annulment of the sale
of their respective shares. By their continued
silence, the 3 have caused the Pahuds to believe
that they have clothed Eufemia with the
authority to transact on their behalf. They are
now estopped from umpugning the validity of the
sale.
• We do not have to categorize the contract
whether it is an agency to sell or as a contract of
sale, the liability of Green Valley is indubitable
because it sold on credit without authority from
its principal.
RM
 IV. OBLIGATIONS OF THE PRINCIPAL
Manila Memorial Park • Thus, the acts of an agent beyond the scope • No ratification can be implied in the instant case.
Cemetary v. of his authority do not bind the principal, Atty. Linsangan failed to how that MMPCI has
Linsangan unless he ratifes them, expressly or knowledge of the arrangement. As far as MMCPI
impliedly. Only the principal can ratify; the is concerned, the contract price was 132k as
agent cannot ratify his own unauthorized stated in the Offer to Purchase.
acts.
o Moreover, the principal must HAVE
KNOWLEDGE of the acts he is to
ratify.
• RATIFCATION in agency is the adoption or
confirmation by one person of an act
performed on his behalf by another without
authority. The substance of the doctrine is
confirmation after conduct, amounting to a
substitute for a prior authority.
• Ordinarily, the principal MUST HAVE FULL
KNOWLEDGE at the time of ratification of all
the material facts and circumstances
relating to the unauthorized act of the
person who assumed to act as agent.
o Thus, if material facts were
suppressed or unknown, there can
be no valid ratification and this
regardless of the purpose or lack
thereof in concealing such facts and
regardless of the parties between
whom the question of ratification
may arise.
• EXCEPTION: this principle does not apply if
the principal's ignorance of the material
facts and circumstances was WILLFUL, or
that the principal chooses to act in
ignorance of the facts.
• However, in the absence of circumstances
putting a reasonably prudent man on
inquiry, ratification cannot be implied as

14 RM
 against the principal who is ignorant of the
facts.
Harry Keeler v. • Persons dealing with an assumed agent,
Rodriguez whether the assumed agency be a general
or special one, are bound at their peril, if
they would, if they would hold the principal,
to ascertain not only the fact of the agency
but the nature and extent of the authority,
and in case either is controverted, the
burden of proof is upon them to establish it.
Filipinas Life • GR: is that the principal is responsible for
Assurance v. Pedroso the acts of its agent done within the scope
of its authority, and should bear the
damage caused to third persons.
• XPN: When the agent exceeds his authority,
the agent becomes personally liable for the
damage.
• XPN to XPN: But even when the agent
exceeds his authority, the principal is still
solidarily liable together with the agent if
the principal allowed the agent to act as
though the agent had full powers. In other
words, the acts of an agent beyond the
scope of his authority do not bind the
principal, unless the principal ratifies them,
expressly or impliedly.
• Ratification in agency is the adoption or
confirmation by one person of an act
performed on his behalf by another without
authority.
Bitte v. Jonas • Basic is the rule that the revocation of an
agency becomes operative, as to the agent,
from the time it is made known to him.
Third parties dealing bona de with one who
has been accredited to them as an agent,
however, are not affected by the revocation
15
• 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.
• Filipinas Life cannot profess ignorance of Valle's
acts. Even if Valle's representations were beyond
his authority as a debit/insurance agent, Filipinas
Life thru Alcantara and Apetrior expressly and
knowingly rati ed Valle's acts. It cannot even be
denied that Filipinas Life benefited from the
investments deposited by Valle in the account of
Filipinas Life. In our considered view, Filipinas
Life had clothed Valle with apparent authority;
hence, it is now estopped to deny said authority.
• In the case at bench, records show that Spouses
Bitte initially transacted with Andrea as Rosa
Elsa's agent on the basis of the SPA. Thereafter,
however, Rosa Elsa returned to the Philippines
and directly negotiated with them. Rosa Elsa's
act of taking over in the actual negotiation for
the sale of the property only shows that Andrea's
RM
 of the agency, unless notified of such authority to act has been revoked pursuant to
revocation Article 1924. At that point, Spouses Bitte had
• DOCTRINE OF APPARENT AUTHORITY - acts information sufficient enough to make them
and contracts of the agent within the believe that Andrea was no longer an agent
apparent scope of the authority conferred
on him, although no actual authority to do
such acts or has been beforehand
withdrawn, revoked or terminated, bind the
principal.
o RATIONALE of doctrine: third party
may reasonably believe that the
actor continues to act as an agent
and within the scope of actual
authority on the basis of
manifestations previously made by
the principal. Such a manifestation,
once made, remains operative until
the third party has notice of
circumstances that make it
unreasonable to believe that the
actor continues to have actual
authority.
o LIMIT of doctrine: Such a
manifestation, once made, remains
operative until the third party has
notice of circumstances that make it
unreasonable to believe that the
actor continues to have actual
authority." Hence, apparent
authority may survive the
termination of actual authority or of
an agency relationship.
§ Apparent authority ends
when it is no longer
reasonable for the third party
with whom an agent deals to
believe that the agent

16 RM
 continues to act with actual
authority.
• IN OTHER WORDS: a third party cannot be
bound by a revocation unless he had notice
or knowledge of such revocation.
• CC. 1924. "an agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing directly with
third persons."
Litonjua v. Eternit • The settled rule is that, persons dealing with
an assumed agent are bound at their peril,
and 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 [third persons] to prove it.
Hahn v. CA • Investment of own money DOES NOT
DISPROVE AGENCY
Dominion Insurance • CC. 1918. The principal is not liable for the
v. CA expenses incurred by the agent in the
following cases:
o (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 xxx.
17
• In this case, the petitioners as plaintiffs below,
failed to adduce in evidence any resolution of the
Board of Directors of respondent 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 respondent
EC including the improvements thereon.
• 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. In addition, BMW
held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it
announced in the Asian region that Hahn was the
"official BMW agent" in the Philippines.
• 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.
• Having deviated from the instructions of the
principal, the expenses that respondent
Guevarra incurred in the settlement of the claims
RM

V. EXTINGUISHMENT OF AGENCY
CMS Logging v. CA • The principal may revoke a contract of
agency at will, and such revocation may be
express, or implied, and may be availed of
even if the period fixed in the contract of
agency as not yet expired. As the principal
has this absolute right to revoke the
agency, the agent can not object thereto;
neither may he claim damages arising from
such revocation, unless it is shown that
such was done in order to evade the
payment of agent's commission.
Bitte v. Jonas (refer above)
Dybuncio v. Cp V. • The making and accepting of a new power
Ong Guan of attorney, whether it enlarges or
decreases the power of the agent under a
prior power of attorney, must be held to
supplant and revoke the latter when the two
are inconsistent. If the new appointment
with limited powers does not revoke the
general power of attorney, the execution of
18
of the insured may not be reimbursed from
petitioner Dominion.
• In the case at bar, CMS appointed DRACOR as its
agent for the sale of its logs to Japanese firms.
Yet, during the existence of the contract of
agency, DRACOR admitted that CMS sold its logs
directly to several Japanese firms. This act
constituted an implied revocation of the contract
of agency under Article 1924 of the Civil Code.
• [Recit question] Is DRACOR entitled to
damages?
o Since the contract of agency was revoked
by CMS when its sold its logs to Japanese
firms without the intervention of
DRACOR, the latter is no longer entitled
to its commission from the proceeds of
such sale and is not entitled to retain
whatever moneys it may have received as
its commission for said transactions.
Neither would DRACOR be entitled to
collect damages from CMS, since
damages are generally not awarded to
the agent for the revocation of the
agency, and the case at bar is not one
falling under the exception mentioned,
which is to evade the payment of the
agent's commission.
(refer above)
• The title of Ong Guan Can not having been
divested by the so- called deed on July 31, 1931,
his properties are subject to attachment and
execution.
RM
 the second power of attorney would be a
mere futile gesture.
Republic v. • GR: A contract of agency is generally
Evangelista revocable as it is a personal contract of
representation based on trust and con
dence reposed by the principal on his agent.
As the power of the agent to act depends
on the will and license of the principal he
represents, the power of the agent ceases
when the will or permission is withdrawn by
the principal. Thus, generally, the agency
may be revoked by the principal at will.
• XPN: When it is coupled with interest, i.e.,
if a bilateral contract depends upon the
agency.
Int’l Exchange Bank • A bilateral contract that depends upon the
v. Briones agency is considered an agency coupled
with an interest, making it an exception to
the general rule of revocability at will.
19
• In the case at bar, we agree with the finding of
the trial and appellate courts that the agency
granted by Legaspi to Gutierrez is coupled with
interest as a bilateral contract depends on it. It
is clear from the records that Gutierrez was given
by Legaspi, inter alia, the power to manage the
treasure hunting activities in the subject land; to
file any case against anyone who enters the land
without authority from Legaspi; to engage the
services of lawyers to carry out the agency; and,
to dig for any treasure within the land and enter
into agreements relative thereto.
• In the promissory note with chattel mortgage,
the Spouses Briones authorized petitioner to
claim, collect, and apply the insurance proceeds
towards the full satisfaction of their loan if the
mortgaged vehicle were lost or damaged.
Clearly, a bilateral contract existed between the
parties, making the agency irrevocable.
RM
 Sevilla v. CA • 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.
Valenzuela v. CA • There is an exception to the principle that
an agency is revocable at will and that is
when the agency has been given not only
for the interest of the principal but for the
interest of third persons or for the mutual
interest of the principal and the agent.
20
• 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.
• In this case, the Court awarded damages to
Sevilla.
o We rule, therefore, that for its
unwarranted revocation of the contract of
agency, the private respondent, Tourist
World Service, Inc., should be sentenced
to pay damages.Under the Civil Code,
moral damages may be awarded for
"breaches of contract where the
defendant acted . . . in bad faith."
• It is also evident from the records that the
agency involving petitioner and private
respondent is one "coupled with an interest,"
and, therefore, should not be freely revocable at
the unilateral will of the latter.
• The private respondents by the simple expedient
of terminating the General Agency Agreement
appropriated the entire insurance business of
Valenzuela. With the termination of the General
Agency Agreement, Valenzuela would no longer
be entitled to commission on the renewal of
insurance policies of clients sourced from his
agency. Worse, despite the termination of the
RM

National Sugar • Agency cannot be revoked or cancelled at
Trading v. PNB will by any of the parties if the agency
established between the parties is one
coupled with interest
• surrendered its rights in favor of PNB for a
Rallos v. Yangco • The principal having advertised the fact that
a person is his agent and having given
special notice to the third parties of that
fact, and having given them a special
invitation to deal with such agent, it was the
duty of the PRINCIPAL on the termination of
the relationship of principal and agent to
give due and timely notice thereof to the
plaintiffs
Perez v. PNB • The argument that foreclosure by the Bank
under its power of sale is barred upon death
of the debtor, because agency is
extinguished by the death of the principal,
under Article 1732 of the Civil Code of 1889
21
agency, Philamgen continued to hold Valenzuela
jointly and severally liable with the insured for
unpaid premiums. Under these circumstances, it
is clear that Valenzuela had an interest in the
continuation of the agency when it was
unceremoniously terminated not only because of
the commissions he should continue to receive
from the insurance business he has solicited and
procured but also for the fact that by the very
acts of the respondents, he was made liable to
Philamgen in the event the insured fail to pay the
premiums due.
• [T]he relationship between NASUTRA/SRA and
PNB when the former constituted the latter as its
attorney-in-fact is not a simple agency.
NASUTRA/SRA has assigned and practically
substantial consideration. To reiterate,
NASUTRA/SRA executed promissory notes in
favor of PNB every time it availed of the credit
line. The agency established between the parties
is one coupled with interest which cannot be
revoked or cancelled at will by any of the parties.
• Failing to do so, principal is responsible to third
parties for whatever goods may have been in
good faith and without negligence sent to the
agent without knowledge, actual or constructive,
of the termination of such relationship.
• Nevertheless, while upholding the validity of the
appellant Bank's foreclosure, we can not close
our eyes to the fact that the Bank was apprised
since 1947 of the death of its debtor, Vicente
Perez, yet it failed and neglected to give notice
RM
 and Article 1919 of the Civil Code of the of the foreclosure to the latter's widow and heirs,
Philippines, NEGLECTS to take into account as expressly found by the court a quo. Such
that the power to foreclosure is not an failure, in effect, prevented them from blocking
ordinary agency that contemplates the foreclosure through seasonable payment, as
exclusively the representation of the well as impeded their effectuating a seasonable
principal by the agent, but is primarily an redemption. In view of these circumstances, it is
authority conferred upon the mortgagee for our view that both justice and equity would be
the latter's own protection. It is, in fact, an served by permitting herein appellees to redeem
ancillary stipulation supported by the the foreclosed property within a reasonable time,
samecausa or consideration for the by paying the capital and interest of the
mortgage and forms an essential and indebtedness up to the time of redemption, plus
inseparable part of that bilateral foreclosure and useful expenses, less any rents
agreement. and pro ts obtained by the Bank from and after
the same entered into its possession.
•

22 RM