CASE # 3

Case Name: Country Bankers v. Keppel Cebu Shipyard

Petitioner: Country Bankers Insurance Corporation
Respondent: Keppel Cebu Shipyard, Unimarine Shipping Lines, Inc., Paul Rodriguez

FACTS: The company Unimarine Shipping Lines, Inc. (Unimarine) works in the shipping
sector. In order to dry dock and perform ship repairs on its vessel, the MV Pacific Fortune,
Unimarine hired Keppel Cebu Shipyard. Unimarine received a charge from Cebu Shipyard in
exchange for their services. The conditions of this arrangement were outlined in a letter
from Cebu Shipyard to the president/general manager of Unimarine. They negotiated a
reduction of P3.85M. Through its agent, Bethoven Quinain, Unimarine obtained a P3M
Surety Bond from Country Bankers Insurance Corp. (CBIC) in accordance with the terms of
the contract. Through an Endorsement that was appended to the surety bond, the bond's
expiration date was extended.

Unimarine was given letters from Cebu Shipyard requesting payment on its account. Cebu
Shipyard requested the surety CBIC to perform their responsibilities as sureties because
Unimarine had failed to make payments. Quinain, CBIC's representative, allegedly issued the
surety bond in excess of his power.

ISSUE: Whether the principal should be held accountable for the actions taken by its agent
without proper authorization?

RULING: The surety bond owes its obligation to the principal. Quinain's acts were within the
bounds of the special power of attorney granted to him, so CBIC could not claim immunity.
An agent must follow the law's command that he stay within the bounds of his power. The
written conditions of the power of attorney that was granted to an agent define the extent
of that agent's powers. According to Articles 1898 and 1910, the principal may be bound by
an agent's actions even though they are performed outside the bounds of his power if he
ratifies them, either explicitly or implicitly. However, it must be emphasized that the
principal, who must be aware of the unauthorized acts, alone has the authority to approve
them, not the agent.

Unable to refute CBIC's testimony that it was not aware of the existence of the Surety Bond
and Endorsement, Unimarine and Cebu Shipyard were forced to accept it. Also not claimed
was that CBIC ought to have been alerted of Quinain's commercial dealings carried out on its
behalf. Therefore, it is obvious and beyond doubt that there can be no ratification in this
situation, whether stated or implied.
CASE #4
Case Name: Viloria v. Continental Airlines, Inc.
Petitioner: Viloria
Respondent: Continental Airlines, Inc

FACTS: The Viloria spouses visited Holiday Travel Agency, a travel agency working for Continental
Airlines, to purchase tickets from Newark to San Diego. The travel agent, Margaret Mager misled
them into purchasing the plane tickets for Continental Airlines believing that they cannot travel
by train for it is fully booked. Later on, then, the spouses found out that the train trip isn't fully
booked and so they purchased train tickets and travel by train. Agent Mager referred the couple
to Continental Airlines when they request a refund on the airline tickets.

The couple filed a lawsuit against the airline company after they refused to refund the amount of
the ticket. In its defense, Continental Airlines claimed that the ticket sold to them is non-
refundable. That if any, they were not bound by the misinterpretation of Agent Mager because
there is no agency existing between Continental Airlines and Mager.

ISSUE: Does a principal-agent relationship exist between Continental Airlines Inc. and Holiday
Travel Agency?

RULING: The first and second requirements are satisfied because Continental Airlines did not
dispute that if entered into an agreement with Holiday Travel, of which Mager is a member,
whereby Holiday Travel would enter into carriage contractz with third parties on Airlines behalf.
CAI and HT shared all four (4) agency components, indicating the existence of a principal-agent
relationship. The first and second conditions were met because HT agreed to enter into carriage
contracts with third parties on CAI's behalf in accordance with the terms of the agreement,
which CAI did not dispute. The third requirement was satisfied because it was clear that HT was
only acting as a representative and that CAI, not HT, was obligated to follow the terms of the
carriage contracts entered into on its behalf. The fourth requirement was also met because CAI
had not claimed that HT had exceeded the scope of its jurisdiction.

In reality, CAI consistently upheld the legality of the carriage contracts signed by HT with
Sps.Viloria and Mager were clearly making fraudulent false representations.WHEREFORE, in light
of the foregoing, the instant Petition is DENIED.