Agency and Partnership Digests #4

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A&P Compiled Digests No. 4

DEL ROSARIO v. LA BADENIA 33 PHIL 316 Nature: Action to recover sum of P1,795.25 a balance alleged to be due Teofila del Rosario de Costa as the agent of the defendant corporation for services rendered and expenses incurred in the sale of its products. Facts: The plaintiffs are residents of Legaspi, Albay, and the defendant corporation is engaged in the manufacture and sale of tobacco products with its head office in the city of Manila. 1911: the defendant corporation, a new concern, inaugurated an extensive selling campaign for the purpose of introducing its products to the retail trade. Celestino Aragon, a general agent of the defendant corporation, was in charge of this campaign in Albay, Sorsogon, and other provinces in the southern end of Luzon. He established a central distributing agency or depot at Legaspi with the plaintiff, Teofila del Rosario de Costa, nominally in charge, though her husband, Bernardino de Costa appears to have been the actual manager of the agency. The business relations between the plaintiffs and the defendant extended from February 1, 1911, to March 24, 1912, and during this time no settlement of their accounts was ever had. When Aragon, the general agent, came to Legaspi in 1911 he established his headquarters there and took up his residence with the plaintiffs, using the lower part of their house as a store room or depository for large quantities of cigarettes and cigars. He employed a number of persons as solicitors and paid their salaries; he paid the internal revenue fees incident to the conduct of the business in Legaspi, and also the rent of the building in which he lived with the plaintiffs and which he made use of as the general headquarters for the agency. The record shows that business amounting to more than P24,000 (wholesale) was done by the Legaspi agency from February 1, 1911, to March 24, 1912. All goods sent to Legaspi were charged by the head office at Manila against the general agent, Aragon, while on the books kept by Aragon these goods were charged against the plaintiffs, and as goods were withdrawn by himself, he credited the amount of the withdrawals to the account of the plaintiffs. The business at Legaspi appears to have been that of a distributing agency actively in charge of the plaintiffs but over which the general agent maintained a close supervision. Goods were withdrawn from the depository at Legaspi from time to time by the general agent for shipment to other points; goods were likewise withdrawn by plaintiffs and shipped to neighboring towns without any intervention on the part of the general agent. All accounts incident to the business were carried on the books of Aragon. The plaintiffs do not appear to have kept a separate set of books. The account as carried on the books of Aragon, the general agent, was between Teofila del Rosario de Costa and La Badenia, the defendant corporation. On March 24, 1912, the general agent had a settlement with the plaintiffs and acknowledged over his signature that these books showed a balance in favor of the plaintiffs amounting to P1,795.25. When it was time to pay, however, the defendant corporation refused to pay over to plaintiffs the balance of P1,795.25, claiming that plaintiffs had been improperly allowed a credit of P1,850.68 which represented unpaid accounts due the business in Legaspi for cigars and cigarettes sold by it. DEFENDANT CORPORATIONS ARGUMENT: Plaintiffs were simply merchants who purchased the goods at fixed wholesale prices and sold them on their own account, and that they were never employed as their agents. PLAINTIFFS CONTENTION: That they were the agents of the defendant corporation; that they received commissions on the sales made by the agency; and that they were authorized to extend a reasonable credit under the supervision of the general agent. LOWER COURTs DECISION: the specific goods sold to the delinquent debtors, whose unpaid accounts form the basis of this litigation, had already been paid for by the plaintiffs and that this was conclusive evidence that the plaintiffs were not acting as the agents of the defendant corporation, and that in effect, the purpose of this suit was to recover back money already paid for the goods purchased and sold by the plaintiffs. Issue: Whether the plaintiffs are agents of the company or merelt merchants. Held/Ratio: THEY ARE AGENTS. The head office at Manila was fully informed of plaintiffs' relations with the general agent in extending the sales of its products. o Plaintiffs made direct remittances to the head office in Manila and these remittances were credited to the account of the agency at Legaspi, and acknowledgment was made directly to the plaintiffs. o Neither the head office nor Aragon appear to have made any distinction between the business done by Aragon and that done by the plaintiffs. The purchases, sales and remittances made by the plaintiffs do not seem to have been considered as those of an independent business concern, but rather as a part of the work of the Legaspi agency under the control and supervision of Aragon. o The fact that the defendant corporation carried the Legaspi account in the name of the general agent, Aragon, and carried no account with the plaintiffs, would seem to negative the contention that plaintiffs were simply merchants purchasing their goods in Manila at wholesale and selling them locally on their own account. The active management and participation of the plaintiffs in the conduct of the business at Legaspi are fully recognized in the following letters written by the assistant manager of the defendant corporation to one of the plaintiffs. Aragon did not consider the plaintiffs as independent merchants operating on their own account, but rather as agents cooperating with him and working under his supervision. o This fact is clearly borne out by the nature of the entries made in his books of account. A reference to that statement taken from the books of account shows that the plaintiffs were given credit on various items, such as advertising expenses, the free distribution of cigars and cigarettes for advertising purposes, freight and carriage charges on shipments to neighboring towns, and the like, and it does not seem at all likely that plaintiffs would have been allowed credit on such items if they had been conducting the business solely on their own account. o Aragon extended credit to certain purchasers of cigars and cigarettes and the entries made by him on his books of account show that he knew that the plaintiffs were also extending credit to some of the purchasers of the goods shipped from Legaspi. He approved the very items now questioned when as general agent of the defendant corporation he signed the statement of account showing a balance of P1,795.25 in favor of the plaintiffs. It is contended that it is unreasonable that plaintiffs would have so large a balance in their favor, and that they are now merely seeking to saddle upon the defendant corporation a lot of unpaid accounts. In view of the fact that plaintiffs are only seeking to enforce the payment of a balance admitted by the general agent of the defendant corporation to be rightly due them, we fail to see how it can be reasonably urged that plaintiffs are attempting to saddle these unpaid claims on the defendant. The general agent who was in control of the Legaspi business, and who was fully conversant with all of its details, clearly recognized the right of the plaintiffs to have credit on their account for the amount of these unpaid claims. The defendant carried no account whatever with the plaintiffs, and having intrusted the entire management of the Legaspi business to Aragon, it cannot now come into court and repudiate the account confirmed by him, unless it can show that he acted beyond the scope of his authority in making the arrangement he did with the plaintiffs. Aragon's powers as a selling agent appear to have been very broad, and there is no evidence in the record to indicate that he acted beyond his powers in conducting the business at Legaspi as he did; and there can be no doubt that plaintiffs had been authorized by him to extend credit on behalf of the agency. There is no other reasonable explanation of the entries made by Aragon in
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his books of account, and his approval of the balance in favor of the plaintiffs. It is further contended that the goods were charged to plaintiffs at wholesale prices, and that they were to have as profits any amounts received over and above the wholesale cost price on the goods sold by them, and it is urged that such an arrangement indicates that they were independent merchants doing business on their own account. Even granting that such was the arrangement made with the plaintiffs by Aragon, it does not necessarily follow that they were conducting an independent business on their own account. As already stated, the record does not disclose what were the precise terms of arrangement made with the plaintiffs. The record does show however, that in many instances the plaintiffs were allowed commissions on sales made by them, but whether or not these were in addition to other profits allowed them the record does not show. Upon a careful examination of the whole record we are satisfied that plaintiffs were not conducting an independent business but were the agents of the defendant corporation operating under the supervision of the general agent, Aragon. INTERNATIONAL FILMS v. LYRIC FILM 63 PHIL 778 IFC leased Monte Carlo madness film; verbal agreement re: sub-agency and keeping the film in vault; new agent Joseph agreed to sub-agency; vault burned down; SC: defendant not obliged to fulfill more than whats mandated; no mandate to insure against fire FACTS: Bernard Gabelman was the Philippine agent of the plaintiff company International Films (China), Ltd. by virtue of a power of attorney executed in his favor on April 5, 1933 (Exhibit 1) the International Films (China), Ltd., through its said agent, leased the film entitled "Monte Carlo Madness" to the defendant company, the Lyric Film Exchange, Inc., One of the conditions of the contract was that the defendant company would answer for the loss of the film in question whatever the cause. Vicente Albo (chief of the film department of the Lyric Film Exchange, Inc.) informed said agent of the plaintiff company that the showing of said film had already finished and asked, at the same time, where he wished to have the film returned to him. In answer, Bernard Gabelman informed Albo that he wished to see him personally in the latter's office. Gabelman went to Vicente Albo's office and asked whether he could deposit the film in question in the vault of the Lyric Film Exchange, Inc., as the International Films (China) Ltd. did not yet have a safety vault, as required by the regulations of the fire department. After the case had been referred to O'Malley, Vicente Albo's chief, the former answered that the deposit could not be made inasmuch as the film in question would not be covered by the insurance carried by the Lyric Film Exchange, Inc. Bernard Gabelman then requested Vicente Albo to permit him to deposit said film in the vault of the Lyric Film Exchange, Inc., under Gabelman's own responsibility. As there was a verbal contract between Gabelman and the Lyric Film Exchange Inc., whereby the film "Monte Carlo Madness" would be shown elsewhere, O'Malley agreed and the film was deposited in the vault of the defendant company under Bernard Gabelman's responsibility. Bernard Gabelman severed his connection with the plaintiff company, being succeeded by Lazarus Joseph. Bernard Gabelman, upon turning over the agency to the new agent, informed the latter of the deposit of the film "Monte Carlo Madness" in the vault of the defendant company as well as of the verbal contract entered into between him and the Lyric Film Exchange, Inc., whereby the latter would act as a subagent of the plaintiff company, International Films (China) Ltd., with authority to show this film "Monte Carlo Madness" in any theater where said defendant company, the Lyric Film Exchange, Inc., might wish to show it after the expiration of the contract Exhibit C. ask for the return not only of the film "Monte Carlo Madness" but also of the films "White Devils" and "Congress Dances". the Lyric Film Exchange, Inc., returned the films entitled "Congress Dances" and "White Devils" to Lazarus Joseph, but not the film "Monte Carlo Madness" because it was to be shown in Cebu on August 29 and 30, 1933. Lazarus Joseph agreed to said exhibition. the bodega of the Lyric Film Exchange, Inc., was burned, together with the film "Monte Carlo Madness" which was not insured.
ISSUE: whether or not the defendant company, the Lyric Film Exchange, Inc., is responsible to the plaintiff, International Films (China) Ltd., for the destruction by fire of the film in question, entitled "Monte Carlo Madness". Argument of Plaintiff Company: defendant's failure to return the film "Monte Carlo Madness" to the former was due to the fact that the period for the delivery thereof, which expired on June 22, 1933, had been extended in order that it might be shown in Cebu on August 29 and 30, 1933, in accordance with an understanding had between Lazarus Joseph, the new agent of the plaintiff company, and the defendant. Argument of Defendant Company: when it wanted to return the film "Monte Carlo Madness" to Bernard Gabelman, the former agent of the plaintiff company, because of the arrival of the date for the return thereof, under the contract Exhibit C, said agent, not having a safety vault, requested Vicente Albo, chief of the film department of the defendant company, to keep said film in the latter's vault under Gabelman's own responsibility, verbally stipulating at the same time that the defendant company, as subagent of the International Films (China) Ltd., might show the film in question in its theaters. HELD: NO. The defendant company, as subagent of the plaintiff in the exhibition of the film "Monte Carlo Madness", was not obliged to insure it against fire, not having received any express mandate to that effect, and it is not liable for the accidental destruction thereof by fire. RATIO: It does not appear sufficiently proven that the understanding had between Lazarus Joseph, second agent of the plaintiff company, and Vicente Albo, chief of the film department of the defendant company, was that the defendant company would continue showing said film under the same contract Exhibit C. If the verbal contract had between Bernard Gabelman, the former agent of the plaintiff company, and Vicente Albo, chief of the film department of the defendant company, was a sub-agency or a submandate, the defendant company is not civilly liable for the destruction by fire of the film in question because as a mere submandatary or subagent, it was not obliged to fulfill more than the contents of the mandate and to answer for the damages caused to the principal by his failure to do so (art. 1718, Civil Code). The fact that the film was not insured against fire does not constitute fraud or negligence on the part of the defendant company, the Lyric Film Exchange, Inc., because as a subagent, it received no instruction to that effect from its principal and the insurance of the film does not form a part of the obligation imposed upon it by law. PNB v. AGULEDO 58 PHIL 655 FACTS: On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, the document conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros, consisting in lots Nos. 61 and 207 On December 22, 1920, Amparo A. Garrucho executed the document whereby she conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros. Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations. On December 23, 1920, Mauro A. Garrucho executed in the favor of the Philippine National bank, whereby he constituted a mortgage on lot No. 878 of the cadastral survey of Murcia, Occidental Negros, with all the improvements thereon, described in transfer certificate of title No. 2415 issued in the name of Amparo A. Garrucho (his sister), to secure the payment of credits, loans, commercial overdrafts, etc., not exceeding P6,000.

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the Philippine National Bank, whereby he constituted a mortgage on lots Nos. 61 and 207 (owned by the defendant), issued in the name of Paz Agudelo y Gonzaga, to secure the payment of credits, loans and commercial overdrafts which the said bank might furnish him to the amount of P16,00, payable on August 24, 1922, executing the corresponding promissory note to that effect. The mortgage deeds as well as the corresponding promissory notes for P6,000 and P16,000, respectively, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged properties, by means of force if necessary, in case he failed to comply with any of the conditions stipulated therein. Mauro A. Garrucho was unable to pay his loans On July 15, 1922, Mauro A. Garrucho, executed in favor of the PNB the deed whereby he constituted a mortgage on lots Nos. 61 and 207, together with the improvements thereon, described in transfer certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in transfer certificate of title No. 2415, issued in the name of Amparo A. Garrucho. In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note, for P21,000 as a novation of the former promissory notes for P6,000 and P16,000, respectively. In view of the aforesaid consolidated mortgage, the Philippine National Bank, on the said date of July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in Torrens titles Nos. 2216, 1148 and 2415, respectively. On November 25, 1925, Amparo A. Garrucho (the sister) sold lot No. 878 described in certificate of title No. 2415, to Paz Agudelo y Gonzaga (the defendant) On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which reads as follows: ...further agree to the amount of the lien thereon stated in the mortgage deed executed by Miss Amparo A. Garrucho in favor of the Philippine National Bank. although on properties belonging to his principal Paz Agudelo y Gonzaga. Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank, evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000 executed by Mauro A. Garrucho, not only without express authority from his principal Paz Agudelo y Gonzaga but also under his own signature. Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, was for his principal Paz Agudelo y Gonzaga. The special power of attorney, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document, he exceeded the scope of his authority and his principal is not liable for his acts. It is noted that Mauro A. Garrucho was not authorized to execute promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her real properties to secure such promissory notes. The plaintiff Philippine National Bank should know this inasmuch as it is in duty bound to ascertain the extent of the agent's authority before dealing with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the amount of the promissory note.
WON Paz Agudelo y Gonzaga is liable for the lien on lot No. 878, which was tranferred to her by her niece. YES Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 , and in a letter dated January 16, 1926, gave her consent to the lien on lot No. 878, the ownership of which was transferred to her by her niece Amparo A. Garrucho. However, this acknowledgment, however, does not extend to lots Nos. 207 and 61, respectively, inasmuch as, although it is true that a mortgage is indivisible as to the contracting parties and as top their successors in interest (article 1860, Civil Code), it is not so with respect to a third person who did not take part in the constitution thereof either personally or through an agent, inasmuch as he can make the acknowledgment thereof in the form and to the extent he may deem convenient, on the ground that he is not in duty bound to acknowledge the said mortgage. Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that which arises from the aforesaid acknowledgment, but only with respect to the lien and not to the principal obligation secured by the mortgage acknowledged by her to have been constituted on said lot No. 878 . Such liability is not direct but a subsidiary one. In view of the foregoing consideration, when an agent negotiates a loan in his personal capacity and executes a promissory note under his own signature, without express authority from his principal, giving as security therefor real estate belonging to the letter, also in his own name and not in the name and representation of the said principal, the obligation do constructed by him is personal and does not bind his aforesaid principal. Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and the plaintiffappellee has not appealed from the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary obligation in view of the legal maxim that the accessory follows the principal. Wherefore, the defendant herein should also be absolved from the complaint which is hereby dismissed, with the costs against the appellee. So ordered. PHILIPPINE PRODUCTS v. PRIMATERIA 15 SCRA 301 FACTS: Defendant Primateria Societe Anonyme Pour Le Commerce Exterieur (Primateria Zurich) was engaged in "Transactions in international trade with agricultural products, particularly in oils, fats and oil-seeds and related products." The record shows that: Primateria Zurich, through defendant Alexander B. Baylin, entered into an agreement with plaintiff Philippine Products Company,
ISSUE/HELD: WON Paz Agudelo y Gonzaga is liable for the payment of the loans obtained by Mauro A. Garrucho from the Philippine National Bank for the security of which he constituted a mortgage on the aforesaid real estate belonging to the defendant-appellant Paz Agudelo y Gonzaga. NO there is nothing in the said mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage deeds and constituted said mortgages as security for the payment of said loans, for the account and at the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his personal capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the mortgage creditor Philippine National Bank as his attorney in fact so that it might take actual and full possession of the mortgaged properties by means of force in case of violation of any of the conditions stipulated in the respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas delegare non potest" (a delegated power cannot be delegated), inasmuch as there is nothing in the records to show that he has been expressly authorized to do so. He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority from his principal and, therefore, were not binding upon the latter(Agudelo). Neither is there anything to show that he executed the promissory notes in question for the account, and at the request, of his respective principals. Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents, Exhibits I and L, on July 15, 1922, and in their stead the mortgage deed, Exhibit C, was executed, in which there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows that he obtained such credit fro himself in his personal capacity and secured the payment thereof by mortgage constituted by him in his personal capacity,

whereby the latter undertook to buy copra in the Philippines for the account of Primateria Zurich, during "a tentative experimental period of one month from date." The contract was renewed by mutual agreement. During such period, plaintiff caused the shipment of copra to foreign countries, pursuant to instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc. referred to hereafter as Primateria Philippines acting by defendant Alexander G. Baylin and Jose M. Crame, officers of said corporation. As a result, the total amount due to the plaintiff was P33,009.71. This is an action to recover from defendants, the sum of P33,009.71 with interest and attorney's fees of P8,000.00. CFI Manila Trial: it was proven that the amount due from defendant Primateria Zurich, on account of the various shipments of copra, was P31,009.71, because it had paid P2,000.00 of the original claim of plaintiff. There is no dispute about accounting. And there is no question that Alexander G. Baylin and Primateria Philippines acted as the duly authorized agents of Primateria Zurich in the Philippines. As far as the record discloses, Baylin acted indiscriminately in these transactions in the dual capacities of agent of the Zurich firm and executive vice-president of Primateria Philippines, which also acted as agent of Primateria Zurich. It is likewise undisputed that Primateria Zurich had no license to transact business in the Philippines. For failure to file an answer within the reglementary period, defendant Primateria Zurich was declared in default. LOWER COURT: defendant Primateria Zurich liable to the plaintiff for the sums of P31,009.71, with legal interest from the date of the filing of the complaint, and P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.), Inc., Alexander G. Baylin, and Jose M. Crame from any and all liability. PLAINTIFFS APPEAL: that Primateria Zurich is a foreign corporation within the meaning of Sections 681 and 69 of the Corporation Law, and since it has transacted business in the Philippines without the necessary license, as required by said provisions, its agents here are personally liable for contracts made in its behalf. Plaintiff also alleges that the appellees as agents of Primateria Zurich are liable to it under Art. 18972 of the New Civil Code And obviously, liability of the agent is necessarily premised on the inability to sue the principal or non-liability of such principal. In the absence of express legislation, of course. NPC v. NATIONAL MERCHANDISING 177 SCRA 789 FACTS: NAMERCO is the representative of New York firm International Commodities Corporation. NAMERCO and NPC executed a contract for purchase by NPC from the NY firm 4K long tons of crude sulfur for its Ma. Cristina Fertilizer Plant for 450K. Domestic Insurance Company executed a performance bond in favor of NPC to guarantee the seller's obligation. The contract stipulated that sulfur was to be delivered at Iligan City within 60 days from notice of establishment of a letter of credit and faulure would subject the seller and the surety to pay liquidated damages. On November 12, 1956, NPC advised President of Namerco of the opening on Nov. 8 of a letter of credit. The notice was received by the NY firm on Nov. 15. Thus the deadline was set on January 15. NY firm was not able to supply and consequently, the NPC had to shut down the fertilizer plant. NPC informed Namerco that non-availability of vessel does not excuse nonperformance. On May 8, 1957, the Government Corporation Counsel rescinded the contract of the sale and later demanded from Namerco payment of 360K as liquidated damages. Demand was made upon the surety also. The NPC sued the NY firm, Namerco and the insurance company for liquidated damages. The TC dismissed the case against the NY firm as it had no jurisdiction over it. It ordered the respondents to pay liquidated damages. Meanwhile, Melvin Wallick, the assignee of the NY firm sued Namerco. But this case the TC dismissed. NAMERCO contends that the delivery of the sulfur conditioned on the availability of a vessel to carry the shipment and acted within the scope of authority as agent when it signed the contract of sale. ISSUES: 1. WON the delivery of the sulfur was conditioned on the availability of a vessel. NO 2. WON NAMERCO acted within the bounds of its authority. NO 3. WON the stipulation for liquidated damages was enforceable despite a finding that the contract was executed by the agent in excess of its authority. YES 4. WON Domestic Insurance Company is liable to NPC. YES RATIO: 1. The invitation to bid issued by NPC provides that nonavailability of a steamer to transport the sulfur is not a ground for non-payment of the liquidated damages in case of nonperformance. NAMERCO's own bid was even more explicity. True that the NY firm said that the sale was subject to availability of a steamer but NAMERCO did not disclose this to NPC. NAMERCO acted beyond the bounds of its authority because it violated its principal's cabled instructions (1) that the delivery of the sulfur should be C&F Manila and not C&F Iligan City; (2) that the sale be subject to the availability of a steamer and (3) that the seller should be allowed to withdraw right away the full amount of the letter of credit and not merely 80% thereof. NAMERCO is liable for damages pursuant to CC1897 which provides that the agent who exceed the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. The NY firm bluntly told NAMERCO that the latter was never authorized to enter into the contract and that it acted contrary to the repeated instructions of the former. Manresa says that the agent who exceeds the limits of his authority is personally liable and the third person who contracts with the agent in such a case would be defrauded if he would not be allowed to sue the agent. Article 1403 refers to the unenforceability of the contract against the principal. Here, the contract containing the stipulation is not being enforced against the principal but against the agent and its surety. CC 1897 implies that the agent who acts in excess of his authority is personally liable to the party with whom he contracted. CC 1898 does not apply as NPC was unaware of the limitations on the powers granted by the NY firm to NAMERCO.
ISSUE: WON the agents may be held personally liable on contracts made in the name of the entity with third persons in the Philippines.- NO RATIO: At any rate, the plaintiff could never recover from both the principal (Primateria Zurich) and its agents. It has been given judgment against the principal for the whole amount. It asked for such judgment, and did not appeal from it. It clearly stated that its appeal concerned the other three defendants. There is no proof that, as agents, they exceeded the limits of their authority. In fact, the principal Primateria Zurich who should be the one to raise the point, never raised it, denied its liability on the ground of excess of authority. At any rate, article 1897 does not hold that in cases of excess of authority, both the agent and the principal are liable to the other contracting party. This view of the cause dispenses with the necessity of deciding the other issues, namely: whether the agent of a foreign corporation doing business, but not licensed here is personally liable for contracts made by him in the name of such corporation. Although, the solution should not be difficult, since it was already held that such foreign corporation may be sued here (General Corporation vs. Union Ins., 87 Phil. 509).
2.
Section 68 of the Corporation Law states: "No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippines shall be permitted to transact business in the Philippines, until after it shall have obtained a license for that purpose from the Securities and Exchange Commission .. ." And under Section 69, "any officer or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shall be punished by imprisonment for etc. ... ." 2 Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.
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3.

NAMERCO never disclosed to to NPC the cabled or written instructions of its principal. For that reason and because NAMERCO exceeded the limits of its authority, it virtually acted in its own name and not as agent and it is, therefore bound by the contract of sale which, however is not enforceable against its principal. When the determination was communicated to defendant, it protested. Money was the credited Welchs account and interest was even paid for the time the money was withheld. Welch, Fairchild & Co. pointed out that it had acted throughout merely in the capacity of agent for La Compania and was therefore not legally bound by the promise made by it in the letter to the effect that the policy of insurance would be delivered to PNB Manila by La Compania. PNB made demands upon La Compania, but the latter claimed that it never received any policy of insurance upon the ship as it was insured in San Francisco by the agent in behalf of La Compania. Because La Compania became insolvent, PNB made formal demand upon the defendant basing it on the letter that the defendant wrote. The defendant refused even if it had received the proceeds of the insurance way before. It must be noted that the principal is indebted to the agent because of repeated transactions which were the same as the one in this case and that the proceeds of the insurance policy was not enough to cover the entire debt.
4.
It was NAMERCO that actually solicited the bond from the insurance company and as earlier explained, NAMERCO is being held liable under the contract because it virtually acted in its own name. It became the principal in the performance of the bond. The insurance company acted as a surety for NAMERCO. Rule is that want of authority of the person who executes an obligation as the agent or representative of the principal will not as a general rule, affect the surety's liability thereon, especially in the absence of fraud, even though the obligation is not binding on the principal. NATIONAL BANK & WELCH FAIRCHILD 44 PHIL 780
CHARACTERS: PNB plaintiff, lender of money Welch, Fairchild & Co. defendant, owner of 325 shares of La Compania, agent who borrowed money for the principal La Compania Naviera Inc. not a party in the case at bar, buyer of the ship, principal Welch & Co. correspondent of Welch, Fairchild & Co. in San Francisco, USA Mr. Fairchild president of Welch, Fairchild & Co. Benito Juarez the ship (oo, character siya :p) FACTS: La Compania bought Benito Juarez. It was through the efforts of Mr. Fairchild that the consent of the proper authorities in Washington, D.C. was obtained for the transfer of the ship to Philippine registry. While the ship was being delivered to the agent of the buyer in San Francisco (Welch & Co., I think), it was found out that it needed repairs before it could be transported to the Philippines. It also became impracticable to deliver the bill of sale and insurance money to Anglo-London and Paris National Bank, PNBs agent in San Francisco which was supposed to deliver the purchase money (Ignore the agency between PNB ang Anglo-London. Not the subject agency in this case.). Because of this, defendant wrote a letter to PNB to request the latter to cable Anglo-London to release the money and make payment for the ship upon Welch &Co.s application without requiring the delivery of the bill of sale or insurance policy. It was written in the letter that the Compania Naviera will deliver to you here the bill of sale also the insurance policy covering the voyage to Manila. La Compania also addressed a letter to PNB confirming the request and authorizing the bank to send the necessary cablegram. PNB sent the cablegram authorizing payment without the production of the bill of sale or insurance policy. Anglo-London did, and the ship was delivered. After the repair of the ship, it was insured by Welch & Co to the value of $150,000 and was dispatched on its voyage to the Phils. The vessel encountered a storm off the Island in Hawaii and became a total loss. When the insurance was taken out to cover the voyage to Manila, no policy was issued by any insurer; but the insurance was placed by Welch & Co. of San Francisco, upon the instructions of Welch, Fairchild & Co., as agents of the Compaa Naviera, and it was taken out in the ordinary course of business to protect the interests of all parties concerned. (copy-paste) The risk was distributed among several companies, some in remote centers; and it was many months before Welch & Co., of San Francisco, had collected the full amount due from the insurers. However, as the money came to the hands of Welch & Co., of San Francisco, it was remitted by draft or telegraphic transfer to Welch, Fairchild & Co. in Manila. (copy-paste) The amount of $13,000 was mistakenly remitted to PNB in New York, and it was only a month after this that PNB Manila received authority to pay defendant the said amount. This drew the attention of the bank to the fact that the transfer was related to the proceeds of the insurance on Benito Juarez. PNB Manila first determined to intercept the transfer and withhold the credit from the defendant.
ISSUE/HELD: WON PNB could collect from Welch, Fairchild & Co. YES. RATIO: (copy-paste) While it is true that an agent who acts for a revealed principal in the making of a contract does not become personally bound to the other party in the sense that an action can ordinarily be maintained upon such contract directly against the agent (art. 1725, Civ. Code), yet that rule clearly does not control this case; for even conceding that the obligation created by the letter of August 8, 1918, was directly binding only on the principal, and that in law the agent may stand apart therefrom. yet it is manifest upon the simplest principles of jurisprudence that one who has intervened in the making of a contract in the character of agent cannot be permitted to intercept and appropriate the thing which the principal is bound to deliver, and thereby make performance by the principal impossible. The agent in any event must be precluded from doing any positive act that could prevent performance on the part of his principal. This much, ordinary good faith towards the other contracting party requires. The situation before us in effect is one where, notwithstanding the promise held out jointly by principal and agent in the letters of August 8 and 10, 1918, the two have conspired to make an application of the proceeds of the insurance entirely contrary to the tenor of said letters. This cannot be permitted. The idea on which we here proceed can perhaps be made more readily apprehensible from another point of view, which is this: By virtue of the promise contained in the letter of August 8, 1918, the bank became the equitable owner of the insurance effected on the Benito Juarez to the extent necessary to indemnify the bank for the money advanced by it, in reliance upon that promise, for the purchase of said vessel; and this right of the bank must be respected by all persons having due notice thereof, and most of all by the defendant which took out the insurance itself in the interest of the parties then concerned, including of course the bank. The defendant therefore cannot now be permitted to ignore the right of the bank and appropriate the insurance to the prejudice of the bank, even though the act be done with the consent of its principal. As to the argument founded upon the delay of the bank in asserting its right to the insurance money, it is enough to say that mere delay unaccompanied by acts sufficient to create an equitable estoppel does not destroy legal rights, but such delay as occurred here is in part explained by the fact that the loan to La Compaa Naviera did not mature till May 17, 1919, and a demand for the surrender of the proceeds of the insurance before that date would have seemed premature. Besides, it is to be borne in mind that most of the insurance was not in fact collected until in June of 1919. x x x the bank was not slow in asserting its right to the remittance that came through the bank in June to Welch, Fairchild & Co., consisting of $13,000 of the proceeds of this insurance. TUAZON v. OROSCO 5 PHIL 596 FACTS: Juan de VARGAS (OROZCO's husband) executed a power of attorney to Enrique GRUPE, authorizing him, among other things, to dispose

of all his property, and particularly of a certain house and lot located at Calle Nueva, Malate, Manila GRUPE was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced by OROZCO who, inasmuch as the house and lot belongs to the conjugal partnership, was a necessary party to its sale or encumbrance GRUPE later obtained a loan in the amount of P3,500 payable in one (1) year from the plaintiff TUASON, secured by a mortgage on the subject house and lot. In the caption of the instrument evidencing the debt, it appeared that GRUPE acted for himself and also in behalf of VARGAS (his principal). Meanwhile, OROZCO appeared for the purpose of complying with the requirement contained in the power of attorney (i.e. to confirm/consent to the mortgage on the house and lot). Said instrument of debt was duly registered with the Registry of Property In the same instrument of debt, GRUPE declared: (1) that of the P3,500, he has delivered to OROZCO P2,200, retaining the remaining P1,300 for himself for use in his business; (2) that he assumes liability for the whole sum of P3,500, which he promises to repay in current gold or silver coin, without discount on the date of the maturity of the loan; (3) that he shall likewise be liable for all expenses incurred and damages suffered by his creditor TUASON by reason of his failure to comply with any or all of the conditions stipulated; (4) that he shall pay further interest at the rate of 1% per month from the date of default until the debt is fully paid; and (5) that he also pledges as special security for the payment of the debt shares of stock in the "Compaia de los Tranvias de Filipinas," which shares he has delivered to TUASON duly indorsed so that the latter in case of his insolvency may dispose of the same without any further formalities OROZCO denied having received the sum of P2,200. She also repudiated the Deed of Mortgage executed over the subject house and lot. OROZCO principally argued that GRUPE was TUASONs principal debtor, not VARGAS or herself. Hence, he should go after GRUPEs property rather than foreclose the mortgaged house and lot Consequently, TUASON filed suit for recovery of the money borrowed from him against OROZCO. Trial court sustained TUASONs complaint and ordered OROZCO to pay hence, this appeal by OROZCO own benefit, and not incurred for the benefit of his principal, VARGAS this is UNTENABLE!3 In the first place, a debt incurred by the agent is binding directly upon the principal, provided the former acted within the scope of his authority. (Art. 1727, Civil Code) As can be gleaned from the facts presented above, it is clear that GRUPE signed the debt agreement as attorney in fact for VARGAS. The money was delivered to OROZCO and to secure the payment of the debt, the house and lot was mortgaged all these acts by GRUPE are all in accord with instructions contained in the power of attorney. He was merely acting on the authority granted to him! Secondly, the fact that the agent GRUPE has also bound himself to pay the debt does not necessarily mean that he did so for his own interest and not for the benefit of his principal. Such act on the part of GRUPE, as a matter of fact, redounds to the benefit of VARGAS because GRUPEs personal involvement in the payment of the debt served as an additional security therefor. In effect, VARGAs aim to secure the debt has been practically assured because his creditor had more than adequate securities for its payment The individual liability of the agent here merely constitutes a further security (aside from the other material mortgages) in favor of the creditor and does not affect or preclude the liability of the principal. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid. (Art. 1725, Civil Code) C. The Mortgage is very much valid and very much enforceable. In other words, TUASON still has a claim in the house and lot even if it were admitted that GRUPE was the principal debtor Having been duly recorded in the Register of Property, the mortgage duly executed directly subjects the property thus encumbered, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. (Art. 1876, Civil Code and Art. 105, Mortgage Law) Based on the foregoing provisions of the Civil Code and the Mortgage law, even if we assume that GRUPE did bound himself personally to pay the debt in question and that VARGAS his principal in the agency was indeed not the principal debtor, the right in rem arising from the mortgage would still have justified the creditor TUASON in bringing his action directly against the property encumbered irrespective of the personal liability incurred by GRUPE. The result would be practically the same even if it were admitted that OROZCO's contention is correct OROZCO further alleged that GRUPE pledged to TUASON his shares of stock in the "Compaia de los Tranvias de Filipinas" to secure the payment of the entire debt, and contended that it must be shown what has become of these shares as the value of which might be amply sufficient to pay the debt, before proceeding to foreclose the mortgage This contention CANNOT BE SUSTAINED In view of the provisions of laws above quoted, TUASON has the right to proceed against the mortgaged property no matter what. But more importantly, it was incumbent upon OROZCO to show that the debt had been paid with those shares. Payment is not presumed but must be proved. It is a defense which the defendant may interpose. It was therefore her duty to show this fact affirmatively. She failed, however, to do so. Finally, OROZCO contended that in order to render judgment against the mortgaged property, it would be necessary that the minor children of VARGAS be made parties-defendant in this action, they having an interest in the property this contention, again, MUST FAIL Under Art 154 of the Civil Code, which was in force at the time of the death of VARGAS, OROZCO had the parental authority over her children and consequently the legal representation of their persons and property. It can not be said, therefore, that they were not properly represented at the trial. Furthermore,
ISSUES: WON the mortgage over the house and lot is valid. WON OROZCO is liable to pay TUASON HELD: YES. YES. Trial courts judgment is AFFIRMED. OROZCO is ordered to pay TUASON the sum of P2,200, together with interest thereon until the debt shall have been fully discharged, plus costs. RATIO: A. OROZCOs bare denial of ever receiving the P2,200 cannot overcome the convincing proof to the contrary as presented by TUASON (1) She was one of the parties to that debt instrument and signed it this necessarily implies an admission on her part that the statements in the agreement relating to her are true (2) She also personally intervened in the execution of the mortgage and there she attested that the mortgage had been created with her knowledge and consent this furthers the assumption that she had received that amount and that for the purpose of securing its payment, the mortgage was executed (3) In addition, OROZCO also wrote TUASONs attorneys promising to pay the debt. She confirmed the authenticity of this letter! this puts beyond doubt the truth of her receiving the money (4) 13 years had elapsed since she signed the mortgage deed. During all this time she never denied having received the money. The only explanation for this is that she actually received the money as set forth in the debt instrument! *The fact that OROZCO received the money from her husband's agent and not from the creditor directly does not affect the validity of the mortgage. Nowhere does it appear in the agency contract that the money loaned was to be delivered to her by the creditor himself and not through the agent or any other person. The important thing was that she should have received the money B. OROZCO claims that GRUPE is TUASONs principal debtor, not VARGAS; that the debt was personally incurred by GRUPE for his D.
E.
3 This is the only relevant part for our purposes. The rest you can
dispense with because they are issues of procedure, on persons and family relations and on the mortgage law.

this action was brought against OROZCO in her capacity as administratrix of the estate of the deceased VARGAS FINAL NOTE: VARGAS incurred his debt during the subsistence of his marriage with OROZCO, thus, such debt should not be paid out of property belonging to OROZCO exclusively but must be borne by the conjugal partnership. This fact should be borne in mind in case the proceeds of the mortgaged property be not sufficient to allay the debt and interest thereon. The judgment of the court below should be modified in so far as it holds the OROZCO personally liable for the payment of the debt. CERVANTES v. CA 304 SCRA 25 FACTS: Philippines Air Lines, Inc. (PAL), issued to Nicholas Cervantes, a round trip plane ticket for Manila-Honolulu-Los Angeles-HonoluluManila, which ticket expressly provided an expiry of date of 1 year from issuance (until March 27, 1990). The issuance of the said plane ticket was in compliance with a Compromise Agreement entered into between the contending parties in 2 previous suits before the RTC in Surigao City. 4 days before the expiry date of subject ticket, Cervantes used it. Upon his arrival in LA on the same day, he immediately booked his LA-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 stop-over in San Francisco, Cervantes made arrangements with PAL for him to board the flight In San Francisco instead of boarding in Las Angeles. On April 2, 1990, when Cervantes checked in at the PAL counter in San Francisco, he was not allowed to board. The PAL personnel concerned marked the following notation on his ticket: "TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY." Cervantes filed a Complaint for Damages, for breach of contract of carriage RTC in Surigao City. But the said complaint was dismissed for lack of merit. Cervantes interposed an appeal to the CA affirmed RTC. ISSUES: (1) WON the act of the PAL agents in confirming subject ticket extended the period of validity of Cervantes' ticket. NO (2) WON the defense of lack of authority was correctly ruled upon. YES (3) WON the denial of the award for damages was proper. YES RATIO: (1) Under Art. 1989, the acts 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 3rd 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 3rd person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification. Cervantes - the confirmation by the PAL's agents in Los Angeles and San Francisco changed the compromise agreement between the parties. The plane ticket itself provides that it is not valid after March 27, 1990. It is also stipulated in paragraph 8 of the Conditions of Contract4. Lufthansa vs. Court of Appeals - the Tolentinos were issued first class tickets on April 3, 1982, which will be valid until April 10, 1983. On June 10, 1982, they changed their accommodations to economy class but the replacement tickets still contained the same restriction. On May 7, 1983, Tolentino requested that subject tickets be extended, which request was refused by the petitioner on the ground that the said tickets had already expired. The non-extension of their tickets prompted the Tolentinos to bring a complaint for breach of contract of carriage against the petitioner. In ruling against the award of damages, the Court held that the "ticket constitute the contract between the parties. It is axiomatic that
4
when the terms are clear and leave no doubt as to the intention of the contracting parties, contracts are to be interpreted according to their literal meaning." He was aware of the risk that his ticket could expire, as it did, before he returned to the Philippines. The 2 employees did not extend the validity of the ticket. Both had no authority to do so. Cervantes knew this from the very start when he called up the Legal Department of PAL in the Philippines before he left for US. He knew that to secure an extension, he would have to file a written request for extension at the PAL's office in the Philippines. Despite this knowledge, Cervantes persisted to use the ticket in question. Since the PAL agents are not privy to the said Agreement and Cervantes knew that a written request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents acted without authority when they confirmed the flights of the petitioner.
(2) Notwithstanding PAL's failure to raise the defense of lack of authority of the said PAL agents in its answer or in a motion to dismiss, the omission was cured since the said issue was litigated upon, as shown by the testimony of Cervantes in the course of trial. Cervantes - the defense of lack of authority on the part of the PAL employees was deemed waived under Rule 9, Section 2 of the Revised Rules of Court. The lack of authority of the PAL employees was neither raised in the answer nor in the motion to dismiss. The question of whether there was authority on the part of the PAL employees was acted upon by the trial court when was presented as a witness and the depositions of the PAL employees, Georgina M. Reyes and Ruth Villanueva, were presented. (3) 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. Cervantes knew there was a strong possibility that he could not use the subject ticket, so much so that he bought a back-up ticket to ensure his departure. Should there be a finding of bad faith, we are of the opinion that it should be on Cervantes. What the employees of PAL did was one of simple negligence Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner. There is no showing that PAL acted in such a manner. An award for attorney's fees is also improper. The Petition is DENIED and the decision of the Court of Appeals AFFIRMED in toto. SMITH BELL v. SOTELO 44 PHIL 874 *from ADAPT 2009 FACTS: On August 1918, Smith, Bell and Co. (Company), and Vicente Sotelo (Sotelo), entered into a contract where the Company obligated itself to sell and Sotelo to buy 2 steel tanks (P21,000 total), 2 expellers (P25,000 each), and two electric motors (P2,000 each). With respect to delivery dates, the stipulations were: 2 tanks Within 3 or 4 mos., no obligation on the Companys part 2 expellers September 1918 or as soon as possible 2 electric motors Within 90 days, not guaranteed Arrival dates: 2 tanks 2 expellers 2 electric motors April 27, 1919 (8 mos. after signing) October 26, 1918 (1 mo. late) February 27, 1919 (3 mos. late)
8. This ticket is good for carriage for one year from date of issue, except as otherwise provided in this ticket, in carrier's tariffs, conditions of carriage, or related regulations. The fare for carriage hereunder is subject to change prior to commencement of carriage. Carrier may refuse transportation if the applicable fare has not been paid.
Sotelo refused to receive and pay. The Company sued him. Sotelo countered that the deliveries were late and made counterclaims against the Company. The lower court absolved Sotelo with regards to the tanks and the motors, but ordered him to receive and pay for the expellers. Both parties appealed.
Issue: WON the Company has fulfilled its obligation to deliver in due time.

Held: Yes. There really was no fixed date for delivery, as can be seen from the qualifiers in the contract and the final clause providing that the sellers would not be responsible for any delay due to fortuitous events and the will of third persons. The contract was made during war time when restrictions on exports from the US were in force, hence there were many dilatory factors beyond the control of the Company. At best the obligation may be regarded as conditional. The Company did all that it could to deliver, in spite of the restrictions, and thus fulfilled its obligation in due and reasonable time. There was no delay as there was no fixed date, and Sotelo must pay for the equipment. AGENCY-RELEVANT: Moreover, the contracts were signed by Sotelo on his own individual capacity and not for his own company. Hence his company had no cause of action against the plaintiff. Manila Oil doesnt seem to have taken part in the contracts. Mr Vicente Sotelo signed the contracts in his individual capacity and under his own name. If Mr Vicente Sotelo was agent, he is still liable since he entered the contract under his own name, and did not represent that he was under commission to represent Manila Oil (Art. 1717 of the Old Civil Code, Art. 1883 in the NCC). The Code of Commerce holds Mr Vicente Sotelo since he transacted the business under his own name, and therefore directly liable. Intervenor has no right of action, so the Court in its disposition only directed the acceptance and payment of the ordered goods under Mr Vicente Sotelos name, without prejudice to actions he could invoke against his principal. ** If asked by Maam how did Manila Oil Co. impleaded as party CIVPRO!!! (*ehem* Bautista people haha.) Manila Oil Refining and By-Products = INTERVENOR alleging that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not having arrived in due time. RURAL BANK OF BOMBON v. CA 212 SCRA 25 FACTS: Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in favor of Rufina S. Aquino authorizing him to secure a loan from any bank or lending institution for any amount or otherwise mortgage the property and in that connection, to sign, or execute any deed of mortgage and sign other document requisite and necessary in securing said loan and to receive the proceeds thereof in cash or in check and to sign the receipt therefor and thereafter endorse the check representing the proceeds of loan Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of Bombon (Camarines Sur), Inc. (hereafter, defendant Rural Bank) over the three parcels of land Allegations of plaintiffs: o they were surprised to discover that the property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino; o the mortgagor in the deed was defendant Aquino instead of plaintiff Gallardo o correspondence relative to the mortgage was sent to Aquino's address at "Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal address at Las Pias, Metro Manila; o defendant Aquino, in the real estate mortgage, appointed defendant Rural Bank as attorney in fact, and in case of judicial foreclosure as receiver with corresponding power to sell and that although without any express authority from Gallardo, defendant Aquino waived Gallardo's rights under Section 12, Rule 39, of the Rules of Court and the proper venue of the foreclosure suit. Argument of Aquino: the plaintiff authorized him to mortgage her property to a bank so that he could use the proceeds to liquidate her obligation of P350,000 to him. The obligation to pay the Rural Bank devolved on Gallardo. Argument of the Bank: the real estate mortgage executed by respondent Aquino is valid because he was expressly authorized by Gallardo to mortgage her property under the special power of attorney she made in his favor which was duly registered and annotated on Gallardo's title. Since the Special Power of Attorney did not specify or indicate that the loan would be for Gallardo's benefit, then it could be for the use and benefit of the attorney-infact, Aquino.
ISSUE: validity of the Deed of Real Estate Mortgage dated August 26, 1981, executed by Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon (Cam. Sur), Inc. HELD: Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo. RATIO: defendant Aquino in executing the deed of Real Estate Mortgage in favor of the rural bank over the three parcels of land covered by Gallardo's title named himself as the mortgagor without stating that his signature on the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-in-fact. The three (3) promissory notes respectively dated August 31, 1981, September 23, 1981 and October 26, 1981, were each signed by Rufino Aquino on top of a line beneath which is written "signature of mortgagor" and by Bibiana P. Aquino on top of a line under which is written "signature of spouse," without any mention that execution thereof was for and in behalf of the plaintiff as mortgagor. It results, borne out from what were written on the deed, that the amounts were the personal loans of defendant Aquino. As pointed out by the appellant, Aquino's wife has not been appointed co-agent of defendant Aquino and her signature on the deed and on the promissory notes can only mean that the obligation was personally incurred by them and for their own personal account. in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. Agents act of signing mortgage deed in his own name bound himself in his personal capacity as debtor Argument of Petitioner: the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in accordance with Article 1883 which provides (Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.) SC: Exception in Art. 1883 not applicable to the case at bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal capacity. Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Under these circumstances, Gallardo's property is not liable on the real estate mortgage: There is no principle of law by which one can become liable on a real estate mortgage which he never executed either in person or by attorney in fact SY-JUCO v. SY-JUCO 40 PHIL 634 FACTS: In 1902 the defendant was appointed by the plaintiffs administrator of their property and acted as such until June 30, 1916, when his authority was cancelled. The plaintiffs are defendant's father and mother who allege that during his administration, the defendant acquired the property claimed in the Complaint in his capacity as plaintiffs' administrator with their money and for their benefit. After hearing the case the trial court the following: 1. That the defendant return to the plaintiffs the launch Malabon, in question, and execute all the necessary documents and instruments for such delivery and the registration in the

records of the Custom House of said launch as plaintiffs' property; 2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof which has been fixed at the sum of P3,000, and should the return of said casco be made, execute all the necessary instruments and documents for its registration in plaintiffs' name at the Custom House 3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary instruments and documents for its registration at the Bureau of Public Works. And judgment is hereby given for the defendant absolving him from the complaint so far concerns: The rendition of accounts of his administration of plaintiffs' property 1. The return of the casco No. 2545 2. The return of the typewriting machine 3. The return of the house occupied by the defendant 4. The return of the price of the piano in question. Both parties appealed from this judgment. HELD: Yes There is sufficient evidence to show that its price was paid with plaintiffs' money. Defendant's adverse allegation that it was paid with his own money is not supported by the evidence. The circumstances under which, he says, this payment has been made, in order to show that it was made with his own money, rather indicate the contrary. He presented in evidence his checkbook wherein it appears that on March 24, 1916, he issued a check for P300 and on the 27th of same month another for P400 and he says that the first installment was paid with said checks. But it results that, in order to issue the check for P300 on March 24 of that year, he had to deposit P310 on that same day; and in order to issue the other check for P400 on the 27th of the same month, he deposited P390 on that same day. It was necessary for the defendant to make these deposits for on those dates he had not sufficient money in the bank for which he could issue those checks. But, in order to pay for the price of the automobile, he could have made these payments directly with the money he deposited without the necessity of depositing and withdrawing it on the same day. If this action shows something, it shows defendant's preconceived purpose of making it appear that he made the payment with his own funds deposited in the bank. The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed by the lower court: 1. WON the court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545 and that they were its owners until it was sunk in June, 1916. HELD: No RATIO: the SC finds that it belonged to the plaintiffs and that the latter sold it afterwards to the defendant by means of a public instrument WON the court erred in absolving the defendant from his obligation to render an account of his administration to the plaintiffs, and to pay to the latter the amount of the balance due in their favor. HELD: No RATIO: The SC likewise finds correct the trial court's decision absolving the latter from this petition, for it appears, from the plaintiffs' own evidence, that the defendant used to render accounts of his agency after each transaction, to the plaintiffs' satisfaction. WON the court erred in not condemning the defendant to pay to the plaintiffs the value of the woods, windows and doors taken from their lumber-yard by the defendant and used in the construction of the house on calle Real of the barrio of La Concepcion, municipality of Malabon, Rizal.
WON the Launch belongs to the plaintiffs HELD: Yes it belong to the plaintiffs. RATIO: On July, 1914, the defendant bought it in his own name from the Pacific Commercial Co., and afterwards, registered it at the Custom House. But this does not necessarily show that the defendant bought it for himself and with his own money, as he claims. This transaction was within the agency which he had received from the plaintiffs. The fact that he has acted in his own name may be only, as we believe it was, a violation of the agency on his part. It was bought with their money and for them (Plaintiffs) is supported by the fact that, immediately after its purchase, the launch had to be repaired at their expense, although said expense was collected from the defendant. If the launch was not bought for the plaintiffs and with their money, it is not explained why they had to pay for its repairs. By this agency the plaintiffs herein clothed the defendant with their representation in order to purchase the launch in question. However, the defendant acted without this representation and bought the launch in his own name thereby violating the agency. If the result of this transaction should be that the defendant has acquired for himself the ownership of the launch, it would be equivalent to sanctioning this violation and accepting its consequences. If the defendant contracted the obligation to buy the launch for the plaintiffs and in their representation, by virtue of the agency, notwithstanding the fact that he bought it in his own name, he is obliged to transfer to the plaintiffs the rights he received from the vendor, and the plaintiffs are entitled to be subrogated in these rights. There is another point of view leading Us to the same conclusion. From the rule established in Article 1717 of the Civil Code that when an agent acts in his own name, the principal shall have no right of action against the person with whom the agent has contracted, cases involving things belonging to the principal are excepted. According to this exception [when things belonging to the principal are dealt with] the agent is bound to the principal although he does not assume the character of such agent and appears acting on his own name [Decision of the Supreme Court of Spain, May 1, 1900]. This means that in the case of this exception the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person; and, consequently, if the obligations belong to the former, to him alone must also belong the rights arising from the contract. The money with which the launch was bought having come from the plaintiff, the exception established in Article 1717 is applicable to the instant case. WON the defendant has to return the Casco HELD: Yes RATIO The defendant admits it was constructed by the plaintiff himself in the latter's ship-yard. Defendant's allegation that it was constructed at his instance and with his money is not supported by the evidence. In fact the only proof presented to support this allegation is his own testimony contradicted, on the one hand, by the plaintiffs' testimony and, on the other hand, rebutted by the fact that, on the date this casco was constructed, he (defendant) did not have sufficient money with which to pay the expense of its construction. WON the defendant has to return the car
2.
3.
HELD: No RATIO: Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the construction of the latter's house on Calle Real of the Barrio of La Concepcion of the Municipality of Malabon, Rizal, we find correct the trial Court's decision that they were given to the defendant as his and his wife's property. NATIONAL FOOD AUTHORITY v. IAC 184 SCRA 166 FACTS: Gil Medalla, as commission agent of the Superior Shipping Corporation (SSC), entered into a contract for hire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila. Upon completion of the delivery of rice at its destination, SSC wrote a letter requesting defendant NGA that it be allowed to collect the amount stated in its statement of account. The statement of account included not only a claim for freightage but also claims for demurrage and stevedoring charges amounting to P93,538.70. SSC wrote again defendant NGA, this time specifically requesting that the payment for freightage and other charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel "MV Sea Runner" In reply, NGA informed plaintiff that it could not grant its request because the contract to transport the rice was entered into by

defendant NGA and defendant Medalla who did not disclose that he was acting as a mere agent of plaintiff . Thereupon NGA paid defendant Medalla the sum of P25,974.90, for freight services in connection with the shipment of 8,550 sacks of rice. SSC wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid to him by NFA (ewan ko bakit naging F ang G bigla, di sinabi, hahaha). Medalla, however, "ignored the demand." Plaintiff was therefore constrained to file the instant complaint against NFA LOWER COURT: in favor of the SSC. NFA and Gil Medalla are jointly and severally liable to pay SSC. CA: affirmed the judgment of the lower court attachment - the filing of a bond - was not fulfilled, so it cannot be said that the injunction was superseded). Jimena and Tolentino died successively during the pendency of the case in the trial court and were, accordingly, substituted by their respective widows and children. CFI decided in favor of Victor Jimenas heirs, declaring among others that they be entitled to half of the shares of the royalties of Lincallo in his contracts with Gold Star, Marinduque Iron Mines and Alejandro Marquez, that both mining companies pay directly to the former half of the shares of the royalties until said contracts were terminated, that Lincallo pay the heirs the capital Victor Jimena gave him to purchase the mining claims and the latters shares with interest, and that Gold Star Mining Co., Inc. pay them the sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction. The defendants appealed to the CA, which affirmed CFI Manilas decision.
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ISSUE: WON NFA is liable noting the general rule provided for in Art. 1883 of the Civil Code of the Philippines- YES RATIO: Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provision of this article shall be understood to be without prejudice to the actions between the principal and agent. Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract. GOLD STAR MINING v. LIM JIMENEZ 25 SCRA 597 NATURE: Appeal from a decision of the Court of Appeals PARTIES INVOLVED: Gold Star Mining Co., Inc., petitioner Marta Lim-Jimena, et al., as legal heirs of the deceased Victor Jimena, and Jose Hidalgo, respondents FACTS: In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena half of the proceeds from all mining claims that he would purchase with the money to be advanced by the latter. This agreement was later on modified to include in the equal sharing agreement not only the proceeds from several mining claims, but also the lands constituting the same, and so as to bing thereby their heirs, assigns, or legal representatives. Eventually, the mining rights over parts of the claims were assigned by Lincallo to Gold Star Mining Co., Inc., while others were assigned to Marinduque Iron Mines Agents. Meanwhile, Jimena repeatedly apprised both mining corporations of his interests over the mining claims so assigned and/or leased by Lincallo. However, both corporations ignored his demands. Jimena also demanded Lincallo for the payment of the P5,800 he gave Lincallo as money to purchase the mining claims and the lands, but to no avail. Lincallo did not only fail to settle his accounts with Jimena, he even transferred about majority of his share in the royalties due from Gold Star to Gregorio Tolentino, a salaried employee. Hence, on Sept. 2, 1954, Jimena filed a suit against Lincallo for recovery of his advances and his one-half share in the royalties, and impleaded Gold Star and Marinduque Iron Mines, as well as Tolentino, later on as defendants. Two weeks later, the trial court issued a writ of preliminary injunction, preventing both mining companies from paying royalties during the pendency of the case to Lincallo, his assigns or legal representatives. Despite of such injunction, Gold Star still paid P30,691.92 to Lincallo and Tolentino (claiming that a writ of prelimary attachment filed by Jimena supposedly superseded the injunction, but the condition to such
LEGAL ISSUES: 1. WON the CA erred in finding that the Jimenas have a cause of action against Gold Star Mining Co., as there is no privity of contract between Gold Star and Jimena. 2. WON the CA erred in condemning Gold Star to pay the sum of P30,691.92 for violation of an allegedly non-existent injunction. JUDGMENT: Affirmed. RATIO DECIDENDI: 1. NO. The existence of a common subject-matter supplies the juridical link. Jimena repeatedly made demands upon God Star for the payment of his share of the royalties, but all in vain, so he was forced to implead Gold Star for having refused to recognize his right. Furthermore, under such conditions wherein Jimena was repeatedly denied of his interests, Jimena has an action against Gold Star, pursuant to Art. 1883, NCC, which provides that the principal may sue the person with whom the agent dealt with in his (agents) own name, when the transaction involves things belonging to the principal. 2. NO. Said award is not so much a penalty against petitioner as a decree of restitution. Said sum to be paid by the company to Jimena is to be imputed to Lincallos liability under this judgment. CA thus left the way open for Gold Star to recover later the whole amount from Lincallo. MACONDRAY v. SELLNER 33 PHIL 370 FACTS: Macondray & Co. bought a parcel of land from Sellner. The land was flooded by high tides, and Macondray became dissatisfied with its purchase. It then requested Sellner, after the final transfer was made,to find another buyer because the land was unsuited for use as a coal-yard, the purpose for which it had been purchased. It was expressly understood that Macondray was willing to sell the land for P17,175 and that Sellner would receive as commission for securing a purchaser anything over that amount he could get. Sellner found a purchaser, Antonio Barretto, who was willing to buy the land for P18892.5o. Macondray executed a formal deed of conveyance which, together with the certificate of title, was delivered to Sellner with the understanding that the latter would consummate the sale, deliver the title to the buyer and receive the purchase price. Barretto asked that he be given time to examine the title deed. if he found it satisfactory, he would accept the land and give Barretto the check for the amount of the purchase price. Because Barretto had to go to Tayabas for a business trip and was delayed by a typhoon, Macondray advised Sellner that he must consummate the sale upon Barrettos return to Manila. When he got back, Barretto told Sellner that he would pay the purchase price in a day or two if he found the documents satisfactory. Monday morning - Young (person from Macondray) formally notified Sellner that the deal would be off if purchase price was not paid before 5pm of that afternoon. Sellner received the check from Barretto on Wednesday morning. He immediately turned over the amount of P17175 to Macondray, but mAcondrays manager refused to accept the check and iled this action, claiming that the sale had been cancelled when the

purchase price was not received on Monday afternoon. There was a letter regarding the cancellation. ISSUE/HELD: WON Macondray is entitled to damages from Sellner for selling the land to BArretto for and on behalf of MAcondray after Sellners authority had been revoked? No. RATIO: (copy-paste) From the very nature of the transaction it was understood that the purchaser should have a reasonable time in which to examine the deed of transfer and the other documents of title, and that defendant exercising an authority impliedly if not expressly conferred upon him, gave the purchaser a reasonable time in which to satisfy himself as to the legality and correctness of the documents of title. That the company through its manager Young, acquiesced in and ratified what had been done by defendant in this regard when, with full knowledge of all the facts, Young advised the defendant, during Barretto's absence in Tayabas, that the deal must be closed up without delay on Barretto's return to Manila. No reason appears, nor had any reason been assigned for the demand by the plaintiff company for the delivery of the purchase price at the hour specified under threat in the event of failure to make payment at that hour it would decline to carry out the agreement, other than that the manager of the plaintiff company had been annoyed by the delays which occurred during the earlier stage of the negotiations, and had changed his mind as to the desirability of making the sale at the price agreed upon, either because he believed that he could get a better price elsewhere, or that the land was worth more to his company than the price he had agreed to take for it. The commission agreed upon was all over P17,175 which the defendant could secure from the property, and it is clear that allowing the defendant this commission, and offsetting it against the unpaid balance of the market value of the land, the plaintiff company is not entitled to a money judgment against defendant. (kasi dapat yung damages Is yung actual market value daw) We do not mean to question the general doctrine as to the power of a principal to revoke the authority of his agent at will, in the absence of a contract fixing the duration of the agency (subject, however, to some well defined exceptions). Our ruling is that at the time fixed by the manager of the plaintiff company for the termination of the negotiations, the defendant real estate agent had already earned the commissions agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff company in declining to execute the contract of sale for some reason personal to itself. The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the absence of an express contract between the broker and his principal, the implication generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. (Lunney vs Harley) The rights of a real estate broker to be protected against the arbitrary revocation of his agency, without remuneration for services rendered in finding a suitable purchaser prior to the revocation, are clearly and forcefully stated in the following citation form the opinion in the case of Blumenthal vs. Goodall (89 Cal., 251). The only reasons assigned for the sudden and arbitrary demand for the payment of the purchase price which was made with the manifest hope that it would defeat the agent's deal with Barretto, are that the plaintiff company's manager had become satisfied that the land was worth more than he had agreed to accept for it; and that he was piqued and annoyed at the delays which marked the earlier stages of the negotiations. Time does not appear to have been of the essence of the contract. The agreement to sell was made without any express stipulation as to the time within which the purchase price was to be paid. Under all the circumstances surrounding the transaction in the case at bar, as they appear from the evidence of record, we have no hesitation in holding that the plaintiff company's letter of September 2, 1912 demanding payment before five o'clock of the afternoon of that day, under penalty of the cancellation of its agreement to sell, was an arbitrary unreasonable attempt to deny to the purchaser the reasonable opportunity to inspect the documents of title, to which he was entitled by virtue of the express agreement of the plaintiff company's agent before any attempt was made to revoke his agency. It follows that Barretto's right to enforce the agreement to sell was in no wise affected by the attempt of the plaintiff company to "cancel" the agreement; and that the plaintiff company suffered no damage by the consummation of the agreement by the acceptance of the stipulated purchase price by the defendant real estate agent. DANON v. BRIM & CO. 42 PHIL 133 FACTS: Antonio A. Brimo, manager of BRIMO & CO, in a conversation with Julio DANON, informed the latter that he (BRIMO) desired to sell his factory, the Holland American Oil Co., for the sum of P1.2M BRIMO agreed and promised to pay DANON a commission of 5% of the stipulated price provided the latter could sell said factory for that amount. No definite period of time was fixed within which DANON should effect the sale Meanwhile, another broker, a certain SELLNER, was also negotiating the sale of the same factory for BRIMO. The records are not clear but it appears that DANON was aware that he was not alone as broker. The records seem to point that DANON exerted earnest effort to forestall his competitor by being the first to find a purchaser and effect the sale In time, DANON found a willing purchaser. It appears that after having the conversation with BRIMO, DANON went to see Mauro PRIETO, president of the STA ANA Oil Mill, and offered to sell to him BRIMOs property at P1.2M STA ANA was at that time in need of such a factory. As such, PRIETO, its president, eagerly expressed interest in DANONs offer. PRIETO immediately sought to ascertain whether BRIMO really wanted to sell said factory, and after getting such confirmation from BRIMO, sought also to inspect the factory (which he did) PRIETO then set for an appointment with BRIMO to perfect the negotiation. However, such appointment never pushed through because at that time, the other broker, SELLNER, had already found a purchaser for the same property who ultimately bought it for P1.3M DANON filed the instant case to recover the sum of P60,000, alleged to be the value of services rendered by him to BRIMO as a broker DANON claimed that as compensation for his services, a commission of 5% on the said sum of P1.2M (P60,000) was promised to him by BRIMO if the sale was consummated OR even if he should merely find a purchaser ready, able and willing to buy said factory for the stipulated price DANON averred that BRIMO refused to sell the said factory without any justifiable motive or reason and without having previously notifying DANON of its desistance or variation in the price and terms of the sale To that complaint the BRIMO interposed a general denial The trial court ruled in favor of DANON and ordered BRIMO to pay the sum prayed for plus costs hence this petition by BRIMO ISSUE: WON DANON is entitled to recover the sum of P60,000 as compensation for his services HELD: NO. The judgment appealed from is hereby revoked and BRIMO is hereby absolved from all liability under the DANONs complaint RATIO: Note that DANON's action here is not one for damages for breach of contract; it is an action to recover "the reasonable value" of services rendered. Hence, to determine whether DANON is entitled to recover the commission agreed upon, the pivotal question to be resolved is whether DANON had performed all that was required of him under his contract with BRIMO As can be gleaned from the facts, the most that can be said as to what DANON had accomplished is that he had found a person (STA ANA Oil Mill) who MIGHT have bought the subject factory had BRIMO not sold it to someone else However, even this point is dubious as the evidence does not show that the STA ANA had definitely decided to buy the property in question at the price of P1.2M. The board of directors of STA ANA had not resolved to purchase said property; and even if its president, PRIETO, could legally make the purchase without board authorization, yet PRIETO himself did not pretend that he had definitely agreed to buy the factory on behalf of his corporation at the price stated It must be emphasized the DANON himself (in his complaint and testimony in open court) admitted that BRIMO agreed to pay him a commission of 5% provided he could sell the factory at P1.2M
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under the circumstances presented, it is difficult to see how DANON can recover anything! What benefit did DANON, by his "services," bestow upon BRIMO to entitle him to recover from the latter the sum of P60,000? It is perfectly clear and undisputed that his "services" did not any way contribute towards bringing about the sale of the factory in question. He was not "the efficient agent or the procuring cause of the sale." DOCTRINE: The broker must be the efficient agent or the procuring cause of sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker DOCTRINE (restated): The duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue. A broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is wholly his. The reward comes only with his success. The broker may devote his time and labor, and expend his money with ever so much of devotion to the interest of his employer, and yet if he fails, if without effecting an agreement or accomplishing a bargain, he abandons the effort, or his authority is fairly and in good faith terminated, he gains no right to commissions Simply put, a broker is never successful and never becomes entitled to his commission until and unless the sale is consummated. Even when he has successfully brought the would be buyer and seller together, or when his efforts have created impressions favorable to seller, or when seller otherwise benefited from brokers labor as long as no sale has been consummated, he is not entitled to commission Such a rule, however, has an exception: If the efforts of the broker are rendered a failure by the fault of the employer, then the broker does not lose his commissions. For instance, when the employer capriciously changes his mind after the purchaser, ready, willing, and able has already been produced by the broker; or when the purchaser declines to complete a sale because of some defect of title in the ownership of the seller, which defect is the fault of the seller Usually the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject of course to the right of the seller to sell independently. But the right of the principal to terminate brokers authority is absolute and unrestricted, except only that he may not do it in bad faith, and as a mere device to escape the payment of the broker's commissions Thus, if in the midst of negotiations instituted by the broker, and which were approaching success, the seller should revoke the authority of the broker, with the view of concluding the bargain without his aid, and avoiding the payment of commission about to be earned, it might be well said that the due performance his obligation by the broker was purposely prevented by the principal But if the seller acts in good faith, not seeking to escape the payment of commissions, but moved fairly by a view of his own interest, he has the absolute right before a bargain is made while negotiations remain unsuccessful, before commissions are earned, to revoke the broker's authority, and the latter cannot thereafter claim compensation for a sale made by the principal, even though it be to a customer with whom the broker unsuccessfully negotiated, and even though, to some extent, the seller might justly be said to have availed himself of the fruits of the broker's labor The obligation of a broker to procure a purchaser requires of broker not simply to name or introduce a person who may be willing to make any sort of contract in reference to the property, but to actually produce a party capable, and who ultimately becomes the purchaser It is clear from the foregoing that although DANON could probably have effected the sale of the factory had BRIMO not sold it to someone else, he is not entitled to the commissions agreed upon because he had no intervention whatever in the sale that transpired It must be borne in mind that no definite period was fixed by BRIMO within which DANON might effect the sale of its factory. Nor was DANON given by BRIMO the exclusive agency of such sale. Therefore, DANON cannot complaint of BRIMO's conduct in selling the property through another agent (SELLNER) before DANON's efforts were crowned with success DOCTRINE: One who has employed a broker can himself sell the property to a purchaser whom he has procured, without any aid from the broker ROCHA v. PRATS 43 PHIL 397 FACTS: Antonio Brimo, manager of Prats & Co., verbally authorized Joaquin Mencarini to negotiate the sale of a building and lot, Mencarini to receive as his compensation the excess of the purchase price over and above P150,000. Rocha agreed to help Mencarini in finding a purchaser and received from Brimo an authorization similar to that of Mencarini. Both Mencarini and Rocha from time to time submitted propositions from various prospective purchasers, none of which were acceptable to the defendant. Finally, Rocha obtained an offer from Vincente Madrigal to buy the property for P165,000 of the sum of P65,000 was to be paid in cash and balance within a year from the date of the sale. Before closing the sale, Brimo, at Rochas request, gave the latter the following power in writing: We hereby authorize you to close in our name during this day the sale of our real estates on Pinpin, Martinez, and David Streets, containing a total area of 1,529 square meters, for the price of (P165,000) under the following conditions: o P65,000 should be paid to us at the time of signing the deed. o The remaining P100,00 should be paid to us within the period of 1 year from date with interest at 6% per annum until paid. Provided that the purchaser shall give banking security for the payment of these P100,000. o We reserve the right to vacate within 6 months the premises we are actually occupying for which we will pay a monthly rent of P1,000, and in the event that they are vacated before the 6 months stipulated, we will pay only for the months during which we shall have occupied the premises. Rocha testifies that when the document was handed to him he protested against the clause provided that the purchaser shall give banking security for the payment of these P100,000 and Brimo then told him that if the sale was made to Madrigal he could strike out this clause. Brimo denies that he authorized Rocha to waive this condition. The following day, Rocha endeavored to close the transaction with Madrigal who offered to secure the deferred payment on the purchase price with a mortgage on the property, but Brimo then insisting to agree to this, the sale failed. A few days later, Brimo, through another agent, sold the property to one Concepcion Leyba for P175,000. Mencarini at first claimed compensation for his services in connection with the negotiations for the sale to Madrigal, but now appears to have relinquished his claim in favor of Rocha. Rocha filed an action to recover P15,000 as brokers commission on the sale of the property against Prats & Co. TC rendered a judgment in favor of Prats & Co. ISSUE: WON Rocha is entitled to the commission. NO. RATIO: There is no doubt that if the authorization correctly states the terms of the proposed sale, Rocha cannot recover; he never quite succeeded in bringing the minds of the buyer and seller to an agreement. Danon vs. Antonio A. Brimo and Co. - In all cases, under all and varying forms of expression, the fundamental and correct doctrine is, that the duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commission does not accrue. It may be conceded that if it were clearly established that Prats & Co. waived the condition that the deferred payments of the purchase price were to be secured by bank credits, Rocha would be entitled to a recovery, but we do not think the oral evidence presented by Rocha is sufficient to vary the terms of the written instrument. Had there been a clear understanding as to the waiver, ordinary prudence should have led Rocha to have that understanding appear in writing. The judgment appealed from is therefore affirmed. INLAND REALTY v. CA 273 SCRA 70 Quick Facts: (Agent referred Stanford Microsystems as buyer, initial price too low; sale was eventually consummated with Stanford about 1 year 5 months after cessation of agency)
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Agent not entitled to commission because it was not the efficient procuring cause in bringing about the sale. There was no participation in the critical events leading to the sale negotiations, finalization of terms and conditions, drafting of the deed, processing of documents, etc. Facts: September 16, 1975: Defendant corporation thru its co-defendant Assistant General Manager J. Armando Eduque, granted to plaintiffs a 30-day authority to sell its . . . 9,800 shares of stock in Architects' Bldg., Inc. as follows: Plaintiff Inland Realty Investment Service, Inc. planned their sales campaign, sending proposal letters to prospective buyers. One such prospective buyer to whom a proposal letter was sent to was Stanford Microsystems, Inc. . . . [that] counter-proposed to buy 9,800 shares offered at P1,000.00 per share or for a total of P9,800,000.00, P4,900,000.00 payable in five years at 12% per annum interest until fully paid. Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote defendant a letter to register Stanford Microsystems, Inc. as one of its prospective buyers Defendant Araneta, Inc., thru its Assistant General Manager J. Armando Eduque, replied that the price offered by Stanford was too low and suggested that plaintiffs see if the price and terms of payment can be improved upon by Stanford Other prospective buyers were submitted to defendants among whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez. The authority to sell given to plaintiffs by defendants was extended several times: the first being on October 2, 1975, for 30 days from said date, the second on October 28, 1975 for 30 days from said date, and on December 2, 1975 for 30 days from said date. [SO THE AUTHORITY TO SELL EXPIRED ON JANUARY 1976] De los Reyes [co-plaintiff] testified that when his company was initially granted the authority to sell, he asked for an exclusive authority and for a longer period but Armando Eduque would not give, but he argues that the life of the authority could always be extended for the purpose of negotiation that would be continuing. On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock [in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for P13,500,000.00 On September 6, 1977, plaintiffs demanded formally [from] defendants, through a letter of demand, for payment of their 5% broker['s] commission at P13,500,000.00 or a total amount of P675,000.00 . . . which was declined by [defendants] on the ground that the claim has no factual or legal basis. TRIAL COURT: DISMISSED THE COLLECTION COMPLAINT After their authority to sell expired thirty (30) days from December 2, 1975, or on January 1, 1976, petitioners abandoned the sales transaction and were no longer privy to the consummation and documentation thereof, the trial court dismissed petitioners' complaint for collection of unpaid broker's commission. COURT OF APPEALS: Affirmed TC Hence, this appeal. Issue: W/N the petitioners, regardless of whether or not their agency contract and authority to sell had expired, they are automatically entitled to their broker's commission merely upon securing for and introducing to private respondent Araneta, Inc. the buyer in the person of Stanford which ultimately acquired ownership over Araneta, Inc.'s 9,800 shares in Architects' Held/Ratio: NO. [PROCEDURAL EK-EK.] Petitionerss contention # 1: the Letter dated October 28, 1976, Gregorio Araneta III, in behalf of Araneta, Inc., renewed petitioner Inland Realty's authority to act as agent to sell the former's 9,800 shares in Architects' for another thirty (30) days from same date. o This claim is a blatant lie. In the first place, petitioners have conspicuously failed to attach a certified copy of this Letter dated October 28, 1976. They have, in fact, not attached even a machine copy thereof. All they gave this court is their word that said Letter dated October 28, 1976 does exist, and on that basis, they expect us to accordingly rule in their favor. o hypothetically assuming its existence, its alleged content, namely, a listing of four (4) other prospective buyers, does not at all prove that the agency contract and authority to sell in favor of petitioners was renewed or revived after it expired on January 1, 1976. [AGENCY-RELATED RATIO] o Petitioners did not succeed in outrightly selling said shares under the predetermined terms and conditions set out by Araneta, Inc. They admit that they could not dissuade Stanford from haggling for a lower price. From September 16, 1975 to January 1, 1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to show that they actively served their principal's interests, o The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale to Stanford, to be a significant index of petitioners' non-participation in the really critical events leading to the consummation of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking price, the finalization of the terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent documents, and the delivery of the shares of stock to Stanford. Certainly, the lapse of the period of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of evidence of petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that period and in the subsequent processing of the documents pertinent to said sale.
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INFANTE v. CUNANAN 93 PHIL 691 Quick facts: Principal terminated agency after referral of a buyer, allegedly because of change of mind, but subsequently transacted directly with the proposed buyer FACTS: Consejo Infante (owner of the lands) contracted the services of Jose Cunanan and Juan Mijares, plaintiff herein, to sell the abovementioned property for a price of P30,000 subject to the condition that the purchaser would assume the mortgage existing thereon in the favor of the Rehabilitation Finance Corporation. She agreed to pay them a commission of 5 per cent on the purchase price plus whatever overprice they may obtain for the property. Plaintiffs found one Pio S. Noche who was willing to buy the property under the terms agreed upon with defendant, but when they introduced him to defendant, the latter informed them that she was no longer interested in selling the property and succeeded in making them sign a document stating therein that the written authority she had given them was already can-celled. defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon learning this transaction, plaintiffs demanded from defendant the payment of their commission, but she refused and so they brought the present action. Argument of petitioner: authority has already been withdrawn on November 30, 1948 when, by the voluntary act of respondents, they executed a document stating that said authority shall be considered cancelled and without any effect, so that when petitioner sold the property to Pio S. Noche on December 20, 1948, she was already free from her commitment with respondents and, therefore, was not in duty bound to pay them any commission for the transaction. Argument of respondents: while they agreed to cancel the written authority given to them, they did so merely upon the verbal assurance given by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they would be given the commission agreed upon. ISSUE: WON respondents are entitled to the commission originally agreed upon

HELD: Yes RATIO: That petitioner had changed her mind even if respondents had found a buyer who was willing to close the deal, is a matter that would not give rise to a legal consequence if respondents agree to call off the transaction in deference to the request of the petitioner. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without ac-cording to the party prejudiced the reward which is due him. Petitioner took advantage of the services rendered by respondents, but believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation Exhibit 1. This act of subversion cannot be sanctioned and cannot serve as basis for petitioner to escape payment of the commission agreed upon PRATS v. CA 81 SCRA 360 FACTS: Private defendant Alfonso Doronilla was the registered owner of 300 hectares of land located in Montalban Rizal. Doronilla has been trying to sell the said land for a time. On July 3, 1967, Doronilla offered to sell the land to the Social Security System (SSS) at 4 pesos per square meter. July 17, 1967, SSS replied, asking if there was any possibility if the price could be reduced to 3.25 pesos per square meter. July 19, 1967, Doronilla replied saying that he was amenable to the decrease in price and would sell at 3.25. Aug. 10, 1967, SSS replied that it would study the sale, and would reply after it finishes its studies. Feb. 14, 1968, Doronilla granted plaintiff Prats an exclusive option and authority in writing to negotiate the sale of the said property. The option would last for 60 days and will be automatically extended until said negotiations os terminated, but not more than 15 days. Feb 19, 1968, In view of his exclusive option, Prats asked Doronilla if he could take immediate steps to withdraw any and all papers pertaining to the property offered to the SSS Feb 20, 1968, Doronilla wrote a letter to SSS requesting for the return of all papers concerning the property. Feb. 27, 1968, SSS replies, asking for a meeting with Doronilla on Mar 4, 1968 Feb.28 1968, Doronilla replies to SSS, saying that Prats has the exclusive option and authority to negotiate the sale, thus SSS will have to communicate directly with Prats. April 18, 1968, Doronilla extended Prats exclusive option and authority to expire May 18, 1968. May 6, 1968, Prats made a formal letter to SSS offering the said lot for 6 pesos per square meter. May 17, 1968, Doronilla recieves a telegram from the SSS, saying that the SSS was considering the purchase of the land. May 18, 1968, the exclusive option was extended for 15 days, as per the option agreement that the option shall be extended if there were negotiations. May 18, 1968, Prats writes again to SSS offering the same land for 4.50 pesos per square meter. May 30, 1968. Prats writes to Doronilla, stating that the SSS had agreed to buy the said land and that the SSS would contact Doronilla. June 6, 1968, Doronilla writes to prats saying that he had not received any written offer from the SSS, and reminding Prats that the exclusive authority had already expired on June 3, 1968. June 19, 1968. Doronilla offers the land to SSS at 4 pesos. June 25, 1968, SSS makes a counter-offer of 3.25 June 30, 1968, Doronilla executes the deed of sale to the SSS September 17, 1968, Prats demands 1.38 million as his fee for professional services as previously agreed upon in the exclusive option and authority to negotiate. ISSUE: WON Prats is entitled to the 1.38 million for the prefessional services rendered. HELD: No he is not entitled to 1.38 million, the exclusive option to negotiate had alrady elapsed when Doronilla and SSS perfected their sale. RATIO: Thou Prats argues that he was instrumental in bringing the two parties together, it can be seen from the facts that Doronilla and SSS were already talking even before Prats became the agent of Doronilla. However, the court notes that Prats had diligently taken steps to bring back together Doronilla and SSS. He had the two parties meet in various luncheons, he communicated with the Office of the Presidential Housing Commission, wrote follow up letters to the SSS. Thus the Court grates in equity the sum of 100,000 pesos by way of compensation for Prats' efforts and assistance in the transaction. UNILAND RESOURCES v. DBP 200 SCRA 757 FACTS: Long before this case arose, Marinduque Mining Corporation obtained a loan from the DBP and as security therefor, mortgaged certain real properties to the latter, among them two lots located in Makati The aforesaid lots had, however, been previously mortgaged by Marinduque Mining Corp., to Caltex, and the mortgage in favor of DBP was entered on their titles as a second mortgage The account of the Marinduque Mining Corp., with the DBP was later transferred to the Assets Privatization Trust (APT) pursuant to Proclamation No. 50.law library For failure of the Marinduque Mining Corp. to pay its obligations to Caltex, the latter foreclosed its mortgage on the aforesaid two lots. APT on the other hand, to recover its investment on the Marinduque Account, offered for sale to the public through DBP its right of redemption on said two lots by public bidding. Considering, however, that Caltex had required that both lots be redeemed, the bidding guidelines set by DBP provided that any bid to purchase either of the two lots would be considered only should there be two bids or a bid for the two items which, when combined, would fully cover the sale of the two lots in question.virtual law library The aforesaid bidding was held with only one bidder, the Counsel Realty Corp. [an affiliate of Glaxo, Philippines, the client of petitioner], which offered a bid only for the warehouse lot in the amount of P23,900,000.00. Said bid was thus rejected by DBP. Seeing, however, that it would make a profit if it redeemed the two lots and then offer them for sale, and as its right to redeem said lots from Caltex would soon expire, DBP retrieved the account from APT and, on the last day for the exercise of its right of redemption, redeemed said lots from Caltex for P33,096,321.62 , thus acquiring them as its physical assets. library In preparation for the sale of the two lots in question, DBP called a pre-bidding conference wherein a new set of bidding guidelines were formulated. The public bidding for the sale of the two lots was held and again, there was only one bidder, the Charges Realty Corp. [another affiliate of Glaxo, Philippines], for only the warehouse lot and for the amount of P24,070,000.00, which is slightly higher than the amount previously offered by Counsel Realty Corp. No bid was submitted for the office building lot. Notwithstanding that there was no bidder for the office building lot, the DBP approved the sale of the warehouse lot to Charges Realty Corp. As for the office building lot, it was later sold by DBP in a negotiated sale to the Bank of P.I. as trustee for the "Perpetual Care Fund of the Manila Memorial Park" for P17,460,000.00. The DBP admittedly paid the (five percent) broker's fee on this sale to the DBP Management Corporation, which acted as broker for said negotiated sale. After the aforesaid sale, Uniland, through its President, wrote two letters to DBP asking for the payment of its broker's fee in instrumenting the sale of its (DBP's) warehouse lot to Charges Realty Corp. The claim was referred to the Bidding Committee chaired by Amanda S. Guiam which issued a decision denying Unilands claim .Hence, the instant case filed by Uniland to recover from DBP the aforesaid broker's fee. LOWER COURT: in favor of Uniland; DBP to pay Uniland the sum of P1,203,500,00 which is the equivalent of 5% broker's fee plus legal interest thereto
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CA: reversed the judgment of the lower court and dismissed the complaint. The motion for reconsideration filed by petitioner was also subsequently denied. PROCEDURAL ISSUE : WON the case for certiorari lies- NO The rule is that in petitions for certiorari as a mode of appeal, only questions of law distinctly set forth may be raised. Such questions have been defined as those that do not call for any examination of the probative value of the evidence presented by the parties. Petitioner's singular assignment of error would, however, have this Court go over the facts of this case because it necessarily involves the examination of the evidence and its subsequent reevaluation. Under the present proceeding, the same, therefore, cannot be done. It bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the facts of a case does not of itself warrant this Court's review of the same. AGENCY ISSUE: WON Uniland can recover from DBP the 5% brokers fee? NO It is obvious that petitioner was never able to secure the required accreditation from respondent DBP to transact business on behalf of the latter. The letters sent by petitioner to the higher officers of the DBP and the APT are merely indicative of petitioner's desire to secure such accreditation. At best these missives are self-serving; the most that they prove is that they were sent by petitioner and received by respondent DBP, which clearly never agreed to be bound thereto. As declared by the trial court even when it found in favor of petitioner, there was no express reply from the DBP or the APT as to the accreditation sought by petitioner. RE: Implied agency noting Article 1869 of the new Civil Code UNILAND argues that it "should have been stopped, disauthorized and outrightly prevented from dealing by the DBP from the inception." On the contrary, these steps were never necessary. In the course of petitioner's dealings with the DBP, it was always made clear to petitioner that only accredited brokers may look for buyers on behalf of respondent DBP. This is not a situation wherein a third party was prejudiced by the refusal of respondent DBP to recognize petitioner as its broker. The controversy is only between the DBP and petitioner, to whom it was emphasized in no uncertain terms that the arrangement sought did not exist. Article 1869, therefore, has no room for operation in this case. RE: Formality of accreditation as merely a mechanical act The need for accreditation, result from the evolution of sound business practices for the protection and benefit of all parties concerned. They are designed and adopted specifically to prevent the occurrence of situations similar to that obtaining in this case. More importantly, petitioner's stance goes against the basic axiom in Civil Law that no one may contract in the name of another without being authorized by the latter, unless the former has by law a right to represent him. From this principle, among others, springs the relationship of agency which, as with other contracts, is one founded on mutual consent: the principal agrees to be bound by the acts of the agent and the latter in turn consents to render service on behalf or in representation of the principal. RE: Considerations of Equity While not actively involved in the actual bidding and transfer of ownership of the warehouse property, petitioner may be said to have initiated, albeit without proper authority, the transaction that eventually took place. In Prats v. Court of Appeals, there was a finding that the petitioner therein as the agent was no longer the efficient procuring cause in bringing about the sale proceeding from the fact of expiration of his exclusive authority. There was therefore no basis in law to grant the relief sought. Nevertheless, this Court in equity granted the sum of P100,000.00, out of the P1,380,000.00 claimed as commission, by way of compensation for the efforts and assistance rendered by the agent in the transaction prior to the expiration of his authority. These consist in offering the lot for sale to the eventual buyer, sending follow-up letters, inviting the buyer to dinner and luncheon meetings, etc. Under the foregoing disquisition and following the precedent, as well as roughly the proportion, set in Prats, the Court in equity grants petitioner the sum of One Hundred Thousand Pesos (Pl00,000.00) for the role it played in the transaction between respondent DBP and buyer Glaxo, Philippines. It is emphasized, however, that the circumstances that came into play in this case do not meet the minimum legal standards required for the existence of an agency relationship and that the award is based purely on equity considerations. DOMINGO v. DOMINGO 42 SCRA 131 FACTS: Vicente granted Gregorio exclusive agency to sell lot for P2 per square meter. 5% commission was to be granted to Gregorio is Vicente sells the property during the period of agency or if the property is sold by Vicente within three months from the termination of the agency to a purchaser to whom it was submitted by Gregorio during the continuance of the agency with notice ot Vicente. Gregorio authorized Purisima to look for a buyer with the agreement that Purisima will get half of the 5% commission. Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. Written offer of De Leon was really low but subsequent conferences between De Leon and Gregorio led to the 109K purchase price which Vicente agreed to. De Leon issued 1K as earnest money. Vicente advanced to Gregorio 300 as part of his commission. When De Leon confirmed his former offer to pay, Vicente asked for an additional 1000 which De Leon promised to give. It was agreed that de Leon will vacate his house in September as his house is part of the purchase price. It was later moved to December as de Leon's wife was pregnant. It was also agreed that Vicente could stay in the property until June 1956. Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina P1000 for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total of 109K. This gift was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional 1000 by way of earnest money. When the Deed of Sale was not executed as stipulated in Oscar's offer to pay, Oscar told Gregorio that he was giving up negotiations. Vicente tore the Contract of Agency when Gregorio came to claim the 5% commission he was entitled to receive. Gregorio was not worried as he still had a duplicate copy. Gregorio later found out that Vicente proceeded with the sale, not with Oscar but his wife Amparo. Vicente apparently told Oscar to eliminate Gregorio in the transaction and the former would lower the price to 104K. Vicente claims that Gregorio is not entitled to the 5% commission because he sold the property not to Gregorio's buyer, Oscar but to another buyer, Amparo. TC and CA ordered Vicente to pay. CA found that there was a C of agency. J. Esguerra in his concurring opinion found that there was no fraud on the part of the broker as it was merely part of the whole process of bringing about the meeting of the minds of the seller and the buyer. J. Gatmaitan held the view that such an act on the part of Gregorio was fraudulent and constituted a breach of trust, which should deprive him of his right to the commission. ISSUES: 1. WON the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar of the 1K as gift or propina constitutes fraud as to cause the forfeiture of his 5% commission on the sale price. YES 2. WON Gregorio or Vicente should be liable directly to the intervenor Purisima for the latter's share in the expected commission of Gregorio by reason of the sale. GREGORIO RATIO: 1. Articles 1891 and 1909 of the NCC demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency. The duty of the agent is likened to that of a trustee. An agent who takes a secret profit in the nature of a bonus, gratuity, or personal benefit from the vendee, without
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revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, 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 of custom allows it. The rule is to prevent any possibility of a wrong. By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. Gregorio received the propina without the knowledge and consent of Vicente. His acceptance of the 1K corrupted his duty to serve the interests only of his principal and undermined his loyalty to his principal. Instead of exerting his best to get the most advantageous terms for Vicente, he succeeded in persuading his principal to accept terms that are more beneficial to the prospective buyer. Because of this, Gregorio must forfeit his right to the commission and must return the part of the commission he received from his principal.
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2.
Purisima can only recover from Gregorio of whatever amount Gregorio received by virtue of the transaction as his sub-agency contract was with Gregorio alone and not with Vicente who was not even aware of the sub-agency.

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A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

A&P Compiled Digests No. 4

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