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Facts: Concepcion and Gerundia Rallos were sisters and registered
co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer Certificate of Title No.
11116 of the Registry of Cebu. They executed a special power of
attorney in favor of their brother, Simeon Rallos, authorizing him to
sell such land for and in their behalf. After Concepcion died,
Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia to Felix Go Chan & Sons Realty Corporation for the
sum of P10,686.90. New TCTs were issued to the latter. Petitioner
Ramon Rallos, administrator of the Intestate Estate of Concepcion
filed a complaint praying (1) that the sale of the undivided share of
the deceased Concepcion Rallos in lot 5983 be unenforceable, and
said share be reconveyed to her estate; (2) that the Certificate of
'title issued in the name of Felix Go Chan & Sons Realty Corporation
be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal
undivided and (3) that plaintiff be indemnified by way of attorney's
fees and payment of costs of suit.
1) WON sale was valid although it was executed after the
death of the principal, Concepcion.
2) WON sale fell within the exception to the general rule that
death extinguishes the authority of the agent
3) WON agents knowledge of the principals death is a
material factor.
4) WON petitioner must suffer the consequence of failing to
annotate a notice of death in the title (thus there was good
faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case
should be treated parallel to that of an innocent purchaser
for a value of a land.
Relationship of Agency (concept arising from principles under Art
1317 and 1403)- one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in
his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal

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

o Generally: among others, By the death, civil
interdiction, insanity or insolvency of the principal or
of the agent
- death of the principal effects instantaneous
and absolute revocation of the authority of
the agent
o Exceptions:
(Art. 1930) if it has been constituted in the
common interest of the latter and of the
agent, or in the interest of a third person who
has accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge
of the pricipals death and that the third
person was in good faith (both these reqs
should be present)


1) Sale was void.
No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to
represent him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon
Concolacions death
2) The sale did not fall under the exceptions to the general rule
that death ipso jure extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos
was not coupled with interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from
his pleadings) of principal Concepcions death
For Art 1931 to apply, both requirements must
be present

3) Yes, agents knowledge of principals death is material.

Respondent asserts that: there is no provision in the Code
which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with
respect to third persons who may have contracted with him
in good faith and without knowledge of the death of the
Court says: this contention ignored the ignores the
existence of the general rule enunciated in Article 1919 that
the death of the principal extinguishes the agency. Article
1931, being an exception to the general rule, is to be strictly
4) NO, the Civil Code does not impose a duty upon the heirs to
notify the agent or others of the death of the principal.
If revocation was by the act of the principal: a general
power which does not specify the persons to whom
represents' on should be made, it is the general opinion
that all acts, executed with third persons who contracted
in good faith, Without knowledge of the revocation, are
BUT, if revocation was due to death of the principal:
extinguishment, by operation of law, is instantaneous
without the need for notification to the parties
5) No.

Laws on agency, the terms of which are clear and

unmistakable leaving no room for an interpretation
contrary to its tenor, should apply, the law provides that
death of the principal ipso jure extinguishes the
authority of the agent to sell rendering the sale to a third
person in good faith unenforceable unless at the agent
had no knowledge of the principals death at that time
(exception under Art. 1931)


to be bound)
FACTS: St. Therese Merchandising (STM) regularly bought sugar
from Victorias Milling Co (VMC). In the course of their dealings, VMC
issued several Shipping List/Delivery Receipts (SLDRs) to STM as
proof of purchases. Among these was SLDR No. 1214M. SLDR No.

1214M, dated October 16, 1989, covers 25,000 bags of sugar. Each
bag contained 50 kg and priced at P638.00 per bag. The
transaction covered was a direct sale.
On October 25, 1989, STM sold to private respondent Consolidated
Sugar Corporation (CSC) its rights in the same SLDR for
P14,750,000.00. CSC issued checks in payment. That same day,
CSC wrote petitioner that it had been authorized by STM to
withdraw the sugar covered by the said SLDR. Enclosed in the letter
were a copy of SLDR No. 1214M and a letter of authority from STM
authorizing CSC to withdraw for and in our behalf the
refined sugar covered by the SLDR On Oct. 27, 1989, STM
issued checks to VMC as payment for 50,000 bags, covering SLDR
No. 1214M. CSC surrendered the SLDR No. 1214M and to VMCs
NAWACO Warehouse and was allowed to withdraw sugar. But only
2,000 bags had been released because VMC refused to release the
other 23,000 bags.
Therefore, CSC informed VMC that SLDR No. 1214M had been sold
and endorsed to it. But VMC replied that it could not allow any
further withdrawals of sugar against SLDR No. 1214M because STM
had already withdrawn all the sugar covered by the cleared checks.
VMC also claimed that CSC was only representing itself as STMs
agent as it had withdrawn the 2,000 bags against SLDR No. 1214M
for and in behalf of STM. Hence, CSC filed a complaint for specific
performance against Teresita Ng Sy (doing business under STM's
name) and VMC. However, the suit against Sy was discontinued
because later became a witness. RTC ruled in favor of CSC and
ordered VMC to deliver the 23,000 bags left. CA concurred. Hence
this appeal.
ISSUES: W/N CA erred in not ruling that CSC was an agent of STM
and hence, estopped to sue upon SLDR No. 1214M as assignee.
HELD: NO. CSC was not an agent of STM. VMC heavily relies on
STMs letter of authority that said CSC is authorized to withdraw
sugar for and in our behalf. It is clear from Art. 1868 that the:
basis of agency is representation. On the part of the principal, there
must be an actual intention to appoint or an intention naturally
inferable from his words or actions, and on the part of the agent,
there must be an intention to accept the appointment and act on it,
and in the absence of such intent, there is generally NO agency.

One factor, which most clearly distinguishes agency from other

legal concepts, is control; one person the agent agrees to act
under the control or direction of another the principal. Indeed, the
very word agency has come to connote control by the principal.
The control factor, more than any other, has caused the courts to
put contracts between principal and agent in a separate category.
Where the relation of agency is dependent upon the acts of the
parties, the law makes no presumption of agency and it is always a
fact to be proved, with the burden of proof resting upon the
persons alleging the agency, to show not only the fact of its
existence but also its nature and extent. It appears that CSC was a
buyer and not an agent of STM. CSC was not subject to STMs
control. The terms for and in our behalf should not be eyed as
pointing to the existence of an agency relation. Whether or not a
contract is one of sale or agency depends on the intention of the
parties as gathered from the whole scope and effect of the
language employed. Ultimately, what is decisive is the intention of
the parties. (In fact, CSC even informed VMC that the SLDR was
sold and endorsed to it.)
Agency distinguished from sale.

Facts: Heirs of Bartolome Ramos alleged that spouses Leonilo and

Maria Tuazon purchased a total of 8,326 cavans of rice from [the
respondents]. That of this [quantity,] . . . only 4,437 cavans [have
been paid for so far], leaving unpaid 3,889 cavans valued at
P1,211,919.00. In payment therefor, the spouses Tuazon issued
several Traders Royal Bank checks. But when these checks were
encashed, all of the checks bounced due to insufficiency of funds.
[Respondents] advanced that before issuing said checks[,] spouses
Tuazon already knew that they had no available fund to support the
checks, and they failed to provide for the payment of these despite
repeated demands made on them.
For their part, defendants denied having purchased rice from
[Bartolome] Ramos. They alleged that it was Magdalena Ramos,
wife of said deceased, who owned and traded the merchandise and
Maria Tuazon was merely her agent. They argued that it was
Evangeline Santos who was the buyer of the rice and issued the
checks to Maria Tuazon as payments therefor. In good faith[,] the
checks were received [by petitioner] from Evangeline Santos and
turned over to Ramos without knowing that these were not funded.

In an agency to sell, the agent, in dealing with the thing received, is

bound to act according to the instructions of his principal, while in a
sale, the buyer can deal with the thing as he pleases, being the
owner. The elementary notion of sale is the transfer of title to a
thing from one to another, while the essence of agency involves the
idea of an appointment of one to act for another. Agency is a
relationship which often results in a sale, but the sale is a
subsequent step in the transaction. (Teller, op. cit., p. 26; see
Commissioner of Internal Revenue vs. Manila Machinery & Supply
Co., 135 SCRA 8 [1985].) An authorization given to another
containing the phrase for and in our behalf does not necessarily
establish an agency, as ultimately what is decisive is the intention
of the parties. Thus, the use of the words sold and endorsed may
mean that the parties intended a contract of sale, and not a
contract of agency.

Issue: WON there was a contract of agency between spouses

Tuazon and spouses Ramos
Held: there was no contract of Agency
Ratio: In a contract of agency, one binds oneself to render some
service or to do something in representation or on behalf of
another, with the latter's consent or authority. 9 The following are
the elements of agency: (1) the parties' consent, express or
implied, to establish the relationship; (2) the object, which is the
execution of a juridical act in relation to a third person; (3) the
representation, by which the one who acts as an agent does so, not
for oneself, but as a representative; (4) the limitation that the agent
acts within the scope of his or her authority. 10 As the basis of
agency is representation, there must be, on the part of the
principal, an actual intention to appoint, an intention naturally
inferable from the principal's words or actions. In the same manner,
there must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent, there is
generally no agency. 11

Tuazon, et. Al. vs. Heirs of Bartolome Ramos. G.R. No.

156262, July 14, 2005

This Court finds no reversible error in the findings of the courts a

quo that petitioners were the rice buyers themselves; they were
not mere agents of respondents in their rice dealership. The
question of whether a contract is one of sale or of agency depends
on the intention of the parties.
The Court notes that petitioners, on their own behalf, sued
Evangeline Santos for collection of the amounts represented by the
bounced checks, in a separate civil case that they sought to be
consolidated with the current one. If, as they claim, they were mere
agents of respondents, petitioners should have brought the suit
against Santos for and on behalf of their alleged principal, in
accordance with Section 2 of Rule 3 of the Rules on Civil Procedure.
15 Their filing a suit against her in their own names negates their
claim that they acted as mere agents in selling the rice obtained
from Bartolome Ramos.

Relation of third party with principal and agent

G.R. No. 120465. September 9, 1999 WILLIAM UY and RODEL
William Uy and Rodel Roxas (petitioners) are agents authorized to
sell 8 parcels of land in Benguet.
Uy and Roxas offered to sell the parcels of land to NHA for a
housing project. 1989, NHA passed a resolution approving the
acquisition of said lands, and they executed Deeds of Absolute
HOWEVER, only 5 out of 8 lands were paid for by NHA because of
a report from DENR that the remaining area is located at an active
landslide area and are therefore not conducive for housing.
1991, NHA issued a resolution canceling the sale of the remaining
lands and offered P1.225 million to the landowners as daos
1992, Uy and Roxas filed a complaint for damages against NHA.

RTC: cancellation was justified, but awarded the amount offered

by NHA as damages.
CA: affirmed the decision, but deleted the award.
ISSUE/S: Whether or not Uy and Roxas are real parties in interest;
Whether or not, as agents, Uy and Roxas can maintain an action
against a third party.
HELD: No, they are not parties in interest because theyre merely
agents of their principal.
RATIO:An action shall be prosecuted in the name of the party who,
by the substantive law, has the right sought to be enforced. Uy and
Roxas are not parties to the contract of sale between their
principals and NHA. They are mere agents of the owners of the land
subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals. The
rendering of such service did not make them parties to the
contracts of sale executed in behalf of the latter. Since a contract
may be violated only by the parties thereto as against each other,
the real parties-in-interest, either as plaintiff or defendant, in an
action upon that contract must, generally, either be parties to said
contract. Uy and Roxas, likewise, have not shown that they are
assignees of their principals to the subject contracts.
It is only when an agent is constituted as an assignee that he, in his
own behalf, may sue on a contract made for his principal.
Jocelyn B. Doles vs. Ma. Aura Tina Angeles
G.R. No. 149353. June 26, 2006.
Petitioner executed a Deed of Absolute Sale ceding a parcel of land
in favor of respondent to satisfy the alleged indebtedness of the
former in the amount of P405,430.00. Since the said land was
mortgaged to the National Home Mortgage Finance Corporation,
they further agreed that respondent assume the remaining balance
of the loan. Learning that the petitioner still has arrearages,
respondent demanded that the arrearages be paid first. Petitioner
did not heed, thus a case was filed by the respondent.

In answer, the petitioner alleged that sale was void for lack of
consideration and that she was not indebted to the respondent as
she only referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal
checks through her capitalist Arsenio Pua. Further petitioner
contended that since the respondent is also an agent, she does not
have the capacity to sue her.

Here, both petitioner and respondent have undeniably disclosed to

each other that they are representing someone else and so both of
them are estopped to deny the same.

It is an admitted fact by both petitioner and defendant, based on

their testimonies, that respondent knew that the money will be
used by the friends of the petitioner; that the respondent was
merely representing Arsenio Pua; and that before the supposed
friends of the petitioner defaulted in payment, each issued their
personal checks in the name of Arsenio Pua for the payment of
their debt.


FACTS: o A car belonging to Salvador SISON was brought to a
gasoline and service station somewhere in Manila, owned by the
SHELL Company of the Philippine Islands, Limited, but operated by
Porfirio DE LA FUENTE, for the purpose of having said car washed
and greased for a consideration of P8.00 o 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 o The job of washing and greasing
was undertaken by DE LA FUENTE through his two employees a
greaseman and a helper/washer. To perform the job, the car was
carefully and centrally placed on the platform of a hydraulic lifter
before raising up said platform to a height of about 5 feet and then
the servicing job was started o After more than one hour of washing
and greasing, the job was about to be completed except for an
ungreased portion underneath the vehicle which could not be
reached by the greaseman. So, the lifter was lowered a little by the
greaseman and while doing so, the car for unknown reason
accidentally fell and suffered substantial damage o SISON forthwith
brought the matter to his insurers attention. The insurance
companies after due inspection paid the sum of P1,651.38 for the
damaged cars repair. SISON, for his part made assignments of his
rights to recover damages in favor of the Firemen's Insurance
Company and the Commercial Casualty Insurance Company
hence, the instant case for the recovery of the total amount of the
damage from SHELL and DE LA FUENTE on the ground of
negligence o CFI dismissed the complaint. Insurance Companies
appealed. The Court of Appeals reversed the CFIs judgment and
sentenced SHELL and DE LA FUENTE to pay the amount sought to
be recovered, plus legal interest and costs o The CA ruled that DE

Whether or not petitioner and respondent were acting on their
personal capacity or as mere agents.
The question whether an agency has been created is ordinarily a
question which may be established in the same was as any other
fact, either by direct or circumstantial evidence. Agency may be
implied from the words and conduct of the parties and the
circumstances of the particular case. Though the fact or extent of
authority of the agents may not, as a general rule, be established
from the declarations of the agents alone, if one professed to act as
agent for another, she may be stopped to deny her agency both as
against the asserted principal and the third persons interested in
the transaction in which he or she is engaged.
In this case, petitioner knew that the financier of the respondent is
Pua, and respondent knew that the borrowers are friends of
petitioner. It is sufficient that petitioner disclosed to respondent
that the former was acting in behalf of her principals, her friends.
For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent

That both parties acted as mere agents is shown by the undisputed

fact that the friends of the petitioner issued checks in payment of
the loan in the name of Arsenio Pua.

LA FUENTE is SHELLs agent; hence, as principal, it is liable for his

agents breach of undertaking o SHELL now comes to the SC on
appeal questioning the aforesaid CA decision, raising the
ISSUE: WON DE LA FUENTE is really SHELLs agent? Isnt he more
of an independent contractor?
HELD: DE LA FUENTE is SHELLs agent. The operator of a gasoline
station is an agent of the oil company. He cannot be considered as
an independent contractor by reason of SHELLs extensive control
and supervision over his tasks. The assailed CA decision is affirmed.
RATIO: o DE LA FUENTE owed his position to SHELL which could
remove him or terminate his services at any time. He merely
undertook to exclusively sell SHELLs products at the station he
operates. For this purpose, he was placed in possession of all the
equipments needed to operate it, including the hydraulic lifter from
which SISONs automobile fell o But it must be noted that these
equipments were delivered to DE LA FUENTE merely on loan basis.
SHELL still took charge of its care and maintenance. It supervised
DE LA FUENTE and conducted periodic inspection of the gasoline
and service station o Moreover, SHELL did not leave the fixing of
price for gasoline to DE LA FUENTE; on the other hand, SHELL had
complete control thereof; and it had supervision over DE LA
FUENTE in the operation of the station and in the sale of its
products therein o In fine, the gasoline and service station really
belonged to SHELL. It bore its tradename and the operator DE LA
FUENTE merely sold the products of SHELL there o Considering the
abovelisted, in no wise can it be said that DE LA FUENTE is an
independent contractor of SHELL. The extensive control and
supervision that SHELL exercises over DE LA FUENTE militate
heavily against this contention. On the contrary, such
circumstances show the existence of agency between them o The
existence of agency between SHELL and DE LA FUENTE is also
evidenced by a receipt issued by SHELL and signed by DE LA
FUENTE, acknowledging the delivery of equipments for the gas
station in question and an official from of the inventory of said
equipment containing DE LA FUENTEs signature above the words:
"Agent's signature" RE: Liability of Principal for Agents breach of
undertaking o As the CA correctly ruled, the fall of SISONs car from
the hydraulic lift was the result of some unforeseen shortcoming of
the mechanism itself. As the servicing job on SISONs car was

accepted by DE LA FUENTE in the normal and ordinary conduct of

his business as operator of SHELLs service station, and that the
defective hydraulic lift caused the fall of the car, he is liable
therefor. SHELL, his principal, is also liable as DE LA FUENTE acted
withn the representative authority granted him as SHELLs agent.
As the act of the agent 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 Moreover, SHELL
undertook to "answer and see to it that the equipments are in good
running order and usable condition." Obviously, SHELL failed to
make a thorough check up of the hydraulic lifter. Hence, it was also
negligent in that aspect to which it must answer, as the faulty lifter
was the cause of the fall of the SISONs car.
Fressel v Mariano Uy Chaco Sons & Co. (ABBY) March 3, 1916
Trent, J. FACTS: Merritt undertook and agreed with the defendant to
build for the defendant a costly edifice in the city of Manila at the
corner of Calle Rosario and Plaza del Padre Moraga. In the contract
it was agreed between the parties thereto, that Uy Chaco at any
time, upon certain contingencies, before the completion of said
edifice could take possession of said edifice in the course of
construction and of all the materials in and about said premises
acquired by Merritt for the construction of said edifice.Fressel
delivered to Merritt at the said edifice in the course of construction
certain materials of the value of P1,381.21Uy Chaco took
possession of the incomplete edifice in course of construction
together with all the materials on said premises including the
materials delivered. Neither Meritt nor Uy Chaco paid for the
materials even after extrajudicial demand. The appellants insist
that the above quoted allegations show that Merritt acted as the
agent of the defendant in purchasing the materials in question and
that the defendant, by taking over and using such materials,
accepted and ratified the purchase, thereby obligating itself to pay
for the same. ISSUE: Fressels allegation That in pursuance of the
contract between Merritt and the defendant, Merritt acted as the
agent for defendant in the acquisition of the materials from
plaintiffs. W/N Meritt acted as an agent for Uy Chaco and Sons
Held: NO. Meritt is an independent contractor. Where one party to a
contract was authorized to do work according to his own method
and without being subject to the other partys control, except as to
the result of the work, he is an independent contractor and not an

agent. The fact that "the defendant entered into a contract with
one E. Merritt, where by the said Merritt undertook and agreed with
the defendant to build for the defendant a costly edifice" shows
that Merritt was authorized to do the work according to his own
method and without being subject to the defendant's control,
except as to the result of the work. He could purchase his materials
and supplies from whom he pleased and at such prices as he
desired to pay. Again, the allegations that the "plaintiffs delivered
the Merritt . . . . certain materials (the materials in question) of the
value of P1,381.21, . . . . which price Merritt agreed to pay," show
that there were no contractual relations whatever between the
sellers and the defendant. The mere fact that Merritt and the
defendant had stipulated in their building contract that the latter
could, "upon certain contingencies," take possession of the
incompleted building and all materials on the ground, did not
change Merritt from an independent contractor to an agent. In the
absence of a statute creating what is known as mechanics' liens,
the owner of a building is not liable for the value of materials
purchased by an independent contractor either as such owner or as
the assignee of the contractor.
Agency vs Sale
Quiroga vs Parsons G.R. No. L-11491
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a
contract making the latter an agent of the former. The contract
stipulates that Don Andres Quiroga, here in petitioner, grants
exclusive rights to sell his beds in the Visayan region to J. Parsons.
The contract only stipulates that J.Parsons should pay Quiroga
within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the
following stipulations: not to sell the beds at higher prices than
those of the invoices; to have an open establishment in Iloilo; itself
to conduct the agency; to keep the beds on public exhibition, and
to pay for the advertisement expenses for the same; and to order
the beds by the dozen and in no other manner. With the exception
of the obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth

in the contract. But the plaintiff alleged that the defendant was his
agent for the sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency. The whole question,
therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was
a purchaser or an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to
its essential clauses. In the contract in question, what was
essential, as constituting its cause and subject matter, is that the
plaintiff was to furnish the defendant with the beds which the latter
might order, at the price stipulated, and that the defendant was to
pay the price in the manner stipulated. Payment was to be made at
the end of sixty days, or before, at the plaintiffs request, or in cash,
if the defendant so preferred, and in these last two cases an
additional discount was to be allowed for prompt payment. These
are precisely the essential features of a contract of purchase and
sale. There was the obligation on the part of the plaintiff to supply
the beds, and, on the part of the defendant, to pay their price.
These features exclude the legal conception of an agency or order
to sell whereby the mandatory or agent received the thing to sell it,
and does not pay its price, but delivers to the principal the price he
obtains from the sale of the thing to a third person, and if he does
not succeed in selling it, he returns it. By virtue of the contract
between the plaintiff and the defendant, the latter, on receiving the
beds, was necessarily obliged to pay their price within the term
fixed, without any other consideration and regardless as to whether
he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the
only one expressly imposed by the contract, the effect of its breach
would only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff
consents to fill them, he waives his right and cannot complain for
having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by
and between the plaintiff and the defendant was one of purchase
and sale, and that the obligations the breach of which is alleged as

a cause of action are not imposed upon the defendant, either by

agreement or by law.
Gonzalo Puyat & Sons, Inc. v. Arco Amusement Company
G.R. No. L-47538, 20 June 1941
Arco Amusement Company (formerly Teatro Arco) contracted the
services of Puyat in order to purchase equipment and machinery for
a theater sound system from US-based company Starr Piano. Puyat
used the list price in charging Arco. When Arco knew of this, it filed
a complaint alleging that Puyat should have used the net price
since the latter acted as its agent.
HELD: Puyat was the agent of Starr Piano Company and not of
Teatro Arco. It is not possible to be the agent of both Starr Piano
and Teatro Arco. As observed by the trial court, whatever
unforseen events might have taken place unfavorable to the
defendant [Gonzalo Puyat & Sons], such as change in prices,
mistake in their quotation, loss of the goods not covered by
insurance or failure of the Starr Piano Company to properly fill the
orders as per specifications, the plaintiff [Arco Amusement
Company] might still legally hold the defendant [Gonzalo Puyat &
Sons] to the prices fixed of $1,700 and $1,600. This is incompatible
with the pretended relation of agency between the petitioner and
the respondent, because in agency, the agent is exempted from all
liability in the discharge of his commission provided he acts in
accordance with the instructions received from his principal and
the principal must indemnify the agent for all damages which the
latter may incur in carrying out the agency without fault or
imprudence on his part
HAHN v. CA G.R. No. 113074; January 22, 1997
Ponente: J. Mendoza
FACTS: Petitioner Alfred Hahn is a Filipino citizen doing business
under the name and style "Hahn-Manila". On the other hand,
private respondent (BMW) is a nonresident foreign corporation
existing under the laws of the former Federal Republic of Germany,
with principal office at Munich, Germany.

Per the agreement, the parties "continue[d] business relations as

has been usual in the past without a formal contract."
But on February 16, 1993, in a meeting with a BMW representative
and the president of Columbia Motors Corporation (CMC), Jose
Alvarez, petitioner was informed that BMW was arranging to grant
the exclusive dealership of BMW cars and products to CMC, which
had expressed interest in acquiring the same.
On February 24, 1993, petitioner received confirmation of the
information from BMW which, in a letter, expressed dissatisfaction
with various aspects of petitioner's business, mentioning among
other things, decline in sales, deteriorating services, and
inadequate showroom and warehouse facilities, and petitioner's
alleged failure to comply with the standards for an exclusive BMW
Nonetheless, BMW expressed willingness to continue business
relations with the petitioner on the basis of a "standard BMW
importer" contract, otherwise, it said, if this was not acceptable to
petitioner, BMW would have no alternative but to terminate
petitioner's exclusive dealership effective June 30, 1993.
Because of Hahn's insistence on the former business relations,
BMW withdrew on March 26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer relationship effective
June 30, 1993.
On April 29, 1993, BMW proposed that Hahn and CMC jointly import
and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a
complaint for specific performance and damages against BMW to
compel it to continue the exclusive dealership.
ISSUE:Whether petitioner Alfred Hahn is the agent or distributor in
the Philippines of private respondent BMW
HELD: Alfred Hahn is an agent of BMW.

On March 7, 1967, petitioner executed in favor of private

respondent a "Deed of Assignment with Special Power of Attorney.

The Supreme Court held that agency is shown when Hahn claimed
he took orders for BMW cars and transmits them to BMW. Then
BMW fixes the down payment and pricing charges and will notify
Hahn of the scheduled production month for the orders, and
reconfirm the orders by signing and returning to Hahn the
acceptance sheets.
The payment is 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.
Moreover, the Court distinguished an agent from a broker. The
court ruled that an agent receives a commission upon the
successful conclusion of a sale. On the other hand, a broker earns
his pay merely by bringing the buyer and the seller together, even
if no sale is eventually made.
(Siasat v. IAC)
Where general words were employed in an agreement that no
restrictions were intended as to the manner the agency was to be
carried out or in the place where it was to be executed, a general
agency is constituted.
(Katigbak v. Tai Hing Co.)
The power of attorney given by the principal authorized the agent
to sell any kind of of realty that "might belong" to the principal. The
phrase "might belong" means that the authority given by the
principal referred not only to the property he had at the time the
power was conferred, but also to such as he might afterwards have
during the time the power of attorney was in force.
139 SCRA 238October 10, 1985; Gutierrez, Jr.

Nacianceno succeeded in convincing officials of the Department of

Education and Culture, hereinafter called Department, topurchase
without public bidding, 1m worth of national flags forthe use of
public schools throughout the country. WhenNacianceno was
informed by the Chief of the Budget Division of the Department
that the purchase orders could not be releasedunless a formal offer
to deliver the flags in accordance with therequired specifications
was first submitted for approval, shecontacted the owners of the
United Flag Industry. The next day,after the transaction was
discussed, a document was executed
formalizing Naciancenos authority to represent United Flag
Industry and entitling her to a 30% commission. This was signedby
Primitive Siasat.
After the first delivery of flags was made, Naciancenos authority
was revoked by Siasat.
After Siasat received the payment for the first delivery, hetendered
5% of the amount received to Nacianceno as payment of her
commission. Nacainceno refused to accept the said amount
However,Nacianceno still accepted the amount because the Siasat
assuredher that she would receive the commission in full after
thedelivery of the other half of the order.
When Nacianceno later on learned that Siasat had alreadyreceived
payment for the 2nd delivery, she confronted him. Siasat denied
the receipt of payment, at the same time claiming that
theNaciaceno had no participation whatsoever with regard to the
2nd delivery of flags and that the agency had already been
Nacianceno filed a complaint with the Complaints andInvestigation
Office of Malacanang. When nothing came of thecomplaint, she
filed an action in the CFI to recover hercommissions (25%, as
balance of the 1st delivery and 30%, on the2nd delivery)
TCdecided in favour of Nacianceno
IACaffirmed the decision.

(1) the authorization making Nacianceno United Flag

Industrys representative merely states that she could deal with

any entity in connection with the marketing of their products fora

commission of 30%. There was no specific authorization for thesale
of the Philippine flags to the Department (2) there were
2transaction. The revocation of agency effected by the parties with
mutual consent forecloses Naciancenos claim of 30& commission
on the 2nd transaction (3) no basis for granting of attorneys fees
and moral damages because there was no showing of bad faith
onthe part of Siasat.
1.WON Nacianceno was authorized to negotiate the sale of
thePhilippine flags to the Department.
2.WON the revocation of agency forecloses Naciancenos claim
of 30% commission on the 2nd transaction.
3.WON the grant of attorneys fees and moral damages was proper.
1.YES. It can easily be seen by the way general words
wereemployed in the agreement that no restrictions were intended
asto the manner the agency was to be carried out or in the
placewhere it was to be executed. The power granted to
theNacianceno was so broad that it practically covers
thenegotiations leading to, and the execution of, a contract of sale
Siasats merchandise with any entity or organization.
There are several kinds of agents:
An agent may be (1) universal: (2) general, or (3) special.
Auniversal; agent is one authorized to do all acts for hisprincipal
which can lawfully be delegated to an agent. So faras such a
condition is possible, such an agent may be said tohave universal
A general agent is one authorized to do all acts pertaining toa
business of a certain kind or at a particular place, or all
actspertaining to a business of a particular class or series. He
hasusually authority either expressly conferred in general termsor
in effect made general by the usages, customs or nature of the
business which he is authorized to transact.

An agent, therefore, who is empowered to transact all thebusiness

of his principal of a particular kind or in a particular place, would,
for this reason, be ordinarilydeemed a general agent.
A special agent is one authorized to do some particular act or to act
upon some particular occasion. lie acts usually inaccordance with
specific instructions or under limitationsnecessarily implied from
the nature of the act to be done.
There is no merit in Siasats allegations that the contract of agency
between the parties was entered into under fraudulent
representation because Nacianceno would not disclose the
agencywith which she was supposed to transact and made Siasat
believethat she would be dealing with The Visayas", and that
"thepetitioner had known of the transactions and/or project for
thesaid purchase of the Philippine flags by the Department of
Education and Culture and precisely it was the one being
followedup also by the petitioner."
If the circumstances were as claimed by Siasat, they would
haveexerted efforts to protect their interests by limiting
theNacianceno's authority. It is incredible that they could be
socareless after being in the business for fifteen years.
A cardinal rule of evidence embodied in Section 7 Rule 130 of
ourRevised Rules of Court states that "when the terms of
anagreement have been reduced to writing, it is to be considered
ascontaining all such terms, and, therefore, there can be
betweenthe parties and their successors-in-interest, no evidence of
theterms of the agreement other than the contents of the
writing",except in cases specifically mentioned in the same
rule.Petitioners have failed to show that their agreement falls
underany of these exceptions. The respondent was given
ampleauthority to transact with the Department in behalf of
2.NO. The revocation of agency could not prevent therespondent
from earning her commission because it cametoo late, the contract
of sale having been already perfectedand partly executed.
The petitioners' evidence does not necessarily prove that therewere
two separate transactions. Exhibit "6" is a generalindorsement
made by Secretary Manuel for the purchase of thenational flags for
public schools. It contains no reference to thenumber of flags to be
ordered or the amount of funds to bereleased. Exhibit "7" is a letter

request for a "similar authority" topurchase flags from the United

Flag Industry. This was, however,written by Albarracin who was
appointed Acting Secretary of theDepartment after Secretary
Manuel's tenure, and who may not have known the real nature of
the transaction.
If the contracts were separate and distinct from one another,the
whole or at least a substantial part of the government'ssupply
procurement process would have been repeated. Inthis case, what
were issued were mere indorsements for therelease of funds and
authorization for the next purchase.
Since only one transaction was involved, we deny thepetitioners'
contention that Nacianceno is not entitled to thestipulated
commission on the second delivery because of therevocation of the
agency effected after the first delivery.
Macondray & Co. v. Sellner - Our ruling is that at the timefixed by
the manager of the plaintiff company for thetermination of the
negotiations, the defendant real estateagent had already earned
the commissions agreed upon, andcould not be deprived thereof by
the arbitrary action of theplaintiff company in declining to execute
the contract of salefor some reason personal to itself.
Infante v. Cunanan - The principal cannot deprive his agent of the
commission agreed upon by cancelling the agency and,thereafter,
dealing directly with the buyer
Heimbrod et al. v. Ledesma - The appellee is entitled torecovery. No
citation is necessary to show that the generallaw of contracts the
equitable principle of estoppel and theexpense of another, uphold
payment of compensation forservices rendered.

There is merit, however, in the petitioners' contention that

theagent's commission on the 1st delivery was fully paid.
andInvestigation Office to help her collect her commission,
30%commission on the second delivery. The demand letter of the
Naciacenos lawyer asked Siasat on

ly for the 30%commission due from the second delivery. The fact
that theNaciaceno demanded only the commission on the 2nd
delivery without reference to the alleged unpaid balancewhich was
only slightly less than the amount claimed canonly mean that the
commission on the first delivery wasalready fully paid, Considering
the sizeable sum involved,such an omission is too glaringly remiss
to be regarded as anoversight.
Moreover, the Naciaceno's authorization letter bears hersignature
with the handwritten words "Fully Paid", inscribedabove it.
The respondent contested her signature as a forgery,Handwriting
experts from two government agenciestestified on the matter.
While the experts testified in a civil case, the principles incriminal
cases involving forgery are applicable. Forgerycannot be presumed.
It must be proved. Borromeo v. Court of Appeals - Where the
evidence, as here, gives rise to twoprobabilities, one consistent
with the defendant's innocenceand another indicative of his guilt,
that which is favorable tothe accused should be considered. The
constitutionalpresumption of innocence continues until overthrown
byproof of guilt beyond reasonable doubt, which requiresmoral
certainty which convinces and satisfies the reason andconscience
of those who are to act upon it

We also rule against the respondent's allegation that thepetitioners

acted in bad faith when they revoked the agency givento the
respondent. Fraud and bad faith are matters not to bepresumed but
matters to be alleged with sufficient facts. Tosupport a judgment for
damages, facts which justify the inferenceof a lack or absence of
good faith must be alleged and proven.
There is no evidence on record from which to conclude that the
revocation of the agency was deliberately effected by
thepetitioners to avoid payment of the respondent'scommission.
What appears before us is only the petitioner'suse in court of such
a factual allegation as a defense against the respondent's claim.
This alone does not per se make thepetitioners guilty of bad faith
for that defense should havebeen fully litigated.3.
NO. The award of moral damages and attorneys fees is without

The decision of the respondent court is hereby MODIFIED. The

petitionersare ordered to pay the respondent the amount of
P140,994.00 as her commission on the second delivery of flags.

The payment of claims is not an act of administration which

requires a special power of attorney before Guevarra could settle
the insurance claims of the insured.



Also Guevarra was instructed that the payment for the insured
must come from the revolving fund or collection in his possession,
Gueverra should not have paid the insured through his own
capacity. Under 1918 of civil code an agent who acted in
contravention of the principals instruction the principal will not be
liable for the expenses incurred by the agent.

FACTS:Rodolfo Guevarra (Guevarra) filed a civil case for sum of

money against Dominion Insurance Corp. (Dominion) for the
amount advanced by Guevarra in his capacity as manager of
defendant to satisfy certain claims filed by defendants client.
The pre-trial was always postponed, and during one of the pre-trial
conference dominion failed to arrive therefore the court declared
them to be in default. Dominion filed several Motions to Lift Order
of Default but was always denied by the court. The RTC rendered its
decision making Dominion liable to repay Guevarra for the sum
advanced and other damages and fees. Dominion appealed but CA
affirmed the decision of RTC and denied the appeal of Dominion.
(a) W/N Guevarra acted within his authority as agent of petitioner.
(b) W/N Guevarra must be reimbursed for the amount advanced.
(a) NO. Even though the contact entered into by Guevarra and
Dominion was with the word special the contents of the
document was actually a general agency. A general power permits
the agent to do all acts for which the law does not require a special
power and the contents in the document did not require a special
power of attorney.
Art 1878 of the civil code provides instances when a special power
of attorney is required.:
1) To make such payment as are not usually considered as acts of
15) any other act of dominion

(b) YES. Even if the law on agency prohibits Gueverra from

obtaining reimbursement his right to recover may be justified under
the article 1236 of the civil code.[1] Thus Guevarra must be
reimbursed but only to the extent that Dominion has benefited
without interest or demand for damages.
BPI vs. De Coster
Facts:De Coster, La Orden and Poizat issued a promissory note in
favor of BPI for P292,000
The promissory note was secured by several mortgages on
the several properties of the debtors
The debtors defaulted so BPI asked the court to foreclose
the mortgages
CFI issued an execution order against the three debtors
Gabriela de Coster, wife of Poizat, complained that at the
time of the filing of the complaint she was in Paris and was absent
in the Philippines .and has no knowledge of the actual facts. De
Coster also alleged that the mortgage was made without her
consent and made in excess of the authority given his husband and
therefore it was null and void.
Issue:W/N de Coster is also liable as to the debt incurred by his
Husband has no authority to execute a promissory note in
behalf of his wife or to make the latter liable as an accommodation
maker. Also, the debt was a preexisting debt of the husband
wherein the wife was not a party and has no legal obligation to pay.

The obligation of the husband stated in the power if attorney

was to borrow money for or in account of his wife as her agent as
her attorney in fact. That does not carry with it the power to make
his wife liable as a surety for his preexisting debt
Also, the husband, the agent of his wife, failed to represent
the interest of his principal in court. This gave the principal the
authority to obtain relief under section 113 of the Code of Civil
JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ,
Petitioners, vs. ALLIED BANKING CORPORATION, Respondent.
G.R. No. 171460
July 24, 2007
Facts: Perla executed a Special Power of Attorney (SPA) in favor of
her husband, Julian D. Mercado (Julian) over several pieces of real
property registered under her name, authorizing the latter to
perform the following acts: 1. To act in my behalf, to sell, alienate,
mortgage, lease and deal otherwise over the different parcels of
land described hereinafter x x x 2. To sign for and in my behalf any
act of strict dominion or ownership any sale, disposition, mortgage,
lease or any other transactions including quit-claims, waiver and
relinquishment of rights x x x 3. To exercise any or all acts of strict
dominion or ownership over the above-mentioned properties, rights
and interest therein.
On the strength of the aforesaid SPA, Julian obtained a loan from
the respondent. Still using the subject property as security, Julian
obtained an additional loan from the respondent.
It appears, however, that there was no property identified in the
SPA and registered with the Registry of Deeds. What was identified
in the SPA instead was the property different from the one used as
security for loan.
Julian defaulted on the payment of his loan obligations. Thus,
respondent initiated extra-judicial foreclosure proceedings over the
subject property which was subsequently sold at public auction
wherein the respondent was declared as the highest bidder.
Petitioners initiated an action for the annulment of REM constituted
over the subject property on the ground that the same was not

covered by the SPA and that the said SPA, at the time the loan
obligations were contracted, no longer had force and effect since it
was previously revoked by Perla. In the absence of authority to do
so, the REM constituted by Julian over the subject property was null
and void; thus, petitioners likewise prayed that the subsequent
extra-judicial foreclosure proceedings and the auction sale of the
subject property be also nullified.
Issues: (1) Whether or not there was a valid mortgage constituted
over subject property.
(2) Whether or not there was a valid revovation of SPA.
(3) Construction of powers of attorney.
Rulings: (1) In the case at bar, it was Julian who obtained the loan
obligations from respondent which he secured with the mortgage of
the subject property. The property mortgaged was owned by his
wife, Perla, considered a third party to the loan obligations between
Julian and respondent. It was, thus, a situation recognized by the
last paragraph of Article 2085 of the Civil Code that third persons
who are not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property. There is no question
therefore that Julian was vested with the power to mortgage the
pieces of property identified in the SPA, however, the subject
property was not among those enumerated therein. Julian was not
conferred by Perla with the authority to mortgage the subject
property under the terms of the SPA, the real estate mortgages
Julian executed over the said property are therefore unenforceable.
Hodges vs. Salas and Salas Agents powers are limited by the
stipulation in the PoA
Salas and Salas executed a PoA in favor of Felix Yulo
authorizing the latter to obtain a loan in the Salas name and
mortgage a parcel of land owned by the Salas. This PoA was
registered in the RD.
Yulo obtained a loan from C.N. Hodges in the amount of 28k
and mortgaged the land of the Salas. The loan was in the name of
Salas and Salas, holding them solidarily liable.
The whole 28k was not delivered to the Yulo. Part of it was
applied to a separate loan obtained by Yulo from Hodges.

Salas and Salas was not able to pay at maturity so Hodges

filed for foreclosure of the mortgaged land.
RTC absolved Salas and Salas from liability on the whole
amount. The RTC only held the Salas liable for the amount which
was actually delivered to them.
W/n the Salas can be held liable for the whole debt.
SC says no. The powers granted to Yulo by the PoAs were
only limited to obtaining a loan and securing such with a mortgage
on the property of the Salas. There is nothing to indicate that the
Salas had authorized Yulo to convert the money to his personal
use. In applying part of the loan to pay his obligations, Yulo
exceeded the authority granted to him by the PoAs. in cases like
this, the agent was obliged to turn over the money to the principal
or at least, place it at their disposal.
(side issues) Registration of the mortgage was proven
through oral evidence. The SC allowed this because there was no
objection to the presentation of such evidence. Also, the loans
were not usurious. The law allows the creditor to require payments
of interest in advance, provided it does not exceed 1 year.
Katigbak v. Tai Hing Co.
(December 29, 1928)
DOCTRINE: The power is general and authorizes Gabino Po Ejap to
sell any kind of realty "belonging" (pertenezcan) to the principal.
The use of the subjunctive "pertenezcan" (might belong) and not
the indicative "pertenecen" (belong), means that Po Tecsi meant
not only the property he had at the time of the execution of the
power, but also such as he might afterwards have during the time it
was in force.
While it is true that a power of attorney not recorded in the registry
of deeds is ineffective in order that an agent or attorney-in-fact
may validly perform acts in the name of his principal, and that any
act performed by the agent by virtue of said' power with respect to
the land is ineffective against a third person who, in good faith,
may have acquired a right thereto, it does, however, bind the
principal to acknowledge the acts performed by his attorney-in-fact
regarding said property.

NATURE: Appeal from a judgment of CFI Manila

PONENTE: Villa-Real

Po Ejap was the owner of a titled land w/c was mortgaged to

PNB in 1919

1921, Po Tecsi executed a general power of attorney in favor

of his brother Po Ejap to perform on his behalf the ff: "to buy, sell,
or barter, assign, admit in acquittance or in any other manner to
acquire or convey all sorts of property, real and personal,
businesses and industries, credits, rights, and actions belonging to
me, for whatever prices and under the conditions which he may
stipulate, paying and receiving payment in cash or in installments,
and to execute the proper instruments with the formalities provided
by the law."

Po Tecsi executed a document acknowledging an

indebtedness to his brother Po Ejap of 68K, the price of the
properties w/c the latter sold to him.

Po Ejap then sold the said land with its improvements to his
brother Po Tecsi for the sum of P10,000.

1923, making use of the power conferred by his brother, Po

Ejap sold absolutely said land to Katigbak.

1924, Po Tecsi wrote Po Ejap, promising to remit the balance

of the rents (meaning, Tecsi became a lessee).

Nov 1926, Po Tecsi died and his son Po Sun Suy was
appointed administrator of Tecsi's estate in 1927.

In Dec 1926, Po Sun Suy submitted to Po Ejap a liquidation

of accounts showing rents collected on the property.

Later, Katigbak sold the property to Po Sun Boo (son of Po


As Po Tecsi had not paid a part of the rent due up to the time
of his death, and his son Sun Suy also, rent due from his father's
death until Katigbak sold the property to Sun Boo, Katigbak filed
this action for the recovery of the rent.

Po Sun Suy contends that Katigbak is not the owner of the

property (so not entitled to rents) because Po Ejap was not
authorized under the power executed by Po Tecsi to sell said land,
because said power had been executed before Po Ejap sold said
land to Tecsi.

*Po Sun Suy and Po Ching are owners of the commercial firm Tai
Hing Co.

Tecsi - must be presented to the court having cognizance of said

intestate proceeding.

WON Po Ejap cannot have sold the property (on behalf of Tecsi)
because the power was executed by Tecsi before Tecsi owned the

The power is general and authorizes Gabino Po Ejap to sell

any kind of realty "belonging" (pertenezcan) to the principal. The
use of the subjunctive "pertenezcan" (might belong) and not the
indicative "pertenecen" (belong), means that Po Tecsi meant not
only the property he had at the time of the execution of the power,
but also such as he might afterwards have during the time it was in

Under Act 496, every document which in any manner affects

the registered land is ineffective unless it is recorded in the registry
of deeds. But such inefficacy only refers to third persons who, in
good faith, may have acquired some right to the registered land.

While it is true that a power of attorney not recorded in the

registry of deeds is ineffective in order that an agent or attorney-infact may validly perform acts in the name of his principal, and that
any act performed by the agent by virtue of said' power with
respect to the land is ineffective against a third person who, in
good faith, may have acquired a right thereto, it does, however,
bind the principal to acknowledge the acts performed by his
attorney-in-fact regarding said property.

VOTE: en banc, Malcolm dissent

CONCURRING/DISSENTING OPINION: Malcolm, dissenting (no need
to note this, as Malcolm dissented on procedural matters.)

1. Katigbak declared owner of property. (ang labo nito. He sold it
nga eh. Hahaha)
2. Katigbaks claim for the rents accrued and unpaid by Po Tecsin
before his death - must be presented to the committee on claims
and appraisal appointed in the intestate proceedings for the
settlement of the estate of said Po Tecsi;
3. the claim of Katigbak for the rents collected by Po Sun Suy, as
administrator of the property of the intestate estate of his father Po

Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL.

Antonio C. Goquilay, ET AL. vs. Washington Z. Sycip, ET AL. GR NO.
L-11840, December 10, 1963

Tan Sin An and Goquiolay entered into a general commercial
partnership under the partnership name Tan Sin An and Antonio
Goquiolay for the purpose of dealing in real estate. The agreement
lodged upon Tan Sin An the sole management of the partnership
affairs. The lifetime of the partnership was fixed at ten years and
the Articles of Co-partnership stipulated that in the event of death
of any of the partners before the expiration of the term, the
partnership will not be dissolved but will be continued by the heirs
or assigns of the deceased partner. But the partnership could be
dissolved upon mutual agreement in writing of the partners.
Goquiolay executed a GPA in favor of Tan Sin An. The plaintiff
partnership purchased 3 parcels of land which was mortgaged to
La Urbana as payment of P25,000. Another 46 parcels of land
were purchased by Tan Sin An in his individual capacity which he
assumed payment of a mortgage debt for P35K. A downpayment
and the amortization were advanced by Yutivo and Co. The two
obligations were consolidated in an instrument executed by the
partnership and Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of Banco HipotecarioTan Sin An died leaving
his widow, Kong Chai Pin and four minor children. The widow
subsequently became the administratrix of the estate. Repeated
demands were made by Banco Hipotecario on the partnership and
on Tan Sin An. Defendant Sing Yee, upon request of defendant
Yutivo Sons , paid the remaining balance of the mortgage debt, the
mortgage was cancelled Yutivo Sons and Sing Yee filed their claim
in the intestate proceedings of Tan Sin An for advances, interest

and taxes paid in amortizing and discharging their obligations to

La Urbana and Banco Hipotecario. Kong Chai Pin filed a petition
with the probate court for authority to sell all the 49 parcels of land.
She then sold it to Sycip and Lee in consideration of P37K and of
the vendees assuming payment of the claims filed by Yutivo Sons
and Sing Yee. Later, Sycip and Lee executed in favor of Insular
Development a deed of transfer covering the 49 parcels of land.
When Goquiolay learned about the sale to Sycip and Lee, he filed a
petition in the intestate proceedings to set aside the order of the
probate court approving the sale in so far as his interest over the
parcels of land sold was concerned. Probate court annulled the sale
executed by the administratrix w/ respect to the 60% interest of
Goquiolay over the properties Administratrix appealed.The decision
of probate court was set aside for failure to include the
indispensable parties. New pleadings were filed. The second
amended complaint prays for the annulment of the sale in favor of
Sycip and Lee and their subsequent conveyance to Insular
Development. The complaint was dismissed by the lower court
hence this appeal.
ISSUE/S: Whether or not a widow or substitute become also a
general partner or only a limited partner. Whether or not the lower
court err in holding that the widow succeeded her husband Tan Sin
An in the sole management of the partnership upon Tans death
Whether or not the consent of the other partners was necessary to
perfect the sale of the partnership properties to Sycip and Lee?
HELD: Kong Chai Pin became a mere general partner. By seeking
authority to manage partnership property, Tan Sin Ans widow
showed that she desired to be considered a general partner. By
authorizing the widow to manage partnership property (which a
limited partner could not be authorized to do), Goqulay recognized
her as such partner, and is now in estoppel to deny her position as
a general partner, with authority to administer and alienate
partnership property. The articles did not provide that the heirs of
the deceased would be merely limited partners; on the contrary,
they expressly stipulated that in case of death of either partner,
the co partnership will have to be continued with the heirs or
assignees. It certainly could not be continued if it were to be
converted from a general partnership into a limited partnership

since the difference between the two kinds of associations is

fundamental, and specially because the conversion into a limited
association would leave the heirs of the deceased partner without a
share in the management. Hence, the contractual stipulation
actually contemplated that the heirs would become general
partners rather than limited ones.
Vda de Chua vs CA
Vda de Chua vs. CA
GR No. 70909, January 5, 1994
FACTS: Roberto Lim Chua, during his lifetime, lived out of wedlock
with private respondent Florita A. Vallejo from 1970-1981. The
couple had two illegitimate children, Roberto Rafson Alonzo and
Rudyard Pride Alonzo, all surnamed Chua. Roberto died intestate in
Davao City on May 28, 1992. Vallejo filed on July 2, 1992 with RTCCotabato a petition for declaration of guardianship of the two child
and their properties worth P5,000,000.00.
Antonietta Garcia Vda De Chua, the petitioner, filed a motion
alleging that she was the true wife of Roberto. However, according
to Vallejo, she is not the surviving spouse of the latter but a
pretender to the estate since the deceased never contracted
marriage with any woman and died a bachelor.
ISSUE: Whether petitioner is indeed the true wife of Roberto Chua.
The court ruled that petitioner was not able to prove her status as
wife of the decedent. She could not produce the original copy or
authenticated copy of their marriage certificate. Furthermore, a
certification from the Local Civil Registrar was presented that no
such marriage contract between petitioner and Roberto Chua was
ever registered with them, attested by Judge Augusto Banzali, the
alleged person to have solemnized the alleged marriage, that he
has not solemnized such alleged marriage.
Hence, it is clear that petitioner failed to establish the truth of her
allegation that she was the lawful wife of the decedent. The best
evidence is a valid marriage contract which she failed to produce.
Ignacio Vicente vs Ambrosio Geraldez

210 Business Organization Corporation Law
Delegation of Corporate Powers Compromise Agreement

entering into a compromise agreement. Judge Ambrosio Geraldez

ruled in favor of HI Cement.

In 1967, HI Cement Corporation was granted authority to operate

mining facilities in Bulacan. However, the areas allowed for it to
explore cover areas which were also being explored by Ignacio
Vicente, Juan Bernabe, and Moises Angeles. And so a dispute arose
between the three and HI Cement as neither side wanted to give up
their mining claims over the disputed areas. Eventually, HI Cement
filed a civil case against the three. During pre-trial, the possibility of
an amicable settlement was explored where HI Cement offered to
purchase the areas of claims of Vicente et al at the rate of P0.90
per square meter. Vicente et al however wanted P10.00 per square

ISSUE: Whether or not a compromise agreement entered into by a

lawyer purportedly in behalf of the corporation is valid without a
written authority.

In 1969, the lawyers of HI Cement agreed to enter into a

compromise agreement with the three whereby commissioners
shall be assigned by the court for the purpose of assessing the
value of the disputed areas of claim. An assessment was
subsequently made pursuant to the compromise agreement and
the commissioners recommended a price rate of P15.00 per square
One of the lawyers of HI Cement, Atty. Francisco Ventura, then
notified the Board of Directors of HI Cement for the approval of the
compromise agreement. But the Board disapproved the
compromise agreement hence Atty. Ventura filed a motion with the
court to disregard the compromise agreement. Vicente et al
naturally assailed the motion. Vicente et al insisted that the
compromise agreement is binding because prior to entering into
the compromise agreement, the three lawyers of HI Cement
declared in open court that they are authorized to enter into a
compromise agreement for HI Cement; that one of the lawyers of HI
Cement, Atty. Florentino Cardenas, is an executive official of HI
Cement; that Cardenas even nominated one of the commissioners;
that such act ratified the compromise agreement even if it was not
approved by the Board. HI Cement, in its defense, averred that the
lawyers were not authorized and that in fact there was no special
power of attorney executed in their favor for the purpose of

HELD: No. Corporations may compromise only in the form and with
the requisites which may be necessary to alienate their property.
Under the corporation law the power to compromise or settle
claims in favor of or against the corporation is ordinarily and
primarily committed to the Board of Directors but such power may
be delegated. The delegation must be clearly shown for as a
general rule an officer or agent of the corporation has no power to
compromise or settle a claim by or against the corporation, except
to the extent that such power is given to him either expressly or by
reasonable implication from the circumstances. In the case at bar,
there was no special power of attorney authorizing the three
lawyers to enter into a compromise agreement. This is even if the
lawyers declared in open court that they are authorized to do so by
the corporation (in this case, the transcript of stenographic notes
does not show that the lawyers indeed declare such in open court).
The fact that Cardenas, an officer of HI Cement, acted in effecting
the compromise agreement, i.e. nominating a commissioner, does
not ratify the compromise agreement. There is no showing that
Cardenas act binds HI Cement; no proof that he is authorized by
the Board; no proof that there is a provision in the articles of
incorporation of HI Cement that he can bind the corporation.
Insular Drugs V. PNB (1933)
G.R. No. L-38816
November 3, 1933
Lessons Applicable: Liabilities of person who did not sign and
liability of an agent (Negotiable Instruments Law)
FACTS: Foerster formerly a salesman and collector of Insular Drug
Co., Inc (Insular) for the Islands of Panay and Negros
instructed to take the checks which came to his hands to the Iloilo
branch of the Chartered Bank of India, Australia and China and
deposit the amounts to the credit of the Insular
Instead, placed the checks in his personal account

Some of the checks were drawn against the Bank of Philippine

National Bank.
After the indorsement on the checks was written "Received
payment prior indorsement guaranteed by Philippine National bank,
Iloilo Branch, Angel Padilla, Manager."
Insular Manila office discovered the anomalies and Foerster
committed suicide
Insular filed against the bank for total of 132 checks amounting to
ISSUE: W/N Insular can file against the bank
HELD: YES. bank will have to stand the loss occasioned by the
negligence of its agent
the bank permitted Foerster, Foerster's wife and clerk to indorse
checks and then place them to his personal account
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
Severino v Severino
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 of conveyance to effect such retransfer or, in default
thereof, to pay damages
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.
in the case of Gilbert vs. Hewetson (79 Minn., 326):
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.
Domingo v Domingo
The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real
estate broker in this case, to his principal, the vendor. The law
imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his
transactions and other material facts relevant to the agency, so
much so that the law as amended does not countenance any
stipulation exempting the agent from such an obligation and
considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule
but a rule founded on the highest and truest principle of morality as
well as of the strictest justice.
Hence, an agent who takes a secret profit in the nature of a bonus,
gratuity or personal benefit from the vendee, without revealing the
same to his principal, the vendor, is guilty of a breach of his loyalty
to the principal and forfeits his right to collect the commission from
his principal, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results
or that the agency is a gratuitous one, or that usage or custom
allows it; because the rule is to prevent the possibility of any
wrong, not to remedy or repair an actual damage. 3 By taking such
profit or bonus or gift or propina from the vendee, the agent
thereby assumes a position wholly inconsistent with that of being
an agent for his principal, who has a right to treat him, insofar as
his commission is concerned, as if no agency had existed. The fact
that the principal may have been benefited by the valuable
services of the said agent does not exculpate the agent who has

only himself to blame for such a result by reason of his treachery or

As a general rule, it is a breach of good faith and loyalty to his
principal for an agent, while the agency exists, so to deal with the
subject matter thereof, or with information acquired during the
course of the agency, as to make a profit out of it for himself in
excess of his lawful compensation; and if he does so he may be
held as a trustee and may be compelled to account to his principal
for all profits, advantages, rights, or privileges acquired by him in
such dealings, whether in performance or in violation of his duties,
and be required to transfer them to his principal upon being
reimbursed for his expenditures for the same, unless the principal
has consented to or ratified the transaction knowing that benefit or
profit would accrue or had accrued, to the agent, or unless with
such knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The application of
this rule is not affected by the fact that the principal did not suffer
any injury by reason of the agent's dealings or that he in fact
obtained better results; nor is it affected by the fact that there is a
usage or custom to the contrary or that the agency is a gratuitous
The duty embodied in Article 1891 of the New Civil Code will not
apply if the agent or broker acted only as a middleman with the
task of merely bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms and conditions of
the transaction. Neither would the rule apply if the agent or broker
had informed the principal of the gift or bonus or profit he received
from the purchaser and his principal did not object therto
Murao vs People
All profits made and any advantage gained by an agent in the
execution of his agency should belong to the principal.[27] In the
instant case, whether the transactions negotiated by the sales
agent were for the sale of brand new fire extinguishers or for the
refill of empty tanks, evidently, the business belonged to LMICE.
Consequently, payments made by clients for the fire extinguishers
pertained to LMICE. When petitioner Huertazuela, as the Branch
Manager of LMICE in Puerto Princesa City, with the permission of
petitioner Murao, the sole proprietor of LMICE, personally picked up
Check No. 611437 from the City Government of Puerto Princesa,
and deposited the same under the Current Account of LMICE with

PCIBank, he was merely collecting what rightfully belonged to

LMICE. Indeed, Check No. 611437 named LMICE as the lone payee.
Private complainant Federico may claim commission, allegedly
equivalent to 50% of the payment received by LMICE from the City
Government of Puerto Princesa, based on his right to just
compensation under his agency contract with LMICE,[28] but not as
the automatic owner of the 50% portion of the said payment.
current Petition concerns an agency contract whereby the principal
already received payment from the client but refused to give the
sales agent, who negotiated the sale, his commission. As has been
established by this Court in the foregoing paragraphs, LMICE had a
right to the full amount paid by the City Government of Puerto
Princesa. Since LMICE, through petitioners, directly collected the
payment, then it was already in possession of the amount, and no
transfer of juridical possession thereof was involved herein. Given
that private complainant Federico could not claim ownership over
the said payment or any portion thereof, LMICE had nothing at all
to deliver and return to him. The obligation of LMICE to pay private
complainant Federico his commission does not arise from any duty
to deliver or return the money to its supposed owner, but rather
from the duty of a principal to give just compensation to its agent
for the services rendered by the latter.

Beaumont vs Prieto
Araullo, J:
Facts: Benito Legarda owns a parcel of land known as the Nagtajan
Hacienda which he wanted to sell through his agent Benito
Valdez; who is also his attorney in fact. Negotiations as to the
purchase of land has been had between Benito Valdez and W.
Borck. However, the parties eventually had a misunderstanding as
to the three (3) month period which the agent Benito Valdez gave
to Borck. It is an option period to buy the property.
Issue: Whether the agreement between the parties constitutes a
mere offer to sell or an actual contract of option?
Held: There was not contract because there was no concurrence of
the offer and acceptance of the thing and the cause which are to
constitute a contract. An option is an accepted offer. It states the

terms and conditions on which the owner is willing to sell or lease

his land, if the holder elects to accept them within the time limited.
As there can be no contract without the concurrence of the
requisites of consent of the parties and cause of consideration of
the obligation created, in order that a proposition or offer for sale
may acquire the character of a contract it is necessary that there
appear the expression of the will of the offeror and that of the
offeree and the consent of both as well as the fact that there was a
cause or consideration for the obligation which is the object of what
was agreed upon. Promises being binding when and so long as they
are accepted in the exact terms in which they are made it not
being legally proper to modify the conditions imposed by the
promisor without his consent then in order that the acceptance of
a proposition or offer may be efficacious and the option be perfect
and binding upon the parties thereto, it is necessary that such
acceptance should be unequivocal and unconditional and the
acceptance and proposition shall be without any variation
whatsoever, so that whatever modifications or deviation from the
terms of the offer annuls the latter and frees the offeror.
J. DANON vs. A. BRIMO (1921) Procuring Cause
NATURE: Action to recover the sum of P60,000, alleged to be the
value of services by the plaintiff as a broker.
QUICK FACTS & HELD: Danon (Broker) found a purchaser for the
factory of his manager (Brimo), who promised 5% commission to
Danon; Another broker found another purchaser who would buy the
factory at a higher price, said factory was sold to this purchaser; As
such, Danons client did not perfect the sale with Brimo.
Held: Danon not the procuring cause. A broker is never entitled to
commissions for unsuccessful efforts. The risk of failure is only his.
The reward comes only with his success. Where no time for the
continuance of the contract is fixed by its terms, either party is at
liberty to terminate it at will, subject only to the ordinary
requirements of good faith.
1.Antonio Brimo, informed the Danon, that he (Brimo) desired to
sell his factory, the Holland American Oil Co., for the sum of
2. Brimo agreed and promised to pay to the Danon commission of
5% provided the latter could sell said factory for that amount.

3. No definite period of time was fixed within which the Danon

should effect the sale. It seems that another broker, Sellner, was
also negotiating the sale, or trying to find a purchaser for the same
property and that the plaintiff was informed of the fact either by
Brimo himself or by someone else; at least, it is probable that the
plaintiff was aware that he was not alone in the field, and his whole
effort was to forestall his competitor by beingthe first to find a
purchaser and effect the sale.
4. Immediately after having an interview with Mr. Brimo, Danon
went to see Mr. Mauro Prieto, president of the Santa Ana Oil Mill, a
corporation, and offered to sell to him the defendant's property at
P1,200,000. The said corporation was at that time in need of such a
factory, and Mr. Prieto,instructed the manager, Samuel E. Kane, to
see Mr. Brimo and ascertain whether he really wanted to sell said
factory, and, if so, to get permission from him to inspect the
premises. Mr. Kane inspected the factory and, presumably, made a
favorable report to Mr. Prieto. The latter asked for an appointment
with Mr. Brimo to perfect the negotiation. In the meantime Sellner,
the other broker referred to, had found a purchaser for the same
property, who ultimately bought it for P1,300,000. For that reason
Mr. Prieto, the would be purchaser found by the plaintiff, never
came to see Mr. Brimo to perfect the proposed negotiation.
ISSUE: Whether Danon as broker was the Procuring Causeof
Sale? NO
Whether Danon is entitled to Compensation -NO
HELD: The most that can be said as to what the plaintiff had
accomplished is, that he had found a person who might have
bought the defendant's factory. The evidence does not show that
the Santa Ana Oil Mill had definitely decided to buy the property at
the fixed price of P1,200,000. The plaintiff claims that the reason
why the sale was not consummated was because Mr. Brimo refused
to sell.
Defendant agreed and promised to pay him a commission of 5%
provided he (the plaintiff) could sell the factory at P1,200.000.It is
difficult to see how the plaintiff can recover anything in the
premises. The plaintiff's action is an action to recover "the
reasonable value" of services rendered. It is clear that his
"services" did not contribute towards bringing about the sale. He
was not "the efficient agent or the procuring cause of the sale." The
broker must be the efficient agent or the procuring cause of sale.

The means employed by him and his efforts must result in the sale.
The duty assumed by the broker is to bring the minds of the buyer
and seller to an agreement for a sale, and the price and terms on
which it is to be made, and until that is done his right to
commissions does not accrue. It follows, that a broker is never
entitled to commissions for unsuccessful efforts. The risk of a
failure is wholly his. The reward comes only with his success. He
may have introduced to each other parties who otherwise would
have never met; he may have created impressions, which under
later and more favorable circumstances naturally lead to and
materially assist in the consummation of a sale; he may have
planted the very seed from which others reap the harvest; but all
that gives him no claim.
The failure therefore and its consequences were the risk of the
broker only. This however must be taken with one important and
necessary limitation. If the efforts of the broker are rendered a
failure by the fault of the employer; if capriciously he changes his
mind after the purchaser, ready and willing, and consenting to the
prescribed terms, is produced; or if the latter declines to complete
the contract because of some defect of title in the ownership of the
seller, some unremoved encumbrance, some defect which is the
fault of the latter, then the broker does not lose his commissions.
But this limitation is not even an exception to the general rule
affecting the broker's right for it goes on the ground that the broker
has done his duty, that he has brought buyer and seller to an
agreement, but that the contract is not consummated and fails
though the after-fault of the seller.
One other principle applicable: Where no time for the continuance
of the contract is fixed by its terms either party is at liberty to
terminate it at will,subject only to the ordinary requirements of
good faith. Usually the broker is entitled to a fair and reasonable
opportunity to perform his obligation, subject of course to the right
of the seller to sell independently. But having been granted him,
the right of the principal to terminate his authority is absolute and
unrestricted, except only that he may not do it in bad faith.
Although the present plaintiff could probably have effected the
sale, he is not entitled to the commissions agreed upon because he
had no intervention whatever in, and much sale in question. It must
be borne in mind that no definite period was fixed by the defendant
within which the plaintiff might effect the sale of its factory. Nor

was the plaintiff given by the defendant the exclusive agency of

such sale. Therefore, the plaintiff cannot complain of the
defendant's conduct in selling the property through another agent
before the plaintiff's efforts were crowned with success. "One who
has employed a broker can himself sell the property to a purchaser
whom he has procured, without any aid from the broker."
DISPOSITIVE: For the foregoing reasons the judgment appealed
from is hereby revoked and the defendant is hereby absolved from
all liability under the plaintiff's complaint, with costs in both
instances against the plaintiff. So ordered
Sanchez vs. Medicard Phil. Inc.
FACTS: Sometime in 1987 Medicard Inc. appointed petitioner
Sanchez as its special corporate agent and they gave him a
commission based on the "cash brought in." In 1988, through
petitioner's efforts, Medicard and Unilab executed a Health Care
representing the premium for one (1) year. Medicard then handed
petitioner 18% of said amount or P746,640.90 representing his
commission. Again, through petitioner's initiative, the agency
contract between Medicard and Unilab was renewed for another
year. Prior to the expiration of the renewed contract, Medicard
proposed an increase of the premium which Unilab rejected "for the
reason that it was too high,". In a letter dated October 3, 1990,
Unilab confirmed its decision not to renew the health program.
Meanwhile, in order not to prejudice its personnel by the
termination of their health insurance, Unilab negotiated with Dr.
Montoya and other officers of Medicard, to discuss new ways in
order to continue the insurance coverage. Under the new scheme,
Unilab shall pay Medicard only the amount corresponding to the
actual hospitalization expenses incurred by each personnel plus
15% service fee. Medicard did not give petitioner any commission
under the new scheme. Aggrieved, Petitioner demanded from
Medicard payment of P338,000.00 as his commission plus
damages, but the latter refused to heed his demand.
ISSUE: whether or not the contract of agency has been revoked by
Medicard, hence, petitioner is not entitled to a commission.
HELD: Yes the Contract of Agency has been revoked, thus the
petitioner is not entitled to any commission. It is dictum that in
order for an agent to be entitled to a commission, he must be the

procuring cause of the sale, which simply means that the measures
employed by him and the efforts he exerted must result in a sale.
Based on the facts, it may be recalled that through petitioner's
efforts, Medicard was able to enter into a Contract with Unilab, two
times, However before the expiration of the renewed contract,
Unilab rejected the proposal. Medicard then requested petitioner to
reduce his commission should the contract be renewed on its third
year, but he was obstinate. It is clear that since petitioner refused
to reduce his commission, Medicard directly negotiated with Unilab,
thus revoking its agency contract with petitioner. Such revocation is
authorized by Article 1924 of the Civil Code which provides: "The
agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons."
Moreover, as found by the lower courts, petitioner did not render
services to Medicard, his principal, to entitle him to a commission.
There is no indication from the records that he exerted any effort in
order that Unilab and Medicard, after the expiration of the Health
Care Program Contract, can renew it for the third time. In fact, his
refusal to reduce his commission constrained Medicard to negotiate
directly with Unilab. We find no reason in law or in equity to rule
that he is entitled to a commission.
Infante vs. Cunanan
G.R L- 5180 August 31, 1953
Bautista Angelo, J:
Facts: Infante was the owner of the land with a house built on it.
Cunanan and Mijares were contracted to sell the property from
which they would receive commission. Noche agreed to purchase
the lot but Infante informed C & M about her change of mind to sell
the lot and had them sign a document stating that their authority
to sell was already cancelled. Subsequently, Infante sold the lot &
house to Noche. Defendants herein demanded for their
commission. RTC ordered Infante to pay commission. CA affirmed.
Issue: Whether or not petitioner was duty bound to pay commission
notwithstanding that authority to sell has been cancelled.
Ruling: A principal may withdraw the authority given to an agent at
will. But respondents agreed to cancel the authority given to them
upon assurance by petitioner that should property be sold to
Noche, they would be given commission.

That petitioner had changed her mind even if respondents had

found a buyer who was willing to close the deal, is a matter that
would give rise to a legal consequence if respondents agree to call
off to transaction in deference to the request of the petitioner.
Petitioner took advantage of the services of respondents, but
believing that she could evade payment of their commission, she
made use of a ruse by inducing them to sign the deed of
cancellation. This act of subversion cannot be sanctioned and
cannot serve as basis for petitioner to escape payment of the
commissions agreed upon.
Philippine Health-Care Providers, Inc. V. Estrada (2008)
Lessons Applicable: Insurance Broker (Insurance)
FACTS: Philippine Health-Care Providers, Inc. (Maxicare) formally
appointed Estrada as its General Agent evidenced by a letteragreement dated February 16, 1991 granting him a commission
equivalent to:
15 to 18% from individual, family, group accounts 2.5 to 10% on
tailored fit plans 10% on standard plans of commissionable amount
on corporate accounts Maxicare had a "franchising system" in
dealing with its agents whereby an agent had to first secure
permission from to list a prospective company as client MERALCO
account was included as corporate accounts applied by
EstradaEstrada submitted proposals and made representations to
the officers of MERALCO regarding the MAXICARE Plan but
MERALCO directly negotiated with MAXICARE from December 1,
1991 to November 30, 1992 and was renewed twice for a term of 3
years each March 24, 1992: Estrada through counsel demanded his
commission for the MERALCO account and 9 other accounts but it
was denied by MAXICARE because he was not given a go signal to
intervene in the negotiations for the terms and conditions
RTC: Maxicare liable for breach of contract and ordered it to pay
Estrada actual damages in the amount equivalent to 10% of
P20,169,335 representing her commission for Meralco
CA: Affirms in toto
ISSUE: W/N Estrada should be paid his commission for the Maxicare
Plans subscribed by Meralco
HELD: YES. petition is DENIED. Both courts were one in the
conclusion that Maxicare successfully landed the Meralco account
for the sale of healthcare plans only by virtue of Estradas
involvement and participation in the negotiations

Maxicares contention that Estrada may only claim commissions

from membership dues which she has collected and remitted to
Maxicare as expressly provided for in the letter-agreement does not
convince us. It is readily apparent that Maxicare is attempting to
evade payment of the commission which rightfully belongs to
Estrada as the broker who brought the parties together.
The only reason Estrada was not able to participate in the collection
and remittance of premium dues to Maxicare was because she was
prevented from doing so by the acts of Maxicare, its officers, and
Agent vs. Broker:
agent receives a commission upon the successful conclusion of a
broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made"procuring cause" in
describing a brokers activity cause originating a series of events
which, without break in their continuity, result in the
accomplishment efforts must have been the foundation on which
the negotiations resulting in a sale began
Even a cursory reading of the Complaint and all the pleadings filed
thereafter before the RTC, CA, and this Court, readily show that
Estrada does not concede, at any point, that her negotiations with
Meralco failed -Counsel's contention is wrong
Estrada is entitled to 10% of the total amount of premiums paid by
Meralco to Maxicare as of May 1996 (including succeeding
Prats v. Court of Appeals G.R. No. L-39822, January 31, 1978,
Fernandez, J.
In 1968, Antonio Prats, under the name of Philippine Real Estate
Exchange instituted against Alfonso Doronilla and PNB a case to
recover a sum of money and damages. Doronilla had for sometime
tried to sell his 300 ha land and he had designated several agents
for that purpose at one time. He offered the property to the Social
Security System but was unable to consummate the sale.
Subsequently he gave a written authority in writing to Prats to
negotiate the sale of the property. Such authorization was
published by Prats in the Manila Times. The parties agreed that

Prats will be entitled to 10% commission and if he will be able to

sell it over its price, the excess shall be credited to the latter plus
his commission. Thereafter, Prats negotiated the land to the SSS.
SSS invited Doronilla for a conference but the latter declined and
instead instructed that the former should deal with Prats directly.
Doronilla had received the full payment from SSS. When Prats
demanded from him his professional fees as real estate broker,
Doronilla refused to pay. Doronilla alleged that Prats had no right to
demand the payment not rendered according to their agreement
and that the authority extended to Prats had expired prior to the
closing of the sale..
Issue: Whether petitioner was the efficient procuring cause in
bringing about the sale of respondents land to the SSS.
Ruling: The Supreme Court ruled that Prats was not the efficient
procuring cause of the sale. It was not categorical that it was
through Prats efforts that meeting with the SSS official to close the
sale took place. The court concluded that the meeting took place
independently because the SSS had manifested disinterest in Prats
intervention. However, in equity, the court noted that Prats had
diligently taken steps to bring back together Doronilla and SSS.
Prats efforts somehow were instrumental in bringing them together
again and finally consummating the sale although such finalization
was after the expiration of Prats extended exclusive authority.
Doronilla was ordered to pay Prats for his efforts and assistance in
the transaction
G.R. No. 94753. April 7, 1993.
The petitioner is the owner of a certain parcel of land and
building which were formerly leased by the City of Manila and used
by the Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc

2. By means of a letter dated July 5, 1966, petitioner authorized

herein private respondent Salvador Saligumba to negotiate with the
City of Manila the sale of the aforementioned property for not less
than P425,000.00. In the same writing, petitioner agreed to pay
private respondent a five percent (5%) commission in the event the
sale is finally consummated and paid.
3. The letter of authority was extended three times. The final one
was on Nov. 16, 1967, giving Saligumba an extension of 180 days
to finalize and consummate the sale of the property to the City of
Manila for not less than P410,000.00.
4. The Municipal Board of the City of Manila eventually, on April 26,
1968, passed Ordinance No. 6603, appropriating the sum of
P410,816.00 for the purchase of the property which private
respondent was authorized to sell. Said ordinance however, was
signed by the City Mayor only on May 17, 1968, one hundred eighty
three (183) days after the last letter of authorization.
5. On January 14, 1969, the parties signed the deed of sale of the
subject property. The initial payment of P200,000.00 having been
made, the purchase price was fully satisfied with a second payment
on April 8, 1969 by a check in the amount of P210,816.00.
6. Notwithstanding the realization of the sale, private respondent
never received any commission, which should have amounted to
P20,554.50. This was due to the refusal of petitioner to pay private
respondent said amount as the former does not recognize the
latter's role as agent in the transaction, since:
a. the sale was not made within the period given in the
letter of authority
Saligumba was not the person responsible for the
negotiation and consummation of the sale but it was Filomeno
Huelgas, the PTA presidence.
7. Saligumba recounted how he initiated the sale. He recounted
that it first began at a meeting with Rufino Manotok at the office of
Fructuoso Ancheta, principal of C.M. Recto High School. Atty.
Dominador Bisbal, then president of the PTA, was also present. The
meeting was set precisely to ask private respondent to negotiate

the sale of the school lot and building to the City of Manila. Private
respondent then went to Councilor Mariano Magsalin, the author of
the Ordinance which appropriated the money for the purchase of
said property, to present the project. He also went to the Assessor's
Office for appraisal of the value of the property. While these
transpired and his letters of authority expired, Rufino Manotok
always renewed the former's authorization until the last was given,
which was to remain in force until May 14, 1968. After securing the
report of the appraisal committee, he went to the City Mayor's
Office, which indorsed the matter to the Superintendent of City
Schools of Manila. The latter office approved the report and so
private respondent went back to the City Mayor's Office, which
thereafter indorsed the same to the Municipal Board for
appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603
was passed by the Municipal Board for the appropriation of the sum
corresponding to the purchase price. Petitioner received the full
payment of the purchase price, but private respondent did not
receive a single centavo as commission.
8. Atty. Bisbal testified that Huelgas was aware of the fact the
Saligumba was working on the sale but he never offered to help in
the acquisition of the property.
9. The CFI remdered judgment in favor of Saligumba.
affirmed by the CA.

This was

ISSUE: WON Saligumba is entitled to the 5% agents commission

1.As enunciated in the case of Prats vs. CA, the court ruled in favor
of the claimant-agent, despite the expiration of his authority.
"In equity, however, the Court notes that petitioner had
diligently taken steps to bring back together respondent Doronila
and the SSS,.
xxx xxx xxx
The court has noted on the other hand that Doronila finally sold the
property to the Social Security System at P3.25 per square meter
which was the very same price counter-offered by the Social

Security System and accepted by him in July, 1967 when he alone

was dealing exclusively with the said buyer long before Prats came
into the picture but that on the other hand Prats' efforts somehow
were instrumental in bringing them together again and finally
consummating the transaction at the same price of P3.25 per
square meter, although such finalization was after the expiration of
Prats' extended exclusive authority.
xxx xxx xxx
Under the circumstances, the Court grants in equity the sum of One
hundred Thousand Pesos (P100,000.00) by way of compensation
for his efforts and assistance in the transaction, which however was
finalized and consummated after the expiration of his exclusive
authority . . ."
From the foregoing, it follows then that private respondent herein,
with more reason, should be paid his commission. While in Prats vs.
Court of Appeals, the agent was not even the efficient procuring
cause in bringing about the sale, unlike in the case at bar, it was
still held therein that the agent was entitled to compensation. In
the case at bar, private respondent is the efficient procuring cause
for without his efforts, the municipality would not have anything to
pass and the Mayor would not have anything to approve.
2. In an earlier case, this Court ruled that when there is a close,
proximate and causal connection between the agent's efforts and
labor and the principal's sale of his property, the agent is entitled to
a commission.
We agree with respondent Court that the City of Manila ultimately
became the purchaser of petitioner's property mainly through the
efforts of private respondent. Without discounting the fact that
when Municipal Ordinance No. 6603 was signed by the City Mayor
on May 17, 1968, private respondent's authority had already
expired, it is to be noted that the ordinance was approved on April
26, 1968 when private respondent's authorization was still in force.
Moreover, the approval by the City Mayor came only three days
after the expiration of private respondent's authority. It is also
worth emphasizing that from the records, the only party given a

written authority by petitioner to negotiate the sale from July 5,

1966 to May 14, 1968 was private respondent.
3. Contrary to what petitioner advances, the case of Danon vs.
Brimo, on which it heavily anchors its justification for the denial of
private respondent's claim, does not apply squarely to the instant
petition. Claimant-agent in said case fully comprehended the
possibility that he may not realize the agent's commission as he
was informed that another agent was also negotiating the sale and
thus, compensation will pertain to the one who finds a purchaser
and eventually affects the sale. Such is not the case herein. On the
contrary, private respondent pursued with his goal of seeing that
the parties reach an agreement, on the belief that he alone was
transacting the business with the City Government as this was what
petitioner made it to appear.
4. While it may be true that Filomeno Huelgas followed up the
matter with Councilor Magsalin, the author of Municipal Ordinance
No. 6603 and Mayor Villegas, his intervention regarding the
purchase came only after the ordinance had already been passed
when the buyer has already agreed to the purchase and to the
price for which said property is to be paid. Without the efforts of
private respondent then, Mayor Villegas would have nothing to
approve in the first place. It was actually private respondent's labor
that had set in motion the intervention of the third party that
produced the sale, hence he should be amply compensated.
Dispositive: WHEREFORE, in the light of the foregoing and finding
no reversible error committed by respondent Court, the decision of
the Court of Appeals is hereby AFFIRMED. The temporary
restraining order issued by this Court in its Resolution dated
October 1, 1990 is hereby lifted. SO ORDERED.
Marinduque Mining Corporation got hold of a loan from the DBP and
mortgaged a warehouse lot and an office building lot previously
mortgaged by MMC to Caltex, and the mortgage in favor of DBP
was entered on their titles as a second mortgage. The account of
the Marinduque Mining Corp., with the DBP was later transferred to
the Assets Privatization Trust (APT).
Caltex foreclosed the mortgage due to the nonpayment of MMC.
APT on the other hand offered for sale to the public through DBP its

right of redemption on said two lots by public bidding. DBP

subsequently retrieved the account from APT and redeemed said
lots from Caltex . A public bidding for the sale of the two lots was
held and the warehouse lot was sold to Charges Realty Corp . The
office building lot was later sold by DBP to a different buyer. After
the aforesaid sale, Uniland Resources sent two letters to DBP
asking for the payment of its broker's fee in instrumenting the sale
of its the warehouse lot to Charges Realty Corp. Uniland filed a
case to recover from DBP the broker's fee.
The Trial Court ordered DBP to pay the brokerss fee to the
petitioner. On appeal, the Court of Appeals reversed the judgment
of the lower court ..
Whether or not the petitioner there is a contract of agency between
DBP and Uniland in the sale of warehouse lot.
No. There is no contract of agency, express or implied. The
petitioner was never able to secure the required accreditation from
respondent DBP to transact business on behalf of the latter. It was
always made clear to petitioner that only accredited brokers may
look for buyers on behalf of respondent DBP. The contract of
Agency is one founded on mutual consent: the principal agrees to
be bound by the acts of the agent and the latter in turn consents to
render service on behalf or in representation of the principal.
Petitioner Manila Remnant Co., Inc. is the owns parcels of
land situated in Quezon City and constituting the Capital Homes
Subdivision Nos. I and II. Manila Remnant and A.U. Valencia & Co.
Inc. entered into a contract entitled "Confirmation of Land
Development and Sales Contract" to formalize a prior verbal
agreement whereby A.U. Valencia and Co., Inc. was to develop the
aforesaid subdivision for a consideration of 15.5% commision. At
that time the President of both A.U. Valencia and Co. Inc. and
Manila Remnant Co., Inc. was Artemio U. Valencia. Manila Remnant
thru A.U. Valencia and Co. executed two "contracts to sell" covering
Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla and Carmen
Gloria Diaz. Ten days after the signing of the contracts with the
Ventanillas, Artemio U. Valencia, without the knowledge of the

Ventanilla couple, sold Lots 1 and 2 of Block 17 again, to Carlos

Crisostomo, one of his sales agents without any consideration.
Artemio Valencia then transmitted the fictitious Crisostomo
contracts to Manila Remnant while he kept in his files the contracts
to sell in favor of the Ventanillas. All the amounts paid by the
Ventanillas were deposited in Valencia's bank account. Upon orders
of Artemio Valencia, the monthly payments of the Ventanillas were
remitted to Manila Remnant as payments of Crisostomo for which
the former issued receipts in favor of Crisostomo.
General Manager Karl Landahl, wrote Artemio Valencia informing
him that Manila Remnant was terminating its existing collection
agreement with his firm on account of the considerable amount of
discrepancies and irregularities. As a consequence, Artemio
Valencia was removed as President by the Board of Directors of
Manila Remnant. Therefore, Valencia stopped transmitting
Ventanilla's monthly installments. A.U. Valencia and Co. sued
Manila Remnant to impugn the abrogation of their agency
agreement. The court ordered all lot buyers to deposit their
monthly amortizations with the court. But A.U. Valencia and Co.
wrote the Ventanillas that it was still authorized by the court to
collect the monthly amortizations and requested them to continue
remitting their amortizations with the assurance that said
payments would be deposited later in court.
Thereafter, the trial court issued an order prohibiting A.U. Valencia
and Co. from collecting the monthly installments. Valencia complied
with the court's order of submitting the list of all his clients but said
list excluded the name of the Ventanillas. Manila Remnant caused
the publication in the Times Journal of a notice cancelling the
contracts to sell of some lot buyers. To prevent the effective
cancellation of their contracts, Artemio Valencia filed a complaint
for specific performance with damages against Manila Remnant
The Ventanillas, believing that they had already remitted enough
money went directly to Manila Remnant and offered to pay the
entire outstanding balance of the purchase price. Unfortunately,
they discovered from Gloria Caballes that their names did not
appear in the records of A.U. Valencia and Co. as lot buyers. Also,
Manila Remnant refused the offer of the Ventanillas to pay for the

remainder of the contract price. The Ventanillas then commenced

an action for specific performance, annulment of deeds and
damages against Manila Remnant, A.U. Valencia and Co. and Carlos
The trial court found that Manila Remnant could have not been
dragged into this suit without the fraudulent manipulations of
Valencia. Subsequently, Manila Remnant and A.U. Valencia and Co.
elevated the lower court's decision to the Court of Appeals through
separate appeals. On October 13, 1987, the Appellate Court
affirmed in toto the decision of the lower court. Reconsideration
sought by petitioner Manila Remnant was denied, hence the instant
Whether or not petitioner Manila Remnant should be held
solidarily liable together with A.U. Valencia and Co. and Carlos
Crisostomo for the payment of moral, exemplary damages and
attorney's fees in favor of the Ventanillas
YES. In the case at bar, the Valencia realty firm had clearly
overstepped the bounds of its authority as agent and for that
matter, even the law when it undertook the double sale of the
disputed lots. Such being the case, the principal, Manila Remnant,
would have been in the clear pursuant to Article 1897 of the Civil
Code which states that "(t)he agent who acts as such is not
personally liable to that 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." However,
the unique relationship existing between the principal and the
agent at the time of the dual sale must be underscored. Bear in
mind that the president then of both firms was Artemio U. Valencia,
the individual directly responsible for the sale scam. Hence, despite
the fact that the double sale was beyond the power of the agent,
Manila Remnant as principal was chargeable with the knowledge or
constructive notice of that fact and not having done anything to
correct such an irregularity was deemed to have ratified the same.
More in point, we find that by the principle of estoppel, Manila

Remnant is deemed to have allowed its agent to act as though it

had plenary powers.
Article 1911 of the Civil Code provides: "Even when the
agent has exceeded his authority, the principal is solidarily liable
with the agent if the former allowed the latter to act as though he
had full powers." In such a situation, both the principal and the
agent may be considered as joint feasors whose liability is joint and
solidary (Verzosa vs. Lim, 45 Phil. 416). In essence, therefore, the
basis for Manila Remnant's solidary liability is estoppel which, in
turn, is rooted in the principal's neglectfulness in failing to properly
supervise and control the affairs of its agent and to adopt the
needed measures to prevent further misrepresentation. As a
consequence, Manila Remnant is considered estopped from
pleading the truth that it had no direct hand in the deception
employed by its agent. That the principal might not have had
actual knowledge of the agent's misdeed is of no moment.
Areola vs. CA
Reciprocal Obligations on Contract of Insurance
1. W/N erroneous cancellation of insurance policy entitle petitionerinsured to payment of damages?
2. W/N reinstatement of insurance policy in order to rectify the
error, obliterate the liability for damages?
A Personal Accident Insurance Policy was issued to the petitioner by
respondent company
Private respondent cancelled the same since company records
revealed that P failed to pay his premiums
t was submitted that the fraudulent act of Malapit, manager of PR's
branch office in Baguio in misappropriating funds is the proximate
cause of cancellation of the policy
PR ordered for reinstatement of insurance policy
However, complaint for breach of contract with damages had
already been filed by P

Contract of insurance creates reciprocal obligations for both insurer

and insured
Under Art. 1191 (2), the injured party is given a choice between
fulfillment or rescission of obligation in case one of the obligors fails
to comply with what is incumbent upon him. Said article entitles
injured party to payment of damages whether he demands
fulfillment or rescission. Untenable then is PR's argument, namely
reinstatement being equivalent to fulfillment of its obligation,
divests petitioner's rightful claim over damages
P should be awarded with damages- nominal damages since no
substantial injury or actual damages have been shown