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1
Rallos vs Felix Corp. Facts Concepcion Rallos and Gerundia
Rallos are sisters and registered co-owner of Land X. The sisters
executed a special power of attorney in their brothers favor,
Simeon Rallos. When Concepcion died, Simeon Rallos sold Concepcions
share in Land X to Felix Corp. Ramon Rallos (complainant) as
administrator of Concepcions estate filed a complaint to declare
Simeons sale of Concepcions share unenforceable and to recover said
share. Issue Was the sale of Concepcions share valid despite the
agent executing it after his principals death? Held No. In an
agency the principal (mandante), authorizes another called the
agent (mandatario) to act for and in his behalf in transactions
with 3rd persons. The agencys essential elements are:
1. There is consent, express or implied of the parties to
establish the relationship 2. Object is to execute a juridical act
in relation to a 3rd person 3. The agent acts as a representative
and not for himself 4. The agent acts within the scope of his
authority.
Agency is basically personal representative and derivative in
nature. The agents authority to act emanates from the powers
granted to him by his principal, his act is the principals act if
done within the scope of his authority. Agency is extinguished by
the principals or agents death among others. The general rule is:
The principals death effects instantaneous and absolute revocation
of the agents authority by operation of law. The agents act after
the principals death is void ab initio. The principals heirs dont
event need to notify the agent of the principals death. There are
exceptions to this general rule in Art. 1930 and Art. 1931. No
exception applies because:
1. The agency wasnt coupled with an interest 2. Simeon knew of
Concepcions death at the time he sold the shares in Land X.
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2
Urban Bank vs Pena Facts ISCI Corp. owns Property X that it
leased to tenants. The tenants leased Property X to Subtenants in
contravention of the lease agreement. ISCI Corp. eventually moved
to sell Property X Urban Bank. Urban Bank agreed on the condition
that payment will be in installments and the final install will be
paid only when the Subtenants have been removed from Property X and
Urban Bank can take possession. ISCI Corp. then authorized its
corporate secretary Pena to clear Property X of the Subtenants.
Pena stationed guards around the property and filed a case in court
to keep the Subtenants out. The court issued a TRO in Penas favor
when the lease agreement with the tenants expired; ISCI Corp. then
executed a deed of sale in Urban Banks favor. Without authority
from Urban Bank, the court revoked the TRO in Penas favor. Pena
then contacted Urban Bank and the latter agreed to authorize Pena
to clear Property X of the Subtenants, such authority was written.
Urban Bank also promised to pay Pena compensation if he clears
Property X within a certain time period but such promise was made
over the telephone. Eventually, Pena managed to force the
Subtenants out after paying them. Urban Bank was able to take
possession of Property X. Pena demanded compensation but Urban Bank
refused. Issue Is Pena entitled to compensation? Held Yes. Pena
should be paid for services rendered under the agency relationship
that existed between him and Urban Bank based on the civil law
principle against unjust enrichment and quantum merit. Also, Pena
is still ISCIs principal and the latter is also liable to pay Pena
compensation. Whether or not an agency has been created is
determined by the fact that one is representing and acting for
another. The law makes no presumption of agency; proving its
existence, nature and extent is incumbent upon the person alleging
it.
In this case, the evidence shows Urban Bank constituted Pena as
its agent to secure possession of Property X. Union Bank gave Pena
a specific and special authority to act on its behalf with respect
to the latters claims of ownership over the property against the
tenants. Further, Urban Banks actions ratified Penas authority as
its agent, such as in the court actions and security guards.
Agency is presumed to be for compensation. Unless the contrary
intent is shown, a person who acts as an agent does so with the
expectation of payment according to the agreement and to the
services rendered or results effected.
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3
Loadmaster Customs vs Glodel Brokerage Corp. Facts R&B
Insurance (respondent) insured Columbias shipment of its products
against all risks. The products were shipped by sea and arrived at
the pier. From there, Columbia contracted Glodel (respondent) to
deliver the products to its warehouse. Glodel in turn contracted
Loadmaster to use its delivery trucks in transporting the products.
Out of 12 trucks used, only 11 reached the warehouse. Columbia
sought reimbursement from R&B Insurance and the latter paid.
R&B Insurance then went after Loadmaster and Glodel. Issue Is
there a principal-agent relationship between Glodel and
Loadmasters? Held No. Loadmasters never represented Glodel because
it was never authorized to make such representation. The settled
rule is the basis for agency is representation, the agent acts for
and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were
personally executed by the principal. On the principals part, there
must be an actual intention to appoint or an intention naturally
inferable from his words or actions, while on the part of the
agent, there must be an intention to accept the appointment and act
on it. In this case, theres no mutual intent.
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4
Bordador vs Luz Facts Bordador is engaged in the business of
purchase and sale of jewelry. Luz is their regular customer. On
several occasions, Deganos (respondent) received jewelry from
Bordador with the responsibility to sell the items at a profit and
remit the proceeds and return the unsold items to Bordador. The
jewerly and prices were indicated in receipts stating they were
received for Deganos niece and Luz. Deganos never returned the
sales proceeds or the unsold items. Luz appeared on Deganos behalf
and obligated himself to pay the amount due to Bordador on an
installment basis. Luz failed to comply with his obligation. Issue
Is Deganos an agent of Luz? Held No. The basis for agency is
representation. In this case, theres no evidence to show Luz
consented to Deganos acts or authorized him to act on her behalf
with respect to the particular transactions involved. In fact,
Bordador was grossly and inexcusably negligent to entrust Deganos
with the jewelry without requiring a written authorization for his
alleged principal. A person dealing with an agent is put on inquiry
and must discover upon his peril the agents authority. Theres no
express or implied agency between Deganos and Luz.
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5
Eurotech Industrial vs Cuizon Facts Eurotech is in the business
of importing and distributing various European industrial equipment
for customers in the Philippines. Eurotech has Impact Systems
(represented by Sales Manager Cuizon) as one of its customers.
Impact Systems bought equipment from Eurotech. When the equipment
arrived in the Philippines Eurotech refused to give it to Impact
Systems until it fully pays their indebtedness. Impact Systems paid
by way of a deed of assignment transferring the receivables due it
from Toledo Power in Eurotechs favor. However, Impact Systems still
collected on the receivables due from Toledo Power. When Eurotech
discovered Impact Systems actions, Eurotech demanded payment from
Impact Systems that it failed to do so. Issue Did Cuizon exceed his
authority when he signed the Deed of Assignment thereby making him
personally liable to Eurotech? Held No. The basis of agency is
representation, the agents acts for and on behalf of the principal
on matters within the scope of his authority and said acts have the
same legal effect as if the principal personally executed them. As
a general rule an agent is not personally liable to the party with
whom he contracts. The exception is if the agent binds himself to
the obligation and if the agent exceeds his authority. If the agent
exceeds his authority, the 3rd person affected cant recover from
both agent and principal. In this case, Cuizon is the agent while
Erwin Cuizon (Impact Systems owner) is the principal. Cuizon signed
the deed of assignment in his capacity as Impact Systems Sales
Manager. An agents powers are particularly broad in the case of one
acting as a general agent or manager. A high degree of confidence
and liberal powers are invested in such agent. Such agent may enter
into any contract he deems reasonably necessary or requisite to
protect the principals interest. Here, Cuizon acted within his
authority because Impact Systems had great need for the equipment
and negotiations were being held up.
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6
Orient Air Services vs CA Facts American Airlines (respondent)
is an air carrier offering passenger and air cargo transportation
in the Philippines. American Airlines and Orient Air entered into a
General Sales Agency Agreement where American Airlines authorizes
Orient Air to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation. American
Air lines terminated the Agreement alleging Orient Air failed to
remit the net proceeds of sales for certain months in accordance
with the Agreement. American Airlines further filed a complaint for
accounting. The lower courts ruled that American Airlines should
reinstate Orient Air as its general sales agent in accordance with
the Agreement. Issue Can American Airlines be compelled to
reinstate Orient Air as its agent? Held No. Such order in effect
compels American Air to extend its personality to Orient Air. It
violates the principles and essence of agency that requires that
agency be constituted with the consent or authority of the
principal. In an agent-principal relationship, the principals
personality is extended through the agents facility. The agent, by
legal fiction, becomes the principal authorized to perform all acts
which the principal would have him do. Such relationship can be
effected only with the principals consent which mustnt in any way
be compelled by any law or court.
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7
Domingo vs Domingo Facts Vicente Domingo (complainant) granted
Gregorio Domingo (respondent) the exclusive agency to sell Vicentes
Property X. Gregorio would receive a 5% commission if Property X is
sold to a purchaser Gregorio introduces. Gregorio authorized
Purisima to look for a buyer promising the latter a share of the
commission. Purisima introduced Oscar, a potential buyer to
Gregorio. Negotiations took place between Oscar and Vicente with
Gregorio managing to persuade Vicente to sell Property X at a lower
price. Oscar gave Gregorio a P1,000.00 gift for Gregorios success
in lowering the price. Gregorio didnt disclose to Vicente the gift.
After some time, Oscar told Gregorio he was no longer buying the
property and didnt meet Gregorio anymore. Gregorio sensed something
fishy and discovered that Vicente had actually sold Property X to
Oscars wife. When Gregorio demanded his commission, Vicente refused
arguing Property X was sold not to Gregorios buyer, but to another
buyer namely Oscars wife. Issue Is Gregorio still entitled to his
commission? Held No. The Civil code demands the utmost good faith,
fidelity, honesty, candor and fairness on the agents part to his
principal. The agent has an absolute obligation to make a full
disclosure to his principal of all his transactions and facts
relevant to the agency. An agent who takes a secret profit from the
vendee without revealing the same to his principal is guilty of a
breach of his loyalty to the principal and forfeits his right to
collect the commission from the principal. In this case, Gregorio
received a gift from Oscar but failed to disclose it to Vicente.
The gift corrupted Gregorios duty to serve his principals interest
by persuading Vicente to sell Property X at a much lower price than
he intended. Art. 1891 doesnt apply if the agent acted only as
middleman with the task of bringing together the vendor and vendee.
The article also wont apply if the agent had informed his principal
of the gift he received from the purchaser and the principal didnt
object to it. Here, Gregorio wasnt merely a middleman because he
served as Vicentes broker and agent. Gregorio also didnt disclose
Oscars gift to Vicente. As a consequence of such breach of trust,
Gregorio has forfeited his right to the commission.
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Schmid Inc. vs RJL Corp. Facts RJL needed 12 electric generators
and while canvassing for generators, Schmid sent RJL its quotation
for 12 Nagata-brand electric generators. Schmid stipulated RJL
would pay by opening a letter of credit in Nagata Corps favor.
Nagata sent the electric generators to RJL and Schmid got its
commission. Afterwards, the 12 generators broke down and it turns
out they were faulty. Some of the generators were repaired but most
were neither repaired nor replaced. RJL demanded Schmid refund it
but the latter refused arguing it wasnt the vendor of the
Nagata-brand generators. Issue Is Schmid Inc. liable for the faulty
electric generators? Held No. Schmid was merely an indentor, and
not a vendor. Being an indentor, Schmid cant be held liable for the
implied warranty for hidden defects under the Civil Code. Further,
Schmid never expressly bound itself to warrant the 12 generators as
free of any hidden defects. An indentor is similar to a broker and
in effecting a sale, theyre merely middlemen and act in a certain
sense as the agent of both parties to the transaction. A broker is
generally defined as one who is engaged, for others, on a
commission, negotiating contracts relative to property with the
custody of which he has no concern; the negotiator between other
parties, never acting in his own name but in the name of those who
employed him; he is strictly a middleman and for some purpose the
agent of both parties.
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9
Tan vs Gullas Facts Gullas owns Property X that he wants to
sell. Gullas authorized Tan, a real estate broker, to negotiate for
the sale of the land with a commission if Tan does sell it. Tan
found a buyer in the Sisters of Mary Banneaux. After negotiations,
Gullas agreed to sell Property X to Sisters of Mary Banneaux.
Gullas authorized his attorney to sell, transfer, and convey
Property X. The transaction went smoothly and title was issued in
Sisters of Mary Banneauxs favor. Afterwards, Tan went to Gullas to
collect his commission but Gullas refused reasoning another broker
introduced Sisters of Mary Banneaux to Gullas. Issue Is Tan
entitled to the commission? Held Yes. An agent receives a
commission upon the sale's successful conclusion. Meanwhile, a
broker earns his commission by merely bringing the buyer and seller
together, even if no sale is eventually made. In this case, it was
Tan who first introduced Sisters of Mary Banneaux to Gullas. Gullas
allegation that he hired another broker who first introduced
Sisters of Mary Banneaux to him is untenable because he failed to
provide evidence proving it. Gullas is merely avoiding paying Tan
his commission for Tans role in the transaction. Further, Tan
wasn't able to participate in the negotiations because of Gullas
actions.
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Medrano vs CA Facts Vice-Chairman Medrano of Ibaan Rural Bank
was looking for a buyer of a foreclosed bank asset. Medrano asked
Flor (complainant) to look for a buyer. Borbon, Flors associate and
a real estate broker, knew of Lee, who might be interested in the
property. Medrano gave Flor and Borbon written authority to
negotiate the propertys sale. The defendants arranged for the
propertys ocular inspection with Lee but were delayed for one
reason or another. After a few weeks, defendants discovered Medrano
had already sold the property to Lee. With the sale consummated,
defendants asked Medrano for their commission but Medrano refused
to pay. Issue Are defendants entitled to their commission? Held
Yes. Procuring cause is meant to be the proximate cause. Procuring
cause, in a brokers activity, refers to a cause originating a
series of events which, without break in their continuity, result
in accomplishment of prime object of the brokers employment -
producing a purchaser ready, willing and able to buy real estate in
the owners terms. A broker will be regarded as the sales procuring
cause if his efforts are the foundation on which the negotiations
resulting in sale are begun. The means he employs and his efforts
must result in the sale. He must find the purchaser and the sale
must proceed from his efforts acting as broker. In this case,
defendants are the sales procuring cause because they were the ones
who informed Buyer A leading him to its consummation. Even if
defendants didnt take part in the negotiations, they are still
entitled to the commission. A brokers conventional employment is
merely to find a willing and able buyer to purchase the property.
There is no agreement to the contrary that defendants also had to
negotiate the sale to get paid their commission.
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Litonjua vs Eternit Corp. Facts Eternit Corp. owns Property X in
the Philippines. ESAC Corp, a majority shareholder in Eternit Corp.
grew concerned about the Philippines political situation and wanted
to stop operations. ESAC Corp moved to sell Property X. ESAC Corp,
through Glanville and Delsaux engaged the services of
realtor/broker Lauro G. Marquez. Marquez later showed Property X to
Litonjua. Litonjua wanted to buy Property X and negotiations went
underway. Litonjua deposited the necessary fees in the bank.
Meanwhile, the Philippines political situation improved with Cory
Aquinos assumption to Presidency. ESAC Corp changed its mind and
wanted to continue operations. ESAC Corp decided no longer to sell
Property X. Litonjua demanded payment for damages from Eternit
Corp. but the latter refused. Issue Did Marquez, Glanville, and
Delsaux bind Eternit Corp. to sell Property X? Held No. Litonjua
failed to prove Eternit Corp. allowed Glanville, Delsaux, and
Marquez to sell its property. Litonjua filed to establish the
agency by clear, certain, and specific proof. Glanville, Delsaux,
and Marquez had no authority to bind Eternit Corp. in the
transaction with Litonjua. A corporation may act only through its
board of directors or, when authorized either by its by-laws or by
its board resolution, through its officers or agents in the normal
course of business. While a corporation may appoint agents to
negotiate for the sale of its real properties, the final say will
have to be with the board of directors through its officers and
agents as authorized by a board resolution or by its by-laws. An
unauthorized act of an officer of the corporation isnt binding on
it unless the latter ratifies the same expressly or impliedly by
its board of directors. Any sale of real property of a corporation
by a person purporting to be an agent thereof but without written
authority from the corporation is null and void. In creating or
conveying real rights over immovable property, a special power of
attorney is necessary. In a sale of a piece of land or any portion
thereof through an agent, the latters authority shall be in
writing, otherwise the sale is void. Here, complainants failed to
provide in evidence the Board resolution of Eternit Corp.
empowering Marquez, Glanville, or Delsaux as its agents to sell,
let alone offer for sale, Property X. ESACs authorization is not
equal to Eternits authorization. A real estate broker is one who
negotiates the sale of real properties. His business, generally
speaking, is only to find a purchaser who is willing to buy the
land upon terms fixed by the owner. He has no authority to bind the
principal by signing a contract of sale. Indeed, an authority to
find a purchaser of real property does not include an authority to
sell.
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Spouses Viloria vs Continental Airlines Facts The Spouses
Viloria purchased 2 tickets on board Continental Airlines from
Holiday Travel. However, the Spouses Viloria found out Holiday
Travel misled them into buying the tickets and decided to refund
the tickets instead. Continental refused and advised them they can
apply for a re-issuance of new tickets within 2 years from the date
the original tickets were issued. The Spouses Viloria then had the
original tickets replaced by a single round trip ticket. However,
Continental informed the Spouses Viloria that the tickets were
non-transferrable and so both tickets cant be used to purchase the
single round trip ticket. Also, they will have to pay additional
fees because a single original ticket cant cover the entire price
of the single round trip ticket. The Spouses Viloria then demanded
for a refund of the original tickets but Continental refused.
Spouses Viloria then filed a civil case to refund the money plus
damages. Issue Is there a principal-agent relationship between
Continental and Holiday Travel? Held Yes. All the elements of
agency are present. Continental doesnt deny that it concluded an
agreement with Holiday Travel, where Holiday Travel would enter
into contracts of carriage with 3rd persons on Continentals behalf.
Further, Holiday Travel merely acted in a representative capacity
and its Continental, not Holiday Travel, whos bound by the
contracts of carriage entered into by Holiday Travel on its behalf.
Also, Continental hasnt made any allegation Holiday Travel exceeded
its scope of authority. In an agency, the principal retains
ownership and control over the property and the agent merely acts
on the principals behalf and under his instructions in furtherance
of the agency. On the other hand, theres a sale if the delivery of
property will effect a relinquishment of title, control, and
ownership in such a way the recipient can do with the property as
he pleases. In this case, Continental recognized the validity of
the contracts of carriage that Holiday Travel entered into with
Spouses Viloria and considered itself bound by the terms and
conditions thereof.
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Rallos vs Yangco Facts Yangco sent Rallos a letter informing
Rallos that he has a shipping and commission department for buying
and selling tobacco. The letter also states Collantes is Yangcos
agent. Rallos did business with Yangco through Collantes. After
some time, Rallos sent Collantes, as Yangcos agent, tobacco to be
sold on commission. Collantes didnt turn the commission over but
rather appropriated it for his own use. It turns out Yangco had
already removed Collantes as his agent before Rallos sent the
tobacco leaf. Rallos didnt know Collantes was no longer Yangcos
agent and Yangco never gave any notice of the terminations agency.
Rallos demanded payment from Yangco but the latter refused arguing
Collantes acted in his personal capacity. Issue Is Yangco liable?
Held Yes. Yangco advertised the fact Collantes was his agent and it
was Yangcos duty to give due notice to Rallos of the agencys
termination. Failing to give notice, Yangco is responsible for any
goods delivered in good faith to Collantes as Yangcos agent without
knowledge of the agencys termination.
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Litonjua vs Fernandez Facts 2 brokers offered to sell to
Litonjua Property X. Respondents Fernandez and Eleosida represented
Property Xs owners. The respondents authorized the brokers to offer
the property for sale. Afterwards, Litonjua met with Fernandez and
the 2 brokers where they agreed Litonjua would buy Property X and
set a date to finalize the sale. The date for the sale passed and
Litonjua asked Fernandez to execute the deed of sale and Property X
be turned over to him. Fernandez refused saying the sale will no
longer push through because of alleged tenants that appeared on
Property X and causing problems. Litonjua filed a case for specific
performance and damages against Fernandez and Property Xs owners.
Issue Does Fernandez have authority to sell Property X? Held No.
The Civil Code provides that a special power of attorney is
necessary to enter into any contract involving immovable property
or real rights. Any sale of real property by one purporting to be
the registered owners agent must show his authority in writing
otherwise the sale is null and void. The agents declarations alone
are generally insufficient to establish his authority. In this
case, theres no documentary evidence to show Property Xs owners
specifically authorized Fernandez to sell Property X to Litonjua.
Fernandez specifically denied authority to sell Property X. The
purported letter Fernandez sent Litonjua representing herself to
have authority do so is signed by Fernandez alone. Further,
Property Xs owners never ratified any of Fernandezs actions.
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Spouses Aggabao vs Parulan Jr. Facts Real Estate Broker Atanacio
offered to sell Land X and Land Y, owned by Elena and Parulan Jr,
to the Spouses Aggabao. The Spouses Aggabao met with Elena, the
properties co-owner, where they discussed the sale and payment
terms. Elena presented a document to the spouses stating Elena was
authorized to sell on her husband's behalf. Afterwards, Spouses
Aggabao paid Elena as promised and received a TCT for Land X. Elena
failed to turn over the duplicate owners copy of the TCT over Land
Y. It turns out the duplicate copy was with Parulan, Parulan Jrs
brother. Parulan demanded money in exchange for the duplicate copy
over Land Y. Spouses Aggabao refused and when Parulan again
demanded payment the Spouses Aggabao explained they already fully
paid Elena. Parulan Jr then filed a case to declare the sale void.
Issue Is the sale valid? Held No. The power of administration
doesnt include acts of disposition or encumbrance, which are acts
of strict ownership. An authority to dispose cant proceed from an
authority to administer, and vice versa, for the 2 powers many only
be exercised by an agent following the provisions of agency in the
Civil Code. In this case, Parulans authority, as special agency,
was limited to selling the property, which didnt include the power
of administration. The sale is void because Parulan Jr, as co-owner
in a conjugal property, never gave his consent. If the Spouses had
taken the time to verify the document Elena based her authority on,
they would've found out the same was fake and Elena and her husband
were already estranged.
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Dominion Insurance Corp. vs CA Facts Respondent Guevarra,
Dominion Insurance Corps manager, filed a case to recover money
which he claimed to have advanced in his capacity as manager to
satisfy claims filed by Dominion Insurances clients. Issue Did
Guevarra act within his authority as Dominion Insurance Corps
agent? Held No. A general power of agency permits the agent to do
all acts for which the law doesnt require a special power. One such
instance where a special power of attorney is required is to make
such payments as are not usually considered as acts of
administration, In this case, Dominion Insurance and Guevarra
entered into a principal-agent relationship evidenced by the
document Special Power of Attorney. However, despite the word
Special in the documents title, the contents reveal a general
agency. The agency comprises all the principals business but is
couched in general terms limited only to acts of administration.
Payment of insurance claims isnt an act of administration and
consequently requires a special power of attorney. Guevarra had
authority to pay only very specific insurance claims and even then
from a specific fund in his possession. Guevarra acted outside the
scope of his authority and therefore the principal isnt liable.
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Veloso vs CA Facts Veloso owns Land X with title registered in
his name. Afterwards, Velosos wife sold Land X to respondent
Escario, supported by a general power-of-attorney and deed of
absolute sale without Velosos knowledge. Veloso found out when he
discovered his title was cancelled and a new one issued in Escarios
name. Veloso filed a case to recover Land X. Veloso alleged in
court that hes the absolute owner of Land X and he never authorized
anybody, not even his wife, to sell it. Veloso denied ever having
executed a power-of-attorney in his wifes favor. Issue Was there a
valid sale of Land X? Held Yes. A special power-of-attorney can be
included in the general power when the act or transaction for which
the special power is required is specified therein. In this case,
the records show the assailed power-of-attorney was valid and
regular on its face. It was notarized and therefore carries
evidentiary weight. Further, there was no need to execute a
separate and special power-of-attorney because the general
power-of-attorney expressly authorized the agent to sell Land
X.
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Pineda vs CA Facts PMSI availed of life insurance from Insular
Life for its employees. Afterwards, some of PMSIs employees died at
sea when its ship sank. Pineda, one of the dead employees relative,
sought death benefits from the Government and PMSI assisted him.
PMSI made Pineda execute a special power-of-attorney authorizing
PMSI Capt. Nuval to follow up, ask, demand, collect and receive on
Pinedas behalf money due him relative to the ships sinking.
Afterwards, PMSI claimed from Insular Life on Pinedas behalf. Among
the documents PMSI submitted to Insular Life to process the claim
included the special power-of-attorney Pineda executed. Insular
Life released money pursuant to the insurance on the basis of these
documents. PMSI then deposited the money in Nuvals account.
Afterwards, Pineda discovered he was entitled to benefits under
Insular Life and demanded these benefits but Insular Life refused
arguing the money was already released to PMSI. Issue Did the
special power-of-attorney authorize Nuval to claim benefits from
Insular Life in Pinedas behalf? Held No. The special
power-of-attorney doesnt contain in unequivocal and clear terms
authority to Nuval to obtain from Insular Life insurance proceeds
arising from the insureds death. A special-power-of-attorney must
be strictly construed. The document is couched in terms which would
easily arouse an ordinary man suspicion because it deviated from
Insular Lifes standard practice. Further, it cant even be
considered a general power-of-attorney because theres no intent to
grant such power or constitute a universal agency. In a group
insurance policy, the employer acts as the insurance companys
agent. In this case, PMSI, through Nuval, was Insular Lifes
agent.
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19
Home Insurance Co. vs USL Facts A USL-owned ship arrived in
Manila discharging its cargo to the custody of the Bureau of
Customs as arrastre operator. The cargo was consigned to Burroughs
Limited but when Burroughs received the cargo some parts of the
cargo were damaged. Home Insurance paid Burroughs the cost of
damages and demanded payment from USL and the Bureau of Customs.
Both refused to pay. Home Insurance filed a case in court but the
latter dismissed because only Home Insurances attorney appeared at
the pre-trial. Issue Was the dismissal proper? Held Yes. The Rules
of Court provide the court can direct the parties and their
attorneys to appear before it for a conference (pre-trial). The
rules purpose is to possibly reach a compromise among the parties.
The court has the discretion to dismiss the case if the plaintiff
fails to appear at the pre-trial. In this case, Home Insurance
failed to appear at the pre-trial. True, Home Insurances attorney
asserted he was given verbal authority to enter into a compromise.
However, the rules require a special authority for an attorney to
compromise on his clients behalf. Such authority doesnt need to be
in writing but must be duly established by evidence. Authority to
compromise cant be presumed. The attorneys self-serving assertion
doesnt prove such authority.
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20
Estate of Lina Olaguer vs Ongjoco Facts When Lino Olaguer died,
Olivia and Eduardo became administrators. Olivia and Eduardo sold
the properties to Bacani. Bacani then sold the properties back to
Olivia and Eduardo. Olivia and Eduardo then sold the properties to
Estanislao. Estanislao then sold them to Jose Olaguer. Jose then
sold them to his son, Virgilio. Under an alleged general power of
attorney, Jose sold the lots 1 & 2 to Ongjoco. Jose sold the
other lots to Ongoco as well, also through an alleged general power
of attorney. The lots were sold twice evidenced by 2 deeds of sale
but still to Ongjoco. The heirs of the estate of Lina Olaguer are
claiming the sale is void and the properties should be returned to
the estate. Issue Was Ongjoco an innocent purchaser for value? Held
Partly. When the sale of a piece of land or any interest therein is
made through an agent, the latters authority shall be in writing,
otherwise the sale is void. A special power-of-attorney is
necessary in order for an agent to enter into a contract where
ownership of an immovable property is transmitted or acquired,
either gratuitously or for valuable consideration. Even if a
document is designated as a general power-of-attorney, the
requirement of a special power-of-attorney is met provided the act
that requires the special power-of-attorney is specified therein.
In this case, as to Property X and Y the Torrens title for these
properties were in Virgilios name. Ongjoco failed to produce the
power-of-attorney Virgilio purportedly issued in Jose Olaguers
favor on the sale of said properties. However, as to the rest of
the properties Ongjoco was able to present a general
power-of-attorney Virgilio executed. While the law requires a
special power-of-attorney, the general power-of-attorney was
sufficient because it expressly authorized Jose Olaguer to sell
said properties.
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21
City Lite Realty Inc. vs CA Facts F.P. Holdings is the
registered owner of the Violago Property and offered it for sale to
the general public. F.P. Holdings sought respondent Roy of Metro
Drugs help in finding buyers. Roy sent the sales brochure and
pertinent documents to real estate broker Mamaril who in turn
passed them to City Lite. City Lite met with Roy to tell him it
wanted to purchase the front lot of Violago Property. City Lite,
Mamaril, and Roy met together to negotiate the sale and finally
reached an agreement. Roy agreed to sell the Violago Propertys
front portion to City Lite after City Lite submits its formal
acceptance of the sale and its terms, which City Lite did so.
However, F.P. Holding refused to execute the deed of sale despite
repeated demands from City Lite. City Lite had an adverse claim
annotated on Violago Propertys certificate of title. Then, City
Lite instituted a complaint against F.P. Holdings. During the
complaints pendency, the property was transferred to defendant
Viewmaster Corp. Issue Can F.P. Holdings be forced to sell the
Violago Propertys front portion? Held No. The Civil Code provides
that when a sale of a piece of land or any interest therein is
through an agent, the latters authority shall be in writing
otherwise the sale is void. In this case, Metro Drugs assistance
was limited to looking for buyers for the Violago Property and
endorsing such buyers to F.P. Holdings. The final evaluation,
appraisal, and acceptance of any sale remained with F.P. Holdings.
Roy and Metro drug were mere contact persons with no authority to
sell the Violago Property. For lack of written authority, the sale
City Lite concluded with Roy is void.
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22
Pineda vs CA Facts Pineda owns Property X in California while
respondent Banez owns Property Y in White Plains. Pineda and Banez
agreed to exchange properties after the parties have cleared the
mortgages on their respective properties. The exchange agreement
failed because Pineda failed to clear the mortgage on the
California property. Afterwards, Banez found out his title to the
White Plains property was cancelled and a new one issued in Pinedas
favor. There was also a deed of sale in Pinedas favor. Pineda then
sold the property to Duque. Issue Did Duque validly acquire the
White Plains property? Held No. The Civil Code provides that in a
sale of a parcel of land or any interest therein made through an
agent, a special power of attorney is essential. The authority must
be in writing otherwise the sale is void. A special power of
attorney is necessary to enter into any contract where ownership of
an immovable is transmitted or acquired for valuable consideration.
In this case, Banez never authorized Pineda to sell the White
Plains property to Duque. Without authority in writing, Pinedas
sale of the property is void.
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23
Cosmic Lumber vs CA Facts Cosmic Lumber executed a Special Power
of Attorney in Paz Vilamil-Estradas favor. Paz, as Cosmic Lumbers
attorney-in-fact, then filed an ejectment suit against respondent
Perez to recover Property X. Afterwards, Paz and Perez entered into
a compromise agreement where Perez would just buy Property X. The
court approved the compromise agreement but it was never executed
because Cosmic Lumber failed to produce the needed owners duplicate
copy of title over Property X. Perez then filed a case to revive
judgement. Issue Is the compromise agreement valid? Held No. When
the sale of a piece of land or any interest thereon is through an
agent, the agents authority shall be in writing; otherwise the sale
shall be void. In this case, Pazs special power-of-attorney was
explicit and exclusionary and she was never granted authority to
sell Property X or any portion thereof. Such power cant be implied
from her authority to enter into a compromise agreement because
such agreement should protect Cosmic Lumbers right to physically
possess Property X. Pazs alienation of Property X cant be
considered protecting Cosmic Lumbers rights, more so when Paz sold
it at a loss. Without authority from Cosmic Lumber, Pazs sale of
Property X is void. Further, the general rule the principal is
charged with knowledge of his agents actions doesnt apply here.
Cosmic Lumber cant be expected to know of Pazs actions because she
was acting fraudulently. Its contrary to common sense to expect Paz
to inform Cosmic Lumber of her fraudulent actions. Excerpt from the
special power-of-attorney To initiate, institute and file any court
action for the ejectment of third persons and/or squatters of the
entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649,
for the said squatters to remove their houses and vacate the
premises in order that the corporation may take material possession
of the entire lot, and for this purpose, to appear at the pre-trial
conference and enter into any stipulation of facts and/or
compromise agreement so far as it shall protect the rights and
interest of the corporation in the aforementioned lots.
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24
Gutierrez Hermanos vs Orense Facts Orense owns Property X. Jose
Duran, Orenses nephew, sold Property X to Gutierrez by means of a
public instrument executed before a notary. The instrument allowed
the vendor to redeem Property X within 4 years from the time of
sale. Orense was allowed to occupy Property X through a contract of
lease. The redemption period expired but Orense refused to convey
Property X and furthermore stopped paying rent. Orense argues he
never gave Durant authority to sell Property X. Gutierrez then
filed a civil case against Duran and Orense to get Property X.
Gutierrez also filed a criminal case against Duran for estafa. In
both criminal and civil trial Orense testified he consented to
Durans selling of Property X to Gutierrez. Issue Was Durans sale
valid? Held Yes. Orenses testimony in both the criminal and civil
cases proved Orense gave his consent to Durans sale of Property X.
It follows Orense conferred verbal, or at least implied, power of
agency to Duran who accepted it by selling Property X. Even if
Durans authority to sell wasnt in writing, Orenses testimony
affirming he gave consent to the sale legally excuses the lack of
written authority, amounts to full ratification of Durans acts, and
produces the effects of an express power of agency. Further, even
if such consent was granted subsequent to the sale, Orense ratified
the sale through his testimony. Such sale would have been void but
Orenses testimony cured it of the defect of nullity.1
1 Under the Old Civil Code, a contract entered into in the name
of another without authority from the latter is void, unless
ratified by the person in whose name it was executed before the
other contracting party revokes it. Under the New Civil Code, the
contract wouldve been unenforceable and not void.
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25
Shoppers Paradise Realty vs Roque Facts Shoppers Paradise
entered into a 25-year lease contract with Felipe over Property X.
Property X was covered by a TCT in Felipes name. Simultaneously,
both parties likewise entered into an agreement to construct and
operate a commercial building complex on Property X. Afterwards,
Felipe died forcing Shoppers Paradise to negotiate with his heir,
respondent Roque. Negotiations broke down and Roque filed a case to
annul the contracts. Roque alleges hes Property Xs absolute owner
when Felipe donated it to him but the TCT remained in Felipes name.
The donation happened years before Felipe entered into the
contracts with Shoppers Paradise. Further alleged, Felipe had no
authority to enter in such contracts involving Property X because
he only had administration over it. Issue Are the contracts Felipe
entered into valid? Held No. An agent requires a special power of
attorney to lease any real property to another person for more than
1 year. A lease of property for more than 1 year is considered an
act of dominion, not merely administration. In this case, Felipe
wasnt Roques authorized agent to lease Property X because he had no
special power of attorney. Further, Shoppers Paradise knew Felipe
wasnt Property Xs true owner because the latter informed it of the
same.
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26
Vda. De Chua vs IAC Facts Defendant Herrera executed a 10-year
lease contract renewable for another 5 years over Property X in Ons
favor. The lease contract gave the lessee an option to buy the
leased property. On built a house on Property X and resided there.
4 years into the lease contract, On sold the house to plaintiff
Chua with Chua replacing On as lessee with Herreras consent. The
lease contract expired but Herreras alleged attorney-in-fact
renewed it for another 5 years with Chua. Afterwards, Herrera sold
Property X to respondent Sps. Go. Chua filed a case to annul the
sale alleging it violated her right of option to buy Property X as
provided in the contract of lease and the Sps. Go were in bad faith
because they knew Chuas right to buy Property X. Issue Is the
renewed contract of lease valid? Held No. The agent must be armed
with a special power-of-attorney when leasing real property to
another person for more than 1 year. In this case, Herreras
attorney-in-fact was never armed with a special power-of-attorney.
True, Herrera herself allowed Chua to occupy Property X after the
original lease contract expired and a tacit renewal is deemed to
have taken place. However, the tacit renewal is limited only to the
contracts terms that are germane to the lessees right to continued
enjoyment of the property and doesnt extend to alien matters, like
option to buy the leased premises.
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27
BA Finance vs CA Facts Respondent Sps. Cuady obtained from
Supercars a credit of P40 thousand to cover the cost of Car X. The
obligation was evidenced by a promissory note and to secure
compliance with the promissory note a chattel mortgage was also
constituted on Car X. Supercars then assigned the promissory note
and chattel mortgage to BA Finance. BA Finance also renewed Car Xs
insurance coverage when the Sps. Cuady failed to do so and under
the terms and conditions of said insurance coverage, the proceeds
shall be payable to BA Finance. Afterwards, Car X got into an
accident. Cuady wanted the car be declared a total loss under the
insurance coverage but BA Finance forced him to repair it. Not long
after, the car bogged down and Cuady again requested to have BA
Finance declare Car X as a total loss. BA Finance didnt respond
favorable and Cuady stopped paying the promissory note. BA Finance
filed a case to recover the amount of the note. Issue Has BA
Finance waived its right collect on the note by failing to enforce
the total loss provision in the insurance coverage? Held Yes. BA
Finance is bound by the terms and conditions of the chattel
mortgage when it accepted Supercars assignment. Under the deed of
chattel mortgage, BA Finance was made attorney-in-fact with full
authority and power to follow-up, prosecute, compromise or settle
insurance claims, to sign, execute and deliver documents to the
Insurance Company as may be necessary to prove the claim, and to
collect the insurance proceeds if Car X suffers any loss or damage.
Cuady in fact created in BA Finances favor an agency that BA
Finance was bound by its acceptance to carry out. Consequently, BA
Finance is liable for damages that Cuady may suffer through its
non-performance. In this case, Cuady suffered loss when BA Finance
stubbornly refused to enforce the insurance coverages total loss
provision.
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28
British Airways vs CA Facts Respondent Mahtani purchased a
ticket from British Airways going to India. Mahtani would board PAL
going to Hong Kong, and then British Airways going to India. When
Mahtani finally arrived in India, he discovered his luggage was
missing. Mahtani waited a week for his lugge until British Airways
advised him to file a claim. Afterwards, back in the Philippines
Mahtani filed a complaint for damages against British Airways.
British Airways claims it is PAL who should be liable because the
PAL plane arrived late resulting in the missing luggage. Issue Is
British Airways liable to Mahtani? Is PAL liable to British
Airways? Held Yes & Yes. Carriage by plane although performed
by successive carriers is regarded as a single operation and the
carrier issuing the passengers ticker is considered the principal
party and the other carriers merely agents. In this case, the
contract of air transportation was exclusively between Mahtani and
British Airways with PAL acting as British Airways agent. PAL acted
as British Airways agent in transporting Mahtani from Manila to
Hong Kong. British Airways is liable to Mahtani but PAL is liable
to British Airways for its negligence in the performance of its
function and is liable for damages that the principal may suffer by
reason of such negligence. PAL was negligent in failing to arrive
in Hong Kong on time and transfer Mahtanis luggage to his flight
going to India.
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29
Pacific Rehouse Corp. vs EIB Securities Inc. Facts Pacific Corp
bought KPP and DMCI shares from the PSE through its broker, EIB
Securities. Afterwards, Pacific Corp and EIB Securities agreed to
sell the KPP shares without a buy back option. Afterwards, EIB
Securities sold the DMCI shares at a substantial loss without
Pacific Corps knowledge and consent and used the proceeds to buy
back the KPP shares. EIB bought back the KPP shares because it made
an unauthorized promise to buy back said KPP shares. Upon finding
out, Pacific Corp. demanded EIB Securities return the DMCI shares
but the latter couldnt comply because it already sold said DMCI
shares. Issue Did EIB Securities have authority to sell the DMCI
shares and use the proceeds to buy back the KPP shares? Held No. An
agent must act within the scope of his authority. The agent is
granted the right to affect his principals legal relations by
performing acts done in accordance with the principals consent. In
this case, Pacific Corp never consented to EIBs sale of the DMCI
shares. EIBs right as Pacific Corps agent to sell or dispose
Pacific Corps properties is confined to paying the obligations and
liabilities Pacific Corp may have to EIB and none other. Thus, when
EIB sold the DMCI shares to buy back the KKP shares, it paid
Pacific Corps obligation to a 3rd party and hence was beyond EIBs
authority. Consequently such sale is void.
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30
Cervantes vs CA Facts Respondent Philippine Air Lines issued to
Cervantes a round trip ticket for Manila-Honolulu-Los
Angeles-Honolulu-Manila pursuant to a compromise agreement between
the 2 parties in another case. The ticket would expire 1-year from
its issuance. Cervantes used the ticket 4 days before it expired
and arrived in Los Angeles. Cervantes then booked his return
flight, which was already past the 1-year expiration period.
Cervantes later learned his return PAL plane would stopover in San
Francisco and he made arrangements with PAL to board his flight in
San Francisco instead of Los Angeles. At San Francisco, Cervantes
wasnt allowed to board and PAL marked his ticket as expired.
Cervantes then filed a complaint against PAL. Issue Did the PAL
agents in confirming the ticket extend its period of validity? Held
No. An agent who acts beyond the scope of his authority doesnt bind
the principal, unless the latter ratifies the same expressly or
impliedly. Further, when the 3rd person knows the agent was acting
beyond his authority, the principal cant be held liable for the
agents acts. The 3rd person is to blame and is not entitled to
recover damages from the agent, unless the latter undertook to
secure the principals ratification. In this case, Cervantes knew
his ticket would expire before he returned to the Philippines.
Also, he knew beforehand that he needed to file a written request
for extension to PAL to extend the validity of his ticket. The PAL
agents didnt know about the compromise agreement and acted without
authority when they confirmed Cervantes return flight.
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31
Borja Sr. vs Sulyap Inc. Facts Borja leased Property X to Sulyap
Inc. Pursuant to the lease contract; Sulyap Inc. paid advance
rentals, dues, and deposits. When the lease contract expired,
Sulyap demanded the return of the advance payments it made. Borja
refused causing Sulyap to file a case in court. Afterwards, the
parties entered into a Compromise Agreement that the court
approved. However, Borja failed to fulfill his duty under the
Agreement and Sulyap filed a motion to enforce the Agreements
penalty clause. Borja challenged the motion twice and in his 2nd
challenge he argued there was fraud in the Agreements execution.
Borja argued 3 sets of Compromise Agreements were submitted for his
approval. He signed the Agreement without the penalty clause but
his former counsel removed the page containing his signature and
attached it to another Agreement. Issue Is Borja bound by the
penalty clause in the Agreement? Held Yes. Borja had several
opportunities to raise the issue of the penalty clauses fraudulent
inclusion. The 1st was when the court rendered judgement dismissing
the case pursuant to the Agreement which was reproduced in full in
said judgement. The second was when he 1st opposed Sulyaps motion
to enforce the penalty clause. In this case, even assuming Borjas
counsel exceeded his authority in inserting the penalty clause, the
status of said clause was voidable, not void. Borjas failure to
question the penalty clauses inclusion despite several
opportunities to do so was tantamount to ratification.
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32
Gozun vs Mercado Facts Gozun owns a printing shop. Mercado ran
for governor in Pampanga and Gozun submitted to Mercado sample
campaign materials. Mercados wife told Gozun Mercado already
approved the samples and Gozun should start printing the campaign
materials. Gozun printed and delivered the campaign materials to
Mercado. Afterwards, Lilian, Mercados sister-in-law, obtained a
loan from Gozun allegedly for the poll-watchers allowance. Later,
Gozun demanded payment from Mercado but the latter failed to pay in
full. Gozun then filed a case to enforce payment. Issue Was Lilian
authorized to obtain a loan from Gozun? Held No. A special power of
attorney is necessary for agent to borrow money unless it is urgent
and indispensable for the preservation of the things that are under
administration. The special power-of-attorney refers to the
authorizations nature and not to its form. A special
power-of-attorney doesnt need to be in writing provided its duly
established by evidence. In this case, Gozuns testimony failed to
establish Lilian obtained the loan on Mercados behalf. Further,
Gozuns receipt of the loan indicates Lilian received the money but
it neither specified what reason the loan was obtained nor in what
capacity Lilian received the money. Also, Lilian alone signed the
receipt.
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33
Sazon vs Vasquez-Menancio Facts Respondent Vasquez-Menancio is a
resident of the US and she entrusted the management,
administration, care and preservation of her properties to Sazon.
Vasquez avers the properties are productive and Sazon as
administrator collected and received all the fruits and income
accruing therefrom. She further alleges Sazon never rendered a full
accounting of such fruits and income derived from the properties
but instead applied them for her own use and benefit. Consequently,
Vasquez revoked Sazons authority as administrator and demanded the
latter return the possession and administration of the properties.
Vasquez also made repeated demands upon Sazon to render and
accounting and remit the fruits. Sazon denied all of Vasquez
allegations forcing Vasquez to file a case before the RTC. Issue
Did Sazon fail to render accounting and return the fruits and
incomes of the property under her administration? Held Yes. First,
Sazon cant turn over possession of all the properties because some
have been leased. Meanwhile, other properties have already been
sold to 3rd persons. Both the lease agreements and sales are valid
because Sazon was acting within her authority as Vasquez agent.
However, Sazon can still return administration over the remaining
properties including the leased ones. On the accounting issue, the
reason behind Sazons failure to render accounting is immaterial.
Whats important is Sazon failed to fulfill her duty to render
accounting of the transactions she entered into as Vasquez agent.
Sazons claims she sent letters to Vasquez to comply with her
obligation to render accounting. Such claim is insufficient because
Sazon was administrator for 18 years and 4 letters within 18 years
can hardly be considered as sufficient to keep Vasquez informed and
updated of her properties condition. As to the fruits and incomes,
the Civil Code states every agent is bound to deliver the principal
whatever the former may have received by virtue of the agency, even
though the amount may not be owed to the principal. In this case,
the evidence shows the properties under Sazons administration
generated fruits and income but Sazon failed to turn them over.
However, theres insufficient evidence to show how much income the
properties actually generated and how much expenses Sazon incurred
administering said properties. The Court now orders both parties to
present evidence as to:
1. The total income generated by the properties 2. The total
expenses Sazon incurred that should be borne by Vasquez as owner of
the
properties.
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34
Hernandez vs Hernandez Facts Cornelia Hernandez (petitioner) is
a co-owner of a piece of property the DPWH wants to buy. DPWH
negotiated with the 3 co-owners but it broke down and DPWH was
forced to file an expropriation case. Later, the co-owners executed
a letter appointing Cecilio Hernandez (respondent) as their
representative and fixing his compensation for such job. The
expropriation proceedings continued with the judge appointing
Cecilio as one of the commissioners to determine just compensation.
Afterwards, the co-owner executed an irrevocable special power of
attorney appointing Cecilio as their true and lawful attorney with
respect to the expropriation of the property. The expropriation
proceedings concluded with the co-owners being entitled to P21
million in just compensation. Later, Cornelia revoked Cecilios SPA
and moved to withdraw her share in the just compensation worth P7
million. The judge granted Cornelias motion and released the entire
P21 million to Cecilio. Afterwards, Cecilio sent Cornelia a check
for P1.1 million accompanied by a Receipt and Quitclaim document.
The Quitclaim documents states
1. The check represents Cornelias share of the just compensation
2. Cecilio is forever discharged from any action, damages, claims,
or demands 3. Cornelia wont institute any action and pursue her
opposition to release of the P21 million to
Cecilio. Cornelia accepted the check because she badly needed
the money. A few days later, Cornelia got hold of the judges
decision and found out she was entitled to P7 million and demanded
an accounting of the proceeds from Cecilio. Cecilio didnt reply and
so Cornelia filed a case to annul the Quitclaim and recover her
share in the just compensation. Issue Is Cecilio entitled to his
share of the compensation in the just compensation? Held No. In
this case, under the compensation scheme that the co-owners
approved, Cecilio would obtain 83% of the just compensation due to
Cornelia as co-owner. This is because Cecilio is allowed to obtain
the excess of anything beyond P300 per square meter. The judge
pegged just compensation at P1500 per square meter, the reason
being the propertys value skyrocketed during the proceedings.
Cornelia asked for an accounting of the just compensation from
Cecilio several times, but the request remained unheeded. Until
that point, Cecilio violated the fiduciary relationship of an agent
and a principal. Instead of an accounting, Cornelia received a
receipt and quitclaim document ready for signing. Cecilio didnt
disclose the truth as to Cornelias share in the just compensation
and consequently the Quitclaim document is fraudulent. Further, the
compensation scheme that the co-owners approved is also vitiated by
mistake. Further, Cecilio cant claim any authority to collect
payment from the just compensation based on the SPA the co-owners
executed. Because Cecilio was appointed as commissioner and
proceeded to perform the duties of a commissioner until he
completed his mandate. He created a barrier that preventing him
from performing his duties under the SPA. Cecilio couldnt have been
a hearing officer as commissioner and defendant as agent for the
co-owners at the same time. Cecilio is entitled only to be
compensated for his services as commissioner.
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35
Escueta vs Lim Facts Respondent Rufina Lim filed an action to
quiet title to real property with preliminary injunction and
issuance of an HDO against petitioner Rubio. Rufina alleges she
bought land from Rubio and heirs of Luz Baloloy. That she made a
downpayment as earnest money with an agreement the remaining
balance of the purchase price would be paid once the sellers turn
over the Certificate of Title. However, both Ignacio and the heirs
refused to deliver the Certificate of Title even if she was willing
to pay. Further, Ignacio made a simulate sale in Escuetas favor
despite the former knowing of the sale to Rufina. For Ignacio, he
denies the allegations arguing he never entered into a contract of
sale with Rufina. He argues he appointed his daughter, Llamas, as
his attorney-in-fact and not Virginia Lim who was the one who
represented him in the sale with Rufina. Further, he alleges the
downpayment was actually a loan with Rufina. Issue Is the Contract
of Sale between Rufina and Ignacio valid? Held Yes. The Civil Code
allows an agent to appoint a substitute if the principal hasnt
prohibited him from doing so; but he shall be responsible for the
substitutes acts if he wasnt given the power to appoint one. In
this case, Ignacio executed a special power of attorney in Llamas
favor who in turn appointed Virginia as her substitute. Llamas was
acting within her authority in appointing Virginia but she will be
responsible for Virginias acts. Among these is Virginias sale of
the property to Rufina. Further, even if Virginia had no authority
to sell the property, the contract she executed was unenforceable
and not void pursuant to Art. 1317. Ignacios acceptance of part of
the purchase price constitutes ratification of the contract of
sale. Similarly, the heirs have also ratified the sale in accepting
part of the purchase price.2
2 If Virginia had no authority, it would be void and not subject
to ratification because in the sale of real property or any
interest therein through an agent, the latters authority shall be
in writing otherwise the sale is void.
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36
Serona vs CA Facts Quilatan delivered jewelry to Serona to be
sold on commission basis. The parties agreed Serona will remit
payment or return the unsold jewelry within 30 days from receipt of
the item. Serona failed to pay or return the jewelry after 30 days.
Quilatan then required Serona to execute an acknowledgement receipt
indicating their previous agreement and the amount due. Serona and
a witness, Navarette, signed the receipt. Unknown to Quilatan,
Serona entrusted the jewelry to Labrador to sell on commission
basis. Serona failed to collect from Labrador causing the former to
fail to pay her obligation to Quilatan. Quilatan then filed a case
for estafa against Serona. Issue Is Serona guilty of estafa? Held
No. Missing is the element of misappropriation or conversion of
such money or property by the offender or denial on his part of
such receipt. Serano didnt ipso facto commit the crime of estafa by
delivering the jewelry to a sub-agent for sale on commission basis.
An agent is allowed to appoint a sub-agent in the absence of an
express agreement to the contrary between the agent and principal.
In this case, Serano was neither expressly prohibited from
appointing Labrador as her sub-agent nor passing on the jewelry to
a 3rd person. Serano passed along the jewelry to Labrador for the
very same purpose she received it. Consequently, there was no
conversion because the jewelry wasnt devoted to a purpose different
from that agreed upon. Also, Serano didnt dispose of the jewelry
without right because she was within her rights to appoint a
sub-agent and to give the jewelry to the sub-agent for selling.
However, Serano is responsible for Labradors actions as her
sub-agent and consequently is civilly liable to Quilatan for the
value of the jewelry.
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37
Municipal Council of Iloilo vs Evangelista Facts Toco owns a
piece of land that the Municipality of Iloilo took to widen a
public street. Toco then filed a civil case against the
Municipality of Iloilo to recover the value of land. The Iloilo CFI
ordered the Municipality to pay Toco P42 thousand. At the hearing
for the claims the following persons appeared: Evangelista,
Soriano, PNB, and Mauricio Cruz & Co. Evangelista is claiming
professional fees for services he rendered in the civil case.
Soriano is claiming on the strength of Tiongs assignment to him of
part of Tocos rights to the judgement in the case, Tiong was Tocos
attorney-in-fact. PNB is claiming the amount of the judgement
because the disputed land was actually mortgaged to it. The
municipality then paid P6 thousand each to Soriano and Evangelista.
The rest of the amount was turned over to PNB. Issue Was Tiongs
assignment of credits, rights, and interests due to Toco in the
civil case valid? Held Yes. In this case, Tiong was authorized to
employ the services of lawyers upon such conditions as he may deem
convenient to take charge of any actions necessary for his
principals interest, and to defend suits brought against her. This
power necessarily implies the authority to pay for the professional
services thus engaged. Tiong assignment in Sorianos favor was
payment for professional services rendered in other cases in Tocos
interests, such assignment taken from the judgement amount due in
the instant civil case. Concerning the failure of Tocos other
attorney-in-fact, Montano, to consent to the assignment in Sorianos
favor, the same doesnt affect the assignment. Montano was also
authorized to pay, in the principals name and behalf, all her
debts, claims, and encumbrances on her property. The very fact that
different letters of attorney were given to each of them shows it
wasnt the principals intention they should act jointly in order to
make their acts valid. Further, Toco knew of such assignment but
continued employing Soriano to represent her. Consequently, an
agent empowered to pay the principals debt, and to employ lawyers
to defend the latters interests, is impliedly empowered to pay the
lawyers fees for services rendered in the principals interests, and
may satisfy them by assigning judgement rendered in the principals
favor. Further, when a person appoints 2 attorneys-in-fact
independently, the consent of one wont be required to validate the
others acts unless that appears positively to have been the
principals intention.
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38
Smith Bell vs CA Facts Chua bought and imported to the
Philippines 50 metric tons of Dicalcium Phospate. These were
shipped from Taiwan on board the ship S.S. Golden Wealth bound for
Manila. First Insurance Co insured the shipment against all risks
at port of departure. Smith Bell was stamped at the lower left side
of the policy as Claim Agent. The cargo arrived in Manila and the
cargo was discharged to the local arrastre operator, Metroport
Services Inc. Some of the cargo was in bad condition with some
damaged and contents partly empty. Chua then filed before Smith
Bell a formal claim for the value of the loss. Smith Bell conveyed
the claim to First Insurance Co. but the latter offered only 50% of
the claim. Chua didnt accept the offer and filed a case to enforce
payment. Smith Bell denied any liability arguing its a mere claim
agent of First Insurance Co. and as agent; it isnt personally
liable under the policy. Issue Can a claim agent of a disclosed
principal be held solidarily liable with said principal under the
principals marine cargo insurance policy given the agent isnt a
party to the insurance contract? Held No. An adjustment and
settlement agents function doesnt include personal liability. His
function is merely to settle and adjust claims in his principals
behalf if those claims are proven and undisputed. If the principal
disapproves the claim, the agent doesnt assume any personal
liability. Further, Smith Bells only participation in the contract
is limited to having its name stamped at the bottom left portion of
the policy as Claim Agent. Smith Bell isnt a real party-in-interest
being a mere agent. Also, theres no proof Smith Bell is First
Insurances resident agent. Even if theres proof, a resident agent
is tasked only to receive legal processes on its principals behalf
and not to answer personally for insurance claims.
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39
Chemphil Export vs CA Facts Dynetics and Antonio Garcia filed a
complaint before the RTC against the consortium (a collection of
banks) regarding a surety agreement Dynetics and Garcia entered
into with the consortium. The complaint seeks to prevent the
consortium from enforcing any obligation Dynetics and Garcia may
have under the surety agreement. Meanwhile, Dynetics and Garcia
also filed a similar complaint before the RTC against Security
Bank. The RTC in both cases issued a writ of garnishment against
Garcias Chemphil shares, but the writ was issued first in the
Security Bank case. Later, the consortium and Garcia entered into a
compromise agreement with the former agreeing to limit Garcias debt
to P145 million immediately demandable. Later, Garcia sold his
Chemphil shares to Ferro Chemicals with the understanding part of
the purchase price will be paid to Security Bank. Ferro Chemicals
then assigned the shares to CEIC. Meanwhile, Garcia failed to
comply with the Compromise Agreement and so the consortium filed a
motion for execution that the RTC granted. Among Garcias properties
levied upon on execution were his Chemphil shares. The consortium
acquired Garcias shares at the public auction. The RTC ordered
Chemphil to register the shares in the consortiums name. This
caused CEIC to intervene in the case on the grounds its the shares
rightful owner. The trial court then revoked its earlier order
transferring the shares to the consortium. Later, the consortium,
except for PCIB, assigned all its rights and interest to the shares
to Gonzales. The case now centers on who is the shares rightful
owner; CEIC or PCIB and Gonzales? Issue Was CEIC subrogated to the
rights of Security Bank against Garcia and acquired the latters
attachment to the disputed shares? Held No. CEIC traces its claim
over the disputed shares to the attachment claim the RTC issued in
Security Banks favor against Garcia. It argues that when FCI paid
Security Bank the obligations due to Garcia, FCI was subrogated to
Security Banks rights. In turn, CEIC was subrogated to FCIs rights
by virtue of FCIs assignment in its favor. Further, Security Banks
attachment is superior to the consortiums because it was issued
first and duly recorded in Chemphils books, unlike the consortiums.
However, the facts show FCI is a mere agent because it paid
Security Bank with Garcias own money. Payment was to be taken from
the purchase price that FCI owed Garcia by virtue of the sale over
the Chemphil shares. Its as if Garcia paid Security Bank himself
but through an agent, namely FCI. FCI then cant be considered a 3rd
party payor for purposes of legal subrogation. Further, FCI isnt a
disinterested party as required by legal subrogation because the
benefits of the extinguishment would redound to its benefit.
Payment would result in Security Bank no longer having any claim to
the Chemphil shares; FCI would then have a clean slate to the
titles. Consequently, CEIC wasnt subrogated to Security Banks
rights against Garcia and didnt acquire the latters attachment over
the disputed shares.
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40
Uy vs CA Facts Petitioners Uy and Roxas are agents authorized to
sell 8 parcels of land by the owners thereof. The petitioners then
offered to sell the lands to the NHA to be used for a housing
project. The NHA agreed to buy the 8 parcels of land. However, NHA
only paid for 5 out of 8 parcels of lands because the DENR reported
the 3 unpaid lands were at an active landslide area and not
suitable for a housing project. The NHA then cancelled the sale
over the 3 parcels of land and offered P1 million to the landowners
as danos perjuicios. The petitioners then filed before the RTC a
complaint for damages against NHA and its general manager. Issue Do
petitioners possess the right to seek damages? Held No. Every
action must be prosecuted and defended in the name of the real
party-in-interest. The real party-in-interest is the party who
stands to be benefited or injured by the judgement or the party
entitled to the avails of the suit. The party, who by substantive
law, has the right sought to be enforced. In this case, petitioners
arent parties to the contract of sale between the principals and
the NHA. They are mere agents and their rendering of service didnt
make them parties to the contracts of sale executed in the
principals behalf. The real parties-in-interest in an action upon
the contract are the parties to the contract. Further, petitioners
arent assignees to the rights under the contract of sale. The
petitioners havent established any 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. Otherwise, the agents couldve brought an
action on the contract as assignee of such contract. Also, theres
no stipulation pour autrui benefitting petitioners. Consequently,
petitioners arent real parties-in-interest.
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41
Angeles vs PNR Facts PNR informed Romualdez that it has accepted
the latters offer to buy on an As is, Where is basis the PNRs scrap
rails located in Del Carmen and Lubao respectively for a total
amount of P96 thousand. Romualdez then addressed a letter
authorizing Angeles to withdraw the scrap rails to PNRs acting
purchasing agent. Later, Angeles requested PNR to transfer the
location of withdrawal because the scrap rails located in the
original areas werent ready for hauling. The PNR granted the
request and chose another location. However, the PNR subsequently
suspended the withdrawal because of documentary discrepancies
coupled by pilferages in the new locations. Consequently, Angeles
demanded a refund in the amount of P96 thousand but PNR refused to
pay alleging the Angeles already withdrew scrap rails worth P114
thousand. Angeles then filed suit against PNR for specific
performance and damages. Issue Did the letter Romualdez sent to PNR
designate Angeles as mere agent or as assignee of Romualdezs
interest in the scrap rails? Held Agent. Normally, an agent has
neither rights nor liabilities against 3rd parties to a contract
because only the parties to the contract may violate a contract;
the real party-in-interest is generally a contracting party.
However, the legal situation is different where an agent is
constituted as an assignee. In such case, the agent may in his own
behalf sue on a contract made for his principal as an assignee of
such contract. A person who has a right assigned to him is a real
party-in-interest and can maintain an action upon such right. In
this case, Angeles was constituted as a mere agent and not
assignee. The mere fact the letter doesnt contain the words agent
or attorney-infact doesnt matter because other terms are used to
designate the parties in an agency, such as representative.
Further, the letter used the verb authorized indicating Romualdez
intention to limit Angeles role as agent. Also, the letters 2nd
paragraph was qualified by the phrase For this reason which
reinforces the idea that Angeles is a mere agent. Further, Angles
own actions after the letter was sent confirm the agency. She
referred to herself as an authorized representative and signed
receipts indicating she was doing so in a representative capacity.
Consequently, the letter is a power of attorney that merely
authorized Angeles to withdraw the scrap rails and didnt allow her
to sue in her own name in the contract. Excerpt from the letter:
This is to inform you as President of San Juanico Enterprises, that
I have authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon
St., Sta. Cruz, Manila, to be my lawful representative in the
withdrawal of the scrap/unserviceable rails awarded to me. For this
reason, I have given her the ORIGINAL COPY of the AWARD, dated May
5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate
my waiver of rights, interests and participation in favor of
LIZETTE R. WIJANCO.
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42
National Power Corporation vs NAMARCO Facts NPC and NAMARCO, as
representative of International Commodities Corp (IC), based in New
York, executed in Manila a contract with NPC purchasing from IC
sulfur for a total price of P450 thousand. Domestic Insurance
executed a performance bond worth P90 thousand in NPCs favor to
guarantee ICs obligation. NPC paid way of opening a letter of
credit and duly informed NAMARCo of such act. IC however wasnt able
to deliver the sulfur because there was no available ship causing
NPC to shut down its fertilizer plant. NPC rescinded the sale and
filed suit against IC, NAMARCO, and Domestic Insurance to recover
stipulated damages worth P360 thousand. Issue Is NAMARCO liable for
damages? Held Yes. In this case, NPCs invitation to bid clearly
stipulated that nonavailability of a steamer to transport sulfur
isnt a ground for non-payment of liquidated damages in case of the
sellers non-performance. NAMARCOs bid is even more explicit because
it guaranteed the availability of a steamer to ship the sulfur.
True, IC notified NAMARCO the sale was subject to a steamers
availability buy the latter didnt disclose such information to NPC
and, contrary to the principals instructions, agreed that
non-availability of a steamer wouldnt be an justification for
non-payment of damages. NAMARCO was even aware IC was having
trouble booking a steamer, and yet continued with the contract.
Consequently, NAMARCO acted beyond the scope of its authority by
violating ICs explicit instructions namely the sale being subject
to a steamers availability. In effect, NAMARCO was acting in its
own name and could be held liable as such. Further, NAMARCO is
liable for damages because the agent who exceeds the scope of his
authority without giving the party he contracts with sufficient
notice of his powers is personally liable to such party. The rule
that a person dealing with an agent must inquire into the scope of
the latters authority if the principal is to be held liable doesnt
apply in this case. Here, its the agent to be held liable and such
stipulation for damages is being enforced against the agent.
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43
BA Finance vs CA Facts Gebbs International applied for and was
granted a loan from respondent Traders Royal Bank in the amount of
P60 thousand. As security, Gaytano became a surety promising to pay
jointly and severally to Traders Royal Bank the loan. BA Finances
credit administrator, Wong, sent a letter to Traders Royal Bank
binding BA Finance as guarantor to the loan. Later, Gaytano failed
to pay the loan causing Traders Royal Bank to filed a case to
recover the loan against Gaytano and BA Finance. BA Finance argues
its credit administrator had no authority to bind it as guarantor.
Issue Is BA Finance liable as guarantor? Held No. A person dealing
with an agent is bound at his peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also
the agents authority. The burden of proof is on the person claiming
an agency exists and the agent acted within his authority. In this
case, Traders Royal only presented Wong to prove the agency that in
turn testified that he acted within his authority based on a
memorandum BA Finance gave to him on his lending authority.
Granting Wong was authorized to approve loans up to P350 thousand
without any security requirement, nothing in the memorandum
authorizes Wong to issue guarantees. The word contingent commitment
in the memorandum cant be held to mean guarantees. A power of
attorney shouldnt be inferred from vague or general words. Guaranty
isnt presumed; it must be express and cant extend beyond its
specified limits. Wong sole testimony he acted within his authority
in the absence of other proof shouldnt be given weight. More
likely, Wong is testifying to save himself from personal liability
for damages to Traders Royal considering he exceeded his authority.
An agent who exceeds his authority is personally liable for
damages.
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44
DBP vs CA Facts Respondent Dans applied for a P500 thousand loan
with DBP. DBP advised Dans, then 76 years old, to obtain a mortgage
redemption insurance with the DBP MRI pool. Later, DBP approved a
P300 thousand loan in Dans favor from which it deducted P1.5
thousand as insurance premium. Dans accomplished the MRI
application for Insurance and Health Statement for DBP MRI pool.
Later, DBP credited the DBP MRI pool with Dans MRI premium. Dans
then died of cardiac arrest and DBP notified the DBP MRI pool. The
DBP MRI pool then informed DBP that Dans wasnt eligible for MRI
coverage because he was over the accepted age limit of 60 when he
applied. DBP then apprised Dans family of Dans disapproved MRI
application. DBP offered to pay back the P1.5 thousand premium plus
P30 thousand as ex gratia settlement. Dans family refused DBPs
offer demanding the MRIs face value or an amount equivalent to the
loan. Later, Dans family filed a case before the RTC to collect the
amount demanded. Issue Is DBP liable to the Dans family? Held Yes,
An agent isnt personally liable to the party with whom he contracts
unless he expressly binds himself or exceeds the limit of his
authority without giving such party sufficient notice of his
powers. An agents liability who exceeds the scope of his authority
depends if the 3rd person is aware of the limits of the agents
powers. In dealing with Dans, DBP was acting both as lender and as
insurance agent. DBP compelled Dans to secure a DBP MRI pool
coverage instead of allowing Dans to look for his own insurer. DBP
released the loan deducting already the MRI premium and 4 days
later made Dans complete an MRI application form as well as a
health statement. The DBP then submitted both forms to the DBP MRI
pool. DBP made Dans believe he had already fulfilled all the
requirements for an MRI and the insurance policy was forthcoming.
Further, DBP had full knowledge Dans application would be denied
because they knew of the age limit and Dans age. DBP isnt
authorized to accept MRI applications when the application is over
60. Consequently, DBP exceeded the scope of its authority in
accepting Dans MRI application. Also, theres no showing Dans knew
of the limitation on DBPs authority to accept MRI applications. DBP
is liable to Dans for damages in making the latter believe the
former had authority to accept his MRI application.
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45
Eugenio vs CA Facts Eugenio was a dealer of soft drink products
of respondent Pepsi-Cola corp. She had a regular charge account in
both the Quezon City plant and Muntinlupa plant. Meanwhile, her
husband and co-petitioner used to be a route manager of Pepsi-Cola
corp. in the Quezon City plant. Later, Pepsi-Cola filed a complaint
for a sum of money against Eugenio and her husband for various
products and empties totaling P96 thousand because they failed to
pay despite repeated demands. In their defense, the petitioners
presented 4 trade provisional receipts (TPR) allegedly issued to
them from Pepsi-Colas route manager Estrada showing payments
totaling P80.5 thousand. The TPRs shouldve been credited in their
favor. However, Estrada denied issuing the TPRs. Issue Should the
amounts in the TPRs be credited in Eugenios favor? Held Yes.
Payment shall be made to the person in whose favor the obligation
has been constituted, or his successor-in-interest or any person
authorized to receive it. As far as third persons are concerned, an
act is deemed to have been performed within the scope of the
agent's authority, if such 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 his agent. In this case, Pepsi-Cola failed to prove
that Estrada, its duly authorized agent with respect to Eugenio,
didnt receive the amounts reflected in the TPRs from Eugenio. So
long as Pepsi-Colas customers are concerned, for as long as they
pay their obligations to Pepsi-Colas sales representative using the
official receipt, said payment extinguishes their obligations.
Pepsi-Cola itself admitted its the collectors, in this case
Estrada, responsibility to turn over the collection. Simply put,
Eugenio paid the right person, Pepsi-Colas agent, and if Pepsi-Cola
received the payment is no longer Eugenios problem. Payment should
be credited.
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