Eurotech vs.

Cuison
FACTS: Petitioner Eurotech, who is engaged in the
business of importation and distribution of various
European equipment, sold to Impact Systems
(Impact) a sledge pump valued at P250,000, of
which Impact made a down payment of P50,000.
However, due to their failure to pay, respondent
Edwin Cuison as sales manager of Impact, executed
a Deed of Assignment in favor of petitioner.
1.
Despite the existence of the Deed of
Assignment, Impact proceeded to collect from
Toledo Power Company P365,135.29. As such,
Eurotech demanded payment from Impact Systems
2.
For failure to pay, Eurotech filed an action
for sum of money against respondents Edwin Cuison
(as sales manager) and Erwin Cuison (as owner of
Impact Systems)
3.
The trial court ordered that Edwin Cuison be
dropped as party defendant since his actions were
ratified by Impact Systems. CA affirmed the trial
courts decision
4.
Petitioner contends that since Edwin did not
sufficiently notify Eurotech of the extent of his
powers as an agent, Edwin Cuison should be made
personally liable for the obligations of his principal
ISSUE: WON Edwin Cuison as agent of Impact
Systems can be held personally liable in this case
HELD: No. In a contract of agency, a person binds
himself to render some service or to do something in
representation or on behalf of another with the
latters consent. The underlying principle of agency
is to accomplish results by using the services of
others. Its purpose is to extend the personality of the
principal or the party for whom another acts or from
whom he or she derives the authority to act. The
basis of agency is representation---the agent acts for
and on behalf of the principal on matters within the
scope of his authority and said acts have the same
legal effect as if they were personally executed by
the principal.
The elements of the contract of agency are: (1)
consent, express or implied, of the parties to
establish the relationship; (2) the object is the
execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not
for himself; and (4) the agent acts within the scope
of his authority.
Art 1897 provides that an agent who acts as such is
not personally liable to the party with whom he

contracts. However, Art 1897 also provides two

instances when an agent becomes personally liable to
a third person: (1) when the agent expressly binds
himself to the obligation and; (2) when the agent
exceeds his authority. In the 2nd instance, the agent
can be liable if he does not give the third party
sufficient notice of his powers, which is not the case
here.
The Deed of Assignment clearly states that Edwin is
the sales manager of Impact Systems. Such position
presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of
judgment and discretion in the transactions and
concerns which are incidental to the business
entrusted to his care ad management. In the absence
to the contrary a managing agent may enter into
contracts that he deems reasonably necessary for the
protection of the interests of his principal entrusted
to his management.
Since Edwin Cuison acted within his authority as
agent, who did not acquire any right nor incur in any
liability arising from the Deed of Assignment, it
follows that he is not a real party in interest who
should be impleaded in this case.
Rallos vs. Felix Go Chan
FACTS: Concepcion and Gerundia Rallos were
registered co-owners of a parcel of land. The sisters
executed a SPA in favor of their brother, petitioner
Rallos, authorizing him to sell for and in their behalf
said parcel of land.
1.

Thereafter, Concepcion died.

2.
Rallos, then, sold the undivided shares of his
sisters to respondent Felix Go Chan.
3.
The administrator of Concepcions estate
subsequently filed an action to declare the sale of
Concepcions share in the lot unenforceable and for
said share to be reconveyed to her estate
ISSUE: What is the nature of the relationship of
agent and principal in a contract of agency?
HELD: As a general rule, a contract entered into in
the name of another by one who has no authority or
the legal representation or who has acted beyond his
powers, shall be enforceable, unless it is ratified,
expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by
the other contracting party. In a contract of agency,
then, a party called the principal authorizes another,
the agent, to act for and in his behalf in transactions

with third persons. The essential elements of agency

are:
(a)
Consent, whether express or implied, of the
parties to establish the relationship
(b)
The object is the execution of a juridical act
in relation to a third person
(c)
The agent acts as a representative and not for
himself
(d)
The agent acts within the scope of his
authority
Agency is basically personal representative and
derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his
principal; his act is the act of the principal if done
within the scope of the authority.
By reason of the very nature of the relationship
between the principal and agent, agency is
extinguished by the death of the principal or agent.
Given the authority of the agent to act for and in
behalf of his principal is derived from the principal,
the death of the principal extinguishes the agency
between the principal and agent.
ISSUE: Is the general rule under Art 1919 that the
death of the principal or of the agent extinguishes the
agency, subject to any exception and if so, does the
instant case fall within such exception
HELD: No. Respondent contends that the despite
the death of the principal, the sale of the property by
the agent is valid and enforceable inasmuch as the
respondent acted in good faith in buying the property
in question.
Under Art 1931, an act done by the agent after the
death of the principal is valid and effective only
under two conditions:
(a)
That the agent acted without knowledge of
the principals death; and
(b)
The third person who contracted with the
agent himself acted in good faith.
Good faith here means that the third person was not
aware of the principals death at the time he
contracted with the agent. These two requisites must
concur; the absence of one will render the act of the
agent invalid and unenforceable.
CAB: It cannot be denied that the agent Rallos knew
of the death of the principal at the time he sold the
latters share to respondent. This can be clearly

inferred from the pleadings filed by the agent before

the trial court. On the basis of the established
knowledge of Rallos concerning the deateh of his
principal, Art 1931 is not applicable. The law
expressly requires lack of knowledge on the part of
the agent of the death of the principal; it is not
enough that the third person acted in good faith.
The fact that the notice of death was not annotated in
the Certificate of Title by the heirs of the principal is
of no moment. The court made a distinction between
revocation by an act of the principal as a mode of
terminating the agency as opposed to revocation by
operation of law such as the death of the principal.
Although a revocation of a power of attorney in
order to be effective must be communicated to the
parties concerned, revocation by operation of law
such as in the death of the principal, is
instantaneously effective. With death, the principals
will or his authority is extinguished.
The Civil Code does not impose a duty on the heirs
to notify the agent of the death of the principal. What
it provides in Art 1931 is that if the agent dies, his
heirs must notify the principal thereof. As such, the
lack of notice of the death of the principal on the
TCT is not fatal to the cause of the estate of the
principal.
Severino vs. Severino
FACTS:
1.
The decedent Melecio had amongst others,
428 hectares of land which was subject to mortgage,
the same was under the administration of his brother
defendant Guillermo. Upon the death of Melecio,
Guillermo continued possession therein and in a
cadastral proceeding was able to secure the lands
title under his name on the ground that he was in
possession of the same for 30 years.
2.
Plaintiff, the alleged natural daughter and
sole heir of Melecio brought this action to compel
Guillermo to convey to her the property in question
or pay 800,000 pesos in default thereof.
Administratix Felicitas intervened so the land would
be conveyed to the estates name.
3.
The lower court rendered a judgment
recognizing the plaintiff Fabiola Severino as the
acknowledged natural child of the said Melecio
Severino and ordering the defendant to convey 428
hectares of the land in question to the intervenor as
administratrix of the estate of the said Melecio
Severino, to deliver to her the proceeds in his
possession of a certain mortgage placed thereon by

him and to pay the costs. From this judgment only

the defendant appeals.
4.
Defendant Guillermo argues that the lands
was not owned solely by the decedent but was shared
in common by their father and that his title is now
indefeasible under the Land Registration Act. Hence
the case
This is an action brought by the plaintiff as the
alleged natural daughter and sole heir of one Melecio
Severino, deceased, to compel the defendant
Guillermo Severino to convey to her four parcels of
land described in the complaint, or in default thereof
to pay her the sum of P800,000 in damages for
wrongfully causing said land to be registered in his
own name. Felicitas Villanueva, in her capacity as
administratrix of the estate of Melecio Severino, has
filed a complaint in intervention claiming in the
same relief as the original plaintiff, except in so far
as she prays that the conveyance be made, or
damages paid, to the estate instead of to the plaintiff
Fabiola Severino. The defendant answered both
complaints with a general denial.
The lower court rendered a judgment recognizing the
plaintiff Fabiola Severino as the acknowledged
natural child of the said Melecio Severino and
ordering the defendant to convey 428 hectares of the
land in question to the intervenor as administratrix of
the estate of the said Melecio Severino, to deliver to
her the proceeds in his possession of a certain
mortgage placed thereon by him and to pay the costs.
From this judgment only the defendant appeals.
The land described in the complaint forms one
continuous tract and consists of lots Nos. 827, 828,
834, and 874 of the cadaster of Silay, Province of
Occidental Negros, which measure, respectively, 61
hectares, 74 ares, and 79 centiares; 76 hectares, 34
ares, and 79 centiares; 52 hectares, 86 ares, and 60
centiares and 608 hectares, 77 ares and 28 centiares,
or a total of 799 hectares, 75 ares, and 46 centiares.
The evidence shows that Melecio Severino died on
the 25th day of May, 1915; that some 428 hectares of
the land were recorded in the Mortgage Law
Register in his name in the year 1901 by virtue of
possessory information proceedings instituted on the
9th day of May of that year by his brother Agapito
Severino in his behalf; that during the lifetime of
Melecio Severino the land was worked by the
defendant, Guillermo Severino, his brother, as
administrator for and on behalf of the said Melecio
Severino; that after Melecio's death, the defendant
Guillermo Severino continued to occupy the land;

that in 1916 a parcel survey was made of the lands in

the municipality of Silay, including the land here in
question, and cadastral proceedings were instituted
for the registration of the lands titles within the
surveyed area; that in the cadastral proceedings the
land here in question was described as four separate
lots numbered as above stated; that Roque Hofilea,
as lawyer for Guillermo Severino, filed answers in
behalf of the latter in said proceedings claiming the
lots mentioned as the property of his client; that no
opposition was presented in the proceedings to the
claims of Guillermo Severino and the court therefore
decreed the title in his favor, in pursuance of which
decree certificates of title were issued to him in the
month of March, 1917.
It may be further observed that at the time of the
cadastral proceedings the plaintiff Fabiola Severino
was a minor; that Guillermo Severino did not appear
personally in the proceedings and did not there
testify; that the only testimony in support of his
claims was that of his attorney Hofilea, who swore
that he knew the land and that he also knew that
Guillermo Severino inherited the land from his father
and that he, by himself, and through his predecessors
in interest, had possessed the land for thirty years
ISSUE(S): WON Guillermo has rights over the
land?
HELD: NO, he was an agent of the deceased.
RATIO:
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.
As held in the case of Gilbert vs. Hewetson
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. 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.
While the legal title of Guillermo is not questioned,
it must be deemed as to inure to the benefit of the
estate of Melecio since prior to the issuance of the
decree of registration, it was the duty of the
defendant to return the said property in his custody
to the principal, or in this case, his estate. This right
to demand by the principal, is not cancelled of barred
by the registration.
CASE LAW/ DOCTRINE: An agent is estopped
from acquiring or asserting a title adverse to that of
the principal. agent is not only estopped from
denying his principal's title to the property, but he is
also disable from acquiring interests therein adverse
to those of his principal during the term of the
agency.
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.
According to the clearest and best established
principles of equity, the agent who so acts becomes a
trustee for his principal. He cannot hold the land
under an entry for himself otherwise than as trustee
for his principal.
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.
Orient Air Service vs. CA
Facts: American Air, an air carrier offering
passenger and air cargo transportation, entered into a
General Sales Agency Agreement with Orient Air,
authorizing the latter to act as its exclusive general
sales agent for the sale of air passenger
transportation. Orient air failed to remit the net
proceeds of sales for several months prompting
American Air to undertook the collection of the
proceeds of tickets sold originally by Orient Air and

terminating their agreement. American air instituted

suit against Orient Air for the settlement of past
outstanding funds in possession of the latter. Orient
Air contended that because of the unpaid overriding
commissions it retained the sales proceeds before
remitting the balance to American Air. American Air
contended that the sale must be made by Orient Air
and the sale must be done with the use of American
Air's ticket stocks in order for it to be entitled to the
overriding commission. On the other hand, Orient
Air contends that the contractual stipulation of a 3%
overriding commission covers the total revenue of
American Air and not merely that derived from
ticketed sales undertaken by Orient Air because it
was an exclusive General Sales Agent. CA held that
Orient Air is entitled to commissions and ordered
American Air to reinstate Orient Air as its General
Sales Agent.
ISSUES:
Whether or not
commissions?

Orient

Air

is

entitled

to

Whether or not CA is correct in ordering

reinstatement of Orient Air as an agent?
RULING:
1. Yes. Orient Air was entitled to an overriding
commission based on total flown revenue. American
Air's perception that Orient Air was remiss or in
default of its obligations under the Agreement was,
in fact, a situation where the latter acted in
accordance with the Agreementthat of retaining
from the sales proceeds its accrued commissions
before remitting the balance to American Air. Since
the latter was still obligated to Orient Air by way of
such commissions. Orient Air was clearly justified in
retaining and refusing to remit the sums claimed by
American Air. The latter's termination of the
Agreement was, therefore, without cause and basis,
for which it should be held liable to Orient Air.
2. No. CA in effect compels American Air to extend
its personality to Orient Air. Such would be violative
of the principles and essence of agency, defined by
law as a contract whereby "a person binds himself to
render some service or to do something in
representation or on behalf of another, WITH THE
CONSENT OR AUTHORITY OF THE LATTER. In
an agent-principal relationship, the personality of the
principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts
which the latter would have him do. Such a
relationship can only be effected with the consent of

the principal, which must not, in any way, be

compelled by law or by any court.

The Bordadors elevated the case to the CA which

affirmed said judgment, hence the instant petition.

Bordador vs. Luz

ISSUE: WON Luz is liable to the Bordadors for the

latter's claim for money and damages despite the fact
that Luz did not sign any of the subject receipts or
authorized Deganos to receive the items of jewelry
on her behalf

FACTS: Petitioners Bordador spouses were

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

HELD: NO, Luz is not liable to the Bordadors.

THE
BASIS
FOR
AGENCY
IS
REPRESENTATION. The basis for agency is
representation. Here, there is no showing that Luz
consented to the acts of Deganos or authorized him
to act on her behalf, much less with respect to the
particular transactions involved. The Bordadors'
attempt to foist liability on Luz through the supposed
agency relation with Deganos is groundless and
illadvised. A PERSON DEALING WITH AN
AGENT IS PUT UPON INQUIRY AND MUST
DISCOVER UPON HIS PERIL THE AUTHORITY
OF THE AGENT. Besides, it was grossly and
inexcusably negligent of the Bordadors to entrust to
Deganos, not once or twice but on at least 6
occasions as evidenced by 6 receipts, several pieces
of jewelry of substantial value without requiring a
written authorization from his alleged principal. A
person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the
agent.
Apex Mining Co., Inc. v. Southeast Mindanao
Gold Mining Corp.
Facts: The case involves the Diwalwal Gold Rush
Area (Diwalwal), a rich tract of mineral land
located inside the Agusan-Davao-Surigao Forest
Reserve in Davao del Norte and Davao Oriental.
Since the early 1980s, Diwalwal has been stormed
by conflicts brought about by numerous mining
claims over it. On March 10, 1986, Marcopper
Mining Corporation (MMC) was granted an
Exploration Permit(EP 133) by the Bureau of Mines
and Geo-Sciences (BMG).
A long battle ensued between Apex andMMC with
the latter seeking the cancellation of the mining
claims of Apex on the ground that suchmining
claims were within a forest reservation (AgusanDavao-Surigao Forest Reserve) and thus the
acquisition on mining rights should have been
through an application for a permit to prospect with
the BFD and not through registration of a DOL with
the BMG.
When it reached the SC in 1991, the Court ruled
against Apex holding that the area is a forest reserve

and thus it should have applied for a permit to

prospect with the BFD. On February 16 1994,
MMC assigned all its rights to EP 133 to Southeast
Mindanao GoldMining Corporation (SEM), a
domestic corporation which is alleged to be a 100%owned subsidiary of MMC. Subsequently, BMG
registered SEMs Mineral Production Sharing
Agreement (MPSA)application and the Deed of
Assignment. Several oppositions were filed. The
Panel of Arbitrators created by the DENR upheld the
validity of EP 133. During the pendency of the case,
DENR AO No. 2002-18 was issued declaring an
emergency situation in the Diwalwal Gold Rush
Area and ordering the stoppage of all
miningoperations therein.
ISSUES:
1. W/N EP 133 and its subsequent transfer to SEM is
valid.
2.W/N the DENR Secretary has authority to issue
DAO 66 declaring 729 hectares of the areas covered
by the Agusan-Davao-Surigao Forest Reserve as
non-forest lands and open to small-scale mining
purposes.
3.Who (among petitioners Apex and Balite) has
priority right over Diwalwal?
Held/Ratio:
1. INVALID. One of the terms and conditions of EP
133 is: That this permit shall be for the exclusive
use and benefit of the permittee or his duly
authorized agents n and shall be used for mineral
exploration purposes only and for no other purpose.
While it may be true that SEM is a100% Subsidiary
Corporation of MMC, there is no showing that the
former is the duly authorized agent of the latter. As
such, the assignment is null and void as it directly
contravenes the terms and conditions of the grant of
EP 133.
a. The Deed of Assignment was a total
abdication of MMCs rights over the permit. It is not
a mere grant of authority to SEM as agent.
b. Reason for the stipulation. Exploration
permits are strictly granted to entities or individuals
possessing the resources and capability to undertake
mining operations. Without such a condition, nonqualified entities or individuals could circumvent the
strict requirement sunder the law by the simple
expediency of acquiring the permit from the original
permittee.
c. Separate personality. The fact that SEM is
a 100% subsidiary of MMC does not automatically
make it an agent of MMC. A corporation is an
artificial being invested by law with a personality
separate and distinct from persons composing it as

well as from that of any other legal entity to which it

may be related. Absent any clear proof to the
contrary, SEM is a separate and distinct entity from
MMC.
d. Doctrine of piercing the corporate veil
inapplicable.
Only in cases where the corporate fiction was used
as a shield for fraud, illegality or inequity may the
veil be pierced andremoved. The doctrine of piercing
the corporate veil cannot therefore be used as a
vehicle to commit prohibited acts. The assignment of
the permit in favor of SEM is utilized to circumvent
the condition of non- transferability of the
exploration permit. To allow SEM to
avail itself of this doctrine and to approve the
validity of the assignment is tantamount to
sanctioning an illegal act which is what the doctrine
precisely seeks to forestall.
e. PD 463 requires approval of Secretary of
DENR. Also, PD 463 (Mineral Resources
Development Decree), which is the governing law
when the assignment was executed, explicitly
requires that the transfer or assignment of mining
rights, including the right to explore a mining area,
must be with the prior approval of the Secretary of
DENR. Such is not present in this case.
f. EP 133 expired by non-renewal.Although
EP 133 was extended for 12 months until July
6,1994, MMC never renewed its permit prior and
after its expiration.With the expiration of EP 133 on
July 6, 1994, MMC lost any right to the Diwalwal
Gold RushArea. SEM, on the other hand, has not
acquired any right to the said area because the
transfer of EP 133 in its favor is invalid. Hence, both
MMC and SEM have not acquired any vested
rightover the area covered by EP 133.
2. NO. The DENR Secretary has no power to convert
forest reserves into non-forest reserves. Such power
is vested with the President. The DENR Secretary
may only recommend to the President which forest
reservations are to be withdrawn from the coverage
thereof. Thus, DAO No. 66 is null and void for
having been issued in excess of the DENR
Secretarys authority.
3. (Since its been held that neither MMC nor SEM
has any right over Diwalwal, it is thus necessary to
make a determination of the existing right of the
remaining claimants, petitioners Apex and Balite, in
the dispute.) The issue on who has priority right
over Diwalwal is deemed overtaken by the issuance
of Proclamation 297 and DAO No. 2002-18, both
being constitutionally-sanctioned acts of the
Executive Branch. Mining operations in the
Diwalwal Mineral Reservation are now, therefore,

within the full control of the State through the

executive branch. Pursuant to Sec. 5 of RA 7942, the
State can either: (1) directly undertake the
exploration, development and utilization of the area
or (2) opt to award mining operations in the mineral
reservation to private entities including petitioners
Apex and Balite, if it wishes. The exercise of this
prerogative lies with the Executive Department over
which courts will not interfere.
Dela Cruz v Northern Theatrical Enterprises,
Inc., et al
Facts: Northern Theatrical Enterprises Inc., a
domestic corporation operated a movie house in
Laoag, Ilocos Norte, and among the persons
employed by it was the plaintiff Domingo De La
Cruz, hired as a special guard whose duties were to
guard the main entrance of the cine, to maintain
peace and order and to report the commission of
disorders within the premises. He carried a revolver.
One day, a Benjamin Martin wanted to enter without
a ticket but dela Cruz refused him entrance.
Infuriated, Martin attacked him with a bolo and in
order to save his life, dela Cruz shot and killed
Martin. Martin, thereafter, was charged with
homicide which, after re-investigation, was
dismissed.
A few years later, dela Cruz again figured in a
homicide case related to his work as security guard
for the theater. He was acquitted for the second
charge. In both instances, dela Cruz employed a
lawyer. He thereafter demanded reimbursement for
his litigation expenses but was refused by the theater.
After which, he filed an action for reimbursement
plus damages.
The Court found for Northern Theater and dismissed
the complaint saying that dela Cruz had no cause of
action.
ISSUE:WON the relationship involved bet.
Northern and De La Cruz is that of a principal and an
agent?
RULING: NO. The trial court was correct in
rejecting the theory of dela Cruz that he was an agent
of the defendants and that as such agent he was
entitled to reimbursement for the expenses incurred
by him in connection with the agency. The
relationship between the theater and the plaintiff was
not that of principal and agent because the principle
of representation was not involved.
He was not employed to represent defendant
corporation in its dealings with third parties. He was
merely an employee hired to guard the cinema. Issue
is primarily one of employer employee.

Whether an employee who in line with the

performance of his duty incur expenses caused not
directly by his employer or fellow employees but by
a third party or stranger, may recover against his
employer.
In this case, theres no legal obligation on the part of
the employer, it might yet be regarded as a moral
obligation. Since employer not legally obligated to
give legal assistance, plaintiff naturally cannot
recover the amount from defendant. The damage
incurred did not flow from the performance of his
duties but only indirectly. Filing of the criminal
charges was the efficient, intervening cause. As such,
plaintiff cannot fix civil responsibility to the
defendant.
Tuazon vs. Heirs of Ramos
FACTS: This case arose from the failure of
petitioners Tuazon to pay respondent predecessorin-interest. Respondents alleged that spouses Tuazon
a total of 8,326 sacks of rice from Ramos. Of this
quantity, 3,889 sacks remain unpaid amounting to
P1.2 million. As payment, Tuazon issued several
checks.
1.
When these checks were encashed, all of the
checks bounced due to insufficiency of funds.
2.
Respondents averred that because Tuazon
anticipated they would be sued, they conspired with
other defendants to defraud them as creditors by
executing fictitious sales of their properties.
3.
On the other hand, spouses Tuazon alleged
that it was Magdalena Ramos, the wife of the
deceased, who owned and traded the merchandise
and that Tuazon was merely her agent.
4.
Tuazon also argued that it was Santos (the
owner of the checks) who was the buyer of the rice
and issued the checks to Tuazon as payments. Said
checks were turned over to Ramos in good faith
without knowing that they were unfunded.
5.
The trial court acquitted the petitioners of the
criminal case. They appealed only its decision in
finding them civilly liable to respondents.
6.
On appeal, CA held that petitioners failed to
prove the existence of an agency between
respondents and spouses Tuazon
ISSUE: WON the spouses Tuazon merely acted as
agents of Ramos?
HELD: NO. The following are elements of agency:
(a)
The parties consent, express or implied, to
establish the agency

(b)
The object, which is the execution of a
juridical act in relation to a third person
(c)
The representation, by which the agent acts
not for himself but as a representative
(d)
The limitation that the agent acts within the
scope of his or her authority.
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
principals 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. Without such
mutual intent, there is no agency.
CAB: The declarations of the agents alone are
generally insufficient to establish the fact or extent
of their authority. The law makes no presumption of
agency; proving its existence, nature and extent is
incumbent upon the person alleging it. In the present
case, the petitioners raise the fact of agency as an
affirmative defense but fail to prove its existence.
Victorias Milling vs. CA
FACTS: St. Therese Merchandising (STM)
purchased sugar from petitioner Victorias Milling Co
(VMC). In the course of its dealings, petitioner
issued several Shipping List/Delivery Receipts
(SLDR) as proof of purchases.
1.
In October 1989, STM sold to private
respondent Consolidated Sugar Corp (CSC) its rights
in SLDR no 1214M for P14.75 million. CSC then
informed petitioner that it had been authorized by
STM to withdraw sugar covered by the SLDR in
question
2.
However, of the 25,000 bags covered by the
SLDR, only 2,000 bags were released. VMC refused
to allow further withdrawals of sugar because STM
had already withdrawn all the sugar covered by the
cleared checks
3.
As such, CSC filed an action for specific
performance against STM and VMC.
4.
In its defense, VMC alleged that it was an
unpaid seller for the 23,000 bags. Since STM had
already withdrawn in full the sugar covered by the
SLDR, it could no longer authorize further delivery
of sugar to CSC
5.
Petitioner argued that STMs letter of
authority allowing CSC to withdraw sugar against
SLDR show that the latter was STMs agent.
ISSUE: WON CA erred in not ruling that CSC was
an agent of STM and hence, estopped from suing
upon SLDR as an assignee.

HELD: NO. The basis of agency is representation.

On the party 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. On fact which
most clearly distinguishes agency from other legal
concepts is controlthe agent agrees to act under
the control or direction of the principal.
CAB: It clearly appears from the facts that CSC was
a buyer of the SLDR and not an agent of STM. CSC
was not subject to STMs control. The question of
whether 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.
That the authorization was given to CSC contained
the phrase for and in our (STMs) behalf did not
establish an agency. What is decisive is the intention
of the parties. No agency is meant to be established
by CSC and STM because the SLDR has been
endorsed and sold to CSC, which means that STM
and CSC intended a contract of sale and not an
agency.
Doles vs. Angeles
Facts: Doles alleges that she referred her friends to
Angeles, who lends money in exchange for personal
checks thru her capitalist Pua. Her friends,
absconded payment, prompting Angeles to threaten
Doles, who issued personal checks for payment
despite knowledge of insufficiency of funds, with a
criminal case, forcing the latter to execute a deed of
sale of her Cavite property. RTC held that the sale
was void for lack of consideration and dismissed the
RTC case, but this was reversed by the CA.
Issue: WON there was a contract of agency as to
both parties and their principals?
Held: Yes. Doles as to her friends, Angeles as to her
capitalist. They are not creditors and debtors of each
other. It is not material if respective principals do not
meet, for the purpose of agency is to extend
personality thru the facility of agents. Agents are
estopped from denying the existence of agency if
their actions prove otherwise. Sale of property is
void due to lack of cause, because the property
belonged to HDC, the special power of attorney
given to Doles and her father was cancelled.
Uy and Roxas vs. CA
FACTS: Petitioners Uy and Roxas were authorized
agents for the sale of 8 parcels of land. The land was
offered to NHA and the acquisition of he same was
approved by an NHA resolution, deeds of sale were
executed thereafter. However, only 5/8 of the land
was paid because a report from DENR stated that
only 5 parcels among the 8 are conducive to housing.

NHA issued anothe resolution cancelling the sale of

the unpaid land and offered to pay damages.
Petitioners filed a case in their own capacities a
agens agains NHA for damages. RTC ruled in favor
of NHA. CA afirmed the decizion but deleted the
award thereafter.

interest since Lizette was merely a representative of

Romualdez in the subject transaction and not an
assignee to the latters rights with respect to the
award

ISSUE: WON petitioner agents are real parties in

interest for damage claim in the case at bar?

HELD: Yes. Lizette was merely an agent whose

authority was limited to the withdrawal of the scrap
rails, hence, without personality to sue.

HELD: NO, the petitioners are not the proper parties

in the case. An action shall be prosecuted in the
name of the party who, by the substantive law, has
the right sought to be enforced. Petitioners 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 partiesin-interest, either as plaintiff or defendant, in an
action upon that contract must, generally, either be
parties to said contract. Petitioners have not shown
that they are assignees of their principals to the
subject contracts. While they alleged that they made
advances and that they suffered loss of commissions,
they have not established any agreement granting
them "the right to receive payment and out of the
proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the
principal[s]."
Angeles vs. PNR
FACTS: In May 1980, PNR accepted Romualdezs
offer to buy PNRs scrap/unserviceable rails in
Pampanga for a total amount of P96,000.
Subsequently, Romualdez informed PNR that he was
authorizing Lizette Wijanco (wife of petitioner
Angeles) as his lawful representative to withdraw the
said scrap rails.
1.
Since the scrap rails in Pampanga were not
ready for hauling, PNR allowed Lizette to withdraw
scrap rails in Tarlac instead. However, PNR later
suspended the withdrawal of the scrap rails
2.
Consequently, spouses Angeles demanded the
refund of P96,000. PNR refused to pay, alleging that
based on the delivery receipt Lizette had already
withdrawn scrap rails amounting to P11,781.80
which was more than amount of their claims
3.
As such, Angeles filed an action for specific
performance against PNR and prayed that PNR be
directed to deliver 46 metric tons of scrap rails
4.
The trial court dismissed the complaint citing
that spouses Angeles were not the real parties-in-

ISSUE: WON Angeles is an agent of Romualdez

Where agency exists, the third partys (PNR) liability

on a contract is to the principal and not to the agent
and the relationship of the third party to the principal
is the same as that in a contract in which there is no
agent. Normally, the agent has neither rights nor
liabilities as against the third party. Thus, he cannot
sue or be sued based on the contract.
CAB: It is clear in the letter sent by Romualdez to
PNR that Lizette was to act just as a
REPRESENTATIVE. Since Lizette was without
legal standing to sue and appear in this case, it also
follows that her husband, herein petitioner, is also
without such standing.
That the terms agent or attorney-in-fact were not
used is not important. The terms principal and
agent are not the only terms used to designate
parties in an agency relation.
Moreover, the fact of the agency was confirmed in
the letters from the spouses Angeles in which they
referred to Lizette as authorized representative.
Also, Lizette had indicated in the withdrawal receipt
that she was signing thereon in a representative
capcity.
That Romualdezs letter was not in the form of a
special power of attorney is also untenable. In the
absence of a statute, no form or method of execution
is required for a valid power of attorney; it may be in
any form clearly showing on its face the agents
authority.
Ong vs. CA
Facts: Petitioner, representing ARMAGRI, applied
for a letter of credit for P2,532,500.00 with
SOLIDBANK Corporation to finance the purchase
of differential assemblies from Metropole Industrial
Sales. On 6 July 1990, petitioner, representing
ARMAGRI, executed a trust receipt acknowledging
receipt from the Bank of the goods valued at
P2,532,500.00.
On 12 July 1990, petitioner and Benito Ong,
representing ARMAGRI, applied for another letter of
credit for P2,050,000.00 to finance the purchase of
merchandise from Fertiphil Corporation. The Bank
approved the application, opened the letter of credit
and paid to Fertiphil Corporation the amount of

P2,050,000.00. On 23 July 1990, petitioner, signing

for ARMAGRI, executed another trust receipt in
favor of the Bank acknowledging receipt of the
merchandise.

documents, petitioner did not explain or show why

he is not responsible for the failure to turn over the
proceeds of the sale or account for the goods covered
by the trust receipts.

Both trust receipts contained the same stipulations.

Under the trust receipts, ARMAGRI undertook to
account for the goods held in trust for the Bank, or if
the goods are sold, to turn over the proceeds to the
Bank. ARMAGRI also undertook the obligation to
keep the proceeds in the form of money, bills or
receivables as the separate property of the Bank or to
return the goods upon demand by the Bank, if not
sold

The Bank released the goods to ARMAGRI upon

execution of the trust receipts and as part of the loan
transactions of ARMAGRI. The Bank had a right to
demand from ARMAGRI payment or at least a
return of the goods. ARMAGRI failed to pay or
return the goods despite repeated demands by the
Bank.
It is a well-settled doctrine long before the enactment
of the Trust Receipts Law, that the failure to account,
upon demand, for funds or property held in trust is
evidence of conversion or misappropriation. Under
the law, mere failure by the entrustee to account for
the goods received in trust constitutes estafa. The
Trust Receipts Law punishes dishonesty and abuse
of confidence in the handling of money or goods to
the prejudice of public order. The mere failure to
deliver the proceeds of the sale or the goods if not
sold constitutes a criminal offense that causes
prejudice not only to the creditor, but also to the
public interest. Evidently, the Bank suffered
prejudice for neither money nor the goods were
turned over to the Bank.

When the trust receipts became due and demandable,

ARMAGRI failed to pay or deliver the goods to the
Bank despite several demand letters. Consequently,
as of 31 May 1991, the unpaid account under the
first trust receipt amounted to P1,527,180.66, while
the unpaid account under the second trust receipt
amounted to P1,449,395.71
Assistant City Prosecutor Dina P. Teves of the City
of Manila charged petitioner and Benito Ong with
two counts of estafa.
Issue: WON Ong may be held liable for estafa as he
was only acting as agent?
Held: The Trust Receipts Law is violated whenever
the entrustee fails to: (1) turn over the proceeds of
the sale of the goods, or (2) return the goods covered
by the trust receipts if the goods are not sold. The
mere failure to account or return gives rise to the
crime which is malum prohibitum. There is no
requirement to prove intent to defraud.
The Trust Receipts Law recognizes the impossibility
of imposing the penalty of imprisonment on a
corporation. Hence, if the entrustee is a corporation,
the law makes the officers or employees or other
persons responsible for the offense liable to suffer
the penalty of imprisonment. The reason is obvious:
corporations, partnerships, associations and other
juridical entities cannot be put to jail. Hence, the
criminal liability falls on the human agent
responsible for the violation of the Trust Receipts
Law.
In the instant case, the Bank was the entruster while
ARMAGRI was the entrustee. Being the entrustee,
ARMAGRI was the one responsible to account for
the goods or its proceeds in case of sale. However,
the criminal liability for violation of the Trust
Receipts Law falls on the human agent responsible
for the violation. Petitioner, who admits being the
agent of ARMAGRI, is the person responsible for
the offense for two reasons. First, petitioner is the
signatory to the trust receipts, the loan applications
and the letters of credit. Second, despite being the
signatory to the trust receipts and the other

The Trust Receipts Law expressly makes the

corporations officers or employees or other persons
therein responsible for the offense liable to suffer the
penalty of imprisonment. In the instant case,
petitioner signed the two trust receipts on behalf of
ARMAGRI as the latter could only act through its
agents. When petitioner signed the trust receipts, he
acknowledged receipt of the goods covered by the
trust receipts. In addition, petitioner was fully aware
of the terms and conditions stated in the trust
receipts, including the obligation to turn over the
proceeds of the sale or return the goods to the Bank
True, petitioner acted on behalf of ARMAGRI.
However, it is a well-settled rule that the law of
agency governing civil cases has no application in
criminal cases. When a person participates in the
commission of a crime, he cannot escape punishment
on the ground that he simply acted as an agent of
another party. In the instant case, the Bank accepted
the trust receipts signed by petitioner based on
petitioners representations. It is the fact of being the
signatory to the two trust receipts, and thus a direct
participant to the crime, which makes petitioner a
person responsible for the offense.
PNB vs. Ritratto
FACTS: PNB is a domestic corporation organized
and existing under Philippine law. Ritratto Group,
Inc., Riatto International, Inc. and Dadasan General
Merchandise are domestic corporations, likewise,
organized and existing under Philippine law.

On 1996 PNB International Finance Ltd. (PNB-IFL),

a subsidiary pf PNB, established a branch and
operated in Hong Kong, where it extended letters of
credit to Rittrato, in increasing amoubts, with the
final total of USD1.4M in 1998. The loan was
secured by a real estate mortgage of four parcel of
lands in Makati.
However, as of 1998, Rittrato's outstanding balance
is stil at USD1.4M. Pursuant to the terms of their
real estate mortgage, PNB-ICL thru its attorney-infact PNB caused the foreclosure and auction of the
real estates on 1999.
Ritratto filed for a writ of preliminary injunction
with RTC as against PNB, where they were granted
and thus issued a TRO. PNB then filed motion to
dismiss but was likewise rejected. Hence the appeal
to SC, alleging that they are not really party to the
case, hence such action must not proper.
ISSUE: WON PNB is a party to the case being
merely the attorney-in-fact authorized to enforce
ancillary contract?
HELD: NO, PNB is just the attorney-in-fact for
PNB-IFL. As a rule, a suit as against the agent is not
a suit against the principal. For the suit to prosper,
the petitioner must implead the proper party to the
case. Even Ritratto et al admit that petitioner is a
mere attorney-in-fact for the PNB-IFL with full
power and authority to, inter alia, foreclose on the
properties mortgaged to secure their loan obligations
with PNB-IFL. In other words, PNB is an agent with
limited authority and specific duties under a special
power of attorney incorporated in the real estate
mortgage. It is not privy to the loan contracts entered
into by respondents and PNB-IFL, hence, not a party
to the case.
Francisco vs. GSIS

- GSIS, through its general manager Rodolfo Andal,

accepted Vicentes offer. GSIS did not take over the
property.
- But Francisco collected rents and turned them over
to GSIS.
-Then in 1960, GSIS demanded Francisco to pay off
the loan. Vicente then reminded GSIS that the
agreement in 1959 which is actually a compromise is
binding upon GSIS. GSIS then averred that the letter
sent to Vicente in response to his offer was not sent
in error because Andals secretary sent the poorly
worded response without Andals knowledge.
ISSUE: WON a corporation like GSIS is bound by
the acts of its officers acting in their apparent
authority?
HELD: Yes. If a corporation knowingly permits one
of its officers, or any other agent, to do acts within
the scope of an apparent authority, and thus holds
him out to the public as possessing power to do those
acts, the corporation will, as against anyone who has
in good faith dealt with the corporation through such
agent, be estopped from denying his authority. At
any rate, even if the compromise agreement is void
because of the unauthorized telegram, GSISs
silence and acceptance of the subsequent remittances
of the Franciscos ratified the compromise agreement.
Sunace International vs. NLRC
FACTS: Petitioner Sunace Intl Management
Services (Sunace) deployed to Taiwan private
respondent Divina Montehermozo as a domestic help
for 12 months effect February 1997. The deployment
was with the assistance of a Taiwanese broker,
Edmund Wang.
1.
After her employment contract expired,
Divina continued working for her Taiwanese
employer, Hang Rui Xiong, for 2 more years, after
which she returned to the Philippines.

FACTS: Trinidad J. Francisco, in consideration of a

loan in the amount of P400,000.00, out of which the
sum of P336,100.00 was released to her, mortgaged
in favor of GSIS a parcel of land with 21 bungalows,
known as Vic-Mari Compound, located at QC.

2.
Upon her return, Divina filed a complaint
before NLRC against Sunace, her Taiwanese
employer and employer-foreign principal (Xiong)
that she was jailed for 3 months and was underpaid

- Upon failure to pay, GSIS foreclosed the mortgage

and bought the property.
- But then, Trinidads father, Atty. Vicente

3.
Sunace alleged that Divinas 2-year extension
was without its knowledge and consent, as such it
was not liable

Francisco, wrote a letter to GSIS offering that he pay

P30k off the loan and then allow GSIS to administer
the mortgaged property instead of foreclosing it; that
thereafter, GSIS shall receive rents from the tenants
of the land until the arrears are paid and the account
is made current or up to date (because the total of the
monthly rents is bigger than the monthly loan
payments supposed to be paid by Trinidad to GSIS).

4.
NLRC held in favor of Divina and ruled
Sunace solidarily liable with Xiong to pay Divina
5.
On appeal, CA affirmed the Labor Arbiter
and NLRCs finding that Sunace knew of and
impliedly consented to the extension of Divinas
employment contract. It cited that Sunace was
continually communicating with Divinas foreign
employer. Thus, as agent of the foreign principal,
petitioner cannot claim ignorance of such extension

since the act of the principal extending the

employment contract necessarily bound the agent.
ISSUE: WON the doctrine of imputed knowledge is
applicable in this case to hold Sunace liable?
HELD: NO. CAs ruling that Sunace, being the
agent, cannot profess ignorance of the extension of
the employment contract since the act of its principal
in extending Divinas employment necessary bound
Sunace, is misplaced. The theory of imputed
knowledge ascribes the knowledge of the agent,
Sunace, to the principal, employer Xiong, not the
other way around. The knowledge of the principalemployer cannot, therefore, be imputed to its agent,
Sunace.
Since there is no substantial proof that Sunace knew
of and consented to the extension, it cannot be said
to privy therefo. As such, Sunace cannot be held
solidarily liable with Xiong for any of Divinas
claims.
Moreover, there was an implied revocation of its
agency relationship with the foreign principal when,
after the termination of the original employment
contract, the foreign principal directly negotiated
with Divina and entered into a new and separate
employment contract in Taiwan. Art 1924 NCC
provides that: the agency is revoked if the principal
directly manages the business entrusted to the agent,
dealing directly with third persons.
Cosmic Lumber vs. CA
FACTS: The General Manager, Paz G. VillamilEstrada, of Cosmic Lumber Corporation on behalf of
the company instituted an action for ejectment
against Isidro Perez to recover a portion of Lot No.
443 before the RTC of Dagupan on 11 March 1985.
She was appointed as Attorney-in-fact through a SPA
(28 January 1985) to do the following:
x x x to initiate, institute and file any court action for
the ejectment of third persons and/or squatters of the
entire lot 9127 and 443 and covered by TCT Nos.
37648 and 37649, for the said squatters to remove
their houses and vacate the premises in order that the
corporation may take material possession of the
entire lot, and for this purpose, to appear at the pretrial conference and enter into any stipulation of
facts and/or compromise agreement so far as it shall
protect the rights and interest of the corporation in
the aforementioned lots.
On 25 November 1985 Villamil-Estrada entered into
a Compromise Agreement with respondent Perez, the
terms of which follow:
1. That as per relocation sketch plan dated June 5,
1985 prepared by Engineer Rodolfo dela Cruz the
area at present occupied by defendant wherein his

house is located is 333 square meters on the

easternmost part of lot 443 and which portion has
been occupied by defendant for several years now;
2. That to buy peace said defendant pays unto the
plaintiff through herein attorney-in-fact the sum of
P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and
possession of the defendant by virtue of this
compromise agreement over said portion of 333
square m. of lot 443 which portion will be located on
the easternmost part as indicated in the sketch as
annex A;
4. Whatever expenses of subdivision, registration,
and other incidental expenses shall be shouldered by
the defendant.
On 27 November 1985 the "Compromise
Agreement" was approved by the trial court and
judgment was rendered in accordance with its terms.
However, after five years from the date of its finality
(even if the decision became final and executory),
Paz G. Villamil-Estrada failed to produce the owner's
duplicate copy of Title No. 37649 needed to
segregate from Lot No. 443 the portion she sold as
attorney-in-fact. Hence, on 25 January 1993 Isidro
Perez filed a complaint to revive the judgment,
docketed as Civil Case No. D-10459.
ISSUE: WON the actions of Paz G. VillamilEstrada as attorney-in-fact bind the principal,
Cosmic Lumber Corporation, in the compromise
agreement she entered into with Isidro Perez?
HELD: A special power of attorney for an agent to
institute any action in court to eject all persons in the
principal's lots so that the principal could take
material possession thereof, and for this purpose, to
appear at the pre-trial and enter into any stipulation
of facts and/or compromise agreement but only
insofar as this is protective of the rights and interests
of the principal in the property, does not grant any
power to the agent to sell the subject property nor a
portion thereof.We agree with petitioner. The
authority granted Villamil-Estrada under the special
power of attorney was explicit and exclusionary: for
her to institute any action in court to eject all persons
found on Lots Nos. 9127 and 443 so that petitioner
could take material possession thereof, and for this
purpose, to appear at the pre-trial and enter into any
stipulation of facts and/or compromise agreement
but only insofar as this was protective of the rights
and interests of petitioner in the property. Nowhere
in this authorization was Villamil-Estrada granted
expressly or impliedly any power to sell the subject
property nor a portion thereof. Neither can a
conferment of the power to sell be validly inferred
from the specific authority "to enter into a
compromise agreement" because of the explicit
limitation fixed by the grantor that the compromise

entered into shall only be "so far as it shall protect

the rights and interest of the corporation in the
aforementioned lots" In the context of the specific
investiture of powers to Villamil-Estrada, alienation
by sale of an immovable certainly cannot be deemed
protective of the right of petitioner to physically
possess the same, more so when the land was being
sold for a price of P80.00 per square meter, very
much less than its assessed value of P250.00 per
square meter, and considering further that petitioner
never received the proceeds of the sale.
The express mandate required by law to enable an
appointee of an agency (couched) in general terms to
sell must be one that expressly mentions a sale or
that includes a sale as a necessary ingredient of the
action mentioned.When the sale of a piece of land
or any interest thereon is through an agent, the
authority of the latter shall be in writing; otherwise,
the sale shall be void. Thus the authority of an agent
to execute a contract for the sale of real estate must
be conferred in writing and must give him specific
authority, either to conduct the general business of
the principal or to execute a binding contract
containing terms and conditions which are in the
contract he did execute. A special power of attorney
is necessary to enter into any contract by which the
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration. The express mandate required by law
to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly
mentions a sale or that includes a sale as a necessary
ingredient of the act mentioned. For the principal to
confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the
agent in clear and unmistakable language. When
there is any reasonable doubt that the language so
used conveys such power, no such construction shall
be given the document.
DECISION: The petition is GRANTED. The
decision and resolution of respondent Court of
Appeals dated 29 October 1993 and 10 March 1994,
respectively, as well as the decision of the Regional
Trial Court of Dagupan City in Civil Case No. D7750 dated 27 November 1985, are NULLIFIED and
SET ASIDE. The "Compromise Agreement" entered
into between Attorney-in-fact Paz G. VillamilEstrada and respondent Isidro Perez is declared
VOID. This is without prejudice to the right of
petitioner to pursue its complaint against private
respondent Isidro Perez in Civil Case No. D-7750 for
the recovery of possession of a portion of Lot No.
443.
New Life Enterprises vs. CA
Facts: Julian Sy and Jose Sy Bang formed a
partnership under a business name New Life
Enterprises, engaged in the sale of construction
materials. The stocks in trade of the business were

insured with Western Guaranty Corporation,

Reliance Surety and Insurance, and Equitable
Insurance Corporation for an aggregate amount of
Php 1.55 million.
On 19 October 1982, the building occupied by NLE
was gutted with fire. The insurance companies
denied the plaintiff's claim for payment on the
ground of breach of policy conditions, specifically,
failure to notify insurers of other insurances already
effected or subsequently effected covering the same
stocks in trade.
Petitioners, however, argued that the agents of the
insurance companies knew of the existence of the
additional insurance coverage and that they were not
informed about the said requirement, as they have
not even read the policies.
Issue: WON the knowledge of the agent satisfies the
requirement of the condition
Held: The knowledge of such insurance by the
insurer's agents, even assuming the acquisition
thereof by the former, is not the "notice" that would
estop the insurers from denying the claim.
The theory of imputed knowledge, that is,
knowledge of the agent is knowledge of the
principal, is not applicable in this case.
Post Script:
What is the Theory of Imputed Knowledge?
A rule in insurance law that any information material
to the transaction, either possessed by the agent at
the time of the transaction or acquired by him before
its completion, is deemed to be the knowledge of the
principal, at least so far as the transaction is
concerned, even though in fact the knowledge is not
communicate.
Caram vs. Laureta
FACTS: Marcos Mata conveyed a parcel of land in
favor of Claro Laureta. The deed of absolute sale
was not registered because it was not acknowledged
before a notary public or any authorized officer.
Nonetheless, Mata delivered to Laureta possession of
the property together with pertinent papers (OCT, tax
declaration etc.)
1.
Subsequently, the same parcel of land was
sold by Mata to Fermin Caram. The deed of sale in
favor of Caram was acknowledged before Atty.
Aportadera. Mata, through Aportadera and Arcilla,
filed with the CFI Davao a petition for the issuance
of a new owners duplicate of the OCT, alleging loss
of said document. The court issued a new title and
declared the loss title null and void

2.
Laureta, then, filed before CFI Davao an
action for nullity, recovery of ownership and/or
reconveyance against Mata and Caram.
3.
Mata, in his answer, alleged that he signed
the sale in favor of Laureta as he was subjected to
duress, threat and intimidation since Laureta was the
commanding officer of the USFIP in Davao. Caram,
on the other hand, denied that he had any knowledge
or information of any previous encumbrance,
transaction or alienation in favor of Laureta until the
filing of the complaints
4.
The trial court held in favor of Laureta and
declared the sale in favor of Caram null and void
5.
Petitioner Caram assailed the trial court
finding that the second sale of the property was made
through his representatives, Irespe and Aportadera.
Caram contended that Irespe merely acted as a
broker with the specific task and duty to pay Mata
P1,000 for the property and to ensure that the deed of
sale was executed by Mata, and that Aportadera only
acted as notary public in the execution of the deed of
sale
ISSUE: WON Irespe and Aportadera were agents of
Caram for the purpose of buying the subject
property?
HELD: YES. The facts show that Mata and Caram
had never met. During the trial Mata testified that he
knew Aportadera but he did not know Caram. Thus,
the sale of the property could only have been through
Carams representatives, Irespe and Aportadera.
Even if Irespe and Aportadera did not have actual
knowledge of the first sale, still their actions have
not satisfied the requirement of good faith. In the
instant Case, Irespe and Aportadera had knowledge
of circumstances which ought to have put them on
inquiry. Both of them knew that Matas OCT
together with other papers pertaining to the land
were taken by Laureta.
There is no doubt then that Irespe and Aportadera,
acting as agents of Caram, purchased the property of
Mata in bad faith. Applying the principle of agency,
Caram as principal, should also be deemed to have
acted in bad faith.
Dominion Insurance vs. CA
FACTS: Rodolfo Guevarra filed a civil action for
sum of money against Dominion Insurance Corp.
Plaintiff sought to recover P156,473.90 which he
claimed to have advanced in his capacity as manager
of Dominion Insurance to satisfy certain claims filed
by Dominions clients.
1.
Dominion Insurance denied any liability to
plaintiff and asserted a counterclaim for P249,672.53

representing premiums that Guevarra allegedly failed

to remit
2.
The trial court held in favor of Guevarra and
ordered Dominion Insurance to pay Guevarra
P156,473.90
ISSUE: WON private respondent Guevarra acted
within his authority as agent for petitioner
HELD: NO. A perusal of the Special Power of
Attorney show that petitioner Dominion Insurance
and Guevarra intended to enter into a principal-agent
relationship. Despite the word special in the title of
the document, the contents reveal that what was
constituted was actually a general agency. The
agency comprises all the business of the principal,
but it is limited only to acts of administration.
A general power permits the agent to do all acts for
which the law does not require a special power.
Thus, the acts enumerated or similar to those
enumerated in the document do not require a special
power of attorney.
Under, Art 1878 NCC, Special powers of attorney
are required in the following cases:
(1)
To make such payments as are not usually
considered as acts of administration
(15) Any other act of strict dominion.
The payment of claims is not an act of
administration. The settlement of claims is not
included among the acts enumerated in the SPA,
neither is it of a character similar to the acts
enumerated therein. A special power of attorney is
required before Guevarra could settle the insurance
claims of the insured.
Based on the Memorandum of Management
Agreement, Guevarra was authorized to pay the
claim of the insured, but such payment shall come
from the revolving fund or collection in his
possession.
Having deviated from the instructions of the
principal, the expenses that Guevarra incurred in the
settlement of the claims of the insured may not be
reimbursed from petitioner Dominion. Art 1918
NCC provides that the principal is not liable for the
expenses incurred by the agent in the following
cases:
(1)
If the agent acted in contravention of the
principals instructions, unless the latter should wish
to avail himself of the benefits derived from the
contract
However, while the law on agency prohibits
Guevarra from obtaining reimbursement, his right to
recover may still be justified under the general law
on obligations and contracts, specifically Art 1236.

Veloso vs. CA
FACTS: Petitioner Francisco Veloso was the owner
of a parcel of land. In 1988, Veloso filed an action
for annulment of documents and reconveyance of
property with damages. Petitioner alleged that he
was the absolute owner of the subject property and
he never authorized anybody, not even his wife Irma,
to sell it.
1.
Petitioner alleged that when his wife left for
abroad, he discovered that the copy of his title was
missing. Upon inquiry with the Registry of Deeds,
he found out that his title was cancelled in favor of
Aglaloma Escario. The transfer of property was
supported by a General Power of Attorney
2.
Escario, on the other hand, alleged that she
was a buyer in good faith and denied any knowledge
of the alleged irregularity. She allegedly relied on the
GPA of Irma Veloso which was sufficient in form
and substance and was duly notarized
3.
The trial court held in favor of Escario citing
that she was an innocent purchaser for value.
ISSUE: WON the GPA of Irma includes the power
to sell the property?
HELD: YES. An examination of the assailed power
of attorney was valid and regular on its face. It was
notarized and as such, it carries the evidentiary
weight conferred upon it with respect to its due
execution. While it is true that it was denominated as
a general power of attorney, a perusal thereof
revealed that it stated an authority to sell. Thus, there
was no need to execute a separate SPA since the GPA
had expressly authorized the agent the power to sell
the subject property. The special power of attorney
can be included in the general power when it is
specified therein the act or transaction for which the
special power is required.
Lim Pin vs. Liao Tan
Facts: Sps. Conchita Liao Tan and Tan Cho Hua
alleged in their complaint for unlawful detainer that
the plaintiff Conchita Liao Tan, as owner of a parcel
of registered land with improvements located at
Francisco Street, Caloocan City, had leased a portion
of it, more particularly known as 91 Francisco Street,
Caloocan City to defendant Lim Pin on a month to
month basis but that the latter starting April, 1977
had not paid the agreed rental stipulated for such
month and the succeeding months thereafter. And
that despite demand, the defendant refused to vacate
the leased premises.
Defendant Lim Pin, filed her Answer denying the
material allegations of the complaint and protesting
the
alleged
highly
"unconscionable
and

unreasonable" increase of rental demanded by

plaintiffs.
On the scheduled October 19, 1977 hearing,
defendant Lim Pin was absent. Her son George Hung
who attended with his mother all the previous
hearings was present together with the defendant's
counsel. Plaintiff Conchita Liao Tan together with
her counsel was also present. Through the initiative
of the court a quo, the subject compromise
agreement was formulated and executed and it
finally became the basis of the October 19, 1977
judgment.
The aforesaid judgment was the subject of a motion
for reconsideration filed on October 28, 1977 by
defendant Lim Pin on the following grounds: 1) that
she never authorized her son nor her counsel on
record (Attorney. Pastor Mamaril) to enter into such
compromise agreement and 2) that had she been
present when said agreement was prepared, she
would not have acceded thereto.
Petitioner argues that the respondent Judge should
not have allowed her son George Hung and her then
counsel, Attorney. Pastor Mamaril in her absence to
enter into the October 19, 1977 compromise
agreement with the private respondent Conchita Liao
Tan assisted by her counsel. Said agreement
contained admissions by petitioner, the respondent
Judge should have required a written authority and
power of attorney from her son and counsel. Her
objections to the validity of the compromise
agreement are premised on Article 1878 of the Civil
Code and Rule 138, Section 23 of the Rules of
Court.
Issue: WON the respondent Judge committed grave
abuse of discretion in allowing the October 19, 1977
compromise agreement in the absence of the
petitioner?
HELD: NO. Article 1878 is found in Title X of the
Civil Code on Agency. It states that a special power
of attorney is necessary to compromise, to submit
questions to arbitration, to renounce the right to
appeal from a judgment, to waive objections to the
venue of an action or to abandon a prescription
already acquired.
Section 23 of Rule 138 on Attorneys and Admission
to the Bar governs the authority of attorneys to bind
their clients and provides that "Attorneys have
authority to bind their clients in any case by any
agreement in relation thereto made in writing, and in
taking appeal, and in an matters of ordinary Judicial
Procedure, but they cannot, without special authority,
compromise their clients' litigation or receive
anything in discharge of their clients' claims but the
full amount in cash."

The requirements of a special power of attorney in

Article 1878 of the Civil Code and of a special
authority in Rule 138 of the Rules of Court refer to
the nature of the authorization and not its form. The
requirements are met if there is a clear mandate from
the
principal
specifically
authorizing
the
performance of the act. As early as 1906, this Court
in Strong v. Gutierrez-Repide (6 Phil. 680) stated
that such a mandate may be either oral or written, the
one vital thing being that it shall be express. And
more recently, We stated that, if the special authority
is not written, then it must be duly established by
evidence:
... the Rules require, for attorneys to compromise the
litigation of their clients, a special authority. And
while the same does not state that the special
authority be in writing the Court has every reason to
expect that, if not in writing, the same be duly
established by evidence other than the self-serving
assertion of counsel himself that such authority was
verbally given him.
Whereupon the following took place: (1) The court
asked George Hung whether he was willing to enter
into the compromise agreement and whether he had
the authority of his mother to enter into such a
compromise agreement; (2) The defendant's counsel
confirmed in open court the assurance of George
Hung that he had the full authority of his mother to
enter into a compromise agreement: (3) After the
formulation of the compromise agreement the Judge
explained in Tagalog to both parties, including
George Hung its terms and conditions after which
the same was reduced into writing; (4) George Hung
willingly signed the compromise agreement, the
terms and conditions of which were those originally
proposed by the petitioner herself. Hung was all the
while assisted by their counsel.
PETITION DISMISSED.
Dungo vs. Lopena
FACTS: Anastacio Dungo and Rodrigo Gonzales

purchased 3 parcels of land from Adriano Lopena

and Rosa Ramos for the total price of P269,804.00.
P28.000.00 was given as down payment with the
agreement that the balance of P241,804.00 would be
paid in 6 monthly installments.
To secure the payment of the balance, the Dungo and
Gonzales executed over the same parcels of land
Deed of Real Estate Mortgage in favor of Lopena
and Ramos. This deed was duly registered with the
Office of the Register of Deeds Rizal, with the
condition that failure of the vendees to pay any of
the installments on their maturity dates shall
automatically cause the entire unpaid balance to
become due and demandable.
Dungo and
installment.

Gonzales

defaulted

on

the

1st

Lopena and Ramos filed a complaint for the

foreclosure of the real estate mortgage with the CFI
of Rizal
There were 2 other civil cases filed in the same
lower court against the same defendants Dugo and
Gonzales. The plaintiff in one was a certain Dionisio
Lopena, and in the other case, the complainants were
Bernardo Lopena and Maria de la Cruz. All 3 cases
arose out of one transaction. In view of the identical
nature of the cases, they were consolidated by the
lower court into just one proceeding.
This present decision refers solely to the interests
and claim of Adriano Lopena against Anastacio
Dugo alone.
Before the cases could be tried, a compromise
agreement1 was submitted to the lower court for
approval. It was signed by Lopena and Ramos on
one hand, and Gonzales, on the other. It was not
signed by Dungo. However, Gonzales represented
that his signature was for both himself and the
Dugno. Moreover, Dugo's counsel of record, Atty.
Chan, the same lawyer who signed and submitted for
him the answer to the complaint, was present at the
preparation of the compromise agreement and this
counsel affixed his signature thereto.This
compromise agreement was approved by the lower
court on the same day it was submitted
Subsequently a so-called Tri-Party Agreement2 was
drawn. The signatories to it were Dugo and
Gonzales as debtors, Lopena and Ramos as creditors,
and, one Emma R. Santos as payor.
When Dugo and Gonzales failed to pay the balance,
Lopena and Ramos filed a Motion for the Sale of
Mortgaged Property. Although this last motion was
filed ex parte, Dugo and Gonzales were notified of
it by the lower court. Neither of them filed any
opposition thereto. The lower court granted the
above motion and ordered the sale of the mortgaged
property.
The 3 parcels of land were sold by the Sheriff at a
public auction where at herein petitioners, together
with the plaintiffs of the other two cases won as the
highest bidders. The said sheriff's sale was later
confirmed by the lower court. Before confirming the
sale, the lower court gave due notice of the motion
for the confirmation to the herein petitioner who
filed no opposition therefore.
Dugo filed a motion to set aside all the proceedings
on the ground that the compromise agreement was
void ab initio with respect to him because he did not
sign the same. Consequently, he argued, all
subsequent proceedings under and by virtue of the
compromise agreement, including the foreclosure

sale, were void and null as regards him. This motion

to set aside was denied by the lower court
Dugo filed a Notice of Appeal from the order
approving the foreclosure sale, as well as the order
denying his motion to set aside. The approval of the
record on appeal however, was opposed by the
respondent spouses who claimed that the judgment
was not appealable having been rendered by virtue
of the compromise agreement. The opposition was
contained in a motion to dismiss the appeal. The
lower court dismissed the appeal
ISSUES:
1. Whether or not the compromise agreement,
the Order of the same date approving the
same, and, all the proceedings subsequent
thereto, valid or void insofar as Dungo is
concerned?
2. Whether or not Dugo had ratified the
compromise agreement?
HELD:
1. YES. Dugo - the Compromise Agreement
was void ab initio and could have no effect
whatsoever against him because he did not
sign the same. Furthermore, as it was void,
all the proceedings subsequent to its
execution, including the Order approving it,
were similarly void and could not result to
anything adverse to his
It is true that a compromise is, in itself, a contract.
ART. 2028. A compromise is a contract whereby the
parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced.
Moreover, under Art. 18783 of the Civil Code, a
third person cannot bind another to a compromise
agreement unless he, the third person, has obtained a
special power of attorney for that purpose from the
party intended to be bound.
Although the Civil Code expressly requires a special
power of attorney in order that one may compromise
an interest of another, it is neither accurate nor
correct to conclude that its absence renders the
compromise agreement void. In such a case, the
compromise is merely unenforceable. It must be
governed by the rules and the law on contracts.
ART. 1403. The following contracts are
unenforceable, unless they are ratified: Those
entered into in the name of another person by one
who has been given no authority or legal
representation, or who has acted beyond his powers;
2. YES. The ratification of the compromise
agreement was conclusively established by

the Tri-Party Agreement. It is to be noted that

the compromise agreement was submitted to
and approved by the lower court. Now, the
Tri-Party Agreement referred itself to that
order4.
Rivero v. Rivero - When it appears that the client, on
becoming aware the compromise and the judgment
thereon, fails to repudiate promptly the action of his
attorney, he will not afterwards be heard to contest
its validity
This Court has not overlooked the fact that which
indeed Dugo was not a signatory to the compromise
agreement, the principal provision of the said
instrument was for his benefit. Originally, Dugo's
obligation matured and became demandable on
October 10, 1959. However, the compromise
agreement extended the date of maturity to June 30,
1960. More than anything the compromise
agreement operated to benefit of Dungo because it
afforded him more time and opportunity to fulfill his
monetary obligations under the contract. If only for
this reason, this Court believes that the herein
petitioner should not be heard to repudiate the said
agreement.
The compromise agreement stated "that, should the
defendants fail to pay the said mortgage
indebtedness, judgment of foreclosure shall
thereafter be entered against the said defendants:"
Beyond doubt, this was ratified by the TriParty
Agreement when it covenanted that - If the MAYOR
defaults or fails to pay anyone of the installments in
the manner stated above, the MAYOR and the
DEBTOR hereby permit the CREDITOR to execute
the order of sale referred to above (the Judgment of
Foreclosure), and they (PAYOR and DEBTOR)
hereby waive any and all objections or oppositions to
the propriety of the public auction sale and to the
confirmation of the sale to be made by the Court.
Dugo - even assuming that the compromise
agreement was valid, it nevertheless could not be
enforced against him because it has been novated by
the Tri-Party Agreement which brought in a third
party, Santos, who assumed the mortgaged
obligation of Dungo.
Novation by presumption has never been favored. To
be sustained, it need be established that the old and
new contracts are incompatible in all points, or that
the will to novate appears by express agreement of
the parties or in acts of similar import.
An obligation to pay a sum of money is not novated,
in a new instrument wherein the old is ratified, by
changing only the term of payment and adding other
obligations not incompatible with the old one or
wherein the old contract is merely supplemented by
the new one

Dungo claims that when a third party, Santos, came

in and assumed the mortgaged obligation, novation
resulted thereby inasmuch as a new debtor was
substituted in place of the original one.
In this kind of novation, however, it is not enough
that the juridical relation of the parties to the original
contract is extended to a third person; it is necessary
that the old debtor be released from the obligation,
and the third person or new debtor take his place in
the new relation. Without such release, there is no
novation; the third person who has assumed the
obligation of the debtor merely becomes a co-debtor
or surety. If there is no agreement as to solidarity, the
first and the new debtors are considered obligation
jointly. There was no such release of the original
debtor in the Tri-Party Agreement.
It is a very common thing in the business affairs for a
stranger to a contract to assume its obligations; while
this may have the effect of adding to the number of
persons liable, it does not necessarily imply the
extinguishment of the liability of the first debtor).
The mere fact that the creditor receives a guaranty or
accepts payments from a third person who has
agreed to assume the obligation, when there is no
agreement that the first debtor shall be released from
responsibility, do not constitute a novation, and the
creditor can still enforce the obligation against the
original debtor.
The Tri-Party Agreement was an instrument intended
to render effective the compromise agreement. It
merely complemented and ratified the same. That a
third person was involved in it is inconsequential.
Nowhere in the new agreement may the release of
Dungo be even inferred.
Vicente vs. Geraldez
FACTS: 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 meter.
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 meter.
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 entering into a compromise
agreement. Judge Ambrosio Geraldez ruled in favor
of HI Cement.
ISSUE: WON a compromise agreement entered into
by a lawyer purportedly in behalf of the corporation
is valid without a written authority?
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.

Mercado vs. Allied Banking Corporation

FACTS: Perla executed a Special Power of Attorney
(SPA) in favor of her husband, Julian D. Mercado
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.
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 Real Estate
Mortgage 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 REVOCATION OF THE SPA.
HELD:

1. 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. The
SPA will be held to grant only those powers
which are specified therein, and the agent
may neither go beyond nor deviate from the
power of attorney. Where powers and duties
are specified and defined in an instrument, all
such powers and duties are limited and are
confined to those which are specified and
defined, and all other powers and duties are
excluded.
2. Article 1919, an agency is extinguished,
among others, by its revocation
Article 1920, the principal may revoke the
agency at will, and compel the agent to return
the document evidencing the agency. Such
revocation may be express or implied. In this
case, the revocation of the agency or Special
Power of Attorney is expressed and by a
public document executed on March 10,
1993.
Given that Perla revoked the SPA as early as
10 March 1993, and that she informed the
Registry of Deeds of Quezon City of such
revocation in a letter dated 23 January 1996
and received by the latter on 7 February
1996, then third parties to the SPA are
constructively notified that the same had
been revoked and Julian no longer had any
authority to mortgage the subject property.
BPI vs. De Coster
FACTS: BPI filed a complaint against defendants
Gabriela Andrea de Coster y Roxas, her husband
Jean M. Poizat and their partnership J.M. Poizat &
Co. for failure to deliver a mortgage on a real
property in Manila. The CFI of Manila rendered that
the defendants be jointly and severally liable for Php
292,000 with an interest of 9% per annum and other
damages.
BPI filed later for the immediate possession of the
property and sell the same according to the Chattel
Mortgage Law.
Sps. De Coster and Poizat, as well as J.M. Poizat &
Co., were all declared in default by the court for their
failure to appear or file their answer. Without
notifying the defendants, and after introducing
evidence, rendered an opinion that the property
should be sold and the proceeds should be used for
the satisfaction of respective judgments.
De Coster filed a suit to absolve her from the
liability and to request for the reopening of the case

because: (1) She resided in Paris from 1908 to April

30, 1924 and was not notified even by her husband
regarding the case; (2) Her husband executed the
mortgage transactions without her consent.
ISSUE: WON the transactions entered by Poizat, as
an agent of his wife valid?
HELD: NO. Paragraph 5 of the power of attorney
authorizes the husband for in the name of his wife to
loan or borrow any sums of money or fungible
things, etc. This should be construed to mean that
the husband had power only to his wifes money and
not to borrow money for or on account of his wife as
her agent and attorney-in-fact. That does not carry
with it or imply that he had the legal right to make
his wife liable as a surety for the preexisting debt of
a third person.
Anent her contention that the promissory note was
void, the High Court agreed with her that under the
power of attorney given by De Coster to her
husband, he had no authority to execute a joint and
several note nor to make her liable as an
accommodation maker or surety, as the case may be.
The money owed to BPI was Jean Poizat and his
companys alone, and she was not a party to such
loan, and therefore, was not obligated to pay it. The
old, original debts of her husband and his company
to the bank were all taken up and merged in the new
note in question.
Furthermore, the bank knew that not a dollar was
loaned nor borrowed on the strength of the note. It
was actually given at the banks urgent and pressing
demand to obtain security for the previous
indebtedness of Jean Poizat
Considering these facts, De Coster had a valid
defense against the payment of the questioned note,
and thus, she is not liable to pay it or the original
notes. In addition, the note and mortgage show on
their face that De Costers husband as her attorneyin-fact executed them. The bank knew or should
have known the nature and extent of Jean Poizats
authority and the limitations on his power. The fact
is, there is no provision in the husbands power of
attorney that empowers or authorizes him to sign
anything or to do anything that will make his wife
liable as a surety for a pre-existing debt.
On the question of the void mortgage: The same is
true of the real estate mortgage. The note being void
as to De Coster, it follows that as to her, the real
estate mortgage is also void for want of power to
execute it.
Hence, the SC reversed the lower courts ruling and
remanded the case to said court for trial on the
merits.

Insular Drug vs. PNB

Facts: 132 checks made out in the name of the
Insular Drug Co., Inc., were brought to the branch
office of the Philippine National Bank in Iloilo by
Foerster, a salesman of the drug company, Foerster's
wife, and Foerster's clerk. And said bank credited
those checks to the personal account of Foerster and
permitted him amd his wife to make withdrawals.
Eventually the Manila office of the drug company
investigated the transactions of Foerster. Upon the
discovery of anomalies, Foerster committed suicide.
But there is no evidence showing that the bank knew
that Foerster was misappropriating the funds of his
principal. The Insular Drug Company claims that it
never received the face value of 132 checks.
Issue: WON PNB shall be held liable for permitting
Foerster to indorse and withdraw the checks of his
principa, Insular Druga Co. Inc.
Held: YES. The bank could tell by the checks
themselves that the money belonged to the Insular
Drug Co., Inc., and not to Foerster or his wife or his
clerk. Moreover, the bank did not only permit
Foerster to indorse checks and then place them to his
personal account, but it went farther and permitted
Foerster's wife and clerk to indorse the checks. 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.
And it suffices to state in conclusion that bank will
have to stand the loss occasioned by the negligence
of its agents.
Hodges vs. Salas
Facts: In 1923, Salas executed a power of attorney
in favor of their brother-in-law, Felix Yulo. Said P.A.
enables Yulo to obtain a loan and secure it with a
mortgage on real property.
Acting under said power of attorney, Yulo obtained a
loan of P28,000 from Hodges, binding his principals
jointly and severally to pay it within 10 years with
12% interest.
This loan is secured with a mortgage over a real
property. However, the P28,000 loan was not
delivered to Yulo.
Instead, an agreement between Yulo and Hodges
indicate that the P28,000 loan was applied to pay his
personal debts to Hodges, amounting to P10,188.29.
Defendants failed to pay the interests at maturity,
which should have been paid one year in advance.
Hodges, now seeks to have the property subject of
mortgage foreclosed. Salas then counters such action

arguing that Yulo acted in excess of his authority,

hence such loan is invalid. Hodges then contends
that Salas, thru power of attorney, ratified the action
of Yulo.
Issue: WON agent Yulo was authorized to borrow
money and invest it as he wished, without being
obliged to apply it necessarily for the benefit of the
principals, by virtue of the authority conferred by the
defendants
Held: NO. In Manila Trading & Supply Co., vs. Uy
Tiepo, the Court held that an agent who applied
loaned money for his own benefit is deemed to have
exceeded his authority as provided under the power
of attorney. The power of attorney which authorizes
an agent for a specific undertaking has limited term.
In this case, Yulo exceeded the authority provided
under the power of attorney since he applied portion
of the money loaned for his own benefit.
Note: The Court ordered that defendants pay Hodges
the balance of P17,811.71, since P10,188.29 was
applied by agent Yulo to the payment of his personal
debt to Hodges. As to the interest, since defendants
already paid to Hodges a total of P18,138.77, which
includes a usurious interest, they are still indebted to
pay P4,321.79 (defendants have to pay P22, 460.56
interest12% p.a. from 1926 to 1936less P3,000
attorneys fees).
Bravo-Guerrero vs. Bravo
Facts: Grandparents-spouses Bravo owned two
parcel of land in Makati, the wife executed GPA in
favor of her husband. These properties were
subsequently sold by the grandfather to their
grandchildren. Such properties were mortgaged to
PNB and DBP and the grandchildren-heirs assumed
the payment. Later on, one of the grandchildren
moved for the partition of the properties as coowners but the buyers refused. The grandchildren
contested the sale for lack of consideration. The trial
court upheld the validity of the sale, which was
reversed by CA for lack of the consent on the part of
the grandmother.
Issue: WON the GPA granted by grandmother was
valid.
Held: YES. Sale of conjugal property by husband is
only voidable if without wifes consent. The sale
can only be contested by the wife, and this is not the
case.
The grandmother executed a GPA specifying the
authority (i.e. mortgae, sell, assign, dispose, etc) of
his husband, thus meeting the requirement of
authorization specified in Art. 1878 (nature, and not
the form of power).

There was no need to execute a separate and special

power of attorney as it can be included in the general
power when it is specified therein the act or
transaction for which the special power is required.
The SC divided the co-owned properties between
heirs of the buyers. Gross inadequacy of price will
not affect sale.
Siasat v. IAC
Facts: Nacianceno was able to convince the
Department of Education and Culture to purchase
without bidding Philippine Flags. When she
followed-up the Department of Budget regarding
such purchase, the latter informed her that purchase
order cannot be released until a formal offer to
deliver the flags is given.
Due this, she contacted Siasat, the owner of the
United Flag Ind. The latter then issued a document
authorizing Nacianceno to deal with any entity
regarding the marketing of the products of the UFI.
They also agreed that Nacianceno shall be entitled to
a commission of 30%. The purchase order was then
released in favor of UFI. After the first delivery was
made, UFI gave Nacianceno her commission
amounting to 5% of the amount purchased.
UFI then revoked the authorization given to
Nacianceno. After such revocation, another delivery
was made by UFI to the DEC. Because of this,
Nacianceno demanded that her full 30% from the
first delivery be given as well as her commission for
the second delivery. UFI then contended, among
others, that she has no right over the commission
since the agency contract is special in character (as it
is limited to the marketing of the UFI products only).
Issue: WON the agency contract authorizing of
Nacianceno is special in character.
Held: NO. A special agent is one authorized to do
some particular act or to act upon some particular
occasion while a general agent is one authorized to
do all acts pertaining to a business of a certain kind
or at a particular place, or all acts pertaining to a
business of a particular class or series.
In this case, it is clear from the document that no
restrictions were intended as to the manner the
agency was to be carried out or in the place where it
was to be executed. The power granted to the
respondent was so broad that it practically covers the
negotiations leading to, and the execution of, a
contract of sale of petitioners' merchandise with any
entity or organization.