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480 SCRA 146 (2006)

FACTS: Respondent Divina Montehermozo is a domestic helper deployed to Taiwan by

Sunace International Management Services (Sunace) under a 12-month contract. Such
employment was made with the assistance of Taiwanese broker Edmund Wang. After the
expiration of the contract, Montehermozo continued her employment with her Taiwanese
employer for another 2 years.

When Montehermozo returned to the Philippines, she filed a complaint against Sunace,
Wang, and her Taiwanese employer before the National Labor Relations Commission
(NLRC). She alleges that she was underpaid and was jailed for three months in Taiwan. She
further alleges that the 2-year extension of her employment contract was with the consent
and knowledge of Sunace. Sunace, on the other hand, denied all the allegations.

The Labor Arbiter ruled in favor of Montehermozo and found Sunace liable thereof. The
National Labor Relations Commission and Court of Appeals affirmed the labor arbiters
decision. Hence, the filing of this appeal.

ISSUE: Whether or not the 2-year extension of Montehermozos employment was made with
the knowledge and consent of Sunace

HELD: There is an implied revocation of an agency relationship when after the termination of
the original employment contract, the foreign principal directly negotiated with the employee
and entered into a new and separate employment contract.

Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer.

The finding of the Court of Appeals solely on the basis of the telefax message written by
Wang to Sunace, that Sunace continually communicated with the foreign "principal" (sic) and
therefore was aware of and had consented to the execution of the extension of the contract
is misplaced. The message does not provide evidence that Sunace was privy to the new
contract executed after the expiration on February 1, 1998 of the original contract. That
Sunace and the Taiwanese broker communicated regarding Montehermozos allegedly
withheld savings does not necessarily mean that Sunace ratified the extension of the

As can be seen from that letter communication, it was just an information given to Sunace
that Montehermozo had taken already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the extension or Sunaces
consent thereto.

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume
that it was sent to enlighten Sunace who had been directed, by Summons issued on
February 15, 2000, to appear on February 28, 2000 for a mandatory conference following
Montehermozos filing of the complaint on February 14, 2000.

Respecting the decision of Court of Appeals following as agent of its foreign principal,
[Sunace] cannot profess ignorance of such an extension as obviously, the act of its principal
extending [Montehermozos] employment contract necessarily bound it, it too is a
misapplication, a misapplication of the theory of imputed knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer, not the other way around. The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the
2-year employment contract extension, it cannot be said to be privy thereto. As such, it and
its "owner" cannot be held solidarily liable for any of Montehermozos claims arising from the
2-year employment extension. As the New Civil Code provides, Contracts take effect only
between the parties, their assigns, and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law. Furthermore, as Sunace correctly points out, there was an implied
revocation of its agency relationship with its foreign principal when, after the termination of
the original employment contract, the foreign principal directly negotiated with
Montehermozo and entered into a new and separate employment contract in Taiwan. Article
1924 of the New Civil Code states that the agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons.