Agency Digests Complete

AGENCY DIGESTS ATTY. COCHINGYAN ALS2014B

ALS2014B 1 of 137

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Rallos v. Felix Go Chan & Sons Realty Corporation and Court of Appeals Doctrine:

• Agency is extinguished by the death of the principal or of the agent. However, if the agent acted without the knowledge of the death of the principal and the third person that contracted the agent himself acted in good faith, the sale is enforceable.

Facts:

Sisters Concepcion and Gerundia Rallos were registered co-owners of a parcel of land (Lot No. 5938) located in Cebu. They executed a special power of attorney in favor of their brother Simeon. They authorized Simeon to sell the lot in their behalf. Concepcion died.

After Concepcion’s death, Simeon sold the undivided shares to Felix Go Chan & Sons Realty Corporation (Felix Corp.) for P10,686.90. The old TCT was cancelled and a new one was created in the name of Felix Corp.

The administrator of the estate, Ramon Rallos, filed a complaint in the RTC. He prayed the sale of Concepcion’s share be declared unenforceable, the TCT in Felix Corp’s name be cancelled and for indemnity.

While the case was pending in the RTC, both Simeon and Gerundia died. The respective administrators of their estates substituted them. The trial court ruled in favor of Ramon Rallos. Felix Corp. appealed the decision to the CA. The CA upheld the validity of the sale as to Concepcion’s share.

Issues:

1. W/N the agent’s sale of the undivided share of the principal’s lot is valid although it was executed after the death of the principal.

Held/Ratio:

1. NO. Agency is personal, representative and derivative in nature. The authority of the agent to act emanates from the powers granted to him by the principal. “He who acts through another acts himself.

General rule: agency is extinguished by the death of the principal or of the agent. (Art. 1919)

Exceptions:

a. If it has been constituted in the common interest of the principal and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (Art. 1930)

b. a. The agent acted without the knowledge of the death of the principal, and b. The third person that contracted the agent himself acted in good faith. Good faith means that the third person was not aware of the death of the principal. (Art. 1931)

The 2 requisites must concur; the absence of one will render the act of the agent invalid and unenforceable.

Art. 1930 is not applicable because the special power of attorney executed in favor of Simeon was not coupled with interest.

Art. 1931 is also inapplicable. Under the law, the agent must have acted without knowledge of the death of the principal. In this case, Simeon Rallos knew of the death of his principal (Concepcion) at the time he sold the latter’s share to Felix Corp. This is inferred from the pleadings he filed before the trial court. The law expressly requires lack of knowledge on the part of the agent with regard to the death of the principal. It is not sufficient that the third person acted in good faith. Thus, the agent’s act is unenforceable against the estate of his principal. The sale is null and void insofar as to the share of Concepcion.


ALS2014B 2 of 137

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Loadmasters Customs Services, Inc. v. Golden Brokerage Corp. Memory Aid:

Parties involved are:

Loadmasters Customs Services, Inc.

R&B Insurance Corporation

Glodel Brokerage Corporation

Columbia Wire and Cable Corporation

Facts: On August 28, 2001, R&B Insurance issued a Marine Policy (think insurance policies) in favor of Columbia to insure the shipment of 132 bundles of electric copper cathodes against ALL RISKS. On the same day, the cargoes were shipped from Leyte, and arrived at North Harbor, Manila.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia's warehouses in Bulacan and Valenzuela City.

The goods were loaded on board 12 Loadmasters trucks with drivers and helpers; 6 to Bulacan and 6 to Valenzuela. The cargoes in all trucks were duly delivered except for 1 truck bound for Bulacan, loaded with 11 bundles or 232 pieces of copper cathodes, which failed to deliver its cargo. This truck was later recovered with its cargo gone.

For this, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount of P 1,903,335.39. After investigation and adjustment, R&B Insurance paid Columbia the amount of P 1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the RTC of Manila, seeking reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the party who may be held legally liable for the loss."

The RTC rendered a decision holding Glodel liable and ordering the same to pay R&B Insurance. An appeal by Glodel to the CA followed. The CA ruled that since Loadmasters is an agent of Glodel, it is likewise liable to Glodel for the same amount for which Glodel has been held liable to R&B Insurance. Subsequently, Loadmasters filed the instant petition.

Issue:

1. W/N under the set of facts, can petitioner Loadmasters be legally considered as an agent of respondent Glodel.

Held/Ratio:

1. No. There exists no principal-agent relationship between Glodel and Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides:

“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.”

The elements of a contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.

Accordingly, there can be no contract of agency between the parties. Loadmasters never represented Glodel. Neither was it ever authorized to make such representation. It is a settled rule that the basis for agency is representation, that is, 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 the principal personally executed them. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions, while on


ALS2014B 3 of 137

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the part of the agent, there must be an intention to accept the appointment and act on it. Such mutual intent is not obtaining in this case.

However, even if Loadmasters is correct in saying that it is not an agent of Glodel, it is not correct to conclude that it is completely absolved of liability.

According to Article 2207, "if the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrong-doer or the person who has violated the contract." Therefore, R&B Insurance had the right to seek reimbursement from either Loadmasters or Glodel or both for breach of contract. Premises considered, the Court decided that both Loadmasters and Glodel are jointly and severally liable to R&B Insurance for the loss of the subject cargo. Under Article 2194, "the responsibility of two or more persons who are liable for a quasi-delict is solidary."


ALS2014B 4 of 137

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Bordador v. Luz (jewelry, brother –sister alleged agency)

Doctrine:

• The basis for agency is representation

• A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent

Facts:

The spouses Brigada and Ernesto Luz are sought to be implicated by the petitioner Bordador in a suit for damages against Narciso Deganos (Brigada’s brother). Bordador was engaged in the purchase and sale of jewelry and among his regular customers was Brigada Luz. Narciso Deganos, who received jewelry on several occasions (worth 382, 816P) from Bordador, was supposed to resell such jewelry at a profit and remit the proceeds and return the unsold items to Bordador. He only remitted 53k and did not return any unsold items. In the RTC, Deganos and Luz were charged with estafa but only Deganos was found liable.

In this case, Bordador substantiates the claim- that Deganos acted as an agent of his sister Brigida Luz- through letters wherein the latter (Luz) acknowledged her obligation to Bordador and asked for more time to fulfill the same. Both the RTC and CA found that these letters pertained to a Brigida’s own debt and had nothing to do with the money sought to be recovered in this case. Further, Deganos asserts that it was he alone who was involved in the transaction with Bordador.

Issue:

1. W/N Luz is liable as a principal to the acts of Deganos as her agent

Held/Ratio:

1. NO. The basis for agency is representation. There is no showing that Brigida consented to the acts of her brother or that she authorized him to act on her behalf. The records show that neither an express nor an implied agency was proven to have existed between the siblings Narciso Deganos and Brigida Luz. It was Bordador who was negligent in transacting with Deganos on at least 6 occasions without requiring a written authorization from his alleged principal. According to the court, a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.


ALS2014B 5 of 137

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Victorias Milling Co. v. CA

Doctrine:

• The principal must have an actual intention to appoint the agent. The agent must have an intention to accept and act on it. Absent such, there is NO agency.

• One factor which most clearly distinguishes agency from other legal concepts is control; one person – the agent – agrees to act under the control or direction of another – the principal

• Whether or not a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. Ultimately, what is decisive is the intention of the parties.

Facts:

St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co (VMC). In the course of their dealings, VMC issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M. SLDR No. 1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each bag contained 50 kg and priced at P638.00 per bag. The transaction covered was a “direct sale”.

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P14,750,000.00. CSC issued checks in payment. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by the said SLDR. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC to “withdraw for and in our behalf the refined sugar covered by the SLDR”

On Oct. 27, 1989, STM issued checks to VMC as payment for 50,000 bags. Such checks covered SLDR No. 1214M and SLDR No. 1213.

CSC surrendered the SLDR No. 1214M and to VMC’s NAWACO Warehouse and was allowed to withdraw sugar. Only 2,000 bags had been released. VMC refused to release the other 23,000 bags. CSC informed VMC that SLDR No. 1214M had been “sold and endorsed” to it.

VMC replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already withdrawn all the sugar covered by the cleared checks. VMC also claimed that CSC had represented itself to be STM’s agent as it had withdrawn the 2,000 bags against SLDR No. 1214M “for and in behalf” of STM.

Hence, CSC filed a complaint for specific performance against Teresita Ng Sy (doing business under the name of STM) and VMC. However, the suit against Sy was discontinued because she summons could not be served to her (she couldn’t be found. But it was later found out that the Teresita Ng Go who testified for CSC was the same as Teresita Ng Sy).

RTC ruled in favor of CSC and ordered VMC to deliver the 23,000 bags left. Court of Appeals ruled the same.

Issues:

1. W/N CA erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as assignee

2. W/N CA erred in applying the law on compensation to the transaction under SLDR No. 1214M so as to preclude VMC from offsetting its credits on the other SLDRS

3. W/N CA erred in not ruling that the sale of sugar under SLDR No. 1214M was a conditional sale or a contract to sell and hence freed petition from further obligations

4. W/N CA committed an error of law in not applying the clean hands doctrine to preclude CSC from seeking judicial relief


ALS2014B 6 of 137

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Held/Ratio:

1. NO. CSC was not an agent of STM. VMC heavily relies on STM’s letter of authority that said CSC is authorized to withdraw sugar “for and in our behalf”. It is clear from Art. 1868 that the basis of agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions, and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally NO agency. One factor, which most clearly distinguishes agency from other legal concepts, is control; one person – the agent – agrees to act under the control or direction of another – the principal. Indeed, the very word “agency” has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category. Where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence but also its nature and extent. It appears that CSC was a buyer and not an agent of STM. CSC was not subject to STM’s control. The terms “for and in our behalf” should not be eyed as pointing to the existence of an agency relation. Whether or not a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. Ultimately, what is decisive is the intention of the parties. (In fact, CSC even informed VMC that the SLDR was sold and endorsed to it.)

2. NO. Sugar covered by the SLDR was a separate and independent transaction, not a serial part of a single transaction or of one account contrary to VMC’s insistence. Evidence shows that VMC was paid for the sugar purchased under SLDR No. 1214M. VMC clearly had the obligation to deliver the sugar.

3. NO. The SLDR contained the condition “title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed”. Such shows that VMC transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly establish a contract of sale, not a contract to sell. VMC is thus estopped from alleging the contrary.

4. NO. Doctrine of clean hands should only applied if there is fraud. There is no evidence to support VMC’s allegations of fraud.


ALS2014B 7 of 137

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Eurotech Industrial Technologies v. Cuizon (ERWIN EDWIN)

Doctrine:

• The underlying principle of a contract of agency is to accomplish results by using the services of others.

• The basis of agency is representation, agent acts for and on behalf of the principal.

• Elements of a contract of agency:

a. Consent, express of implied, of the parties to establish a relationship

b. Object is the execution of a juridical act in relation to a third person

c. Agent acts as a representative, not for himself

d. Agent acts within the scope of his authority

• Agent is not personally liable to the party with whom he contracts. EXCEPTION:

e. when he expressly binds himself to the obligation

f. exceeds his authority

Facts:

Eurotech is engaged in the business of importing and distributing European industrial equipment. One of their customers, Impact Systems bought from them various products amounting to P 91,338. They also bought a sludge pump worth 250K. For the second obligation, they made a down payment of 50K. Respondent ERWIN owned Impact Sales while his brother EDWIN worked as a Sales Manager. When the sludge pump arrived, Eurotech refused to deliver because they wanted Impact Sales to first settle their debts. What EDWIN did (with another employee, Alberto de Jesus) was to execute a deed of assignment of receivables (365,000 Pesos, payable by Toldedo Corporation) in favor of Eurotech. Unknown to Eurotech, respondents still collected from Toledo. Eurotech then demanded payment from respondents, but they failed to pay their outstanding obligation (295k). Eurotech filed a complaint in the TC, but EDWIN filed an answer saying that he should not be impleaded because he is not a real party in interest. According to him, he was acting merely as an agent, which Eurotech also acknowledges. However, they assail that EDWIN should be liable because he exceeded his authority by assigning the subject receivables.

Issue:

1. W/N EDWIN is liable.

Held/Ratio:

1. No. There are two exceptions to the non-liability of the agent (please see Doctrine No. 4) and EDWIN has committed neither. The deed of assignment clearly indicates that EDWIN is a sales manager. According to AmJur, a manager, as an agent, acts with broad powers with which to conduct the business of his principal: “In the absence of an agreement to the contrary, a managing agent may enter into any contract that he deems reasonably necessary to protect the interests of his principal.” The acquisition of the sludge pump is important for the interests of the principal (Impact Sales), as evidenced by their delivery of the 50k as Down Payment. The act of executing a deed of assignment is “reasonably necessary” to acquire that sludge pump. Therefore, EDWIN has acted well within his authority. He is not liable as an agent.


ALS2014B 8 of 137

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Orient Air Services and Hotel Representatives v. Court of Appeals (general sales agency agreement; remittance; reinstate as agent)

Doctrine:

• Agency; An agent-principal relationship can only be effected with the consent of the principal, and must not, in any way be compelled by law or by any court.

Facts:

American Airlines, Inc. (AA) and Orient Air Services and Hotel Representatives (OA) entered into a General Sales Agency Agreement (Agreement) wherein the former authorized the latter to act as its exclusive general sales agent within Philippines for the sale of air passenger transportation. OA reneged on its obligation to remit the net proceeds of sales of January-March. AA terminated the Agreement and sues OA.

Trial Court:

-‐ judgment in favor of OA

-‐ termination by AA of the Agreement was illegal and improper

-‐ orders reinstatement of OA as AA’s general sales agent

CA: affirmed

Issues:

1. W/N termination by AA of agreement proper.

2. W/N CA affirming TC’s decision to reinstate OA as AA’s general sales agent is correct.

Held/Ratio:

1. NO.

AA: commission based only on ticketed sales (basis: par 5 of agreement)

OA: commission based on total revenue of AA, not only ticketed sales (basis: designation as the EXCLUSIVE general sales agent of AA)

SC: In favor of OA

: In the interpretation of contracts, the entirety must be taken into consideration to ascertain the meaning of its provisions.

: Accdg to Agreement OA to be paid 2 kinds of commissions (7% ticketed; 3% total)

: OA doing its part on Agreement (collected commission first before remitting the balance to AA)

: Termination without cause and basis. (AA liable to OA)

2. NO. By affirming this ruling of the trial court, respondent appellate court, in effect, compels AA to extend its personality to OA. Violative of the principles and essence of agency, defined by law as a contract whereby “a person binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER.” In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts, which the latter would have him do. Such a relationship can only be EFFECTED with the CONSENT of the principal, which must not, in any way, by compelled by law or by any court.


ALS2014B 9 of 137

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Tongko v. The Manufacturers Life Insurance Company (Insurance agent, illegal dismissal, labor law control)

Doctrine:

• The primary difference between a contract of agency and an employment contract is the level of control.

Facts:

In 1977, Tongko joined the ranks of The Manufacturers Life Insurance Co. (Manulife) as an insurance agent for which he entered into a Career Agent’s Agreement with Manulife. In the 19 years of his employment, Tongko was appointed unit manager, branch manager and regional sales manager of Manulife. In the latter years of Tongko’s employment, Manulife adopted a new company objective of increasing its workforce. Tongko, as regional sales manager, failed to meet the proscribed goals for hiring and training more agents. Manulife found that he was not proactive enough in recruitment. This issue developed into a conflict between Tongko and Manulife. When their differences could not be reconciled even after repeated discussions, Manulife chose to terminate Tongko’s employment. Tongko avers that he was an employee of Manulife and that such termination amounted to an illegal dismissal, which makes Manulife liable to him for backwages and separation pay. On the other hand, Manulife maintains that Tongko was not an employee, but an agent who under the Career Agent’s Agreement they entered into, they could terminate at any time without cause.

Issues:

1. W/N Tongko was an employee of Manulife such that his termination amounted to an illegal dismissal and entitled him to backwages and separation pay

Held/Ratio:

1. No. Tongko is an agent and not an employee of Manulife.

For a relationship to be characterized as one of employment, one party must exert the level of control that characterizes an employment relationship as defined by labor law. Such control must be to the extent that the means and methods to be employed in attaining a result are dictated.

Tongko’s main arguments that he was under labor law control are:

a. That Manulife provided objectives and sales targets regarding production, recruitment, and training of agents

b. That he had to abide by a Manulife Code of Conduct which govern his activities

For his first argument, the Supreme Court says that The objectives and sales targets are aimed only at specific results and do not dictate means and methods by which the results must be met. They are mere directives, which a principal can impose on an agent to achieve assigned tasks. Article 1887 of the civil code provides:

In the execution of the agency, the agent shall act in accordance with the instructions of the principal.

With this provision, it can be gleaned that a principal is not altogether precluded from giving instructions to his agent.

For the second argument, the code of conduct prescribed by Manulife does not dictate means and methods to accomplish work. It is merely a standard of behavior intended as a guide on how agents should conduct themselves in their work and transactions.

The fact that Tongko was appointed as unit manager, branch manager and regional sales manager did not alter his status as an agent of the company. Throughout his employment, Tongko and Manulife were bound by the Career Agent’s Agreement they entered into when Tongko was first hired. The subsequent appointments he had did not alter the Agreement. He progressed from the position of an ordinary agent to a lead agent with supervision over junior agents. Tongko himself was always an agent.

Furthermore, Tongko does not have a fixed salary. He is paid in commissions which fact he has always asserted in his tax declarations. He had always indicated that he was a self-employed insurance agent with the privilege of deducting business expenses.


ALS2014B 10 of 137

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With all the foregoing, Tongko is deemed to be an agent, and not an employee, of Manulife. Pursuant to the Career Agent Agreement, Manulife could terminate his employment at any time for no cause. His termination did not amount to an illegal dismissal and he is not entitled to backwages and separation pay.

Domingo v. Domingo (Full disclosure. If not, forfeiture)

Doctrines:

• Obligations of an agent – Arts. 1891 & 1909 demand the utmost GOOD FAITH, FIDELITY, HONESTY, CANDOR, and FAIRNESS on the part of the agent to his principal (i.e. absolute obligation to make full disclosure or complete account to principal of all his transactions and other material facts)

• Failure of an agent to make FULL DISCLOSURE makes him guilty of BREACH OF HIS LOYALTY to the principal. An agent who takes a secret profit in the nature of bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal is guilty of breach of loyalty to the latter and FORFEITS HIS RIGHT TO COLLECT COMMISSION that may be due to him even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.

• Duty of Fidelity Exception – The duty embodied in Art. 1891 does not apply if the agent or broker acted only as MIDDLEMAN with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction

Facts

1. Heirs (Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene, Joselito) of Vicente Domingo sought the reversal of the majority decision of Special Division of 5 of CA affirming judgment of the Trial court which sentenced Vicente to pay Gregorio Domingo 2,307.50 and the intervenor, Teofilo Purisima, 2,607.50 w/ legal interest on both amounts from date of filing, to pay Gregorio 1,000 as moral and exemplary damages and 500 as attorney’s fees plus costs

2. Vicente Domingo (petitioner-appellant, deceased) granted Gregorio Domingo (real estate broker) exclusive agency to sell lot #883 in Piedad Estate (88,477sqm at P2/sqm = 176,954. NOTE: This is the asking price, not the final selling price as we’ll see later on)

3. Terms of Agency – commission: 5% on total price IF THE PROPERTY IS SOLD BY VICENTE OR BY ANYONE ELSE DURING THE 30-day DURATION OF THE AGENCY or if the property is sold by VICENTE w/in 3 MONTHS FROM TERMINATION OF AGENCY to a PURCHASER TO WHOM IT WAS SUBMITTED by Gregorio during continuance of agency w/ notice to VICENTE

4. Agency contract in TRIPLICATE, 1 for Vicente, Original and another to Gregorio

5. Gregorio authorized intervenor Teofilo Purisima to look for a buyer promising him ½ of 5% commission

6. Purisima introduced him to Oscar de Leon, a prospective buyer

7. de Leon’s first offer was too low (didn’t mention how much). He raised it to P109,000, which Vicente agreed to.

8. de Leon issued a P1,000 check as earnest money. Vicente paid P300 to Gregorio as partial commission. De Leon confirmed his offer to pay P1.20/sqm. Vicente asked for addition P1000 earnest money w/c de Leon promised to deliver. De Leon will vacate his house and lot at Denver St., QC, which is part of the purchase price.

9. de Leon gave Gregorio a GIFT or propina of P1000.00 for succeeding in persuading Vicente. Gregorio DIDN’T DISCLOSE such fact to Vicente. De Leon didn’t give additional earnest money.

10. de Leon told Gregorio that he didn’t receive his money from his brother in US, for which reason he gave up negotiations.


ALS2014B 11 of 137

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11. Gregorio found out in his contract with Vicente that if the sale has been consummated, he still has right over the commission (see # 3, Facts). Vicente grabbed the original, and tore it apart (Gregorio, though, still has another copy).

12. Gregorio discovered in the Register of Deeds a deed of sale by Amparo Diaz, wife of de Leon, over their house at Denver St. Cubao in favor of Vicente as downpayment.

13. Vicente to de Leon: “if we remove Gregorio in the contract, I’ll sell the land to you at P104,000 (lower than P109,000 offer)“

14. CA decision: sale to Diaz (wife) is practically a sale to de Leon (NOTE: might be because there must be consent from the husband as joint administrator); Purisima and Gregorio are EFFICIENT CAUSES in consummation of sale

Issues:

1. Whether the FAILURE on the part of Gregorio TO DISCLOSE to Vicente the payment to him by Oscar de Leon of the amount of P1000.00 as GIFT or “propina” for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20/sqm, so constitutes FRAUD as to cause FORFEITURE of his 5% commission on sale price

2. Whether Vicente or Gregorio should be liable directly to the intervenor Purisima for the latter’s share in the expected commission of Gregorio by reason of the sale

3. Whether the award of legal interest, moral and exemplary damages, attorneys fees and costs, was proper

Held/Ratio:

1. YES. Failure of an agent to make FULL DISCLOSURE makes him guilty of BREACH OF HIS LOYALTY to the principal.

An agent who takes a secret profit in the nature of bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal is guilty of breach of loyalty to the latter and FORFEITS HIS RIGHT TO COLLECT COMMISSION that may be due to him even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.

Article 1891 states that “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 agency, even though it may not be owing to the principal.”

Article 1909 also states that, “The agent is responsible not only for fraud but also for negligence which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.”

NOTE: Gregorio was not a middleman. He was a broker and agent of said petitioner-appellant only.

NOTE: POSSIBLE QUESTION: If the principal doesn’t know about the gift, may he recover from the agent? YES, according to American Jurisprudence, unless principal has consented to or ratified the transaction)

2. ONLY GREGORIO. Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his ½ share of whatever amounts Gregorio received by virtue of the transaction oas his sub-agency contract was with Gregorio alone and not with Vicente. Since Gregorio received 1000 from Vicente and 300 from de Leon, totaling to P1,300.00, Purisima will receive ½ of such, which is P650.00

3. YES. Since the unfounded complaint be Gregorio caused Vicente mental anguish and serious anxiety, as well as wounded his feelings. Moral Damages of P1000.00, Attorney’s fees of P1000.00 to be paid to heirs of Vicente


ALS2014B 12 of 137

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Schmid & Oberly, Inc. v. RJL Martinez Fishing Corp – “indent transaction, not a sale”

Doctrine:

• A contract is what the law defines it to be, considering its essential elements, and not what it is called by the contracting parties. In this case, the essential elements did not prove to be a contract of sale but rather, an indent transaction and in such, a mere indentor should not be held liable for the breach of his principal.

Facts:

The Supreme Court, although not a trier of facts, is compelled to review the Court of Appeal’s factual findings because It is convinced that there has been a misapprehension of facts. The CA has rendered judgment in favor of RJL ordering SCHMID to refund RJL the purchase price of 12 faulty “Nagata”-brand generators, which RJL allegedly bought, from SCHMID, plus consequential damages and attorneys’ fees.

After a careful scrutiny of the records, the SC has found the appellate court’s narration of facts incomplete. The facts are actually as follows:

RJL is engaged in the business of deep-sea fishing and needed electric generators for its boats. SCHMID, on the other hand, sold generators of different brands. Their interactions gave rise to two transactions.

Transaction 1:

It is not disputed that SCHMID is a vendor of different brands of generators. RJL bought from SCHMID 3 generators of the Nagata brand, which the company supplied from their own stock room.

Transaction 2:

RJL needed more generators. SCHMID gave RJL its quotations for 12 Nagata brand generators. It was stipulated that confirming an irrevocable letter of credit (LOC - Payment for a transaction, meaning that redeeming the letter of credit pays an exporter would make payment Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another.) in favor of NAGATA Co. RJL opened a letter of credit in favor of NAGATA. SCHMID transmitted to NAGATA an order for 12 generators to be shipped directly to RJL. NAGATA sent RJL the bill of lading (s a document issued by a carrier to a shipper, acknowledging that non specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified.) and its own invoice which states that 1 case of generators (12 pcs.) was sent to RJL. For its efforts, SCHMID received from NAGATA a commission of $1,752.

All 15 generators purchased by RJL burned out after continuous use. RJL informed SCHMID and in turn, SCHMID brought the matter to NAGATA’s attention. SCHMID replaced the 3 generators directly purchased from them with new ones of a different brand. For the 12 purchased in the 2nd transaction, NAGATA sent 2 technical representatives who later found out that the generators were overrated. The specifications written on the generators indicated a 5KVA capacity when in fact it should have been just 4KVJ. 3 of the 12 generators were repaired by NAGATA. As for the 9 defective ones, NAGATA asked SCHMID to repair them on their behalf, the cost of which will later on be reimbursed. SCHMID indicated that it was not agreeable to these terms. As not all of the generators were replaced, RJL formally demanded from SCHMID that it be refunded the cost of the generators and paid damages. RJL brought a suit against SCHMID on the theory that the latter was the vendor of the 12 generators from the 2nd transaction and was liable under its warranty against hidden defects.

Issue:

1. W/N the second transaction between the parties was a sale.

Held/Ratio:

1. NO. The second transaction involving 12 generators was an indent transaction.

The Civil Code definition of a contract of sale: “By the contract of sale, one of the contracting parties obligates himself to transfer that ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. On the other hand, there is no statutory definition of “indent” however, the


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Omnibus Investments Code lumps “indentors” together with “commercial brokers” and “commission merchants.” Webster defines indent as “a purchase order for goods especially when sent from a foreign country.” There are three parties to an indent transaction, namely, the buyer, the indentor and the supplier. An indentor may therefore be best described as one who, for compensation, acts as a middleman in bringing about a purchase and sale of goods between a foreign supplier and a local purchaser. From the foregoing definitions and from the facts of the case, it can be seen that SCHMID was not a vendor but was merely an indentor in the second transaction.

Moreover, in its demand letter previously sent to SCHMID, RJL admitted that 12 of 15 generators “were purchased through your company (SCHMID) by indent order and 3 by direct purchase” In addition to the admission, payment of the generators from the 2nd transaction were paid directly to NAGATA and NAGATA itself invoiced the sale. The only participation of SCHMID was to act as an intermediary between NAGATA and RJL. Being merely an indentor, SCHMID may not be held liable for the implied warranty for hidden defects under the Civil Code. However, even as SCHMID was merely an indentor, there was nothing to prevent if from voluntarily warranting the 12 defective generators. As an agent of both parties, SCHMID may expressly obligate itself to undertake obligations of its principal. Unfortunately, RJL has failed to prove that SCHMID has undertaken such obligation, therefore SCHMID may not be held liable for the refund of the defective generators and the payment for damages.


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Tan v. Gullas (broker/sisters of mary)

Doctrine:

• “An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.”

Facts:

Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel of land in the Municipality of Minglanilla, Province of Cebu, measuring 104,114 sq. m.,

On June 29, 1992, they executed a special power of attorney authorizing petitioners Manuel B. Tan, a licensed real estate broker, and his associates Gregg M. Tecson and Alexander Saldaña, to negotiate for the sale of the land at P550.00 per sq. m., at a commission of 3% of the gross price.

The power of attorney was non-exclusive and effective for one month from June 29, 1992.

On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction manager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a property in the Minglanilla area.

July 1, 1992, petitioner Tan visited the property with Engineer Ledesma, Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his office at the University of Visayas. It was the first time that the buyers came to know that private respondent Eduardo Gullas was the owner of the property.

On July 3, 1992, private respondents agreed to sell the property to the Sisters of Mary, and subsequently executed a special power of attorney in favor of Eufemia Cañete, giving her the special authority to sell, transfer and convey the land at a fixed price of P200.00 per sq. m..

In the afternoon of the same date, petitioners went to see private respondent Eduardo Gullas to claim their commission, but the latter told them that he and his wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay the broker’s fee and alleged that another group of agents was responsible for the sale of land to the Sisters of Mary.

On July 17, 1992, attorney-in-fact Eufemia Cañete executed a deed of sale in favor of the Sisters of Mary for the price of P20,822,800.00, or at the rate of P200.00 per sq. m.. The buyers subsequently paid the corresponding taxes. Thereafter, the Register of Deeds of Cebu Province issued TCT in the name of the Sisters of Mary of Banneaux, Inc.

Issue:

1. Whether or not Tan et al. are entitled to brokerage fees?

Held/Ratio:

1. Yes, the petitioners are entitled brokerage fees. Although the Gullas contends that a certain Roberto Pacana was the one responsible for the sale, this was unsubstantiated. because this was only evidenced by an undated unnotarized specail power of attorny, while the pettitioners were given a written authority to sell.

At the very least, petitioners set the sale in motion. They were not able to participate in its consummation only because they were prevented from doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) we ruled that, “An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.” (Underscoring ours). Clearly, therefore, petitioners, as brokers, should be entitled to the commission whether or not the sale of the property subject matter of the contract was concluded through their efforts.


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Medrano v. Court of Appeals (Tulay na Pat-Pat, Procuring cause = Commission)

Doctrines:

• A broker is generally defined as one who is engaged, for others, on a commission, negotiation contracts relative to property with the custody of which he has no concern. He is one whose occupation is to bring together the parties in matters of trade, commerce or navigation.

• When there is a close, proximate and causal connection between the broker’s efforts and the principal’s sale of his property, the broker is entitled to commission.

Facts:

Bienvenido Medrano, Vice-Chairman of Ibaan Rural Bank that is owned by the Medrano Family, asked Estela Flor, his cousin-in-law, to look for a buyer of a foreclosed bank asset. This was a 17-hectare mango plantation priced at 2.2Million, located in Brgy. Tulay na Pat-pat, Ibaan, Batangas.

Mr. Dominador Lee was a client of private respondent Pacita Borbon, a licensed real-estate broker and Estela Flor’s associate. Lee and Borbon met through a previous transaction where Lee responded to an ad posted by Borbon. This ad was selling a land with atis on it, Lee preferred mango trees.

Flor informed Borbon about the plantation for sale. Flor immediately secured a written authority to negotiate the sale of the property. In the letter it was said that Medrano will give them a 5% commission.

Respondents arranged for ocular inspection, but failed twice due to weather and transpo problem respectively. While Lee was in Batangas looking at another lot, he called Borbon to ask about the address of the property she was offering. Lee was then instructed to get in touch with Medrano’s daughter, Teresa Ganzon, regarding the property.

After a second follow up by Josefina Antonio, another associate of Borbon, she was surprised when Lee told her that he already purchased the property for 2.2Million and paid a 1Million downpayment. No commission was given to the respondents.

Since the sale was consummated, the respondents asked for their commission, but were offered only 5,000 each.

A series of trials and appeal to the CA, wherein the petitioner lost every time, came to pass with the petitioner saying that they are not liable for commission contending that the respondents:

1. Did not verify the real owner of the property

2. Never saw the property

3. Never got in touch with the owner of the property

4. Neither they assisted in assisting the buyer in having the property inspected and verified.

The CA affirmed the trials court’s decision that petitioners:

1. Should pay the respondents the sum of P60,000 representing their 5% commission plus legal interest from the date of filing the case in the trial court.

2. Should pay the respondents 20,000 for attorney’s fees

3. Should pay the respondents 10,000 as litigation fees

4. Should pay the cost of proceedings

Hence this case filed at the Supreme Court.

Issue:

1. W/N the petitioners are liable for commission


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Held/Ratio:

1. YES. The petitioners are liable for commission. The court declared that there is an inescapable conclusion that is readily inferred by that fact that:

a. The petitioners where the ones who set the sale of the subject land in motion.

b. Borbon lost no time in informing Lee about the property.

c. The letter of authorization serves as the contract between the parties.

d. An ocular sale with Lee was planned but was cancelled due to reasons beyond their control.

e. The respondents instructed Lee to get in touch with Teresa Ganzon of Ibaan Rural Bank.

f. No evidence was adduced to show that other persons, aside from the respondents, informed Lee about the property.

g. Teresa Ganzon testified that no other person, aside from the respondents, inquired from her about the sale of the property to Lee.

h. The court sited Macondray v. Sellner wherein in this case, the brokers recovered commissions just by doing one thing—advertise the property.


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Litonjua Jr. v. Eternit Corporation

Doctrines:

• By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them.

• For agency by estoppel to exist, the following must be established:

1. the principal manifested a representation of the agent's authority or knowingly allowed the agent to assume such authority

2. the third person, in good faith, relied upon such representation

3. relying upon such representation, such third person has changed his position to his detriment.

Facts:

Eternit Corporation (EC) is a Philippine corporation engaged in the manufacture of roofing and piping products since 1950. Their manufacturing operations were conducted on 8 parcels of land covering 47,233sqm in Mandaluyong. 90% of its stocks were owned by Eteroutremer SA Corporation (ESAC), a Belgian corporation. Glanville is the General Manager and President of EC, while Delsaux was the Regional Director for Asia of ESAC, both of whom work in Belgium.

In 1986, ESAC grew concerned about the political situation in the Philippines and wanted to stop operations. Adams, an EC board member, was instructed by ESAC to dispose of the 8 parcels of land of EC. Adams engaged the services of Marquez as realtor/broker so that the properties could be offered for sale. Marquez offered them to the Litonjua brothers (Eduardo and Antonio) of Litonjua & Company Inc for P27million on Sept 12, 1986, subject to negotiation. The Litonjuas countered with a P20million cash offer. Marquez told Glanville, who told Delsaux on Oct 28, 1986, but there was no response. On Feb 12, 1987, Delsaux responded by telex stating that based on the "Belgian/Swiss decision", the final offer was US$1million and P2.5million.

Marquez sent the telex to the Litonjuas, who accepted the proposal. The Litonjuas deposited US$1million to Security Bank. However, given that the political situation was improving, Glanville informed Marquez that the sale would not push through, followed by a letter stating that the board members of EC decided not to sell the properties. Delsaux also sent a letter stating that the sale would not push through.

The Litonjuas wrote EC demanding damages on account of the aborted sale, which EC rejected. They then filed for specific performance and damages against EC (which became Eterton Multi-Resources Corporation), claiming, among others, that Marquez was a broker and not an agent, so no written authority was required; that there was an agency by estoppel when Marquez was given apparent authority to sell; and that a contract of sale was perfected. RTC and CA rejected the complaints, hence this petition.

Issues:

1. W/N there was a perfected contract of sale

2. W/N Marquez, acting as agent, needed written authorization from the EC board of directors

3. W/N Glanville and Delsaux had authority to sell the properties of EC

Held/Ratio:

1. NO.

2. NO.

3. NO.


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Firstly, the existence of agency is a question of fact to be answered by the evidence on record, where the findings of the lower courts are conclusive. In order that specific performance from a contract made with an agent may prosper, agency must be established by clear, certain and specific proof. According to the corporation code, corporations are controlled by its board of directors or trustees, and can only act when authorized by such. Absent any valid delegation/authorization, the declarations of an individual director are not binding on the corporation unless ratified by the board.

Additionally, any sale of real property of a corporation by a person purporting to be an agent thereof needs a written authority from the board, or else it is null and void.

Marquez acted under the authority of Adams and Glanville, who acted on the authority of Delsaux, who acted under the authority of ESAC, who was the majority stockholder. However, the authority needed for a valid agency to exist is from the board of directors. Even if ESAC owns 90% of the company, the board resolution is not a mere formality but a condition sine qua non. It is up to those dealing with supposed agents to make sure that the principal validly authorized them as such and is acting within the scope of their authority.

Marquez acted as an agent, evidenced by his confirmation in behalf of the Litanjuas that they accepted the offer. However, he had no authority to bind EC to sell the properties. He only had authority to find a purchaser, not to authorize a sale.

Glanville and Delsaux had no authority as agents, and they were not agents by estoppel. For agency by estoppel to exist, the principal must have manifested a representation of the agent's authority, a third person relied on such representation and relying upon such, the third person changed his position to his detriment. Agency by estoppel, or the doctrine of apparent authority, requires proof of reliance upon representations, which in turn needs proof that the representations predated the action taken in reliance. Those are not present in this case.


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Abacus Securities Corporation v. Ampil Doctrine:

• A brokerage relationship is essentially a contract for the employment of an agent: Thus, the principle of contract law must also govern broker-principal relationships.

Facts:

Petitioner Abacus Securities Corporation is engaged in the business as a broker and dealer of securities of listed companies at the Philippine Stock Exchange. Respondent Ampil is an investor.

In April 1997, Ampil opened a cash/regular account with Abacus for the purpose of buying and selling securities, as evidenced by the Account Application Form (AAF), which served as the agreement between the said parties.

From April 10 to 30 of the same year, Ampil accumulated outstanding obligations amounting to over P 6.6M in favor of Abacus. This was an aggregate result of active trading activities that took place during the span of the said period. Ampil failed to settle his P 6.6M debt. This prompted Abacus to sell Ampil’s securities in order to set off the proceeds against the unsettled obligations.

Even after the application of the proceeds from the sale of the said securities, a debt worth over P 3.3M still remained outstanding. Abacus referred the matter to its legal counsel for collection purposes.

Abacus, through a letter sent by their counsel, demanded that Ampil settle his obligations, including penalty charges and interest of 2% per annum. Ampil replied and requested for a 60-day period in order that he may raise funds to settle his obligations. Abacus agreed. However, despite the said period, Ampil still failed to settle his outstanding obligations. Thus, Abacus filed a suit against Ampil before the Regional Trial Court of Makati.

As a defense, Ampil raised that he was induced to transact with Abacus primarily because of the following reasons:

a. Abacus allowed “offset settlements”, thus allowing him to transact continuously without having to pay the purchase price of the stocks.

b. In case of loss upon the sale of stocks, Abacus only charged the investor for the difference between the high and low selling prices.

Ampil claimed that had Abacus followed the normal stock market price in accordance with the regulations set forth in the Revised Securities Act (RSA Act), his liability would have been limited to a little over P1.6M only. This was because the RSA Act requires that initial transactions be paid in full within 3 days after the transaction (T+3), prior to subsequent purchase of additional stocks. If needed, an extension of 1 day (T+4) may be given to the investor upon request for extension with the Philippine Stock Exchange or the Securities Exchange Commission. Ampil claimed that because of the offset method, he was induced to take a risk, thus bringing about the suit.

RTC Ruling

The RTC of Makati ruled that Abacus violated the RSA Act and its IRR by allowing Ampil to trade his account actively without cash, Abacus effectively induced him to purchase more securities, which led him to incur more debt. However, the court found Ampil equally at fault, by speculating the outcome of his investments knowing that offset method was against RSA regulations. Thus, he could not invoke the regulations he violated as a defense. The RTC ruled that the parties could not claim from each other, because they were in pari delicto.

CA Ruling

The CA affirmed the RTC decision, castigating the actions of Abacus. It was in the opinion of the CA that such arrangement revealed that Abacus was in bad faith because the offset arrangement allowed the corporation to repeatedly charge commission for each transaction entered into in Ampil’s name, regardless of the losses Ampil ended up incurring. On the other hand, the CA rejected Ampil’s contention that the trial court had no jurisdiction to try the case, since Ampil actively and voluntarily submitted himself to its jurisdiction by participating in the trial.


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Issues:

1. W/N the parties are in pari delicto

2. W/N the trial court had jurisdiction to try the case

Held:

1. Yes, the parties are in pari delicto in relation to the transactions after the initial ones, before the offsetting happened.

In the stock market, the normal practice is that an investor hires a broker or dealer to transact for him. The dealer in turn represents the investor in the stock market. In purchasing stocks, the dealer has to advance the money that is used to purchase the stocks for the investor. RSA regulations mandate that the investor pay the full price of the stocks advanced by his broker/dealer after the initial purchase of stocks, before the investor is allowed to enter into subsequent transactions.

The SC held that the initial transactions entered into by Abacus for Ampil were valid. It was the subsequent transactions entered into that were invalid because the same were entered into without the initial transactions having been paid. Thus, Ampil must be held liable for the valid transactions. The broker-principal relationship is essentially a contract for the employment of an agent, which is governed by the principles of contract law. Contract law dictates that whoever pays for another, may demand from the debtor what he has paid. (Art 1236, Civil Code)

However, the parties cannot claim anything from each other with respect to the subsequent transactions. This is mainly because with respect to the said transactions, the parties are considered in pari delicto. If Abacus followed RSA regulations, Ampil would not have been able to buy more stocks after his initial transactions because Ampil failed to pay his initial transactions in full. What Abacus should have done upon Ampil’s failure to pay his initial transactions was to compel Ampil to pay the purchase price Abacus advanced for him, and liquidate the proceeds, if any. Instead, Abacus let Ampil transact further through the offset method, wherein Abacus offset whatever proceeds were made from subsequent stock transactions with the purchase price of the stocks. Thus, Ampil incurred more losses, without ever paying for any of the transactions in full. Ampil , on the other hand chose to speculate on the outcome f his investment through the offset method despite being aware of RSA regulations.

2. Yes, the trial court had jurisdiction to try the case.

After voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for petitioner to question the jurisdictional power of the court. It is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure affirmative relief, and to afterwards deny the same jurisdiction to escape penalty.


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Hahn v. CA and BMW (broker v. agent, exclusive dealership)

Doctrine:

• An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.

Facts:

This is a petition for review of the decision of the Court of Appeals dismissing a complaint for specific performance which petitioner had filed against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for reconsideration.

Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the former Federal Republic of Germany.

On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney" wherein Hahn will be the exclusive dealer of BMW.

On February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW dealer. Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a "standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to terminate petitioner's exclusive dealership effective June 30, 1993.

Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.

Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership.

On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service of summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing business in the Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; and that Hahn was an indentor or middleman transacting business in his own name and for his own account.

Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.

The trial court deferred resolution of the Motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in its motion did not seem to be indubitable. Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals.


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The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, Section 14. It held that petitioner was a mere indentor or broker and not an agent through whom private respondent BMW transacted business in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.

Hence, this appeal.

Issue:

1. W/N HAHN IS AN AGENT OF BMW

Held/Ratio:

1. YES, Hahn is an agent and not merely a broker. The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW).

Rule 14, § 14 provides:

§14. Service upon foreign corporations. — If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

What acts are considered "doing business in the Philippines" are enumerated in §3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:

d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches, appointing representatives or distributors domiciled in the Philippines or xxx; and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, xxx; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding that Hahn solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." To the contrary, Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the down payment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn


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received an additional 3% of the full purchase price. Hahn performed after-sale services, including, warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW.

Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.

The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications.

Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. It is now settled that. for purposes of having summons served on a foreign corporation in accordance with Rule 14, §14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines.

Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss.


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Rallos v. Yangco (buying and selling tobacco leaf)

Doctrine:

• Termination of the agency: It is the duty of the defendant on the termination of the relationship of principal and agent to give due and timely motive thereof to the plaintiffs.

• Liability of the principal: the general rule is that when the relationship of principal and agent is established, and the principal gives notice of the agency and holds out the agent as his authorized representative, upon the termination of the agency it is the duty of the principal to give due and timely notice thereof, otherwise, he will be held liable to third parties acting in good faith and properly relying upon such agency

Facts:

Teodoro Yangco sent a letter to Florentino Rallos, offering his services because he just opened a Shipping and Commission department for buying and selling leaf tobacco and other native products in his steamship office in Binondo manila. He expressly indicated in his letter that he has conferred public power of attorney to Mr. Collantes to perform in his name and to act in his behalf for all acts necessary to carry out his plans.

Accepting the invitation, Rallos then proceeded to do business with Yangco through Collantes. Rallos then sent Collantes 218 bundles of tobacco in the leaf l to be sold on commission as had been other produce previously.

Collantes received P1744 from the sale of said tobacco and after deducting his commission of P206.96 (2.5%), Collantes was left with the sum of P1527.08 which should belong to Rallos but which Collantes converted to his own use.

It appears, however, that prior to sending of said tobacco the defendant had severed his relations with Collantes and the latter was no longer acting as his agent. But this fact was not known nor was it communicated to Rallos. When Rallos demanded the said amount, Yangco refused to pay on the grounds that at the time the said tobacco was received and sold by Collantes, the latter was acting personally and not as agent of the defendant.

Issue:

1. W/N Yangco is still liable to pay Rallos the amount of P1537

Held/Ratio:

1. YES. Yangco is liable. Having advertised the fact that Collantes was his agent and having given special notice to the plaintiffs of that fact, and having given them a special invitation to deal with such agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of such relationship.


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Siasat v. Intermediate Appellate Court (1985) (30% commission, Philippine flags)

Doctrines:

• An agent may be (1) universal, (2) general, or (3) specific. A universal agent is one authorized to do all acts, which can be lawfully delegated to an agent. So far as such a condition is possible, such an agent may be said to have universal authority. A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series. He usually has authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business, which he is authorized to transact. A special agent is one authorized to do some particular act or act upon some particular occasion. He acts in accordance with specific instructions or limitations necessarily implied from the nature of the act to be done.

Facts:

In 1974, a certain Teresita Nacianceno convinced the Department of Education and Culture (Department for brevity) to purchase, without public bidding, P1M worth of Philippine flags for use in public schools. By early September 1974, all the legal requirements had been complied with, except the release of the purchase orders, which could not be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval. When Nacianceno was informed of this, she contacted the owners of the United Flag Industry on 17 September 1974. The next day, after the transaction was discussed, the following document was drawn up:

Mrs. Tessie Nacianceno

This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or organization, private or government in connection with the marketing of our products-flags and all its accessories.

For your service, you will be entitled to a commission of thirty percent.

Signed

Mr. Primitivo Siasat

Owner and Gen. Manager

On 16 October, the first delivery (7933 flags) was made by the United Flag Industry. The next day, on 17 October, the Nacianceno’s authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat.

On 23 October, after receiving the payment of P469,980 for the first delivery, Siasat, according to Nacianceno, tendered the amount of P23,900 or 5% of the amount received to the latter as payment of her commission. She naturally protested, insisting on the 30% commission agreed upon. However, she eventually accepted, relying upon an assurance by Siasat that they would pay the commission in full after delivery of the second half of the order.

However, Nacianceno later on found out that Siasat had already received payment for the second delivery. When she confronted Siasat, he vehemently denied receipt of the payment, at the same time claiming that she had no participation whatsoever with regard to the second delivery of flags and that the agency had already been revoked.

Fuming, she filed an action in the CFI of Manila to recover the following commissions: 25%, as balance on the first delivery and 30%, on the second delivery. The trial court decided in her favor, and the Intermediate Appellate Court affirmed in toto. Hence, this petition was filed.

Issues:

1. W/N Nacianceno was incapacitated to transact with the Department because the authorization simply states that she could deal with any entity in connection with the marketing of their products for a commission of 30%. There was no specific authorization for the sale of Philippine flags to the Department.


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2. W/N Nacianceno is entitled to commission on the second delivery even if the agency has been revoked after the first.

Held/Ratio:

1. NO, Nacianceno was capacitated because she was a general agent.

An agent may be (1) universal, (2) general, or (3) special. x x x A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series. He has usually authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business, which he is authorized to transact.

Nacianceno was instituted as a general agent. It can easily be seen by the way general words were employed in the agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization.

2. YES, Nacianceno is still entitled to commission on the second delivery, notwithstanding the revocation of the agency after the first, because the two deliveries are part of a single, perfected transaction.

The revocation of agency could not prevent the respondent from earning her commission because it came too late, the contract of sale having been already perfected and partly executed. The principal, once the contract between his then duly authorized agent and a third person has been perfected, cannot deprive his agent of the commission agreed upon by cancelling the agency and, thereafter, dealing directly with the buyer.

Note: Nacianceno alleged that she was entitled to the balance (25%) on the first delivery. However, the totality of evidence shows that Nacianceno had already received full payment of her commission for the first delivery. By virtue of this, and the apparent yet unproven conspiracy with Department officials to plunder public money, the Court posited that she did not come to Court with clean hands (masyadong swapang eh magnanakaw rin naman, lol) and, therefore, is not entitled to moral damages and attorney’s fees.

The Court also took notice of the unscrupulous procurement policies of the Department of Education and Culture in its purchase of Philippine flags, to wit:

There is no reason why a shocking 30% of the taxpayers' money should go to an agent or facilitator who had no flags to sell and whose only work was to secure and hand carry the indorsements of education and budget officials. x x x Considering the sad plight of underpaid and overworked classroom teachers whose pitiful salaries and allowances cannot sometimes be paid on time, a P300,000 fee for a P1,000,000 purchase of flags is not only clearly unnecessary but a scandalous waste of public funds as well.


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Litonjua v. Fernandez (2004) (best offer v. perfected contract of sale)

Doctrines

• Art 1878 of the Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority.

• The settled rule is that persons dealing with an assumed agent are bound at their peril and if they would hold the principal liable, to ascertain not only the fact of the agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it.

Facts:

Alimario and Fisico were brokers who offered to sell to Litonjua and Litonjua Jr. 2 parcels of land. Brokers told them that they are authorized by respondent Fernandez to offer the property for sale. The Litonjua’s met with Fernandez and the 2 brokers at the Litonjua’s office and both petitioner and respondent agreed to buy the property at P150/sq m and that the owners would be the one to shoulder the capital gains tax, transfer tax and expenses for documentation of the sale. They agreed to meet on Dec 8 1995 to finalize the sale and agreed that Fernandez would present a Special power of attorney executed by the owners of the property authorizing her to sell the properties for and in their behalf and to execute an absolute deed of sale thereon.

However, only Fisico attended the meeting and told the petitioners that Fernandez was working out a settlement with the tenants on the said property. After weeks of waiting and 2 letters asking that a deed of absolute sale be executed in accordance with their verbal agreement, Fernandez wrote the Litonjuas saying that:

1. It is not true that she agreed to shoulder registrations fees nor was it discussed

2. That the Dec 8 meeting was in order to sign the absolute deed of sale, that it was only the status of the property that was discussed and whether or not there are really no tenants. Unfortunately, “alleged tenants” appeared so she and her cousin are no longer pushing through with the sale.

3. Although petitioners offered to buy the property, she did not accept, no verbal contract perfected.

4. Contract of sale unenforceable for failure to comply with the statute of frauds.

5. No earnest money demanded nor received; no obligations exist.

Fernandez version: [note: Fernandez isn’t the owner of the property, relative lang siya ng owners na abroad]

Fernandez requested Alimario to look for buyers of the properties on a best offer basis. That during the Dec 8 meeting, she only attended to hear the petitioners’ offer and that she could not bind the owners of the properties because she had no written authority to sell the same. After the meeting, she asked Marquez to secure a barangay clearance that the property has no tenants but couldn’t ‘cause apparently there are tenants. Her cousin told her that he was not selling his property for P150/ sqm.

Trial court’s decision was in favor of petitioners, ordering Fernandez to execute a contract of sale. Court of appeals reversed stating that petitioners failed to prove that a sale or a contract to sell over the property had been perfected between petitioners and private respondent.

Issues:

1. W/N there was a perfected contract of sale between the parties

2. W/N the contract falls under the coverage of the Statute of Frauds


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Held/Ratio:

1. No. Text of Fernandez’ letter states that: “My cousin and I have thereby changed our mind and that the sale will no longer push through. …. In view thereof, I regret to formally inform you that we are no longer selling the property until the problems are fully settled.”

The letter can hardly be constituted as a note or memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that the seller DID NOT ACCEPT the condition that she will be the one to pay the reg fees and denied that she committed to execute a deed of sale. When Fernandez used the words “changed our mind”, she was referring to the decision to sell the property at all and NOT IN SELLING THE PROPERTY TO LITONJUAS as Fernandez has not yet made the final decision to sell the property to the Litonjuas.

Art 1878 of the Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority. The settled rule is that persons dealing with an assumed agent are bound at their peril and if they would hold the principal liable, to ascertain not only the fact of the agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it. The letter sent by Fernandez was signed by her alone, without authority nor ratification from the owners and so said letter is not binding on the owners. Therefore, there is no perfected contract of sale.

2. No. Art.1403 states that The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or secondary evidence of its contents.

The application of such stature presupposes the existence of a perfected contract, however for a note or memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in parol. And To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly authorized in writing.


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Spouses Aggabao, v. Dionisio Parulan Jr. and Ma. Elena Parulan (2010) (Void SPA/Sale + Conjugal Property)

Doctrines:

• Art. 1877: General Power of Attorney

a. Agency couched in general terms comprises only acts of administration

• The power of Administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (Arts 1876-1878).

Facts:

Spouses Parulan, who are separated-in-fact, owned 2 parcels of land in BF Homes, Paranaque, registered under TCT 63376 to 77. On Jan. 1991, Atanacio, a real estate broker, caused Elena Parulan, the wife, to meet with petitioners, Spouses Aggabao regarding the sale of the lands. During the meeting Elena showed them a copy of a special power of attorney executed by Dionisio (husband) on Jan 1991, authorizing Elena to sell the property. After the meeting, they paid 20k as earnest money and arranged the terms of payment.

The Aggabaos then went to the Register of Deeds of Paranaque to inquire about the lots. They found out that the land under 63377 is subject of an existing mortgage in favor of Los Banos Rural Bank, attached is a court order authorizing Elena to mortgage the said land. The mortgage was effected through a special power of attorney executed by Dionisio. They inquired with the Los Banos Rural Bank regarding the mortgage of the second land and the latter told them that the bank asked for a court order because the land was part of the spouses’ conjugal properties.

Following such verification, the Aggabaos complied with the terms of payment (they paid the mortgage with Los Banos Rural Bank) and paid the final amount of 700k. However Elena only executed a deed of absolute sale and failed to deliver the owner’s duplicate of the TCT 63376, alleging that it was in the hands of a relative in Hong Kong. She promised that it would be delivered in a week. The second TCT (63377) however was cancelled and a new one was issued in the name of the Aggabaos. Elena failed to deliver as promised.

Petitioners found out that the TCT was with Atty. Parulan, the brother of Dionisio, who also had a SPA executed by Dionisio, authorizing him to sell both lands. Atty. Parulan asked for 800k from the Aggabaos in exchange for TCT 63376. He gave the petitioners a moratorium for their decision. However, petitioners did not respond. Atty. Parulan found out that the Aggabaos already paid in full to Elena. Atty. Parulan then sued them (the Aggabaos + Elena) and asked the court for the nullification of the deed of absolute sale and cancellation of titles issued under it. Petitioners on the other hand sued for specific performance against respondents. The cases were consolidated.

The RTC nullified the deed on the ground that the SPA held by Elena is a forgery. CA affirmed. They also rejected the contention of the Aggabaos that they were buyers in good faith, because according to them (the courts) the Aggabaos did not exercise ordinary prudence in buying said lots. Thus this petition.

Petitioners contend that because the spouses were married prior to the Family Code, the provisions regarding Conjugal Partnership under the Civil Code should apply. According to the CC, the husband is the administrator of the Conjugal Properties. The remedy of the wife in case the husband disposes of any property is to ask for annulment of the contracts (Art173). Therefore, according to them, the contract was merely voidable and maybe subject to ratification. And such ratification, according to them, happened when Atty. Parulan made an offer to give the TCT for 800k.

Issues:

1. W/N the sale is merely voidable under Art 173.

2. W/N petitioners were buyers in good faith.

3. W/N the Veloso doctrine applies.


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Held/Ratio:

1. NO. The sale is VOID. Art 173 has been expressly repealed by the Family Code. Secondly, the sale was made in 1991, years after the Family Code was promulgated. Therefore, the provisions of the Family Code should apply. Moreover the Family Code states that it may be applied retroactively. In which case, under the Family Code provisions on the CPG, both spouses are administrators of the property. The sale is VOID pursuant to art 124 par 2 of the Family Code:

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.

Nonetheless, the SC explained that even if the power of administration is with Dionisio, pursuant to the repealed provisions, and he conferred a SPA to his brother for the sale of the lands, the brother still has no power of administration -- he may not ratify the contract. “The power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article 1878) Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did not include or extend to the power to administer the property.”

2. NO. They failed to exercise due diligence in inquiring whether or not Elena had the power to alienate such properties especially when they were made aware by the Los Banos Bank that the lands were part of the Conjugal Partnership. They should have inquired about the authenticity of the SPA, and not merely on the liens and encumbrances on the subject lands.

3. NO. In Veloso, the land was not part of the conjugal property. It was part of the exclusive properties of one of the parties. Therefore even if the petitioners therein failed to inquire about the authenticity of the SPA, Art 124 would not apply.


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Dominion Insurance Corporation v. CA, Guevarra (2002) (Insurance Claims, Personal Money Payment, Recovery)

Doctrines:

• From The Case: CIVIL LAW; CIVIL CODE; AGENCY; WHEN PRINCIPAL IS NOT LIABLE FOR EXPENSES INCURRED BY AGENT; CASE AT BAR. — Respondent Guevarra's authority to settle claims is embodied in the Memorandum of Management Agreement dated February 18, 1987 which enumerates the scope of respondent Guevarra's duties and responsibilities as agency manager for San Fernando, Pampanga. . . . In settling the claims mentioned above, respondent Guevarra's authority is further limited by the written standard authority to pay, which states that the payment shall come from respondent Guevarra's revolving fund or collection. . . . The instruction of petitioner as the principal could not be any clearer. Respondent Guevarra was authorized to pay the claim of the insured, but the payment shall come from the revolving fund or collection in his possession. Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. This conclusion is in accord with Article 19181, Civil Code.

• From the Outline: Although “Special Power of Attorney2” was issued by the insurance company to its agency manager, it (sic) wordings show that it sought only to establish an agency that comprises all the business of the principal within the designated locality, but couched on the general terms and consequently was limited only to acts of administration. A general power permits the agent to do all the acts which the law does not require a special power. Thus, the act enumerated or similar to those enumerated in the “Special Power of Attorney” (i.e.

1. Civil Code of The Philippines article 1918. This article provides:

Article 1918. The principal is not liable for the expenses incurred by the agent in the following cases: 1. If the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the

benefits derived from the contract; 2. When the expenses were due to the fault of the agent; 3. When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware

thereof; 4. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain

sum. (n) 2. Id art 1878-1880. These articles provide:

Art. 1878. Special powers of attorney are necessary in the following cases: 1. To make such payments as are not usually considered as acts of administration; 2. To effect novations which put an end to obligations already in existence at the time the agency was constituted; 3. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections

to the venue of an action or to abandon a prescription already acquired; 4. To waive any obligation gratuitously; 5. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a

valuable consideration; 6. To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; 7. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are

under administration; 8. To lease any real property to another person for more than one year; 9. To bind the principal to render some service without compensation; 10. To bind the principal in a contract of partnership; 11. To obligate the principal as a guarantor or surety; 12. To create or convey real rights over immovable property; 13. To accept or repudiate an inheritance; 14. To ratify or recognize obligations contracted before the agency; 15. Any other act of strict dominion. (n)

Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (n) Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a)


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really a general power of attorney) did not require a special power of attorney, and could only cover acts of administration.

Facts:

Acting as agent for petitioner Dominion, Guevarra paid P156,473.90 in settling the claims of several insured clients of petitioner out of his personal money. Guevarra thereafter filed a civil case for sum of money to recover said amount. The RTC and the CA rendered judgment in favor of Guevarra.

On appeal, Dominion claimed Guevarra is not entitled to reimbursement because he did not act within his authority as agent for Dominion.

Issues:

1. W/N Guevarra acted within his authority as an agent for Dominion Insurance.

2. W/N Guevarra is entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured.

Held/ Ratio:

1. No, because to make such payments as are not usually considered as acts of administration, and such act, thus, would require a Special Power of Attorney.3

A perusal of the “Special Power of Attorney” executed between Guevarra and Dominion Insurance would show that petitioner and respondent intended to enter into a principal-agent relationship. Despite the word "special" in the title of the document, the contents reveal that what was constituted was actually a general agency4. The agency comprises all the business of the principal but, couched in general terms, it is limited only to acts of administration. A general power permits the agent to do all acts for which the law does not require a special power. Thus, the acts enumerated in or similar to those enumerated in the “Special Power of Attorney agreement” do not require a special power of attorney.

The payment of claims is not an act of administration. The settlement of claims is not included among the acts enumerated in the “Special Power of Attorney”, neither is it of a character similar to the acts enumerated therein. A special power of attorney is required before respondent Guevarra could settle the insurance claims of the insured.

Also, the instruction of petitioner as the principal could not be any clearer. Respondent Guevarra was authorized to pay the claim of the insured, but the payment shall come from the revolving fund or collection in his possession. Having deviated from the instructions of the principal, the expenses that respondent Guevarra

3. Id, article 1878 (1)

4. The terms of the agreement read: "That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., 17 a corporation duly organized and existing under

and by virtue of the laws of the Republic of the Philippines, . . . represented by the undersigned as Regional Manager, . . . do hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo Guevarra . . . to be our Agency Manager in San Fdo., for our place and instead, to do and perform the following acts and things:

"1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING with the right, upon our prior written consent, to appoint agents and sub-agents.

"2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for and on our behalf. "3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and receive and give effectual receipts

and discharge for all money to which the FIRST CONTINENTAL ASSURANCE COMPANY, INC., 18 may hereafter become due, owing payable or transferable to said Corporation by reason of or in connection with the above-mentioned appointment.

"4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal proceedings against the said Corporation."


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incurred in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. This conclusion is in accord with Article 19185, Civil Code.

2. No, if under the laws on agency. His right to recover is under the general law of obligations and contracts, most specifically, Article 1236, second paragraph.6 To rule otherwise would be unjust enrichment of Dominion Insurance.

Veloso v. CA (1996) (innocent purchaser for value; wife; general power of attorney)

Doctrines:

• Documents acknowledged before a notary have the evidentiary weight with respect to their due execution.

• There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent of attorney in fact the power to sell the subject property.

• The separate power of attorney can be included in the general power of attorney when the act of transaction for which the special power is required is specified therein.

Facts:

Francisco Veloso is the owner of a parcel of land (177 square meters) located in Tondo, Manila. The land was covered by a TCT and registered under his name. However, the TCT was cancelled a new one was issued in the name of Aglaloma Escaro.

Veloso claimed that he was the sole owner of the property and he never authorized anyone to sell the land. He further alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out his copy was missing. He went to the Register of Deeds to verify and he found out that his TCT was cancelled and is now under the name of Escario.

A general power of attorney and a deed of absolute sale executed by his wife, Irma as his attorney-in-fact supported the TCT. However, Veloso denied executing the power of attorney. He prayed that a temporary restraining order be issued over the land.

Issues:

1. W/N there was a valid sale of the subject property.

Held/Ratio:

1. YES.

The assailed power of attorney was valid and regular on its face. It was notarized and therefore has evidentiary weight with regard to its due execution. Furthermore, if the General Power of Attorney expressly granted the power to sell the property to the agent/ attorney in fact, there is no need to execute a separate and special power of attorney.

“To buy or sell ---- lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said attorney shall deem fit and proper.”

Even assuming that the General Power of Attorney and Deed of Sale is void, Aglaloma Escaro is still the lawful owner of the property. She is deemed an innocent purchaser for value because she relied on the General Power of

5. Supra note 1 article 1918 (1) 6. Civil Code of the Philippines article 1236, second paragraph. This article provides:

"Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor


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Attorney presented by Veloso’s wife, Irma. There was no reason for Escaro not to believe in Irma’s authority as she is the wife of Veloso and was in possession of the title of the land. She is a buyer in good faith.

Pineda v. CA (First One) (marine services, group policy, special powers of attorney)

Doctrine:

• Outline: Special powers of attorney should be strictly construed.

• Case: The employer is considered the agent of the insurer in performing the duties of administering group insurance policies.

Facts:

In September 1983, Prime Marine Services, Inc. (PMSI) a crewing/manning outfit, procured a Group Policy from Insular Life Assurance Co., Ltd. (Insular) to provide life insurance coverage its sea based employees enrolled under the plan. On February 17, 1986, during the effectivity of the policy, six covered employees of the PMSI perished at sea when their Greek cargo vessel, M/V Nemos sunk somewhere in EL Jadida, Morocco. Following the tragic demise of their loved ones, Pineda and the other beneficiaries sought to claim death benefits due them and, for this purpose, they approached the President and General Manager of PMS, Capt. Roberto Nuval. The latter evinced willingness to assist Pineda and others to recover Overseas Workers Welfare Administration (OWWA) benefits arising from the deaths of their husbands/sons. They were thus made to execute, with the exception of the spouses Alarcon, special powers of Atty. authorizing Capt. Nuval to, among others, “follow up , ask, demand, collect and receive” for their benefit indemnities of sums of money due them relative to the sinking of M/V Nemos. By virtue of these written powers of attorney, Pineda and the others were able to receive their respective death benefits.

Unknown to them, PMSI, in its capacity as employer and policyholder of the life insurance of its deceased workers, filed with Insular formal claims for an in behalf of the beneficiaries, through its President, Capt. Nuval. Among the documents submitted by Capt. Nuval were the five special powers of atty. Executed by Pineda and others. On the basis of these documents, Insular released six checks four for P200,00.00 each, one for P50,000.00 and another for P40,00.00 payable to the order of the beneficiaries. These checks were released to the treasurer of PMSI, who was the son-in-law of Nuval. The transfer was made upon the instructions of Capt. Nuval over the phone to Mr Urbano the Asst. Dept. Manager for the Group Administration Dept of Insular Life. Upon receipt of the checks, Capt. Nuval endorsed and deposited them in his account with the Commercial Bank of Manila, now Boston Bank.

On July 1989, Pineda and others learned that they were entitled to life insurance benefits under a group policy with Insular, they sought to recover these benefits; however, Insular said that their liability is already extinguished upon the issuance of the 6 checks to PMSI. Thus, a case was filed against Insular.

Issues:

1. W/N the special powers of attorney were sufficient to authorize Capt. Nuval to receive the proceeds of the insurance pertaining to the beneficiaries

2. W/N Insular is bound by the misconduct of its agent, Capt. Nuval.

Held/Ratio:

1. NO. The special powers of attorney executed by petitioners Luz Pineda, Lucia B. Lontok, Dina Ayo, Celia Calumag, and Marilyn Montenegro, respectively, on 14 May 1986 uniformly granted to Capt. Rosendo Nuval the following powers:

a. To follow-up, ask, demand, collect and receipt for my benefit indemnities or sum of money due me relative to the sinking of M.V. NEMOS in the vicinity of El Jadida, Casablanca, Morocco on the evening of February 17, 1986; and

b. To sign receipts, documents, pertinent waivers of indemnities or other writings of whatsoever nature with any and all third persons, concerns and entities, upon terms and conditions acceptable to my said attorney.


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The court agrees with the Insurance Commission that the special powers of attorney "do not contain in unequivocal and clear terms authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the death of the seaman-insured. On the contrary, the said powers of attorney are couched in terms which could easily arouse suspicion of an ordinary man."

Moreover, the execution by the principals of special powers of attorney, which clearly appeared to be in prepared forms and only had to be filled up with their names, residences, dates of execution, dates of acknowledgment and others, excludes any intent to grant a general power of attorney or to constitute a universal agency. Being special powers of attorney, they must be strictly construed.

Certainly, it would be highly imprudent to read into the special powers of attorney in question the power to collect and receive the insurance proceeds due the petitioners from Group Policy No. G-004694. Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies. (General practice: Payments are COURSED THRU and NOT PAID TO Policyholders/employers)

2. YES. The employer is the agent of the insurer in performing the duties of administering group insurance policies.

The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer, however, is that the employee has no knowledge of or control over the employer's actions in handling the policy or its administration. An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control. It is clear from the evidence regarding procedural techniques here that the insurer-employer relationship meets this agency test with regard to the administration of the policy, whereas that between the employer and its employees fails to reflect true agency. The insurer directs the performance of the employer's administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more constricted control over the employer's conduct.

Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. Unfortunately, through its official, Mr. Urbano, it acted imprudently and negligently in the premises by relying without question on the special power of attorney.

The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs.

Thus, Insular is bound by the misconduct of the agent.


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Home Insurance Company v United States Lines Co., et al. (Pre-trial conference, absent client, special power of authority to compromise)

Doctrine:

• Special powers of attorney is (are? Hahahha) required to compromise a client’s litigation.

Facts:

A shipment of 200 cartons of carbonized adding machine rolls arrived in Manila. It was discharged to the Bureau of Customs as arrastre operator and subsequently consigned to Burroughs, Limited. When the cartons were delivered to Burroughs, some were damaged. Burroughs claimed damages (P 2,605.64) from the Bureau of Customs, the United Lines Company (owner of cargo ship) and Home Insurance Company (who insured the cargo.) Home Insurance Company paid the amount to Burroughs and sought reimbursement from either the Bureau of Customs or United States. Both refused to reimburse prompting Home Insurance to file a case for recovery of sum of money against them.

United States Lines denies responsibility saying that the damage was incurred while the cargo was in the custody of the Bureau of Customs. However, the Bureau of Customs cannot be sued because the performance of arrastre operations is incidental to the government’s power of taxation. Definition of arraste operations: receiving, conveying, and loading or unloading merchandise on piers or wharves.)

On the day of pre-trial, only the counsel of Home Insurance appeared. The plaintiff did not appear personally. Counsel did not have written authority to compromise but he assured the court that he was verbally given authority. The lower court dismissed the case because of failure of the plaintiff to appear at the pre-trial conference.

Issues:

1. W/N the lower court rightly dismissed the case for the failure of plaintiff to appear personally during the pre-trial conference.

Held/Ratio:

1. YES, the lower court was right to dismiss the case for the failure of the plaintiff to appear personally during the pre-trial conference.

Under the Rules of Court, referring to the mandatory pre-trial conference, the court shall direct the parties and their attorneys to appear before it for a conference…a party who fails to appear at a pre-trial conference may be considered in default.

Furthermore, Section 23, Rule 138, of the Rules of Court states: Attorneys have authority to bind their clients in…all matters of ordinary judicial procedure. But they cannot, without special authority, compromise their client’s litigation… Counsel for petitioner Home Insurance argued that he had verbal authority. Even if it is true that the Rules of Court does not require the special authority to be in writing, it is generally expected to be in writing, and if not, at least established by evidence other than the self-serving assertion of counsel himself.


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Estate of Lino Olaguer v. Ongjoco (2008) (must be written)

Doctrines:

• Art. 1874: When the sale of a piece of land or any interest therein is made through an agent, the authority of the latter shall be in writing. Absent this requirement, the sale shall be void.

• Art. 1878: A special power of attorney is necessary in order for an agent to enter into a contract by which the ownership of an immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.

• Even if a document is designated as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the performance of the act. The 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.

Facts:

[This is an extremely complicated case involving a multitude of parcels of land in dispute. It is very hard to follow, so the facts stated here may not be pretty. The doctrines are the only important parts.]

Lino Olaguer died on October 3, 1957. Special proceedings for probate of a will ensued. The probate court ordered the sale of some properties of the estate to pay for its obligations (Order1). Estate administrators, Olivia and Eduardo Olaguer, sold to Pastor Bacani 12 parcels of land, which was approved by the probate court. The next day, Pastor Bacani sold all of them back (4 to Olivia; 7 to Eduardo) (SaleX), with the remaining parcel (Lot 76) divided into 13 (6/13 to Olivia; 7/13 to Eduardo).

Still relying on Order1 from the probate court, Olivia and Eduardo sold to Estanislao Olaguer 10 parcels of land (SaleY), which the probate court approved after the sale. Thereafter, Olivia executed a special power of attorney to Jose Olaguer authorizing him to "sell, mortgage, assign, transfer, endorse and deliver" her shares in Lot 76. Estanislao executed the same in favor of Jose for his other lands. Jose mortgaged 3 of Estanislao's properties to PNB, which the latter subsequently foreclosed and sold at public auction to the Republic of the Philippines (used for agrarian reform).

Estanislao also executed a general power of attorney to Jose, giving him general control and supervision of his business and properties, and to sell/mortgage his properties. Estanislao then sold to Jose the 10 parcels of land he bought from Olivia and Eduardo.

Jose, as attorney-in-fact of Estanislao, sold to Virgilio, his son, 2 properties of Estanislao. Virgilio then executed a general power of attorney in favor of his father, Jose.

Jose divided Lot 76 into 11 (A-K). Acting as attorney-in-fact of Olivia, he then sold 6 of them (B-G) to Virgilio. B&C were made into Lot1&2. Lots 1&2 were sold by Jose, claiming to be Virgilio's attorney-in-fact, to Ongjoco. Later on, lots 76-D,E,F,G were also sold to Ongjoco under the same general power of attorney, twice (there were two separate transactions, with different dates, amounts and notaries, for each parcel of land. It was not specified why). Ongjoco did not verify the titles.

Later on, the estate of Lino Olaguer, represented by his legitimate children, sought to make the various sales annulled, claiming they were absolutely simulated/fictitious. SaleX and SaleY were declared by the RTC to be null and void, adding that the approval by the probate court did not make SaleY valid. The RTC ordered the reconveyance and cancellation of titles of the lands in question. The RTC also said that Ongjoco was a buyer in bad faith since he did not verify the title to the land and the capacity of the vendor (agent) to convey the properties.

The CA reversed, saying Ongjoco was an innocent purchaser for value because he relied on a written power of attorney. It ruled that even if Ongjoco did not verify the title of the principal, he was not required to do so since he can rely merely on the written authority of the agent. (The mortgage to PNB was not included in the complaint, so it was not declared null. The Philippines was also held as a transferee in good faith and could retain the land it acquired.)

This is a petition for review on certiorari on the decision of the CA.


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Issues:

1. W/N Ongjoco is an innocent purchaser for value

Held/Ratio:

1. YES & NO. He was an innocent purchaser for value for 4 parcels of land (76-D,E,F,G), but a buyer in bad faith for the other 2 parcels (1&2).

He was in bad faith for 1&2 because while he claims there was a written power of attorney, no such evidence was presented in the trial court. All there was to go on was his self-serving statement that there was such a document. Absent this crucial piece of evidence, his contention that there was a written power of attorney authorizing the agent to sell to him the 2 parcels of land must fail.

He was in good faith for D,E,F&G, even if the written authority was a general power of attorney as opposed to a special power of attorney, because the document expressly empowered the agent to sell the properties in question. Even if a document is designated as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the performance of the act. The 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. Furthermore, the document was notarized, and as such, it is considered a public document and it has the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence.

The fact that there were 2 separate transactions for each sale of a parcel of land was not held to be evidence of bad faith. They do not indicate that Ongjoco knew about any defect in the titles.


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City Lite Realty Inc. v. Court of Appeals (2000) (Violago Property)

Doctrines:

• Art 1874 “When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise the sale shall be void”

Facts:

Private Respondent F.P. Holdings Realty Corporation (FP Holdings) was the registered owner of a parcel of land along E. Rodriguez Ave, QC, also known as “Violago Property” or the "San Lorenzo Ruiz Commercial Center", with an area of 71, 754sqm (9,192 sqm in front, 23,332 sqm in the middle and 39,230sqm in the back). The property was offered for sale to the general public through the circulation of a sales brochure. The brochure indicates an asking price of P6,250/sqm with Meldin Al G. Roy of Metro Drug Inc. as the contact person.

Respondent Roy sent a sales brochure together with a location plan and copy of TCT to Atty. Gelacio Mamaril (lawyer and real estate broker) who passed the documents on to Antonio Teng (EVP) and Atty. Victor P. Villanueva (Legal Counsel) of City Lite Realty Inc.

After meeting Roy, City Lite sent a letter to convey its interest to purchase ½ of the front lot which Roy replied that it would take time to subdivide the lot and that FP Holdings is not receptive to the purchase of only half of the front lit. After a few days, Atty. Mamaril wrote Metro Drug (Attn to Roy) expressing the desire of City Lite to purchase the entire front lot and asking for the price to be reduced and that it be in installment for a certain period. Roy made a counter offer subject to the ff terms and conditions: the price shall be P6,250 per sqm or a total of P57,450,000.00; purchase price shall first be paid with a downpayment of 15M and balance shall be payable within 6 months from date of downpayment without interest.

City Lite’s officers and Mamaril met with Roy the next day at the Mandarin Hotel Makati to consummate the transaction. Later in the afternoon, Petitioner conveyed their formal acceptance to the terms and conditions set forth by Roy.

However, despite demand, FP Holdings refused to execute the corresponding deed of sale. Upon its claim of protecting its interest as vendee of the property suit, City-Lite registered an adverse claim to the title of the property with the Register of deeds of QC. FP Holdings filed a petition for the cancellation of the adverse claim against City Lite, to which City Lite cause the annotation of the first notice of lis pendens.

FP Holdings caused the resurvey and segregation of the property and then asked the Register of deeds to issue separate titles.

FP Holdings petition was dismissed. City Lite instituted a complaint against FP Holdings for specific performance and damages, which caused the second notice of lis pendens on the new TCT. After annotation, the property was transferred to Viewmaster Construction Corp, to which new TCT was issued (notice of lis pendens carried over).

TC ruled in favor of City-Lite, Viewmaster filed MR, which was denied, CA reversed decision of TC and ruled in favor of FP Holdings.

Issues:

1. W/N Metro Drug and Meldin Al G. Roy were authorized to sell the property of City Lite

Held/Ratio:

1. NO. Art 1874 of the Civil Code provides “When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise the sale shall be void.” FP Holdings President issued a written memorandum requesting Metro Drug’s assistance in finding buyers for the property. The memorandum in part stated “"We will appreciate Metro Drug's assistance in referring to us buyers for the property. Please proceed to hold preliminary negotiations with interested buyers and endorse formal offers to us for our final evaluation and appraisal." Meldin Al G. Roy and/or Metro Drug was only to assist FP Holdings in getting prospective buyers. Final evaluation, appraisal and acceptance of the transaction can be made only by


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FP holdings. Roy was only a contact person with no authority to conclude a sale of the property. In fact, a witness for petitioner even admitted that Roy and/or Metro Drug was a mere broker, and Roy's only job was to bring the parties together for a possible transaction.

Due to lack of authority to sell the property, the sale between Roy and City Lite is declared null and void.

Pineda v. Court of Appeals (2011) (White Plains – California Exchange)

Doctrine:

• Special Power of Attorney, when essential: The Civil code provides that in the sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. This authority must be in writing, otherwise, the sale shall be void.

Facts:

Appellees Nelson and Mercedes Banez are the original owners of a parcel of land, together with the improvements thereon (house), located at 32 Sarngaya St., White Plains, Quezon City. This land was subject to a mortgage in favor of the Government Insurance System (GSIS)

Alejandria Pineda is the owner of a house, located at 5224 Buchanan St., Los Angeles California. This house was subject to an $84,000 mortgage obligation.

On January 11, 1983, spouses Banez and Pineda, together with her spouse Caldona, executed an “Agreement to Exchange Real Properties” over their respective properties. In the document, the parties agreed to exchange properties and to consummate the exchange not later than June 1983. In the same agreement, Pineda undertook to pay earnest money amounting to $12,000 on or before the first week of February 1983. Moreover, the parties mutually undertook to clear the mortgages over their respective properties.

Meanwhile, prior to the consummation of the exchange, the spouses Banez were allowed to occupy Pineda’s California property, or to lease the said property to a third person. Conversely, Pineda was allowed to occupy the spouses’ White Plains property.

On December 18, 1984, Pineda executed an “Agreement to Sell” over the White Plains property in favor of appellant spouses Adeodato Duque Jr. and Evangeline Duque. In the agreement to sell, Pineda sold the property to the Duques for P 1.6M. The agreement stipulated the payment of P 450,000 as down payment in exchange for Pineda’s obligation to release the property from any encumbrances and to deliver the title of the property to the Duques. The agreement further stipulated that the balance be paid to Pineda on or before the end of January 1985 and that upon full payment, Pineda shall be bound to deliver to the Duques a deed of absolute sale signed by the registered owner. Out of the down payment given by the Duques, Pineda settled the GSIS mortgage. The entire agreement between Pineda and the Duques were unknown to the Banez spouses.

After the settlement of the mortgage, Pineda requested a written authority from the Banez spouses so that the title of the White Plains property may be released from the GSIS. The Banez spouses gave Pineda authority with the understanding that the title would be delivered to them personally. Meanwhile, the Duques started occupying the White Plains property some time in June or July of 1985.

Upon the Banez spouses’ return to the Philippines in March 1985, they discovered that the Duques were already occupying the White Plains property. It was then when Adeodato Duque informed the Banez spouses of his interest to buy the property, also mentioning that they had given Pineda money to facilitate the redemption of her property in the U.S. When the spouses Banez confronted Pineda, she informed them that the title of the White Plains property was already with the Duques. The spouses did not insist on getting the title from the Duques since they already expressed interest in buying the property.

Consequently, the exchange agreement between spouses Banez and Pineda was rescinded due to Pineda’s failure to clear the mortgage obligation of her California property.


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Negotiations relative to the purchase of the White Plains property continued between spouses Banez and the Duques. When the negotiations failed, the spouses demanded that the Duques vacate the property.

Spouses Banez claim that upon inquiry with the Register of Deeds, they discovered that their title over the White Plains property was cancelled in favor of a new one issued in the name of Pineda. The issuance of the new title was facilitated by fictitious deed of sale bearing their forged signatures. They informed the Duques about this in a meeting in the U.S. In the same meeting, the parties agreed to the sale of the property. However, the records are silent as to the outcome of the said agreement.

Thus, the Banez spouses filed this present complaint before the RTC of Quezon City. Pineda was declared in default due to failure to respond to summonses, while the Duques filed their answer.

The trial court rendered a decision in favor of the Banez spouses, declaring them to be the absolute owners of the White Plains property in fee simple. The fictitious deed of sale between the spouses and Pineda was declared void ab initio, invalidating all the subsequent agreements it facilitated, including the agreement to sell between Pineda and the Duques. The Duques were declared purchasers in bad faith and were required to vacate the subject property. On appeal, the CA affirmed the RTC’s decision. Hence, this appeal via certiorari.

Issue:

1. W/N the petitioners Pineda and spouses Duque validly acquired the White Plains property.

Held/Ratio:

1. NO, the petitioners did not validly acquire the White Plains property.

The issue is factual and may not be raised via certiorari. Nevertheless, upon examination it can be seen that the Banez spouses were the original owners of the property and remained to be the owners because the exchange agreement between Pineda and the Banez spouses was never consummated. Thus, at the time the Duques executed the agreement to sell with Pineda could not sell the property because he was not the owner, neither did he have authority to sell on behalf of the real owners, the Banez spouses. Adeodato Duque in fact confirmed that Pineda was not equipped with a special power of attorney to sell.

A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, Pineda could not sell the property to the Duques. Any sale in favor of the Duques is void.


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Cosmic Lumber v. CA - “fraudulent sale of lot void”

Doctrine:

• Agent’s authority to sell land must be in writing and must explicitly be granted by the principal.

• The general rule is that a principal is chargeable with and bound by the acts of his agent BUT there is a well-established exception that where an agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal.

Facts:

On January 28 1985, COSMIC LUMBER CORPORATION executed a special power of attorney appoint Paz G. Villamil-Estrada as attorney in fact. VILLAMIL-ESTRADA was granted authority to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443, for 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.

On March 11 1985, VILLAMIL-ESTRADA instituted an action for ejectment of private respondent PEREZ. On November 25 1985 PEREZ and VILLAMIL-ESTRADA entered into a Compromise Agreement allowing PEREZ to purchase a portion of the easternmost part of lot 443, the area that has been occupied by PEREZ for several years now. It was sold at a price of P26,640.00 computed at P80.00/square meter.

The compromise agreement was not executed within the 5-year period from the date of finality of the decision stipulated by the parties because VILLAMILL-ESTRADA failed to produce the owner’s duplicate copy of Title No. 37649 needed to segregate from lot 443 that PEREZ purchased. PEREZ filed a complaint to revive the judgment.

COSMIC LUMBER CORPORATION asserts that they did not have knowledge of such compromise agreement between VILLAMIL-ESTRADA and PEREZ. COSMIC sought to annul the compromise agreement and the ruling of the trial court on the ground that it was void because:

a. VILLAMIL-ESTRADA did not have authority to dispose, of, sell, encumber or divest COSMIC of its ownership over the property

b. VILLAMIL-ESTRADA’s authority was confined to the institution and filing of ejectment suit / recovery of property

c. The authority to enter into a compromise agreement was limited to the eviction of third persons occupying the property

d. The amount PEREZ paid for the portion of lot 443 (P26,640.00) was never received by COSMIC

e. PEREZ acted in bad faith because he had knowledge of the want of authority of VILLAMIL-ESTRADA

f. Disposal of corporate property indispensably requires a board resolution of directors, a fact which is wanting

The CA dismissed the complaint as well as the motion for reconsideration. The CA ruled that the nullity of the compromise agreement may be raised only to prevent the execution of the compromise agreement but not as a ground for annulment of judgment.

Issue:

1. W/N VILLAMIL-ESTRADA had the authority to dispose of a portion of lot 443.

2. W/N the trial court judgment was void.

Held/Ratio:

1. NO. VILLAMIL-ESTRADA did not have the authority to dispose of a portion of lot 443. The authority granted upon her by COSMIC was explicit and exclusionary. She may only institute ejectment actions and enter into compromise agreements only insofar as this was protective of the rights and interests of COSMIC in the


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property. Nowhere in the authorization was VILLAMIL-ESTRADA granted expressly or impliedly any power to sell property and neither can this be inferred from the authority “to enter into a compromise agreement” because of the limitation “so far as it shall protect the rights and interest of the corporation in the aforementioned lots.” Alienation by sale of an immovable certainly cannot be deemed protective of the rights of COSMIC. Also, aside from COSMIC never receiving the proceeds of the sale, the price of P80.00 per square meter was very much less than the assessed value of the land which amounts to P250.00 per square meter.

Furthermore, when the sale of a piece of land or any interest thereon is through an agent, the authority of the agent must be in writing; otherwise, the sale is void.

2. YES. The CA erred when they said that the TC’s judgment may not be annulled but the nullity of the compromise agreement may be raised only to impede the execution of the same. VILLAMIL-ESTRADA acted without authority. The sale ipso jure is void. So is the compromise agreement. Consequently, the judgment based thereon is necessarily void. A judgment based on a compromise agreement entered into by an attorney in fact without specific authority from the client is void and may be impugned and its execution restrained. (Jacinto v. Montesa, Justice J. B.L. Reyes) The conduct of VILLAMIL-ESTRADA constituted extrinsic fraud by reason of which the judgment rendered thereon should have been struck down.


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Gutierrez Hermanos v. Engrancio Orense (1914) Facts:

Orense was the owner of a parcel of land located at Guinobatan, Albay. Allegedly, Duran, his nephew, and with Orense’s knowledge and consent, sold to the firm of Gutierrez Hermanos (plaintiff) on February 1907 the aforementioned parcel of land for P1,500.00. Duran reserved himself the right to repurchase it at the same price within the period of 4 years from the date of the instrument.

On the expiration of the redemption period, February 1911, the firm of Gutierrez Hermanos demanded that the property be delivered to them. Orense refused. He based his refusal on that he was the registered owner of the property; that he had neither given a verbal authorization or a written authority for Duran to sell the property to Gutierrez Hermanos in his name; and that, prior to the execution of the sale, he performed no act as to induce the plaintiff to believe that Duran was authorized to sell the property.

Thereafter, the plaintiff charged Duran with estafa in the Court of First Instance for representing himself the owner in the Deed of Sale of the property when in fact he was not. However, in the trial, Orense stated during interrogation of the fiscal in the case that he had consented to Duran selling the property with right of redemption, to the plaintiff. Therefore, Duran was acquitted by the CFI of estafa.

As a result of the acquittal of Duran for estafa, the plaintiff filed a complaint and prayed that Orense be compelled to execute a deed for the transfer and conveyance of the property to the plaintiff. The plaintiff alleged that Orense’s testimony in the estafa case against Duran ratified the authority given by Orense to Duran.

Issues:

1. W/N the testimony of Orense in the trial of Duran ratified his unwritten authority to sell the property to the plaintiff.

Held/Ratio:

1. Yes. Article 1259 of the old Civil Code prescribes “No man can contract in the name of another without being authorized by him or without having his legal representation according to law”

“A contract executed in the name of another by one who has neither his authorization nor legal representation shall be void, unless it should be ratified by the person in whose name it was executed before being revoked by the other contracting party”

Indeed the Deed of Sale with right of Redemption was null and void in the beginning because Orense never gave written and signed authorization to Duran to sell the property. However, the records have proven that Orense gave consent to the contract of sale. This consent was proved in a criminal action for estafa against Duran when Orense, the principal, confirmed that he gave consent in the sale of the property. Consequently, in the present civil case against Orense for the conveyance of property, his testimony in the criminal case was used to prove that he ratified the acts of Duran. Therefore, as principal, Orense is bound to abide by the consequence of the agency as though it has been in writing. According to the Court, Orense gave consent to the property and met the requirement of the law and legally excuses the lack of written authority and is full ratification of the acts of Duran and produces the effect of an express power of agency.

Disclaimer: Please be forewarned that this doctrine was based on the old Civil Code and therefore it may be in conflict with prevailing doctrine and jurisprudence.


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Shopper’s Paradaise Realty v. Roque Doctrine:

• Special Power of Attorney, needed for lease of more than one year.

Facts:

On 23 December 1993, petitioner Shopper’s Paradise Realty & Development Corporation (lessee), represented by its president, Veredigno Atienza, entered into a 25-year lease with Dr. Felipe C. Roque (lessor). Simultaneously, they likewise entered into a memorandum of agreement for the construction, development and operation of a commercial building complex on the property. Before the documents could be annotated, Dr. Roque died.

Dr. Roque’s son, Efren, upon returning from the US, sought to annul the contract on the basis that the property has been already donated to him by his father prior to the execution of the contract. However, while the donation was in a public instrument, the title remained with Dr. Roque and was transferred only 16 years later.

It was found that the petitioners knew that the property already belonged to Efren at the time the contract was perfected.

Issue:

1. W/N Dr. Roque is an agent who can bind Efren Roque to enter into the lease.

Held/Ratio:

1. NO. In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter. Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent. In this case, it was not shown that Dr. Rouque was authorized with a special power of attorney.


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Vda. De Chua v. IAC (Chuas lease, special power of attorney)

Doctrine:

• In cases where a contract of lease for more than a year is entered into by the agent of the lessor and not the lessor himself, the law requires that the agent be armed with a special power of attorney to lease the premises

Facts:

In 1950, Herrera, the owner of the land and lessor, executed a Contract of Lease in favor of Tian On (or Sy Tian On) whereby an area of 151 sq. meters was leased for a term of ten years, renewable for five. The contract of lease also had a stipulation giving Tian On an option to buy the property and that the Herrera guarantees to leave the possession of said property to Tian On for ten years for as long as he faithfully fulfills the terms and conditions of contract.

In accordance with the lease, Tian On built a residential house. Four years after the execution for the contract of lease, Tian On executed a Deed of Absolute Sale of Building in favor of Chua Bok for P8,000. Tian On assigned his rights and privileges as lessee of the lot with its corresponding obligations to Chua Bok. The sale was made with the knowledge and consent of Herrera, who was represented by her attorney-in fact, Vicenta de Reynes.

When the original contract of lease expired in 1960, Chua Bok and Herrera, through her alleged attorney-in-fact executed another contract of lease with a term of five years. After the expiration of the second contract of lease, Chua Bok and family remained in possession of the land up to 1978. Herrera let the Chuas stay despite the expiration of the contract.

On 1977, Herrera through another attorney-in-fact, Tormis, authorized with a special power of attorney, sold the land to the Go spouses.

Later on, Chua Bok’s successors-in-interest filed a case seeking the annulment of sale between Herrera and the Go’s, claiming that they had the option to buy the leased premises provided in the lease contracts.

RTC and CA ruled that the Chuas should vacate the land and turn them over to the Go spouses.

Issue:

1. W/N the CA erred in ordering that the Chuas vacate the premises

Held/Ratio:

1. NO. Petitioners rely on the contract of lease executed between Chua Bok and de Reynes. It should be noted that de Reynes was not armed with a special power of attorney to enter into a lease contract for a period of more than one year. In cases where a contract of lease for more than a year is entered into by the agent of the lessor and not the lessor himself, the law requires that the agent be armed with a special power of attorney to lease the premises. Art. 1878 of the Civil Code specifically provides for this. Although Herrera granted a tacit renewal to respondents after the expiration of the contract of lease, such renewal is only limited to the terms of the contract which are germane to the lessee’s right of continued enjoyment of the property and does not extend to alien matters, like the option to buy the leased premises.


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BA Finance Corporation v. CA (1991) (chattel mortgage / car insurance)

Doctrines:

• When the finance company executes a mortgage contract that contains a provision that in the event of accident of loss, it shall make a proper claim against the insurance company, was in effect an agency relation, and that under Article 1884, the finance company was bound by its acceptance to carry out the agency, and in spite of the instructions of the borrowers to make such claims instead insisted on having the vehicle repaired but eventually resulting in loss of the insurance coverage, the finance company had breached its duty of diligence, and must assume the damages suffered by the borrowers, and consequently can no longer collect the balance of the mortgage loan secured thereby.

Facts:

Spouses Cuady (Spouses) obtained from Supercars, Inc. a credit of P39,574.80, to buy a Ford Escort 1300. Said obligation was evidenced by a promissory note executed by Spouses in favor of Supercars, Inc., obligating themselves to pay the latter or order the sum of P39,574.80, inclusive of interest at 14% per annum, payable on monthly installments. There was also stipulated a penalty of P10.00 for every month of late installment payment. To secure the faithful and prompt compliance of the obligation under the said promissory note, the Spouses constituted a chattel mortgage on the aforementioned motor vehicle.

Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to B.A. Finance Corporation (B.A. Finance). The Spouses paid to the B.A. Finance, but still had an unpaid balance of around P2,000. The Spouses also owe B.A. Finance P460.00 representing penalties for tardy monthly installments.

B.A. Finance, as the assignee of the mortgage lien, obtained the renewal of the insurance coverage over the aforementioned motor vehicle with Zenith Insurance Corporation, when the Spouses failed to renew said insurance coverage themselves. Under the terms and conditions of the said insurance coverage, any loss under the policy shall be payable to the B.A. Finance.

The motor vehicle figured in an accident and was badly damaged. The Spouses asked the B.A. Finance to consider the same as a total loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining account and give them the surplus thereof, if any. But instead, B.A. Finance told them to just have the car repaired. The car bogged down. The Spouses requested B.A. Finance, again, to enforce the total loss provision in the insurance coverage. When B.A. Finance Corporation did not respond favorably to their request, the Spouses stopped paying their monthly installments on the promissory note. B.A. Finance Corporation sued Spouses.

B.A. Finance Corporation claims that its failure to enforce the total loss provision in the insurance policy does not operate to extinguish the unpaid balance on the promissory note, as it does not fall under Article 1231 of the Civil Code relative to the modes of extinguishment of obligations.

The Spouses insist that owing to its failure to enforce the total loss provision in the insurance policy, B.A. Finance lost not only its opportunity to collect the insurance proceeds on the mortgaged motor vehicle in its capacity as the assignee of the said insurance proceeds pursuant to the memorandum in the insurance policy which states that the "LOSS: IF ANY, under this policy shall be payable to BA FINANCE CORP., as their respective rights and interest may appear" but also the remaining balance on the promissory note.

Issues:

1. W/N B.A. Finance Corporation has waived its right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel mortgage.

Held/Ratio:

1. YES.

B.A. Finance was deemed subrogated to the rights and obligations of Supercars, Inc. when the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in question in favor of the


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former. Consequently, B.A. Finance is bound by the terms and conditions of the chattel mortgage executed between the Spouses and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance was constituted attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage. In granting B.A. Finance the aforementioned powers and prerogatives, the Spouses created in the former's favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A. Finance is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Spouses, the principal in the case at bar, may suffer.

British Airways v. Court of Appeals (2 airlines and lost luggage)

Doctrine:

• The well-settled rule is that an agent is also responsible for any negligence in the performance of its function and is liable for the damages, which the principal may suffer by reason of its negligent act.

Facts:

Mahtani decided to visit his relatives in Bombay, India. Since British Airways (BA) had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hong Kong via Philippine Airlines (PAL), and upon arrival in Hong Kong he had to take a connecting flight to Bombay on board BA. He checked in at the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects but when he arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that they might have been diverted to London.

In the Philippines, Mahtani filed his complaint against BA. BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter’s late arrival in Hong Kong, leaving hardly any time for the transfer of Mahtani’s luggage to the BA aircraft bound for Bombay. PAL argued that it was only an agent and that there was adequate time to transfer the luggage to BA facilities in Hong Kong.

The trial court rendered its decision in favor of Mahtani and dismissed the third-party complaint against PAL for lack of cause of action. The Court of Appeals also affirmed the trial court’s findings.

Issue:

1. W/N the CA was correct in the dismissal of BA’s third-party complaint against PAL

Held/Ratio:

1. No. It is a well-settled rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the passenger’s ticket is considered the principal party and the other carrier merely subcontractors or agent.

The contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hong Kong leg of the former’s journey to PAL, as its subcontractor or agent. The fourth paragraph of the “Conditions of Contracts” of the ticket issued to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay and regarded as a single operation. PAL, in transporting Mahtani from Manila to Hong Kong acted as the agent of BA.

Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. If it is proven that the latter’s negligence was the proximate cause of Mahtani’s experience, it is but logical to allow BA to sue PAL for indemnification, instead of totally absolving PAL from any liability.


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Pacific Rehouse et al v. EIB Securities (2010) (DMCI shares, no authority/consent)

Doctrines:

• Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;

• Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a)

• Article 1887 of the Civil Code provides succinctly the twin measures of how an agent should act “In the execution of the agency,” to be as follows:

(a) Agent must act “in accordance with the instructions of the principal;”

(b) In default of guiding instructions, the agent “shall do all that a good father of a family would do, as required by the nature of the business.

• Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal (n)

• Contract is VOID if:

o the agent contracts in the name of the principal

o agent exceeds the scope of his authority

o the principal does not ratify the contract,

o the 3rd party is aware of the limits of the powers granted by the principal

Facts:

Background of the case: Petition for Review on Certiorari, seeking to reverse CA decision, which revoked RTC ruling

On various dates from June 2003 - March 2004, Pacific Rehouse (petitioner, P) bought 60,790,000 Kuok Properties Inc. (KPP) shares of stock through their broker EIB Securities (respondent, R) at P 0.22 per share

On various dates from July to August 2003, P acquired 32,180,000 DMCI shares at P 0.38 per share, 16,180,000 of which was thru R.

On 01 April 2004 P and R agreed to sell all KPP shares to any buyer at the price of P 0.14 apiece, with an option for P to buy back said shares within 30 days of the transaction at P 0.18 per share

30 days after the sale, P opted not to exercise their option

On various dates in June 2004, R sold P's 32,180,000 DMCI shares at P 0.24/share without P's knowledge and consent, despite having the knowledge that such sale will result to a total loss of around P 4.5 million for P. This is in violation of Art. 1888 of the CivCode

Proceeds of the sale was used by R to buy back the KPP shares R made an unauthorized promise and commitment to the buyer/s of the KPP shares in April 2004 that P would buy back the KPP shares.

P learned of the unauthorized sales in #5 and 6 much later. P also learned that all throughout their business dealings, R had surreptitiously charged and collected from plaintiff’s exorbitant interest amounting to thirty percent (30%) of all amounts owing from the plaintiffs.

On 05 January 2005, plaintiffs wrote to R to demand that their 32,180,000 DMCI shares be transferred to Westlink Global Equities Inc., but because of the sale in #5, R could not comply with the demand.


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R later on admitted to P that they sold the 32,180,000 DMCI shares of stock of plaintiffs without the latters prior knowledge and consent, however, it claims that since P made no exceptions to the statements of account when R sent them in June 2004, the sale of P's DMCI shares in June 2004 was supposedly "validly executed".

R claims that since P owes them P 70 million they have the power to sell the stocks of P, pursuant to the provisions of the Securities Dealing Accounts Agreements that was signed by the plaintiffs in favor of the defendant, a copy of which is hereto attached and made an integral part hereof as Annex "1". Section 7 of the aforesaid Securities Dealing Accounts Agreements , which states:

The client agrees that all monies and/or securities and/or all other property of the Client (plaintiffs) in the Company's (defendant) custody or control held from time to time shall be subject to a general lien in favor of Company for the discharge of all or any indebtedness of the Client to the Company.

The company shall be entitled at any time and without notice to the Client to retain, apply, sell or dispose of all or any of the [clients] property if any such obligation or liability is not discharged in full by the client when due or on demand in or towards the payment and discharge of such obligation or liability and the Company shall be under no duty to the client as to the price obtained or any losses or liabilities incurred or arising in respect of any such sale or disposal.

RTC ruled in favor of P, finding its claims meritorious. CA reversed.

Issues:

1. W/N the sale conducted by EIB as agent involving the DMCI stocks of Pacific Rehouse, its principal, was valid.

Held/Ratio:

1. No. The sale of the DMCI shares made by EIB is null and void for lack of authority to do so, for petitioners never gave their consent or permission to the sale. The Court ruled that:

xxx. Article 1881 of the Civil Code provides that "the agent must act within the scope of his authority." Pursuant to the authority given by the principal, the agent is granted the right "to affect the legal relations of his principal by the performance of acts effectuated in accordance with the principals manifestation of consent. In the case at bar, the scope of authority of EIB as agent of petitioners is "to retain, apply, sell or dispose of all or any of the clients [petitioners] property," if all or any indebtedness or other obligations of petitioners to EIB are not discharged in full by petitioners "when due or on demand in or towards the payment and discharge of such obligation or liability." The right to sell or dispose of the properties of petitioners by EIB is unequivocally confined to payment of the obligations and liabilities of petitioners to EIB and none other. Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid the proceeds to the vendees of said shares, the act of which is clearly an obligation to a third party and, hence, is beyond the ambit of its authority as agent. Such act is surely illegal and does not bind petitioners as principals of EIB.


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Cervantes v. Court of Appeals (1999) (PAL Case)

Doctrines:

• As a rule, conclusions and findings of fact arrived at by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons.

• Where a passenger was fully aware of the need to send a letter to a particular office of an airline for the extension of the period of validity of his ticket, he cannot subsequently use what was done by airline agents, who acted without authority, in confirming his flights

• Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein Cervantes) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person (Cervantes) is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification.

• The failure of a defendant to raise the defense of lack of authority of its agents in its answer or in a motion to dismiss is cured where the said issue was litigated.

• In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Essentially the same goes with exemplary damages.

Facts:

On March 27, 1989, private respondent Philippine Airlines, Inc. (PAL) issued to petitioner, Nicholas Cervantes, a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided the expiry date of one year from issuance (March 27, 1990). The issuance of said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in 2 previous suits before Surigao RTC.

On March 23, 1990, 4 days before the expiry of subject ticket, Cervantes used it. Upon his arrival in L.A. on the same day, he immediately booked his L.A.-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. Upon learning that the same PAL plane would make a stopover in San Francisco, and considering that he would be there on April 2, 1990, Cervantes made arrangements with PAL for him to board the flight in San Francisco instead of boarding in L.A. On April 2, when the petitioner checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation in his ticket: “TICKET NOT ACCEPTED DUE TO EXPIRATION OF VALIDITY.” Cervantes then filed a complaint for damages, for breach of contract of carriage.

Issues:

1. W/N the act of PAL agents confirming subject ticket extended the period of validity of Cervantes’ ticket

2. W/N the defense of lack of authority was correctly ruled upon

3. W/N the denial of the award for damages was proper

Held/Ratio:

1. NO, PAL agents don’t have the authority to do so. And Cervantes knows it.

The plane ticket itself provides that it is not valid after March 27, 1990. In the Lufthansa case, the court held that the ticket constitute the contract between the parties. Cervantes also theorized that the confirmation by the 2 PAL agents in L.A. and San Francisco changed the compromise agreement between the parties. However, the court held that Cervantes was aware of the risk that his ticket could expire. In fact, Cervantes called the PAL Legal Department, which informed him that in order to secure an extension, he would have to file a written request for


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extension to the legal counsel of PAL. Since the PAL agents are not privy to the said agreement and petitioner knew that a written request was necessary, Cervantes cannot use what the PAL agents did to his advantage.

Under Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (Cervantes) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said third person (Cervantes) is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification.

Also, in rules of evidence, conclusions and findings of fact arrived at by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons.

2. NO. Cervantes alleged that the lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss. But records show that the question of whether there was authority on the part of the PAL employees was acted upon by the Trial Court when Cervantes was presented as witness and depositions of PAL employees, Reyes and Villanueva, were presented. Cervantes’ admission that he was told by PAL’s legal counsel that he had to submit a letter was tantamount to knowledge that the PAL employees had no authority to extend validity of tickets and only the PAL’s legal counsel was authorized to do so. The omission in the answer and in the motion to dismiss was cured since the said issue was litigated upon.

3. NO. An award of damages is improper because Cervantes failed to show that PAL acted in bad faith in refusing to allow him to board its plane in San Francisco. In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Essentially the same goes with exemplary damages (example or correction for the public good).


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Borja, Sr. v. Sulyap, Inc. (2003) (contract of lease, penalty clause, fraud, voidable)

Doctrines:

• When an agent exceeds his authority (in this case, in inserting a penalty clause), the status of the said clause is not void but merely voidable, i.e. capable of being ratified. The client (principal), failing to question the penalty clause despite several opportunities to do so was tantamount to ratification and he is estopped from assailing the validity thereof.

Facts:

Borja as lessor and Sulyap Inc. as lessee enter into a contract of lease involving a one-story office building owned by Borja at 12th St., New Manila. Sulyap Inc. paid advance rentals, association dues and deposit for electrical and telephone expenses accordingly. Upon the expiration of their contract, Sulyap Inc. demanded the return of the advance payments but Borja refused so Sulyap Inc. filed a complaint for sum of money with QC RTC. Following this, the parties entered into and submitted to the court a Compromise Agreement, which the court approved.

The parties agreed that Borja would pay the reimbursement to Sulyap Inc. of withholding taxes paid to BIR, together with the association dues (amounting to P30,575) and advance rentals (P50,000). “Any amount due not paid within the period stated in this agreement shall earn 2% interest per month until fully paid plus 25% attorney’s fees of the amount collectible and that writ of execution shall be issued as a matter of right.”

Borja failed to pay. Sulyap Inc. filed a motion for the issuance of a writ of execution. Borja prayed for the quashal of the writ twice. The first time, he was assailing that his failure to pay was due to Sulyap Inc.’s fault. The second time, he was saying that there was fraud in the execution of the Compromise Agreement. He said that there were 3 sets of Agreements and he allegedly chose to sign the one that contained no penalty clause. He alleged that his former counsel, Atty. Leonardo Cruz, who assisted him in entering into the agreement, removed the page of the genuine compromise agreement where he affixed his signature and fraudulently attached the same to the agreement submitted to the court in order to make it appear that he agreed to the penalty clause.

Sulyap Inc. presented said Atty. Cruz to the court, who declared that Borja signed the agreement inside the courtroom and the agreement was chosen by the petitioner over another more burdensome penalty clause which states that default will automatically entitle Sulyap Inc. to damages amounting to P250,000 plus P50,000 attorney’s fees. Both the trial court and the CA gave credence to Atty. Cruz’s testimony and noted that it was more than one year from the receipt of the judgment on the compromise agreement when Borja questioned the inclusion of the penalty clause.

Issues:

1. W/N the petitioner is bound by the penalty clause

Held/Ratio:

1. YES. While a judicial compromise may be annulled or modified on the ground of vitiated consent or forgery, Borja failed to establish the existence of fraud. He never raised the issue or questioned the penalty clause. When he refused to pay the first time because the person that Sulyap, Inc. sent was not authorized, Borja in effect acknowledged the validity of the penalty clause.

Assuming that Atty. Cruz exceeded his authority in inserting the penalty clause, the status of the said clause is not void but merely voidable, i.e., capable of being ratified. Petitioner’s failure to question the inclusion of the penalty clause is tantamount to ratification and he is estopped from assailing the validity thereof.


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Gozun v. Mercado (2006) (campaign materials, compadres, cash advance)

Doctrines:

• General rule on Exercise of Power; effects of Non-ratified acts done by the agent in Excess of His Authority is Unenforceable and not Void.

• Contracts entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers are classified as unauthorized contracts and are unenforceable, unless they are ratified.

Facts:

In 1995 local elections, Don Pepito Mercado was a candidate for the gubernatorial post in Pangpanga. Upon his request, he asked his compadre, Gozun, who owned JMG Publishing House for draft samples and price quotations of campaign materials.

Gozun asserts that upon the statement of Mercado’s wife, that respondent had approved the price quotation, he proceeded in printing the campaign materials. Due to the urgency and limited time to do the job order, Gozun availed of the services of Metro Angeles Printing (owned by his daughter) and St. Joseph Printing Press (owned by his mother).

Meanwhile, on March 31, 1995, Mercado’s sister-in-law, Lillian Soriano, obtained from Gozun a cash advance of P253,000. This was allegedly for the allowances of the poll watchers. Lillian acknowledged the cash advance in a receipt issued by Gozun.

On August 11, respondent’s wife partially paid P1,000,000 to Gozun.

3 years lapsed until Gozun sent a formal demand for the outstanding balance of Mercado, being that they are good friends and compadres in the amount of P2,177,906 itemized as follows: P640,310 for JMG, P837,696 for Metro Angeles, P446,900 for St. Joseph, and P253,000 obtained by Lillian as cash advance. Mercado refused to pay, thus the complaint by Gozun filed in the RTC.

Mercado claims that the all the campaign materials that he had used were mostly donations from family and friends. Thus, the partial payment of P1,000,000 delivered by his wife was intended to be compensation for the help that Gozun gave during the campaign. And regarding the cash advance that Lillian acquired, Mercado claims that he had not given any authority to her to receive any kind of amount (P253,000).

Issues:

1. W/N Lillian Soriano was authorized by Mercado to receive the cash advance from Gozun in the amount of P253,000.00

2. W/N the amounts due to the Metro Angeles Press (owned by Gozun’s daughter) and St. Joseph Printing Press (owned by Gonzun’s mother) was a party in interest in the complaint

Held/Ratio:

1. No. The receipt issued by the petitioner, received by Lillian, did not specify for what reason the said amount was delivered and in what capacity did Lillian receive such money. According to Art. 1317 of the Civil Code, one is not bound by contracts he did not authorize to be entered into his behalf. Thus, it is unenforceable, unless ratified by the principal.

To add to this, the law requires a specific form of agency in this case. A special power of attorney is necessary for an agent to, as in this case, borrow money. It cannot be made orally. Thus Lillian acted in her personal capacity in acquiring the said money.

2. YES. The SC ruled that the Gozun sub-contracted the job order to the two companies. Thus, Gozun, being a real party in interest could recover what is due to them. Thus, the court ruled that Mercado has to pay a sum of P924,906 due to JMG, Metro Angeles, and St. Joseph: P2,177,906(total) less P1,000,000(partial payment) and P253,000(cash advance), to the petitioner for the cost of the campaign materials.


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Domingo v. Domingo (Full disclosure. If not, forfeiture)

Doctrines:

• Obligations of an agent – Arts. 1891 & 1909 demand the utmost GOOD FAITH, FIDELITY, HONESTY, CANDOR, and FAIRNESS on the part of the agent to his principal (i.e. absolute obligation to make full disclosure or complete account to principal of all his transactions and other material facts)

• Failure of an agent to make FULL DISCLOSURE makes him guilty of BREACH OF HIS LOYALTY to the principal. An agent who takes a secret profit in the nature of bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal is guilty of breach of loyalty to the latter and FORFEITS HIS RIGHT TO COLLECT COMMISSION that may be due to him even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.

• Duty of Fidelity Exception – The duty embodied in Art. 1891 does not apply if the agent or broker acted only as MIDDLEMAN with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction

Facts

1. Heirs (Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene, Joselito) of Vicente Domingo sought the reversal of the majority decision of Special Division of 5 of CA affirming judgment of the Trial court which sentenced Vicente to pay Gregorio Domingo 2,307.50 and the intervenor, Teofilo Purisima, 2,607.50 w/ legal interest on both amounts from date of filing, to pay Gregorio 1,000 as moral and exemplary damages and 500 as attorney’s fees plus costs

2. Vicente Domingo (petitioner-appellant, deceased) granted Gregorio Domingo (real estate broker) exclusive agency to sell lot #883 in Piedad Estate (88,477sqm at P2/sqm = 176,954. NOTE: This is the asking price, not the final selling price as we’ll see later on)

3. Terms of Agency – commission: 5% on total price IF THE PROPERTY IS SOLD BY VICENTE OR BY ANYONE ELSE DURING THE 30-day DURATION OF THE AGENCY or if the property is sold by VICENTE w/in 3 MONTHS FROM TERMINATION OF AGENCY to a PURCHASER TO WHOM IT WAS SUBMITTED by Gregorio during continuance of agency w/ notice to VICENTE

4. Agency contract in TRIPLICATE, 1 for Vicente, Original and another to Gregorio

5. Gregorio authorized intervenor Teofilo Purisima to look for a buyer promising him ½ of 5% commission

6. Purisima introduced him to Oscar de Leon, a prospective buyer

7. de Leon’s first offer was too low (didn’t mention how much). He raised it to P109,000, which Vicente agreed to.

8. de Leon issued a P1,000 check as earnest money. Vicente paid P300 to Gregorio as partial commission. De Leon confirmed his offer to pay P1.20/sqm. Vicente asked for addition P1000 earnest money w/c de Leon promised to deliver. De Leon will vacate his house and lot at Denver St., QC, which is part of the purchase price.

9. de Leon gave Gregorio a GIFT or propina of P1000.00 for succeeding in persuading Vicente. Gregorio DIDN’T DISCLOSE such fact to Vicente. De Leon didn’t give additional earnest money.

10. de Leon told Gregorio that he didn’t receive his money from his brother in US, for which reason he gave up negotiations.

11. Gregorio found out in his contract with Vicente that if the sale has been consummated, he still has right over the commission (see # 3, Facts). Vicente grabbed the original, and tore it apart (Gregorio, though, still has another copy).


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12. Gregorio discovered in the Register of Deeds a deed of sale by Amparo Diaz, wife of de Leon, over their house at Denver St. Cubao in favor of Vicente as downpayment.

13. Vicente to de Leon: “if we remove Gregorio in the contract, I’ll sell the land to you at P104,000 (lower than P109,000 offer)“

14. CA decision: sale to Diaz (wife) is practically a sale to de Leon (NOTE: might be because there must be consent from the husband as joint administrator); Purisima and Gregorio are EFFICIENT CAUSES in consummation of sale

Issues:

1. Whether the FAILURE on the part of Gregorio TO DISCLOSE to Vicente the payment to him by Oscar de Leon of the amount of P1000.00 as GIFT or “propina” for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20/sqm, so constitutes FRAUD as to cause FORFEITURE of his 5% commission on sale price

2. Whether Vicente or Gregorio should be liable directly to the intervenor Purisima for the latter’s share in the expected commission of Gregorio by reason of the sale

3. Whether the award of legal interest, moral and exemplary damages, attorneys fees and costs, was proper

Held/Ratio:

1. YES. Failure of an agent to make FULL DISCLOSURE makes him guilty of BREACH OF HIS LOYALTY to the principal.

An agent who takes a secret profit in the nature of bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal is guilty of breach of loyalty to the latter and FORFEITS HIS RIGHT TO COLLECT COMMISSION that may be due to him even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.

Article 1891 states that “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 agency, even though it may not be owing to the principal.”

Article 1909 also states that, “The agent is responsible not only for fraud but also for negligence which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.”

NOTE: Gregorio was not a middleman. He was a broker and agent of said petitioner-appellant only.

NOTE: POSSIBLE QUESTION: If the principal doesn’t know about the gift, may he recover from the agent? YES, according to American Jurisprudence, unless principal has consented to or ratified the transaction)

2. ONLY GREGORIO. Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his ½ share of whatever amounts Gregorio received by virtue of the transaction oas his sub-agency contract was with Gregorio alone and not with Vicente. Since Gregorio received 1000 from Vicente and 300 from de Leon, totaling to P1,300.00, Purisima will receive ½ of such, which is P650.00

3. YES. Since the unfounded complaint be Gregorio caused Vicente mental anguish and serious anxiety, as well as wounded his feelings. Moral Damages of P1000.00, Attorney’s fees of P1000.00 to be paid to heirs of Vicente


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Hernandez v. Hernandez (2011) (expropriation proceedings)

Doctrines:

• The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal

Facts:

The Republic of the Philippines, through the Department of Public Works and Highways (DPWH) offered to purchase a parcel of land in Tanauan, Batangas owned by the Hernandezes (Cornelia herein petitioner, Jose, the deceased father Cecilio herein respondent, Pacencia and Mena) for use in the expansion of the South Luzon Expressway. The initial offer of the government was P35 per square meters, which was increased to P70 per square meters. Both offers were rejected by the Hernandez family thereby forcing the government to file an expropriation case. In 1993, he owners of the Hernandez property executed a letter which indicating that Cecilio Hernandez shall the representative of the owners of the land and the compensation in doing such job. According to the letter, Cecilio will receive:

1. 20% of any amount exceeding P70 per square meter as success fee

2. Whatever excess beyond P300 per square meter as incentive

3. P1500 each for preparation of pleading

Cecilio Hernandez as their only true and lawful attorney with respect to the expropriation of their property. The SPA stated that the authority shall be irrevocable and continue to be binding all throughout the negotiation process. In the course of the expropriation proceedings, Cecilo Hernandez was appointed a commissioner to determine just compensation.

In 1998, just compensation for the condemned properties was fixed at P1,500 per square meter. The total area that was condemned for the Hernandez family was 16,643 square meters. Therefore, the Hernandez family is entitled to P21,964,500.

In 1999, Cornelia revoked the SPA, withdrawing the authority earlier granted to Cecilio. She also moved for the withdrawal of 1/3 of her share of the just compensation amounting to P7,321,500. The Judge allowed the withdrawal on the condition that the money will only be released to the attorney-in-fact, Cecilio. Cecilio, was not only able to get P7,321,500 but the whole amount of P21,964,500.

Cornelia received from Cecilio a BPI check amounting to P1,123,000 accompanied by a receipt and a quitclaim document in favor of Cecilio. In essence, it states that:

1. The amount received will be Cornelia’s share in the just compensation.

2. It will release and forever discharge Cecilio from any claims, damages or demands.

3. Cornelia will not institute any action.

Cornelia was forced to receive this with a heavy heart because she was in a frail condition and immediately needed the money for medical expenses. She, however, sought the help of her niece in obtaining the judgment for just compensation and it was only upon perusal of the decision that she learned that she was entitled P7,321,500, 1/3 of P21,964,500. Cornelia then filed a case in court to claim what is due her. Cecilio failed to accept summons and was declared in default. The TC ruled in favor of Cornelia, ordering Cecilio to pay Cornelia the amount of P6,198,417.60 with interest at 12% per annum. The CA reversed, hence this petition.

Issues:

1. W/N Cornelia is entitled to receive 1/3 of the total purchase price despite the compensation scheme embodied in the letter executed by the Hernandezes.


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Held/Ratio:

1. YES. The trial court awarded the Hernandez family a total amount of P21,964,500. As pro-indiviso landowners, each of them is entitled to 1/3 of the total amount, which is P7,321,500. Although Cecilio insists that what is due Cornelia is only P1,123,000 because of his compensation as an agent embodied in the service contract executed in 1993 and signed by the Hernandez landowners, the court ruled that a contract where consent is vitiated through intimidation, mistake, violence, undue influence or fraud is voidable. In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties. And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.

At the time when the service contract was made, the parties estimated the base price of a square meter of their land to be P70 (based on the final offer of the government) and they posed a ceiling price of P300. The ceiling price was, from the base price, extraordinarily high, justifying the grant to Cecilio of anything in excess of the ceiling price. It was on these base and ceiling prices, conditions which principally moved both parties to enter into the agreement on the scheme of compensation, that an obvious mistake was made. The trial court, deviating from the principle that just compensation is determined by the value of the land at the time either of the taking or filing, which was in 1993, determined the compensation as the 1998 value of P1,500.00 per square meter. The trial court ratiocinated that the 1998 value was considered for the reason that prices of real estate in Batangas have skyrocketed in the past two years.

Cecilio’s compensation as embodied in the service contract:

CECILIO’S FEES = (20% of anything over P70.00) + (everything in excess of P300)

*If the land value is at P1,500.00 per square meter, then,

= (20% of P230.00) + (P1,500.00 – P300.00)

= P46.00 + P1,200.00

= P1,246.00 per square meter

CORNELIA’S SHARE = (land value at 1,500 less Cecilio’s fees)

= P254.00 per square meter

*The total expropriated property is at 14,643 m2, thus, Cecilio will get a total of

= P1,246.00 * 14,643

= P18,245,178.00 total compensation

*One Third of the above value shows that Cecilio will get, from Cornelia

= P6,081,726.00

It must be noted that:

*The Hernandez’ family gets P21,964,500 for 14,643 m2, at P1,500.00 per m2

*One-third (1/3) of that is P7,321,500 representing the share of a co-owner like Cornelia

*What will be left of Cornelia’s share if she pays Cecilio will be:

P1,239,774 less: 124,953.60 (Nominal Cost of Litigation as averred by Cecilio)

1,500.00 (Nominal payment for preparation of pleadings)

OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE:

P 1,113,320.4


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As opposed to:

OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE: P6,081,726.00

From this compensation scheme, Cecilio would get almost 83% of the proceeds of the sale and no evidence on record would show that Cornelia agreed to such. Cornelia even repeatedly asked Cecilio for an accounting of the just compensation but the request remained unheeded. Cecilio violated the fiduciary relationship of an agent and a principal. The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust.

Moreover, during the expropriation proceedings, Cecilio was appointed commissioner to determine just compensation. According to Section 5 of Rule 67 of the Rules of Court, an appointed commissioner should be disinterested in the subject of the proceedings. When Cecilio accepted the position as commissioner and proceeded to perform the duties of such commissioner until the completion of his mandate as such, he created a barrier that prevented his performance of his duties under the SPA. Cecilio acted for the expropriation court. He cannot be allowed to consider such action as an act for or in behalf of the defendant in the same case. Cecilio could not have been a hearing officer and a defendant at the same time. Indeed, Cecilio foisted fraud on both the Court and the Hernandezes when, after his appointment as commissioner, he accepted the appointment by the Hernandezes to "represent" and "sue for" them.


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Cosmic Lumber v. CA - “fraudulent sale of lot void”

Doctrine:

• Agent’s authority to sell land must be in writing and must explicitly be granted by the principal.

• The general rule is that a principal is chargeable with and bound by the acts of his agent BUT there is a well-established exception that where an agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal.

Facts:

On January 28 1985, COSMIC LUMBER CORPORATION executed a special power of attorney appoint Paz G. Villamil-Estrada as attorney in fact. VILLAMIL-ESTRADA was granted authority to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443, for 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.

On March 11 1985, VILLAMIL-ESTRADA instituted an action for ejectment of private respondent PEREZ. On November 25 1985 PEREZ and VILLAMIL-ESTRADA entered into a Compromise Agreement allowing PEREZ to purchase a portion of the easternmost part of lot 443, the area that has been occupied by PEREZ for several years now. It was sold at a price of P26,640.00 computed at P80.00/square meter.

The compromise agreement was not executed within the 5-year period from the date of finality of the decision stipulated by the parties because VILLAMILL-ESTRADA failed to produce the owner’s duplicate copy of Title No. 37649 needed to segregate from lot 443 that PEREZ purchased. PEREZ filed a complaint to revive the judgment.

COSMIC LUMBER CORPORATION asserts that they did not have knowledge of such compromise agreement between VILLAMIL-ESTRADA and PEREZ. COSMIC sought to annul the compromise agreement and the ruling of the trial court on the ground that it was void because:

a. VILLAMIL-ESTRADA did not have authority to dispose, of, sell, encumber or divest COSMIC of its ownership over the property

b. VILLAMIL-ESTRADA’s authority was confined to the institution and filing of ejectment suit / recovery of property

c. The authority to enter into a compromise agreement was limited to the eviction of third persons occupying the property

d. The amount PEREZ paid for the portion of lot 443 (P26,640.00) was never received by COSMIC

e. PEREZ acted in bad faith because he had knowledge of the want of authority of VILLAMIL-ESTRADA

f. Disposal of corporate property indispensably requires a board resolution of directors, a fact which is wanting

The CA dismissed the complaint as well as the motion for reconsideration. The CA ruled that the nullity of the compromise agreement may be raised only to prevent the execution of the compromise agreement but not as a ground for annulment of judgment.

Issue:

1. W/N VILLAMIL-ESTRADA had the authority to dispose of a portion of lot 443.

2. W/N the trial court judgment was void.

Held/Ratio:

1. NO. VILLAMIL-ESTRADA did not have the authority to dispose of a portion of lot 443. The authority granted upon her by COSMIC was explicit and exclusionary. She may only institute ejectment actions and enter into compromise agreements only insofar as this was protective of the rights and interests of COSMIC in the


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property. Nowhere in the authorization was VILLAMIL-ESTRADA granted expressly or impliedly any power to sell property and neither can this be inferred from the authority “to enter into a compromise agreement” because of the limitation “so far as it shall protect the rights and interest of the corporation in the aforementioned lots.” Alienation by sale of an immovable certainly cannot be deemed protective of the rights of COSMIC. Also, aside from COSMIC never receiving the proceeds of the sale, the price of P80.00 per square meter was very much less than the assessed value of the land which amounts to P250.00 per square meter.

Furthermore, when the sale of a piece of land or any interest thereon is through an agent, the authority of the agent must be in writing; otherwise, the sale is void.

2. YES. The CA erred when they said that the TC’s judgment may not be annulled but the nullity of the compromise agreement may be raised only to impede the execution of the same. VILLAMIL-ESTRADA acted without authority. The sale ipso jure is void. So is the compromise agreement. Consequently, the judgment based thereon is necessarily void. A judgment based on a compromise agreement entered into by an attorney in fact without specific authority from the client is void and may be impugned and its execution restrained. (Jacinto v. Montesa, Justice J. B.L. Reyes) The conduct of VILLAMIL-ESTRADA constituted extrinsic fraud by reason of which the judgment rendered thereon should have been struck down.


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British Airways v. Court of Appeals (2 airlines and lost luggage)

Doctrine:

• The well-settled rule is that an agent is also responsible for any negligence in the performance of its function and is liable for the damages, which the principal may suffer by reason of its negligent act.

Facts:

Mahtani decided to visit his relatives in Bombay, India. Since British Airways (BA) had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hong Kong via Philippine Airlines (PAL), and upon arrival in Hong Kong he had to take a connecting flight to Bombay on board BA. He checked in at the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects but when he arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that they might have been diverted to London.

In the Philippines, Mahtani filed his complaint against BA. BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latter’s late arrival in Hong Kong, leaving hardly any time for the transfer of Mahtani’s luggage to the BA aircraft bound for Bombay. PAL argued that it was only an agent and that there was adequate time to transfer the luggage to BA facilities in Hong Kong.

The trial court rendered its decision in favor of Mahtani and dismissed the third-party complaint against PAL for lack of cause of action. The Court of Appeals also affirmed the trial court’s findings.

Issue:

1. W/N the CA was correct in the dismissal of BA’s third-party complaint against PAL

Held/Ratio:

1. No. It is a well-settled rule that carriage by plane although performed by successive carriers is regarded as a single operation and that the carrier issuing the passenger’s ticket is considered the principal party and the other carrier merely subcontractors or agent.

The contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hong Kong leg of the former’s journey to PAL, as its subcontractor or agent. The fourth paragraph of the “Conditions of Contracts” of the ticket issued to Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay and regarded as a single operation. PAL, in transporting Mahtani from Manila to Hong Kong acted as the agent of BA.

Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its negligent acts. If it is proven that the latter’s negligence was the proximate cause of Mahtani’s experience, it is but logical to allow BA to sue PAL for indemnification, instead of totally absolving PAL from any liability.


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Escueta, (Rubio) v. Lim (2007) (daughter-agent assigned substitute)

Doctrines:

• The agent may appoint a substitute if principal has not prohibited him from doing so. The agent shall, however, be responsible for the acts of the substitute if agent was not given the power to appoint. (Art 1892 Civil Code)

• A contract executed by an agent without authority to sell is not void but simply unenforceable. (Art. 1317)

• The acceptance and encashment by the owner of a check representing purchase price sold through agent constitute ratification and produce effect of an express power of agency.

Facts:

This case resulted from Rufina Lim’s filing of quieting of title and hold departure order against Ignacio Rubio. A contract of sale between Rufina Lim (vendee) and Ignacio Rubio and Luz Baloloy (vendors) were executed on April 10, 1990 pertaining to 10 lots (from hereditary shares.) Rubio and Baloloy then accepted the earnest money (P102,169 and 450K) in order to secure certificate of title. Rubio and Baloloy, however refused to receive remaining downpayment and deliver 2 certificates of title. Another party, Escueta (co-petitioner) also claims that it was to her that Rubio sold the land. Thus, Rufina Lim filed a complaint.

Petitioner’s Contention:

Rubio contends that Virginia Lim (appointed by Llamas) who represented him in the contract of sale between Rufina Lim does not have the authority. He claims that he instituted Special Power of Attorney only to Patricia Llamas (his daughter) who is not empowered to designate another as his substitute. Rubio also claims that amount he received from R. Lim represents payment of Lim’s debt and not a down payment. Thus, this is not a ratification of contract of sale.

Issues:

1. W/N Llamas (agent of Rubio) may appoint V. Lim as her substitute

2. W/N contract of sale between petitioners Rubio and Rufina Lim is valid

Held/Ratio:

1. YES. The Court ruled that in the absence of expressed stipulation prohibiting such action, Llamas (agent of Rubio) may appoint a substitute. This is within the scope of authority of agent Lamas. This is in pursuant to Art 1892: The agent may appoint a substitute if principal has not prohibited him from doing so, but he shall be responsible for the acts of substitute.

2. YES. The Court held that contract of sale executed by Virginia Lim (on behalf of Rubio) in favor of Rufina Lim is valid for certain reasons. Assuming that Virginia Lim has no authority to sell said properties, the contract of sale entered into by former (on behalf of Rubio) and R.Lim will only be unenforceable and not void. This contract therefore may be enforced by virtue of ratification by Rubio. As it was stated in Art 1317: “A contract entered into in the name of another by one who has no authority or legal representation… shall be unenforceable unless it is ratified, expressly or impliedly by the person on whose behalf it has been executed.”

In this case, the Court said that based on the actions of Rubio, the amount he accepted is deemed to be an earnest money and not for “payment” of a loan. The acceptance of earnest money, (recognized as part of advance payment by buyer R. Lim) by Rubio signifies his waiver of right of action to avoid the contract and implies confirmation of said sale.


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Serona v. CA and the People of the Philippines (2002) (Estafa + No Misappropriation)

Doctrines:

• The law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absence of an express agreement to the contrary between the agent and the principal.

• An agent who receives jewelry for sale or return cannot be charged for estafa for there was no misappropriation when she delivered the jewelry to a sub-agent under the sale terms which the agent received it.

Facts:

Quilatan delivered to Serona several pieces of jewelry, which the latter would sell on commission basis. The terms of the oral contract were that Serona should remit payment or return the jewelry if not sold, both within thirty days. Serona’s failure to pay/return prompted Quilatan to require the former to execute a document evidencing her debt of 567,750. Unknown to Quilatan, Serona delivered the jewelries to Marichu Labrador to sell on commission basis. Serona failed to collect from Labrador, which caused Serona’s failure to pay.

Based on this, an action for the commission of estafa was filed against Serona. The complaint alleged that Serona misappropriated the jewelries and its proceeds. Serona pleaded not guilty but admitted the fact that she failed to pay/return the jewelries to Quilatan because she failed to collect from Labrador. Labrador also testified stating that jewelries were indeed delivered to her for selling, and that she sold the jewelries to a certain person who absconded without paying her. Trial Court rendered a decision in favor convicting Serona of Estafa. CA affirmed. Hence, this appeal.

(Note: Serona was able to remit 100K and returned 43K of the Jewelries. The amount now subject of the litigation is the remaining 434, 750)

Issue:

1. W/N all the elements of estafa7 were established.

2. W/N Serona may be held civilly liable

Held/Ratio:

1. NO. Petitioner argues that the prosecution failed to establish the elements of estafa under Art 315 of RPC: “In particular, she submits that she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the subject jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her undertaking with Quilatan. Moreover, petitioner delivered the jewelry to Labrador under the same terms upon which it was originally entrusted to her. It was established that petitioner had not derived any personal benefit from the loss of the jewelry. Consequently, it cannot be said that she misappropriated or converted the same.” The SC agreed with petitioner’s contention.

The law on agency in our jurisdiction allows the appointment by an agent of a substitute or a sub-agent in the absence of an agreement to the contrary between the agent and the principal. It cannot be said that petitioner’s act of entrusting the jewelry to Labrador is characterized by abuse of confidence because such an act was not proscribed and is, in fact, legally sanctioned.

The essence of misappropriation is the disposal of a thing, without right, as if it were one’s own. Because the thing was given to Marichu Labrador for the purpose of selling on commission, it cannot be said that there was misappropriation. Serona did not in anyway intend to dispose of the thing as if it were her own.

2. YES. Notwithstanding the above, however, petitioner is not entirely free from any liability towards Quilatan. The

7. ELEMENTS OF ESTAFA: (1) that the money, good or other personal property is received by the offender in trust, or on

commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) that there is a demand made by the offended party on the offender


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rule is that an accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. Then too, an agent who is not prohibited from appointing a sub-agent but does so without express authority is responsible for the acts of the sub-agent.

Municipal Council of Iloilo v. Evangelista (1930) (Widow, attorney’s fees, 2 attorneys-in-facts)

Doctrines:

• An agent of attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal

• (from Syllabus): That when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's attention

Facts:

On March 20, 1924, the CFI of Iloilo City rendered judgment in favor of Tan Ong Sze Viuda de Tan Toco (widow of Tan Toco) to recover the value of a strip of land belonging to her taken by Municipal Council of Iloilo to widen a public street. She was able to recover P42,966.40 for its value.

Atty. Jose Evangelista filed a claim in the same case for his attorney’s fees as the administratrix of Jose Ma. Arroyo’s intestate estate. With the consent of the widow, 15% of the amount was granted to him. After the hearing on this claim, adverse claimants appeared (PNB-claiming that land was mortgaged to it, Atty. Antero Soriano- claiming the amount as it had been assigned to him by the widow’s Attorney-in-fact and, in turn, he assigning it to Mauricio Cruz & Co., Inc.) After hearing all the adverse claims for the amount of the judgment, the court ordered that the 15% of the amount be granted to Atty Evangelista as, his own behalf and as counsel for the administratrix of the deceased Jose Ma .Arroyo and directed the Municipal Council of Iloilo to file an action of interpleading against the adverse claimants.

The court declared the deed of assignment of the credit executed by the widow’s attorney-in-fact (Tam Buntiong) in favor of Soriano valid and likewise the assignment of Soriano to Mauricio Cruz & Co., Inc. during his lifetime. So, the remaining P30,966.40 (P42,966.40 minus 15% attorney’s fee) is to be paid by the Municipal Council of Iloilo to Mauricio Cruz & Co. Inc.

Municipal treasurer of Iloilo paid the late Soriano P6,000 as partial payment of the judgment. Afterwards, another P6,000 was delivered to Evangelista for his attorney’s lien. With the payment of a total of P12,000, remaining P30, 966.40 must go to Mauricio Cruz & Co. This appeal, then, is confined to the claim of Mauricio Cruz & Co. as the alleged assignee of the rights of the late Atty. Soriano by virtue of the said judgment in payment of his professional fees given to him by the widow and her coheirs.

Issue:

1. (MAIN ISSUE) W/N the assignment made by Tan Buntiong (attorney-in-fact of the widow), to Atty. Soriano, of all the credits, rights and interests belonging to the widow in the amount of P42,966.40, plus the costs of court against municipal council of Iloilo, in consideration of the professional services rendered by Soriano to the widow is valid.

2. (OTHER ISSUE. Eto yung quoted doctrine sa syllabus. Ewan ko bakit dito nagfocus, di naman main issue): W/N the other attorney-in-fact’s, Tan Montano’s, consent is required to validate the acts of the other attorney-in-fact, Tan Butiong, who assigned the amount as payment to Soriano

Held/Ratio:

1. YES. An agent of attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal In the present case, the assignment made by Tan Buntiong, as Attorney-in-fact for the widow, in favor of Soriano for professional services rendered for other cases he served the widow and coheirs, was that credit which she had


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against the municipality of Iloilo, and such assignment was equivalent to the payment of the amount of said credit to Soriano.

2. That when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's attention; the very fact that different letters of attorney were given to each of these two representatives shows that it was not the principal's intention that they should act jointly in order to make their acts valid.

Smith, Bell & Co. v. Court of Appeals (Liability of settling agent)

Doctrines:

• A settling agent acting within the scope of its authority cannot be held personally liable and/or solidarily liable for the obligations of its principal.

• A resident agent, as a representative of a foreign insurance company, is tasked only to receive legal processes on behalf of its principal and not to answer personally for any insurance claims.

Facts:

In July 1982, private respondent Joseph Bengzon Chua, under the business style of Tic Hin Chiong, bought and imported 50 metric tons of material to the Philippines from Chin Gact Co., worth $13,000.00. These were shipped aboard SS Golden Wealth for port of Manila. On July 27, 1982, the shipment was insured by defendant First Insurance Co. for US $19,500.00 ‘against all risks’ under a marine policy with the note ‘Claim, if any, payable in US currency at Manila’. Stamped at the lower left of the document of the policy is Smith, Bell and Co. as ‘Claim Agent’.

The cargo arrived on September 2, 1982 and discharged at the Metroport Services, an arrastre contractor, with a number of the cargo in apparent bad condition. Respondent then secured the service of a cargo surveyor to assess the damage. The report came that out of 1,250 bags of imported material, 600 were damaged by tearing at the sides and the contents partly empty. Upon weighing, the bags were 18, 546 kg short.

On October 16, respondent filed with Smith Bell a formal statement of claim with proof of loss and a demand for settlement worth US $7,357.78. After allegedly forwarding the claim to the principal, Smith Bell informed respondent that said principal offered only 50% of the claim or $3, 616.17 as redress, claiming discrepancy between the amounts contained in the shipping agent’s reply to the claimant of only $90.48 with that of Metroport’s. Respondent refused the redress offer, arguing that the discrepancy was a result of loss from vessel to arrastre to consignee’s warehouse, which losses were still within the ‘all risk’ insurance cover. Respondent thereafter pursued the present action. The trial court adjudicated in favor of respondent, and the CA affirmed the decision, hence the petition for review.

Issues:

1. W/N a local claim or settling agent is personally and/or solidarily liable upon a marine insurance policy issued by its disclosed foreign principal.

Held/Ratio:

1. NO. The Supreme Court ruled in favor of the petitioner on three grounds.

Existing Jurisprudence

Petitioner, a settling agent acting within the scope of its authority, cannot be held personally and/or solidarily liable for the obligations of its disclosed principal merely because there is allegedly a need for speedy settlement of the claim of private respondent. Citing Salonga v. Warner, Barnes & Co., Ltd. The SC explained that: an adjustment and settlement agent is no different from any other agent from the point of view of his responsibility, for he also acts in a representative capacity. Whenever he adjusts or settles a claim he does it in behalf of his principal, and his action is binding not upon himself but upon his principal.

The SC also added that the involvement of petitioner in the subject of the insurance was having its name stamped as ‘Claim Agent’. Without anything else to back it up, such stamp cannot be deemed to mean that petitioner had


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participated in the preparation of the contract between respondent and its principal. There is no privity of contract, and there can be no obligation or liability, hence no cause of action against petitioner.

Absence of Solidary Liability

The SC held that solidary liability cannot be lightly inferred, and must be clearly and positively expressed. Looking to the Insurance Code, the SC explained that a resident agent is tasked only to receive legal processes on behalf of its principal and not to answer personally for insurance claims.

Not Real Party-In-Interest

Being a mere agent and representative, petitioner is not the real party-in-interest in the case. If the party being sued is not the proper party, any decision rendered will be futile, because the decision cannot be enforced.


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Chempil Export & Import Corporation v. CA (consortium case)

Doctrines:

• By definition, subrogation is the “transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts; this is the subrogation referred to in Art. 1302.

• Where the money used to discharge a person’s debt rightfully belong to the debtor, the party paying cannot be considered a third-party payor under Art. 1302 (2) of the Civil Code but a mere agent

• When the buyer of shares of stock, pursuant to the terms of the deed of sale, effects payment of part of the purchase price to one of the seller’s creditors, then there is no subrogation that takes place, as the buyer then merely acts as an agent of the seller effecting payment of money that was due the seller in favor of a third-party creditor.

Facts:

(This case is a legal tug of war between the parties as to who is the rightful owner of the disputed shares. There are 2 cases in here—consortium case and SBTC Case. I tried to make the facts as easy to understand as possible. Sorry if it’s a bit confusing as the original is also confusing. Haha )

On September 25, 1984, Dynetics and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the consortium—composed of PISO, Bank of the Philippine Islands (BPI) with Jaime Gonzales as assignee, Rizal Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial International Bank (PCIB)—(Consortium Case). This is to seek judicial declaration, construction and interpretation of the validity of the surety agreement that Dynetics and Garcia entered into with the consortium and to perpetually enjoin the latter from claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have undertaken in the said surety agreement.

Dynetics, Garcia and Matrix Management and Trading Corporation filed a complaint for declaratory relief against Security Bank and Trust Co. (SBTC Case). However, the court granted SBTC’s prayer for the issuance of a writ of preliminary attachment and a notice of garnishment covering Garcia’s shares in the Chempil (including the disputed shares). The notice was duly annotated in the stock and transfer books of Chempil. The writ of attachment in favor of SBTC was eventually

In the consortium case, the preliminary injunction prayed for by Dynetics and Garcia was denied by the RTC. Hence, in July 1985, after the consortium had filed the required bond, a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished, including the disputed shares, such garnishment however, was not annotated.

Unsatisfied with the trial court’s order, the consortium appealed to the Court of Appeals. During this appeal, Garcia and the consortium entered into a Compromise Agreement, which was approved by the CA.

In July 1988, Garcia transferred to Ferro Chemicals, Inc. (FCI), under a Deed of Sale, the disputed shares and other properties for 79M. It was agreed upon, that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter’s favor and against Garcia in the aforementioned SBTC case.

In March 1989, FCI (through its Pres, Garcia), issued a bank check in favor of SBTC in the amount of 35M. SBTC refused the check because it was not sufficient to discharge the debt. The check was then consigned by Dynetics and Garcia to the RTC as payment for the debt in the SBTC case.

FCI assigned some of its shares to petitioner (Chempil Export and Import Corp) CEIC, which includes the disputed shares, which were registered and recorded in the corporate books of

Chemphil in CEIC’s name.

Meanwhile, Garcia, in the consortium case, failed to comply with the terms of the compromise agreement. As a consequence, the consortium filed a motion for execution, which was granted by the court. The properties that were levied


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upon on execution include some of his shares in Chemphil (disputed shares) previously garnished in July 1985. In Aug 1989, the consortium acquired the dispute shares of stock at the public auction sale.

CEIC filed a motion to intervene in the consortium case seeking the previous order of the court granting the shares to the CEIC, for the reason that it is the rightful owner of the disputed shares. The disputed shares were previously owned by Garcia but were sold to FCI, which in turned assigned to CEIC.

The trial court ruled in favor of the CEIC, stating that since neither CEIC nor FCI had notice of the consortium’s attachment of July 1985 (the one not annotated), the shares of stock, legally acquired from Garcia, cannot be levied upon in execution to satisfy his judgment debts. The Court of Appeals reversed the decision and ruled for the consortium.

Issues:

1. W/N CEIC was subrogated to the rights of SBTC (particularly its attachment lien over the disputed shares by virtue of a previous sale and assignment)

2. W/N the attachment lien acquired by the consortium is valid

3. W/N consortium has indeed a prior valid and existing attachment lien over the disputed shares

4. W/N the compromise agreement between Garcia and the consortium discharge the latter’s attachment lien over the disputed shares

Held/Ratio:

1. NO. CEIC’s subrogation theory is unavailing.

When FCI issued the back check to SBTC in the amount of 35M to pay Garcia’s indebtedness to the said bank, it was in effect paying with Garcia’s money, no longer with its own, because said amount was part of the purchase price, which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The money ‘paid’ by FCI to SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC but through a third party—FCI. Given this, FCI cannot be considered a third party payor under Art 1302 (2). It was but a conduit, merely an agent as defined in Art 1868.

In sum, CEIC, for its failure to fulfill the requirements of Art 1303 (2), was not subrogated to the

rights of SBTC against Garcia and did not acquire SBTC’S attachment lien over the disputed shares which, in turn, had already been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt to the said bank.

2. YES. The attachment acquired by the consortium is valid and effective.

Both the Revised Rules of Court and the Corporation Code do not require annotation in the corporation’s stock and transfer books for the attachment of shares of stock to be valid case (petitioner’s basis) was it categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of giving notice to third persons.

3. YES. The sheriff’s notice of garnishment (July 1985) was received by one Thelly Ruiz, who was neither the president nor managing agent of Chemphil, but just the secretary of the president. It makes no difference. A secretary’s major function is to assist his or her superior. She is in effect an extension of the latter. One of her duties is to receive letters and notices for and in behalf of her superior.

4. NO. To agree with the petitioner would totally disregard the concept and purpose of a preliminary attachment.

A preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant, the same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. An attachment lien continues until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law.


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Thus, It is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the disputed shares. When CEIC purchased the disputed shares from Garcia in July 1988, it took the shares subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium.

Uy v. CA (1999) (parties-in-interest, NHA, landslide)

Doctrines:

• Agents who have been authorized to sell parcels of land cannot claim personal damages in the nature of unrealized commission by reason of the act of the buyer in refusing to proceed with the sale. The rendering of such service did not make them parties to the contracts of sale executed on behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon the contract must, generally, either be parties to said contract.

Facts:

Uy and Roxas are agents authorized to sell eight parcels of land by the owners. They offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project.

The NHA Board approves the acquisition of land with an area of 31.8231 hectares worth P23.867 million. The parties executed a series of Deeds of Absolute Sale covering the subject lands but only five were paid for by the NHA because Department of Environment and Natural Resources (DENR) reporting that the remaining area is located at an active landslide area and not suitable for development into a housing project. The NHA canceled the sale over the 3 parcels of land and offered the amount of P1.225 million to the landowners.

Petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. RTC ruled that the cancellation of the contract was justified but awarded damages to plaintiffs in the sum of P1.255 million. The Court of Appeals (CA) reversed the decision of the trial court and held that since there was sufficient justifiable basis in cancelling the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court.

Issue:

1. W/N Uy and Roxas are real-parties-in-interest

Held:

1. NO. The real party in interest is the party who stands to be benefited or injured by the judgment, or a party entitled to the avails of the suit. An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. NHA was justified in canceling the sale of the 3 lands for lack of cause because the land was not suitable for housing.

Article 1311 of the Civil Code states that contracts take effect only between the parties, their assigns, and heirs except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.

Uy and Roxas are not parties to the contract of sale between their principals and NHA. Nor are they heirs, assignees, transferees, or beneficiaries in a stipulation pour autrui. They are merely agents. As agents, they only render some service or do something in representation or on behalf of their principal. Where the action was brought by an attorney-in-fact of a landowner in his name, and not in the name of the principal, the action was properly dismissed.

Also according to Sec 372 (2) of the Restatement of the Law on Agency, an agent does not have such an interest in a contract so as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach. An agent entitled


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to receive a commission from his principal upon performance of a contract w/c he made on his principal’s account does NOT have a claim against the other party for breach of contract.

The only way Uy and Co. can become parties of interest if the rights were assigned to them (Sec 372 (1) of the Restatement of the Law on Agency)

Angeles v. Philippine National Railways (PNR) (1961) (scrap rails / agent not party-in-interest)

Doctrines:

• A person acting as a mere representative of another acquires no rights whatsoever, nor does he incur any liabilities arising from the said contract between his principal and another party.

Facts:

The Philippine National Railways (PNR, hereinafter) accepted Romualdez’s offer to buy, on an “AS IS, WHERE IS” basis, PNR’s scrap / unserviceable rails. After paying purchase price of P96,600.00, Romualdez addressed the ff. letter to Atty. Dizon (PNR’s Acting Purchasing Agent):

“This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO x x x 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, x x x x and O.R. x x x which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.”

**Lizette Wijanco is Lizetter Wijanco-Angeles, petitioner’s deceased wife.

PNR allowed Lizette to withdraw scrap/unserviceable rails in Tarlac. However, PNR subsequently suspended the withdrawal due to documentary discrepancies and reported pilferages of PNR scrap properties in said area. Spouses Angeles demanded the refund of P96,000 (Note: This is not a typo. I noticed in the original case it really says P96,000 was prayed for and the purchase price was P96,600. I don’t think its relevant though.). PNR, however, refused to pay, alleging that unserviceable rails already been withdrawn, which amount already exceeds the claim for refund (about P114,000). Spouses Angeles filed suit against the PNR for specific performance and damages before the RTC. Meanwhile, Lizette W. Angeles passed away and was substituted by petitioner Laureno T. Angeles (husband).

The trial court dismissing their complaint for lack of cause of action. The TC held that Lizette was merely a representative (agent) of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter's rights. Thus, the spouses Angeles are not the real parties-in-interest. The CA affirmed the trial court’s decision. Petitioner claims Lizette was an assignee and thus, is a real party-in-interest with capacity to sue.

Issues:

1. W/N petitioner/s (Angeles) is a real party-in-interest.

Held/Ratio:

1. NO. Lizette Angeles is not a real party-in-interest; thus, it follows neither is her husband.

Where agency exists, the third party's (in this case, PNR) liability on a contract is to the principal and not to the agent. The agent neither has rights nor liabilities as against the third party. He cannot sue nor be sued on the contract. However, where an agent is constituted as an assignee, the agent may, in his own behalf, sue on a contract made for his principal.

Upon scrutiny, the letter of Romualdez to Atty. Dizon of the PNR designated Lizette W. Angeles as a mere agent, and not as an assignee. Being merely an agent whose authority was limited to the withdrawal of the scrap rails, hence, Angeles is without personality to sue.

Even if the terms “agent” or “attorney-in-fact” were not used in the letter, the agent may also be called an


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attorney, proxy, delegate or, as here, representative. In addition, Romualdez used the word “authorized,” instead of “assigned,” indicating an intent on his part to limit Lizette’s role to being the representative of his interest.

Petitioner’s contention that the second paragraph of the letter, stating - “I have given [Lizette] the original copy of the award x x x which will indicate my waiver of rights, interests and participation in favor of Lizette R. Wijanco” - shows that Lizette was intended to be an assignee, is misplaced. The Court said that petitioner conveniently omitted the phrase at the beginning of the sentence, “For this reason.” The antecedent thereof is Romualdez’s having appointed Lizette as his representative in the matter of withdrawal. The key phrase clearly conveys the idea that Lizette was given the original copy of the contract award to enable her to withdraw the rails as an authorized representative.

Moreover, the fact of agency was confirmed by subsequent acts of the parties; that is, subsequent letters from the Angeles spouses in which they refer to Lizette as “authorized representative” and the withdrawal receipt, which Lizette had signed, indicated that she was doing so in a representative capacity.


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National Power v. Namerco (1982) (delivery of sulfur, beyond powers)

Doctrines:

• An agent who exceeds the limit of his authority is personally liable

Facts:

National Power Corporation and National Marketing Corporation, as representative of International Commodities Corporation of New York, executed in Manila a contract for the purchase by the NPC from ICC 4,000 long tons of sulfur. It was stipulated that the seller would deliver the sulfur in Iligan City within 60 days from notice of the establishment of letter of credit and that failure to effect delivery would subject the seller and its surety to the payment of liquidated damages.

In entering into the contract, NAMERCO did not disclose to NPC that ICC, in a cable instruction, stated that the sale was subject to the availability of a streamer. Contrary to this, NAMERCO agreed that non-availability of a streamer was not a justification for non-payment of liquidated damages.

ICC was unable to deliver the sulfur due to its inability to secure shipping space. Consequently, Government Corporate Counsel rescinded the contract due to the non-performance. NPC sued for recovery of the stipulated liquidated damages. SC dismisses case against ICC for lack of jurisdiction.

Issues:

1. W/N NAMARCO is absolved from liability for being a mere agent of ICC.

Held/Ratio:

1. NO, NAMARCO is not absolved for acting beyond his powers thus, making him personally liable.

The contention of NAMARCO that every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent would be would apply in this case IF the principal is sought to be held liable on the contact entered into by the agent. However, in this case, it is the agent who is sought to be liable on a contract of sale, which was expressly repudiated by the principal because the agent exceeded his authority.

In addition, the unenforceability of a contract entered into by an agent beyond his power is applicable only when the contract is sought to be enforced against the principal.

Because NAMARCO exceeded his powers by agreeing that non-availability of a streamer is not a justification for non-payment of liquidated damages despite the instructions of ICC, NAMARCO is personally liable. In such instance, he acted in his own name.

The cases cited Spanish commentators. You can consider memorizing some lines if you want to impress.


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BA Finance v. CA (1992) Doctrines:

• The special power to approve loans does not carry with it the power to bind the principal to a contract of guaranty even to the extent of the amount for which a loan could have been granted by the agent.

• Guaranty is not presumed; it must be expressed and cannot be extended beyond its specified limits.

[This case is about a claim for damages brought forth before petitioner with regards to an accident involving petitioner's Isuzu ten-wheeler truck then driven by an employee of a Lino Castro which petitioner claims are not connected with him.]

Facts:

Petitioner leased his Isuzu ten-wheeler truck to Rock Component Philippines, Inc. The truck then was being driven by Rock Component Philippines Inc.’s driver named Rogelio Villar y Amare. While driving, Amare got into an accident involving triple homicide with multiple physical injuries due to reckless imprudence.

The court found Amare guilty beyond reasonable doubt and adjudged petitioner liable for damages in as much as the truck was registered in its name during the incident in question, following the doctrine laid down by the Court in Perez v. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. v. Jepte (102 Phil. 103 [1957]) and that Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may be adjudged liable to pay herein private respondents as expressly stipulated in the contract of lease between petitioner and Rock Component Philippines, Inc.

Also, the court held both petitioner and Rock Component as solidarily liable for the tort charges against Amare.

Issue:

1. W/N Petitioner should be held liable for damages albeit the truck was leased to Rock Component Philippines when the incident occurred.

Held/Ratio:

1. YES. The court used the doctrine of Erezo laid down as follows:

”the registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person.”

The principle, which this doctrine is based on, is that concerned with vehicles registered under the Public Service Law. It states that the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult with the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who actual the owner is.

The court ruled that under the same principle, the registered owner of any vehicle, even if not used for a public service, should primarily responsible to the public or to the third persons for injuries caused the latter while the vehicle is being driven on the highways or streets.

The case also sites pertinent rules laid down by the Revised Motor Vehicle Law (Act No. 3992, as amended) that provides for the use and operation of vehicles on any public highway as long as they are properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury of pedestrians and other travelers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances.

The court rejected petitioner’s argument relying on the doctrine laid down by Duquillo v. Bayot because in said case, defendant could not be held liable for anything because the truck was driven without the consent or knowledge of the defendant-owner. Here, although the truck was leased, it was still under the name of petitioner and was used with his knowledge.


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Pineda v. CA (First One) (marine services, group policy, special powers of attorney)

Doctrine:

• Outline: Special powers of attorney should be strictly construed.

• Case: The employer is considered the agent of the insurer in performing the duties of administering group insurance policies.

Facts:

In September 1983, Prime Marine Services, Inc. (PMSI) a crewing/manning outfit, procured a Group Policy from Insular Life Assurance Co., Ltd. (Insular) to provide life insurance coverage its sea based employees enrolled under the plan. On February 17, 1986, during the effectivity of the policy, six covered employees of the PMSI perished at sea when their Greek cargo vessel, M/V Nemos sunk somewhere in EL Jadida, Morocco. Following the tragic demise of their loved ones, Pineda and the other beneficiaries sought to claim death benefits due them and, for this purpose, they approached the President and General Manager of PMS, Capt. Roberto Nuval. The latter evinced willingness to assist Pineda and others to recover Overseas Workers Welfare Administration (OWWA) benefits arising from the deaths of their husbands/sons. They were thus made to execute, with the exception of the spouses Alarcon, special powers of Atty. authorizing Capt. Nuval to, among others, “follow up , ask, demand, collect and receive” for their benefit indemnities of sums of money due them relative to the sinking of M/V Nemos. By virtue of these written powers of attorney, Pineda and the others were able to receive their respective death benefits.

Unknown to them, PMSI, in its capacity as employer and policyholder of the life insurance of its deceased workers, filed with Insular formal claims for an in behalf of the beneficiaries, through its President, Capt. Nuval. Among the documents submitted by Capt. Nuval were the five special powers of atty. Executed by Pineda and others. On the basis of these documents, Insular released six checks four for P200,00.00 each, one for P50,000.00 and another for P40,00.00 payable to the order of the beneficiaries. These checks were released to the treasurer of PMSI, who was the son-in-law of Nuval. The transfer was made upon the instructions of Capt. Nuval over the phone to Mr Urbano the Asst. Dept. Manager for the Group Administration Dept of Insular Life. Upon receipt of the checks, Capt. Nuval endorsed and deposited them in his account with the Commercial Bank of Manila, now Boston Bank.

On July 1989, Pineda and others learned that they were entitled to life insurance benefits under a group policy with Insular, they sought to recover these benefits; however, Insular said that their liability is already extinguished upon the issuance of the 6 checks to PMSI. Thus, a case was filed against Insular.

Issues:

1. W/N the special powers of attorney were sufficient to authorize Capt. Nuval to receive the proceeds of the insurance pertaining to the beneficiaries

2. W/N Insular is bound by the misconduct of its agent, Capt. Nuval.

Held/Ratio:

1. NO. The special powers of attorney executed by petitioners Luz Pineda, Lucia B. Lontok, Dina Ayo, Celia Calumag, and Marilyn Montenegro, respectively, on 14 May 1986 uniformly granted to Capt. Rosendo Nuval the following powers:

a. To follow-up, ask, demand, collect and receipt for my benefit indemnities or sum of money due me relative to the sinking of M.V. NEMOS in the vicinity of El Jadida, Casablanca, Morocco on the evening of February 17, 1986; and

b. To sign receipts, documents, pertinent waivers of indemnities or other writings of whatsoever nature with any and all third persons, concerns and entities, upon terms and conditions acceptable to my said attorney.

The court agrees with the Insurance Commission that the special powers of attorney "do not contain in unequivocal and clear terms authority to Capt. Nuval to obtain, receive, receipt from respondent company


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insurance proceeds arising from the death of the seaman-insured. On the contrary, the said powers of attorney are couched in terms which could easily arouse suspicion of an ordinary man."

Moreover, the execution by the principals of special powers of attorney, which clearly appeared to be in prepared forms and only had to be filled up with their names, residences, dates of execution, dates of acknowledgment and others, excludes any intent to grant a general power of attorney or to constitute a universal agency. Being special powers of attorney, they must be strictly construed.

Certainly, it would be highly imprudent to read into the special powers of attorney in question the power to collect and receive the insurance proceeds due the petitioners from Group Policy No. G-004694. Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies. (General practice: Payments are COURSED THRU and NOT PAID TO Policyholders/employers)

2. YES. The employer is the agent of the insurer in performing the duties of administering group insurance policies.

The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer, however, is that the employee has no knowledge of or control over the employer's actions in handling the policy or its administration. An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control. It is clear from the evidence regarding procedural techniques here that the insurer-employer relationship meets this agency test with regard to the administration of the policy, whereas that between the employer and its employees fails to reflect true agency. The insurer directs the performance of the employer's administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more constricted control over the employer's conduct.

Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. Unfortunately, through its official, Mr. Urbano, it acted imprudently and negligently in the premises by relying without question on the special power of attorney.

The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection. So if the suggestions of probable limitations be of such a clear and reasonable quality, or if the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs.

Thus, Insular is bound by the misconduct of the agent.


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DBP v. CA (1994) (DBP MRI Pool, 60 years old age limit)

Doctrines:

• Article 1897 – The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority.

• The rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75)

• Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.

o Article 19 – Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and observe honesty and good faith.

o Article 20 – Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.

o Article 21 – Any person, who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

Facts:

In 1987, Juan Dans, his wife Candida, and their children, applied for a P500k loan with DBP Basilan. DBP advised Dans, who was already 76 years old, to obtain a Mortgage Redemption Insurance (MRI) with their DBP MRI pool.

On August 11, 1987, DBP approved a smaller loan (P300k) and released it to the Dans. DBP also deducted from the proceeds of the loan an amount of P1,476 in payment for the MRI premium. Dans also accomplished the required paperwork for application of the MRI. On August 20, the DBP credited the MRI premium, less 10% service fee, to the account of the DBP MRI pool.

On September 3, Dans died of cardiac arrest. DBP relayed the information to the MRI pool. On September 23, the MRI pool denied Dans’ application for the MRI, claiming that there is a 60 years age limit for applicants. Only on October 21 did the DBP inform Candida of the rejected application. To remedy the situation, DBP offered to refund the P1,476 premium paid by Juan Dans, but Candida refused, and demanded the payment of the MRI or an amount equivalent. She also rejected a P30k offered by DBP as settlement.

On February 10, 1989, Candida filed a complaint against DBP and DBP MRI pool for a collection of sum and damages. They allege that DBP, by deducting the MRI premium from the loan despite knowledge of Juan’s age, the deceased Dans became insured by the insurance pool.

On March 10, 1990, the RTC decided in favor of Candida Dans and against the DBP. The DBP was declared in estoppel for leading Juan Dans to believe he was eligible for their MRI pool. The DBP MRI pool, however, was absolved because the trial court found no existing contract between it and the deceased Juan. The DBP appealed, but the CA affirmed the trial court’s decision.

Issues:

1. Whether there was a perfected insurance contract between Juan and MRI pool to be held liable.

2. Whether DBP can be held liable acting as the MRI pool’s insurance agent.

Held/Ratio:

1. NO. Juan Dans application was never approved by the insurance pool.


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The application form filled up by Dans required two (2) conditions to concur. The first one is that the insurance pool has to approve the application, and the second condition requires that the full premium be paid (the P1,476 deducted from Dans’ loan.)

The power to approve applications is lodged within the insurance pool, not the DBP itself. And despite crediting the premium to the MRI pool’s account, there was never any proof shown that they accepted the amount and approved Dans’ application.

2. YES. By compelling Juan Dans to apply with the MRI pool instead of looking for another insurance company, the DBP acted as an insurance agent. This can be proven by the actions of the DBP: deducting the premium from the loan, making Dans sign the application forms and later on submitting it to the MRI pool, and eventually collecting a 10% service fee for the services rendered for Dans. These are the duties of the MRI pool.

Article 1897 provides that “an agent is liable when he expressly binds himself or exceeds his authority without notice to the principal.” The DBP, knowing that Dans was 76 years old, should have precluded itself from offering the MRI pool which had a 60 years old age limit. This act showed a clear excess of the authority.

However, Candida cannot claim the full amount from the DBP. Juan Dans, being of advanced age, has a smaller chance that he will be granted an insurance coverage by another company.


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Eugenio v. CA (1994) Doctrine:

• 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.

Facts:

Petitioner Nora S. Eugenio was a dealer of Private respondent Pepsi-Cola Bottling Company of the Philippines, corporation(Pepsi) . She had one store located at Marikina, Metro Manila, Eugenio had a regular charge account in 2 plants of Pepsi. Her husband and co-petitioner, Alfredo Eugenio, used to be a route manager of Pepsi in its Quezon City plant.

On August 4, 1981 Pepsi's Legal department thru Atty. Rosario interviewed Alfredo Eugenio, concerning an alleged "non-payment of debts to the company, inefficiency, and loss of trust and confidence". During the interview it was initially presented that the Eugenio's owed Pepsi a total of P94,651, it was later reconciled to be P74,849, because the loaned empties were reduced after re-evaluation of "empties" and a spurious sales invoice was also deducted.

Eugenio submitted to Atty Rosario(Pepsi) four Trade Provisional Receipts (TPRs), signed by Pepsi Route Manger Estrada, amounting to P80,560. (if said TPRs were credited to the account of the Eugenios then the Eugenios would not be indebted to Pepsi but it would be Pepsi that would be indebted to the Eugenios). Atty Rosario(Pepsi) asked Azurin assistant personnel manager of Pepsi to conduct an investigation.

According to Azurin, during the investigation on December 4, 1981, Estrada allegedly denied that he issued and signed the aforesaid TPRs. He also presented a supposed affidavit, which Estrada allegedly executed. However, said supposed affidavit is inexplicably dated February 5, 1982. Estrada never testified in court and what he is supposed to have done or said was merely related by Azurin.

The RTC held in favor of Pepsi and the CA affirmed the RTC's decision

Issue:

1. W/N the amounts in the aforementioned trade provisional receipts should be credited in favor of the Eugenios?

Held/Ratio:

1. Yes it should be credited to the Eugenios.

The evidence saying that the TPR's were false, are not counted as evidence because it is hearsay, under the hearsay evidence rule, a witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in the Rules. Estrada failed to appear as a witness at the trial. It was only Azurin who testified that during the investigation he conducted, Estrada supposedly denied having signed the TPRs. therefore, it is not admissible in evidence.

An exception to such hearsay rule is a witness deceased or unable to testify, given in a former case or proceeding, judicial or administrative, involving the same parties and subject matter, may be given in evidence against the adverse party who had the opportunity to cross-examine him. but Pepsi cannot use said exception because the investigation conducted by Azurin was neither a judicial trial nor an administrative hearing. It was an inter-office interview. Secondly, Eugenios was not given the opportunity to interview Estrada(Pepsi). Thirdly, The supposed stenographic notes on which Pepsi relies is unauthenticated therefore inadmissible for the purpose intended. Lastly, even if Pepsi said that Estrada was not presented as a witness because he had disappeared, there was no evidence showing it was the fault of the Eugenios. Pepsi just said that Estrada disappeared without any other explanation, even though it knew the importance of Estrada's testimony and Pepsi was in a better position to look for Estrada a former employee.

Neither is the affidavit of Estrada admissible; it is likewise barred as evidence by the hearsay evidence rule because the affidavits were made 2 months after the investigation


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The affidavit said that the signature of Estrada(Pepsi) on the TRB's were dissimilar from Estradas signature proven by a 201 file attached, but said 201 file was never submitted in court, therefore the affidavit fall under hearsay.

According to respondent court, the questioned TPR's are merely 'provisional' because they were not confirmed by Eugenios, but this is wrong. The TPRs presented in evidence are disputably presumed as evidentiary of payments. There are presumptions juris tantum in law that private transactions have been fair and regular and that the ordinary course of business has been followed. The role of presumptions in the law on evidence is to relieve the party enjoying the same of the evidential burden to prove the proposition that he contends for, and to shift the burden of evidence to the adverse party. Pepsi having failed to rebut the aforestated presumptions in favor of valid payment by the Eugenios, the presumption is kept.

Assuming that Pepsis cashier never received the amounts in the TPRs, Pepsi still failed to prove that Estrada, who is its duly authorized agent, did not receive those. In so far as the Pepsis customers are concerned, for as long as they pay their obligations to the sales representative of the private respondent using the latter's official receipt, said payment extinguishes their obligations. Otherwise, it would unreasonably cast the burden of supervision over its employees from respondent corporation to its customers.

The substantive law is that 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 fact, Atty. Rosario(Pepsi), admitted that "it is the responsibility of the collector to turn over the collection.


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Toyota Shaw v. CA (Lite-Ace, personal capacity of sales representative)

Doctrine:

• One dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.

Facts:

1) June 1989 Luna Sosa wanted to purchase a Toyota Lite Ace. And one was available at Toyota Shaw.

2) There they met Popong Bernardo, a sales representative.

3) Sosa emphasized that he needed the Lite Ace not later than June 17 since he and his family and a balikbayan will return to his home province for his birthday celebration to brag about this car.

4) Bernardo promised that such will be delivered in time and so, Sosa signed an Agreement between him and Bernardo and the balance shall be financed by BAFinance.

5) Downpayment of 100,000 was delivered to Toyota. And a Vehicle Sales Proposal containing all pertinent information about the Lite Ace EXCEPT for its “delivery terms”.

6) Upon the arrival of the date, Bernardo was not able to deliver due to some delays and alleged that “nalusot ang unit ng ibang malakas”.

7) Toyota however contends that it was not delivered to Sosa since BAFinance disapproved the financing application of Sosa. Toyota then gave Sosa the option of paying the full price in cash instead. Sosa refused.

8) Sosa asked for the refund of the downpayment of which Toyota obliged and issued a check for it as verified by a check voucher which Sosa signed with reservation for future claims and damages.

9) Sosa sent two letters, first (June 27 1989) for the collection of downpayment plus an interest on it from the time of his payment of such. With a warning that legal action will be taken if not paid within 5 days of receipt of letter.

10) Second (November 4 1989), signed by his lawyer, demanded one million pesos representing damages and interest, again with the same warning.

11) Before any answer form Toyota was received, Sosa sued for damages in the Marinduque RTC. Since he suffered mockery by his relatives and friends and province-mates since they have to take the public transport going there.

12) Toyota alleged that no sale was entered into since Bernardo has no authority to sign the same agreement and Bernardo signed it on its own behalf.

13) The RTC decided in favor of Sosa since:

o Toyota did not volunteer any information about Bernardo’s authority

o From the whole time of the transaction Toyota made the impression that Bernardo is their agent.

14) Toyota appealed to the CA and the latter affirmed the RTC.

15) Now Toyota faces the SC.

Issue:

1. W/N a perfected sale was entered into between Toyota (through Bernardo) and Sosa.

Held/Ratio:

1. NO. Sosa was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. Sosa knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.


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There was no perfection of sale since such agreement can only be seen at merely the negotiation stage of the sale and NOT perfection. No meeting of minds between TOYOTA and Sosa.

No Damages must be given since such is only based on misplaced pride and ego.

Bacaltos Coal Mines v. CA (1995) (“but not by way of limitation”)

Doctrines:

• Every person dealing with an agent is put upon inquiry and must discover at his own peril the authority of such agent

• If he does not make such an inquiry, he is chargeable with knowledge of the agent’s authority; ignorance will not be an excuse

Facts:

Petitioner Bacaltos (principal) authorized Savellon (agent) “to use the coal operating contract of BCM xxx for any legitimate purpose that it may serve. Namely, but not by way of limitation, as follows:

1. acquire purchase orders

2. engage in trading

3. collect receivables

4. extend to any person/ company by substitution the same extent of authority granted to Savellon

5. in connection with the preceding paragraphs to execute and sign documents, contracts, and other pertinent papers

Savellon executed a Trip Charter Party with SMC wherein they agreed that BCM “lets/demises” a vessel to SMC for 3 round trips to Davao. This fell through as the vessel was only able to make one trip. In payment for this agreement, SMC issued a check payable to “Rene Savellon in trust for BCM”.

BCM denies liability on the contention that Savellon was not duly authorized to enter into the Trip Charter Party.

Issues:

1. W/N agent Savellon acted within his authority

2. W/N BCM is liable to SMC

Held/Ratio:

1. NO, he acted beyond his authority.

The SC interpreted the above quoted authority of Savellon as a special power of attorney. And that the clause “but not by way of limitation” should be understood as contemplating other prerogatives, which must exclusively pertain to, the power to use the coal operating contract. (ps: BCM doesn’t even own vessels and their main business is coal mining).

2. NO, there is negligence on the part of SMC.

Apart from their negligence in drawing the check payable to Rene Savellon, they were also remiss in their duty (as an entity dealing with an agent) to inquire upon the authority of the agent. As they did not make such inquiry, they are chargeable with knowledge of his authority despite ignorance thereof.


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Yu Eng Cho v. PANAM (unconfirmed flight, Pan American Airlines, TWSI, Tagunicar)

Doctrines:

• The fact that one is dealing with an agent, whether the agency be general or special, should be a danger signal. The mere representation or declaration of one that he is authorized to act on behalf of another cannot of itself serve as proof of his authority to act as agent or the extent of his authority as agent

• Settled rule: persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only that fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it.

Facts:

Yu Eng Cho (plaintiff) is the owner of Young Hardware Co. and Achilles Marketing. Due to his business, he travels to Malaysia, Taipei and Hong Kong. On July 10, he bought plane tickets from Claudia Tagunicar (independent travel solicitor), who represented herself to be an agent of Tourist World Services, Inc. (TWSI). Yu Eng Cho paid 25,000 pesos for each computation (destinations: Hong Kong, Tokyo, San Francisco). Tagunicar received 7% commission and 1 % commission from TWSI

The purpose of this trip was to go to Fairfield, New Jersey to buy two lines of infrared heating systems processing textures plastic article. On said date of departure, only the passage from Manila-Hong Kong-Tokyo was confirmed. The flight from Tokyo-San Francisco was on “RQ” status (on request). Tagunicar told Yu Eng Cho to return after a few days so she could confirm with Canilao (TWSI), and Canilao in return confirmed. When plaintiffs returned, Tagunicar said that their flight was confirmed all the way (attached confirmation stickers on tickets).

A few days before the scheduled flight, their son Adrian, called the Pan Am office to verify, and the personnel of defendant confirmed their bookings over the phone. So on July 23, plaintiffs left for HK (stayed for 5 days), then left for Tokyo on July 28. Upon arrival in Tokyo, they called up Pan Am office and they were told that their names were not in the manifest. Since plaintiffs were supposed to leave on July 29 and they could not remain in Japan for more than 72 hours, they bought tickets for Taipei instead (constrained by JAL officials). This was the only option available for them because Northwest Airlines was on strike, there was NO chance for plaintiffs to obtain airline seats to the US within 72 hours.

When they reached Taipei, there were no flights available so they returned to Manila on August 3, instead of going to the US. JAL paid for the difference of the price for Tokyo-Taipei and Tokyo-San Francisco.

Due to plaintiff’s failure to reach Fairfield, Radiant Heat Enterprises, cancelled Yu Eng Cho’s option to buy the two lines of infrared heating system. (Agreement: plaintiff would inspect equipment and make final arrangements NOT LATER THAN AUGUST 7). From this transaction, Yu Eng Cho expected a profit of 300-400k. A complaint for damages was filed.

Defendant TWSI/Canilao denied having confirmed the Tokyo-SF segment because flights were really tight due to Northwest Airlines Strike. The confirmation stickers used by defendant are exclusively for Pan-Am only and only travel agency can confirm the bookings the IATA number should also appear in the validation.

Issue:

1. W/N there was an agency relationship between Tagunicar and TWSI.

Held:

1. NO. Petitioners rely on the affidavit of Tagunicar where she stated that she is an authorized agent of TWSI. This affidavit has weak probative value. Affidavits, are almost always incomplete and often inaccurate (considered inferior to the testimony given in court). Affidavit was prepared and typewritten by secretary of petitioner’s lawyer. They never told her that it would be used against her.


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No agency relationship even if she received commission: Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. The transaction is a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium.

There is NO evidence that Tagunicar was employed by Pan Am as its agent. Petitioner’s tickets were on RQ status – not confirmed. More of wait-listed then confirmed. Pan Am cannot be held for damages.

Tagunicar should be held liable for having acted in bad faith in misrepresenting to petitioners that their tickets have been confirmed. (mitigated by the courts because evidence shows that plaintiff’s knew that their tickets were unconfirmed by repeatedly calling to ask for the status of their tickets)


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Litonjua v. Fernandez (2004) (best offer vs perfected contract of sale)

Doctrines

• Art 1878 of the Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority.

• The settled rule is that persons dealing with an assumed agent are bound at their peril and if they would hold the principal liable, to ascertain not only the fact of the agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it.

Facts:

Alimario and Fisico were brokers who offered to sell to Litonjua and Litonjua Jr. 2 parcels of land. Brokers told them that they are authorized by respondent Fernandez to offer the property for sale. The Litonjua’s met with Fernandez and the 2 brokers at the Litonjua’s office and both petitioner and respondent agreed to buy the property at P150/sq m and that the owners would be the one to shoulder the capital gains tax, transfer tax and expenses for documentation of the sale. They agreed to meet on Dec 8 1995 to finalize the sale and agreed that Fernandez would present a Special power of attorney executed by the owners of the property authorizing her to sell the properties for and in their behalf and to execute an absolute deed of sale thereon.

However, only Fisico attended the meeting and told the petitioners that Fernandez was working out a settlement with the tenants on the said property. After weeks of waiting and 2 letters asking that a deed of absolute sale be executed in accordance with their verbal agreement, Fernandez wrote the Litonjuas saying that:

1. It is not true that she agreed to shoulder registrations fees nor was it discussed

2. That the Dec 8 meeting was in order to sign the absolute deed of sale, that it was only the status of the property that was discussed and whether or not there are really no tenants. Unfortunately, “alleged tenants” appeared so she and her cousin are no longer pushing through with the sale.

3. Although petitioners offered to buy the property, she did not accept, no verbal contract perfected.

4. Contract of sale unenforceable for failure to comply with the statute of frauds.

5. No earnest money demanded nor received; no obligations exists.

Fernandez version: [note: Fernandez isn’t the owner of the property, relative lang siya ng owners na abroad]

Fernandez requested Alimario to look for buyers of the properties on a best offer basis. That during the Dec 8 meeting, she only attended to hear the petitioners’ offer and that she could not bind the owners of the properties because she had no written authority to sell the same. After the meeting, she asked Marquez to secure a barangay clearance that the property has no tenants but couldn’t ‘cause apparently there are tenants. Her cousin told her that he was not selling his property for P150/ sqm.

Trial court’s decision was in favor of petitioners, ordering Fernandez to execute a contract of sale. Court of appeals reversed stating that petitioners failed to prove that a sale or a contract to sell over the property had been perfected between petitioners and private respondent.

Issues:

1. W/N there was a perfected contract of sale between the parties

2. W/N the contract falls under the coverage of the Statute of Frauds


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Held/Ratio:

1. No. Text of Fernandez’ letter states that: “My cousin and I have thereby changed our mind and that the sale will no longer push through. …. In view thereof, I regret to formally inform you that we are no longer selling the property until the problems are fully settled.”

The letter can hardly be constituted as a note or memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that the seller DID NOT ACCEPT the condition that she will be the one to pay the reg fees and denied that she committed to execute a deed of sale. When Fernandez used the words “changed our mind”, she was referring to the decision to sell the property at all and NOT IN SELLING THE PROPERTY TO LITONJUAS as Fernandez has not yet made the final decision to sell the property to the Litonjuas.

Art 1878 of the Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority. The settled rule is that persons dealing with an assumed agent are bound at their peril and if they would hold the principal liable, to ascertain not only the fact of the agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it. The letter sent by Fernandez was signed by her alone, without authority nor ratification from the owners and so said letter is not binding on the owners. Therefore, there is no perfected contract of sale.

2. No. Art.1403 states that The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or secondary evidence of its contents.

The application of such stature presupposes the existence of a perfected contract, however for a note or memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in parol. And To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly authorized in writing.


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Manila Memorial Park Cemetery, Inc. v. Pedro L. Lisangan (2004) (change in contract, higher consideration, separate agreement with the agent, ignorance of person of agent’s authority not an excuse)

Doctrine:

• The ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon the agent’s assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency.

Facts:

Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot was no longer interested in acquiring the lot and opted to sell his rights subject to reimbursement of the amounts already paid. Baluyot reassured Atty. Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to him. The latter agreed and gave P35,295.00 representing amount to be reimbursed to the original buyer and to complete the downpayment.

Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the new contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot executed a document confirming that while the contract price is P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.

The document reads in part:

The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be issued as discounted to conform to the previous price as previously agreed upon. --- P95,000.00

Prepared by:

(Signed)

(MRS.) FLORENCIA C. BALUYOT

Agency Manager

Holy Cross Memorial Park

4/18/85

Dear Atty. Linsangan:

This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that the total price of P132,250.00 your undertaking is to pay only the total sum of P95,000.00 under the old price. Further the total sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985 has been credited in the total purchase price thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00 including interests (sic) charges for a period of five (5) years.

(Signed)

FLORENCIA C. BALUYOT

By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No. 118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI. The next year, Atty. Linsangan again issued twelve (12) postdated checks in favor of MMPCI.


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On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons the latter could not explain, and presented to him another proposal for the purchase of an equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Damages against the former.

MMPCI alleged that Baluyot exceeded the terms of her agency, neither did MMPCI ratify Baluyot’s acts. It added that it cannot be charged with making any misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written contract expressly stated the terms and conditions which Atty. Linsangan accepted and understood. In canceling the contract, MMPCI merely enforced the terms and conditions imposed therein.

The trial court held MMPCI and Baluyot jointly and severally liable. It found that Baluyot was an agent of MMPCI and that the latter was estopped from denying this agency, having received and enchased the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down payment, it allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently encashed.

Court of Appeals affirmed.

Issues:

1. W/N the cancellation of the contract was justified on grounds of Atty. Lisangan’s failure to abide by the terms thereof. (sub-question: W/N Baluyot exceeded authority as an agent.)

Held/Ratio:

1. YES. The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a total list price of P132,250.00. Likewise, it was clearly stated therein that “Purchaser agrees that he has read or has had read to him this agreement, that he understands its terms and conditions, and that there are no covenants, conditions, warranties or representations other than those contained herein.” By signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyot’s authority. Baluyot’s authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written contract provided by MMPCI. The document/letter “confirming” the agreement that Atty. Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the same came from MMPCI or any of its officers.

The ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon the agent’s assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency.

In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty. Linsangan’s friend and known to be an agent of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her authority.

NOTE: Nung pinalitan yung contract to a higher consideration, yung agent na yung nagbabayad nung P1,445 na balance (P1,800 binabayad ni Atty. Lisangan as per old agreement; P3,255 nasa new contract). AGENTFAIL.


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Commissioner of Public Highways v. San Diego (1970) Appropriation of EDSA

Doctrines:

• Private or secret orders of Principal do not prejudice 3rd persons who relied upon agent’s power of attorney or principal’s instruction

Facts:

In 1940, the Government of the Philippines (GP) filed a complaint for eminent domain in the CFI of Rizal for the expropriation of a parcel of land belonging to N.T. Hashim (14,934 sq. m) needed to construct a public road (EDSA). Upon GP’s deposit (P23,413.64) to the City Treasurer of an amount fixed by court as the provisional value all lands needed to construct the road, it took possession. The records of the expropriation case were destroyed and lost during the WWII, and neither party took any step thereafter to reconstitute the proceedings.

In 1958 the estate of N. Hashim through its administrator (Tomas N. Hashim) filed a money claim with QC’s Engineer’s Office for P522,620.00 alleging that amount represents FMV of the property, which was already a public highway. In 1963, a case was filed before the CFI of Rizal (QC Branch) for such claim (increased to P672,030.). As reply, the Solicitor General stated that the claim should have been for P3,203.00 only (FMV at the time the State took possession) with legal interest at 6%. The parties then entered into a Compromise Agreement which provided payment of P14.00 per sq.m totaling P209,076.00 (assessed value), which was confirmed, ratified and approved in November 1966 by the Commissioner of Public Hways and the Sec of Public Works and Comm. This was also later on submitted to the lower court, which rendered judgment approving the agreement and ordering parties to comply.

On October 1968, respondent estate filed for a writ of execution before the lower court alleging that petitioners failed to satisfy judgment. On the same date, respondent Garcia (special sheriff) served a Notice of Garnishment together with a writ of execution to respondent PNB, notifying said bank that levy was thereby made upon the funds of petitioners Bureau of Public Hways and the Auditor General to cover judgment of P209,076.00. Coruña, in his capacity as Chief, Documentation Staff of PNB’s legal dept replied to the notice of garnishment that in compliance therewith, the bank was holding the claimed amount. Respondent bank alleges that it sent a letter to the official of the Bureau of Public Hways upon receipt of garnishment. Respondent estate filed before the lower court an order ordering PNB to release and deliver to Garcia the garnished amount, which was granted by the court. Coruña, allegedly taking advantage of his position, authorized the issuance of a cashier’s check of the bank taken out the funds of petitioner Bureau and paid the same to respondent estate, without notice to petitioner.

Petitioners, through the Sol Gen wrote PNB complaining of its action without affording the Bureau reasonable time to contest the validity of garnishment notwithstanding PNB’s knowledge that gov’t funds are exempt from execution or garnishment and demanded the re-credit of the amount alleging that it was illegally garnished. Respondent PNB claimed that it was not liable alleging that it was “helpless to refuse delivery under teeth” of the special order directing immediate delivery of the garnishment amount. Thus, a case was filed. The Court ordered on January 1969 the issuance of the writ against principal respondents (solidary liability). In compliance with the writ, respondent PNB restored garnished sum to petitioner’s Bureau’s account. Strangely though, instead of asking respondent estate to reimburse it in turn in the same amount, PNB filed with the probate court a motion for estate deposit, purportedly in compliance with the writ. P125,446 was deposited as savings account, while the remainder was not yet paid.

Issues:

1. AGENCY RELATED: Was the Compromise Agreement entered into by the Sol Gen valid?

2. Was the respondent Court’s orders (1) for the execution of judgment (2) for delivery of garnished amount valid?

Held/Ratio:

1. YES, even if it was executed only by the lawyer of the respondent court, without any showing of having been specifically authorized to bind the estate. In the first place, only the principal or client (estate) may raise such lack of authority. More importantly, instead of alleging such, the estate confirmed and ratified the compromise agreement. Further, the Sol Gen did not make any petition to annul the compromise agreement or of the court’s decision approving the same.


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2. NO. The questioned orders were declared null and void on the fundamental ground that government funds are not subject to execution or garnishment.

Green Valley v. IAC (1984) Doctrines:

• In an agency to sell, the agent is liable to pay the principal for goods sold by the agent w/o the principal’s consent.

• Commission agent can’t sell on credit w/o the express or implied consent of the principal. Should he do so, the principal may demand from him payment in cash. But he is still entitled to any interest or benefit, which may result from such sale.

Facts:

Green Valley Poultry & Allied Products, Inc. entered into an agreement with E.R. Squibb & Sons Philippine Corporation (private respondent) that the former would be the latter’s non-exclusive distributor of products (related to animal feeds and antibiotics), specifically in the Central and North Luzon areas, including Cagayan Valley. Pursuant to the contract, Green Valley will get a distributor’s discount and commission for the products sold. E.R. Squibb will deliver their products to Green Valley, and that payment for the products will be due 60 days from date of invoice. For goods delivered but unpaid, Squibb filed a suit to collect P48,374.74 plus P96 with interest at 6% per annum.

Green Valley claims that it was only an agency to sell, meaning that the goods they received were on consignment only with an obligation to turn over the proceeds less their commission, or to return the goods if not sold. Since they sold the goods but have not been able to collect payment from the purchasers, they claimed that the case Squibb filed was premature. On the other hand, Squibb asserted, and the RTC and CA concurred, that the contract was one of sale so that Green Valley was obligated to pay for the goods received upon the expiration of the 60-day credit period.

Issues:

1. W/N Green Valley has to pay Squibb for the goods received.

Held/Ratio:

1. YES. The SC said that they didn’t have to categorize the contract. Whether it was an agency to sell or a contract of sale, Green Valley still has to pay Squibb. If it was an agency to sell, Green Valley is liable because it sold on credit w/o authority form the principal (meaning, they let their customers purchase even without paying first). According to Art. 1905 of the Civil Code, the commission agent cannot, without express or implied consent of the principal, sell on credit. If he does (as Green Valley did in this case), then the principal (here, Squibb) can demand from him payment in cash. So the CA decision is affirmed.


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Panlilio v. Citibank, N.A. (LTCPs, withdrawal upon news about of stock crash)

Doctrines:

• Principals in an agency relationship are solely obliged to observe the solemnity of the transaction entered by the agent on their behalf, absent any proof that the latter acted beyond its authority

• Concomitant to this, the principal also assumes the risks that may arise from the transaction

• Bank regulations prohibit banks from guaranteeing profits or the principal in an investment management account.

Facts:

Amalia Panlilio deposited in Citibank’s Makati branch P1M into a “Citihi” account, which is a fixed-term savings account with a higher-than-average interest. She initially wanted to invest the money in a Peso Repriceable Promissory Note (PRPN), which yielded higher interest, but it wasn’t available on that day. On the same day (Oct. 10, 1997), she also opened a checking account, to which the interests of the Citihi account will be credited. Jinky Suzara Lee was assigned to personally transact w/ Amalia and handle the accounts. These accounts were “ITF” or “in trust for” accounts. This means that they were intended to benefit her minor children in case she would meet an untimely death. In order to open them, she had to sign 2 documents: a Relationship Opening Form (ROF) and a Invester Profiling and Suitability Questionnaire (Questionnaire).

About a month later, on Nov. 28, Amalia phoned Citibank saying she wanted to place another investment for P3M. She brought a PCIB check worth that amount to Citibank. P2,134,635 was placed in a Long-Term Commercial Paper (LTCP) issued by Camella and Palmera Homes (C&P Homes). Essentially, an LTCP is a debt of indebtedness with a maturity period of more than 365 days, and is issued by a corporation to any person or entity. It’s a higher-risk long-term investment that can yield higher pay-offs. In effect, Amalia loaned C&P Homes money, and the latter pays it over a long period—in this case, the maturity period was in 2003 (five years later), with a gross interest rate of 16.25% per annum. Investment banks are authorized to buy such documents for investment purposes on behalf of their clients upon the latter’s express instructions. The remaining money from the P3M was put in two PRPN accounts in trust for Amalia’s 2 children. That day, she signed the ff. documents: a Directional Investment Management Agreement (DIMA), Term Investment Application (TIA), and a Directional Letter, which served as Amalia’s specific instructions to Citibank regarding the investment of her money.

The DIMA and Directional Letter both contain specific provisions that state that clear Citibank of any obligation to guarantee the principal and interest of the investment absent fraud or negligence on its part, and that all risks shall be assumed by Amalia. Pursuant to these investments, Citibank regularly sent Amalia confirmations of investment (COI), which is a 1-page computer generated document that stated where her money went. Amalia received the first COI on December 9, 1997. According to her, it was the first time she learned that her money was put into an LCTP and that she never instructed the bank to do so but only to open a “trust account with an interest of around 16.25% w/ a term of 91 days”. She claims that upon receipt of the 1st COI, she immediately called Lee and asked that the investment in the LTCP be withdrawn. However, according to Amalia, Lee convinced her not to withdraw her investments immediately because C&P Homes is owned by Ayala Corp. and is therefore secure, and that in any case, she could easily withdraw them at a later date. She also claims that she signed blank documents and that the bank only made unauthorized intercalations.

Around August 1998, newspaper reports about the plummeting of C&P Homes stocks and Ayala’s subsequent withdrawal of its investments in the company hit the public. On Aug. 6, Amalia met with Lizza Colet, another Citibank employee, to preterminate the LTCP and their other investments. However, in order for the LTCP to be preterminated before maturity, there must be another willing buyer for it. It was very hard to find buyers then because of the economic crisis. Still, petitioner spouses signed 3 sets of Sales Order Slips to sell the LTCP and left these with Colet. On Aug. 18, Amalia sent their first formal, written demand to Citibank for the withdrawal of her investment ASAP. In its response, Citibank says that the investment was not a deposit so its return to the investor was not guaranteed by the bank and that its sale is still subject to the availability of other buyers. Also, Citibank denies that Amalia


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immediately called them upon her receipt of the 1st COI, and they also deny that they just convinced her not to withdraw her investments immediately.

Thus, petitioners filed a case with the RTC for the recovery of a sum of money and damages. The Panlilios won. However, upon appeal, the CA reversed the RTC decision.

Issues:

1. W/N Citibank is liable to return to Amalia the P2,134,635.

Held/Ratio:

1. No. As evidenced by the DIMA and Directional Letter, Amalia opened an investment managing account. In essence, Amalia constituted Citibank as an investment manager, which gave birth to a principal-agent relationship and NOT a creditor-debtor or trustee-trustor one. Thus, the money invested was the sole and exclusive obligation of C&P Homes. Under Sec. 4 of the DIMA, it explicitly states that the agreement is one of agency and not trust. As such, the principal shall “at all times retain legal title to the funds…subject of the agreement.” Under Sec. 6, the investment manager (in this case, Citibank), is absolved of any liability in the absence of fraud, bad faith, or gross or willful negligence on its part. The same terms are contained within the Directional Letter. Thus, they generally extricate Citibank from responsibility in case the investment is lost.

The DIMA, Directional Letter, TIA and COIs, read together, establish that the agreement between the parties, as an investment management agreement, created a principal-agent relationship. Citibank purchased the LTCPs only as agent of petitioners. Amalia’s proper recourse is against C&P Homes and only upon maturity. As principals, they are bound by the provisions of the contracts entered into by their agents absent any proof that the latter acted beyond its authority. It’s the principal who assumes the risks that may arise from the transaction.

The Court ruled that there’s no merit to petitioner’s claim that they signed blank documents. Amalia testified that she didn’t ordinarily sign blank documents. Evidence shows that Amalia is a smart businesswoman. She wouldn’t just sign any document without first reviewing it. The rule that any ambiguity in a contract of adhesion shall be strictly construed against the one who wrote the contract can’t apply in this case because there is no evidence of any ambiguity, obstruction or doubt. The construction only applies when the ambiguity, obstruction or doubt is present in the contract. The word “TRUST” in the TIA merely indicates that it was to be handled by the trust department. The fact that it was handled by the trust department of the bank is immaterial because the trust department also handles other fiduciary and investment management services. Also, the fact that the ROF and Questionnaire contradict the other documents is immaterial because they were filled up for a different investment—not the one in question here. Also, when they first demanded the withdrawal of the investment, the Panlilio’s only questioned the maturity period and not the validity of the purchase of the LTCPs themselves.

Petitioners acts and omissions strongly indicate that they conformed to the agreement in the months after the signing. In that period, they received several banks statements and earned interest from their investments. In fact, C&P continued paying interest up to when this case was on trial. Suspiciously, it was only when news reports about C&P Homes’ stock crash got out that the Panlilio’s decided to withdraw their investment.


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Air France v. Court of Appeals (1983) (Japan Trip, Ganas, expired ticket, knowledge )

Doctrines:

• From Agency Outline: Under the principle that knowledge of the agent is considered knowledge by the principle, the Court ruled that the spouses cannot defend by contending lack of knowledge of the rules upon which they received their tickets from the airline company since the evidence bore out that their travel agent who handled their travel arrangements, was duly informed by proper representatives of the airline company.

Facts:

Sometime in February, 1970, the late Jose G. Gana and his family (Ganas) purchased from Air France through Imperial Travels 9 (nine) open-dated tickets for the Manila/Osaka/Tokyo/Manila route. Ganas were booked for Manila/Osaka May 8, 1970 and Tokyo/Manila May 22, 1970. The expiry date was May 8. 1971. The Ganas, however, did not depart on May 8, 1970.

Sometime in January 1971, Jose Gana asked the assistance of Teresita Manucdoc (Secretary of Sta Clara Lumber - where Jose Gana is working as Director and Treasurer) for the extension of the validity of their tickets (which again due to expire on May 8, 1971). Teresita asked for help from Lee Ella, Manager of the Philippine Travel Bureau. She used to handle travels of Sta. Clara Lumber. She then sent the tickets to Cesar Rillo who is the Office Manager of Air France. Tickets were returned to Ella. Ella was informed that extension was NOT possible, unless the following are paid first (1) fare differentials resulting from the increase in fares triggered by an increase of the exchange rate of the USD to P and (2) the increased travel tax.

Ella returned the tickets to Manucdoc and informed the impossibility of extension. Meanwhile, Ganas scheduled their departure on May 7, 1971 (ONE DAY BEFORE expiry). Manucdoc requested Ella to arrange the tickets but Ella warned her that the tickets can be used May 7, but they would NO longer be valid for the rest of the trip because it will expire next day. Manucdoc said that Ganas will make the arrangements (This was verified through the Q&A. It was even asked if Tagalog or in English. It was in English).

Assured, Ella ON HIS OWN, attached to the tickets revalidating stickers (Japan Airlines and Scandinavian Airways System (SAS) sticker). The SAS indicates that it was “Reevaluated by: the Philippine Travel Bureau, Branch No.2” (as shown by a circular rubber stamp) and signed "Ador", and the date is handwritten in the center of the circle. Then appear under printed headings the notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status). Ella made no more attempt to contact Air France as there was no more time.

Come Osaka/Tokyo Flight on May 17, 1971 - Japan Airlines refused to honor the tickets and the Ganas had to purchase new tickets. Same difficulty happened in their return trip to Manila - Air France also refused the tickets. They were only able to return only after pre-payment in Manila, through their relatives , of the adjusted rates. The family flew separate flights.

Issues:

1. W/N notice to Manucdoc is notice to the Ganas

2. W/N Ella acted beyond his powers as travel agent

Held/Ratio:

1. YES. To all legal intents and purposes, Manucdoc was the agent of the Ganas and notice to her of the rejection of the request for extension of the validity of the tickets was notice to the Ganas, her principal. There are IAT (Int’l Air Transportation Association) Rules about ticket expiry and fare differentials (adjustment for increase and decrease). The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that Manucdoc was duly informed by Ella of the advice of Reno, the Office Manager of Air France, that the tickets in question could not be extended beyond the period of their validity without paying the fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes. – This is the topic for the Agency class


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2. YES. The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the Ganas to leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. It should be recalled that the Ganas left in Manila the day before the expiry date of their tickets and that "other arrangements" were to be made with respect to the remaining segments. Besides, the validating stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of a ticket or revive an expired one. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL. stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted within their contractual rights when they dishonored the tickets on the remaining segments of the trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila flight.

Emergency Facts: Tickets cost USD 2,528.58, exchange rate was P3.90/USD1, travel tax is P100 for each passenger,


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Cuison v. CA (1993) (manager, holds him out to the public, “kinakapatid”)

Doctrines:

• One who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent to the prejudice of third parties dealing with such person in good faith and in the honest belief that he is what he appears to be

• Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed to latter to act as though he had full powers

• The fact that the agent defrauded the principal in not turning over the proceeds of the transactions to the latter cannot in any way relieve or exonerate such principal from liability to the third persons who relied on his agent’s authority.

• Equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

Facts:

Case is for a sum of money. Kue Cuison (petitioner) is a sole proprietorship (stores: Baesa, QC and Binondo, Manila) engaged in the buy and sell of newsprint, bond paper, and scrap. Valiant Investment Associates “VIA” (respondent) delivered paper products amounting to 297k to a certain Lillian Tan of LT Trading. The deliveries were made pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed at Binondo of Cuison. It was likewise pursuant to Tiac’s instructions that the merchandise be delivered to Lillian Tan. Upon delivery, Lillian paid by issuing several checks payable to cash at the specific request of Tiac. In turn, Tiac issued 9 postdated checks to VIA. Unfortunately, these 9 checks were dishonored.’

VIA made several demands to Kue Cuison to pay for the merchandise, claiming that Tiu Huy Tiac was duly authorized by Cuison as the manager of his Binondo office, to enter into transactions with VIA and Lillian Tan. Cusion denied any involvement and refused to pay.

Issues:

1. W/N Cuison is liable for Tiu Huy Tiac’s transactions

Held/Ratio:

1. YES. By Cuison’s own acts and admission, he held out Tiu Huy Tiac to the public as the manager of his store in Binondo, Manila. More particularly, Cuison explicitly introduced Tiu Huy Tiac to Villanueva, VIA’s manager, as his (petitioner’s) branch manager as testified to by Villanueva.

Secondly, Lillian Tan (who has been doing business with Cuison for quite a while) also testified that she knew Tiu Huy Tiac to be the manager of the store. The general perception of Tiu Huy Tiac as the manager is even made manifest by the fact that Tiu Huy Tiac is known in the community to be the “kinakapatid” of Cuison. Even petitioner admitted his close relationship in open court that they are “like brothers.”

Petitioner’s unexplained delay in disowning the transactions entered into by Tiu despite several attempts made by VIA to collect the amount from him proved all the more that he was aware of the questioned transactions. Also, 3 months after Tui Huy Tiac left petitioner’s employ, Cuison sent communications to its customers notifying them that Tiu is no longer connected with his business. Such undertaking spoke unmistakably of Tiu’s valuable position as manager. Cuison is now estopped from disclaiming liability for the transaction entered into by Tiu Huy Tiac on his behalf because innocent third persons relied upon such representations in good faith and for value.


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Pleasantville Development v. CA (lot mix-up) Doctrine:

• The principal cannot absolve itself from the damages sustained by its buyer on the premise that the fault was primarily caused by its agent if the agent was acting within his authority, even if such agent has acted negligently. The liability of the principal for acts done by its agent within the scope of his authority does not exclude those done negligently.

Facts:

A certain Robillo purchased from Pleasantville Development a parcel of land located in Pleasantville Subdivision in Bacolod City. This lot was designated as Lot 9. Subsequently in 1975, a certain Jardinico bought the rights to the lot from Robillo. At that time, the lot was vacant.

Upon completing payment in 1978, Jardinico applied for registration of the land under his name. It was then that he learned that a certain Wilson Kee had already introduced improvements and took possession of Lot 9.

FLASHBACK! Apparently, in 1974, Kee bought on installment Lot 8 in the same subdivision from CT Torres, the exclusive real estate agent of Pleasantville. Unfortunately, when Kee’s wife conducted an inspection with a CT Torres employee, the employee mistakenly pointed to Lot 9, instead of Lot 8. Thereafter, sometime after 1975, Kee constructed his residence and other improvements on the lot.

Jardinico and Kee tried to settle to no avail. Jardinico filed for ejectment and Kee countered with a third-party complaint. The CA eventually ruled that the erroneous delivery was due to the negligence of CT Torres, and that Kee was a builder in good faith as he was unaware of the mix-up when he began construction on Lot 9. The Court also said that the wrong delivery was likewise imputable to the principal, Pleasantville.

Issues:

1. W/N Pleasantville is liable as principal for the negligent acts of its agent.

Held/Ratio:

1. YES. Pleasantville is liable for the damages sustained by its buyer primarily caused by its agent if the agent was acting within his authority, even if such agent has acted negligently.

The rule is that the principal is responsible for the acts of the agent, done within the scope of his authority, and should bear the damage caused to third persons. On the other hand, the agent who exceeds his authority is personally liable for damages. In this case, CT Torres, the agent, was acting within its authority when it made the delivery to Kee. In acting within the authority, it was, however, negligent. It is this negligence that is the basis of Pleasantville’s liability, per Articles 1909 and 1910 of the Civil Code.

Therefore, Pleasantville and CT Torres are declared solidarity liable for damages due to negligence.


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Rural Bank of Milaor v. Ocfemia (2000) Bank foreclosure, Board Resolution, Manager’s authority for conduct in the normal course of business.

Doctrine:

• When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an acquired asset in the normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names. It has a duty to perform necessary and lawful acts to enable the other parties to enjoy all benefits of the contract, which it had authorized.

Facts:

Several parcels of land were mortgaged by the respondents during the lifetime of the respondent’s grandparents to the Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage and the Promissory Note. Spouses Felicisimo Ocfemia and Juanita Ocfemia, one of the respondents, were not able to redeem the mortgaged properties consisting of seven parcels of land and so the mortgage was foreclosed and thereafter ownership was transferred to the petitioner bank. Out of the seven parcels of land that were foreclosed, five of them are in the possession of the respondents because these five parcels of land were sold by the petitioner bank to the respondents as evidenced by a Deed of Sale. However, the five parcels of land cannot be transferred in the name of the parents of Merife Nino, one of the respondents, because there is a need to have the document of sale registered. The Register of deeds, however, said that the document of sale cannot be registered without the board resolution of the petitioner bank confirming both the Deed of sale and the authority of the bank manager, Fe S. Tena, to enter such transaction.

The petitioner bank refused her request for a board resolution and made many alibis. Respondents initiated the present proceedings so that they could transfer to their names the subject five parcel of land and subsequently mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother.

Issue: (Focusing on the case doctrine on the outline, di ko na isasama yung remedial part)

1. W/N the board of directors of a rural banking corporation may be compelled to confirm a deed of absolute sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking corporation?

Held:

1. YES. The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena (bank manager) to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes. If the bank management believed that it had title to the property, it should have taken measured to prevent the infringement and invasion of title thereto and possession thereof. Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena even though such agent is abusing her authority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank.

The bank is estopped from questioning the authority of the bank to enter into contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.


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Filipinas Life Assurance Co. v. Pedroso (2008) (Insurance, investment)

Doctrines:

• The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes personally liable for the damage. But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers. In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or implied. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.

• Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more so if the principal ratified his agent’s acts beyond the latter’s authority

Facts:

Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by Filipinas Life. Pedroso claims that Renato Valle was her insurance agent since 1972. Valle collected her monthly premiums. In January 1977, Valle informed Pedroso that Filipinas Life Escolta Office was holding a promo investment program for policyholders: 8% prepaid interest a month for certain amounts deposited on a monthly basis. Pedroso invested and issued a post-dated check dated January 7, 1977 for P10,000. In return, Valle issued his personal check for P800 for the 8% prepaid interest and a Filipinas Life “Agent’s Receipt” No. 807838.

Pedroso, through employees of the Escolta Office Alcantra (administrative assistant) and Apertrior (branch manager), confirmed that there was such a promo. She was even told that she could push through with the check she issued. The check she issued was, with endorsement of Alcantara at the back, deposited in the account of Filipinas Life with Commercial Bank and Trust Company.

Relying on the representations made by Filipinas representatives, Pedroso waited for maturity of the investment. After a month, her P10,000 investment was returned to her after she requested for its refund. After the initial investment, she proceeded to make 7 to 8 more, totaling P37,000 but at a lower rate of 5% interest. Upon maturity of the subsequent investments, Valle would take back from Pedroso the corresponding agent’s receipt he issued to the latter.

Pedroso later told Palacio, another Filipinas insurance policyholder of the investment plan. Palacio made a total P49,550 investment but at 5% interest. When Pedroso subsequently tried to withdraw her investment, Valle didn’t want to return P17,000. Palacio also tried but was refused by Filipinas. Pedroso and Palacio went to Filipinas Escolta to collect their investments and look for Valle (who they had not seen for some time). Hence, Pedroso and Palacio filed a case for recovery of sum of money.

RTC ruled that Filipinas Life, Valle, Apertrior and Alcantara jointly and solidarily liable to the respondents. CA affirmed.

Issues:

1. W/N the CA err in holding Filipinas and its employees jointly and severally liable to Pedroso and Palacio?

Held/Ratio:

1. NO. Filipinas does not dispute that Valle was its agent. But it claims that it was only a life insurance company and not engaged in the business of collecting investment money. Filipinas says that the investment scheme offered to Pedroso/Palacio by Valle/Apertrior/Alcantara was outside the scope of their authority as agents. And as such, Filipinas claims that it can’t be liable to Pedroso/Palacio.

It is indisputable that Pedroso/Palacio invested P47,000 and P49,550 respectively. Such amounts were received by Valle and remitted to Filipinas Life thru its official receipts. When Pedroso sought confirmation, Alcantara and Apertrior confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon inquiry and must discover at his own peril the agent’s authority, in this case, respondents did exercise due diligence in removing all doubts and in confirming the validity of the representations made by Valle.


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Filipinas Life, as principal, is liable for obligations contracted by its agent, Valle. The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes personally liable for the damage. But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers. In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or implied. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.

Filipinas Life can’t profess ignorance of Valle’s acts. Even if Valle’s representations were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valle’s acts. In fact, Filipinas even benefitted from the investments deposited by Valle in the account of Filipinas. Filipinas Life had clothed Valle with apparent authority, hence it is now estopped to deny said authority. Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more if the principal ratified his agent’s acts beyond the latter’s authority. Act of the agent is hence, considered that of the principal.


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Professional Service Inc. v. CA (2008) (2 gauzes) Doctrine:

• It must be stressed that under the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.

Facts:

In 1984 Natividad Agana was suffering from "cancer of the sigmoid". She had a surgery(hysterectomy) in Medical City, performed by Drs. Ampil(Aganas Neighbor) and Fuentes. After the operation the attending nurses remarked that sponge count 2 lacking.

After a couple of days Natividad complained of pain to the Drs.. The Drs. advised her to see an oncologist. As a consequence she went to the states for consultation, and there she was told she was fee of cancer. When she came back to the Phil. still suffering from pains, her daughter found a piece of gauze protruding from her vagina. Then Dr. Ampil went to the Agans and removed from Natividad a gauze measuring 1.5 in.

After Natividad pains intensified, despite the assurance of Dr. Ampil that the pain would soon go away. Then Natividad went to Polymedic General Hospital, where it was detected a presence of a gauze measuring 1.5 inches in width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ, which forced stool to excrete through the vagina. Therefore Natividad underwent another surgery.

Natividad filed with the RTC, a complaint for damages against PSI (owner of Medical City), Dr. Ampil and Dr. Fuentes. During the pendency of the case Natividad died and was substituted by her children.

The Aganas won in the RTC and CA.

Issue:

1. W/N there was an employee-employer relationship between PSI and Dr. Ampil under the principle of respondeat superior?

2. W/N Dr. Ampil was an agent of PSI under the doctrine of ostensible agency?

3. W/N PSI was liable to Natividad under the doctrine of corporate negligence?

Held:

1. YES, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated in Ramos v. Court of Appeals that "for purposes of allocating responsibility in medical negligence cases, an employer-employee relationship exists between hospitals and their consultants." Although the Court in Ramos later issued a Resolution reversing its earlier finding on the existence of an employment relationship between hospital and doctor, a similar reversal was not warranted in the present case because the defense raised by PSI consisted of a mere general denial of control or responsibility, maintaining that consultants, like Dr. Ampil, are independent contractors, not employees of the hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor, still the said hospital is liable to the Aganas.

2. YES, Dr. Ampil was an agent of PSI, because PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those of the other physicians in the public directory at the lobby of the hospital amounts to holding out to the public that it offers quality medical service through the listed physicians. This justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed that under the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.


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3. YES, Under the Doctrine of Corporate Responsibility, PSI is responsible for the proper supervision of the members of its medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians practicing in its premises. PSI committed a serious breach of its corporate duty when it failed to conduct an immediate investigation into the reported missing gauzes.

Professional Service Inc. v. CA (2010) (2 gauzes) Doctrine:

• The two factors that determine apparent authority: first, the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent; and second, the patient’s reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.

Facts:

Same as the previous case of the same title because this is 2nd motion for reconsideration of the previous case this time Manila Medical Services, Inc. (MMSI), Asian Hospital, Inc. (AHI), and Private Hospital Association of the Philippines (PHAP) all sought to intervene in the case because it might affect the financial side of health care.

Issue:

1. W/N there was an employee-employer relationship between PSI and Dr. Ampil under the principle of respondeat superior?

2. W/N Dr. Ampil was an agent of PSI under the doctrine of ostensible agency?

3. W/N PSI was liable to Natividad under the doctrine of corporate negligence?

Held:

1. NO, the Court holds that, the concurrent finding of the RTC and the CA that PSI was not the employer of Dr. Ampil is correct. Control as a determinative factor in testing the employer-employee relationship between doctor and hospital under which the hospital could be held vicariously liable to a patient in medical negligence cases is a requisite fact to be established by preponderance of evidence. Here, there was insufficient evidence that PSI exercised the power of control or wielded such power over the means and the details of the specific process by which Dr. Ampil applied his skills in the treatment of Natividad. Consequently, PSI cannot be held liable for the negligence of Dr. Ampil under the principle of respondeat superior.

2. YES, the hospital (PSI) held out to the patient (Natividad) that the doctor (Dr. Ampil) was its agent. Present are the two factors that determine apparent authority: first, the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent; and second, the patient’s reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.

It was Dr. Ampil, after the first meeting, who asked Natividad to go to Medical City to be examined by Dr. Ampil there. The decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced by the impression that Dr. Ampil was a staff member of Medical City General Hospital. Enrique looked upon Dr. Ampil not as independent of but as integrally related to Medical City.

It is of record that PSI required a "consent for hospital care" to be signed preparatory to the surgery of Natividad. The form reads:

Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General Hospital to perform such diagnostic procedures and to administer such medications and treatments as may be deemed necessary or advisable by the physicians of this hospital for and during the confinement of xxx. (emphasis supplied)


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By such statement, PSI reinforced the public impression that Dr. Ampil was a physician of its hospital, rather than one independently practicing in it; that the medications and treatments he prescribed were necessary and desirable; and that the hospital staff was prepared to carry them out.

3. Yes, PSI admitted that, Natividad only complained to Drs. Ampil and Fuentes, and if only she "informed the hospital of her discomfort and pain, the hospital would have been obliged to act on it.", by such admission, PSI defined the standards of its corporate conduct under the circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even after her operation to ensure her safety as a patient; (b) that its corporate duty was not limited to having its nursing staff note or record the two missing gauzes and (c) that its corporate duty extended to determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his negligence.

PSI violated its standard of conduct, by not reviewing what happened in the operation in connection with the gauzes, Rather, it evaded its responsibility and passed it on to others – to Dr. Ampil whom it expected to inform Natividad, and to Natividad herself to complain before it took any meaningful step. By its inaction, therefore, PSI failed its own standard of hospital care. It committed corporate negligence.


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Sargasso Construction (Joint Venture) v. PPA (Philippine Ports Authority) (2010) (“jumped the gun”/ doctrine of apparent authority)

Doctrines:

• Under the law on agency, however, "apparent authority" is defined as the power to affect the legal relations of another person by transactions with third persons arising from the other's manifestations to such third person such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred.

Facts:

Plaintiffs Sargasso Construction and Development Corporation, Pick and Shovel, Inc. and Atlantic Erectors, Inc. (a joint venture now referred to as "the Consortium") was awarded by the Philippine Ports Authority (PPA) the construction of Pier 2 and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union. Adjacent to Pier 2 is an area intended for the reclamation project as part of the port development plan.

On Oct. 1, the Consortium through its director Mr. Melecio Go, offered to work on the reclamation between Pier 2 and Timber Per. Extra work for a price amounting to P 36 million. Defendant PPA, through Asst. General Manager Mr. Landicho, denied plaintiffs proposal and made a counter-offer lowering the P 36M to P 30M, but approval of such is subject to the approval of higher authority.

On Aug 26, PPA General Manager Mr. Rogelio Dayan sent the approved Notice of Award for P 30M Supplemental Agreement with several conditions:

- Fendering of Pier No. 2 Port of San Fernando and the Port of Tobacco is completed before approval of the reclamation contract.

- Acceptance by the contractor that mobilization/demobilization cost shall not be included in the contract and that escalation shall be reckoned upon approval of the Supplemental Agreement.

The purpose of awarding the contract as a supplemental project was to save on mobilization costs.

On September 9, the PPA board advised the management to have the reclamation project for bidding, which rejected the proposal, "since there is no strong legal basis to award the supplemental contract through negotiation." The terms of the original contract, which was for construction of Pier 2, cannot be compared with a totally different project, which was the reclamation project.

Apparently, the rejection of the supplemental agreement was not properly communicated to the consortium. Through Mr. Go, the consortium sent a letter requesting a review of the agreement but no reply was received from the defendant.

June 30, the consortium filed a complaint for specific performance against the PPA for unjust refusal of the Supplemental Agreement. They claim that such refusal lead to the delay of their other projects and prayed for a reconsideration of the Aug 9 decision. They allocated resources and manpower in accordance with the Notice of Award approved by PPA’s general manager. They also claim that because of the late notice of the bidding, they were not able to join the bidding for lack of a permit. Their other companies have undertaken projects similar to what is specified in the Supplemental Agreement.

Defendant PPA, through the OGCC, filed its answer with Compulsory Counterclaim contending that the Notice of Award was revoked when the board rejected such proposal. The consortium's cannot hold defendant PPA liable for their lack of a permit to bid for the project. And their act of allocating men and resources for the reclamation project was due to them "jumping the gun" prior to the PPA's approval.

The trial court sided with the plaintiff, claiming that the higher authority referred to in the counter-offer refers to the approval of the General Manager, Mr. Dayan, was deemed sufficient enough to perfect the contract based on PD 857, amending PD 505 which created the PPA. CA sided with the trial court, but later on reversed its decision claiming that the authority of the General Manager to sign contracts is overpowered by the PPA Board's power to enter into contracts. The


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CA held that the Notice of Award signed by the General Manager was only a part of the contract, not an acceptance thereof.

Hence this petition.

Issues:

1. W/N the Notice of Award has perfected the contract between the consortium and the PPA.

2. W/N the general manager of PPA is vested with the authority to enter into a contract for and on behalf of PPA.

Held/Ratio:

1. NO. The higher authority contemplated is the PPA's board.

The Notice of Award signed by the general manager was a mere supporting document, not an evidence of perfection. EO 380 is clear when it stated that approval of entering into contracts with GOCCs requires the governing board's approval.

Since the contract between the Consortium and the General Manager lacked an important requisite to perfect contracts, which is the consent from the board of PPA.

2. NO. The doctrine of apparent authority invoked by the petitioners is misplaced, because this doctrine is intended only to mean that the government is NOT bound by unauthorized acts of its agents, even though within the apparent scope of their authority.

Furthermore, Sec. 51 of the Revised Administrative Code states that "contracts in behalf of the political subdivisions and corporate agencies shall be approved by their respective boards."

The indicators of apparent authority is seen through “(1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.”

Not a single act of respondent PPA, acting through its Board of Directors, was cited as having clothed its general manager with apparent authority to execute the contracts with petitioner.


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Banate v. PCRB (2010) (Cross collateral stipulation / apparent authority)

Doctrine:

• The existence of apparent authority may be ascertained through:

a. The general manner in which the corporation holds out an officer or agent as having the power to act.

b. The acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers.

• The principal’s liability, however, is limited only to third persons that have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none was given. In other words, apparent authority is determined only by the acts of the principal and not by the acts of the agent. The present case failed to show the manner by which PCRB, as supposed principal, has "clothed" or "held out" its branch manager as having the power to enter into an agreement, as claimed by petitioners.

Facts:

On July 1997, Spouses Rosendo Maglasang and Patrocinia Monilar (Spouses Maglasang) obtained from PCRB a loan (subject loan) worth P1,070,000.00. The loan was evidenced by a promissory note payable on January 1998 and secured by a real estate mortgage over the spouses’ property (subject properties), including the house constructed thereon which is also owned by spouses Melgrid and Bonifacio Cortel, the spouses Maglasang’s daughter and son-in-law, respectively. Aside from the abovementioned loan, the spouses Maglasang obtained two other loans from PCRB, which were evidenced by separate promissory notes and secured by mortgages on their other properties.

Sometime in November 1997, the spouses Maglasang asked PCRB’s permission to sell the subject properties. They likewise requested that the subject properties be released from mortgage since the two other loans were adequately secured by the other mortgages. Mondigo, PCRB branch manager, verbally agreed to their requested but required first the full payment of the subject loan. The spouses Maglasang and Cortel thereafter sold to Banate the subject properties for P1,750,000.00 and such amount was used to settle the subject loan. Banate was able to secure a title in her name, however, the title still carried the mortgage lien in favor of PCRB. Banate, along with spouses Maglasang and Cortel requested from PCRB a deed of release of mortgage but PCRB refused to comply. PCRB invoked the cross collateral stipulation in the mortgage deed which states that:

That as security for the payment of the loan or advance in principal sum of one million seventy thousand pesos only (P1,070,000.00) and such other loans or advances already obtained, or still to be obtained by the MORTGAGOR(s) as MAKER(s), CO-MAKER(s) or GUARANTOR(s) from the MORTGAGEE plus interest at the rate of _____ per annum and penalty and litigation charges payable on the dates mentioned in the corresponding promissory notes, the MORTGAGOR(s) hereby transfer(s) and convey(s) to MORTGAGEE by way of first mortgage the parcel(s) of land described hereunder, together with the improvements now existing for which may hereafter be made thereon, of which MORTGAGOR(s) represent(s) and warrant(s) that MORTGAGOR(s) is/are the absolute owner(s) and that the same is/are free from all liens and encumbrances;

PCRB claims that full payment of the 3 loans obtained from the bank must be fulfilled before the subject properties may be released from mortgage. The settlement of the subject loan merely constituted partial payment of the total obligation. On the other hand, petitioners claim that the contract was novated by the subsequent agreement with Mondigo that upon full payment of the subject loan, subject properties may be released from mortgage.

Issue:

1. W/N Mondigo’s verbal agreement to the petitioners’ request novated the mortgage contract.

Held/Ratio:

1. NO. Section 23 of the Corporation Code states that the powers of all corporations shall be exercised by the board of directors. In the absence of authority from the board of directors, no person, not even its officers, can validly


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bind a corporation. However, the board of directors may validly delegate some of its functions and powers to its officers, committees or agents. The authority of a corporate officer or agent in dealing with third persons may be actual or apparent. Actual authority is either express or implied. The extent of an agent’s express authority is to be measured by the power delegated to him by the corporation, while the extent of his implied authority is measured by his prior acts which have been ratified or approved, or their benefits accepted by his principal. The doctrine of “apparent authority” on the other hand, with special reference to banks, had long been recognized in this jurisdiction. The existence of apparent authority may be ascertained through:

a. The general manner in which the corporation holds out an officer or agent as having the power to act.

b. The acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or beyond the scope of his ordinary powers.

The petitioners, in failing to prove that Mondigo had actual authority to novate the mortgage contract, base their claim on Mondigo’s apparent authority. The petitioners’ claim is misplaced.

Under the doctrine of apparent authority, acts and contracts of the agent, as are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred, bind the principal. The principal’s liability, however, is limited only to third persons that have been led reasonably to believe by the conduct of the principal that such actual authority exists, although none was given. In other words, apparent authority is determined only by the acts of the principal and not by the acts of the agent. The present case failed to show the manner by which PCRB, as supposed principal, has "clothed" or "held out" its branch manager as having the power to enter into an agreement, as claimed by petitioners. Neither was there any allegation, much less proof, that PCRB ratified Mondigo’s act or is estopped to make a contrary claim. Being a mere branch manager alone is insufficient to support the conclusion that Mondigo has been clothed with "apparent authority" to verbally alter terms of written contracts. Also, it is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of the agent’s authority, and in case either is controverted, the burden of proof is upon them to establish it.

Being that Mondigo did not have the authority to bind PCRB, then novation cannot take place. The requisites of novation are: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation. The second requisite is lacking in this case because the consent of both parties was never obtained.


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Manila Remnant Co v. CA (garnishment)

(Disclaimer: I’m not sure how this is related to Agency since it’s mainly about Garnishment but it’s in the syllabus and there’s a supposed doctrine included.)

Doctrine:

• Even when the agent of the real estate company acts unlawfully and outside the scope of authority, the principal can be held liable when by its own act it accepts without protest the proceeds of the sale of the agents, which came from double sales of the same lots, as when learning of the misdeed. It failed to take necessary steps to protect the buyers and failed to prevent further wrong from being committed when it did not advertise the revocation of the authority of the culprit agent. In such case, the liabilities of both principal and the agent is solidary.

Facts:

Manila Remnant Co, Inc.(MRCI) owned parcels of land in Quezon City, which became the subject of its agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage the sale of the lots, execute contracts and issue official receipts to the lot buyers. At the time of the agreement, the president of both MRCI and AUVCI was Valencia.

AUVCI executed two contracts to sell in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00. Without the knowledge of the Ventanilla couple, Valencia, as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia, the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his name. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly installment.

MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's collections and remittances and removed Valencia as MRCI president. The Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo, commenced an action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and Carlos Crisostomo.

The trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting, and annulling the contract to sell in favor of Crisostomo and ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free from all liens and encumbrances. MRCI, AUVCI, and Crisostomo were held solidarily liable for damages amounting to P210,000.

MRCI alleged that the subject properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on February 7, 1990, while their petition was pending in this Court. Nevertheless, MRCI offered to reimburse the amount paid by the respondents.

The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question had ever been made by Marquez..

While the petitioners have readily complied with the order of the trial court for the payment of damages to the Ventanillas, they have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their compliance with this portion of the judgment that the trial court issued the garnishment order, which by its term could be lifted only upon the filling of a cash bond of P500,000.00.

Issue:

1. W/N the Trial Court and the Court of Appeals committed reversible errors to the prejudice of MRCI?

2. W/N the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the lifting of the garnishment order at P500,000.


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Held/Ratio:

1. NO. No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of sale of the subject property in favor of the respondent Ventanillas.

Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. It is an attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person or money owed by such third person or garnishee to the defendant. As the main obligation of the petitioner is to execute the absolute deed of sale in favor of the Ventanillas, its unjustified refusal to do so warranted the issuance of the garnishment order. Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary.

2. NO. The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the lifting of the garnishment order. As correctly pointed out by the respondent court, that amount corresponds to the current fair market value of the property in litigation and was a reasonable basis for determining the amount of the counterbond.


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Yu Kwuan Byung v. PAGCOR (2009) (Junket Agreement)

Doctrines:

• The basis of agency is representation. On the part of the principal, 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. Absent such mutual intent, there is generally no agency.

Facts:

The Korean-based ABS Corporation was one of the international groups that availed of PAGCOR’s Foreign Highroller Marketing Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino Filipino).

The relevant stipulations of the Junket Agreement state:

1. PAGCOR will provide ABS Corporation with separate junket chips. The junket chips will be distinguished from the chips being used by other players in the gaming tables.

ABS Corporation will distribute these junket chips to its players and at the end of the playing period, ABS Corporation will collect the junket chips from its players and make an accounting to the casino treasury.

2. ABS Corporation will assume sole responsibility to pay the winnings of its foreign players and settle the collectibles from losing players.

Petitioner, a Korean national, alleges that from November 1996 to March 1997, he came to the Philippines four times to play for high stakes at the Casino Filipino. Petitioner claims that in the course of the games, he was able to accumulate gambling chips worth US$2.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCOR’s employees or agents, PAGCOR refused to redeem them. Petitioner sues for the sum of money.

In its essence, PAGCOR claims that the petitioner is dealing, not with them, but with ABS. Thus, PAGCOR should not be held liable as according to their agreement. In addition, PAGCOR posted a notice that ABS will solely be liable for the playing chips used gaming rooms occupied exclusively by ABS clients.

Trail Court dismisses complaint of the petitioner. On appeal, one of the contentions of the petitioner is that there is an implied agency between PAGCOR and ABS. Court of Appeals said “it was never PAGCOR’s intention to deal with the junket players. Neither did PAGCOR intend ABS Corporation to represent PAGCOR in dealing with the junket players.” Thus, there can be no implied agency between PAGCOR and ABS.

Issues:

1. Was there an implied agency between PAGCOR and ABS.

Held/Ratio:

1. No. The basis of agency is representation. On the part of the principal, 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. Absent such mutual intent, there is generally no agency.

There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCOR’s actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and services.

The players brought in by ABS Corporation were covered by a different set of rules in acquiring and encashing chips. The players used a different kind of chip than what was used in the regular gaming areas of PAGCOR, and that such junket players played specifically only in the third floor area and did not mingle with the


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regular patrons of PAGCOR. Furthermore, PAGCOR, in posting notices stating that the players are playing under special rules, exercised the necessary precaution to warn the gaming public that no agency relationship exists.

Manotok Brothers v. CA (1993) (authority expired / efficient procuring cause)

Doctrines:

• When there is a close, proximate and causal connection between the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.

• Efficient procuring cause: when there is a close proximate and causal connection between the efforts and labor of the agent and the principal’s sale of property.

Facts:

Manotok Brothers Inc. is the owner of a certain parcel of land and building which were formerly leased by the City of Manila and used by the Claro M. Recto High School. Manotok Brothers authorized Salvador Saligumba to negotiate with the City of Manila the sale of the aforementioned property for not less than P425,000.00. 5% commission would be paid to him in the event the sale is finally consummated and paid. Manotok executed a 2nd and 3rd letter, each for 120 days, extending the authority of Saligumba. Finally, the 4th letter dated November 16, 1967, ManotoK with Rufino Manotok, its President, as signatory, authorized Saligumba to finalize and consummate the sale of the property to the City of Manila for not less than P410,000.00. With this letter came another extension of 180 days.

The Municipal Board of the City of Manila, on April 26, 1968, passed Ordinance No. 6603, appropriating the sum of P410,816.00 for the purchase of the aforementioned property. Said ordinance however, was signed by the City Mayor only on May 17, 1968, 183 days after the last letter of authorization. On January 14, 1969, the parties signed the deed of sale.

Saligumba never received any commission (should have been P20,540.00). He filed a complaint against Manotok Brothers, alleging that he had successfully negotiated the sale of the property. He claimed that it was because of his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the property subject of the sale.

Manotok Brothers claimed (1) a broker is only entitled to a commission if the sale was consummated and the price paid within the period given in the respective letters of authority; and (2) that Filomeno E. Huelgas, the PTA president of the Claro M. Recto High School was responsible for the negotiation and consummation of the sale.

Issues:

1. W/N Saligumba is entitled to the five percent (5%) agent's commission.

Held/Ratio:

1. YES, Saligumba is entitled to the 5% agent’s commission because it was through his efforts that a purchase actually materialized between the parties.

It would seem that Saligumba is not entitled to any commission because when the Deed of Sale was finally executed, his extended authority had already expired. Going deeper however into the case would reveal that it is within the coverage of the exception rather than of the general rule.

In an earlier case, this Court ruled that when there is a close, proximate and causal connection between the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission. We agree that the City of Manila ultimately became the purchaser of petitioner's property mainly through the efforts of Saligumba. Without discounting the fact that when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, Saligumba’s authority had already expired, it is to be noted that the ordinance was approved on April 26, 1968 when Saligumba’s authorization was still in force. Moreover, the approval by the City Mayor came only 3 days after the expiration of Saligumba’s authority. It is also worth emphasizing that from the records, the only party given a written authority by Manotok Brothers Inc. to negotiate the sale from July 5, 1966 to May 14, 1968


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was Saligumba.

In the case at bar, private respondent is the efficient procuring cause for without his efforts, the municipality would not have anything to pass and the Mayor would not have anything to approve.

Note: Although Filomeno Huelgas followed up the matter with Councilor Magsalin (author of Ordinance) and Mayor Villegas, his intervention regarding the purchase came only after the ordinance had already been passed — when the buyer has already agreed to the purchase and to the price for which said property is to be paid.


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Albaladejo Y Cia., S en C. v. The Philippine Refining Co. (as successor to the Visayan Refining Co.) (1923) (copra + not agency)

Doctrines:

• Art 1913: The principal must also indemnify the agent for all the damages, which the executive of the agency may have caused the latter, without fault or negligence on his part.

• When the purchase by one company from another is by way of a contract of purchase rather than an agency to purchase, the former is not liable to reimburse the latter for expenses incurred by the latter.

Facts:

Albaladejo Y Cia is a limited partnership organized under Philippine laws for the purpose of buying and selling Copra. They operate in Legazpi, Albay. Respondent Philippine Refining Co. is the successor of The Visayan Refining Co., a business in Cebu, engaged in the manufacture of coconut oil, for which copra products are needed. In 1918, The Visayan contracted with Albaladejo to buy all the copra products, which the latter would purchase from all over Albay, for a period of one year. The Visayan would provide transportation from Albay to Cebu. The parties were happy with the arrangement and they allowed the same terms to govern their transactions until 1920, when the Visayan closed down its factory and withdrew from the copra market. Over the next 8-10 months, the two companies liquidated their accounts. Petitioner showed no sign of dissatisfaction against respondent during this time. However, 6 weeks later petitioner instituted the present action in the Trial Court.

Petitioner relied on two causes of action, the first is that it suffered considerable damages when the Visayan, allegedly, failed to send the ships which will carry the copra to Cebu on time, pursuant to its contract. Petitioner alleges that the Visayan was negligent and due to their delay, the copras suffered shrinkages, which diminished its value (value of the copra was determined by weight). On this first cause of action, the trial court decided in favor of Philippine Refining Co.

(Agency Issue) The second cause of action was based on the fact that petitioner, during the subsistence of the contract, expanded its organization and created offices and sub-agencies all over Albay. This was done in view of future purchases “to be made” by Visayan. However, as stated above, Visayan closed down. Petitioner alleged that the expansion was maintained and extended at the express request of Visayan, coupled with constant reassurances that the defendant would soon get back to the business of buying copra. Petitioner seeks to recover 110,00 P from the defendant – the amount allegedly spent for the expansion and its maintenance. The trial court rendered a decision in favor of the petitioners but awarded only 49, 626 on the basis that the Visayan constituted only 30% of Albaladejo’s business.

Both parties appealed the decisions on both causes of action. Hence this petition.

In their appellant’s brief, petitioners argued that the contract created a principal-agent relationship between them and the respondents and that pursuant to article 1729 of the civil code (now 1913) the principal should be liable for damages incurred by the agent in the execution of the agency.

Issues:

1. W/N there was negligence on the part of The Visayan in sending ships to transport the copra products and therefore W/N they should pay for the shrinkage.

2. W/N The Visayan should be liable for damages on account of the petitioner company’s expansion.

3. W/N the contract created an agent-principal relationship between the petitioner and respondent.


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Held/Ratio:

1. NO. The Visayan was not negligent. Firstly, the delays were caused by violent weather and the inability to dispatch boats to more remote ports. The SC agreed with the Trial Court that these do not constitute negligence. Secondly, the shrinkage suffered by the copra products was average/normal at 8.187 per centum, this fact goes to show that there was really no undue delay. Thirdly, their contract specified that the shrinkage, before it reaches The Visayan in Cebu, should be shouldered by the petitioner, showing the intention of the parties that the price to be paid by the Visayan should depend on the weight of the copra upon arrival in Cebu.

AGENCY ISSUES:

2. NO. Pursuant to Par. 4 of their contract, the defendant should keep Albaladejo advised regarding the current market rates of copra in Cebu. For this reason, the Visayan, through its GM, sent “trade letters” to Albaladejo. In considering these letters, the SC held that nothing that is contained therein indicated that Visayan mandated the expansion of Albaladejo. At most, what the letters contained were mere hopes that the Visayan would reopen and purchase copras extensively. The fact that the General Manager stated that if the various purchasing agents of the Visayan would continue to open their agencies they would endeavor to see that the agents would not lose their transactions is not sufficient to bind the Visayan to pay for the expansion.

3. NO. It is true that Visayan made Albaladejo one of its instruments in buying copra, but a perusal of the agreement shows that when Albaladejo bought copras all over Albay, it is buying on its own account and not on behalf of the Visayan. The sale to Visayan was, in effect, a second sale. Moreover, even though the contract and the letters constantly use the word “agent” when referring to Albaladejo, the nature of the agreement does not support the existence of an agency in its legal sense. The mere use of the word “agent” does not make the contract one of agency. The word “agent” was used merely for convenience. The contract is one of sale and not of agency. Art 1729 (1913) would not apply.


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De Castro v. CA & Artigo (2002) (EDSA property, 5% commission)

Doctrine:

• Art. 1915 provides that if 2 or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for the consequences of agency.

• The solidarity arises from the common interest of the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity owing to him by the others.

Facts:

Petitioners Constante and Corazon De Castro (with 2 other co-owners not made parties to the suit) were co-owners of 4 parcels of land in EDSA corner New York Cubao, which they undertook to sell through their private respondent Artigo (for a 5% commission of the total selling price as agent’s fee).

This is to state that Mr. Artigo is authorized as our real estate broker in connection with the sale or our property in EDSA. Asking price: 23 million with 5% commission as agent’s fee C. de Castro owner and representing co-owners

This authority is on a first come first serve basis

2 parcels of the respective property were sold to Times Transit at the price of 7,050,000P through the brokerage of Artigo. Artigo was subsequently paid by De Castro only 48, 893.76P while he was, under the above agreement, entitled to 353,500P (5% of selling price. He brings this suit to collect the unpaid balance of his commission. The De Castros contend that Artigo had already been given “his proportionate share” and that he was only one among other agents also entitled to a proportionate share.

Issues:

1. W/N dismissal is proper for not impleading the other co-owners

2. W/N artigo’s claim has been extinguished by full payment, waiver or abandonment

Held:

1. No. Constante De Castro signed as owner and as representative of other owners. The de Castros admit that other co-owners are solidarily liable under the above contract of agency. Art. 1915 provides that if 2 or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for the consequences of agency.

2. No. it was proved that the other agents the de Castros were referring to were agents of Times Transit. The fact that other agents intervened cannot vary the terms of the contract of agency granting Artigo 5% commission. He is not estopped from claiming the balance as the mere receipt of partial payment is not equivalent to the required acceptance of performance as would extinguish the whole obligation under article 1235 (when obligee accepts performance, knowing its incompleteness or irregularity, and without protest, the obligation is deemed complied with).


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Garcia v. de Manzano (1919) (GPA to both his son and wife)

Doctrines:

• The appointment of a new agent for the same business produces revocation of the previous agency from the day on which notice was given to the former agent, excepting the provisions of the next preceding article.

Facts:

Narciso Manzano was a Filipino merchant who went to Spain in May 1910 and died there on 08 September 1913. He gave a general power of attorney to his son, Angel Manzano and a second general power of attorney to his wife, Josefa Samson

Narciso was a partner of Ocejo, Perez & Co.(OPC) in running a small steamer. When the period expired, OPC refused to continue the contract and demanded that Narciso buy or sell.

Angel, by virtue of the GPA from his father:

• sold the other half of the boat to Garcia (registered in his son's name since he was a Spaniard and cannot register the same at the Custom House)

• Executed a contract of loan where Garcia agreed to lend Narciso P12,000.00. This was secured by a mortgage over 3 parcels of land (registration though was refused by registrar)

Josefa was assigned as the administratix of the property of Narciso. CFI then ordered the partition of Narciso's property among his heirs. Garcia filed his action to foreclose the so-called mortgage. Josefa stated that the estate had already been divided to Narciso's heirs.

Josefa alleged that:

• The GPA given to Josefa revoked the one given to Angel

• Garcia took advantage of the youth and inexperience of Angel to falsely and maliciously make him believe that he had the authority under the GPA to sell the interest of his father.

CFI: judgment against Josefa Samson only

Issues:

1. W/N the GPA to Josefa revoked the GPA of Angel

2. W/N the GPA authorized the sale by Angel of the half interest in the steamer to Garcia

Held/Ratio:

1. NO. According to Article 1753, the appointment of a new agent for the same business produces revocation of the previous agency from the day on which notice was given to the former agent, excepting the provisions of the next preceding article.

Defendants failed to prove that notice of the subsequent GPA was given to Angel. He did not know of the GPA given to his mother.

Thus, it must be considered to prove that he was acting under a valid GPA when he sold the half interest in the steamer.

2. YES. The GPA given to Angel is general and complete, terms of which authorize the sale, buying and mortgaging of real property and the borrowing of money.

Although it does not state that the agent may sell the steamer, since it is so full and complete as to authorize sale of real property, it must necessarily carry with it the right to sell the half interest.

The record further shows the sale was necessary in order to get money or a credit without it would be impossible to continue the business, which was being conducted in the name of Narciso and for his benefit.


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CMS Logging v. Court of Appeals (1992) (Alleged separate commissions for logs)

Doctrines:

• The principal may revoke a contract of agency at will, and such revocation may be express or implied, and may be availed of even if the period fixed in the contract of agency has not yet expired.

• Damages are generally not awarded to the agent for the revocation of the agency, except if the revocation was done precisely to avoid payment of the agent’s commission.

Facts:

On August 28, 1957, CMS Logging and private respondent Dr. Aguinaldo Corporation (DRACOR), entered into a contract of agency for a period of five years, in which DRACOR is appointed as CMS’s exclusive export and sales agent for all logs CMS may produce. Pertinent to the case at bar is the following provision of their contract:

xxx xxx xxx

9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross sales of logs of SISON (herein petitioner CMS) based on F.O.B. invoice value which commission shall be deducted from the proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account of SISON;

CMS was able to sell thru DRACOR a total of 77, 264, 672 board feet of logs. Then, about six months prior to the expiration of the agreement, CMS President Atty. Carlos Moran Sison and legal counsel Atty. Teodoro Dominguez , while on a trip to Tokyo discovered that DRACOR used Shinko Trading as agent, representative and liaison officer in selling CMS’s logs in Japan, for which Shinko earned $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko earned a total of $77, 264.77.

CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. After this discovery, CMS sold and shipped logs valued at $739,321.13 or P2,883,351.90, directly to several firms in Japan without the aid or intervention of DRACOR.

CMS then sued DRACOR for the commission received by Shinko and damages. DRACOR in turn counterclaimed for its commission amounting to 144, 679.59 pesos. The trial court dismissed the complaint of CMS, explaining that it received no evidence that Shinko did receive the disputed amount by way of commission from DRACOR. The CA also affirmed the dismissal in a 3-2 decision, saying that the trial court could not have made a categorical finding that Shinko did receive commission for sale of CMS’s logs in Japan. Aggrieved, CMS filed the present petition.

Issues:

1. W/N Shinko Trading did receive the disputed amount for commission.

2. W/N DRACOR was still entitled to its commission from CMS.

3. W/N DRACOR committed acts of fraud and bad faith against CMS.

Held/Ratio:

1. NO. The SC explained that while it was undisputed that DRACOR enlisted the services of Shinko as its agent, representative and liaison officer in Japan, there was no evidence that clearly established the fact that the said amounts received by Shinko were from the sale of CMS’s logs to various firms in Japan. The testimony of Atty Teodoro Dominguez failed to establish the receipt of those amounts by Shinko, as it was hearsay. A certain letter from Mr. K. Shibata of Tokyo Menka Kaisha (one of the companies Shinko sold the logs to) nor Mr. K. Shibata himself was not presented in court to establish the contested fact about the commissions.


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The SC also took note the conclusion reached by the CA that even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs.

2. NO. In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Article 19248 of the Civil Code. Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission.

3. NO. Like the matter on the alleged commissions received by Shinko, CMS failed to clearly establish evidence regarding this matter.

8. Art. 1294 - The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third

persons.


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Dy Buncio & Co. v. Ong Guan Can (1934) (rice-mill case)

Doctrines:

• Art. 1926- General power of Attorney is revoked by a special one granted to another agent as regards the special matter involved in the later

• A special power of attorney giving the son the authority to sell the principal’s properties is deemed revoked by a subsequent general power of attorney that does not give such power to the son, and any sale effected thereafter by the son in the name of the father would be void.

Facts:

On July 31, 1931, Ong Guan Can Jr. as agent of Ong Guan Can, the proprietor of the commercial firm of Ong Guan Can & Sons, sells the rice mill and camarin situated at Dao, Province of Capiz for P 13,000 and gives as his authority the power of attorney dated May 23, 1928, a copy of this public instrument being attached to the deed and recorded with the deed in the office of the register of deeds in Capiz. The receipt of the money acknowledged in the deed was to the agent and was signed by the agent in his own name and without any words indicating he was signing it for the principal.

Dy Buncio & Company as the judgment creditor of Ong Guan Can claims that the properties in question still belongs to the latter alleging that the sale executed on July 31, 1931 is void for not being in accordance with the limited power given to Ong Guan Can Jr. Being a limited power of attorney and not a general one, it does not give him the express power to alienate the properties in question.

Defendants Juan Tong and Pua Giok Eng as owner and lessee of the owner by a virtue of the deed executed by Ong Guan Can Jr. on July 31, 1931 claims that the said defect in the power of attorney is cured by Exhibit 1 (no description) which purports to be a general power of attorney given to the same agent in 1920.

The trial court of First Instance of Capiz held that the deed was invalid and that the property was subject to the execution of the judgment creditor hence, this petition.

Issues:

1. W/N the deed is valid

Held/Ratio:

1. NO. The Civil Code is silent over the partial termination of an agency. The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent. If the new appointment with limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture.


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Republic v. Evangelista (2005) (treasure hunt in bulacan)

Doctrines:

• An exception to the revocability of a contract of agency is when it is coupled with interest such as in a bilateral contract—which depends upon the agency. The reason for its irrevocability is because the agency becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of the agent and the thirds persons, which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the principal.

• Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service or do something in representation or on behalf of another, known as the principal, with the consent or authority of the latter

Facts:

Legaspi is the owner of a land located in Bigte, Norzagaray, Bulacan. In November 1999, Petitioner Calimlim, representing the Republic of the Philippines, and as then head of the Intelligence Service of the Armed Forces of the Philippines and the Presidential Security Group, entered into a Memorandum of Agreement (MOA) with one named Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan.

It was alleged that, Reyes, together with the Petitioners, started, digging, tunneling and blasting works on the said land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about 80 military personnel to guard the area and encamp thereon to intimidate Legaspi and other occupants of the area from going near the subject land.

On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting activities on Legaspi's land and to file charges against those who may enter it without the latter's authority. Legaspi agreed to give Gutierrez 40% of the treasure that may be found in the land.

On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally entering Legaspi’s land. He hired the legal services of Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspi’s share in whatever treasure may be found in the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per court hearing and defray all expenses for the cost of the litigation

On March 14, 2000, Petitioners filed a Motion to dismiss contending first that there is no real party-in-interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of Revocation, second Gutierrez failed to establish that the armed men was acting under the orders of the petitioners and third that the respondent judge on the ground of alleged partiality favored the private respondent.

Issues:

1. W/N the contract of agency between Legaspi and Gutierrez has been effectively revoked by Legaspi

Held/Ratio:

1. NO. Gutierrez’s unilateral revocation last March 7 is invalid as his agency is coupled with interest.

Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service or do something in representation or on behalf of another, known as the principal, with the consent or authority of the latter.

A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the agent ceases when the will or permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will.

However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency. The reason for its irrevocability is because the agency becomes part of


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another obligation or agreement. It is not solely the rights of the principal but also that of the agent and third persons, which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the principal. It is clear that the treasure that may be found in the land is the subject matter of the agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the land. This bilateral contract depends on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the principal Legaspi.

When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement. Consequently, the Deed of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected.


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Sevilla v. Court of Appeals (1988) Mabini St. leased property

Doctrines:

• Irrevocable Agencies: When it is a means of fulfilling an obligation already contracted.

Facts:

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari.

Tourist World Services, Inc. (TWSI) entered into a lease agreement with Segunida Noguera over a property in Mabini St., Manila to be used by the TWSI as a branch office. Petitioner Sevilla held herself solidarily liable with TWSI for the prompt payment of monthly rental agreed upon. When the branch was opened, Sevilla run the operations as “branch manager” and for her efforts she received 4% for airline tickets bought (remaining 3% for TWSI).

Later on, TWSI was informed that Sevilla was connected with a rival firm (Philippine Travel Bureau) and since the branch was losing, it considered closing down its office. The board of directors issued 2 resolutions to effect the following: (1) abolishing of manager and VP of TWSI Ermita Branch (2) authorizing corporate secretary to receive the properties of TWSI located at that branch. To comply with the latter, Corporate Secretary Canilao padlocked the premises to protect the interest of TWSI. Further, the lease contract was terminated.

As a result, Sevilla and her employees could not enter the locked premises. The petitioners filed a complaint of mandatory preliminary injunction against TWSI and lessor Noguera. The trial court held for private respondents on the premise that TWSI being the true lessee, has within its prerogative to terminate the lease and padlock the premise. It also found that Sevilla was merely an employee of TWSI and as such, was bound by the acts of her employer.

Issues:

1. AGENCY RELATED: What was the true nature of the relation between petitioner Sevilla and private respondent TWSI?

2. Whether the appellee Tourist World Service unilaterally disconnected the telephone line at the branch office on Ermita;

3. Whether or not the padlocking of the office by the Tourist World Service was actionable or not;

Held/Ratio:

1. Contract of Agency. In essence, Sevilla renders services “in representation or on behalf of another”.

In this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. In general, we have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end." Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, lease agreement bounding her in solidum for rental payments belie claims of master-servant relationship. Second, Sevilla in pursuing the business obviously relied on her own gifts and capabilities. It was also further admitted that she was not in TWSI’s payroll. The use of ‘branch manager’ was only for appearance’s sake.

Contrary to Sevilla’s claim, relationship was also not that of a joint venture, wherein generally there is parity of standing between the joint co-venturers or partners. Further, the parties did not hold themselves out as partners (building’s electric sign: “Tourist World Services, Inc.”)

Unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for the mutual interest of the agent and the principal. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not limited to the commissions she earned as a result of her business transactions, but one that


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extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal.

2. Not proven. The CA holds that “there is no evidence that the TWSI disconnected the telephone lines”, yet it did not take pains to have them re-connected. As owner of the telephone lines, it is their responsibility.

3. Yes. The fact that Tourist World Service, Inc. was the lessee named in the lease contract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such blitzkrieg fashion. Lina Sevilla, had acquired a personal stake in the business itself, she was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments solidarily with Tourist World, Inc.

In summary:

For unwarranted revocation of contract of agency - award for damages based on breach of contract

For moral injury done to Sevilla arising from brazen conduct subsequent to the cancellation of the power of attorney granted to her – additional award for damages based on Art. 21 (Willfully causing lose or injury to another in a manner contrary to morals, good customs or public policy.)


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Valenzuela v Court of Appeals (1990) (kawawang insurance agent)

Doctrines:

• One party in an agency contract could not terminate at his own will the agency if it is coupled with Interest.

• There are cases in which an agent has been induced to such circumstances that, if the authority be withdrawn, the agent will be exposed to personal loss or liability.

• The exception is that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for mutual interest of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal.

Facts:

Valenzuela is a General Agent of Philippine American General Insurance Company Inc. (Philamgen) since 1965. He was asked to solicit and sell all non-life insurances of Philamgen. For his service, he is to receive a full agent’s commission of 32.5%. Valenzuela closed a deal with Delta Motors in the amount of P4.4Million. However, Valenzuela did not receive his commission amounting to P1.6Million from Philamgen. He also did not receive anything from the premiums that were annually paid by Delta Motors amounting to P1.9Million, which entitles him to a commission amounting to P632,700.

Philamgen offered that the commission entitled to Valenzuela be split in a 50-50 basis. Valenzuela refused the offer and stood firmly on his claim that he is entitled to the full commission.

Philamgen, thru Aragon, Catolico, Parnell took drastic action against Valenzuela reversing the commission due to him, placed the transaction on a cash and carry basis (I have no idea what this is), threatened to terminate the policies of the agency, and started to leak out that Valenzuela has a substantial account with Philamgen which diminished Valenzuela’s credibility as an insurance agent.

Issues:

1. W/N the general agency can be terminated at the will of Philamgen

2. W/N Valenzuela is entitled for damages

Held/Ratio:

1. No. In the insurance business in the Philippines, the most difficult and frustrating period is the solicitation and persuasion of the prospective clients to buy insurance policies. Normally, agents would encounter much embarrassment, difficulties, and oftentimes frustrations in this said period of solicitation.

The agency involved is coupled with Interest on the part of Valenzuela. This could not be freely revocable at the unilateral will of Philamgen. This would be in violation of the Civil Code frowning on Unjust Enrichment.

In addition to the Interest that is due to Valenzuela, he had an interest on the continuation of the agency when it was unceremoniously terminated not only because of the commissions he should continue to receive from the insurance business he had solicited and procured but also for the fact that the very acts of Philamgen, he is made liable to them in the event that the insured failed to pay the premiums.

2. YES. Due to the bad faith of Philamgen in stating different motives of terminating the agency, it should be noted that their allegations were not true. Their real motive in the termination is the want to have a part on Valenzuela’s commission. The statements that Philamgen released against Valenzuela is destructive for his character and especially in his profession as an insurance agent, which he had taken cared of for about 13 years.


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National Sugar Trading v. PNB (2003) (promissory note as interest, cannot be revoked by will of a party)

Doctrines:

• If the agency established is coupled with interest, it cannot be revoked or cancelled at the will of any of the parties.

Facts:

Pursuant of PD No. 388, PHILSUCOM (Philippine Sugar Commission) was made in order to function as the sole agent for the buying and selling of sugar on the quedan permit level of the government and to regulate all purchases of sugar in the country. In the same year, PHILEXHANGE (Philippine Exchange Company Inc.) was authorized to be as the marketing agent of the PHILSUCOM. PHILEXCHANGE purchases of sugar are to be financed by PNB, which in turn shall be paid thru the proceeds of PHILEXCHANGE’s profits.

PHILEXCHANGE was then authorized to be the exclusive trading agency of the government for buying sugar from local millers and exporting them abroad. PNB financed PHILEXHANGE’s operations. At first, PHILEXCHANGE religiously paid its obligations to PNB, but then defaulted for the amount of P206Million due to the fall of the sugar prices in the world market.

3 years after, NASUTRA (National Sugar Trading Corp.) replaced PHILEXHANGE to be the marketing agent of PHILSUCOM. (Take note that PHILSUCOM is just a government entity regulating the sugar trade in the Philippines and is using PHILEXHANGE, now NASUTRA for it’s trading transactions) PHILEXCHANGE then sold and turned over all sugar quedans to NASUTRA, which were acquired previously.

No immediate payment was required by PHILEXCHANGE from NASUTRA/PHILSUCOM. As of 1984, NASUTRA/PHILSUCOM still failed to pay the amount due to PHILEXHANGE and now amounting to P498Million. As a consequence, PHILEXCHANGE was not able to pay PNB for its previous loans.

In 1981, NASUTRA then applied for a P408Million Revolving Credit Line with PNB in order to finance its sugar trading operations. For every use of the credit line, NASUTRA’s EVP, Unson, executed a promissory note in favor of PNB.

PHILSUCOM allowed local millers thru a liquidation scheme to loan from PNB. Such loans would be treated as loans of NASUTRA. PHILSUCOM added that NASUTRA would shoulder the interest rates that would apply. This is stabilizing the sugar prices in the country.

NASUTRA still failed to pay to remit the interest payment thus President Marcos dissolved NASUTRA thru PD No. 2005. However, the records of NASUTRA of its trading operations were lost during the EDSA Revolution. Cory Aquino then created the SRA (Sugar Regulatory Administration) abolishing PHILSUCOM. All assets including interests over the assets of NASUTRA were transferred to SRA.

NASUTRA established a trusteeship with PNB to liquidate and settle its amounts. But NASUTRA still defaulted.

With glimpse of hope to finally settle their debts, foreign banks finally gave remittances of the proceeds of NASUTRA, which amounted to P696Million. The remittances should be applied to the unpaid accounts of NASUTRA/PHILSUCOM with PNB and PHILEXCHANGE.

PNB applied such amount to PHILSUCOM’s account with PHILEXCHANGE, which in turn was applied to PHILEXCHANGE’s account with PNB. NASUTRA is dissatisfied on the disposition of the remittances by PNB. PNB also failed to produce documents for them about the disposition. NASUTRA claims that PNB arbitrarily applied the remittances due to them to different accounts.

NASUTRA contends that no compensation (which means they could not allocate the remittances in their own will) involving the subject remittances can take effect by operation of law since the subject remittances were created in a trustee-beneficiary relationship between PNB and NASUTRA, and not one of a creditor-debtor.

PNB claims that it can apply the remittances on the long overdue obligations of NASUTRA in pursuit of national interest and policy.


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Issues:

1. W/N PNB can offset the remittances with the accounts of NASUTRA despite the fact that no creditor-debtor relationship existed between NASUTRA and PNB.

Held/Ratio:

1. YES. The promissory notes issued by EVP Unson, executed for every loan made in the P408Million Credit Line applied for gave PNB the power compensate with its discretion the remittances, which it received.

The relationship that NASUTRA and PNB has is not of simple agency. NASUTRA assigned and practically surrendered its rights in favor of PNB for a substantial consideration. Meaning, the relationship between NASUTRA and PNB is an agency coupled with interest, which cannot be revoked or cancelled at will by any of the parties.


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Bacaling v. Muya (2011) (110 sub-lots; J-MALT; JJ TONG, irrevocable SPA)

Doctrines:

• Art. 1927. An agency cannot be revoked (1) if a bilateral contract depends upon it, or (2) if it is the means of fulfilling an obligation already contracted, or (3) if a partner is appointed manager of a partnership and his removal from the management is unjustifiable

• The agency, to stress, is one coupled with interest, which is explicitly irrevocable x x x.

Facts:

The title of the case is: “NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN TONG, and JOSE JUAN TONG, in his personal capacity, petitioners, v. FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFO LAZARTE and NEMESIO TONOCANTE, respondents.”

Bacaling owned three 9.96 hectares of land in Barangay Cubay, Jaro, Iloilo City which was subdivided to 110 sub-lots as registered in the Registry of Deeds in Iloilo.

On May 16, 1955, the landholding was processed and approved as "residential" or "subdivision" by the National Urban Planning Commission (NUPC).

On May 24, 1955 the Bureau of Lands (BOL) approved the corresponding subdivision plan for purposes of developing the said property into a low-cost residential community, which the spouses referred to as the Bacaling-Moreno Subdivision.

In 1957, a P600,000 real estate loan from GSIS was granted to Bacaling with a mortgage on the 110 sub-lots. Only P240,000 was released to Bacaling. Bacaling was unable to complete the project due to the immensity of the project cost. GSIS foreclosed the 110 sub-lots.

1964 was a point in time in which the respondents Muya, Amor, Jereza, Lazarte, Tonocante (J-MALT) claim they were legally instituted by Bacaling’s administrator/overseer as tenant-tillers of the 110 sub-lots on a sharing basis (J-1.1 ha, M-2.5 ha, A-2.5 ha, L-2.5 ha, T-2.5 ha) [Alam ko 11.5 ha pag-inadd mo. Sobra sa 9.96 ha. Pero yun ang sabi ng case eh].

In 1972, the Office of the President (OP) released findings that J-MALT clandestinely entered and occupied the entire 110 sub-lots. J-MALT took advantage of the problematic peace and order situation at the onset of Martial Law and the GSIS foreclosure. J-MALT sowed the lots, altered roads, drainages, boundaries, and monuments, as if the lots were their own.

1974 was a point in time in which J-MALT claim their relationship with the landowner changed from tenant-tillers to leasehold. J-MALT religiously delivered rental payments to Bacaling as agricultural-lessor.

In 1977, the City Council of Iloilo enacted Zoning Ordinance 212 declaring the 110 sublots as “residential” and “non-agricultural”, consistent with the NUPC and BoL decisions.

In 1978, Bacaling registered 110 sub-lots as Bacaling-Moreno Subdivision with the National Housing Authority (NHA) and obtained a license to sell the sub-lots pursuant to the development plan.

In 1980, J-MALT secured certificates of land transfer (CLTs) in their names for the 110 sub-lots. J-MALT made various payments to Landbank as amortizing owners-cultivators of their respective tillage.

In 1989, after a decision of the Supreme Court in a prior case regarding the same 110 sublots, Bacaling eventually repurchased the 110 sub-lots from GSIS.

In 1990, petitioner Jose Juan Tong (JJ Tong), together with Juan and Siady bought the 110 sub-lots from Bacaling for P1,700,000.

In 1992, to secure performance of the contracts of absolute sale and facilitate the transfer of the title of the lots, Bacaling appointed JJ Tong as her attorney-in-fact under and irrevocable Special Power of Attorney (I-SPA) with the following mandate:


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1. To file, defend and prosecute any case/cases involving lots nos. 1 to 110 covered by TCT Nos. T-10664 to T-10773 of the Register of Deeds of the City of Iloilo;

2. To assume full control, prosecute, terminate and enter into an amicable settlement and compromise agreement of all cases now pending before the DARAB, Region VI, Iloilo City, which involved portion of Lots 1 to 110, covered by TCT Nos. T-10664 to T-10773 of the Register of Deeds of Iloilo City, which were purchased by Jose Juan Tong, Vicente Juan Tong and Victoria Siady;

3. To hire a lawyer/counsel which he may deem fit and necessary to effect and attain the foregoing acts and deeds; handle and prosecute the aforesaid cases;

4. To negotiate, cause and effect a settlement of occupation and tenants on the aforesaid lots;

5. To cause and effect the transfer of the aforesaid lots in the name of the VENDEES;

6. To execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts and deeds.

Before September 19, 1997, JJ Tong filed for cancellation of the CLTs of J-MART to the Department of Agricultural Reform (DAR). DAR dismisses the petition. MR to DAR also fails.

On September 19, 1997, the Office of the President (OP) reverses the DAR decision.

On July 22, 1999, the MR to the OP decision is denied.

Before December 2, 1999, J-MART appealed the OP decision to the CA under Rule 43.

On December 2, 1999 Bacaling revokes the I-SPA, and admits the status of J-MART as her

tenants to the 110 sub-lots, which she now alleges as agricultural lands.

On January 1, 2001, the Court of Appeals reversed the OP decision.

On June 5, 2001, without reference to Bacaling’s repudiation of JJ Tong’s acts, denies the MR.

Hence, the instant petition to the Supreme Court (SC).

On 8 October, 2001, Bacaling moved to dismiss the petition in the SC on the ground of her nullification of the I-SPA.

Issues:

1. W/N JJ Tong has the requisite interest to litigate case?

2. W/N J-MART are agricultural lessees?

3. W/N the 110 sub-lots are residential?

Held/Ratio:

1. YES. “Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the irrevocable special power of attorney which she had duly executed in favor of petitioner Jose Juan Tong and duly acknowledged before a notary public. The agency, to stress, is one coupled with interest, which is explicitly irrevocable since the deed of agency was prepared and signed and/or accepted by petitioner Tong, and Bacaling with a view to completing the performance of the contract of sale of the one hundred ten (110) sub-lots. It is for this reason that the mandate of the agency constituted Tong as the real party in interest to remove all clouds on the title of Bacaling and that, after all these cases are resolved, to use the irrevocable special power of attorney to ultimately "cause and effect the transfer of the aforesaid lots in the name of the vendees [Tong with two (2) other buyers] and execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts and deeds." The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration which in the type of agency herein established bars the removal or dismissal of petitioner Tong as Bacaling's attorney-in-fact on the ground of alleged loss of trust and confidence.


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Furthermore, Bacaling’s allegations of fraud on the constitution of the I-SPA is not supported by evidence.”

2. NO. SC rules that the 110 sub-lots are not agricultural land because it does not satisfy all the 6 requisites to a valid agricultural lease. Requisites #1,3, and 6 are lacking.

3. YES. SC rules that the 110 sublots are residential pursuant to the ruling in Natalia Realty Inc. vs DAR where the court held that “where we excluded lands not devoted to agricultural activity, i.e., lands previously converted to non-agricultural or residential uses prior to the effectivity of the 1988 agrarian reform law (R.A. No. 6657) by agencies other than the DAR, from the coverage of agrarian reform.” Also, the SC rules on the validity of the charter of the NUPC.


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Coleongco v. Claparols (nails, acid on machines)

Doctrine:

• It must not be forgotten that a power of attorney although coupled with interest in a partnership can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trusts, by the agents for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal.

Facts:

Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory manufacturing nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign sources such as Belgium. Claparols had a regular dollar allocation granted by the Import Control Commission and the Central Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho To.

Kho To introduced Vicente Coleongco to help finance the factory of Claparols. Claparols and Coleongco executed a financing contract whereby Coleongco undertook to finance and put up the funds necessary for the importation of nail wire, which Claparols will convert to nails.

The terms of the contract were as follows:

- Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao Agency;

- Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative in the management;

- that all contracts and transactions should be jointly approved by both parties;

- that proper books would be kept and annual accounts rendered;

- and that profits and losses would be shared "on a 50-50 basis".

Two days after the execution of the basic agreement, Claparols executed in favor of Coleongco, a special power of attorney:

- to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions;

- to represent appellee and the nail factory;

- and to accept payments and cash advances from dealers and distributors.

Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes.

Around mid-November of 1956, Claparols was surprised by service of an alias writ of execution to enforce a judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. Upon conferring with bank authorities, he learned that the execution had been procured because of derogatory information against him had reached the bank from Coleongco. Coleongco wrote to the bank of his acquisition of the whole interest of Claparols in the factory and also stated that Claparols is not serious in meeting his obligations with the bank.

Claparols revoked the power of attorney and informed Coleongco demanding a full accounting at the same time. Claparols also wrote a letter to Coleongco dismissing him as assistant manager of the plant and asked auditors to go over the books and records of the business with a view to adjusting the accounts of the associates. These last steps were taken in view of the revelation made by his machinery superintendent that Coleongco had drawn him aside and proposed that the latter should pour acid on the machinery to paralyze the factory.


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In this appeal, it is first contended by the appellant Coleongco that the power of attorney was made to protect his interest under the financing agreement and was one coupled with an interest that the appellee Claparols had no legal power to revoke. This point cannot be sustained. The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco.

Issue:

1. W/N Claparols can revoke the SPA?

Held:

1. YES. The power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for just cause, such as when the attorney-in-fact betrays the interest of the principal. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetuation of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with interest authorizes the agent to commit frauds against the principal.

That the appellee Coleongco acted in bad faith towards his principal Claparols is unquestionable and cannot be justified by claiming that Claparols' mal-administration of the business endangered the security for the advances that he had made under the financing contract. If that were the case, it is to be expected that Coleongco would have first protested to Claparols himself.


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Ramnani v. CA (1991) (brother makes brothers attorneys-in-fact of business in the Philippines)

Doctrines:

• (from Syllabus): In a case covering a power of attorney to deal with the general public, the fact that the revocation was advertised in a newspaper of general circulation would be sufficient warning to third persons.

Facts:

This case involves the bitter quarrel of brothers over 2 parcels of land. Ishwar, Choitram and Navalrai Jethmal Ramnani are full-blooded brothers.

In 1965, Ishwar Jethmal Ramnani sent US $150K to Choithram through two bank drafts of US$65,000.00 and US$85,000.00, the purpose of which is investing the same in real estate in the Philippines. Subsequently, spouses Ishwar executed a general power of attorney appointing Ishwar’s full blood brothers Choithram and Navalrai as attorneys-in-fact, empowering them to manage and conduct their business concerns in the Philippines.

Choithram, as attorney-in-fact, entered into two agreements for the purchase of 2 parcels of land in Ugong, Pasig from Ortigas & Company, Ltd. Partnership (Ortigas Ltd.) afterwards 3 buildings were constructed thereon and were leased out by Choithram as attorney-in-fact. 2 of these buildings were later burned.

In 1970, Ishwar asked Choithram to account for the income and expenses of these properties during the period 1967 to 1970. Choithram failed and refused to render an accounting, which prompted Ishwar to revoke the general power of attorney. Choithram and Ortigas Ltd. were duly notified by notice in writing of such revocation. It was also registered with the Securities and Exchange Commission and published in The Manila Times. Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Spouses Ishwar to Nirmla Ramnani, the wife of Choitram’s son, Moti. Ortigas also executed the corresponding deeds of sale in favor of Nirmla and the TCT issued in her favor. Thus, spouses Ishwar filed a complaint in the Court of First Instance of Rizal against Choithram and spouses Nirmlaand Moti (Choithram et al.) and Ortigas Ltd. for reconveyance of said properties or payment of its value and damages.

Trial court dismissed the complaint ruling that the lone testimony of Ishwar regarding the cash remittance is unworthy of faith and credit because the cash remittance ($150K) was made before the execution of the general power of attorney. He also failed to prove his testimony by not exhibiting any commercial document as regard the alleged remittances. TC believed the claim of Choithram that he and Ishwar entered into a temporary arrangement in order to enable Choithram, then a British citizen, to purchase the properties in the name of Ishwar who was an American citizen and who was then qualified to purchase property in the Philippines under the then Parity Amendment.

Upon appeal, the CA reversed the decision and gave credence to Ishwar. It upheld the validity of Ishwar’s testimony and gave cognizance to a letter written by Choithram imploring Ishwar to renew the power of attorney after it was revoked. It states therein that Choithram reassures his brother that he is not after his money and that the revocation is hurting the reputation of Ishwar. Choithram also made no mention of his claimed temporary arrangement in the letter. The CA ruled that Choithram is also estopped in pais or by deed from claiming an interest over the properties because of Choitram’s admissions of the power of attorney, the Agreements, and the Contract of Lease. CA also held that Choithram's temporary arrangement, by which he claimed purchasing the two 2 parcels of land in question and placing them in the name of Ishwar who is an American citizen circumvents the disqualification provision of aliens acquiring real properties in the Philippines. Upholding the supposed "temporary arrangement" with Ishwar would be a culpable violation of the Constitution.

During the pendency of the case, Choithram made several attempts to dispose of his properties by way of donation and also mortgaged the properties under litigation for US $3 million to Overseas with a mere capital of US $100. (This tactic was obviously Choithram’s ploy to place the properties out of the reach of Ishwar should they gain a favorable judgment.)

Issues:

1. W/N there was a principal-attorney-in-fact between the brothers Ishwar and Choithram and that it was not a mere temporary arrangement as Choithram claims


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2. W/N Ortigas Ltd. is liable.

Held/Ratio:

1. YES. The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed Choithram as their attorney-in-fact. Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as Ishwar’s attorney-in-fact. Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and collected the rentals. Through Choithram, Ishwar's property was developed and improved into a valuable asset worth millions of pesos. In the words of the SC: “We have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is thicker than water. However, because of the devious machinations and schemes that Choithram employed he should pay moral and exemplary damages as well as attorney's fees to spouses Ishwar”

2. YES. Ortigas had several notices of the revocation. The fact that the revocation was advertised in a newspaper of general circulation (The Manila Times) would be sufficient warning to third persons. Despite said notices, Ortigas acceded to the representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner Ishwar to Nirmla. While Choithram is the one mainly to be blamed, Ortigas is not entirely without fault. It should have required Choithram to secure another power of attorney from Ishwar. For Ortigas’s negligence in believing Choithram’s pretension that his power of attorney was still good, it must share in the latter's liability to Ishwar.


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Lustan v. CA (2nd SPA used to obtain unauthorized loans from PNB)

Doctrines:

• Art. 1921: If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof\

• The third party who relies on a special power of attorney executed by the principal in favor of an agent can rely on such power of attorney until it is given due notice that such has been revoked

Facts:

Adoracion Lustan, an illiterate, owns a parcel of land w/ an area of 10.0057 hectares in Calinog Ilo-ilo. In 1969, she leased it to private respondent Nicolas Parangan for an annual rent of P1k and a term of 10 years. During the period of the lease, Parangan regulary extended loans to Lustan in small amounts for her daily expenses and her daughter’s education. In 1970, Lustan executed a Special Power of Attorney (SPA) in favor of Parangan to secure an agricultural loan from private respondent PNB, w/ the aforesaid lot as collateral. A second SPA was again issued in favor of Prangan in 1972, for another loan. By virtue of the 2nd SPA, Parangan was able to secure four more loans for over 5 years (P24k in Dec. 1975, P38k in Sept. 1976, P38.6k in July 1979, and P 25k in June 1980). The last three loans obtained w/o the knowledge of Lustan and were used by Parangan for his own benefit. These encumbrances were duly annotated in the certificate of title.

On April 16, 1973, Lustan signed a Deed of Pacto de Retro Sale (w/ a right of repurchase) in favor of Parangan. However, this was superseded by a Deed of Definite Sale issued on May 4, 1979. Lustan signed the latter upon Parangan’s representation that it was merely to evidence the loans he extended to Lustan. But according to Parangan, Lustan really sold the property and all improvements thereon to him for P75k. Thus, Lustan filed a case for a quieting of title, recovery of possession and damages against Parangan and PNB. The RTC ruled in favor of Lustan, but the CA reversed the decision.

Issues:

1. W/N petitioner’s property is liable to PNB for the loans contracted by Parangan by virtue of the 2nd SPA

Held/Ratio:

1. Yes. Though Lustan argues that the last three mortgages were void for lack of authority, she failed to consider that the SPA was a continuing one and that absent a valid revocation duly furnished to the mortgagee, it continued to have force and effect against third persons who had no knowledge of such lack of authority. The SPA clothed Parangan with the authority to deal with PNB on Lustan’s behalf. In the absence of proof that PNB had knowledge that agency has been revoked and that the last three loans were obtained without Lustan’s authority, then it cannot be prejudiced in its rights. In this case, the SPA particularly provides that it is valid not just for the principal loan but also for subsequent ones, and that the attorney-in-fact (Parangan) may avail of it until it is revoked in a public instrument, of which a copy is given to PNB.

Moreover, as far as 3rd persons are concerned, an act is deemed to have been performed w/in the scope of the agent’s authority if it is w/in SPA as written even if the agent has in fact exceeded the limits of his authority according to the understanding between him and his principal. However, Luscan still has a right to demand proportional indemnification from Parangan w/ respect to the sums paid by PNB to the latter by virtue of the unauthorized loans.

**In this case, the court also held that the Deed of Definite Sale was really an equitable mortgage pursuant to Arts. 1602 and 1604 of the Civil Code. According to Art. 1602, a contract will be considered as an equitable mortgage if the real intention of the parties is to secure the payment of a debt or the performance of any other obligation. Art. 1604 provides that this also applies to those purporting to be an absolute sale. In this case, Luscan did not know that it was a deed of sale. It wasn’t explained to her, and she, being unable to read and write, did not really understand the contract. Plus, there was discrepancies in the testimonies of Parangan’s witnesses, while Luscan’s witness was found to be credible by the RTC.


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Amparo G. Perez v. PNB (1966) (AGENCY COUPLED WITH INTEREST, mortgage, extrajudicial foreclosure after death)

Doctrines:

• The power of foreclosure is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter’s own protection. It is, in fact, an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement.

• The power to foreclose extra judicially survives the death of the mortgagor.

Facts:

Vicente Perez mortgaged a lot to PNB to secure payment of a loan of P2,500 plus interest. He died intestate survived by his wife and children, during which there was an outstanding balance of P1,917 and corresponding interest on the mortgage. Thereafter, the widow of Perez instituted Special Proceedings on CFI of Occidental Negros for settlement of the estate of the deceased. The widow was appointed Administratrix and notice was duly published to creditors. PNB did not file a claim. The property was partitioned and thereafter distributed accordingly.

The Bank afterwards caused for the extrajudicial foreclosure of the mortgaged properties, which was sold at auction and subsequently bought by the bank. After the lapse of the year of redemption, the Certificate of Title was also transferred in the name of the Bank.

The widow and heirs of Perez then filed a complaint against the Bank seeking to annul the extrajudicial foreclosure sale and the transfer of the Certificate of Title. The trial court rendered judgment favorable to the former holding that, according to the doctrine of Pasco v. Ravina (54 Phil. 382), the Bank should have foreclosed its mortgage in court; that the power to sell contained in the deed of mortgage had terminated upon the death of the mortgagor. Trial court declared the sale null and void.

The Bank appealed to SC.

Issues:

1. W/N the power to sell (extra judicially) contained in a deed of mortgage terminates upon the death of the mortgagor.

Held/Ratio:

1. NO, the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is, in fact, an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement.

Nevertheless, Bank was late in foreclosing property (Bank was informed of death since 1947; property partitioned in 1956; Bank foreclosed in 1962). SC ruled:

“it is our view that both justice and equity would be served by permitting herein appellees to redeem the foreclosed property within a reasonable time, by paying the capital and interest of the indebtedness up to the time of redemption, plus foreclosure and useful expenses, less any rents and profits obtained by the Bank from and after the same entered into its possession.”

NOTE:

SC in deciding, relied on Pasno v. Ravina which in turn relied on Sec. 7, Rule 87, of the original Rules of Court (Sec. 7, Rule 86 of Revised Rules of Court) which presented three ways wherein a creditor may hold a claim against a deceased when secured by a mortgage, to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a claim for any deficiency.


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Pasno ruled that #3 should not be applied for equitable purposes. Dissent on same case ruled otherwise (duh). BOTH decisions acknowledged the fact that the power to foreclose extra judicially survives the death of the mortgagor. SC relied on the dissenting opinion in its ruling.

Pasno v. Ravina (redemption of mortgage by estate administrator)

Facts:

There are two appeals in this case. One is about validity of the will of Gabina Labitoria. The other is taken by the PNB concerning the survivability of the right of sale of the mortgaged property under special power while the mortgaged property is in custodia legis.

1st Appeal:

No discussion on the evidence is possible since the stenographic notes have not been elevated to the court. The only issue was the date of execution of the will, either July 27 1928 or February 6, 1926. The reason for the error was that the will was a reproduction of another will dated February 6, 1926, such inadvertently added as the date of the will in question. The Judge ruled that the will is probate (genuine and conferring on the executors the power to administer the estate).

2nd Appeal:

Gabina Labitoria mortgaged 3 parcels of land to the PNB to secure an indebtedness of P1,600. The mortgage stipulated that the mortgagee may dispose of the property or anything attached to it or take legal action deemed necessary. Labitoria died, and a petition for the validity of his will was presented in court and a special administrator was appointed and took possession of Labitoria’s estate. Upon the estate’s failure to comply with the mortgage, PNB now want to proceed with the sale of the lands. The lawyer of the special administrator knew about this and filed a motion in court to stop this. The court granted the motion and denied PNB’s reconsideration.

The mortgage made reference to Act. No. 3135, one that regulates the sale of property under special powers annexed to mortgages. This failed to provide for sale of mortgaged property in custodial egis. The appellant then concedes to Sec. 708 of the Code of Civil Procedure which provided remedies: (1) Mortgagee waives his security and prove his credit as an ordinary debt against the estate, (2) foreclose the mortgage by ordinary action in court and recover any deficiency against the estate. (3) Foreclose without action at any time within the period allowed by the statute of limitations with no share in the estate for deficiency. Nothing was shown prohibit the administrator from redeeming the property mortgaged by paying the debt seeing that it is for the best interest of the state. The mortgagee chose the 2nd option.

Issue:

1. W/N the administrator can redeem the mortgaged property.

Held/Ratio:

1. NO. The power of sale given in a mortgage survives the death of the grantor. Given this and the provisions of Sec. 708, the power to sell must be suspended, but the mortgagee should be made to foreclose the mortgage. This is in line with safeguarding the interest of the estate while securing the orderly administration of the estate of a decedent.


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Spouses Terrado v. Court of Appeals (1984) (Bayambang fisheries case)

Doctrines:

• Death of the agent extinguishes the agency.

• The contract of agency establishes a purely personal relationship between the principal and the agent, such that the agency is extinguished by the death of the agent, and his rights and obligations arising from the contract of agency are not transmissible to his heirs.

Facts:

Pursuant to Act No. 4041 of the Philippine Legislature approved January 21, 1983, the Fisheries situated in the locality known as Mangabul, Bayambang, Pangasinan, and falling within Plan No. Ipd Ninety-two of the Bureau of Lands and recently declared by the courts as public land was reserved and the usufruct thereof ceded to the municipality of Bayambang, Province of Pangasinan. In virtue of this, on May 15, 1974 the Municipality passed Resolution no. 35, enacting Ordinance no. 8, establishing the Bayambang Fishery and Hunting Park and Municipal Watershed. In the said ordinance, the municipality designated appointed and constituted private respondent Geruncio Lacuesta as Manager-Administrator for a period of 25 years, renewable for another 25 years, under the condition that said respondent shall pay the municipality. a sum equivalent to 10% of the annual gross income that may be derived from the sale of forest products, wild game and fish, which amount shall not be less than P200,000.00 annually. He was further required to post a bond in the amount of P200,000.00 to guaranty payment of the 10% due the municipality.

MO no. 8 was approved by the Provincial Board of Pangasinan, and accordingly forwarded to the then Secretary of Agriculture and National Resources for approval pursuant to the provisions of the Fisheries Act, Act no. 4003. On April 4, 1975, the Secretary disapproved the Ordinance because it grants fishery privileges to respondent Lacuesta without the benefit of competitive public bidding in contravention of the provisions of Act 4003 as amended.

Lacuesta interposed an appeal to the Office of the President, but later on withdrew the same. In the meantime, acting on the disapproval, the Municipality informed Lacuesta to refrain and desist from acting as Manager-Administrator under the contract, but the latter refused, and insisted on remaining in possession of the fisheries. Notwithstanding, the Sanggunian Bayan of Bayambang passed Resolution no. 31 resolving to advertise for public bidding the fisheries in question. As a consequence of this, herein petitioners Spouses Terrado and Domingo Fernandez won. Petitioners subsequently entered in possession of the fisheries, and Lacuesta thus started the legal tug-of-war. On the one hand, Lacuesta filed actions for prohibition, mandamus and restraining orders. Petitioners were also arrested. On the other hand, the Municipality sued for annulment of contract. The situation became too complicated in that the Sanggunian had to pass Resolution no. 34 requesting the assistance of the DENR, Philippine Constabulary, DOJ, the Provincial Fiscal, the Provincial Governor and other agencies.

Eventually the cases reached the Supreme Court and consolidated in this action. Pending the resolution of the controversy by the SC, respondent Lacuesta passed away.

Issues:

1. W/N Municipal Ordinance no. 8 was valid.

2. W/N petitioners still have a right over the Mangabul fisheries, considering they won at the public bidding.

Held/Ratio:

1. NO. The ordinance cannot be valid, as it was disapproved for direct contravention of the provision of the Fisheries Act as follows:

xxx

Section 29. Grant of Fishery Privileges. — A municipal or city council, conformably with an ordinance duly approved by the Secretary pursuant to section 4 hereof, may: (a) grant to the highest qualified bidder the exclusive privilege of construction and operating fish corrals,


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oyster culture beds, or of gathering "bangus" fry, or the fry of other species in municipal waters for a period not exceeding five (5) years: ...

As a consequence of this invalidity, therefore, per force the contract of management and administration between the Municipality and Lacuesta is likewise null and void. It also follows that the actions filed by Lacuesta for prohibition to enjoin the Municipal Council of Bayambang from leasing the Mangabul Fisheries upon public bidding as authorized in its Resolution' No. 31, series of 1977 is without legal basis and merit for Lacuesta has no right or interest under the void ordinance and contract.

Lacuesta’s death also throws the issue in another light. The SC held that the contract entered into by the Municipality and respondent was one of agency. According to Art 1919 of the NCC, agency is extinguished by the death of the agent, and the agent’s rights and obligations arising from the contract cannot be transmitted to his heirs.

2. NO. Petitioners anchored their claims to certain portions of the Mangabul Fisheries, which they allege to have won in public bidding under the authority of Resolution No. 31, series of 1977 of the Municipal Council of Bayambang, which leased the fisheries for a four-year period. The period has already lapsed, hence their fishing privilege is no longer effective as of June 30, 1981. To restore and place petitioners in possession of the fisheries would be an extension of their four-year period lease, which is not authorized under the ordinance.