Agency Exam Reviewer – Block C 2016 Prof.
Dionne Sanchez Go/Lagmay/Pabiona/Reodica
Hello Block C!
This reviewer is a product of the hard work of Carlo Go, Martin Lagmay, Arrow
Pabiona and Ron Reodica.
Cases in italics are the specific cases discussed in class. Most repeated
provisions are re-stated. Notes are from De Leon or class notes.
Re: annotations, Ma’am uses De Leon, most of her questions during recitation can
be answered by reading De Leon. Read Casis’ book for a deeper analysis. Sir Casis
explains the gray areas of the law and the nuances of the cases.
Good luck! ☺
I. Introduction
A. How is Agency Defined 1868
Article 1868. 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. (1709a)
1. Consent – 1868, 1869 to 1872, 1898,
1901, 1910, 1317, 1403(1)
Article 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. (1710a)
Article 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. (n)
Article 1871. Between persons who are present, the acceptance of the
agency may also be implied if the principal delivers his power of
attorney to the agent and the latter receives it without any objection.
(n)
Article 1872. Between persons who are absent, the acceptance of the
agency cannot be implied from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent,
who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a power
of attorney with respect to the business in which he is habitually
engaged as an agent, and he did not reply to the letter or telegram. (n)
Article 1898. If the agent contracts in the name of the principal,
exceeding the scope of his authority, and the principal does not ratify
the contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he undertook to
secure the principal's ratification. (n)
Article 1901. A third person cannot set up the fact that the agent has
exceeded his powers, if the principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
Article 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
(1727)
Article 1317. No one may contract in the name of another without
being authorized by the latter, or unless he has by law a right to
represent him.
A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his powers,
shall be 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. (1259a)
Article 1403. The following contracts are unenforceable, unless they
are ratified: (1) Those 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;
a. Express; ratification
b. Implied; ratification
2. Object
3. Consideration – 1875
Article 1875. Agency is presumed to be for a compensation, unless
there is proof to the contrary. (n)
B. Who are the parties to the contract of
Agency?
C. Must the parties be capacitated?
Rallos v. Felix Go Chan
Doctrine: Relationship of agency whereby one party, called the
principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are: (1) there is
consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agents acts as a representative
and not for himself, and (4) the agent acts within the scope of
his authority.
Facts: Petitioner is the attorney-in-fact of Concepcion Rallos.
After the death of the latter, petitioner sold the property to the
respondent. The administrator went to court to have the sale
declared unenforceable and to recover the share of Concepcion’s
heirs.
Held: Sale is invalid. Agency is extinguished through the death
of either principal or agent. In this case, the court speaking
through Justice Muñoz-Palma had the opportunity to define the
relationship of a contract of agency and the elements thereof.
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
Orient Air Services v. CA (Private Respondent American
Airlines)
Doctrine: An agent-principal relationship can only be effected
with the consent of the principal, and must not in any way be
compelled by law or by any court.
Facts: Petitioner is the agent of American Airlines in the
Philippines. As the agent, the petitioner was authorized to act as
its exclusive general sales agent within the Philippines for the
sale of air passenger transportation. Orient Air had reneged on
its obligations under the agreement by failing to promptly remit
the net proceeds of the sales for the months of January to
march. American Air severed its ties with the Petitioner. Upon
filing a case in court, the trial court, affirmed by the Court of
Appeals, ordered American Airlines to reinstate the petitioner as
its agent.
Held: The ruling regarding the reinstatement of the agency
relationship is set-aside. Compelling American Air to extend its
personality to Orient Air violates the principles and essence of
agency, defined by law as a contract whereby “a person binds
himself to render some service or to do something in
representation or in behalf of another, WITH THE CONSENT
OR AUTHORITY OF THE LATTER.
Uy v. CA (Private Respondent National Housing
Authority)
Doctrine: An agent of the seller is not a party to the contract of
sale between his principal and the buyer. Since only the parties
thereto as against each other may violate a contract, the real
parties-in-interest must generally be either party to the said
contract.
Facts: Petitioner is authorized to sell 8 parcels of land by the
owners. By virtue of such authority, petitioners offered to sell
the lands to the Respondent. Only five were paid for by the
NHA because of a report from the DENR that the remaining
area is located at an active landslide area not suitable for housing
projects. Petitioners filed a complaint for damages against NHA.
Held: Petition dismissed. The agent is not a party to the
contract of sale and may not file an action upon the contract.
Agents may file when it is an assignee of the Principal. An agent
is an assignee when there is an agreement granting them the right
to receive payment and out of the proceeds to reimburse
themselves for advances and commissions before turning the
balance over to the principals.
Notes: For commissions, the agent must go against the principal
NOT the third party (or in this case, the buyer).
Macke v. Camps
Doctrine: 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 third persons.
Facts: Macke and Chandler sold their bills of goods to Camps
and there was a balance for 177.50php. Upon demand, the
defendant failed and refused to pay the said balance. Macke
testified that on the order of one Ricardo Flores, who
represented himself as an agent for the defendant, he shipped
the goods to the defendant. Flores later acknowledged the
receipt of the said goods and made various payments amounting
Go/Lagmay/Pabiona/Reodica
to 174php. A witness testified that in the receipt it appeared that
Flores was a managing agent.
Held: Evidence is sufficient to sustain a finding that Flores was
the agent of the defendant with authority to bind the defendant.
Flores was acting within the scope of his authority in ordering
these goods, and that his admissions as to the receipt of the
goods are binding on the principal, absent of evidence to the
contrary.
Prudential Bank v. CA (Private Respondent Aurora Cruz)
Doctrine: A principal is liable to innocent third persons for
obligations contracted by the agent.
Facts: Respondent invested 200,000 in Central Bank bills with
the Petitioner. The agent of the respondent, Quimbo, prepared
the documents for the transaction. When asked to “roll-over” or
renew her invested, she was asked to sign a withdrawal slip by
Quimbo. The agent explained that this was a new requirement of
the bank. When Cruz returned and sought to withdraw her
money, the 200,000 she invested was gone.
Held: Petitioner should pay the respondent. Qui per alium facit
per seipsum facere videtur “He who does a thing by an agent is
considered as doing it himself.” 1911: 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.
Litonjua, Jr. v. Eternit Corp.
Doctrine: Any sale of real property of a corporation by a person
purporting to be an agent thereof, but without written consent
from the corporation is null and void. An agency contract
involving immovable requires an SPOA.
Facts: Eternit was engaged in the manufacture of roofing
materials. The president of the company wanted to stop
operations in the Philippines because of the political situation
(advent of the EDSA revolution). The board wanted to dispose
of the properties and offered to sell the said properties to the
petitioner through Marquez. Marquez negotiated the final price.
Eventually, the company did not decide to sell due to the
improved political situation. Litonjua filed a case for specific
performance and damages.
Held: Petition dismissed. Marquez did not have the authority to
bind Eternit. The agreement was not in writing and there was no
board resolution authorizing Marquez to do such. Even if he was
a member of the board, a resolution was needed.
Notes: A corporation is separate and distinct from the
individuals comprising the corporation. It can only act through a
board resolution issued by the Board of Directors. Since there
was no real authority, the acts of Marquez were not valid.
Notes on the topic:
Characteristics of Agency
1. Consensual because it is perfected by mere consent
2. Principal because it can stand by itself without the need
of another contract
3. Nominate because it has its own name
4. Unilateral if it is gratuitous because it creates
obligations for only one of the parties, ie, the agent; or
bilateral if it is for compensation because it gives rise to
reciprocal rights and obligations
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

5. Preparatory because it is entered into as a means to an
end, ie, creation of other contracts.
Representative relation: based on trust and confidence
Fiduciary relationship: extends his personality.
Object: execution of juridical acts in representation or on behalf
of another.
Consideration: presumed for compensation, burden of proof to
whoever asserts it is gratuitous.
Must the parties be capacitated?
GR: Must be capacitated. Strictly speaking the agent does not
need to be fully capacitated, since he enters in the capacity of the
principal. The agent is a LITERAL extension of the principal’s
personality.
II. What is the form of the contract of
agency? 1869, 1874
Article 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. (1710a)
Article 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. (n)
A. Oral
B. Written

Angeles v. Philippine National Railways

Doctrine: Normally, the agent has neither rights nor liabilities as
against the third party; he cannot thus sue or be sued on a
contract. EXCEPTION: When the agent is constituted as an
assignee.
Facts: PNR informed Romualdez that he authorized it accepted
his offer to buy PNR’s scrap or unserviceable rails. Romualdez
addressed a letter to PNR that he authorized Angeles to be his
lawful representative. PNR suspended the contract due to
discrepancies involving 500,000php. Angeles filed a suit against
PNR for specific performance and damages.
Held: The spouses Angeles are not the real parties-in-interest.
Complaint is dismissed for lack of cause of action.

Jimenez v. Rabot
Doctrine: Where the owner of real property desires to confer
upon an attorney-in-fact authority to sell the same, it is necessary
that the authority should be expressed in writing; but it is not
necessary that the property to be sold should be precisely as
described. It is sufficient if the authority is so expressed as to
determine without doubt the limits of the agent’s authority.
Facts: Jimenez owned three properties assigned to him as one
of the heirs in the division of the estate of his father. While he
was staying at Vigan, he confided his property in Alaminos to
the care of his sister. He wrote to his sister a letter in which he
informed her that he was pressed for money and requested her
to sell one of the parcels of land and send the money to pay for
his debts. The sister sold the land to Rabot. Jimenez now claims
that his sister did not have valid authority to sell the parcel of
land.
Held: The letter was enough to bind Jimenez as a principal in
the sale of his parcel of land.

City-Lite Realty v. CA (Private Respondent FP Holdings

and Realty)
Doctrine: 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.
Facts: FP holdings owned a property with a total lot area of
71,754 square meters with a total lot area of 9,192 square meters

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

in front. Through Metro Drug, the lot was sold to City Lite. FP
Holdings refused to sell the front part to City Lite. FP Holdings
only requested Metro Drug’s assistance in finding buyers for the
property.
Held: Metro Drug had no authority to sell. It was acting as a
mere broker. As a broker, its duty was only to bring the parties
together for a possible transaction.
Cosmic Lumber v. CA (Private Respondent Isidro Perez)
Doctrine: Principal is chargeable and bound by the knowledge
of/or notice to agent, received while the agent was acting as
such. This is intended to protect those who exercise good faith
and not as a shield for unfair dealing.
Facts: Cosmic Lumber executed a SPOA appointing Estrada as
attorney-in-fact with the power to initiate, institute and file any
court action for the ejectment of third persons and/or squatters
in a lot. Estrada, by virtue of her power of attorney, instituted an
action for the ejectment of private respondents and recover the
possession of a portion of the lot. Estrada entered into a
compromise agreement with the respondents, Cosmic was not
informed of such compromise.
Held: The compromise is void. Entering into a compromise was
not part of her duties (only to institute cases), no authority as an
agent to sell. The highly reprehensible conduct of Estrada
constituted an extrinsic or collateral fraud.
San Juan Structural Steel v. CA (Private Respondent
Motorich Sales Corporation)
Doctrine: A sale requiring written authority is void without the
said authority. It cannot be ratified.
Facts: Petitioner through Nenita Gruenberg (Board member
and treasurer) agreed to enter into a contract of sale of real
property with the petitioner. Petitioner paid 100,000, but
Motorich refused to sell. It stated that Nenita’s signature was not
enough to bind the company and there was no evidence that she
was authorized to sell the said property.
Held: Nenita was not authorized to sell and Motorich did not
ratify the said sale. A corporation is different from a person. The
petitioner has the burden of proving that Nenita was authorized.
The said acceptance letter was only handwritten and contained
Nenita’s signature
Notes: This case exemplifies the importance of a board
resolution.
AF Realty v. Dieselman Freight Services Co.
Doctrine: Contracts or acts of a corporation must be made
either by the board of directors or by a corporate agent duly
authorized by the board. Absent such valid
delegation/authorization the rule is that the declarations of an
individual director relating to the affairs of the corporation, are
not binding on the corporation. The sale of a land cannot be
ratified EVEN if there was an acceptance of benefits.
Facts: Cruz, Jr., a board member of Dieselman, authorized
Polintan as broker. Politan assigned a certain Noble to sell the
same lot. Noble offered the lot to the petitioner, which the latter
accepted. The petitioner asked for board resolution, only the
original TCT was presented. Cruz, Sr. acknowledged 300,000 as
earnest money and was required the petitioner to accept the sale
at 4,000 per sqm. Cruz, Sr. eventually terminated the offer.
Dieselman filed a case stating that there was a perfected contract
of sale.
Held: Cruz, Jr. had no authority and his acts cannot be ratified.
In order for the sale to be valid, there must be a written
delegation by the Board of Directors. Such sale cannot be
ratified.
Notes: There was no board resolution, even if there was the
authority given was not for the sale. The best evidence to prove
the authority would be the power of attorney.
Notes on the topic:
Re: sale of land without a written authority. It is the actual sale
which becomes void if it is done without an SPOA, NOT the
agency relationship.
Best evidence of a principal-agent relationship: Power-of-
Attorney

Delos Reyes v. CA (Private Respondent Daluyong Gabriel)

Doctrine: Contract has no consent, when one in behalf of
another who has never given him authorization therefor enters
into an agreement, unless by law he has a right to represent.
Facts: Gabriel owns a 5,010sqm lot in Davao. Since he is
residing in Mandaluyong, he placed his sister Rita de Rey as
administrator over the said property. Subsequently, he sent his
son to replace Rita as the administrator. Gabriel’s son agreed to
sell part of the property to the lessees Delos Reyes. Gabriel
ordered the petitioners to stop building.
Held: Sale was invalid. Son had no authority since he was
neither authorized as agent nor the owner of the property.

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
III. Who has the obligation to determine
existence and scope of agency?
Keeler Electric Co. v. Rodriguez
Doctrine: Inquiry on whether authority exists:
1. The law indulges in no bare presumptions: must be
proved or presumed from facts
2. Agent cannot establish his own authority either by
representations or assuming to exercise it.
3. An authority cannot be established by mere rumor or
general reputation
4. Even a general authority is not an unlimited one
5. Every authority must find its ultimate source in some
act or omission of the principal. An assumption of
authority to act as agent for another of itself challenges
inquiry.
Burden of proof lies with the person dealing with the assumed
agent that the latter is indeed authorized as an agent. He must be
able to trace the source of the agency.
Facts: Keeler was engaged in the electrical business, and in the
sale of what is known as the “Matthews” electric plant.
Montelibano approached Keeler at its Manila office, claiming
that he was from Iloilo and he could find purchasers for the
“Matthews” plant. Keeler agreed and Montelibano would get
10% commission from every sale. Montelibano sold the plant to
Rodriguez who paid the former. Keeler was claiming payment
from Rodriguez
Held: Rodriguez should pay Keeler. There was nothing on the
face of the receipt to show that the recipient was the agent of, or
that he was acting for the principal. It was his persona receipt
and his personal signature. There was no evidence that he had
any authority, real or apparent to receive or receipt for the
money.
Yu Eng Cho v. Pan American World Airways, Inc.
Doctrine: Persons dealing with an assumed agent are bound at
their peril to ascertain not only the fact but also the extent of the
agency. Burden of proof is for them to establish. Declarations of
the agent alone are insufficient to establish the fact of his
authority.
Facts: Yu Eng Cho bought plane tickets plane tickets from
Tagunicar who represented Tourist World. He booked a flight
from HK – SF, when he called Pan-Am to confirm the airline
manifest. When he arrived in SF, he confirmed the flight back to
Manila but his name was not in the manifest.
Held: Pan-Am is not liable for Tagunicar’s acts. The burden of
proof lies with the petitioner to prove that Tagunicar was an
agent of the petitioner.
Go/Lagmay/Pabiona/Reodica
IV. How is agency distinguished from other
contracts/relationships?
A. Master-Servant – 1689- 1699
Article 1689. Household service shall always be reasonably
compensated. Any stipulation that household service is without
compensation shall be void. Such compensation shall be in addition to
the house helper's lodging, food, and medical attendance.
Article 1690. The head of the family shall furnish, free of charge, to
the house helper, suitable and sanitary quarters as well as adequate
food and medical attendance.
Article 1691. If the house helper is under the age of eighteen years,
the head of the family shall give an opportunity to the house helper
for at least elementary education. The cost of such education shall be
a part of the house helper's compensation, unless there is a stipulation
to the contrary.
Article 1692. No contract for household service shall last for more
than two years. However, such contract may be renewed from year to
year.
Article 1693. The house helper's clothes shall be subject to
stipulation. However, any contract for household service shall be void
if thereby the house helper cannot afford to acquire suitable clothing.
Article 1694. The head of the family shall treat the house helper in a
just and humane manner. In no case shall physical violence be used
upon the house helper.
Article 1695. House helpers shall not be required to work more than
ten hours a day. Every house helper shall be allowed four days'
vacation each month, with pay.
Article 1696. In case of death of the house helper, the head of the
family shall bear the funeral expenses if the house helper has no
relatives in the place where the head of the family lives, with sufficient
means therefor.
Article 1697. If the period for household service is fixed neither the
head of the family nor the house helper may terminate the contract
before the expiration of the term, except for a just cause. If the house
helper is unjustly dismissed, he shall be paid the compensation already
earned plus that for fifteen days by way of indemnity. If the house
helper leaves without justifiable reason, he shall forfeit any salary due
him and unpaid, for not exceeding fifteen days.
Article 1698. If the duration of the household service is not
determined either by stipulation or by the nature of the service, the
head of the family or the house helper may give notice to put an end
to the service relation, according to the following rules:
(1) If the compensation is paid by the day, notice may be given on any
day that the service shall end at the close of the following day;
(2) If the compensation is paid by the week, notice may be given, at
the latest on the first business day of the week, that the service shall
be terminated at the end of the seventh day from the beginning of the
week
(3) If the compensation is paid by the month, notice may be given, at
the latest, on the fifth day of the month, that the service shall cease at
the end of the month.
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Article 1699. Upon the extinguishment of the service relation, the
house helper may demand from the head of the family a written
Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
(3) If the compensation is paid by the month, notice may be given, at
the latest, on the fifth day of the month, that the service shall cease at
the end of the month.
Article 1699. Upon the extinguishment of the service relation, the
house helper may demand from the head of the family a written
statement on the nature and duration of the service and the efficiency
and conduct of the house helper.
B. Employer-Employee – 1700
Article 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts
are subject to the special laws on labor unions, collective bargaining,
strikes and lockouts, closed shop, wages, working conditions, hours of
labor and similar subjects.
C. Lease of Service – 1644
Article 1644. In the lease of work or service, one of the parties binds
himself to execute a piece of work or to render to the other some
service for a price certain, but the relation of principal and agent does
not exist between them. (1544a)
D. Independent Contractor – 1713
Article 1713. By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration
of a certain price or compensation. The contractor may either employ
only his labor or skill, or also furnish the material. (1588a)
E. Trust – 1440
Article 1440. A person who establishes a trust is called the trustor;
one in whom confidence is reposed as regards property for the benefit
of another person is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary.
F. Sale -1458
Article 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional. (1445a)
G. Partnership – 1767
Article 1767. By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
themselves.
Two or more persons may also form a partnership for the exercise of
a profession. (1665a)
Go/Lagmay/Pabiona/Reodica
H. Negotiorum Gestio/Quasi-Contract –
2144, 2145
Article 2144. Whoever voluntarily takes charge of the agency or
management of the business or property of another, without any
power from the latter, is obliged to continue the same until the
termination of the affair and its incidents, or to require the person
concerned to substitute him, if the owner is in a position to do so.
This juridical relation does not arise in either of these instances:
(1) When the property or business is not neglected or abandoned;
(2) If in fact the manager has been tacitly authorized by the owner.
In the first case, the provisions of articles 1317, 1403, No. 1, and 1404
regarding unauthorized contracts shall govern.
In the second case, the rules on agency in Title X of this Book shall be
applicable. (1888a)
Article 2145. The officious manager shall perform his duties with all
the diligence of a good father of a family, and pay the damages which
through his fault or negligence may be suffered by the owner of the
property or business under management.
The courts may, however, increase or moderate the indemnity
according
I. to the circumstances
Judicial of each case. (1889a)
Administrator
J. Broker – (City Lite, p.393)
Sevilla v. CA (Private Respondent Tourist World Service
Inc.)
Doctrine: The agency being coupled with an interest cannot be
revoked at will, the agency having been created for the mutual
interest of the agent and the principal. Sevilla acquired a business
interest in the branch.
Facts: Sevilla ran a branch of Tourist World Services Inc, 4%
was to go to Lina Sevilla and 3% was to be withheld by the
Tourist World Service, Inc. Tourist World appeared to have
been informed that Sevilla was connected with a rival firm.
Tourist World padlocked and closed the branch managed by
Sevilla.
Held: Sevilla is an agent of the respondent. When she agreed to
woman the branch, Tourist World 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 in behalf of
another.” Sevilla solicited fares, but she did so for and on behalf
of her principal.
Notes: She was not an agent because she had no salary and had
a monetary interest in the business. There was no partnership
absent a “parity of standing.” The agency can be gleaned from
the nature of her duties.
Shell Co. v. Firemen’s Ins. Co. of Newark, NJ
Doctrine: To determine the nature of the contract, courts do
not have or are not bound to rely upon the name or title given it
by the contracting parties, should there be a controversy as to
what they really had intended to enter into, the way the
contracting parties perform their obligations
Facts: Car owned by Salvador Sison was brought to Shell
Gasoline Station for washing. The car was placed on a hydraulic
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
lifter but the car fell. The insurance company brought an action
against Shell. Shell argued that the branch was an independent
contractor.
Held: The gas operator was an agent of Shell. The operator
owed his position to the company and can be removed at will.
The service station belonged to the company and the receipts
indicated an agency relationship.
Dela Cruz v. Northern Theatrical Enterprises
Doctrine: For as long as an employee has the power to
represent his employer and enter into binding transactions, he is
both an employee and an agent.
Facts: An employee was seeking reimbursement from his
employer on the ground that he was an agent. The respondent
operated a movie house and employed Dela Cruz as a guard. A
certain Martin wanted to enter the theater without a ticket. Dela
Cruz was attacked by Martin and demanded reimbursement
Held: Plaintiff was not employed to represent the defendant
corporation its dealings with third parties. He was a mere
employee hired to perform a certain specific duty or task, that of
acting as special guard and staying at the main entrance of the
movie house to stop gate crashers.
Nielson and Co. v. Lepanto Consolidated
Doctrine: In both agency and lease of services one of the parties
binds himself to render some service to the other party. Agency,
however, is distinguished from lease of work or services in that
the basis of agency is representation, while in the lease of work
or services the basis is employment. The lessor of services does
not represent his employer, while the agent represents his
principal. Agency is a preparatory contract, as agency “does not
stop with the agency because the purpose is to enter into other
contracts.”
Fact: Petitioner was employed by the respondent to operate
mining dams of Lepanto (owns the rights to the mine). Because
of the war, the dam was destroyed. Nielson was to manage and
operate the mining properties and mill on behalf, and for the
account, of Lepanto. Nielson was authorized to represent
Lepanto in entering, on Lepanto’s behalf, into contracts for
hiring of laborers, purchase of supplies, and the sale and
marketing of the ores mined.
Held: Contract of lease not of agency. The main purpose of the
contract was to operate the mill and not to represent Lepanto.
Quiroga v. Parsons Harware
Doctrine: What differentiates a sale of items from an agency
created for the purpose of selling the said items is 1. Whether the
party receiving the item pays the price. 2. Whether the recipient
can return the items if unsold by him
Facts: Petitioner entered into a contract whereby the former
grants the exclusive right to sell his beds in the Visayas. On
receiving the beds he was obliged to pay for them whether or
not they were sold. He was given a 25% commission per sale of
the bed.
Held: The contract in question embodied a sale primarily
because the defendant “on receiving the beds, was necessarily
obliged to pay their price within the term fixed.”
Go/Lagmay/Pabiona/Reodica
Gonzalo Puyat and Sons v. Arco Amusement Co.
Doctrine: There can be no agency where the person is both the
agent of the vendor and the purchaser.
Facts: Respondent was engaged in the business of operating a
cinematograph. Puyat was acting as exclusive agent in the
Philippines for Starr Piano Company. Arco purchased sound
reproducing devices from Puyat. Arco ordered the equipment
and paid a 10% commission plus all expenses. Arco discovered
that the price quoted to them with regard to their orders was not
the net price but rather the list price and that Puyat was able to
purchase at a discount. They sought a reduction from Puyat.
Held: The stipulated commission was only an additional price
which the buyer bound itself to pay.
Lim v. People
Doctrine: Estafa is present where contract to sell is constituted
by another as a mere agent. There is an agency to sell where the
agreement was to pay to the owner the proceeds as soo as it was
sold.
Facts: Petitioner proposed that she be the one to sell Ayroso’s
tabacco. The proceeds of the sale would be given to Ayroso as
soon as it was sold. Out of the P799 sale of the goods, petitioner
was only able to pay P240.
Held: It was a contract of agency and not a contract of sale. It is
unbelievable that she would go to the extent of actually going to
Ayroso’s house and transport the goods if she did not intent to
make a profit out of the transaction. It is highly unlikely that it
was merely a favor for Ayroso.
Pacific Commercial v. Yatco
Doctrine: The broker, unlike the commission merchant, has no
relation with the thing he sells or buys. He is merely an
intermediary between the purchaser and the vendor.
Facts: The process of sale was that Pacific would look for
purchasers, and the buyers’ orders would be relayed to Victoria’s
Milling Office in Manila. The Manila office would then endorse
the order to their Negros branch. The delivery would then
commence. There were two types of deliveries: Delivery ex-
warehouse where the sugar would be first deposited in the
warehouse before delivery to the purchaser; OR Delivery ex-
ship, where the delivery would be through shipment and an
agreed upon port of arrival. Pacific was assailing the merchant
sales tax imposed upon it by the CIR. Victoria paid the tax but
BIR also collected from Pacific
Held: In delivery ex-warehouse, he acted as a commission agent.
The deposit in the warehouse was made upon Pacific’s own
account and at its own risk until the buyer claimed it; hence it
was in Pacific’s possession and at their disposal. In delivery ex-
ship, Pacific mas merely an intermediary between the purchaser
and the vendor. He acquires neither the possession nor the
custody of the things sold. His only office is to bring together
the parties to the transaction. Pacific was unjustly taxed in the
delivery ex-ship.
Ker v. Lingad
Doctrine: In agency, the transfer does not make the property as
the agent’s own, but that of principal, who remains the owner
and has the right to control sales, fix the price, and terms,
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

demand and receive the proceeds less the agent’s commission V. Some classes of agents (Excluded)
upon sales made. A. Attorneys-at-law
Facts: CIR assessed P20k against Ker. Ker was the USRI’s
“Distributer” and was precluded from disposing such products B. Auctioneers
anywhere else not stipulated unless with written consent from C. Brokers
USRI. The prices, discounts, terms of payment, terms of delivery D. Factors, commission merchants – 1903 -
and other conditions of sale were subject to change in the 1908 (infra, p.13)
discretion of USRI.
Held: Since the company retained ownership of the goods, even
as it delivered possession unto the dealer for resale to customers,
the price and terms of which were subject to the company’s
control, the relationship between the company and the dealer is
one of agency. In sale, the transfer puts the transferee in the
attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an
agent who must account for the proceeds of a resale, the
transaction is a sale. In agency, the transfer does not make the
property as the agent’s own, but that of principal, who remains
the owner and has the right to control sales, fix the price, and
terms, demand and receive the proceeds less the agent’s
commission upon sales made.

Hahn v. CA (Private Respondent BMW)

Doctrine: Specific circumstances such as those presented in this
case, clearly show a contract of agency despite the name of the
agreement entered into by the parties. It is the nature not the
nomenclature, which determines the true essence of the contract.
Facts: Alfred Hahn is a Filipino citizen doing business under the
name Hahn-Manila. It executed a “Deed of Assignment with
Special Power of Attorney” whereas, Hahn was the exclusive
dealer for BMW here in the Philippines. After inspection, BMW
found that the quality of Hahn-Manila was not up to the
standards required so it sought to cancel this exclusive dealership
and BMW offered Hahn a “standard importer contract” to
which Hahn refused. BMW cancelled all transactions with Hahn
so the latter filed a complaint for specific performance against
BMW to compel it to continue the exclusive dealership.
Held: Hahn is an agent for BMW. Hahn claimed that he took
order for BMW and transmitted them to BMW. Upon receipt of
the order, BMW fixed the down payment and pricing charges,
and notified Hahn of the scheduled production month for the
orders, and reconfirmed the orders by signing and returning to
Hahn the acceptance sheets. Payment was made directly to
BMW and Hahn never paid the purchase price of BMW cars
sold in the Philippines. BMW, as the principal, retained control.

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
VI. What are the classifications of agency
contracts?
A. Express agency; implied agency
B. Agency by estoppel; no consent – 1900,
1911, 1921, 1922
Article 1900. So far as third persons are concerned, an act is deemed
to have been performed within the scope of the agent's authority, if
such act is within the terms of the power of attorney, as written, even
if the agent has in fact exceeded the limits of his authority according
to an understanding between the principal and the agent. (n)
Article 1911. 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. (n)
Article 1921. If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation shall not prejudice
the latter if they were not given notice thereof. (1734)
Article 1922. If the agent had general powers, revocation of the
agency does not prejudice third persons who acted in good faith and
without knowledge of the revocation. Notice of the revocation in a
newspaper of general circulation is a sufficient warning to third
persons. (n)
Y un Kwan Byung vs. Philippine Amusement Gaming
Corporation
Doctrine: The law makes no presumption of agency and
proving its existence, nature and extent is incumbent upon the
person alleging it. Whether or not an agency has been created is
a question to be determined by the fact that one represents and
is acting for another.
Facts: There was a junket chip agreement between ABS Corp
and PAGCOR. PAGCOR wanted ABS Corp to be accountable
for the payment of a Korean’s chip as ABS Corp was, in the
agreement, the one responsible for the winnings of its foreign
players.
Held: There is no implied agency in this case because PAGCOR
did not hold out to the public as the principal of ABS
Corporation. PAGCOR's actions did not mislead the public into
believing that an agency can be implied from the arrangement
with the junket operators, nor did it hold out ABS Corporation
with any apparent authority to represent it in any capacity. The
Junket Agreement was merely a contract of lease of facilities and
services. Article 1869 of the Civil Code states that implied
agency is derived 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.
Implied agency, being an actual agency, is a fact to be proved by
deductions or inferences from other facts.
Go/Lagmay/Pabiona/Reodica
C. Agency by operation of law – 1869,
1884(2), 1930, 1931
Article 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. (1710a)
Article 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. (1718)
Article 1930. The agency shall remain in full force and effect even
after the death of the principal, if it has been constituted in the
common interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor. (n)
Article 1931. Anything done by the agent, without knowledge of the
death of the principal or of any other cause which extinguishes the
agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith. (1738)
D. Universal, general and special -1867
Article 1867. A limited partnership formed under the law prior to the
effectivity of this Code, may become a limited partnership under this
Chapter by complying with the provisions of article 1844, provided
the certificate sets forth:
(1) The amount of the original contribution of each limited partner,
and the time when the contribution was made; and
(2) That the property of the partnership exceeds the amount sufficient
to discharge its liabilities to persons not claiming as general or limited
partners by an amount greater than the sum of the contributions of its
limited partners.
A limited partnership formed under the law prior to the effectivity of
this Code, until or unless it becomes a limited partnership under this
Chapter, shall continue to be governed by the provisions of the old
law.
E. Durable agency – 1930 (see above)
Siasat v. IAC (Private Respondent Teresita Nancianceno)
Doctrine: A general agency pertains to the scope of the
authority. An agency couched in general terms pertains to the
nature of the authority granted to the agent.
Facts: The petitioner and the respondent entered into a
document stating that the respondent was to represent the
United Flag Industries and to deal with any entity in connection
with the marketing of their products. The agency relationship
was revoked by the principal stating that the respondent had no
authority to sell.
Held: Teresita is entitled to the commission from the
transactions arising out of the general agency. While a principal
may revoke an agency at will, at the time fixed by the manager
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
for the termination of negotiations, the defendant agent had
already earned the commissions agreed upon and could not be
deprived thereof by the arbitrary action of the plaintiff.
D ominion Insurance v. CA
Doctrine: To cover all the business of the principal, it is not
necessary to state “all the business of the principal.” It is
sufficient that the listed authorized transactions apparently cover
all that is required to run the business.
Facts: Plaintiff Guevarra instituted a civil case for sum of money
against defendant Dominion Insurance Corp. (Dominion).
Guevarra claims to have advanced P156, 473.90 in his capacity as
manager of Dominion to satisfy certain claims of the latter’s
clients.
Held: A perusal of the Special Power of Attorney would show
that petitioner Dominion (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. Being a general agency,
Geuvarra was limited to acts of administration. Payment requires
a separate SPOA being an act of strict dominion. Having
deviated from the instructions of the principal, the expenses that
the agent incurred in the settlement may not be reimbursed from
the principal. However, in this case, the right to recover is
justified under the general law on obligations and contracts, if he
paid without the knowledge of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor.
F. Couched in general terms; couched in
specific terms – 1877 -1880
Article 1877. An agency couched in general terms comprises only acts
of administration, even if the principal should state that he withholds
no power or that the agent may execute such acts as he may consider
appropriate, or even though the agency should authorize a general and
unlimited management. (n)
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;
(2) To effect novations which put an end to obligations already in
existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce
the right to appeal from a judgment, to waive objections to the venue
of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
(6) To make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;
(8) To lease any real property to another person for more than one
year;
(9) To bind the principal to render some service without
compensation;
Go/Lagmay/Pabiona/Reodica
Article 1878. Special powers of attorney are necessary in the following
cases:
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (n)
Article 1879. A special power to sell excludes the power to mortgage;
and a special power to mortgage does not include the power to sell.
(n)
Article 1880. A special power to compromise does not authorize
submission to arbitration. (1713a)
Article 1881. The agent must act within the scope of his authority. He
may do such acts as may be conducive to the accomplishment of the
purpose of the agency. (1714a)
1. Mortgage – 1878(7)
PN B v. Sta. Maria
Doctrine: 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.
Facts: The siblings of Maximo Sta. Maria were alleging that
under the special power of attorney, they had only given him the
power to mortgage property jointly owned by them and not to
borrow money.
Held: The authority granted by defendants-appellants (except
Valeriana) unto their brother, Maximo, was merely to mortgage
the property jointly owned by them. Maximo alone must answer
for the loans he contracted.
BPI v. De Coster
Doctrine: Where in an instrument powers and duties are specified
and defined, all of such powers and duties are limited and
confined to those which are specified and defined, and that all
other powers and duties are excluded.
Facts: Respondent de Coster, with the consent of her husband
acting as her agent, acknowledged and delivered to BPI a
mortgage on certain real property. She alleges that her husband
executed the mortgage in excess of the powers given to him whilst
the bank wanted the property foreclosed.
Held: The husband exceeded his power of attorney. The real
mortgage was void.
2. Loan/borrow - 1878(7)
Hodges v. Salas
Doctrine: The terms of the power of attorney are limited; the
agent was thereby authorized only to borrow any amount of
money which he deemed necessary. There is nothing, however,
to indicate that the defendants had likewise authorized him to
convert the money obtained by him to his personal use.
Facts: Defendants executed a power of attorney in favor of
Yulo to enable him to obtain a loan and secure it with a
mortgage. Yulo obtained a loan but acquired P10K for himself.
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
The defendants were alleging that Yulo exceeded his power
because the stipulations in his authority state that he may only
perform acts necessary to the performance of his trust.
Held: The agent’s acts were never ratified by the principal. The
terms of the power of attorney are limited. In applying part of
the funds to pay his personal obligations, he exceeded his
authority.
3. Sell – 1878(5)
Strong v. Gutierrez
Doctrine: The requirements are met if there is a clear mandate
from the principal specifically authorizing the performance of
the act: such a mandate may be either oral or written, the one
thing vital being that it shall be express.
Facts: Plaintiff owned 800 shares of capital stock of Philippine
Sugar which were purchased by the defendant through a broker
who dealt with the plaintiff’s agent (with special power to collect
money and the general power to manage Strong’s business). Sale
was not made known to the plaintiff, hence the action was
instituted to recover the shares.
Held: The agent did not have the power to sell the shares. An
agency stated in general terms only includes acts of
administration. In order to compromise, alienate, mortgage, or
to execute any, other act of strict ownership, an express
mandate is required. The express mandate required by law to
enable an appointee must be one that expressly mentions sale.
Katigbak v. Tai Hung Co.
Doctrine: While it is true that a power of attorney not recorded
in the registry of deeds is ineffective in order than an agent or
attorney-in-fact may validly perform acts in the name of his
principal, and that any act performed by the agent by virtue of
said with respect to the land is ineffective against a third person
who, in good faith, may have acquired a right thereto, it does,
however, bind the principal to acknowledge the acts performed
by his attorney-in-fact regarding said property.
Facts: Po Tecsi authorized his brother to sell some of his
property, but the same was not recorded. Said land was sold by
the agent to Katigbak.
Held: Po Tecsi’s brother was authorized by Po Tecsi to sell
subject land and, as a result, was able to validly transfer
ownership to Katigbak.
4. Lease – 1878(8)
Chua v. IAC (Private Respondent Vicente Go)
Doctrine: The special power of attorney is necessary to lease
any real property to another person for more than one year.
Facts: The principal, through her agent but without a special
power of attorney, leased the property to Chua with an option
to buy. When the principal sold the property to another upon
expiration of lease, Chua alleged that the principal violated their
right of option to buy.
Held: The contract involves the lease of real property for a
period of more than one year. The contract was entered into by
the agent. The law requires that the agent be armed with an SPA
to lease the premises.
Go/Lagmay/Pabiona/Reodica
5. Compromise – 1878(3)
D ungo v. Lopena
Doctrine: When it appears that the client, on becoming aware
of the compromise and the judgment thereon, fails to repudiate
promptly the action of his attorney, he will not afterwards be
heard to contest its validity. A compromise is a contract and that
a third person cannot bind another to a compromise agreement
unless the third person has obtained a special power of attorney.
Facts: Petitioner was not able to sign the compromise
agreement between him, his co-debtor and their
creditor/mortgagor. However, when the Tri-Party agreement
was drawn, petitioner was already able to sign.
Held: A compromise is a contract and a third person cannot
bind another to a compromise agreement. However, the
compromise agreement was only unenforceable until ratified.
Since the petitioner sign the tri-party agreement, he is estopped
from questioning its validity.
Vicente v. Geraldez
Doctrine: Special powers of attorney are necessary, among other
cases, in the following: to compromise and to renounce the right
to appeal from a judgment. As a general rule an officer or agent
of the corporation has no power to compromise or settle a claim
by or against the corporation, except to the extent that such
power is given to him either expressly or by reasonable
implication from the circumstances.
Facts: Hi Cement Corp. acquired a Placer Lease Contract
(mining claims). Vicente et, al claimed that some parts of the
mining claims are theirs hence the suit. They decided to have a
Compromise Agreement however the Corporation’s President
refused to sign it. TC however still rendered judgment.
Held: TC found that the counsel for the Corporation entered
into the agreement without the written authority of his client
and the latter did not ratify the same. Orders therefore made by
the court have been issued in excess of jurisdiction and grave
abuse of discretion. The compromise agreement was signed only
by the lawyers for petitioners and lawyers for Hi Cement. The
latter did not submit to the Court any written authority from
their client to enter into a compromise.
6. Other acts of strict dominion –
1878(12)
Insular Drug Co. v. N ational Bank
Doctrine: The right of an agent to indorse commercial paper is
a very responsible power and will not be lightly inferred. Any
person taking checks made payable to a corporation, which can
act only by agents does so at his peril, and must abide by the
consequences if the agent who indorses the same is without
authority.
Facts: The agent placed certain checks of the petitioner in his
personal account. The Bank allowed him to place the checks in
his account even though the checks were not named for him.
Held: The bank defrauded petitioner. The bank permitted the
agent to indorse the checks. The bank credited those checks to
the personal account of the agent and permitted him and his
wife to make withdrawals without there being any authority
from the drug company to do so. The bank made itself
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
responsible to the drug company for the amounts
represented by the checks.
Notes: Indorsement of checks is also an act of strict dominion.
Notes on the topic:
Kinds of Agency:
Agency may be classified as follows:
1. As to manner of its creation
a. Express – one where the agent has been actually
authorized by the principal either orally or in
writing
b. Implied – one which is 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, or from the acts of the agent which arry
out the agency, or from his silence or inaction
according to the circumstances. The enumeration
of implied agency in 1869-1870 is not exclusive.
2. As to authority conferred:
a. Couched in general terms – one which is created
in general terms and is deemed to comprise only
acts of administration
b. Couched in specific terms – one authorizing only
the performance of a specific act or acts.
3. Agency by Estoppel: Estoppel precludes a person
from denying or asserting anything contrary to that
which has been established as the truth by his own
deed or representation either express or implied. It
arises in cases where the principal by his culpable
negligence permits his agent to exercise powers not
granted to him, even though the principal may have no
notice or knowledge of the conduct of the agent.
Go/Lagmay/Pabiona/Reodica
VII. What are the obligations and liabilities of
agents to their principals?
A. Act within scope of authority – 1879,
1880, 1881, 1882, 1887
Article 1879. A special power to sell excludes the power to mortgage;
and a special power to mortgage does not include the power to sell.
(n)
Article 1880. A special power to compromise does not authorize
submission to arbitration. (1713a)
Article 1881. The agent must act within the scope of his authority. He
may do such acts as may be conducive to the accomplishment of the
purpose of the agency. (1714a)
Article 1882. The limits of the agent's authority shall not be
considered exceeded should it have been performed in a manner more
advantageous to the principal than that specified by him. (1715)
Article 1887. In the execution of the agency, the agent shall act in
accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of a family would
do, as required by the nature of the business. (1719)
B. Carry out the agency – 1884, 1928, 1929
Article 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. (1718)
Article 1928. The agent may withdraw from the agency by giving due
notice to the principal. If the latter should suffer any damage by
reason of the withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon the impossibility of
continuing the performance of the agency without grave detriment to
himself. (1736a)
Article 1929. The agent, even if he should withdraw from the agency
for a valid reason, must continue to act until the principal has had
reasonable opportunity to take the necessary steps to meet the
situation. (1737a)
C. Not to carry out the agency – 1888
Article 1888. An agent shall not carry out an agency if its execution
would manifestly result in loss or damage to the principal. (n)
D. Loyalty – 1889, 1890, 1491
Article 1889. The agent shall be liable for damages if, there being a
conflict between his interests and those of the principal, he should
prefer his own. (n)
Article 1890. If the agent has been empowered to borrow money, he
may himself be the lender at the current rate of interest. If he has been
authorized to lend money at interest, he cannot borrow it without the
consent of the principal. (n) 12
Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
Article 1491. The following persons cannot acquire by purchase, even
at a public or judicial auction, either in person or through the
mediation of another:
(2) Agents, the property whose administration or sale may have been
intrusted to them, unless the consent of the principal has been given;
E. Diligence – 1885, 1887, 1909
Article 1885. In case a person declines an agency, he is bound to
observe the diligence of a good father of a family in the custody and
preservation of the goods forwarded to him by the owner until the
latter should appoint an agent or take charge of the goods. (n)
Article 1887. In the execution of the agency, the agent shall act in
accordance with the instructions of the principal.
In default thereof, he shall do all that a good father of a family would
do, as required by the nature of the business. (1719)
Article 1909. The agent is responsible not only for fraud, but also for
negligence, which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a
compensation. (1726)
F. Account/Deliver – 1891
Article 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing to
the principal.
Every stipulation exempting the agent from the obligation to render
an account shall be void. (1720a)
G. Solidary Liability – 1894, 1895
Article 1894. The responsibility of two or more agents, even though
they have been appointed simultaneously, is not solidary, if solidarity
has not been expressly stipulated. (1723)
Article 1895. If solidarity has been agreed upon, each of the agents is
responsible for the non-fulfillment of agency, and for the fault or
negligence of his fellow agents, except in the latter case when the
fellow agents acted beyond the scope of their authority. (n)
H. Pay Interest – 1896
Article 1896. The agent owes interest on the sums he has applied to
his own use from the day on which he did so, and on those which he
still owes after the extinguishment of the agency. (1724a)
I. Fraud; negligence – 1909
J. The agent is responsible not only for fraud, but also for
Article 1909.
negligence, which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a
compensation. (1726)
Go/Lagmay/Pabiona/Reodica
J. Specific Obligations of Commission
Agents – 1903- 1908
Article 1903. The commission agent shall be responsible for the
goods received by him in the terms and conditions and as described in
the consignment, unless upon receiving them he should make a
written statement of the damage and deterioration suffered by the
same. (n)
Article 1904. The commission agent who handles goods of the same
kind and mark, which belong to different owners, shall distinguish
them by countermarks, and designate the merchandise respectively
belonging to each principal. (n)
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)
Article 1906. Should the commission agent, with authority of the
principal, sell on credit, he shall so inform the principal, with a
statement of the names of the buyers. Should he fail to do so, the sale
shall be deemed to have been made for cash insofar as the principal is
concerned. (n)
Article 1907. Should the commission agent receive on a sale, in
addition to the ordinary commission, another called a guarantee
commission, he shall bear the risk of collection and shall pay the
principal the proceeds of the sale on the same terms agreed upon with
the purchaser. (n)
Article 1908. The commission agent who does not collect the credits
of his principal at the time when they become due and demandable
shall be liable for damages, unless he proves that he exercised due
diligence for that purpose. (n)
Article 1909. The agent is responsible not only for fraud, but also for
Austria v. CA
negligence, which(Private Respondent
shall be judged Sps.or Abad)
with more less rigor by the
Doctrine: In a contract
courts, according of agency
to whether (consignment
the agency of goods
was or was not for a for
sale) it is not necessary
compensation. (1726) that there be prior conviction for
robbery before the loss of the article shall exempt the consignee
from liability for such loss.
Facts: While walking home to her residence, the agent was
robbed. Among the things stolen is petitioner’s diamond
pendant.
Held: It was not necessary that the robbers be convicted first
before the loss of the thing shall exempt the consignee from
liability, absent any proof that she was negligent. Considering
the circumstances of the area at that time, since criminality was
not as rampant as it is now, it was truly a fortuitous event and
she cannot be held liable for its loss.
Notes: What was required was a mere preponderance of
evidence, which is why the court did not require a prior
conviction.
PN B v. Manila Surety
Doctrine: An agent is required to act with the care of a good
father of a family and becomes liable for the damages, which the
principal may suffer through his non-performance.
Facts: The bank failed to collect a certain amount even though it
was tasked by ATACO to receive and collect from the Bureau.
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

Held: The Court of Appeals is erroneous for holding that the Municipal Council of Iloilo v. Evangelista
Bank is not answerable for negligence in failing to collect from the Doctrine: An agent empowered to pay the debts of the
principal debtor but for its neglect in collecting the sums due to principal, and to employ lawyers to defend the latter's interests,
the debtor from the Bureau of Public Works; contrary to its is impliedly empowered to pay the lawyer's fees for services
duty as holder of an exclusive and irrevocable power of attorney rendered in the interests of said principal, and may satisfy them
to make such collections. The bank deprived the surety of any by an assignment of a judgment rendered in favor of said
possibility of recoursing against that security. principal. When a person appoints two attorneys-in-fact
independently, the consent of the one will not be required to
D omingo v. D omingo validate the acts of the other unless that appears positively to
Doctrine: The duties and liabilities of a broker to his employer have been the principal's attention.
are essentially those which an agent owes to his principal. Facts: When judgment was awarded for Tan Ong, various
Facts: The broker failed to disclose to his principal the payment claimants appeared stating claims over the judgment, including
to him by the buyer of P1K as a gift for having the principal their attorney/administratrix. TC said all deeds of
reduce the purchase price. The principal alleges that the agent’s assignments/claims are valid.
actions are fraudulent and such should cause the forfeiture of Held: The attorney in fact of the appellant was empowered by
his 5% commission. the principal to make as assignments of credits, rights and
Held: Commission is withheld. The agent who takes a secret interests, in the payment for professional services rendered by
profit, without revealing the same to the principal, is guilty of a lawyers.
breach of his loyalty and is bereft of his right to collect
commission from his principal. Notes on the Topic:
Notes: An agent should even account for ‘secret’ profits. In
reality that is not how things go. Instructions: The manner of performance
Authority: Source of power
Severino v. Severino Commission agent: typically a consignment relationship
Doctrine: An agent cannot acquire or assert a title adverse to
that of a principal regarding properties that are the subject
matter of agency.
Facts: The brother of the principal worked as the administrator
over the principal’s land. When the principal died, the brother
obtained a title over the whole of the land.
Held: The defendant came into the possession of the property
here in question as the agent of the deceased Melecio Severino
in the administration of the property. The relations of an agent
to his principal are fiduciary and it is an elementary and very old
rule that in regard to property forming the subject-matter of the
agency, he is estopped from acquiring or asserting a title adverse
to that of the principal. The brother should give the land to the
administratrix of the estate of the principal.

Green Valley Poultry v. IAC (Private Respondent ER

Squibb & Sons)
Doctrine: 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.
Facts: Squibb authorized petitioner to be its distributor. Their
contract had another stipulation which stated that the payments
for the purchases of their products will be due 60 days from the
date of invoice. The petitioner sold the products on credit
without authority from Squibb. Petitioner, upon demand of
payment by Squibb, alleges that their contract was a mere
agency to sell and it did not purchase the goods from Squibb.
Held: The contract need not be categorized considering the
facts of the case. Whether viewed as an agency to sell or as a
contract of sale, the liability of Green Valley is indubitable.
Adopting Green Valley's theory that the contract is an agency to
sell, it is liable because it sold on credit without authority from
its principal. Art. 1905 of the Civil Code is exactly in point.

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

VIII. Responsibility for acts of substitutes –
1892, 1893
Article 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.
All acts of the substitute appointed against the prohibition of the
principal shall be void. (1721)
Film’s vault since International Film had no vault of its own.
Gabelman assumed responsibility for the film. The vault burned
down.
Held: The verbal contract between Gabelman and Albo was a
sub-agency or submandate. As such, Lyric Film is not civilly
liable for the destruction of the film by fire because as sub-agent,
it was not obliged to fulfill more than the contents of its
mandate. It was not obliged to answer for damages caused to the
principal by failing to fulfill its mandate. The fact that the film
was not insured does not constitute fraud or negligence on the
part of Lyric Film, because as sub-agent they never received such
instructions from the principal Int’l Films, and insurance of the
film did not form part of their obligation.

Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding Notes on the Topic:
article, the principal may furthermore bring an action against the Subagent – person to whom the agent delegates as his agent,
substitute with respect to the obligations which the latter has the performance of an act for the principal which the agent has
contracted under the substitution. (1722a) been empowered to perform through his representative.

GR: Agent may appoint a subagent

Del Rosario v. La Badenia (Costa v. La Badenia) Except: When substitution is prohibited
Doctrine: The principal cannot deny the existence of substitute
agents whom he recognized.
Facts: Aragon established a central distributing agency or depot
at Legaspi with the plaintiff, Teofila del Rosario de Costa,
nominally in charge, though her husband, Bernardino de Costa
appears to have been the actual manager of the agency. The
statement of goods received by the Legaspi agency from the
factory in Manila are charged against Teofila del Rosario de
Costa, while credits are given on various items, such as,
withdrawals of goods from the depository at Legaspi shipped to
other towns, remittances made to the head office in Manila,
money paid over to the general agent, advertising expenses,
commissions on sales, salaries of employees, and other expenses
incident to the conduct of the business. The company did not
want to pay the plaintiffs amounts charged over the course of
the business.
Held: The petitioners were actually the agents of La Badenia.
The fact that the defendant corporation carried the Legaspi
account in the name of the general agent, Aragon, and carried no
account with the plaintiffs, would seem to negative the
contention that plaintiffs were simply merchants purchasing
their goods in Manila at wholesale and selling them locally on
their own account. The general agent (Aragon) who was in
control of the Legaspi business, and who was fully conversant
with all of its details, clearly recognized the right of the plaintiffs
to have credit on their account for the amount of these unpaid
claims. This agent had employed the plaintiffs to assist him in
extending the sale of the defendant's products, and the
defendant was well aware of this fact.

International Films (China), Ltd. v. The Lyric Film

Exchange, Inc.
Doctrine: A sub-agent, is not obliged to fulfill more than the
contents of its mandate.
Facts: International Film (lessor) and Lyric Film (lessee) entered
into a lease contract for the showing of the film “Monte Carlo
Madness.” Upon expiration of the contract, Gabelman, an agent
of International Film, requested that the film be kept in Lyric

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
IX. What are the obligations and liabilities of
agents to third parties?
A. Agent acting within scope of authority –
1883, 1897, 1899
Article 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. (1717)
Article 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. (1725)
Article 1899. If a duly authorized agent acts in accordance with the
orders of the principal, the latter cannot set up the ignorance of the
agent as to circumstances whereof he himself was, or ought to have
been, aware. (n)
B. Agent acting outside of authority – 1897,
1898, 1911
Article 1898. If the agent contracts in the name of the principal,
exceeding the scope of his authority, and the principal does not ratify
the contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he undertook to
secure the principal's ratification. (n)
Article 1911. 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. (n)
1. With notice to third parties – 1901
Article 1901. A third person cannot set up the fact that the agent has
exceeded his powers, if the principal has ratified, or has signified his
willingness to ratify the agent's acts. (n)
2. Without notice to third parties
PNB v. Agudelo
Doctrine: When an agent negotiates a loan in his personal
capacity and executes a promissory note under his own
signature, without express authority from his principal, giving as
security therefore real estate belonging to the latter, also in his
own name and not in the name and representation of the said
principal, the obligation constructed by him is personal and does
not bind his aforesaid principal.
Facts: Mauro was the attorney in fact of his sister and aunt. In
his transactions with PNB he initially acquired loans and secured
it with the property of the two. When the loans matured, he
Go/Lagmay/Pabiona/Reodica
issued promissory notes novating the mortgage in his own name.
PNB now wants to hold the aunt liable for the debts incurred by
the nephew since he was her agent.
Held: There is nothing in the said mortgage deeds to show that
Mauro is attorney-in-fact of the principals, and that he obtained
the loans mentioned in the aforesaid mortgage deeds and
constituted said mortgages as security for the payment of said
loans, for the account and at the request of said principals.
From the titles as well as from the signatures therein, Mauro,
appears to have acted in his personal capacity. Furthermore, the
records do not show that the loan obtained by Mauro, was for
his principal. The special power of attorney, does not authorize
Mauro to constitute a mortgage on the real estate of his principal
to secure his personal obligations. Therefore, in doing so by
virtue of the document, he exceeded the scope of his authority
and his principal is not liable for his acts. Therefore, Mauro and
not his principal is personally liable for the amount of the
promissory note.
Philippine Products v. Primateria
Doctrine: In cases where there is excess authority, the law does
not provide that both the agent and principal are liable.
Facts: Primateria Zurich was engaged in the trade of agricultural
products. Primateria Zurich through Baylin and Primateria
Philippines agreed to buy copra from the petitioner. Respondent
failed to pay 33,000. The lower court ruled that Primateria
Zurich should pay, Baylin and Primateria Philippines were
absolved since they were merely agents. The petitioner is now
asking that Baylin and Primateria Philippines should not be
absolved since they exceeded the authority given to them.
Held: Primateria Philippines and Baylon should not be included.
We do not see how petitioner can recover from both principal
and agent. The petitioner invoked 1897 but it does not show that
the agent exceeded his authority. Furthermore, it must be the
principal who alleges that the agent exceeded his authority not
the third person.
NPC v. National Merchandising Corporation
Doctrine: The agent who exceeds the limits of his authority is
personally liable and the third person who contracts with the
agent in such a case would be defrauded if he would not be
allowed to sue the agent.
Facts: The NPC and Namerco, as representative of
International Commodities Corporation of New York, executed
a contract for the purchase by the NPC from the New York firm
of 4,000 long tons of crude sulfur for NPC’s Maria Cristina
Fertilizer Plant in Iligan City at a total price of P450,716. The
stipulation in the contract of sale is that the seller would deliver
the sulfur to Iligan within 60 days from notice of the
establishment of a letter of credit and that the failure of the
seller to deliver would subject the seller to pay liquidated
damages, The New York firm failed to deliver, due to its inability
to secure shipping space. The general manager of NPC then sent
a letter to Namerco stating that the “non-availability of bottom
or vessel” was not a fortuitous event that would excuse non-
performance. NPC sued the New York Firm, Namerco, and the
Domestic Insurance Company for the recovery of the liquidated
damages.
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
Held: Evidence shows that the New York Firm sent Namerco a
cable message stating that the sale was subject to the availability
of a steamer. This fact, however, Namerco failed to disclose to
NPC and, contrary to its principal’s instruction, it agreed that the
non- availability of a steamer was not a justification for
nonpayment of liquidated damages. Namerco acted beyond the
authority given to it by its principal and virtually acted in its own
name and not as agent and it is therefore, bound by the contract
which, however, is not enforceable against the principal
PNB v Welch, Fairchild & Co., Inc.
Doctrine: The agent in any event must be precluded from doing
any positive act that could prevent performance on the part of
his principal. This much, ordinary good faith towards the other
contracting party is required. Even if the principal and the agent
have a private agreement regarding something which a third
party does not know of and affects his rights, such agreement
cannot be upheld.
Facts: LCN was organized in Manila for the purpose of
engaging in the business of marine shipping. WCF acted as an
agent for LCN for purposes of arranging the sale and transfer of
the vessel. The arrangement was for PNB to furnish money in
exchange for the delivery by WCF/LCN of the insurance
policies taken out on the vessel. A problem arose in the
arrangements and so WCF in Manila, wrote a letter to PNB
requesting for the money to be paid with the promise of
delivering the insurance policies at a later time. PNB agreed and
gave money, but WCF and LCN never gave the insurance
policies to PNB. On the way to the Philippines, the ship sank.
WCF collected the insurance proceeds, and applied the money to
LCN’s loans to it (LCN’s loans to WCF, consisting of expenses
for arranging for the sale/ transfer/ repairs of the vessel).
Held: The bank can go against the agent in this case. According
to the insurance policy, it was stated that the bank will collect
insurance to the extent necessary to cover the amount advanced
by it. The bank relied on that promise and thus the defendant
cannot go back on it, since it is the right of the bank to collect
such. Even though the agent may have been authorized to do so
by the principal. it is manifest upon the simplest principles of
jurisprudence that one who has intervened in the making of a
contract as an agent cannot be permitted to intercept and
appropriate the thing which the principal is bound to deliver,
and thereby make performance by the principal impossible. The
agent in any event must be precluded from doing any positive
act that could prevent performance on the part of his principal.
This much, ordinary good faith towards the other contracting
party requires.
Tuazon v Orozco
Doctrine: The fact that the agent bound himself to pay the debt
does not relieve from liability the principal for whose benefit the
debt was incurred. Individual liability of agent is merely a further
security and does not affect or preclude the liability of the
principal. Principal is liable to pay debts of agents within the
scope of their authority.
Facts: Vargas, husband of Orozco, executed a Power of
Attorney in favor of Grupe, authorizing the latter: (1) to dispose
of all his property, particularly, a house and lot; and (2) to
mortgage the house for the purpose of securing the payment of
Go/Lagmay/Pabiona/Reodica
any amount advanced to Dolores. Grupe and Orozco obtained a
loan from Tuason. The instrument evidencing the debt was duly
recorded in the Registry of Property, and it appears therefrom
that Grupe, as attorney-in-fact for Vargas, received from Tuason
a loan of P2,200 and delivered the same to the Orozco; and that
to secure its payment, he mortgaged the property of Vargas with
Orozco’s consent. But Orozco denies having received the loan
Held: Grupe signed as attorney-in-fact of Vargas and, pursuant
to instructions, delivered the money to Orozco. Orozco cannot
simply deny having received the P2,200, there being
overwhelming evidence to show her receipt. The fact that the
agent bound himself to pay the debt does not relieve from
liability the principal for whose benefit the debt was incurred.
Individual liability of agent is merely a further security and does
not affect or preclude the liability of the principal
Cervantes v. CA and PAL
Doctrine: 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. Furthermore, when the third person
knows that the agent was acting beyond his power or authority,
the principal cannot be held liable for the acts of the agent. If the
said third person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the agent,
unless the latter undertook to secure the principal's ratification.
(In pari delicto doctrine)
Facts: PAL issued to Cervantes a round trip plane ticket for
Manila-Honolulu-Los Angeles-Honolulu-Manila, which provided
for an expiry date 1 year from issuance (March 27, 1990). On
March 23, 1990, Cervantes used the ticket. He arrived in Los
Angeles on the same day and booked his LA-Manila return ticket
with PAL and it was confirmed for April 2, 1990 flight.
Cervantes checked in at PAL counter in SF but was not allowed
to board. The PAL personnel marked the ticket: “Ticket not
accepted due to expiration of validity.”
Held: Employees of PAL had no authority to extend the period
of validity. Cervantes knew this from the very start when he
called up the Legal Department of PAL before he left for the
United States of America. He had first hand knowledge that the
ticket in question would expire on March 27and that to secure an
extension, he would have to file a written request for extension
at the PAL's . Since the PAL agents are not privy to the said
Agreement and petitioner knew that a written request to the legal
counsel of PAL was necessary, he cannot use what the PAL
agents did to his advantage.
C. Agent acting in his own name; exception –
1883
Article 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.
Smith, Bell v. Sotelo
Doctrine: When the agent acts in his own name, the principal
shall have no right of action against the person with whom the
agent has contracted with. The agent is directly liable as if the
transaction was his own
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
Facts: P and R entered into contracts, the former to sell to the
latter, 2 steel tanks (PhP 21k) to be shipped from NY and
delivered to Manila within 3 or 4 months, 2 expellers (PhP25k)
to be shipped from SF in September 1918 or as soon as possible,
2 electric motors (PhP 2k each) - "Approximate delivery within
ninety days. — This is not guaranteed." The tanks arrived at
Manila on the 27th of April, 1919: the expellers on the 26th of
October, 1918; and the motors on the 27th of February, 1919. R
refused to receive them and pay for the goods . P sued R for the
non-receipt and non-payment. Special defense of R: R had made
the contracts in question as manager of the intervenor, the
Manila Oil Refining and By-Products Co., Inc which fact was
known to the plaintiff
Held: According to Art 247 of the Code of Commerce, when
the agent is to act for the principal, “he must state that fact; and
if the contract is in writing, he must state it therein or in the
subscribing clause, giving the name, surname, and domicile of
said principal” Art 246 of the Code of Commerce: "When the
agent transacts business in his own name, it shall not be
necessary for him to state who is the principal and he shall be
directly liable, as if the business were for his own account, to the
persons with whom he transacts the same” The Old Civil Code,
in Article 1717, states that when the agent acts in his own name,
the principal shall have no right of action against the person with
whom the agent has contracted with. The agent is directly liable
as if the transaction was his own. The foregoing provisions lead
us to the conclusion that the plaintiff is entitled to the relief
prayed for in its complaint, and that the interverior has no right
of action, the damages alleged to have been sustained by it not
being imputable to the plaintiff.
Rural Bank of Bombon vs CA (Private Respondent
Gallardo)
Doctrine: 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
Facts: Gallardo executed an SPA in favor of Aquino authorizing
him to secure a loan from any bank or lending institution or
otherwise mortgage the property of Gallardo. A Deed of Real
Estate Mortgage was executed by Aquino in favor of the Rural
Bank of BombonThey learned that Aquino obtained loans from
the bank solely for his personal use and benefit; that the
mortgagor in the deed was defendant Aquino instead of plaintiff
Gallardo
Held: 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.
Vicente Syjuco v. Santiago Syjuco
Doctrine: The agent is bound to the principal although he does
not assume the character of such agent and appears acting in his
own name. The agent’s apparent representation yields to the
principal’s true representation and that the contract must be
considered entered into between the principal and third party.
Go/Lagmay/Pabiona/Reodica
Facts: Santiago Syjuco was appointed by the couples Vicente
and Cipriana Syjuco as the administrator of their property from
1902 until June 30, 1916, when his authority was cancelled.
Santiago purchased the launch Malabon with the money of his
parents. The parents are contending that the launch should be
given to them. The trial court, Santiago was ordered to return
the launch Malabon, casco 2584, and an automobile.
Held: In July 1914, Santiago bought the launch it in his own
name from the Pacific Commercial Co. and afterwards registered
it at the Custom House. However, such acts does not necessarily
show that the defendant bought it for himself and with his own
money. The transaction was within the agency contract with his
parents. The fact that he acted in his own name may be only a
violation of the agency on his part. The question is not in whose
favor the sale was executed for nor in whose name the sale was
registered, but with whose money the launch was bought.
NFA vs IAC (Private Respondent Superior Shipping)
Doctrine: When things belonging to the principal 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.
Facts: Medalla, as commission agent of Superior Shipping
Corporation, entered into a contract for hire of ship with the
NFA. Under the said contract Superior obligated to transport on
the same vessel 8,550 sacks of rice belonging to NFA. Upon
delivery, Superior wrote a letter requesting NFA that it be
allowed to collect the amount stated in its statement of account.
NFA informed Superior that it could not grant its request
because the contract to transport the rice was entered into by
NFA and defendant Medalla [who did not disclose that he was
acting as a mere agent]. NFA then paid defendant Medalla
P25,974.90, for freight services in connection with the shipment
of 8,550 sacks of rice.
Held: 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. When things
belonging to the principal 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.
Gold Star Mining Co., Inc. v. Lim-Jimena
Doctrine: The principal may sue the person with whom the
agent dealt with in his (agent's) own name, when the transaction
"involves things belonging to the principal."
Facts: Lincallo and Jimena were co-owners of mining claims.
Lincallo bound himself to give to Jimena 50% of the proceeds
from the claims in exchange for Jimena providing capital.
However, Lincallo entered into several contracts wherein he did
not disclose to the other contracting parties that he had a co-
owner. He also failed to forward to Jimena his rightful share in
the proceeds. Lincallo also transferred the mining claims to Gold
Star.
Held: Lincallo, in transferring the mining claims to Gold Star,
acted as Jimena's agent with respect to Jimena's share of the
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
claims. Under such conditions, Jimena has an action against
Gold Star, pursuant to Article 1883, New Civil Code, which
provides that the principal may sue the person with whom the
agent dealt with in his (agent's) own name, when the transaction
"involves things belonging to the principal."
Far East Bank and Trust Company vs Cayetano
Doctrine: 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
Facts: Leonor Cayetano executed an SPA in favor of her
daughter Teresita Tabing authorizing her to contract a loan in an
amount of not more than P300K and to mortgage her 2 lots.
The bank loaned Tabing P100K secured by 2 promissory notes
and a real estate mortgage over the 2 properties. The mortgage
document was signed by Tabing and her husband as mortgagors
without stating that Tabing was executing the mortgage contract
for and in behalf of Cayetano. The bank foreclosed the
properties for failure to pay the loan. A notice of public auction
sale was sent to the Cayetanos. Their lawyer responded and
requested the auction sale be postponed but the sale was held as
scheduled. More than 5 years later, Tabing, on behalf of
Cayetano, sent a letter to the bank expressing the intent to
repurchase the lots for P250K. The bank refused and stated that
the minimum asking price was P500K. The Cayetanos filed a
complaint for annulment of mortgage and extrajudicial
foreclosure with damages.
Held: 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. HOWEVER,
notwithstanding the nullity of the real estate mortgage executed
by Tabing, laches is applicable. It is the 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.
Notes on the Topic:
Agent acting within the scope of his authority:
GR: Principal is liable to third parties
Agent acting outside the scope of his authority:
GR: Agent is liable to third parties
E: Third party in bad faith
E to the E: Property of the Principal (agent in GF)
GR: Principal ratifies, Principal is liable to third parties
Macondray
Doctrine: At the time this agency was revoked, the defendant
agent had already earned the commissions agreed upon, and c
ould not be deprived thereof by the arbitrary action of the
plaintiff in declining to execute the contract of sale. It would be
the height of injustice to permit the principal then to withdraw
Go/Lagmay/Pabiona/Reodica
X. What are the obligations and liabilities of
principals to agents?
A. Advance/reimburse – 1912, 1914, 1918
Article 1912. The principal must advance to the agent, should the
latter so request, the sums necessary for the execution of the agency.
Should the agent have advanced them, the principal must reimburse
him therefor, even if the business or undertaking was not successful,
provided the agent is free from all fault.
The reimbursement shall include interest on the sums advanced, from
the day on which the advance was made. (1728)
Article 1914. The agent may retain in pledge the things which are the
object of the agency until the principal effects the reimbursement and
pays the indemnity set forth in the two preceding articles. (1730)
Article 1918. 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;
(2) When the expenses were due to the fault of the agent;
(3) When the agent incurred them with knowledge that an unfavorable
result would ensue, if the principal was not aware thereof;
(4) When it was stipulated that the expenses would be borne by the
agent, or that the latter would be allowed only a certain sum. (n)
B. Indemnify – 1913 (Dela Cruz v. No
Theatrical)
Article 1913. The principal must also indemnify the agent for all the
damages which the execution of the agency may have caused the
latter, without fault or negligence on his part. (1729)
C. Solidary Liability – 1915
Article 1915. If two or more persons have appointed an agent for a
common transaction or undertaking, they shall be solidarily liable to
the agent for all the consequences of the agency. (1731)
D. Compensation – 1875
Article 1875. Agency is presumed to be for a compensation, unless
there is proof to the contrary. (n)
E. Agent’s Lien – 1914
Article 1914. The agent may retain in pledge the things which are the
object of the agency until the principal effects the reimbursement and
pays the indemnity set forth in the two preceding articles. (1730)
v. Sellner
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
the authority and terminate the agency as against an express
provision of the contract, and perchance reap the benefit of the
agent’s labors, without being liable to him for his commissions.
Facts: Defendant sold a piece of land to the plaintiff company.
Prior to transfer of the title, the land was flooded and so plaintiff
asked defendant to find another buyer. Plaintiff agreed they were
willing to dispose of the land for P17,175 and defendant could
get commission for whatever he sells above that. Defendant
found a buyer named Barretto who agreed to purchase the land
for P18,892.50. Defendant told Barretto he was ready to close
the deal but Barretto wanted to examine the title and the deed
first. Plaintiff informed defendant he had to consummate the
sale immediately, Manager of plaintiff wrote to the defendant
that unless the purchase price would be paid at 5pm of that same
day, the deal would be off. Defendant was only able to receive
the check 36 hours later. Plaintiff refused to accept the check
and claimed the sale was cancelled
Held: There is no question as to the general doctrine that the
principal may revoke the authority of his agent at will in the
absence of a contract fixing the duration of agency. But at the
time this agency was revoked, the defendant agent had already
earned the commissions agreed upon, and could not be deprived
thereof by the arbitrary action of the plaintiff in declining to
execute the contract of sale.
Danon vs Brimo
Doctrine: A broker is never entitled to commissions for
unsuccessful efforts. If the efforts of the broker are rendered a
failure by the fault of the employer, then the broker does not
lose his commissions. The right of the principal to terminate his
authority is absolute and unrestricted, except only that he may
not do it in bad faith
Facts: Brimo informed Danon that he desired to sell his factory
(Holland American Oil Co) for P1.2M. Brimo promised to pay
Danon 5% commission of the stipulated price provided that
Danon could sell the factory for that amount. No definite period
fixed to affect the sale. Sellner was also negotiating the sale of
the factory for Brimo. Danon found a purchaser, Prieto, and
offered him Brimo’s property for P1.2M. Prieto set for an
appointment for the negotiations but this didn’t push through as
Sellner also found another purchaser who bought the factory for
P1.3M. Danon filed a case to recover the sum of P60,000,
alleged to be the value of services rendered by him to Brimo as a
broker
Held: Danon did accomplish finding a person who might have
bought the factory but no sufficient evidence that Prieto
definitely decided to buy the price at P1.2M since the board of
directors had not resolved to purchase it. His services didn’t in
any way contribute towards bringing about the sale of the
factory. He was not “the efficient agent or the procuring cause
of the sale”. The broker must be the efficient agent or the
procuring cause of the sale. The means employed by him and his
efforts must result in the sale. He must find the purchaser, and
the sale must proceed from his efforts acting as broker.
Rocha vs. Prats
Doctrine: The duty assumed by the broker is to bring the minds
of the buyer and seller to an agreement for a sale, and the price
Go/Lagmay/Pabiona/Reodica
and terms on which it is to be made, and until that is
done his right to commission does not accrue
Facts: Brimo verbally authorized Mencarini to negotiate the sale
of property. Mencarini was to receive as his compensation the
excess of the purchase price over and above P150,000. Rocha
agreed to help Mencarini in finding a purchaser and
received from Brimo an authorization similar to that of
Mencarini. Rocha obtained an offer from Vicente Madrigal.
Before closing the sale Brimo, at Rocha's request, gave the latter
a power in writing that said: …“The remaining one hundred
thousand pesos should be paid to us within the period of one
year from date with interest at 6 per cent per annum until paid.
Provided that the purchaser shall give banking security for the
payment of these one hundred thousand pesos (P100,000).”
Rocha protested against the clause that the “purchaser shall give
banking security…” and claimed that Brimo agreed to strike this
out if Rocha sells the land to Madrigal. The sale to Madrigal,
however, failed to prosper A few days later Brimo, through
another agent, sold the property to Concepcion Leyba for
P175,000.
Held: Rocha is not entitled to commission. "In all cases, under
all and varying forms of expression, the fundamental and correct
doctrine is, that the duty assumed by the broker is to bring the
minds of the buyer and seller to an agreement for a sale, and the
price and terms on which it is to be made, and until that
is done his right to commission does not accrue." (Danon
vs. Antonio A. Brimo and Co.) If Rocha was able to establish
that Brimo agreed to strike out the part of the agreement that he
protested against, then, he could have the right to recover.
However, he only presented oral evidence. This is not enough to
outweigh the written instrument.
Inland Realty Investment Service, Inc. and Roman M. De
los Reyes vs. CA (Private Respondent Gregorio Araneta
Inc.)
Doctrine: When the broker-agent is not the efficient procuring
cause in bringing about the sale, such broker-agent is not entitled
to the stipulated broker’s commission. The lapse of more than 1
year and 5 months between the expiration of the broker-agent's
authority to sell and the consummation of the sale is a significant
index of the broker-agent's non-participation in the really critical
events leading to the consummation of said sale.
Facts: GAI granted to Inland Realty a 30-day authority to sell its
9,800 shares of stock. IR then sent proposal letters to
prospective buyers, among them Stanford Microsystems (SM).
SM counter-proposed to buy the shares at P1,000. Upon receipt
of the counter-proposal, IR wrote GAI to register SM as a
prospective buyer. GAI replied that the price offered by SM was
too low. The authority to sell given to IR by GAI was extended
several times the last being on December 2, 1975 for 30 days
from said date. On July 8, 1977, IR finally sold the 9,800 shares
of stock to SM for P13.5M. Afterwards, IR formally demanded
through a letter to GAI of their 5% broker’s commission. GAI
refused to pay alleging that IR’s authority to sell expired 30 days
from December 2, 1975 (the third and last extension).
Held: Inland Realty is not entitled to the 5% broker’s
commission. IR did nothing but submit SM’s name as
prospective buyer. They did not succeed in outrightly selling the
shares under the predetermined terms and conditions set out by
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
GAI e.g., that the price per share is P1,500. The lapse of more
than 1 year and 5 months between the expiration of IR's
authority to sell and the consummation of the sale to SM is a
significant index of IR’s non-participation in the really critical
events leading to the consummation of said sale. IR was not the
efficient procuring cause in bringing about the sale and is
therefore not entitled to the broker’s commission.
Infante v Cunanan
Doctrine: An agent may be entitled to commission even if the
sale is consummated after revocation of the authority, if done in
bad faith.
Facts: Infante owned two parcels of land she owned and
contracted Cunanan and Mijares to sell the land for 30k.
Purchaser will assume the mortgage in favor of Rehabilitation
Finance Corporation. She also agreed to give them 5%
commission on the purchase price plus whatever overprice they
may obtain. Respondents found Pio S. Noche as buyer. BUT,
Petitioner said she was no longer interested in selling the
property. However, Petitioner dealt directly with Pio S. Noche
and sold the land for 31k. Upon knowing this, Respondents
asked their commission.
Held: Respondents claim that while they agreed to cancel the
written authority given to them, they did so merely upon the
verbal assurance given by petitioner that, should the property be
sold to their own buyer, Pio S. Noche, they would be given the
commission agreed upon. Petitioner had changed her mind even
if respondents had found a buyer who was willing to close the
deal. She took advantage of the benevolence of the other and
acts in a manner that would promote her own selfish interest.
This act is unfair as would amount to bad faith. This act cannot
be sanctioned without according to the party prejudiced the
reward which is due him.
Prats v. CA (Private Respondent Doronilla)
Doctrine: Agent who was not the efficient procuring cause of
the sale may be awarded if he was somehow instrumental in
bringing the parties together.
Facts: Doronilla was the registered owner of a parcel of land
(300 hectares). He had tried to sell his land and thus had
designated several agents. At one time, he offered said land to
SSS but failed to consummate any sale. Subsequently, Doronilla
gave Prats an exclusive option and authority in writing to
negotiate the sale of his property. Prats worked to negotiate the
sale to SSS. Eventually, a writer offer to sell was formally made
by Prats to SSS. A few days after, SSS sent a telegram stating that
they are “considering purchase of the property for its housing
project”. Negotiations followed with the conclusion of SSS
agreeing to purchase the property. A deed of absolute sale was
executed b/w Doronilla and SSS. The full purchase price already
having received by Doronilla, Prats demanded the payment of
his professional fee as real estate broker as computed under the
agreement. Doronilla refused to pay said amount.
Held: On June 2, 1968, exclusive authority given to Prats
expired. On June 20, 1968, offer of Doronilla to sell was
formally accepted by SSS. Prats was not the efficient procuring
cause in bringing about the sale because his exclusive authority
already expired when the offer was formally accepted. However,
as a measure of equity the Court noted that Prats had taken steps
Go/Lagmay/Pabiona/Reodica
to bring SSS and Doronilla back together. 100,000 php granted
to Prats as compensation for his efforts and assistance in the
transaction.
Uniland Resources vs Development Bank of the Philippines
Doctrine: The middleman who introduced two parties,
eventually leading into a consummated sale, but who had no
authority (express or implied) from the seller to broker the
transaction cannot be allowed a commission except on equity
considerations.
Facts: Marinduque Mining Corporation obtained a loan from
the DBP and as security therefor, mortgaged certain real
properties to the latter. These two lots had, however, been
previously mortgaged to Caltex. For failure of the Marinduque
Mining Corp. to pay its obligations to Caltex, the latter
foreclosed its mortgage on the aforesaid two lots. APT on the
other hand, to recover its investment on the Marinduque
Account, offered for sale to the public through DBP its right of
redemption on said two lots by public bidding, Caltex, though,
required both lots to be redeemed but the bidding only had one
bidder, the Counsel Realty Corp. (an affiliate of Glaxo,
Philippines, the client of Uniland), and only for the warehouse
lot. Seeing, however, that it would make a profit if it redeemed
the two lots and then offer them for sale, DBP retrieved the
account from APT and redeemed said lots. DBP subsequently
held a public bidding and again, there was only one bidder, the
Charges Realty Corp. for only the warehouse lot. After the
aforesaid sale, Uniland asked for payment of its broker's fee in
instrumenting the sale of the warehouse lot to Charges Realty
Corp.
Held: Uniland was never able to secure the required
accreditation from DBP to transact business on behalf of the
latter. The letters sent by petitioner to the higher officers of the
DBP and the APT are merely indicative of petitioner's desire to
secure such accreditation. HOWEVER, the Court recognizes
Unilands efforts in bringing together DBP and an interested and
financially-able buyer. Uniland's persistence in communicating
with DBP reinforced the seriousness of the offer. The Court in
equity grants petitioner the sum of Pl00k for the role it played in
the transaction.
Domingo vs Domingo, supra p. 14
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

XI. What are the obligations of principals Held: Gonzales contends that she cannot be charged for the
to third parties? misrepresentations of Gomez. Having accepted the benefits of
the misrepresentation, she cannot escape liability for them.

A. Agent acting within scope of authority – Tuason v. Orosco, supra p. 17

1883, 1910, 1917
Article 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. (1717)

Article 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.

As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
(1727)

Article 1917. In the case referred to in the preceding article, if the

agent has acted in good faith, the principal shall be liable in damages
to the third person whose contract must be rejected. If the agent acted
in bad faith, he alone shall be responsible. (n)

B. Agent acting outside scope of authority –

1900, 1911, 1916, 1917 (see above)
Article 1900. So far as third persons are concerned, an act is deemed
to have been performed within the scope of the agent's authority, if
such act is within the terms of the power of attorney, as written, even
if the agent has in fact exceeded the limits of his authority according
to an understanding between the principal and the agent. (n)

Article 1911. 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. (n)

Article 1916. When two persons contract with regard to the same
thing, one of them with the agent and the other with the principal,
and the two contracts are incompatible with each other, that of prior
date shall be preferred, without prejudice to the provisions of article
1544. (n)
C. For crimes; for torts

Gonzalez v. Haberer
Doctrine: A principal is liable to third persons when the former
has accepted the benefits of the agent’s bad faith.
Facts: Gonzales and Gomez (agent of wife) sold a lot to Haberer
representing that they were in actual possession of the lot, that
the greater portion was not in dispute. Upon seeking possession,
practically the entire land was occupied by adverse claimants and
the title was disputed. Haberer asked for rescission of the
contract.

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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
XI. Duty of third parties dealing with agent –
1902
Article 1902. A third person with whom the agent wishes to contract
on behalf of the principal may require the presentation of the power
of attorney, or the instructions as regards the agency. Private or secret
orders and instructions of the principal do not prejudice third persons
who have relied upon the power of attorney or instructions shown
them. (n)
XII. How is agency extinguished?
A. Revocation; agency coupled with an interest –
1873, 1919 to 1927
Article 1873. If a person specially informs another or states by public
advertisement that he has given a power of attorney to a third person,
the latter thereby becomes a duly authorized agent, in the former case
with respect to the person who received the special information, and
in the latter case with regard to any person.
The power shall continue to be in full force until the notice is
rescinded in the same manner in which it was given. (n)
Article 1919. Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or insolvency of the
principal or of the agent;
(4) By the dissolution of the firm or corporation which entrusted or
accepted the agency;
(5) By the accomplishment of the object or purpose of the agency;
(6) By the expiration of the period for which the agency was
constituted. (1732a)
Article 1920. The principal may revoke the agency at will, and compel
the agent to return the document evidencing the agency. Such
revocation may be express or implied. (1733a)
Article 1921. If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation shall not prejudice
the latter if they were not given notice thereof. (1734)
Article 1922. If the agent had general powers, revocation of the
agency does not prejudice third persons who acted in good faith and
without knowledge of the revocation. Notice of the revocation in a
newspaper of general circulation is a sufficient warning to third
persons. (n)
Article 1923. The appointment of a new agent for the same business
or transaction revokes the previous agency from the day on which
notice thereof was given to the former agent, without prejudice to the
provisions of the two preceding articles. (1735a)
Article 1924. The agency is revoked if the principal directly manages
the business entrusted to the agent, dealing directly with third persons.
(n)
Article 1925. When two or more principals have granted a power of
attorney for a common transaction, any one of them may revoke the
same without the consent of the others. (n)
Go/Lagmay/Pabiona/Reodica
Article 1926. A general power of attorney is revoked by a special one
granted to another agent, as regards the special matter involved in the
latter. (n)
Article 1927. An agency cannot be revoked if a bilateral contract
depends upon it, or if it is the means of fulfilling an obligation already
contracted, or if a partner is appointed manager of a partnership in
the contract of partnership and his removal from the management is
unjustifiable. (n)
Barreto v. Sta. Maria
Doctrine: The contract of agency can subsist only so long as the
principal has confidence in his agent, because, from the moment
such confidence disappears and although there be a fixed period
for the exercise of the office of agent, a circumstance that does
not appear in the present case the principal has a perfect right to
revoke the power that he had conferred upon the agent owing to
the confidence he had in him and which for sound reasons had
ceased to exist. Agent cannot claim damages from revocation
unless it is to evade payment.
Facts: Barreto filed a suit against Sta. Maria for fees incurred as
an agent of La Insular Cigar and Cigarette Factory. Barreto was
claiming that he was unlawfully dismissed as an agent and is thus
entitled to his just compensation
Held: Petitioner actually resigned on the occasion of the
disappearance of a client on credit.
Dialosa v. CA (Private Respondent Baterna)
Doctrine: Where the agency contract stipulated that the agent is
authorized to dispose the subdivided property until the same is
fully disposed of, the authority to sell continuous until all the lots
are sold. The contract cannot be terminated by the landowner
before then.
Facts: Baterna is a licensed real estate broker and was under the
agreement to sell, transfer and convey certain lots owned by the
respondent realty. It was stated in the contract that the petitioner
is engaged as an agent until all the subject property as subdivided
is fully disposed of. The petitioner then rescinded the agency
contract because it wanted to reserve the remaining unsold lots
for their six grandchildren. There were 27 lots which remained
unsold.
Held: The authority to sell of the respondent is not extinguished
until all the lots have been disposed of. When the petitioners
revoked the contract, they become liable to the private
respondent for damages for breach of contract.
N ew Manila v. Republic
Doctrine: The powers of attorney made the plaintiff lumber
company the contractor’s agent in the collection of amounts due
to the contractor. However, given that the contractor collected
the payments directly from the defendant, the agency had
therefore been revoked. (Art. 1924)
Facts: Contractor made lumber company its agent to collect
amounts due to the contractor but what happened was the
republic dealt directly with the contractor
Held: The powers of attorney made the plaintiff lumber
company the contractor’s agent in the collection of amounts due
to the contractor. However, given that the contractor collected
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
the payments directly from the defendant, the agency had
therefore been revoked. (Art. 1920 and 1924)
D y Buncio v. Ong Guan
Doctrine: The making and accepting of a new power 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
Facts: Plaintiff claims that the property (ricemill and camarin)
belongs to its judgment debtor, Ong Guan Can, while
defendants Juan Tong and Pua Giok Eng claim as owner and
lessee of the owner by virtue of a deed dated July 31, 1931, by
Ong Guan Can, Jr
Held: The first recital of the deed is that Ong Guan Can, Jr., as
agent of Ong Guan Can, the proprietor of the commercial firm
of Ong Guan Can & Sons, sells the rice-mill and camarin and
gives as his authority the power of attorney. The receipt of the
money acknowledged in the deed was to the agent, and the deed
was signed by the agent in his own name and without any words
indicating that he was signing it for the principal. it is at once
seen that it is not a general power of attorney but a limited one
and does not give the express power to alienate the properties in
question. The title of Ong Guan Can not having been divested
by the so-called deed, his properties are subject to attachment
and execution
Garcia v. De Manzano
Doctrine: It is necessary that the first agent be informed of the
execution of the power-of-attorney to the second agent in order
to extinguish the agency with the first agent. Failure to establish
the fact that the first agent knew of the execution of the second
power-of-attorney, the authority extend to the first agent
remains valid.
Facts: Narciso gave two power-of-attorney: one to his son and
subsequently, one to his wife. The son sold the half interest of
the streamer acting under his powers
Held: The power of attorney of the wife that came later did not
revoke the one given to the son’s, which was earlier. No proof in
the record that the first agent, the son, knew of the power-of-
attorney to his mother. Under the law, it is necessary for the
defendants, in order to establish their counterclaim, to prove that
the son had notice of the second power-of-attorney. They have
not done so, and it must be considered that Angel Manzano was
acting under a valid power-of-attorney which had not been
legally revoked on the date of the sale of the half interest in the
steamer to the plaintiff.
Rallos v. Yangco
Doctrine: It was the duty of the principal, on the termination of
his relationship with the agent to give due and timely notice
thereof to interested third parties. Failing to do so, he is
responsible to such 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.
Facts: Plaintiff sent to Collantes, as agent of the defendant, 218
bundles of leaf tobacco. This was sold for 1,744php, but the
agent did not return the amount due to the plaintiffs because he
converted it for his own use. It appears however, that prior to
Go/Lagmay/Pabiona/Reodica
the sending of the said tobacco, the defendant terminated the
relations between him and the agent. This fact was not made
known to the plaintiff. The plaintiffs demanded from the
defendant for payment, the defendants refused.
Held: See doctrine. Defendants must pay.
Compania General de Tobaccos v. Diaba
Doctrine: The defendant had the perfect right to believe that
the agent had authority to represent the principal in their
transactions, until he was otherwise informed
Facts: Compania initiated an action to recover a sum of money
(P442.00) from Diaba for goods sold to him by Gutierrez
(Compania’s Agent) Diaba admits to purchasing goods in the
amount of P692.00, as well as selling abaca and other goods to
the agent in the amount of P1,308.00. Diaba claims a balance of
P616.80 against Compania for these sales
Held: Compania should pay. There is no convincing proof in
the record that the orders of Gutierrez’s suspension given by
Compania had been communicated to Diaba. Therefore, Diaba
had the perfect right to believe, until otherwise informed, that
the agent of the plaintiff, in his purchase of abaca and other
effects was still representing the plaintiff in said transactions
D el Rosario v. Abad
Doctrine: A mere statement in the power of attorney that it is
coupled with an interest is not enough. In what does such
interest consist must be stated in the power of attorney.
Facts: The late Tibrucio executed an irrevocable SPOA
w/interest in favor of his mortgagee, authorizing to sell and
convey the parcel of land. Tiburcio died leaving the debt unpaid.
Primitivo, acting as Tiburcio’s attorney-in-fact sold the parcel of
land to his son Teodorico Abad for P1.00 and the payment by
the vendee of the mortgage debt of Tiburcio to Primitivo.
Held: The power-of-attorney here was not coupled with
interest. The fact that Tiburcio, the principal, had mortgaged the
improvements of the parcel of land to Primitivo, the agent, is
not such an interest as could render irrevocable the power of
attorney executed by the principal in favor of the agent. In fact
no mention of it is made in the power of attorney. The mortgage
on the improvements of the parcel of land has nothing to do
with the power of attorney and may be foreclosed by the
mortgagee upon failure of the mortgagor to comply with his
obligation. As the agency was not coupled with an interest, it was
terminated upon the death of Tiburcio sometime in December
1945, and Primitivo, the agent, could no longer validly convey
the parcel of land to Teodorico Abad in 1947. The sale,
therefore, to the later was null and void.
Caleongco v. Claparols
Doctrine: Irrevocability of the power of attorney may not be
used to shield the perpetration of acts in bad faith, breach of
confidence, or betrayal of trust, by the agent for that would
amount to holding that a power coupled with an interest
authorizes the agent to commit frauds against the principal.
Facts: Respondent operated a factory hiring Kho To to market
products, introduced him to petitioner. Respondent gave
petitioner a power-of-attorney. Respondent soon learned of
different acts and situations wherein petitioner cheated and/or
misrepresented his principal.
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez
Held: Respondent may revoke the agency. It must not be
forgotten that a power of attorney can be made irrevocable by
contract only in the sense that the principal may not recall it at
his pleasure; but coupled with interest or not, the authority
certainly can be revoked for a just cause, such as when the
attorney-in-fact betrays the interest of the principal, as happened
in this case.
B. Withdrawal – 1919, 1928, 1929
Article 1928. The agent may withdraw from the agency by giving due
notice to the principal. If the latter should suffer any damage by
reason of the withdrawal, the agent must indemnify him therefor,
unless the agent should base his withdrawal upon the impossibility of
continuing the performance of the agency without grave detriment to
himself. (1736a)
Article 1929. The agent, even if he should withdraw from the agency
for a valid reason, must continue to act until the principal has had
reasonable opportunity to take the necessary steps to meet the
situation. (1737a)
Valera v. Velasco
Doctrine: The fact that an agent institutes an action against his
principal for the recovery of the balance in his favor resulting
from the liquidation of the accounts between them arising from
the agency, and renders and final account of his operations, is
equivalent to an express renunciation of the agency, and
terminates the juridical relation between them
Facts: Agent sued principal because the principal still owed him
1,100 from managing principal’s property. Principal sold his
right of redemption and it ended up with the agent. Principal
tried to assail this by saying that at the time of the acquisition the
buyer was still his agent and the suit filed by agent earlier was not
renunciation of the agency.
Held: Sale is valid, the agency was already renounced. Although
the agent has not expressly told his principal that he renounced
the agency, yet neither dignity nor decorum permits the latter to
continue representing a person who has adopted such an
antagonistic attitude towards him
C. Death; agency coupled with an interest –
1919, 1930 to 1932
Article 1930. The agency shall remain in full force and effect even
after the death of the principal, if it has been constituted in the
common interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor. (n)
Article 1931. Anything done by the agent, without knowledge of the
death of the principal or of any other cause which extinguishes the
agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith. (1738)
Article 1932. If the agent dies, his heirs must notify the principal
thereof, and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. (1739)
Pasno v. Ravina
Doctrine: The power of sale given in a mortgage is a power
coupled with an interest which survives the death of the grantor.
Go/Lagmay/Pabiona/Reodica
Facts: Gabina Labitoria mortgaged 3 parcels of land to the PNB
to secure an indebtedness while she was alive. The estate failed
to comply with the conditions of the mortgage. The PNB asked
the sheriff of Tayabas to proceed with the sale. The special
administrator filed a motion in court in which an order was
asked requiring the sheriff to vacate the attachment over the
mortgaged properties and to abstain from selling them.
Held: In Carter vs. Slocomb, the sale after the date of the death
of the mortgagor is valid without notice to the heirs of the
mortgagor. However, in order to protect the interests of the
estate, we should follow the procedure pointed out in Sec 708 of
the Code of Civil Procedure, as it would also not jeopardize any
rights of the mortgagee. Sec 708 of the Code of Civil Procedure
states that the party may foreclose a property by ordinary action
in court. It would be inconsistent with the portion of the law
governing the settlement of estates of deceased persons to hold
otherwise.
Ramon v. Caoibes
Doctrine: An agency is terminated, among other causes, by the
death of the principal or of the agent. When Caoibes made use
of the power of attorney, his principal, Concepcion was already
dead.
Facts: This involved agency given to a nephew on war claims
vs. the heirs of the principal who constituted the agency.
Held: Nephew Caoibes, as agent, had the obligation to deliver
the amount collected by virtue of said power to his principal,
Concepcion, or, after her death, to the administratrix of her
estate, Consolacion.
Herrera v. Luy Kim Guan
Doctrine: The death of the principal does not render the act of
an agent unenforceable, where the latter had no knowledge of
such extinguishment the agency.
Facts: Agency given to Luy Kim Guan before principal Herrera
left for China. Heirs claimed that the sales were fraudulent and
executed after the death of Herrera.
Held: Since it was not sufficiently proved that Herrera died
when the transactions occurred, the court sided with the
presumption that the agency was subsisting then.
Rallos v. Felix Go Chan, supra
Doctrine: Agency is ipso facto extinguished upon the death of
the principal or the agent pursuant to Art. 1919. Therefore, any
act of an agent after the principal’s death is void. There are two
exceptions to this rule: Art. 1930 & Art. 1931 (agent was
unaware of the death of the principal and third person
contracted with him in good faith).
Facts: This is a case of an attorney-in-fact, Simeon Rallos, who
after of his death of his principal, Concepcion Rallos, sold the
latter's undivided share in a parcel of land pursuant to a power of
attorney which the principal had executed in favor. The
administrator of the estate went to court to have the sale
declared uneanforceable and to recover the disposed share.
Held: It is clear that Simeon, the agent and brother, was aware
of the death of his principle at the time he sold the latter’s share
to Go Chan Co (as found as a finding of fact by the trial court).
Therefore, 1931 cannot be applied because Simeon did not act in
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Agency Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

good faith. The good faith of a third person is irrelevant if not

coupled with the good faith of the agent.

D. Dissolution of the firm/corporation

E. Accomplishment of the object/purpose
F. Expiration of the period
G. Civil interdiction, insolvency
Notes on the Topic:

The modes of extinguishment:

1919 (1 and 2) – by the subsequent acts of the parties which may

be either a. mutual consent or b. unilateral act of one of them
1919 (3 and 4) – by operation of law
1919 (5 and 6) – by agreement

Modes provided are not exclusive.

1927 Agency coupled with an interest example:

Option 1: I will sell if you appoint me as agent
Option 2: As a contractor I owe payment to the suppliers and
the client owes me payment. I can assign the supplier as an agent
to collect from my client.

Test to see if the agency is coupled with an interest:

Is the agency relationship just for compensation?
Will anyone else be affected? -

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