You are on page 1of 41

2D 2013 CLASS DIGEST

Philpotts vs. Philippine Manufacturing Co. and Berry W.G. Philpotts (Petitioner) , a stockholder in Philippine Manufacturing Company sought to compel respondents to permit plaintiff, a person or by some authorized agent or attorney to inspect and examine the records of the business transacted by said company since January 1, 1918. Respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything relating to the affairs of the company, and the petitioner prays for an order commanding respondents to place records of all business transactions of the company, during a specific period, at the disposal of the plaintiff or his duly authorized agent or attorney. Petitioner desires to exercise said right through agent or attorney. Petition is filed originally in the Supreme Court under authority of Section 515 of Code of Civil Procedure, which gives SC concurrent jurisdiction with then Court of First Instance in cases where any corporation or person unlawfully excludes the plaintiff from use and enjoyment and some right he is entitled. ISSUE: Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a proper agent or attorney of the stockholder as well as by stockholder in person HELD: Yes. Right of inspection of records can be exercised by proper agent or attorney of the stockholder as well as by stockholder in person. The right of inspection / examination into corporate affairs given to a stockholder in section 51 of the Corporation Law which states: The records of all business transactions of the corporation and the minutes of any meeting shall HELD: NO, Parsons was not an agent. In order to classify a contract, due regard must be given to the essential clauses. In this case, there was an obligation on Quirogas part to supply beds while an obligations on Parsons part to pay the price. These are essential features of a contract of purchase and sale. None of the clauses conveys the idea of an agency where an agent received the thing to sell it and be open to the inspection of any director, member, or stockholder of the corporation at reasonable hour can be exercised either by himself or by any duly authorized representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another. Quiroga v. Parsons FACTS: Quiroga and Parsons entered into a contract for the exclusive sale of Quiroga beds in the Visayan Islands. They agreed on the following terms: a) Quiroga shall furnish the beds and shall give a 25% discount on the invoiced prices as commission sales and Parsons shall order by the dozen; b) Payment shall be made within 60 days from date of shipment; c) Transportation and shipment expenses shall be borne by Quiroga while freight, insurance, and cost of unloading by Parsons; d) If before an invoice falls due, Quiroga should request payment, payment made shall be prompt payment and a deduction of 2% shall be given; same discount if payment is in cash; e) Notice from Quiroga shall be given at least 15 days before any change in price; f) Parsons binds himself not to sell any other kind of bed; and g) Contract is for an unlimited period. Parsons violated some of the conditions such as not to sell the beds at higher prices, pay for the advertisement expenses, and to order beds by the dozen. Quiroga alleged that Parsons was his agent and that the obligations are implied in a commercial agency contract. ISSUE: w/n Parsons, by reason of the contract, was a purchaser or an agent of Quiroga for the sale of the latters beds.

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


does not pay the price but delivers to the principal the price he obtains from the sale to a third person, and if he does not sell it, he returns it. The word agency used in the contract only expresses that Parsons was the only one who could sell the petitioners beds in the Visayan Islands. A contract is what the law defines it to be and not what the parties call it. Shell Co. v. Firemens Insurance Facts: This is an action for recovery of sum of money, based on alleged negligence of the defendants A car was brought to a Shell gasoline station owned by dela Fuente for washing and greasing. The car was placed on a hydraulic lifter for greasing. As some parts of the car couldnt be reached by the greaseman, the lifter was lowered. Unfortunately, for unknown reasons (probably due to mechanical failure or human error), while the lifter was being lowered, the car swung and fell from the platform. Said car was insured against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000 The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to Salvador Sison in accordance with the terms of the insurance contract, have filed this action together with said Salvador Sison for the recovery of the total amount of the damage from the defendants on the ground of negligence Issue: WON dela Fuente is merely an agent of Shell Co. Held: D: Yes De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him as it pleased; that all the equipments needed to operate the station was owned by the Defendant Company which took charge of their proper care and maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave the fixing of price for gasoline to De la Fuente; That the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable The latter was negligent and the company must answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.

Dela Cruz v Northern Theatrical Enterprises, Inc., et al Northern Theatrical Enterprises Inc. operated a movie house in Laoag, Ilocos Norte. Domingo Dela Cruz was one of their security guards. He carried a revolver. One day, a Benjamin Martin wanted to enter without a ticket but dela Cruz refused him entrance. Infuriated, Martin attacked him with a bolo and in order to save his life, dela Cruz shot and killed Martin. Martin, thereafter, was charged with homicide which, after re-investigation, was dismissed. A few years later, dela Cruz again figured in a homicide case related to his work as security guard for the theater. He was acquitted for the second charge. In both instances, dela Cruz employed a lawyer. He thereafter demanded reimbursement for his litigation expenses but was refused by the theater. After which, he filed an action for reimbursement plus damages.

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


Northern Theater moved for the dismissal of the complaint. The Court found for Northern Theater and dismissed the complaint saying that dela Cruz had no cause of action. Dela Cruz filed present appeal (for the reason that only questions of law are involved). Held: Judgment affirmed. Agency Doctrine CFI was correct in rejecting the theory of dela Cruz that he was an agent of the defendants and that as such agent he was entitled to reimbursement for the expenses incurred by him in connection with the agency. The relationship between the theater and the plaintiff was not that of principal and agent because the principle of representation was not involved. He was not employed to represent defendant corporation in its dealings with third parties. He was merely an employee hired to guard the cinema. Issue is primarily one of employer employee. Whether an employee who in line with the performance of his duty incur expenses caused not directly by his employer or fellow employees but by a third party or stranger, may recover against his employer. In this case, theres no legal obligation on the part of the employer, it might yet be regarded as a moral obligation. Since employer not legally obligated to give legal assistance, plaintiff naturally cannot recover the amount from defendant. SC also says that the damage incurred did not flow from the performance of his duties but only indirectly. Filing of the criminal charges was the efficient, intervening cause. As such, plaintiff cannot fix civil responsibility to the defendant. GUARDEX ENTERPRISES V. NLRC Facts: A claim for alleged unpaid commissions of an agent is what is basically involved in the action at bar. The two parties in this case are: Marcelina A. Escandor (engaged in the manufacture and sale of fire-fighting equipment and the building or fabrication of fire trucks under Guardex Enterprises) and Jumbee Orbeta (a freelance salesman). It appears that Orbeta somehow learned that Escandor had offered to fabricate a fire truck for Rubberworld (Phil) Inc. He wrote to Escandor inquiring about the amount of commission for the sale of a fire truck. Escandor wrote back on the same day to advise that it was P15,000 per unit. Four days later, Orbeta offered to follow up Escandors pending proposal to sell a fire truck to Rubberworld, and asked for P250 as representation expenses. Escandor agreed and gave him the money. When no word was received by Escandor from Orbeta after 3 days, she herself inquired in writing from Rubberworld about her offer of sale of a fire truck. After 7 months, Escandor finally concluded a contract with Rubberworld for the latters purchase of a fire truck. At this point, Orbeta suddenly reappeared and asked for his commission for the sale of the fire truck to Rubberworld. Escandor refused, saying that he had nothing to do with the offer, negotiation and consummation of the sale. Issue: Whether or not Orbeta (acting as an agent) is entitled to commission as regards the sale of a fire truck to Rubberworld? Held: No. He is not entitled to any commission. Ratio: Even finding that under these circumstances, an agency had indeed been constituted will not save the day for Orbeta, because nothing in the record tends to prove that he succeeded in carrying out its terms or ever as much as attempted to do so. The evidence in fact clearly indicates otherwise. The terms of Escandors letter assuming that it was indeed an authority to sell, as Orbeta insists are to the effect that entitlement to the P15,000 commission is contingent on the purchase by a customer of a fire truck, the implicit condition being that the agent would earn the commission if he was instrumental in bringing the sale about. Orbeta certainly had nothing to do with the sale of the fire truck, and is not therefore entitled to any commission at all.

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


Furthermore, even if Orbeta is considered to have been Escandors agent for the time he was supposed to follow up the offer to sell, such agency would have been deemed revoked upon the resumption of direct negotiations between Escandor and Rubberworld, Orbeta having in the meantime abandoned all efforts (if indeed any were exerted) to secure the deal in Escandors behalf. between the parties was unenforceable under the Statute of Frauds. Absent the required memorandum or any written document connecting Luz with the subject receipts or authorizing Deganos to act on her behalf, the alleged agreement between the Bordadors and Luz was unenforceable.The Bordadors elevated the case to the CA which affirmed said judgment, hence the instant petition. ISSUE:Whether Luz is liable to the Bordadors for the latter's claim for money and damages despite the fact that Luz did not sign any of the subject receipts or authorized Deganos to receive the items of jewelry on her behalf HELD:No, Luz is not liable to the Bordadors. RATIO:THE BASIS FOR AGENCY IS REPRESENTATION.The basis for agency is representation. Here, there is no showing that Luz consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved. The Bordadors' attempt to foist liability on Luz through the supposed agency relation with Deganos is groundless and illadvised.A PERSON DEALING WITH AN AGENT IS PUT UPON INQUIRY AND MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE AGENT.Besides, it was grossly and inexcusably negligent of the Bordadors to entrust to Deganos, not once or twice but on at least 6 occasions as evidenced by 6 receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. HAHN VS. CA and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT (BMW) 266 SCRA 537 Facts Alfred Hahn is a Filipino citizen doing business under the name and style of Hahn-Manila. BMW is a non resident foreign corporation existing under the laws of Germany.

BORDADOR vs. LUZ FACTS:Petitioners Bordador spouses were engaged in the business of purchase and sale of jewelry, while respondent Brigida Luz was their regular customer. Respondent Narciso Deganos, Luz's brother, received several pieces of jewelry from the Bordadors amounting to P382,816.00, which items were indicated in 17 receipts covering the same--11 of the receipts stated that they were received by Deganos for a certain Evelyn Aquino, while the remaining 6 indicated that they were received by Deganos for Luz.Deganos was supposed to sell the items at a profit and remit the proceeds and return the unsold items to the Bordadors. Deganos remitted only P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to the Bordadors, which led them to file an action for recovery of a sum of money and damages against Deganos and Luz with the RTC. The Bordadors claimed that Deganos acted as the agent of Luz when he received the items of jewelry, and because he failed to pay for the same, Luz, as principal, became solidarily liable with him.Deganos asserted that it was he alone who was involved in the transaction with the Bordadors; that he neither acted as agent for nor was he authorized to act as an agent by Luz, notwithstanding the fact that 6 of the receipts indicated that the items were received by him for Luz. He added that he never delivered any of the items to Luz. Luz corroborated the claims of Deganos.The RTC found that only Deganos was liable to the Bordados. It further found that it was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for Evelyn Aquino and for Luz. It said that it was "persuaded that Brigida D. Luz was behind Deganos," but because there was no memorandum to this effect, the agreement

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


In March of 1967 Hahn executed in favor of BMW a Deed of Assignment. In February of 1993, Hahn was informed that his exclusive dealership was in danger of being terminated due to deteriorating services and sales. Hahn claimed that the termination of his exclusive dealership would be a breach of the deed of assignment. He then filed for a complaint of specific performance and damages against BMW to compel it to continue with the exclusive dealership. BMW on the other hand filed for a motion to dismiss, contending that the court did not acquire jurisdiction over it because it was a foreign corporation and was not doing business in the Philippines. It further claimed that the execution of the Deed of Assignment was an isolated transaction and that Hahn was not its agent and was merely a middleman transacting business for his own name and for his own account. Issue Whether respondent company was doing business in the Philippines? Whether Alfred Hahn was an agent of BMW? Decision Yes. Alfred Hahn was an agent of BMW and consequently, respondent company was doing business in the Philippines. Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the down payment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including, warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. This arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. DE LA PENA V. HIDALGO FACTS: 1887-1893 (1st period) FEDERICO 1893-1902 (2nd period) ANTONIO 1902-1904 (3rd period) FRANCISCO

Ratio The phrase "doing business" includes "appointing representatives or distributors in the Philippines". (Foreign Investments Act of 1991) The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it by virtue of the service of summons on the Department of Trade and Industry. Before DE LA PENA went to Spain, he executed a power of attorney in favor of FEDERICO and 3 other people. Their task is to represent him and administer various properties he owned in Manila. FEDERICO took charge in Nov. 1887. After a few years, FEDERICO wrote a letter to DE LA PENA. It contains a request that DE LA PENA assign a person who might substitute FEDERICO in the event that he leaves the Philippines because one of the agents died and the other 2 are unwilling to take charge. DE LA PENA did not answer the letter

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


there was neither approval nor objection on the accounts and no appointment of another person who might substitute FEDERICO. Because of health reasons, FEDERICO went to Spain. Before he departed, he sent another letter to DE LA PENA a summary of accounts and informing that he will be leaving the Philippines and that he turned over the administration to ANTONIO (though FEDERICO stated that if DE LA PENA is not happy with this, DE LA PENA must send ANTONIO a new power of attorney). DE LA PENA files in court for the collection of revenue from his accounts which was handled by FEDERICO. DE LA PENA alleges that FEDERICO has only remitted 1.2k and still owes him roughly 72k. Furthermore, DE LA PENA seeks to hold FEDERICO liable for the administration from the period of 1887 until 1904. FEDERICO asserts that he cannot be liable for the period after he renounced his agency. Furthermore FEDERICO argues that his renunciation and appointment of a substitute was legal for there was no objection on the part of DE LA PENA. ISSUE: Whether there was a valid agency in the case of ANTONIO (2nd period) HELD: There was an implied agency in the case of ANTONIO. DE LA PENA created an implied agency in favor of ANTONIO because of his silence on the matter for a number of years. There was a valid renunciation in the case of FEDERICO. His reason for leaving the country is legitimate. Furthermore, he gave notice to DE LA PENA about his situation in which the latter failed to give his objection. Being a valid agency on the part of ANTONIO and a valid renunciation on the party of FEDERICO, it must follow that the liability of FEDERICO only extends up to the point before his renunciation of the agency (1st period). DOCTRINE: The implied agency is founded on the lack of contradiction or opposition, which constitutes simultaneous agreement on the part of the presumed principal to the execution of the contract. The agent and administrator who was obliged to leave his charge for a legitimate cause and who duly informed his principal, is thenceforward released and freed from the results and consequences of the management of the person who substituted him with the consent, even tacit though it be, of his principal. SIDE NOTE ON POWER OF ATTORNEY: It was also argued by DE LA PENA that there was no authority on the part of FEDERICO to appoint a substitute. The COURT ruled that the power of attorney given by DE LA PENA to FEDERICO did not include a power to appoint a substitute. Nevertheless, it was pointed out that the appointment made by FEDERICO was not based on the power of attorney of DE LA PENA. The appointment was grounded on a new power of attorney FEDERICO himself executed in favor of ANTONIO. Thus, there was no violation incurred by FEDERICO. And as stated in the case, DE LA PENA was duly informed of this but nevertheless kept his silence on the matter. CONDE v. RIVERA ( December 15, 1982) FACTS: 7 April 1938, Dominga Conde, together with her siblings, sold a parcel of land located in Burauen Leyte, to Casimira Pasagui married to Pio Altera (ALTERAS) with a right of repurchase, within 10 years from said date. The Pacto de retro sale provided that if the end of 10 years the said land is not repurchased, a new agreement shall be made between the parties and in no case title and ownership shall be vested in the hand of the ALTERAS. On a later date, Paciente Cordero, son-in-law, of the ALTERAS signed a document. In substance, the said document provides that the original document was lost in spite of diligent efforts to locate the same; that the representative of the CONDES, Eusebio Amarille, repurchased the subject lot; that Alteras and Pio Cordero received the payment for the repurchase; and that if Dominga et. al., will be disturbed by other persons, Altera and Pio will defend in behalf of

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


Dominga el. Al., because the same was already repurchased by them. To be noted is the fact that the Alteras did not sign the deed and only Pio was the signatory to the deed. On a relevant date, Pio Altera sold the disputed lo to the spouses Ramon Conde and Catalina Conde (their relationship to petitioner was not established). After 24 years, Dominga Conde filed with the CFI of Leyte a civil case for quieting of title against the ALTERAS and the spouses CONDE. Dominga contended that Pio signed the Memorandum in representation of the Pio Aletra, who was very ill on that occasion. Alteras, on the other hand, contended that Pio was not their agent and Pio signed because he has no objection to the repurchase.. The CFI dismissed the complaint which was affirmed by the CA. Hence, this petition. ISSUE: Whether Pio Cordero, in signing the memorandum, acted in representation of the ALTERAS. HELD: YES! There was an impled agency. The Alteras did not repudiate the deed that Pio Cordero had signed. If, as alleged, Dominga never exerted any effort to procure the signature of Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed that Pio executed. Thus, an implied agency must be held to have been created from their silence or lack of action, or their failure to repudiate the agency. Alteras must be held bound by the clear terms of the Memorandum of Repurchase. If the contract is plain and unequivocal in its terms he is ordinarily bound thereby. (The court also held that the ALTERAS were guilty of laches. They, for 24 years, slept on their right to institute an action for quieting of title against petitioner. Furthermore, the court also ruled that the spouses Conde were not purchasers in good faith. They bought the disputed property despite the notice of the condition in the title that the property was subject to repurchase.) PNB VS. CA FACTS The Solomon spouses were the registered owners of a lot located in Davao. In 1932, the Solomon spouses mortgaged the land in favor of Philippine National Bank to secure a loan of P500.00. For failure to pay the loan, the mortgage was foreclosed, the property was sold at public auction, and a Certificate of Sale was executed in favor of the Bank. The next day, after the execution of the Certificate of Sale, the Solomon spouses and the Bank, represented by its manager, Cortes, created a "Promesa de Venta" whereby the Bank bound itself to sell to the Solomon spouses for P802.26 payable in eight equal annual amortizations. Possession of the property was likewise turned over to said spouses upon the execution of the contract. Further, it was stipulated that if the Solomon spouses should fail to pay any of the amortizations, the contract shall be automatically rescinded and the Bank shall be free to take possession of the land and sell it to a third person. Solomon spouses defaulted on the seventh and eighth amortizations. Eventually, both spouses died. Perez as sole heir of the deceased spouses, succeeded into the possession of the land in question. 7 years after default, Perez offered to pay the last two amortizations plus interest, with the request that a Deed of Sale be executed in his favour but was rejected by the bank manager, Lagdameo, on the ground that the "Promesa de Venta" was executed by the Bank in favor of the Solomon spouses. Upon suggestion of Lagdameo, Perez filed an action in Court for a declaration of heirship. Consequently, Perez was judicially declared heir. Acting on Perez notification of such court order, bank manager, Maceda, informed Perez that as soon as he pays the account due of P535.45, they shall cause the release of the mortgage. He also conveyed the comment of the head office as regards his "offer to purchase" which they found too low compared to the market value of the property; therefore he was asked to increase the price. Perez then made several offers to the bank, the last price amounting to P8000.00. However, all these offers were turned down by the Bank.

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


De Castro spouses offered to buy the property for P13,500.00. Failing to match the offer, Perez lost the land to the De Castro spouses and the Bank issued a new TCT under their name. Perez filed a complaint, praying among other things, that the Bank be ordered to accept from Perez payment of the outstanding balance and to deliver the property to him. The court dismissed Perez' complaint. Perez appealed to the Court of Appeals which reversed the trial court's decision. Perez was allowed to redeem or purchase the said property, upon payment of the last two installments and with interest. The Bank and De Castro spouses moved for reconsideration but were denied. Hence, the petitions for review. ISSUE: 1. HELD: No. Firstly the clear intention of the Bank was to allow the Solomon spouses to reacquire ownership of the property. Thus, the "Promesa de Venta" was primarily created to favor the Solomon spouses giving them 8 years to reacquire their land. During those years, the spouses were allowed to remain in possession of the property. Secondly, the Bank did not register the same until 24 years later nor did it disturb Perez's possession of the property. Thirdly, when Perez offered to pay the balance with the request that a Deed of Sale be executed in his favor, his offer was rejected by Lagdameo not because the "Promesa de Venta " had been automatically rescinded and right to redeem was lost, but on the ground that it was in favor of the Solomon spouses. Maceda, on the other hand, issued a statement of account on the loan and informed Perez that "as soon as (he) could cause full payment of the above account, (they) shall cause the release of the mortgage." Relying on this commitment, Perez made several offers as to the amount but Maceda still asked for an increase in the "price." In other words, Perez was led to believe that he would be allowed to redeem the property. Whether the CA erred in holding petitioners in estoppel The "Promesa de Venta" was not essentially a contract to sell real estate on installments but was more of a contract of redemption. Perez justifiably and reasonably relied upon the assurance of the bank managers that he would be allowed to pay the remaining obligation of his deceased parent. The automatic rescission clause contained in it should not be controlling because based on the facts, the bank itself did not strictly adhering to it. The Bank's argument that it is not bound by the acts of its managers, is not well taken for well settled is the rule that if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real as to innocent third persons dealing in good faith with such officers or agents. Rallos v Yangco Facts:Through a letter, Yangco invited Rallos in a consignment arrangementfor the business of buying and selling of leaf tobacco and othernative products, terms and conditions of which were also included inthe letter.In the same letter, Yangco introduced to Rallos the former's agent,Collantes, upon whom Yangco conferred a public power of attorney toperform on Yangco's behalf, all acts necessary for carrying out thebusiness.Rallos accepted the invitation and transacted with Yangco throughCollantes; last transaction being the supply of tobacco, the cost ofwhich that belonged to Rallos was misappropriated by Collantes.Apparently, prior to the last delivery of tobacco, Yangco had alreadyterminated his agency relation with Collantes, unknown to Rallos. ISSUE:W/N Rallos, in good faith and without knowledge of the termination ofthe agency agreement, can recover from Yangco the amountmisappropriated by Collantes. RULING:Yes, Yangco was liable. Having given special notice to Rallos

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


thatCollantes was his (Yangco's) agent and having given him invitation todeal with such agent, it was then the duty of Yangco to give due andtimely notice to Rallos regarding the termination of the agency.Failing to do so, Yangco will be held liable to third parties actingin good faith and properly relying upon such agency. Macke v Camps Facts: The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the firm name of Macke, Chandler & Company, allege that during the months of February and March, 1905, they sold to the defendant and delivered at his place of business, known as the "Washington Cafe," various bills of goods amounting to P351.50; that the defendant has only paid on account of said accounts the sum of P174. Before instituting this action they made demand for the payment thereof; and that defendant had failed and refused to pay the said balance. B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented himself to be agent of the defendant, he shipped the said goods to the defendants at the Washington Cafe; that Flores later acknowledged the receipt of said goods and made various payments. Flores informed him that he did not have the necessary funds on hand, and that he would have to wait the return of his principal. Flores, in the absence of the defendant in the provinces, apparently in charge of the business and claiming to be the business manager of the defendant, said business being that of a hotel with a bar and restaurant. A written contract dated May 25, 1904, was introduced in evidence, from which it appears that one Galmes, the former owner of the business now know as the "Washington Cafe," subrented the building wherein the business was conducted, to the defendant for a period of one year, for the purpose of carrying on that business, the defendant obligating himself not to sublet or subrent the building or the business without the consent of the said Galmes. This contract was signed by the defendant and the name of Ricardo Flores appears thereon as a witness, and attached thereto is an inventory of the furniture and fittings which also is signed by the defendant with the word "sublessee" (subarrendatario) below the name, and at the foot of this inventory the word "received" (recibo) followed by the name "Ricardo Flores," with the words "managing agent" Issue: W/n Flores was an agent of Washington Caf. Held: Flores is an agent of Washington Caf Ratio: In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding that Flores was the agent of the defendant in the management of the bar of the Washington Cafe with authority to bind the defendant, his principal, for the payment of the goods mentioned in the complaint. The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner of business and of the bar, and the title of "managing agent" attached to the signature of Flores which appears on that contract, together with the fact that, at the time the purchases in question were made, Flores was apparently in charge of the business, performing the duties usually entrusted to managing agent, leave little room for doubt that he was there as authorized agent of the defendant. One who clothes another apparent authority as his agent, and holds him out to the public as such, can not be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the following preassumptions or deductions, which the law expressly

(AGENCY ATTY. OBIETA)

2D 2013 CLASS DIGEST


directs to be made from particular facts, are deemed conclusive and unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying his agency into effect. Jimenez vs Rabot Facts: Gregorio was in need of money to pay off his debts. He instructed his sister, through a letter, to sell one of his two parcels of land so as to come up with cash. Nicolasa, following her brother's request, sold one of his parcels of land to Rabot for 500 pesos. There was proof of payment between Rabot and Nicolasa but there was no proof of the payment ever reaching Gregorio. When Gregorio asked for the parcel of land, Nicolasa refused. Gregorio now sues for the land and learns later on that ownership was already with Rabot. Issue: Whether or not the conveyance between Nicolasa and Pedro Rabot was a valid. Held: It was valid. Judgement of CA is reversed. Ratio: The purpose in giving a power of attorney is to substitute the mind and hand of the agent for the mind and hand of the principal; and if the character and extent of the power is so far defined as to leave no doubt as to the limits within which the agent is authorized to act, and he acts within those limits, the principal cannot question the validity of his act. It is not necessary that the particular act to be accomplished should be predestinated by the language of the power. The question to be answered always, after the power has been exercised, is rather this: Was the act which the agent performed within the scope of his authority? In the case before us, if the question is asked whether the act performed by Nicolasa Jimenez was within the scope of the authority which had been conferred upon her, the answer must be obviously in the affirmative. When the owner, or his agent, comes to make a contract to sell, or a conveyance to effect a transfer, there must be a description of the property which is the subject of the sale or conveyance. This is necessary of course to define the object of the contract The general rule here applicable is that the description must be sufficiently definite to identify the land either from the recitals of the contract or deed or from external facts referred to in the document, thereby enabling one to determine the identity of the land and if the description is uncertain on its face or is shown to be applicable with equal plausibility to more than one tract, it is insufficient. The principle embodied in these decisions is not, in our opinion, applicable to the present case, which relates to the sufficiency of the authorization, not to the sufficiency of the contract or conveyance. It is unquestionable that the deed which Nicolasa executed contains a proper description of the property which she purported to convey There is ample authority to the effect that a person may by a general power of attorney an agent to sell "all" the land possessed by the principal, or all that he possesses in a particular city, county, or state. In the present case the agent was given the power to sell either of the parcels of land belonging to the plaintiff. We can see no reason why the performance of an act within the scope of this authority should not bind the plaintiff to the same extent as if he had given the agent authority to sell "any or all" and she had conveyed only one.

COSMIC LUMBER vs. COURT OF APPEALS (CA)

Petition for review on certiorari of Court of Appeals decision (CA decision: dismissed the case, against Cosmic Lumber)

FACTS: Cosmic Lumber Corporation executed a SPA to Villamil-Estrada as attorney in fact, to wit: (1) to initiate, institute and file an ejectment

(AGENCY ATTY. OBIETA)

10

2D 2013 CLASS DIGEST


case against squatters/third persons on the Lot 9127 and 443, in order for the company to take material possession of the entire lot and (2) to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as to protect the rights and interest of the corporation. Villamil-Estrada instituted an action for ejectment of private respondent Perez Villamil-Estrada entered into a Compromise Agreement which contained: Perez has been an occupant of a part of the lot for several years Pays Php 26,640 at Php.80/sqm Recognizes ownership and possession of Perez over said lot Compromise Agreement was approved by trial court which became final without execution within the 5 yr period due to failure of petitioner to produce the owners duplicate copy. To wit, Perez filed a complaint to retrieve the judgment Cosmic Lumber asserts it did not know about the compromise agreement until summons for the revival of judgment was served. Cosmic Lumber sought annulment of the decision of the trial court to CA on the grounds of (1) Villamil-Estrada did not have authority, (2) Villamil-Estradas authority was only to file an ejectment case, (3) Villamil-Estradas authority was limited, (4) the consideration was never received by Cosmic Lumber, (5) Villamil-Estrada acted in bad faith and (6) disposal of corporate property indispensably requires a Board Resolution. RATIO: SPA was explicit and exclusionary, compromise agreement was coupled with an explicit limitation fixed by Cosmic Lumber that it should only be entered so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Price of Php.80/sqm is considerably less than its assessed value of Php.250/sqm and that Cosmic Lumber never received the proceeds of the sale. Art. 1874 of Civil Code: when a sale of a piece of land or any interest thereon is through an agent, the authority of the latter should be in writing; otherwise the sale is void. The express mandate of the law requires of an appointed of an agency couched in general terms, must include an express mention of a sale as a necessary ingredient. The express powers must be clear and unmistakable. When there is reasonable doubt, no such construction shall be given in the document. Villamil-Estrada acted without or in obvious disregard of authority. Sale is ipso jure void and the judgment based thereon is also void. Cosmic Lumber is not in the position to question the compromise agreement in the action to revive the compromise agreement, since it was never PRIVY to such agreement. Trial court had no jurisdiction to render judgment. Villamil-Estradas acts constituted extrinsic fraud (any fraudulent act of the prevailing party in a litigation which is committed outside of the trial of the case, whereby the defeated party is prevented from exhibiting fully his side of the case by deception practiced on him by his opponent) Villamil-Estrada deliberately concealed from her principal (Cosmic Lumber) that a compromise agreement had been forged with the end result of selling a portion of the property. General Rule: principal is chargeable with and bound by the knowledge or notice to his agent (purpose: to protect those who exercise it in good faith)

HELD: petition granted; CA decision is nullified; Compromise agreement is void; without prejudice to the right of Cosmic Lumber to pursue a complaint against Perez for the recovery of the lot

(AGENCY ATTY. OBIETA)

11

2D 2013 CLASS DIGEST


Exception: conduct and dealings of agent are such as to raise a clear presumption that he will not communicate the facts in controversy (reason: when agent is committing fraud, it is contrary to common sense to expect the agent to communicate the facts to the principal) Villamil-Estradas acts were not for the principal, rather he was acting for his own benefit. The basic tenets of an agency rest on justice, equity and fair play. Agent is not permitted to pervert his authority to do such acts contrary to the interests of the principal. Yet, the Office of the President sustained the HLU Arbiter, and the CA dismissed it. Issue: Whether Gatus was acting as an agent of PVDHC. Held: NO! Ratio Gatus was not the agent of private respondent PVDHC. Indeed, the criminal case for estafa against her was dismissed because it was found that she never represented herself to be an agent of private respondent PVDHC. Moreover, Art. 1874 of the Civil Code requires for the validity of a sale involving land that the agent should have an authorization in writing, which Gatus did not possess. Petitioners knew from the beginning that Gatus was negotiating with them in her own behalf, and not as an agent of private respondent PVDHC. There is, therefore, no basis in fact for the finding of the Housing and Land Use Arbiter that Gatus was the agent of private respondent PVDHC with respect to the transactions in question. Aguna v Larena Facts This action is brought to recover the sum of P29,600 on two cause against the administrator. The plaintiff claims the sum of P9,600, the alleged value of the services rendered by him to said deceased as his agent in charge of the deceased's houses situated in Manila. From the evidence it appears undisputed that from February, 1922, to February, 1930, the plaintiff rendered services to the deceased, consisting in the collection of the rents due from the tenants occupying the deceased's houses in Manila and attending to the repair of said houses when necessary.

RAET v. CA Facts In 1984 Spouses Raet and Spouses Mitra negotiated with Amparu Gatus concerning the possibility of buying his rights to certain units at the Las Villas de Sto. Nio Subdivision, Bulacan, which was developed by Phil-Ville Development and Housing Corporation (PVDHC) primarily for parties qualified to obtain loans from the Government Service Insurance System (GSIS). They paid Gatus P40,000 (Raet) and 35,000 (Mitra), and which Gatus issued receipts in her own name. In 1985, the spouses applied directly with PVDHC, with the condition that their application would be processed upon the approval of the GSIS Loans using policy names of Casidsid (for Raet) and Lim (for Mitra), since the spouses are not GSIS members. They paid P32,653 (Raet) and P27,000 (Mitra) to PVDHC, which would be credited to purchase units upon the loans approval. In the meantime, PVDHC had allowed them to occupy certain units. However, the GSIS loans were disapproved, therefore PVDHC told them to seek other sources of financing, while allowing them to stay in the units. Elvira Raet filed an estafa case against Gatus, where the RTC acquitted her. Later in an ejectment case by the PVDHC, the spouses were ordered to surrender possession of the units. Therefore the spouses filed a complaint for specific performances and damages against Gatus and PVDHC. The Housing and Land Use Arbiter ruled in favor of spouses, which the Board of Commissioners of Housing and Land Use Regulatory Board (HLURB) reversed.

(AGENCY ATTY. OBIETA)

12

2D 2013 CLASS DIGEST


The evidence also shows that during the time the plaintiff rendered his services, he did not receive any compensation. It is, however, a fact admitted that during said period the plaintiff occupied a house belonging to the deceased without paying any rent at all. Issue W/n Agency is for compensation. Held The service rendered by the agent was deemed to be gratuitous Ratio The plaintiff-appellant insists that, the services having been rendered, an obligation to compensate them must necessarily arise. The trial court held that the compensation for the services of the plaintiff was the gratuitous use and occupation of some of the houses of the deceased by the plaintiff and his family. This conclusion is correct. if it were true that the plaintiff and the deceased had an understanding to the effect that the plaintiff was to receive compensation aside from the use and occupation of the houses of the deceased, it cannot be explained how the plaintiff could have rendered services as he did for eight years without receiving and claiming any compensation from the deceased. Insular Drug Company VS National Bank Facts: U.E. Foerster was formerly a salesman of the drug company for the island of Panay and Negros. He also acted as a collector of the company, mainly taking checks from the Iloilo branch of the drug company and depositing them to the company account with Philippine National Bank. Upon examination of the checks deposited by Foerster with PNB, there were several indorsements guaranteed by the PNB manager Angel Padilla for Carmen E. de Foerster, the wife of U.E. Foerster, which was consequently withdrawn by the couple and a certain V. Bacaldo (stenographer of Foerster). When the Manila office of the drug company investigated and discovered the anomalies, Foerster committed suicide. Although there was no evidence showing that the bank knew that Foerster was misappropriating the funds of his principal, the Insular Drug Co. claims that it never received the face value of the 132 checks in question covering a total of Php 18, 285.92. The drug company saw fit to stand on the proposition that checks drawn in its favor were improperly and illegally cashed by the bank for Foersters personal account. Issue: Whether the bank is liable for the amount indorsed and withdrawn by Foerster using company checks even if the latter is an agent of the drug company. Whether the bank is liable for the negligence of its agents when they allowed encashing of the checks without prior authority from the company. Ratio: Yes on both issues. The bank is liable for the amount withdrawn by Foerster and will have to stand the loss occasioned by negligence of its agents. The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can [be acted upon] only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority.

(AGENCY ATTY. OBIETA)

13

2D 2013 CLASS DIGEST


The fact that the bank acted in good faith does not relieve it from responsibility. The bank could tell by the checks themselves that the money belonged to the Insular Drug Company and not to Foerster, his wife or his clerk. When the bank permitted the withdrawals without the authority from the drug company, the bank made itself responsible to the drug company for the amounts represented by the checks. The bank could have relieved itself from the responsibility had it proven that the money withdrawn by Foerster passed to the drug company but it hasnt done so. Municipal Council of Iloilo vs. Evangelista and Tan Toco FACTS: This is an appeal taken by Tan Toco of the decision of CFI of Iloilo, declaring valid and binding 1. the deed of assignment of the credit executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of late Antero Soriano 2. the assignment executed by the latter during his lifetime in favor of the defendant Mauricio Cruz & Co., Inc. also appeared claiming the amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. After hearing all the adverse claims on the amount of the judgment the court ordered that the attorney's lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of the deceased Jose Ma .Arroyo, and directed the municipality of Iloilo to file an action of interpleading against the adverse claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista and Jose Arroyo, as was done, the case being filed in the Court of First Instance of Iloilo. Then municipal treasurer of Iloilo deposited with the clerk of the Court of First Instance of Iloilo the amount of P6,000 on account of the judgment rendered in said civil case No. 3514. In pursuance of the resolution of the court below ordering that the attorney's lien in the amount of 15 per cent of the judgment be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the late Jose Ma. Arroyo, the said clerk of court delivered on the same date to said Attorney Jose Evangelista the said amount of P6,000. At the hearing of the instant case, the codefendants of Attorney Jose Evangelista agreed not to discuss the payment made to the latter by the clerk of the Court of First Instance of Iloilo of the amount of P6,000 mentioned above in consideration of said lawyer's waiver of the remainder of the 15 per cent of said judgment amounting to P444.69. With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44 against the municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to Mauricio Cruz & Co. This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney Antero Soriano by virtue of the said judgment in payment of professional services rendered by him to the said widow and her coheirs. ISSUE: Whether the deeds of assignment in this case are null and void HELD: NO.

The CFI of Iloilo rendered judgment in a case awarding Tan Toco the recovery of the value of a strip of land taken by the municipality of Iloilo from her. After the case was remanded to the court of origin, Atty. Evangelista, in his behalf and as counsel for the administratrix of Jose Ma. Arroyos intestate estate, filed a claim in the same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the amount of the judgment. At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano

(AGENCY ATTY. OBIETA)

14

2D 2013 CLASS DIGEST


Tan Toco contends, in the first place, that said assignments was not made in consideration of professional services by Attorney Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but in order to facilitate the collection of the amount of said judgment in favor of the appellant, for the reason that, being Chinese, she had encountered many difficulties in trying to collect. In support of her contention on this point, the appellant alleges that the payments admitted by the court in its judgment, as made by Tan Toco's widow to Attorney Antero Soriano for professional services rendered to her and to her coheirs, amounting to P2,900, must be added to the P700, on the ground that they were considered as payments made for professional services rendered, not by Antero Soriano personally, by the firm of Soriano & Arroyo. An agent of attorney-in -fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal When a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's attention The assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code. Municipal Council of Iloilo vs. Evangelista and Tan Toco (widow) FACTS: 1924: Atty. Evangelista (Atty. E)(as counsel of Jose Marias intestate estate) filed a claim in the same case for professional services rendered by him o He acted with Tan Tocos consent o And the court fixed at 15% of the amount of judgment as payment for his professional services Other claimants also appeared: PNB and Atty. Antero Soriano (Atty. S) (pero he died diba?) So the court judged in favour of Atty. E and ordered Municipality of Iloilo to file an action of interpleading against the claimants CFI then rendered the following decision: 1. That the deed of assignment executed by Tan Tocos widow thru Atty. BoonTiong in favour of Atty. S is valid and binding 2. That the deed of assignment by Atty. S in favour of Mauricio Cruz & Co. Inc is valid and binding 3. Municipal of Iloilo should pay Mauricio Cruz & Co Inc 30K++ But Tan Toco appealed and said that #1 and #2 were null and void and the balance of 30K++ should be given to her instead of Mauricio Cruz and Co Inc.

1928 -

Iloilo paid Atty. S the 6K The Court also delivered 6K to Atty. E, but Atty. E waived the remaining amount that should be given to him So from the 42K 12K, the 30K was awarded to Mauricio Cruz and Co. Inc. So Mauricio claimed the remaining amount since he is the assignee of the rights of Atty. S

CFI awarded to Tan Toco 42K++ for the value of a strip of land taken by the municipality to widen a public street

ISSUE: Whether the assignment made by Tan BoonTiong to Atty. S of all the credits and rights of belonging to Tan Toco (from the strip of land case) is valid as payment for the professional services rendered by Atty. S to Tan Toco HELD:

(AGENCY ATTY. OBIETA)

15

2D 2013 CLASS DIGEST


YES. VALID. Tan Toco (widow) contended the following: 1. That the said assignment was not in consideration of the professional services by Atty. S, since: a. The payment was already satisfied even before the execution of the deed of assignment b. The they only hired Atty. S to collect the amount of judgment, since Tan Toco is Chinese, she cannot make transactions properly (HAHA) c. She already paid Atty. S for professional services rendered by the firm of Soriano & Arroyo, evidenced by receipts 2. That the deed of assignment was drawn up in contravention of the prohibition that lawyers cannot acquire even by assignment (Article 1491 (5)) BUT THE COURT SAID THAT TAN TOCOS CONTENTIONS ARE UNTENABLE: 1. Tan Toco still wired Atty. S money for his services in 1928 after the deed of assignment was executed 2. Atty. S appeared as counsel for Tan Toco many times and won several times too for them. The payment he received for his services is inadequate (10K) 3. INDIRECTLY: the assignment made to Atty. S and determined in the previous judgment was made in consideration of the professional services rendered by Atty. S to Tan Toco 4. Atty. S was NOT counsel for Tan Toco in the case regarding the recovery of value of the strip of land 5. The lawyers who represented her were Arroyo and Evangelista who filed a claim for professional fees!! 6. When the assignment was made to Atty. S this was already decided! Because the rights, credit, etc., in that strip of land case was payment for his professional services rendered in connection with the other cases (client still Tan Toco)so the only thing left to do is to COLLECT! 7. Atty. BoonTiong is authorized to employ and contract for the services of lawyers upon such conditions as he may deem convenient AND take charge of any actions necessary or expedient for the interests of his principal and defend suits brought against her [AGENCY!] Implied power: authority to pay for professional services thus engaged by the principal The assignment made by Atty. BoonTiong was VALID as payment for professional services rendered by Atty. S. DOCTRINES: An agent of attorney-in -fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal When a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's attention Apparently, 2 ang attorney-in-fact ni Tan Toco. Atty. Montano did not consent to the assignment. But they had different and separate letters of attorney, so it was not the principals intention that they should act jointly in order to make their acts valid. The assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1491, case 5, of the Civil Code. Rural Bank of Caloocan vs CA Maxima Castro with Severino Valencia went to the Rural Bank of Caloocan in order to apply for an industrial loan. Valencia personally took care of all the requirement in order for Castro to secure said loan. The loan of 3000 was

(AGENCY ATTY. OBIETA)

16

2D 2013 CLASS DIGEST


approved and Castro, accompanied by Valencia spouses, signed a promissory note. On the same day Valencia spouses also secured a loan of 3000 and was also signed by castro as co-maker. The two loans were secured by a real estate mortgage on castros house and lot. mutually committed by the Bank and Castro, as a consequence of the fraud and misrepresentation (respectively) employed by the Valencias. In the case at bar, the PN is valid only up to the amount of 3000 pesos VDA. DE CHUA VS. INTERMEDIATE APPELLATE COURT Sheriff informed Castro that her property will be sold at a public aution which shall cover the promissory note plus interest and attorneys fee. Castro claims that she has no knowledge of the mortgage contract up until a notice from the sheriff was given. Castro filed a case against the bank. Bank argues that they were led to believe that Valencia was Castros agent Issue: Whether the bank believed Valencia to be Castros agent Whether the promissory note is invalid insofar as they affect Castro and the Bank ? Held: SC affirmed the CA decision. Ratio: the authority of the Valencias was only up to follow up Castros loan application. But they were never authorized to borrow for her. If her acts had been understood by the bank to be a grant of authority to the Valencias it should have required a special power of attorney. Since the bank did not, it can be assumed that it did not entertain the notion that the Valencia spouses were in any manner acting as the agent of Castro Valencia defrauded Castro by making her sign the promissory note and the mortgage contract, they also misrepresented to the bank Castros qualifications in order to secure the Banks consent and grant the loan. As a result , both Castro and the bank committed mistake in giving their consents. Such mistake is deemed substantial thereby rendering such consents, vitiated. For if Castro has been aware of what she signed and the bank of the true qualifications of the loan applicants, they would not have given their consents. They PN in effect may also be invalidated because of substantial mistake FACTS Herrera executed a Contract of Lease in favor of Sy whereby Herrera leased her lots in Cebu. Sy erected a residential building in the leased premises & w/in 4 years from the execution of the contract, he sold the said building to Chua for P8,000. The Deed of Absolute Sale contained provisions where Sy assigned all his rights and privileges on the leased lot with the corresponding obligations. The sale was made with the knowledge and consent of Herrera who is represented by her attorney-in-fact, Reynes. Chua & his family resided in the said building and when the lease contract expired, Chua and Herrera through her attorney-in-fact executed another Contract of Lease wherein & will lease the said lots for a period of 5 years for a monthly rental of P60 w/ Chua having an option to buy the said premises if he is qualified & when Herrera decides to sell the same. Chua is also given the option to renew the contract. It also contained a stipulation that should the property leased be sold to any other party, the terms & conditions of the contract will continue for the duration of the contract. After the expiration of the contract of lease, Chuas successor-in-interest (Chua having died) continued the possession of the premises with an adjusted rental rate of P1000. Herrera through her attorney-in-fact, Reynes sold the lot to the Go spouses. This was registered with the RD and the lots were transferred in spouses names. Chuas successors-in-interest filed a suit claiming that the sale violated their right of option to buy the said lots. The RTC dismissed the complaint and ordered Chuas heirs to vacate the premises & remove the building. Herrera was ordered to reimburse them for attorneys fees and damages. Both Chuas heirs and Herrera appealed to the CA. The CA removed the award of moral damages but affirmed all other respects. The CA in

(AGENCY ATTY. OBIETA)

17

2D 2013 CLASS DIGEST


declaring their contract of lease void noted that Reynes was not armed w/ a SPA to enter into a lease contract for a period of more than 1 year. Whether a general power of attorney may authorize an agent to sell real property. Held/Ratio: Yes. Although sale of real property requires a special power of attorney, if a general power of attorney expressly grants the power to sell to the agent, there is no need to execute a separate special power of attorney. The assailed power of attorney had the following provision: To buy or sell land, more specifically TCT No. 49138 Thus, said power of attorney sufficiently authorized the wife to sell the property. Therefore, the sale is valid. RODRIGUEZ vs. PAMINTUAN and DE JESUS Facts: March 21, 1903, the defendant de Jesus, the owner of the three parcels of land and sugar mill, executed power of attorney in favor of her husband Pamintuan, authorizing him (1) to borrow money in such amount and upon such terms and conditions as he might deem proper, and (2) to secure payment of the loan by a mortgage on her property. June 1, 1903, the husband executed in favor of Rodriguez ( deceased, leaving the plaintiffs as his testamentary heirs) an notarized instrument purporting on its face to be a deed of sale of the lands stated, for the sum of P5,000 with a reserved right in the vendor to repurchase any time within ten years from the date of the deed, and to continue occupying them under as annual rental of 120 pilones of sugar. September 2, 1914, this action was instituted to recover possession of the land and payment of the annual rental due thereon. The defendant husband admitted the execution of the document purporting to be a deed of sale, but alleged that the real purpose and intent of the parties in the execution of the document was to secure payment of the indebtedness by a mortgage upon the lands mentioned therein, and that the instrument would not be enforced as a deed of sale. The

ISSUE W/N the lease contract entered into by Chua and Reynes is valid. RULING NO. In order for a contract of lease executed by an agent to be valid, the law requires the agent to be armed with a special power of attorney to lease the premises. According to Art. 1878 of the NCC, Special Powers of Attorney are necessary to lease any real property to a person for more than 1 year. Therefore, the contract entered into by Reynes and Chua was invalid because Reynes did not have a Special power of Attorney to enter into the contract. It is true that respondent Herrera allowed petitioners to occupy the leased premises after the expiration of the lease contract. This is a tacit renewal of the lease. A tacit renewal is limited only to the terms of the contract w/c are germane to the lessees right of continued enjoyment of the property and does not extend to alien matters like the option to buy the lease premises. Veloso v CA Applicable Provision: Art. 1878 Facts: Petitioner Francisco Veloso was the sole owner of a registered parcel of land in Tondo, Manila, which he acquired in 1957. His wife Irma, armed with a general power of attorney, sold said lot to the respondent spouses Escario in 1987. Petitioner filed an action for annulment of the deed of sale and reconveyance of property Issue:

(AGENCY ATTY. OBIETA)

18

2D 2013 CLASS DIGEST


plaintiffs filed an amended complaint and alleged that the true intention and understanding of the parties in the execution of the instrument purporting to be a deed of sale with the right to repurchase reserved in favor of the vendor was to provide written evidence of a loan of P5,000 and to furnish security for its repayment from the properties mentioned therein. The prayer of the amended complaint is for the amount of the loan, P5,000, and interest thereon at the rate of P900 per annum, the equivalent of 120 pilones of sugar at the rate of P7.50 the pilon, less the sum of P300, the total amount paid on account of interest during the life of the loan; and further that appropriate relief be granted the plaintiffs providing for the recovery of the loan as a debt secured by a mortgage on the lands described in the contract.The trial judge held that the evidence of record conclusively establishes the execution of the power of attorney, and of the instrument purporting to be a deed of sale with the right of repurchase reserved to the vendor, and further that the defendants have repaid neither the principal (P5,000) received by the husband at the time of the execution of the instrument, nor any part of the annual payment of 120 pilones of sugar provided for in the contract, nor its equivalent in money, except only the sum of P300, payment of which is admitted by the plaintiffs. the trial court gave judgment in favor of the plaintiffs for the recovery of the possession of the land in question and for the recovery of 1,440 pilones of sugar which he took to be the total amount due under the contract for the twelve full years which had expired from the date of the contract to the date of the judgment, less 50 pilones of sugar which he found to be equivalent of P300 admittedly paid on account thereof, at the rate of P6 a pilon. Hence, this appeal. Issue: whether the transaction is a sale or a security of a loan? Decision: it is a security of loan. The power of attorney from the defendant wife in favor of the defendant husband authorized merelyBy means of a mortgage of my real property, to borrow and lend sums in cash, at such interest and for such periods and conditions as he may deem proper, and to collect or to pay the principal and interest thereon when dueThis, cannot be construed as sufficient authority to sell the real estate of the wife, and nothing in the record which tends to disclose that she did in fact authorize her husband to sell her lands, or ratified his action in executing a deed of sale therefor. It follows that neither she nor her lands would be bound by the instrument purporting on its face to be a deed of sale of these lands, if that instrument set forth the true nature of the transaction. The instrument should be enforced in accordance with the true intent and purpose of the parties, without prejudice to the rights of third parties.The review of the whole record, that, acting under and by virtue of the powers conferred upon him by his wife, the husband did in fact borrow P5,000 from Rodriguez, and that he executed a public instrument purporting to be a deed of sale, with a reserved right of repurchase, by way of security for the repayment of the loan, with the understanding that although title to the land had been conveyed to him he would hold the land merely as security, and would reconvey it upon receipt of paymentThe instrument was not recorded in the mortgage registry, and it cannot therefore be given the effect of a legal mortgage, but we are of opinion that the contract which is proved to have been entered into by the husband acting by authority of, and on behalf of his wife, may be and should be enforced in accordance with the real intent of the parties so far as innocent third persons are not adversely affected thereby; that is to say, that it should be deemed to be a valid instrument, evidencing the loan of the money mentioned therein and binding the property for the payment of the indebtedness, but without prejudice to the right of third parties. Plaintiffs are not entitled to a judgment for a recovery of the lands but the judgment should be entered in their favor for the sum of P5,000 together with interest thereon at the rate of P720 a year from the date of the execution of the document purporting to be a deed of sale, until paid, less P300, receipt of which is acknowledged by the plaintiffs. PNB vs. Sta. Maria, et al. Facts: Maximos six brothers and sisters (Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila) executed a special power of attorney in his favor to

(AGENCY ATTY. OBIETA)

19

2D 2013 CLASS DIGEST


mortgage a parcel of land, jointly owned by all of them. In addition, Valeriana Sta. Maria (sister of Maximo) alone also executed in favor of her brother, Maximo, a special power of attorney to borrow money and mortgage any real estate owned by her. By virtue of the two aforementioned powers of attorney, Maximo Sta. Maria applied for two separate crop loans, for the 19521953 and 1953-1954 crop years, with PNB, in the amount of P13,216.11 and P23,000.00, respectively. Included as security for these two loans are the parcel of land jointly owned by Maximo and his six brothers and sisters. Also, the loan was guaranteed by surety bonds executed by Associate Insurance & Surety Co. not receive any centavo from the loan proceeds as benefit, thus no estoppel can be claimed by PNB to them. Doctrine/Ratio: Authority to mortgage does not carry with it the authority to contract obligation. A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other obligations contracted by the grantee, in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning such other obligations contracted by the grantee. Sy-Juco v. Sy-Juco FACTS: Plaintiff Sy-Juco and Viardo are parents of defendant Sy-Juco. They appointed defendant Sy-Juco as administrator of their property for a period of time, until such was revoked. Defendant Sy-Juco bought launchMalabon(a boat) in his own name from Pacific Commercial Co. during the period of the agency. He used his parents money and registered it with the Custom House in his name. It was found that such property was bought by defendant Sy-Juco for and in behalf of his parents. The trial court held that defendant Sy-Juco must return the launch Malabon to his parents, 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. ISSUE: Whether the trial court erred in holding that defendant Sy-Juco must return the launch Malabon to his parents, 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

Due to failure to pay said loans, PNB filed a case on collection of money. The trial court rendered judgment in favor of PNB requiring Maximo and his six brothers and sisters together with the surety, to be liable jointly and severally. Maximo and his surety did not appeal the judgment, however, his six brothers and sisters appeal the decision to the Supreme Court. Issue: Whether Maximo and his six brothers and sisters and surety are liable to PNB? Held: No. Only Maximo and his sister Valeriana are jointly liable to PNB. The other five brothers and sisters are not liable. The authority granted by Maximos brothers and sisters (except Valeriana) unto their brother, Maximo, was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone, together with Valeriana who authorized him to borrow money, must answer for said loans and the other defendants-appellants' only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. But they cannot be held personally liable for the payment of such obligations. Moreover, the brothers and sisters did

(AGENCY ATTY. OBIETA)

20

2D 2013 CLASS DIGEST


HELD: NO. Since the defendant contracted the obligation to but the launch for hisparents 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 his parents the rights he received from the vendor, and they are entitled to be subrogated in these rights. specifically requesting that payment be made to it and not to Medalla because plaintiff was the owner of the vessel. On November 16, 1979, NFA informed plaintiff that it could not grant its request because the contract to transport the rice was entered into by NFA and defendant Medalla who did not disclose that he was acting as a mere agent of plaintiff. Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for freight services. On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid to him by defendant NFA. Defendant Medalla, however, "ignored the demand." Issue: Whether NFA is jointly and severally liable with defendant Medalla. Held: Yes, NFA is solidarily liable with defendant Medalla. Ratio: It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior Shipping Corporation which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in the case at bar 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. The provision of this article shall be understood to be without prejudice to the actions between the principal and agent.

Article 1883 of the Civil Code provides 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 in his own name. 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 the parents, the exception established in article 1883 is applicable to the instant case. National Food Authority (NFA) v. IAC Facts: Medalla, as a commission agent of plaintiff Superior Shipping Corporation, entered into a contract for hire of ship (MV Sea Runner) with defendant NFA. The contract obligated Medalla to transport on the MV Sea Runner 8,550 sacks of rice belonging to NFA from Occidental Mindoro to Malabon, Metro Manila. Upon completion of the delivery, plaintiff wrote a letter around October 1979, requesting NFA that it be allowed to collect the amount for freightage and other charges. Plaintiff wrote again around November 1979, this time

(AGENCY ATTY. OBIETA)

21

2D 2013 CLASS DIGEST


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. 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. PNB V. MANILA SURETY & FIDELITY CO., INC. An agent is required to act with the care of a good father of a family and becomes liable for the damages, which the principal may suffer through his non-performance. A bank is answerable for negligence in failing to collect the sums due its debtor from the latters own debtor, contrary to said banks duty as holder of an exclusive and irrevocable power of attorney to make such collections. FACTS: HELD: The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth P279,000.00 were released and delivered to Adams & Taguba Corporation (ATACO) under a trust receipt guaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the amount aforesaid out of funds payable to the assignor. ATACO delivered to BPW asphalt worth P431,466.52. Of this amount, PNB was able to regularly collect a total of P106,382.01. However, due to unexplained reasons, PNB YES. The CA did not hold PNB responsible for its negligence in failing to collect from ATACO for its debt to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO FROM BPW. An agent is required to act with the care and diligence of a good father of a family(Art1887) and becomes liable for the damages, which the principal may suffer through its nonperformance(Art1884). PNBs power to collect was expressly made irrevocable so that BPW could very well refuse to make payments to ATACO itself, and reject any demands by the surety. NEPOMUCENO V. HEREDIA was not able to collect until the investigators found out that more money were payable to ATACO from BPW. The latter allowed another creditor to collect funds due to ATACO under the same purchase order, to a total of P311,230.41. Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18, plus interests and damages. CA ruled that PNB was negligent in having stopped collecting from BPW before ATACOs debt is fully collected, thereby allowing funds to be taken by other creditors to the prejudice of the surety. PNB asserts that the power of attorney executed in it is favor from ATACO was merely an additional security; that it was the duty of the surety to see to it that the obligor fulfills his obligation; and that PNB has no obligation to the surety to collect any sum from ATACO. ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting sums due to it

(AGENCY ATTY. OBIETA)

22

2D 2013 CLASS DIGEST


Severino vs. Severino
NEPOMUCENO -has unsecured debt receivable from Leao, P500.00 -Leao proposed to give a deed of conditional sale to a tract of land w/ buildings and improvements thereon for P2,000 less the P500; P1,500 balance HEREDIA - Business adviser of MARCIANA CANON - Paid P1,500.00 from Marcianas account on Sept. 22, 1904 CANON MARCIANA

Facts: Melecio Severino owned some 428 hectares of land recorded in his name. During his lifetime, he appointed defendant Guillermo Severino, his brother, as his administrator for the said land. This defendant continued to administer and occupy the land even after the death of Melecio. Subsequently, Guillermo filed for the registration of the land in his name and consequently, the court decreed the title in his favor. At that time (when the cadastral proceedings were instituted), petitioner Fabiola Severino, who is the alleged natural daughter and sole heir of Melecio, was a minor. However, after the incapacity ceased, the petitioner filed a complaint for recovery of the litigated land on the ground of fraud and that the property has been wrongfully registered in the name of defendant. The defendant merely denied said allegations. The trial court decided in favor of petitioner as the acknowledged natural child of Melecio and ordered the defendant to convey said property to petitioner. Issue: Whether the lower court erred in its decision Decision: No. Reason: Although defendant denied the accusation of fraud and even offered evidence to rebut such accusation, such attempt is immaterial. It is to be noted that the case is an action in personam against an agent to compel him to return, or retransfer, to the heirs or the estate of its principal, the property committed to his custody as such agent, to execute the necessary documents thereof, to pay damages. That the defendant came into the possession of the property here in question as the agent of the deceased Melecio Severino in the administration of the

- principal of HEREDIA -proposed to MARCIANA CANON an investment on the land discussing it with HEREDIA and - made a joint investment on directed him to make the Deed of Conditional Leaos land with Sale. NEPOMUCENO The Deed of Conditional Sale was executed on Sept. 24, 1904 with a right to

repurchase at the end of 1yr and obligating himself to make monthly payments in considerations of the right to retain the land in possession in sufficient amount to bring 17% interest per annum on Nepomuceno and Canons investments (proponents opinion is that this could effectively be called rent). Canon and Nepomuceno indeed paid the P1,500 price evidenced by a notarized memorandum. The title was placed in the name of Heredia. Leao continued to pay for more than a year to plaintiffs. There was recovery of possession instituted by 3rd parties prompting herein plaintiffs to seek recovery of the whole amount of the money invested from Heredia and alleging that the purchase of the land was not made in accordance with their instructions. The RTC ruled in favor of Nepomuceno and Canon. On appeal, the plaintiffs wanted modification of the RTCs judgment on the grounds that Heredia invested their money under his name and account and not as their agent. The Court reverses the lower courts decision finding that Heredia was acting as mere agent and plaintiffs had full knowledge of the agents actions and ratified it. Furthermore, nothing in the record which would indicate that the defendant failed to exercise reasonable care and diligence in the performance of his duty as an agent, or that he undertook to guarantee the vendors title to the land purchased by direction of the plaintiffs.

(AGENCY ATTY. OBIETA)

23

2D 2013 CLASS DIGEST


property, cannot be successfully disputed. His testimony in a previous related case is, in fact, conclusive in this respect. He there stated under oath that from the year 1902 up to the time the testimony was given, in the year 1913, he had been continuously in charge and occupation of the land as the encargado or administrator of Melecio Severino; that he had always known the land as the property of Melecio Severino; and that the possession of the latter had been peaceful, continuous, and exclusive. In his answer filed in the same case, the same defendant, through his attorney, disclaimed all personal interest in the land and averred that it was wholly the property of this brother Melecio. The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. "A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely independent of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the trustee. It is to avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts between self-interest and integrity. It seeks to remove the temptation that might arise out of such a relation to serve one's self-interest at the expense of one's integrity and duty to another, by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle." C. N. HODGES, Plaintiff-Appellant, vs. CARLOTA SALAS and PAZ SALAS, Defendants-Appellees. Facts: On September 2, 1923, the defendants executed a power of attorney in favor of their brother-in-law Felix S. Yulo to enable him to obtain a loan and secure it with a mortgage on the real property described in transfer certificate of title No. 3335. The power of attorney was registered in the registry of deeds of the Province of Occidental Negros. Acting under said power of attorney, Felix S. Yulo, on March 27, 1926, obtained a loan of P28,000 from plaintiff, binding his principals jointly and severally, to pay it within ten (10) years, with interest at 12 per cent per annum payable annually in advance, to which effect he signed a promissory note for said amount and executed a deed of mortgage of the real property with its improvements described in transfer certificate of title No. 3335, plus 10 per cent more on the unpaid capital as attorneys fees in the event plaintiff would be constrained to file a case in court to recover the loan or its balance. The sum of P28,000 was not delivered to Felix S. Yulo, but by agreement between him and the plaintiff, it was employed as follows: P3,360 advance interest from March 27, 1926 to March 26, 1927, P8,188.29 payment for mortgage constituted on TCT 3335, P2,000 payment for agents personal account re purchase price of real property on Ortiz street, P3,391 personal check issued to Felix S. Yulo, P9,200 paid to Rafael Santos to cancel mortgage of Salas, P1,800 amount delivered to agent Felix S. Yulo. The agent, Felix S. Yulo used a part of the loan for his own benefit. On the next maturity date,the defendants failed to pay interest stipulated which should have been paid one year in advance. An action was brought by the plaintiff to foreclose the real estate mortgage constituted by the defendants to secure a loan in the Courts of First Instance. The plaintiff lost in the CFI. Plaintiff appealed from the judgment of the CFI in absolving the defendants from the complaint. Issues: Whether or not the agents act of employing part of the loan to pay his personal debts was ratified by the defendants?

(AGENCY ATTY. OBIETA)

24

2D 2013 CLASS DIGEST


Held: No, the agent was not authorized to use the funds obtained by him to pay his personal obligation. Ratio: The pertinent clauses of the power of attorney from which may be determined the intention of the principals in authorizing their agent to obtain a loan, securing it with their real property, were quoted at the beginning. The terms thereof are limited; the agent was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate that the defendants had likewise authorized him to convert the money obtained by him to his personal use. With respect to a power of attorney of special character, it cannot be interpreted as also authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority In the case like the present one, it should be understood that the agent was obliged to turn over the money to the principals or, at least, place it at their disposal. The plaintiff contends that the agent's act of employing part of the loan to pay his personal debts was ratified by the defendants in their letter to him dated August 21, 1927. This court has carefully read the contents of said document and has found nothing implying ratification or approval of the agent's act. In it the defendants confined themselves to stating that they would notify their agent of the maturity of the obligation contracted by him. They said nothing about whether or not their agent was authorized to use the funds obtained by him in the payment of his personal obligations. Judgment modified. (Defendants Salas will not pay the full amount of the loan to plaintiffs Hodges but will only pay the sums P 19, 133.50 and P1, 781.17 ) US vs Kiene The defendant was an insurance agent. As such agent there was paid over to him for the account of his employers, the China Mutual Life Insurance Company, the sum of 1,539.20 pesos, Philippine currency, which he failed and refused to turn over to them. For his failure and refusal so to do, he was convicted of the crime of estafa in the Court of First Instance of the city Manila in sentenced to be imprisoned for one year and six months in Bilibid, and to pay the costs of the trial. Counsel for the defendant contends that the trial court erroneously admitted in evidence a certain document purporting to be a contract of agency signed by the defendant. The name of the accused is attached to this document, and one of the witnesses, the district agent of the China Mutual Life Insurance Company, stated that it was the contract of agency it purported to be, but failed to state specifically that the signature attached thereto was the signature of the defendant, though he declared that he knew his signature and had seen him write it on various occasions. An examination of the record seems to indicate that the failure of the witness to expressly identify the signature of the defendant attached to the document was due to an oversight, but however this may be, it is contented that the execution of the document was not formally established, and the trial court erred in taking into consideration one of its provisions whereby the defendant appears to have expressly obligated himself to deliver to the China Mutual Life Insurance Company the funds collected on its account, without deduction for any purpose whatever. Issue: Whether there was a failure of the prosecution to establish the existence of a duty or obligation imposed on the defendant to turn over his principal the funds which he is charged with appropriating to his own use.

(AGENCY ATTY. OBIETA)

25

2D 2013 CLASS DIGEST


Held: We do not deem it necessary to review the action of the court in admitting this document in evidence, because we are of opinion that the obligation of the defendant to deliver the funds in question to his employers is determined by the provision of article 1720 of the Civil Code, which is as follows: Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of the agency, even though what has been received is not owed to the principal. Nothing to the contrary appearing in the record, and the existence of the agency and the collection of the funds on account of the principal having been established, the obligation to deliver these funds to the principal must be held to have been imposed upon the agent by virtue of the contract of agency. Legaspi, Albay to conduct the selling campaign. Aragon established a central distributing agency or depot with the plaintiff Teofila del Rosario de Costa, nominally in charge, though her husband appears to have been the actual manager of the agency. Throughout the course of the business between plaintiffs and defendant, no settlement of their accounts were ever made. Aragon took residence (rent was paid to plaintiffs) in the house of plaintiffs and used the lower part of the house as a store room for the tobacco products.

Del Rosario and Costa vs. La Badenia

Facts: "[P]laintiffs Teofila del Rosario de Costa and her husband, Bernardino Costa, brought this action to recover from the defendant corporation the sum of 1,795.25 [pesos] 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. The defendant denied the claim and set up counterclaim for 55.43 [pesos]. Judgment having been rendered in favor of the defendant, the record is now before us on plaintiffs' bill of exceptions."

Eventually Aragon made a settlement of accounts with the plaintiff. "In this statement goods received by the Legaspi agency from the factory in Manila are charged against Teofila del Rosario Costa, while credits are given on various items, such as, withdrawals of goods from the depository at Legaspi shipped to other towns, remittances made to the head office in Manila, money paid over to the general agent, advertising expenses, commissions on sales, salaries of employees [other people hired by Aragon], and other expenses incident to the conduct of business. x x x The defendant corporation however, refused to pay over to the plaintiffs the balance of 1,795.25 [pesos], claiming that plaintiffs had been improperly allowed a credit of 1,850 [pesos] which represented unpaid accounts due the business in Legaspi for cigars and cigarettes sold by it. If these uncollected items are charged to the defendant corporation a balance is left in favor of plaintiffs amounting to 1,795.25 [pesos]; and if charged to plaintiffs there remains a balance in favor of the defendant corporation amounting to 55.43 [pesos]."

Defendant La Badenia, with head office in Manila, makes and sells tobacco products. To introduce its products to the retail trade, defendant started a selling campaign. One of the locations chosen for the campaign was Albay, Sorsogon. Celestino Aragon, a general agent of the corporation, went to

Defendant claims that plaintiffs are just merchants who purchased the goods and were never employed as agents. Plaintiffs claim that they were the agents of the defendant; "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."

(AGENCY ATTY. OBIETA)

26

2D 2013 CLASS DIGEST


Issue: Are the plaintiffs merchants or sub-agents? The general agent did not consider plaintiffs as independent merchants, but rather as agents cooperating with him and working under his supervision. "The defendant carried no account whatever with the plaintiffs, and having entrusted the entire management of the Legaspi business to Aragon, it can not 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. x x x [T]he record does not disclose what were the precise terms of the arrangement made with the plaintiffs. The record does show however, that in many instances the plaintiffs were allowed commissions on the sales made by them, but whether or not these were in addition to other profits allowed them the record does not show."

Held: Plaintiffs are sub-agents for the defendant corporation. Plaintiffs won.

Ratio: "It is not denied however, that Aragon was acting as the general agent of the defendant corporation and that as such he was invested with the authority to inaugurate and carry out a selling campaign with a view of interesting the sale of the defendant's products in the territory assigned to him. The record does not show what limitations, if any, were placed upon his powers to act for the corporation. x x x It appears further that the head office in Manila was fully informed of plaintiffs' relations with the general agent in extending the sales of its products. 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. Neither the head office nor Aragon appear to have made any distinction between the business done by Aragon and that done by the plaintiffs. x x x 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 good in Manila at wholesale and selling them locally on their own account."

Lyons v. Rosenstock

Facts:

The parties in this case are Lyons and Rosenstock, as executor of the estate of Elser.

The pieces of evidence of note were the two letters (sent by defendant to plaintiff) presented by plaintiffs which the Court deemed "sufficient to show that the defendant was fully aware of plaintiffs' connection with the agency at Legaspi, and recognized them as agents of the company, and clearly did not consider them as independent merchants buying solely on their own account, but rather as subagents working under the supervision of the general agent, Aragon."

Lyons filed an action for recovery of 446 and 2/3 shares of the stock of J. K Pickering & Co. Together with a certain sum of money which accrued on the Companys stock with lawful interest. Trial court absolved Rosenstock (Elser) in this complaint.

Lyons and Elser had been jointly associated in various real estate deals. In April 1919, Lyons, left for US bu before leaning, Elser made a written statement

(AGENCY ATTY. OBIETA)

27

2D 2013 CLASS DIGEST


showing that Lyons was, at that time, half owner with Elser of three particular pieces of real property. Concurrently with this act, Lyons executed in his favour of a general power of attorney empowering him to manage and dispose of said properties at will and to represent Lyons fully and amply, to the mutual advantage of both. When Elser was concluding the transaction for the purchase of the San Juan Estate, he found out that he was indebted to Lyons for a certain sum of money from profits and earnings derived from other properties they owned. To satisfy his indebtedness, Elser indorsed to Lyons 200 shares of stock he owned from J. K Pickerings & Company.

While Lyons was away, Elser was able to sell two of the three properties they jointly own thus, leaving a single piece of property known as the Carriedo property.

Lyons, who arrived in Manila in September 1920, he accepted these shares and sold them for his own benefit thus also gave his consent for the mortgage of the Carriedo property to remain until it was paid off.

Also, while Lyons was away, ELser bought a valuable piece of property known as San Juan Estate. Elser aimed to promote and develop this San Juan Estate as a suburban improvement. For this purpose, Elser and three associates organized a partnership under the name, J. K Pickering & CO. Elser expected that Lyons would join him in this deal and contribute some capital to purchase and develop the property and to do so, Elser borrowed money from a Chinese merchant who required that a personal note be signed by ELser and the surety company. This surety company insisted upon having a security for the liability assumed by it. Thus, Elser mortgaged the Carriedo property owned by them jointly in favour of the surety company. Elsers act of mortgaging the property was executed under a sufficient power of attorney. However, Lyons communicated to Elser though a letter that he declines the invitation to join the venture.

Lyons contention:

When Elser placed a mortgage upon the Carriedo property, Lyons as half owner of the said property, became, as it were, involuntarily the owner of an undivided interest in the property acquired partly by that money; and it insisted that he is entitled to the 445 and 2/3 shares of the earnings of J.K. Pickerind & Company.

Issue:

Because of Lyons refusal to join the venture, Elser began to look for other sources so he may relive the CArreido property from being mortgaged. He was successful in doing so by substituting another property owned by him.

Whether Elser, as an agent, is liable for the interest on funds belonging to Lyons, as principal, which have been applied by Elser to purchase the San Juan Estate? (Whether Article 1724 of the Old Civil Code (or 1986 of NCC)is applicable?)

Held:

(AGENCY ATTY. OBIETA)

28

2D 2013 CLASS DIGEST


No. Elser is not liable.

Article 1896 of CC: The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency (1724a)

SMITH BELL vs CA

Facts: Joseph Bengzon Chua doing business under the name of Tic Hin Chiong Importer, bought and imported to the Philippines from the firm Chin Gact Co., Ltd. of Taipei; Taiwan, 50 metric tons of Dicalcium Phosphate valued at US$13,000. These were contained in 1,250 bags and shipped from the Taiwan to Manila. This shipment was insured by First Insurance Co. under a Marine Policy for US$19,500 "against all risks" at port of departure and with Smith, Bell, and Co stamped at the lower left side of the policy as "Claim Agent." The cargo arrived at the Port of Manila on September 1982 and thereafter the entire cargo was discharged to the local arrastre contractor, Metroport Services Inc. with a number of the cargo in apparent bad order condition. Chua secured the services of a cargo surveyor to conduct a survey of the damaged cargo which were delivered to Chuas house. The surveyor's report showed that of the 1,250 bags of the imported material, 600 were damaged. Upon weighing, the contents of the damaged bags were found to be 18,546.0 kg short. Chua then filed with Smith Bell a formal statement of claim re the value of losses amounting to $7.3k. Smith Bell informed Chua that its principal offered only 50% of the claim as redress on the ground of discrepancy of the items damaged between the record of Metroport and Chuas surveyor. Dissatisfied, Chua wrote a letter to Smith Bell refusing the redress contending that the discrepancy was a result of the loss from the vessel to arrastre to the

Article 1724 of Old CC: An agent is liable for the interest on funds belonging to his principal which have been applied by the agent to unauthorized uses.

If Elser had used the money actually belonging to Lyons in the deal, he would be obligated to pay interest upon the money he applied to his own use under Article 1724 (1896 of the New Civil Code) of the Civil Code.

No money from the mortgage of the Carreido property was ever applied to the purchase of the San Juan Estate. What really happened was that Elser merely subjected the property to a contingent liability, and no actual liability ever resulted therefrom. The financing of the purchase of the San Juan Estate, apart from the modest participation of his associates in the San Juan deal, was the work accomplished entirely upon his own account.

Article1724 (or 1896 of NCC) is not applicable in the case because there was no use of the principals funds by the agents personal dealings.

(AGENCY ATTY. OBIETA)

29

2D 2013 CLASS DIGEST


warehouseall of these loss were still within the all risk insurance cover. No settlement has been made, thus Chua filed a complaint against Smith Bell. Smith Bell contends it is not personally liable since it is merely a settling or claim agent of First Insurance Co. The only involvement of Smith Bell in the subject contract of insurance was having its name stamped at the bottom left portion of the policy as "Claim Agent." Without anything else to back it up, such stamp cannot even be deemed by the remotest interpretation to mean that Smith Bell participated in the preparation of said contract. Under Article 1311 of the Civil Code, contracts are binding only upon the parties (and their assigns and heirs) who execute them. The subject cargo insurance was between the First Insurance Company, Ltd. and the Chin Gact Co., Ltd. There is absolutely nothing in the contract which mentions the personal liability of Smith Bell.

Issue: Whether a local settling agent is personally and/or solidarily liable upon a marine insurance policy issued by its disclosed foreign principal

Held: No

Development Bank of the Philippines vs. Court of Appeals G.R. No. 110274

Ratio: A settling agent acting within the scope of its authority cannot be held personally liable and/or solidarily liable for the obligations of its disclosed principal. An adjustment and settlement agent is no different from any other agent from the point of view of his responsibility, for he also acts in a representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his action is binding not upon himself but upon his principal.

March 21, 1994

Facts

The scope and extent of the functions of an adjustment and settlement agent do not include personal liability. His functions are merely to settle and adjusts claims in behalf of his principal if those claims are proven and undisputed, and if the claim is disputed or is disapproved by the principal, the agent does not assume any personal liability. The recourse of the insured is to press his claim against the principal.

Juan Dans (Dans) and his family applied for a loan of 500,000 Pesos with the Development Bank of the Philippines (DBP). He was already 76 years old when they applied for the loan. DBP then advised Dans to apply for a Mortgage Redemption Insurance (MRI) with the Mortgage Redemption Insurance Pool (DBP MRI Pool). DBP then proceeded with deducting ten percent from the approved loan as payment for the MRI Premium.

Dans died of cardiac arrest a few weeks later. DBP MRI Pool later notified Dans family that he was never eligible for insurance since he was well above the ceiling age (60 years old) when they applied for the insurance policy. Candida

(AGENCY ATTY. OBIETA)

30

2D 2013 CLASS DIGEST


Dans (Juans wife) refused to accept the ten percent premium that DBP tried to return as well as 30 thousand Pesos as an ex gratia settlement. The Dans Estate, with Candida acting as administratix, wanted the sum paid in protest for the loan, the extinguishment of Juans initial loan of 300 thousand Pesos as well as damages. 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.

The lower court ruled in favour of the Dans Estate. Hence this petition.

Issue

Under the aforequoted provision, it is strikingly obvious that DBP acted beyond its capacity when it compelled Dans to secure an MRI coverage knowing full well that Dans was never going to be eligible for the insurance policy. There was no showing that Dans was aware of such limitations when he applied for the policy. What DBP led them to believe is that since they already paid for a premium, the inevitability of approval is apparent.

Whether DBP exceeded its powers as an agent. The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dans application and deducted the necessary fees. This appalling act of deception is therefore a basis for damages for Dans aggrieved family.

Held

Yes!

Ratio

If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and such third person is deceived by the non-disclosure of the agent, then the latter is liable for damages to him.

Article 1897 of the Civil Code states


It is a settled rule that persons dealing with an assumed agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of the agents authority. If either is controverted, the burden of proof is upon them to establish it.

(AGENCY ATTY. OBIETA)

31
Authority given to an officer to approve loans does not include the power to issue guarantees to 3rd persons in principals name.

2D 2013 CLASS DIGEST


defense that Wong had no authority to bind the corporation. The RTC ruled against the spouses but dismissed the case against BA Finance,. TRB, unsatisfied with the decision, appealed. The Court of Appeals (CA) modified the judgment, ordering both the spouses and BA Finance to jointly and severally pay TRB the aforementioned balance. The CA ruled that petitioner corporation was guilty of estoppel. BA Finance filed a petition for review. It contended that the letterguaranty executed by Wong is ultra vires, therefore unenforceable and that it is not guilty of estoppels since it had no knowledge or notice of the guaranty. Wong, on his part, presented as evidence a memorandum given by BA Finance, which allegedly authorized him to approve and grant loans and issue guaranties. A sentence in the memorandum stated that contingent commitments must be considered in granting loans. Wong averred that the quoted phrase referred to guaranties.

BA FINANCE CORPORATION v. COURT OF APPEALS BA Finance Corporation, petitioner Hon. Court of Appeals and Traders Royal Bank, respondents

ISSUES (1) Whether Philip Wong had authority to issue guaranties (2) Whether BA Finance is estopped from questioning the guaranty

FACTS Traders Royal Bank (TRB), respondent, granted a loan worth P60,000 in favor of Renato Gaytano (who is doing business under the name Gebbs International). To secure the loan, the Gaytano spouses executed a deed of suretyship where they agreed to pay the loan, including interests, penalty and other bank charges. Philip Wong, credit administrator of petitioner BA Finance Corporation (BA Finance), undertook to guaranty the loan. Partial payments were made by Gaytano, but a balance of P85,807.25 remained unpaid, which prompted TRB to file with the trial court a complaint for sum of money against the spouses and BA Finance. BA Finance raised the

HELD (1) NO. The phrase contingent commitment cannot be interpreted as referring to guaranties. Although Wong was clearly authorized to approve loans, nothing in the memorandum expressly vested him the power to issue guaranties. Authority given to an officer to approve loans does not include power to issue guaranties to third persons in principals name. A power of attorney or authority of an agent should not be inferred from the use of vague or general words. Furthermore, guaranty is not presumed; it must be expressed and cannot be extended beyond its specified limits.

(AGENCY ATTY. OBIETA)

32

2D 2013 CLASS DIGEST


(2) NO. BA Finance is not estopped from alleging lack of authority. No evidence was presented proving that the disputed transaction of guaranty was in fact entered into the official records or files of the corporation. Hence, BA Finance could not have had notice or knowledge of the guaranty, and no consequent ratification of the said transaction could have occurred. 6. Government Corporate counsel rescinded the contract due to New Yorks non performance, liquidated damages ordered was P360, 572.80 because time was of the essence. 7. NPC sued New York Co., NAMERCO and Domestic Insurance for the recovery of damages. Trial Court dismissed the case as to New York for lack of jurisdiction because it wasnt doing business in the Phils. But TC held that NAMERCO acted beyond the bonds of its authority because it violated the Principals instructions. 8. According to the TC, NAMERCOS contention was that the delivery of sulfur was conditioned on the availability of a vessel to carry the shipment. But evidence shows the contrary. The Invitation to Bid issued by NPC provided that non-availability of vessel is not a ground for nonperformance and non payment of damages. NAMERCOs Bid was even more explicit when it stated that it would be responsible for and guarantees the availability of the vessel. New York Co. however, in its cable to NAMERCO, stated that the sale was SUBJECT TO THE AVAILABILITY OF THE VESSEL. NAMERCO didnt disclose this to NPC and went on ahead with the agreement with NPC that non-availability of a vessel was not justification for nonpayment of damages, CONTRARY TO NEW YOTKS INSTRUCTIONS (not following instructions si NAMERCO) 9. Both NPC and NAMERCO appealed on questions of law and for the amount of damages. ISSUE: W/N NAMERCO acted beyond its limits as New York Companys representative YES RATIO: NAMERCOs CONTENTIONS (italics) AND SCS RATIO: 1. NPC should have inquired into the extent of agents authority - NAMERCO is liable for damages because under art. 1887 the agent who exceeds the limits of

NATIONAL POWER CORP VS. NATIONAL MERCHANDISING CORP. FACTS: 1. October 17, 1956: National Power Corp (NPC) and National Merchandising Corp. (NAMERCO), as the representative of the International Commodities Corporation of New York (New York Company Principal) executed a contract for the purchase of 4,000 long tons of crude sulfur worth P450, 716 for NPCs Fertilizer plant in Iligan City. 2. A performance bond was executed by the Domestic Insurance Company, in favor of NPC to guarantee NAMERCOs obligation. 3. In the sale contract, it was stipulated that NAMERCO would deliver the sulfur at Iligan City within 60 days from notice of the establishment in its favor of a letter of credit and failure to deliver would subject NAMERCO and Domestic Insurance to the payment of damages. 4. LC was opened in Nov 12, 1956. Deadline for delivery was Jan. 15, 1957. NEW YORK CO. WAS UNABLE TO DELIVER due to its inability to secure shipping space. NPC had no sulfur so their fertilizer plant had to shutdown. 5. NPC advised NAMERCO that non-availability of a bottom/vessel was not a fortuitous event that would excuse nonperformance and that NPC would resort to legal remedies.

(AGENCY ATTY. OBIETA)

33

2D 2013 CLASS DIGEST


his authority without giving the party with whom he contracts sufficient notice of his powers is PERSONALLY LIABLE TO SUCH PARTIES. Even before the sale was signed, NAMERCO knew that the principal had problems securing shipping space, New York cabled NAMERCO instructing it not to sign the contract unless t wished to assume sole responsibility. 2. Every person dealing with an agent is put upon inquiry and must discover upon his own peril the authority of an agent this rules not applicable in this case since the principal isnt the one being sought to be held liable, rather its NAMERCO / the agent. Agent is liable because New York repudiated the sale, NAMERCO took chances and went beyond its authority therefore, acting in his own name. 3. TC erred in holding enforceable the stipulation for liquidated damages despite its findings that the contract was executed by an agent who exceeded his authority. Should be unenforceable Enforceable because it is enforced against the agent and the surety, not against the principal. Art. 1897 says: The agent who acts in excess of his authority is personally liable to the party with whom he contracted. Complimented by Art 1898: if the agent contracts in the name of the principal, exceeding the scope of authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal According to New York Companys letter they certified NAMERCO to be their exclusive representatives in the Phils. for the sale of their products; that they are empowered to present offers in New yorks behalf in accordance with their cabled, written instructions. (So yun lang ang auth. Ng NAMERCO, not to sign contracts contrary pa to their instructions...) 4. Regarding damages, SC ruled that P45,100 is the amount of liquidated damages / 10% of the selling price of sulfur. Because NAMERCOS liability should be based on tort / quasi delict and not on a contract of sale; NAMERCO was in good faith, made persistent efforts to charter a vessel, Art. 2227 provides that CERVANTES v. CA liquidated damages, whether penalty or indemnity, shall be equitably reduced if iniquitous / unconscionable. SC ORDERED NAMERCO AND DOMESTIC INSURANCE TO PAY SOLIDARILY TO THE NPC THE SUM OF 45,100. ***Case 25 years in the making. 1957 - 1982

Facts:

On March 27, 1989, Philippine Airlines (PAL) issued to Nicholas Cervantes a round trip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of one year from issuance, i.e., 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 two previous suits (Civil Case 3392 and 3451 before the RTC in Surigao City). On March 23, 1990, 4 days before the expiry date of subject ticket, Cervantes used it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-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, and considering that he would be there on 2 April 1990, Cervantes

(AGENCY ATTY. OBIETA)

34

2D 2013 CLASS DIGEST


made arrangements with PAL for him to board the flight in San Francisco instead of boarding in Los Angeles. On 2 April 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. Held:

Aggrieved, Cervantes filed a Complaint for Damages, for breach of contract of carriage before the RTC of Surigao del Norte in Surigao City (Branch 32, Civil Case 3807), but the said complaint was dismissed for lack of merit.

On 20 September 1993, Cervantes interposed an appeal to the Court of Appeals, which came out with a Decision, on 25 July 1995, upholding the dismissal of the case. On 22 May 1996, Cervantes came to the Suprame Court via the Petition for Review.

The confirmation by the PALs agents in Los Angeles and San Francisco of Cervantes flights did not extend the validity or lifetime of the ticket, as both had no authority to do so. Cervantes knew this from the very start when he called up the Legal Department of appellee in the Philippines before he left for the USA. He had first hand knowledge that the ticket in question would expire on March 27, 1990 and that to secure an extension, he would have to file a written request for extension at the PALs 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 Cervantes. Thus, where a passenger is fully aware of the need to send a letter to a particular office of an airline for the extension of the period of validity of his ticket, he cannot subsequently use what was done by airline agents, who acted without authority, in confirming his flights.

The Supreme Court denied the petition, and affirmed in toto the decision of the Court of Appeals dated 25 July 1995; without pronouncement as to costs.

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

Issue:

Whether the act of the PAL agents in confirming subject ticket extended the period of validity of petitioners ticket. Carson v. Rickards and Smith Bell

(AGENCY ATTY. OBIETA)

35

2D 2013 CLASS DIGEST


Doctrine: When money is received as a deposit by an agent, and that money is by the agent turned over to his principal, with notice that it is the money of the depositor, the principal is bound to deliver it to the depositor, even if his agent was not authorized to receive such deposit. Facts: The defendant Rickards was the agent of the other defendant, Smith, Bell & Co. While he was such agent he received from the plaintiff Carson, as a deposit, the sum of 2,000 pesos. When he left the employ of the defendant company the 2,000 pesos were, by his orders, delivered to another agent of Smith, Bell & Co and Smith, Bell & Co. received ad used the same. This money was not mingled with other money belonging either to Richards or to Smith, Bell & Co., and at the time of its delivery by Rickards to the other agent he notified Smith, Bell & Co. that it was not the money of Smith, Bell & Co., but was the money of the plaintiff. The lower court held that Smith, Bell & Co was responsible for this amount. Issue petitient: W/N Smith Bell & Co is bound to pay Carson she turned over to Rickards Held: Yes. Smith Bell & Co is liable. Ratio: The question as to whether Rickards was authorized by Smith, Bell & Co. to receive deposits of this character for third persons is a matter of no consequence. The identical money which he received from the plaintiff was by him turned over to Smith, Bell & Co., with notice that it was the money of the plaintiff, and they now have it in their possession, and are therefore bound to pay it to her. At the trial of this case Rickards testified that a few days after he received the 2,000 pesos from the plaintiff, he received from her an order or warrant upon the Spanish treasury for the sum of 4,200 pesos; that he wrote Smith, Bell & Co., asking if it could be collected. Rickards testified that he received the money and paid all of it out in the business of Smith, Bell & Co.; that after he had received it he entered upon the books of Smith, Bell & Co. a credit in favor of the plaintiff of 4,200 pesos, less 5 per cent commission for collection, of which commission Smith, Bell & Co. received the benefit. He also testified that he had seen the books of Smith, Bell & Co contained an entry or entries of the receipt by Smith, Bell & Co. of this 4,200 pesos. If this testimony is to be believed there is no doubt as to the liability of Smith, Bell & Co. to repay to the plaintiff the sum of 4,200 pesos, less the commission of 5 per cent. The question as to the general authority of Rickards to receive money on deposit for Smith, Bell & Co. has nothing to do with this cause of action, for Rickards testified that he received express directions in regard to this particular transaction.

EUGINIO VS. COURT OF APPEALS Petitioner EUGENIO is a dealer of the soft drinks of Private respondent (PEPSI). PEPSI claimed that petitioner EUGNEIO has outstanding debts in the company. Petitioner EUGENIO in defense presented four Trade Provisional Receipts (TPR) issued by and received by them from Route Manager ESTRADA of Malate Warehouse. They claim that the TPR are to be credited in their favour. Trial Court: ordered petitioner to pay private respondent (PEPSI- COLA BOTTLING COMPANY OF THE PHIL.) their overdue accounts. Court of Appeals: declared said decision to be a nullity because the requirements of Section14, Article VIII of the 1987 Constitution (basis of decision should clearly state facts and law on which they are based) are not met. Trial Court: Petitioners ordered to pay the amount plus legal interest. Court of Appeals/ Motion for Reconsideration: Affirmed the judgement/ motion denied

(AGENCY ATTY. OBIETA)

36

2D 2013 CLASS DIGEST


Supreme Court FACTS: A review of the facts from the Supreme Court showed that PEPSI through head of its Legal Department, Atty. Antonio N. Rosario (ATTY. ROSARIO) sent for Petitioner EUGENIO to review non-payment of company debts. Petitioner was shown to have a total of P74,849.40 debt in NORA STORE and ABIGAIL MINIMART (petitioners stores) and Loaned Empties after review. EUGENIO submitted to ATTY. ROSARIO the four TPRs. ROSARIO Instructed Daniel AZURIN, assistant personal manager, to conduct investigation of petitioners claim. ESTRADA denied he ever issued or signed the TPRs and AZURIN presented to the Court ESTRADAs affidavit alleging the same however ESTRADA was not present in any of the proceedings. There was also an issue on the signature of ESTRADA which is not relevant to AGENCY, more on the Rules of Evidence. IMPORTANT! RESPONDENT COURT also alleged that the questioned TRP are merely provisional and were... to be officially confirmed by plaintiff within 15 days by delivering the original copy thereof stamped and paid and signed by cashier... Petitioners failed to present the original copies of the TPRs in question showing that they were never confirmed by PEPSI nor did they demand from PEPSI the confirmed copies thereof. Issue 1 (not part of Agency): W/N ESTRADAs affidavit is valid evidence? Answer: No. Under the measure of hearsay evidence AZURINs testimony on the validity of ESTRADAs denial cannot be constituted as legal proof. Also affidavit cannot seek sanctuary to the exception to the hearsay evidence rule because of the following reasons: There was no proper investigation but only an inter-office interview. Also there was no chance for EUGENIO to object nor was there a chance to cross-examine ESTRADA. There is no authenticated stenographic report of the entire testimony of ESTRADA. Absence of ESTRADA also had no TOYOTA SHAW INC V. CA -no file uploaded yet justifiable cause taking into consideration that PEPSI being ESTRADAs employer had the means to find him. Issue 2 (IMPORTANT): W/N petitioners failed in confirming the TPRs in question. Answer: No. The TPRs presented in evidence by petitioners are disputably presumed as evidentiary of payments made on the account of petitioners. Private respondent failed to rebut the presumption in favour of valid payment by petitioners. They failed to prove that ESTRADA who is its duly authorized agent with respect to petitioners, did not receive those amounts from the latter. In so far as the private respondents customers are concerned for as long as they pay their obligations to the sales representative of the private respondent using the latters official receipt, said payment extinguishes their obligations. Else they would make the burden of supervising its employees from PEPSI to its customers. Payment shall be made to the person in whose favour the obligation has been constituted or his successor in inters or any person deemed to received it. Simply put, it was the responsibility of the collector to turn over the collection.

Commissioner of Public Highways and the Auditor General V. San Diego (Presiding Judge, CFI Rizal), Testate Estate of N.T. Hashim, et. al. FACTS:

(AGENCY ATTY. OBIETA)

37

2D 2013 CLASS DIGEST


The Government of the Philippines filed a case of expropriation of a parcel of land belonging to N. T. Hashim, needed to construct a public road, now known as EDSA. Thereafter, the Government took possession of the property upon deposit with the City Treasurer of the sum of P23,413.64 as the provisional value of all the lots needed to construct the road. The records of the expropriation case were destroyed and lost during the second world war, and neither party took any step thereafter to reconstitute the proceedings. In 1958, however, the estate of N.T. Hashim, who at that time had died, through its Judicial Administrator, Tomas N. Hashim, filed a money claim with the Quezon City Engineer's Office in the sum of P522,620.00, alleging said amount to be the fair market value of the property in question, now already converted and used as a public highway. The respondent estate also filed with the CFI, a complaint for the recovery of the fair market price of the said property in the sum of P672,030.00 against the Bureau of Public Highways. The parties thereafter worked out a compromise agreement, Hashims estate having proposed the total amount of P209,076.00, equivalent to the land's total assessed value and by then Solicitor General rendered judgment approving the Compromise Agreement and ordering the Bureau of Public Highways to pay respondent estate the total sum of P209,076.00 for the expropriated lot. On the same date of the approval of the Compromise Agreement, the sheriff served a Notice of Garnishment issued by the Deputy Clerk of Court, on respondent Philippine National Bank, notifying said bank that levy was thereby made upon funds of petitioners Bureau of Public Highways and the Auditor General on deposit, which had funds deposited with the Bank. The garnishment was said to cover the judgment of P209,076 in favor of the estate of Hashim. In reply to the Notice of Garnishment, Benjamin Corua, Chief of Documentation Staff of PNBs Legal Department, allegedly acting in excess of his authority and without the knowledge and consent of the Board of Directors, replied to the notice of garnishment that in compliance therewith, the bank was holding the amount of P209,076 from the account of petitioner Bureau of Public Highways. In compliance to the Notice Of Garnishment, respondent Corua allegedly taking advantage of his position, authorized the issuance of a cashier's check of the bank in the amount of P209,076, taken out of the funds of the Bureau of Public Highways deposited in current account with the bank and paid the same to the estate of Hashim, without notice to said petitioner. Later on, the Bureau of Public Works and Auditor General, through then Solicitor General Makasiar, wrote the PNB complaining that the bank acted precipitately in having delivered such a substantial amount to the special sheriff without affording them a reasonable time to contest the validity of the garnishment, notwithstanding the bank's being charged with legal knowledge that government funds are exempt from execution or garnishment, and demanding that the bank credit the Bureau of Public Highways account in the amount of P209,076 which the bank had allowed to be illegally garnished. Respondent bank replied that it was not liable for the said garnishment of government funds, alleging that it was not for the bank to decide the question of legality of the garnishment order and that much as it wanted to wait until it heard from the Bureau of Public Highways, it was "helpless to refuse delivery under the teeth" of the special order of October 18, 1968, directing immediate delivery of the garnished amount. ISSUE: W/N the PNB through Coruna, as the Chief Documentation of the Bank who authorized the garnishment of the account, is held liable and has acted beyond the scope as the agent of the Bureau of Public Highways? HELD:

YES. The Bank (PNB) is the agent of the Bureau of Public Highways as such that it was entrusted with the latters funds, which is of its nature, is public or government funds.

(AGENCY ATTY. OBIETA)

38

2D 2013 CLASS DIGEST


The SC thus declared untenable the two arguments raised by PNB and its Chief Documentation Staff, Corua as their defenses to justify their wrongful delivery of the garnished public funds to respondent estate. First: Their first contention that the said government funds by reason of their being deposited by petitioner Bureau under a current account, instead of being deposited as special trust funds, "lost their kind and character as government funds". SC: UNTENABLE. As the official depositary of the Philippine Government, respondent bank and its officials should be the first ones to know that all government funds deposited with it by any agency or instrumentality of the government, whether by way of general or special deposit, remain government funds, since such government agencies or instrumentalities do not have any non-public or private funds of their own. Second: Their second contention that said government funds lost their character as such "the moment they were deposited with the respondent bank", since the relation between a depositor and a depository bank is that of creditor and debtor. SC: UNTENABLE. Said respondents shockingly ignore the fact that said government funds were deposited with respondent bank as the official depositary of the Philippine Government. What was garnished was not the bank's own funds but the credit of the Bureau of Public Works by the garnishment of the bank of P209,076.00 delivered to respondent estate. Petitioner bureau's credit against respondent bank thereby never lost its character as a credit representing government funds thus deposited. The moment the payment is made by respondent bank on such deposit, what it pays out represents the public funds thus deposited which are not garnishable and may be disbursed only for legitimate purposes such as legislative appropriation. Neither the PNB nor respondent Corua are the duly authorized disbursing officers and auditors of the Government to authorize and cause payment of the public funds of petitioner Bureau for the benefit or private persons, as they wrongfully did in this case. PNB and Corua faulted in the wrongful garnishment and delivery of the deposited funds of the Bureau. Hence, the matter of payment of Hashims estate's judgment credit is not their concern as custodian and depositary of the public funds deposited with them, whereby they are charged with the obligation of assuring that the funds are not illegally or wrongfully paid out. This ruling is consistent with Article 1903 of the Civil Code, which states: The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. (n) Green Valley Poultry and Allied Products, Inc. v. Intermediate Appellate Court FACTS: E.R. Squib entered into an letter agreement with Green Valley which appointed Green Valley as an non-exclusive distributor for Squib Veterinary Products. For goods delivered to Green Valley but unpaid, Squib filed a suit to collect. Green Valley claimed that the contract with Squib was an agency to sell; that they never purchased goods; that the products received were on consignment only with the obligation to turn over proceeds less commission or to return unsold goods and since it has sold the goods but had not been able to collect from the purchasers the action was premature. Squib claimed that the contract was a contract to sell so that Green Valley was obligated to pay for the goods upon expiration of the 60 day period. The Trial Court and the Court of Appeals ruled in favor of Squib saying the agreement was a sales contract and ordering Green Valley to pay Squib.

(AGENCY ATTY. OBIETA)

39

2D 2013 CLASS DIGEST


ISSUE: Whether or not the agreement was a contract of agency and if so, does it relieve Green Valley of any liability? HELD: The Supreme Court ruled that whether the agreement was an sales contract or an agency to sell, Green Valley was still liable. The Supreme Court further held that even if the contract was an agency to sell, Green Valley would still be liable because it sold on credit without authority from its principal. G.R. No. L-42465 November 19, 1936 INTERNATIONAL FILMS (CHINA), LTD., plaintiff-appellant, vs. THE LYRIC FILM EXCHANGE, INC., defendant-appellee. 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. On June 2, 1933, 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., to be shown in Cavite for two consecutive days. 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. On June 23, 1933, following the last showing of the film in question in the Paz Theater, Vicente Albo, then chief of the film department of the Lyric Film Exchange, Inc., telephoned said agent of the plaintiff company informing him 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. At about 11 o'clock the next morning, 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. under Gabelman's own responsibility, as the International Films (China) Ltd. did not yet have a safety vault. This request was thereafter granted. 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. On August 13 and 19, 1933, 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. Inasmuch as the plaintiff would profit by the showing of the film "Monte Carlo Madness", Lazarus Joseph agreed to said exhibition. It happened, however, that the bodega of the Lyric Film Exchange, Inc., was burned on August 19, 1933, 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". Decision: The verbal contract 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. Thus, 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

(AGENCY ATTY. OBIETA)

40

2D 2013 CLASS DIGEST


insurance of the film does not form a part of the obligation imposed upon it by law. As to the question whether or not the defendant company having collected the entire proceeds of the fire insurance policy of its films deposited in its vault, should pay the part corresponding to the film in question which was deposited therein, the evidence shows that the film "Monte Carlo Madness" under consideration was not included in the insurance of the defendant company's films, as this was one of the reasons why O'Malley at first refused to receive said film for deposit and he consented thereto only when Bernard Gabelman, the former agent of the plaintiff company, insisted upon his request, assuming all responsibility. Furthermore, the defendant company did not collect from the insurance company an amount greater than that for which its films were insured, notwithstanding the fact that the film in question was included in the vault, and it would have collected the same amount even if said film had not been deposited in its safety vault. Inasmuch as the defendant company, The Lyric Film Exchange, Inc., had not been enriched by the destruction by fire of the plaintiff company's film, it is not liable to the latter.

(AGENCY ATTY. OBIETA)

41