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Agency Bar Questions (1975-2016)

1. 2003 Agency

Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the supermarket.

Was there a nominate contract entered into between Jo-Ann and Aissa? If the affirmative, what was it?
Explain. 5%

Suggested Answer:

Yes, there was a nominate contract. On the assumption that Aissa accepted the request of her close
friend Jo-Ann to but some groceries for her in the supermarket, what they entered into was a nominate
contract of Agency. Article 1868 of the New Civil Code provides that 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.

Alternative Answer:

Yes, they entered into a nominate contract of lease to service in the absence of a relation of principal
and agent between them (Article 1644, New Civil Code).

2. 2004 Real Estate Mortgage

B. CX executed a special power of attorney authorizing DY to secure a loan from any bank and to
mortgage his property covered by the owner’s certificate of title. In securing a loan from MBank, DY did
not specify that he was acting for CX in the transaction with said bank.

Is CX liable for the bank loan? Why or why not? Justify your answer. (5%)

Suggested Answer:

CX is liable for the bank loan because he authorized the mortgage on his property to secure the loan
contracted by DY. If DY later defaults and fails to pay the loan, CX is liable to pay. However, his liability is
limited to the extent of the value of the said property.

Alternative Answer:

CX is not personally liable to the bank loan because it was contracted by DY in his personal capacity.
Only the property of CX is liable. Hence, while CX has authorized the mortgage on his property to secure
the loan of DY, the bank cannot sue CX to collect the loan in case DY defaults thereon. The bank can only
foreclose the property of CX.

And if the proceeds of the foreclosure are not sufficient to pay the loan in full, the bank cannot run after

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CX for the deficiency.

Alternative Answer:

While as a general rule the principal is not liable for the contract entered into by his agent in case the
agent acted in his own name without disclosing his principal, such rule does not apply if the contract
involves a thing belonging to the principal. In such case, the principal is liable under Article 1883 of the
Civil Code. The contract is deemed made on his behalf (Sy-juco v. Sy-juco 40 Phil. 634 [1920]).

Alternative Answer:

CX would not be liable for the bank loan. CX's property would also not be liable on the mortgage. Since
DY did not specify that he was acting for CX in the transaction with the bank, DY in effect acted in his
own name. In the case of Rural Bank of Bombon v. CA, 212 SCRA, (1992), the Supreme Court, under the
same facts, ruled that "in order to bind the principal by a mortgage on real property executed by an
agent, it must upon its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to
make the mortgage, if he, has not acted in the name of the principal. Neither is it ordinarily sufficient
that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the
agent has acted in his own name and has set his own hand and seal to the mortgage. There is no
principle of law by which a person can become liable on a real estate mortgage which she never
executed in person or by attorney in fact".

3. 2000 Agency v. Sale

A foreign manufacturer of computers and a Philippine distributor entered into a contract whereby the
distributor agreed to order 1,000 units of the manufacturer's computers every month and to resell them
In the Philippines at the manufacturer's suggested prices plus 10%. All unsold units at the end of the
year shall be bought back by the manufacturer at the same price they were ordered. The manufacturer
shall hold the distributor free and harmless from any claim for defects in the units.

Is the agreement one for sale or agency? (5%)

Suggested Answer:

The contract is one of agency, not sale. The notion of sale is negated by the following indicia: (1) the
price is fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the
manufacturer reacquires the unsold units at exactly the same price; and (3) warranty for the units was
borne by the manufacturer. The foregoing indicia negate sale because they indicate that ownership over
the units was never intended to transfer to the distributor.

4. 1999 Appointment of sub-agent

(a) X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a sub-agent and if he

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does, what are the effects of such appointment? (5%)

Suggested Answer:

a. Yes, the agent may appoint a substitute or sub-agent 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.

5. 2004 Authority to sell does not include authority to collect

B. As an agent, AL was given a guarantee commission, in addition to his regular commission, after he
sold 20 units of refrigerators to a customer, HT Hotel. The customer, however, failed to pay for the
units sold. AL’s principal, DRBI, demanded from AL payment for the customer’s accountability. AL
objected, on the ground that his job was only to sell and not to collect payment for units bought by
the customer.

Is AL’s objection valid? Can DRBI collect from him or not? Reason. (5%)

Suggested Answer:

No, AL's objection is not valid and DRBI can collect from AL. Since AL accepted a guarantee
commission, in addition to his regular commission, he agreed to bear the risk of collection and to
pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser
(Article 1907, Civil Code)

6. 1978 Commission

A authorized B to sell her property for P20,000 subject to the condition that the purchaser would
assume the mortgage existing in favor of Plaridel Bank and agreed to pay B a commission of six per cent
(6%) on the purchase price plus whatever over price he may obtain for the property. B found a buyer C
who was willing to buy the property under the terms stipulated by A. When B introduce C to A, A told B
that she was no longer interested in selling the property and a document was signed canceling the
written authority to sell with the agreement of B. One (1) month later, A sold the same property directly
to C for P22,000, A refused to pay B his commission, contending that when the property was sold to C
the authority to sell of B was already cancelled. B sued to collect his commission.

Is B entitled to his agent's commission? Give reasons for your answer.

Suggested Answer:

B is entitled to his agent's commission. C, the buyer of B, was willing to buy the property under the
terms stipulated by A. Despite this, A told B that she was no longer interested in selling the property. As

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a result, B's authority was cancelled. And yet, all of a sudden, one month later, A sold the property
directly to C for P22,000. It is clear that there was bad faith on the part of A. This act of bad faith cannot
serve as a basis for him to evade payment of the commission of B.

(NOTE: The above answer is based on Infante vs. Cunanan, 49 Off. Gaz. 3320.)

7. 2001 Coupled with an interest

Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual installments over a
period of ten years, but title will remain with Richard until the purchase price is fully paid. To enable Leo
to pay the price, Richard gave him a power-of-attorney authorizing him to subdivide the land, sell the
Individual lots, and deliver the proceeds to Richard, to be applied to the purchase price. Five years later,
Richard revoked the power of attorney and took over the sale of the subdivision lots himself.

Is the revocation valid or not? Why? (5%)

Suggested Answer:

The revocation is not valid. The power of attorney given to the buyer is irrevocable because it is coupled
with an interest: the agency is the means of fulfilling the obligation of the buyer to pay the price of the
land (Article 1927, CC). In other words, a bilateral contract (contract to buy and sell the land) is
dependent on the agency.

8. 1980 Coupled with an interest

(a) "AA" had an option to purchase a vessel. He entered into a contract with "BB" wherein he
assigned his option to "BB" under the condition that "BB" would appoint him as agent of the
vessel for five years. "BB" purchased the vessel and appointed "AA" as agent in accordance with
the contract. After three years of operation "BB" revoked the appointment of "AA" as agent for
loss of confidence. "AA" sued "BB" for damages.

Would you hold "BB" liable for damages?

Suggested Answer:

(a) "BB" should be held for damages. True, according to the Civil Code, the principal may revoke the
agency at will. But there are exceptions. These exceptions are sometimes denominated as
agency coupled with an interest. One of them is when the agency is the means of fulfilling an
obligation already contracted. It is obvious that the agency is the means of fulfilling an
obligation already contracted in favor of "AA". "BB" has clearly breached his contract or
undertaking by revoking the agency before the expiration of the term or period of five years.

(NOTE: The above answer is based upon Arts. 1927, 1930, Civil Code.)

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9. 1979 Coupled with an interest

DT borrowed P50,000.00 from a bank and to secure the payment thereof, signed a Deed of Real Estate
Mortgage in favor of the bank in the usual printed form wherein it is provided among others that "for
the purpose of extra-judicial foreclosure, the mortgagor hereby appoints the mortgagee his attorney-in-
fact to sell the property mortgaged under Act 3135, as amended, to sign all documents and perform any
act requisite and necessary to accomplish said purpose." Upon failure of DT to pay the loan, the bank
foreclosed and bought the property at the foreclosure sale. During the one year period of redemption
DT died and the property was not redeemed despite the lapse of one year. The bank, despite its actual
knowledge, of DT's death, consolidated its title by executing the affidavit of consolidation and Deed of
Sale of the land in its favor as empowered in the Deed of Real Estate Mortgage. After the bank had
consolidated its title the heirs of DT asked the bank to allow them to redeem the property by paying
only the P50,000.00 plus accrued interest and expense of foreclosure, contending that the sale in favor
of the bank was invalid due to the prior death of DT which therefore revoked the power of attorney
inserted in the Deed of Mortgage but the bank demanded payment of P200,000.00, the then fair market
value of the property.

Can the bank be compelled to accept the tender of redemption by the heirs of DT? Why?

Suggested Answer:

The bank cannot be compelled to accept the tender of redemption by the heirs of DT. True, agency is
extinguished by the death of the principal, but there are two well-known exceptions. The first exception
is where the agency is coupled with an interest and the second is where the agent, unaware of the
death of his principal, enters into a contract in behalf of his principal with a third person who is also
unaware of the death of the principal (Arts. 1930, 1931, Civil Code) The instant case falls squarely within
the purview of agency coupled with an interest. According to the Civil Code, 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. Hence, despite the death of DT, the power granted by him to the bank to sell the
property mortgaged and to sign all documents and perform any act requisite and necessary to
accomplish the extra-judicial foreclosure in case he is unable to pay the loan is still of full force and
effect. The foreclosure, therefore, and the consolidation by the bank of its title over the mortgaged
property are perfectly valid.

10. 1992 General v. Special Agency

A as principal appointed B is his agent granting him general and unlimited management over A's
properties, stating that A withholds no power from B and that the agent may execute such acts as he
may consider appropriate.

Accordingly, B leased A's parcel of land in Manila to C for four (4) years at P60,000.00 per year, payable
annually in advance.

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B leased another parcel of land of A in Caloocan City to D without a fixed term at P3,000.00 per month
payable monthly.

B sold to E a third parcel of land belonging to A located in Quezon City for three (3) times the price that
was listed in the inventory by A to B.

All those contracts were executed by B while A was confined due to illness in the Makati Medical Center.

Rule on the validity and binding effect of each of the above contracts upon A the principal. Explain your
answers,

Suggested Answer:

The agency couched in general terms comprised only acts of administration (Art. 1877, Civil Code). The
lease contract on the Manila parcel is not valid, not enforceable and not binding upon A. For B to lease
the property to C, for more than one (1) year, A must provide B with a special power of attorney (Art.
1878. Civil Code).

The lease of the Caloocan City property to D is valid and binding upon A. Since the lease is without a
fixed term, it is understood to be from month to month, since the rental is payable monthly (Art. 1687,
Civil Code).

The sale of the Quezon City parcel to E is not valid and not binding upon A. B needed a special power of
attorney to validly sell the land (Arts. 1877 and 1878, Civil Code). The sale of the land at a very good
price does not cure the defect of the contract arising from lack of authority.

11. 1975 Liability of an agent

A borrowed from B the sum of P3,000.00. Three days after A in a letter authorized the Philippine
National Bank to pay his debt to B out of whatever crop loan might be granted to him by said Bank. On
the same day, the Bank agreed but the Bank paid B only P2,000.00. On the date of the maturity, B sued
the Bank and A for the remaining P 1,000.00.

Is the Bank liable to B? Explain.

Suggested Answer:

No, the Bank is not liable to B. The letter of A to PNB is merely an authority given to PNB to pay B. PNB,
therefore, is merely an agent of A, and an agent cannot be personally liable as long as be acts within the
scope of his authority.

Moreover, the Bank did not assume the obligation to pay A's indebtedness to B, either as co-principal,
surety or guarantor. (Hodges v. Rey, 111 Phil. 219)

12. 1981 Liability of an agent to render an account

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"A", an official of a mining company, was appointed by the company as its buying agent for the
acquisition of mining rights in a designated area for operation by the company. "A" proceeded to enter
into contracts with the claim owners. Claim owner "B", an illiterate, was helped by "A" in locating and
perfecting his rights and for which "A", by contract, obtained a participation in the royalty paid by the
company to the claim owner.

a) The mining company goes to you for advice as to whether it is entitled to the royalty obtained
by "A" from "B". What would your advice be and why?

b) May "B", the claim owner, question the royalty obtained by "A"? On what grounds? Explain,

Suggested Answer:

(a) I would advice the mining company to withhold the payment of the part of the royalty
corresponding to "A". This is so because of the explicit mandate of the Civil Code. According to
the law: 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. It is crystal dear that the act of "A", agent of the mining company, falls
squarely within the purview or coverage of this rule.

(Note: The above answer is based on Art. 1891 of the Civil Code.)

(b) "B", the claim owner, may question the royalty obtained by "A" on the ground that it is "not
owing to the principal." It must be observed that the obligation of the agent to deliver to his
principal anything which he has received by virtue of the agency is followed by the phrase "even
though it may not be owing to the principal" This means that the action for recovery by "B" on
the ground of undue payment would be directed against the mining company and not against
the agent.

(Note: The above answer is based on Art. 1891 of the Civil Code and on Manresa's opinion — Vol. 11, p.
512,}

13. 1994 Powers of the agent

Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots of its newly developed
subdivision. Prime Realty told Nestor that he could not collect or receive payments from the buyers.
Nestor was able to sell ten lots to Jesus and to collect the down payments for said lots. He did not turn
over the collections to Prime Realty.

Who shall bear the loss for Nestor's defalcation. Prime Realty or Jesus?

Suggested Answer:

a) The general rule is that a person dealing with an agent must inquire into the authority of that

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agent. In the present case, if Jesus did not inquire into that authority, he is liable for the loss due
to Nestor's defalcation unless Article 1900, Civil Code governs, in which case the developer
corporation bears the loss.

Art. 1900 Civil Code provides: "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.

However, if Jesus made due inquiry and he was not informed by the principal Prime Realty of
the limits of Nestor's authority. Prime Realty shall bear the loss.

b) Considering that Prime Realty Corporation only "told" Nestor that he could not receive or collect
payments, it appears that the limitation does not appear in his written authority or power of
attorney. In this case, insofar as Jesus, who is a third person. Is concerned, Nestor's acts of
collecting payments is deemed to have been performed within the scope of his authority {Article
1900. Civil Code). Hence, the principal is liable.

However, if Jesus was aware of the limitation of Nestor's power as an agent, and Prime Realty
Corporation does not ratify the sale contract, then Jesus shall be liable (Article 1898. Civil Code).

14. 1988 Termination; death of principal; souble sales

b. In 1950, A executed a power of attorney authorizing B to sell a parcel of land consisting of more
than 14 hectares. A died in 1954. In 1956, his four children sold more than 12 hectares of the
land to C. In 1957, B sold 8 hectares of the same land to D, It appears that C did not register the
sale executed by the children. D, who was not aware of the previous sale, registered the sale
executed by B, whose authority to sell was annotated at the back of the Original Certificate of
Title.

(1) What was the effect of the death of A upon B's authority to sell the land?

(2) Assuming that B still had the authority to sell the land—who has a better right over the said
land, C or D?

Suggested Answer:

(1) While the death of the principal in 1954 ended the authority of the agent to sell the land, it
has not been shown that he was aware of his principal's demise. Hence, the act of such
agent is valid and shall be fully effective with respect to third persons which may have
contracted with him in good faith in conformity with Art. 1931 of the Civil Code. (Buason vs.
Panuyas, 105 Phil. 795, Herrera vs. Luy, 110 Phil. 1020.)

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(2) D has better right since he registered first in good faith.

Alternative Answer to: No, 13 (b):

(1) The agency is terminated upon the death of either the principal or agent. Exceptionally, a
transaction entered into by the agent with a third person where both had acted in good
faith is valid. Article 1930 of the Civil Code provides that:

"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.'* and Article 1931 provides
that;

"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,"

15. 1997 Termination; effect of death of agent

Stating briefly the thesis to support your answer to each of the following cases, will the death of an
agent end an agency?

Suggested Answer:

(c) Yes. The death of an agent extinguishes the agency, by express provision of par. 3, Art 1919 of
the Civil Code.

16. 2010 Sale of a Real Property through an Agent

X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she advised
her sister Y via overseas call to sell the land and sign a contract of sale on her behalf.

Y thus sold the land to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1
fully paid the purchase price.

B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but asked Y for her authority
from X. Without informing X that she had sold the land to B1, Y sought X for a written authority to sell.

X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001 to B2 on monthly
installment basis for two years, the first installment to be paid at the end of May 2001.

Who between B1 and B2 has a better right over the land? Explain. (5%)

Suggested Answer:

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B-2 has a better title. This is not a case of double sale. Since the first sale was void. The law provides that
when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void (Art 1874, NCC). The property was sold by Y to B1 wihtout
any written authority from the owner X. Hence, the sale to B1 was void.

Alternative Answer:

Under the facts, B-1 has a better right to the land. Given the fact that the Deed of Sale in favor of B-1
and B-2 are not inscribed in the Registry of Deeds, the case is governed by Art 1544 of the New Civil
Code which provides that in case of double sales of an immovable property, the ownership shall pertain
to the person who is in good faith was first in possession and in the absence thereof to the person who
presents the oldest title, provide there is good faith.

In a case, the Supreme Court has held that in a sale of real estate the execution of a notarial document
of sale is tantamount to delivery of the possession of the property sold. The ownership of the land
therefore pertains to the first buyer. It may also be mentioned that under Art 3344 no instruments or
deed establishing, transmitting, acknowledging, modifying, or extinguishing right to real property not
registered under Act 496 shall be valid except as between the parties. Thus, the Deed of Sale of B-2 has
no binding effect on B-1.

17. 2014

Fe, Esperanza, and Caridad inherited from their parents a 500 sq. m. lot which they leased to Maria for
three (3) years. One year after, Fe, claiming to have the authority to represent her siblings Esperanza
and Caridad, offered to sell the leased property to Maria which the latter accepted. The sale was not
reduced into writing, but Maria started to make partial payments to Fe, which the latter received and
acknowledged. After giving the full payment, Maria demanded for the execution of a deed of absolute
sale which Esperanza and Caridad refused to do. Worst, Maria learned that the siblings sold the same
property to Manuel. This compelled Maria to file a complaint for the annulment of the sale with specific
performance and damages.

If you are the judge, how will you decide the case? (4%)

Suggested Answer:

I will dismiss the case for annulment of the sale and specific performance filed by Maria with respect to
the shares pertaining to Esperanza and Caridad. Since the object of the sale is a co-owned property, a co-
owner may sell his undivided share or interest in the property owned in common but the sale will be
subject to the result of the partition among the co-owners. In a co-ownership there is no mutual agency
except as provided under Article 487. Thus, Fe cannot sell the shares of Esperanza and Caridad without a
special power of attorney from them and the sale with respect to the shares of the latter without their
written authority is void under Article 1874. Hence, the sale of the property to Manuel is not valid with

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respect to the shares of Esperanza and Caridad. Maria can only assail the portion pertaining to Fe as the
same has been validly sold to her by Fe.

18. 2014

Joe Miguel, a well-known treasure hunter in Mindanao, executed a Special Power of Attorney (SPA)
appointing his nephew, John Paul, as his attorney-infact. John Paul was given the power to deal with
treasure-hunting activities on Joe Miguel’s land and to file charges against those who may enter it
without the latter’s authority. Joe Miguel agreed to give John Paul forty percent (40%) of the treasure
that may be found on the land.

Thereafter, John Paul filed a case for damages and injunction against Lilo for illegally entering Joe
Miguel’s land. Subsequently, he hired the legal services of Atty. Audrey agreeing to give the latter thirty
percent (30%) of Joe Miguel’s share in whatever treasure that may be found in the land.

Dissatified however with the strategies implemented by John Paul, Joe Miguel unilaterally revoked the
SPA granted to John Paul.

Is the revocation proper? (4%)

Suggested Answer:

No, the revocation was not proper. As a rule, a contract of agency may be revoked by the principal at
will. However, an agency ceases to be revocable at will if it is coupled with an interest or if it is a means
of fulfilling an obligation already contracted. (Article 1922). In the case at bar, the agency may be
deemed an agency coupled with an interest not only because of the fact that John Paul expects to
receive 40% of whatever treasure may be found but also because he also contracted the services of a
lawyer pursuant to his mandate under the contract of agency and he therefore stands to be liable to the
lawyer whose services he has contracted. (Sevilla v. Tourist World Service, G.R. No. L-41182-3 April 16,
1988)

19. 2015

Donna pledged a set of diamond ring and earrings to Jane for P200,000.00 She was made to sign an
agreement that if she cannot pay her debt within six months, Jane could immediately appropriate the
jewelry for herself. After six months, Donna failed to pay. Jane then displayed the earrings and ring set
in her jewelry shop located in a mall. A buyer, Juana, bought the jewelry set for P300,000.00.

a) Was the agreement which Donna signed with Jane valid? Explain with legal basis.
(2%)
b) Can Donna redeem the jewelry set from Juana by paying the amount she owed
Jane to Juana? Explain with legal basis. (2%)

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c) Give an example of a pledge created by operation of law. (2%)

Suggested Answer:

a. appropriate the jewelry upon default of Donna is considered pactum commissorium and it
is considered void by law. ( Article 2088)

b. No, Donna cannot redeem it from Juana because the pledge contract is between her and
Jane. Juana is not a party to the pledge contract. (Article 1311, Civil Code)
c. One example of a pledge created by operation of law is the right of the depositary to retain
the thing deposited until the depositor shall have paid him whatever may be due to the
depositary by reason of the deposit. (1994) Another is the right of the agent to retain the
thing which is the object of the agency until the principal reimburses him the expenses
incurred in the execution of the agency. (Article 1914, Civil Code)

20. 2015

A lawyer was given an authority by means of a Special Power of Attorney by his client to sell a parcel of
land for the amount of P3 Million. Since the client owed the lawyer Pl Million in attorney's fees in a prior
case he handled, the client agreed that if the property is sold, the lawyer was entitled to get 5% agent's
fee plus Pl Million as payment for his unpaid attorney's fees. The client, however, subsequently found a
buyer of his own who was willing to buy the property for a higher amount.

Can the client unilaterally the rescind authority he gave in favor of his lawyer? Why or why not? (4%)

Suggested Answer: No, the agency in the case presented is one which is coupled with an interest. As a
rule, agency is revocable at will except if it was established for the common benefit of the agent and the
principal. In this case, the interest of the lawyer is not merely limited to his commission for the sale of
the property but extends to his right to collect his unpaid professional fees. Hence, it is not revocable at
will. (Article 1927)

21. 2016

Dr. Jack, a surgeon, holds clinic at the St. Vincent’s hospital and pays rent to the hospital. The fees of Dr.
Jack are paid directly to him by the patient or through the cashier of the hospital. The hospital publicly
displays in the lobby the names and specializations of doctors associated or accredited by it, including
that of Dr. Jack. Marta engaged the services of Dr. Jack because of recurring stomach pain. It was
diagnosed that she is suffering from cancer and had to be operated on. Before the operation, she was
asked to sign “consent for hospital care,” which reads:

“Permission is hereby given to the medical, nursing and laboratory staff of the St. Vincent’s
Hospital to perform such procedures and to administer such medications and treatments as maybe

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deemed necessary or advisable by the physicians of this hospital for and during the confinement.”

After the surgery, the attending nurses reported the two sponges were missing. Later, Marta died due to
complications brought about by the sponges that were left in her stomach. The husband of Marta sued
the hospital and Dr. Jack for damages arising from negligence in the medical procedure. The hospital
raised the defense that Dr. Jack is not its employee as it did not hire Dr. Jack not pay him any salary or
compensation. It has absolutely no control over the medical services and treatment being provided by
Dr. Jack. Dr. Jack even signed an agreement that he holds the hospital free and harmless from any
liability arising from his medical practice in the hospital.

Is St. Vincent Hospital liable for the negligence of Dr. Jack. Explain your answer.

Suggested Answer: Yes, St. Vincent’s Hospital is liable. In Professional Services vs. Agana, a hospital can
be held liable, not under the principle of respondeat superior for lack of evidence of employer–
employee relationship with the Doctor but under the principle of ostensible agency for negligence of the
doctor and, pro hac vice, under the principle of corporate negligence for its failure to perform its duties
as a hospital.

While it is true that there was insufficient evidence that St. Vincent’s Hospital exercise the
power of control or wielded such power over the means and the details of the specific process by which
Dr. Jack applied his skills in Marta’s treatment, there is ample evidence that St. Vincent’s hospital held
out to the patient, Marta, that Dr. Jack was its agent under the ostensible agency doctrine.

The two factors that determine apparent authority are present:

1. The hospital’s implied manifestation to the patient which led the latter to conclude that the
doctor was the hospital’s agent; and
2. The patient’s reliance upon the conduct of the hospital and the doctor, consistent with ordinary
care and prudence.

The corporate negligence ascribed to St. Vincent hospital is different from the medical negligence
attributed to Dr. Jack. The duties of the hospital are distinct from those of the doctor–consultant
practicing within its premises in relation to the patient; hence, the failure of St. Vincent’s hospital to
fulfill the duties as a hospital corporation gave rise to a direct liability to Marta distinct from that of Dr.
Jack.

Agency Bar Qs 13