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TOPIC: Form

G.R. No. 171464 November 27, 2013

SPOUSES ELISEO R. BAUTISTA AND EMPERA TRIZ C. BAUTISTA, Petitioners, vs.


SPOUSES MILA JALANDONI AND ANTONIO JALANDONI AND MANILA CREDIT
CORPORATION, Respondents.

MENDOZA, J.:

FACTS:

Spouses Jalandoni were the registered owners of two (2) parcels of land. In May 1997, the
Spouses Jalandoni applied for a loan with a commercial bank and, as a security thereof, they
offered to constitute a real estate mortgage over their two lots. After a routine credit
investigation, it was discovered that their titles over the two lots had been cancelled and new
TCT Nos. 206091 and 205624 were issued in the names of Spouses Baustista. Upon further
investigation, they found out that the bases for the cancellation of their titles were two deeds of
absolute sale, dated April 4, 1996 and May 4, 1996, purportedly executed and signed by them in
favor of Spouses Baustista.

Spouses Bautista claimed that in March 1996, a certain Teresita Nasino (Nasino) offered to
Eliseo Baustista (Eliseo) two parcels of land; that the parcels of land were sold at a bargain price
because the owners were in dire need of money; that Nasino told them that she would negotiate
with the Spouses Jalandoni, prepare the necessary documents and cause the registration of the
sale with the Register of Deeds; and that since Nasino was a wife of a friend, Spouses Baustista
trusted her and gave her the authority to negotiate with Spouses Jalandoni on their behalf.

ISSUE:Whether or not the sale made to Spouses Bautista was valid.

HELD: The sale was void.

Articles 1874 of the Civil Code provides:When a sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.

Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the authority of
the agent to sell a real property must be conferred in writing, to wit: Art. 1878. Special powers of
attorney are necessary in the following cases: xxx (5) To enter into any contract by which the
ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration.
The foregoing provisions explicitly require a written authority when the sale of a piece of land is
through an agent, whether the sale is gratuitously or for a valuable consideration. Absent such
authority in writing, the sale is null and void.

TOPIC: Form

G.R. No. 174978 July 31, 2013

SALLY YOSHIZAKI, Petitioner, vs.


JOY TRAINING CENTER OF AURORA, INC., Respondent.

BRION, J.:

FACTS:

Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit
religious educational institution. It was the registered owner of a parcel of land and the building
thereon (real properties). On November 10, 1998, the spouses Richard and Linda Johnson sold
the real properties, a Wrangler jeep, and other personal properties in favor of the spouses Sally
and Yoshio Yoshizaki. On the same date, a Deed of Absolute Sale and a Deed of Sale of Motor
Vehicle were executed in favor of the spouses Yoshizaki. The spouses Johnson were members of
Joy Trainings board of trustees at the time of sale. On December 7, 1998, TCT No. T-25334 was
cancelled and TCT No. T-26052 was issued in the name of the spouses Yoshizaki.

In the complaint, Joy Training alleged that the spouses Johnson sold its properties without the
requisite authority from the board of directors. It assailed the validity of a board resolution dated
September 1, 1998 which purportedly granted the spouses Johnson the authority to sell its real
properties. It averred that only a minority of the board, composed of the spouses Johnson and
Alexander Abadayan, authorized the sale through the resolution. It highlighted that the Articles
of Incorporation provides that the board of trustees consists of seven members.

ISSUES:

1) Whether or not there was a contract of agency to sell the real properties between Joy Training
and the spouses Johnson.

2) As a consequence of the second issue, whether or not there was a valid contract of sale of the
real properties between Joy Training and the spouses Yoshizaki.

HELD:
1) There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel
of land with its improvements. Article 1868 of the Civil Code defines a contract of agency 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." It may be
express, or implied from the acts of the principal, from his silence or lack of action, or his failure
to repudiate the agency, knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral. However, it must be written when the law
requires a specific form. Specifically, Article 1874 of the Civil Code provides that the contract of
agency must be written for the validity of the sale of a piece of land or any interest therein.
Otherwise, the sale shall be void.

In the present case, Sally presents pieces of evidence which allegedly prove that Joy Training
specially authorized the spouses Johnson to sell the real properties: (1) TCT No. T-25334, (2) the
resolution, and (3) certification: We quote the pertinent portion of the TCT:

1. A parcel of land x x x is registered in accordance with the provisions of the Property


Registration Decree in the name of JOY TRAINING CENTER OF AURORA, INC., Rep.
by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON, both of legal age, U.S.
Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203, U.S.A.

The above document does not convince us of the existence of the contract of agency to sell the
real properties. TCT No. T-25334 merely states that Joy Training is represented by the spouses
Johnson. The title does not explicitly confer to the spouses Johnson the authority to sell the
parcel of land and the building thereon. Moreover, the phrase "Rep. by Sps. RICHARD A.
JOHNSON and LINDA S. JOHNSON" only means that the spouses Johnson represented
Joy Training in land registration.

Moreover, the certification is a mere general power of attorney which comprises all of Joy
Trainings business. Article 1877 of the Civil Code clearly states that "an agency couched in
general terms comprises only acts of administration, even if the principal should state that he
withholds no power or that the agent may execute such acts as he may consider appropriate, or
even though the agency should authorize a general and unlimited management."

2. The contract of sale is unenforceable.

Necessarily, the absence of a contract of agency renders the contract of sale unenforceable; Joy
Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally
cannot also claim that she was a buyer in good faith. She misapprehended the rule that persons
dealing with a registered land have the legal right to rely on the face of the title and to dispense
with the need to inquire further, except when the party concerned has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such inquiry. This rule
applies when the ownership of a parcel of land is disputed and not when the fact of agency is
contested. At this point, we reiterate the established principle that persons dealing with an agent
must ascertain not only the fact of agency, but also the nature and extent of the agents
authority.
TOPIC: Form

G.R. No. 165133 April 19, 2010

SPOUSES JOSELINA ALCANTARA AND ANTONIO ALCANTARA, and SPOUSES


JOSEFINO RUBI AND ANNIE DISTOR- RUBI, Petitioners, versus BRIGIDA L. NIDO,
as attorney-in-fact of REVELEN N. SRIVASTAVA, Respondent.

CARPIO, J.:

FACTS:

Revelen, who is respondents daughter and of legal age, is the owner of an unregistered land with
an area of 1,939 square meters located in Cardona, Rizal. Sometime in March 1984, respondent
accepted the offer of petitioners to purchase a 200-square meter portion of Revelens lot (lot)
at P200 per square meter. Petitioners paid P3,000 as downpayment and the balance was payable
on installment. Petitioners constructed their houses in 1985. In 1986, with respondents consent,
petitioners occupied an additional 150 square meters of the lot.

On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a


complaint for recovery of possession with damages and prayer for preliminary injunction against
petitioners with the RTC. The RTC stated that based on the evidence presented, Revelen owns
the lot and respondent was verbally authorized to sell 200 square meters to petitioners. The
RTC ruled the sale was void under Article 1874 of the Civil Code. The RTC ruled that rescission
is the proper remedy. The CA upheld such decision. Hence, the petition.

ISSUE: Whether or not the sale is void under article 1874 of the Civil Code.

HELD: Yes,the sale is void.

Article 1874 of the Civil Code explicitly requires a written authority before an agent can
sell an immovable property. Based on a review of the records, there is absolutely no proof of
respondents written authority to sell the lot to petitioners. In fact, during the pre-trial conference,
petitioners admitted that at the time of the negotiation for the sale of the lot, petitioners were of
the belief that respondent was the owner of lot. Petitioners only knew that Revelen was the
owner of the lot during the hearing of this case. Consequently, the sale of the lot by respondent
who did not have a written authority from Revelen is void. A void contract produces no effect
either against or in favor of anyone and cannot be ratified.

Unfortunately, the General Power of Attorney executed by Revelen constituting


respondent as her attorney-in-fact and authorizing her to enter into any and all contracts and
agreements on Revelens behalf which was notarized by Larry A. Reid, Notary Public in
California, U.S.A, cannot be the basis of respondents written authority to sell the lot. Since the
General Power of Attorney was executed and acknowledged in the United States of America, it
cannot be admitted in evidence unless it is certified as such in accordance with the Rules of
Court by an officer in the foreign service of the Philippines stationed in the United States of
America. Hence, this document has no probative value.

TOPIC: Special Power of Attorney

G.R. No. 214057, October 19, 2015


FLORENTINA BAUTISTA-SPILLE REPRESENTED BY HER ATTORNEY-IN-FACT,
MANUEL B. FLORES, JR., Petitioner, v. NICORP MANAGEMENT AND
DEVELOPMENT CORPORATION, BENJAMIN G. BAUTISTA AND
INTERNATIONAL EXCHAN BANK, Respondents.

MENDOZA, J.:

FACTS:

Petitioner Florentina Bautista-Spille (petitioner) is the registered owner of a parcel of land


covered by Transfer Certificate of Title (TCT) No. T-197, located in Imus City, Cavite, with an
area of more or less 33,052 square meters (subject property). On June 20, 1996, petitioner and
her spouse, Harold E. Spille, executed a document denominated as General Power of Attorney in
favor of her brother, respondent Benjamin Bautista (Benjamin), authorizing the latter to
administer all her businesses and properties in the Philippines. The said document was notarized
before the Consulate General of the Philippines, New York, United States of America.

On August 13, 2004, Benjamin and NICORP Management and Development Corporation
(NICORP) entered into a contract to sell which pertained to the parcel of land covered by TCT
No. T-197 for the agreed amount of P15,000,000.00. Pursuant thereto, an Escrow Agreement was
executed designating IE Bank as the Escrow Agent, obliging the latter to hold and take custody of
TCT No. T-197, and to release the said title to NICORP upon full payment of the subject
property.

When petitioner discovered the sale, her lawyer immediately sent demand letters to NICORP and
Benjamin and to IE bank, informing them that she was opposing the sale of the subject property
and that Benjamin was not clothed with authority to enter into a contract to sell and demanding
the return of the owner's copy of the certificate of title to her true and lawful attorney-in-fact,
Manujel B. Flores, Jr. (Flores). NICORP, Benjamin and IE Bank, however, failed and refused to
return the title of the subject property.

ISSUE: Whether or not Benjamin was authorized to sell the subject property.

HELD: NO.

The well-established rule is when a sale of a parcel of land or any interest therein is through an
agent, the authority of the latter shall be in writing, otherwise the sale shall be void. Articles 1874
and 1878 of the Civil Code explicitly provide:
Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.

Art. 1878. Special powers of attorney are necessary in the following cases:

x xx(5) To enter into any contract by which the ownership of an immovable


is transmitted or acquired either gratuitously or for a valuable consideration;
From the foregoing, it is clear that an SPA in the conveyance of real rights over
immovable property is necessary. In Cosmic Lumber Corporation v. Court of Appeals, the
Court enunciated,

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.

Thus, when the authority is couched in general terms, without mentioning any specific power to
sell or mortgage or to do other specific acts of strict dominion, then only acts of administration
are deemed conferred.

Doubtless, there was no perfected contract to sell between petitioner and NICORP. Nowhere in
the General Power of Attorney was Benjamin granted, expressly or impliedly, any power to sell
the subject property or a portion thereof. The authority expressed in the General Power of
Attorney was couched in very broad terms covering petitioner's businesses and properties. Time
and again, this Court has stressed that the power of administration does not include acts of
disposition, which are acts of strict ownership. As such, an authority to dispose cannot
proceed from an authority to administer, and vice versa, for the two powers may only be
exercised by an agent by following the provisions on agency of the Civil Code.

TOPIC: Special Power of Attorney

G.R. No. 186305 July 22, 2015

V-GENT, INC., Petitioner, vs. MORNING STAR TRAVEL and TOURS, INC., Respondent.

BRION, J.:

FACTS:

Sometime in June and in September 1998, the petitioner V-Gent, Inc. (V-Gent) bought twenty-six
(26) two-way plane tickets (Manila-Europe-Manila) from the respondent Morning Star Travel
and Tours, Inc. (Morning Star). On June 24, 1998 and September 28, 1998, V-Gent returned a
total of fifteen (15) unused tickets worth $8,747.50 to the defendant. Of the 15, Morning Star
refunded only six (6) tickets worth $3,445.62. Morning Star refused to refund the remaining nine
(9) unused tickets despite repeated demands.

On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for
payment of the unrefunded $5,301.88 plus attorney's fees. Morning Star countered that V-Gent
was not entitled to a refund because the tickets were bought on the airline company's "buy one,
take one" promo. Hence, considering that it had already refunded six (6) tickets (which is more
or less 50% of 14), then there was nothing else to refund.

Morning Star also questioned V-Gent's personality to file the suit. It asserted that the passengers,
in whose names the tickets were issued, are the real parties-in-interest.

ISSUES: 1) Whether or not V-Gent is the real party-in-interest.

2) Whether or not Morning Star's recognition of V-Gent's authority to collect a refund


for the passengers is equivalent to recognition of V-Gent's authority to initiate a suit on
behalf of the passengers.

HELD:

1) NO. Every action must be prosecuted or defended in the name of the real party-in-interest -
the party who stands to be benefited or injured by the judgment in the suit. In suits where an
agent represents a party, the principal is the real party-in-interest; an agent cannot file a
suit in his own name on behalf of the principal.

Rule 3, Section 3 of the Rules of Court provides the exception when an agent may sue or be sued
without joining the principal. Thus an agent may sue or be sued solely in its own name and
without joining the principal when the following elements concur: (1) the agent acted in his
own name during the transaction; (2) the agent acted for the benefit of an undisclosed principal;
and (3) the transaction did not involve the property of the principal.

When these elements are present, the agent becomes bound as if the transaction were its own.
This rule is consistent with Article 1883 of the Civil Code which says:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the
agent has contracted; neither have such persons against the principal. In such case, the agent is the one directly
bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the
contract involves things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions between the
principal and agent.

In the present case, only the first element is present; the purchase order and the receipt were in
the name of V-Gent. However, the remaining elements are absent because: (1) V-Gent disclosed
the names of the passengers to Morning Star - in fact the tickets were in their names; and (2) the
transaction was paid using the passengers' money. Therefore, Rule 3, Section 3 of the Rules of
Court cannot apply.
To define the actual factual situation, V-Gent, the agent, is suing to recover the money of its
principals - the passengers - who are the real parties-in-interest because they stand to be injured
or benefited in case Morning Star refuses or agrees to grant the refund because the money
belongs to them. From this perspective, V-Gent evidently does not have a legal standing to file
the complaint.

2) NO. The power to collect and receive payments on behalf of the principal is an ordinary act of
administration covered by the general powers of an agent. On the other hand, the filing of suits is
an act of strict dominion.

Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to exercise any
act of strict dominion on behalf of the principal unless authorized by a special power of attorney.
An agent's authority to file suit cannot be inferred from his authority to collect or receive
payments; the grant of special powers cannot be presumed from the grant of general powers.
Moreover, the authority to exercise special powers must be duly established by evidence, even
though it need not be in writing.

By granting the initial refund, Morning Star recognized V-Gent's authority to buy the tickets and
collect refunds on behalf of the passengers. However, Morning Star's recognition of V-Gent's
authority to collect a refund for the passengers is not equivalent to recognition of V-Gent's
authority to initiate a suit on behalf of the passengers. Morning Star therefore, is not estopped
from questioning V-Gent's legal standing to initiate the suit.

TOPIC: Apparent Authority/ Agency by Estoppel

G.R. No. 182349 July 24, 2013

REMAN RECIO, Petitioner,


vs.
HEIRS OF THE SPOUSES AGUEDO and MARIA ALTAMIRANO, namely:
ALEJANDRO, ADELAIDA, CATALINA, ALFREDO, FRANCISCO, all surnamed
ALTAMIRANO; VIOLETAALTAMIRANO OLFATO, and LORETAALTAMIRANO
VDA. DE MARALIT and SPOUSES LAURO and MARCELINA LAJARCA, Respondents.

REYES, J.:

FACTS:

In the 1950s, Nena Recio (Nena), the mother of Reman Recio (petitioner), leased from the
respondents Altamiranos a parcel of land with improvements. The petitioner claimed that in
1988, the Altamiranos offered to sell the subject property to Nena for P500,000.00. The latter
accepted such offer, which prompted the Altamiranos to waive the rentals for the subject
property. However, the sale did not materialize at that time due to the fault of the Altamiranos.

In the latter part of 1994, the petitioner renewed Nenas option to buy the subject property. The
petitioner conducted a series of negotiations with respondent Alejandro who introduced himself
as representing the other heirs. After the said negotiations, the Altamiranos through Alejandro
entered into an oral contract of sale with the petitioner over the subject property. Partial
payments to the Altamiranos in the total amount of P110,000.00 was made to Alejandro.
Subsequently, when petitioner offered to pay the remaining balance, Alejandro kept on avoiding
her. Because of this, petitioner filed a complaint for Specific Performance with Damages.

Pending the case, the petitioner discovered that the subject property has been subsequently sold
to respondents Lauro and Marcelina Lajarca. CT No. 112727, was issued in the name of the
Spouses Lajarca by virtue of a Deed of Sale executed by the latter and the Altamiranos on
February 26, 1998.

ISSUES: 1) Whether or not the verbal contract of sale between Alejandro and the petitioner is
valid.

2) Can the contract of sale between Alejandro and petitioner, representing the share of
the co-owners of the former be held valid pursuant to Apparent Authority of an Agent based
on Estoppel?

HELD:

1) The sale between the petitioner and Alejandro is valid insofar as the aliquot share of respondent
Alejandro is concerned. Being a co-owner, Alejandro can validly and legally dispose of his share
even without the consent of all the other co-heirs. Since the balance of the full price has not yet
been paid, the amount paid shall represent as payment to his aliquot share.

2) No. In Woodchild Holdings, Inc. v. Roxas Electric and Construction Company, Inc. the Court
stated that apparent authority based on estoppel can arise from the principal who knowingly
permit the agent to hold himself out with authority and from the principal who clothe the agent
with indicia of authority that would lead a reasonably prudent person to believe that he actually
has such authority. Apparent authority of an agent arises only from "acts or conduct on the part
of the principal and such acts or conduct of the principal must have been known and relied upon
in good faith and as a result of the exercise of reasonable prudence by a third person as claimant
and such must have produced a change of position to its detriment."

Indeed, the petitioner can only apply the principle of apparent authority if he is able to prove the
acts of the Altamiranos which justify his belief in Alejandros agency; that the Altamiranos had
such knowledge thereof; and if the petitioner relied upon those acts and conduct, consistent with
ordinary care and prudence.

The instant case shows no evidence on record of specific acts which the Altamiranos made
before the sale of the subject property to the petitioner, indicating that they fully knew of the
representation of Alejandro. Absent the consent of Alejandro's co-owners, the Court holds that
the sale between the other Altamiranos and the petitioner is null and void.

TOPIC: Third party dealing with agent

G.R. No. 166044 June 18, 2012

COUNTRY BANKERS INSURANCE CORPORATION, Petitioner,v KEPPEL CEBU


SHIPYARD, UNIMARINE SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER
RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN QUINAIN,Respondents

LEONARDO-DE CASTRO, J.:

FACTS:

On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation


engaged in the shipping industry, contracted the services of Keppel Cebu Shipyard (Cebu
Shipyard), for dry docking and ship repair works on its vessel, the M/V Pacific Fortune.

Pursuant with the ship repair bill agreement, Unimarine, through its Pres. Paul
Rodriguez, secured from Country Bankers Insurance Corp. (CBIC), through the latters
agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16) 29419 in the amount
of P3,000,000.00. The expiration of this surety bond was extended to January 15, 1993, through
Endorsement No. 33152 (the endorsement), which was later on attached to and formed part of
the surety bond. In addition to this, Unimarine, on February 19, 1992, obtained another bond
from Plaridel Surety and Insurance Co. (Plaridel) in the amount of P1,620,000.00.

Unimarine defaulted on its payment with regard to the ship repair works of Cebu
shipyard. Hence, on November 18, 1992, Cebu Shipyard, through its counsel, sent Unimarine a
letter, demanding payment, within seven days from receipt of the letter, the amount
of P4,859,458.00.
Due to Unimarines failure to heed Cebu Shipyards repeated demands, Cebu Shipyard, through
counsel, wrote the sureties CBIC and Plaridel to inform and to ask them to fulfill their
obligations as sureties. However, even the sureties failed to discharge their obligations, and so
Cebu Shipyard filed a Complaint before the RTC against Unimarine, CBIC, and Plaridel.

CBIC, in its Answer, said that Cebu Shipyards complaint states no cause of action. CBIC alleged
that the surety bond that was issued by its agent, Quinain, was in excess of his authority. It
further alleged that he exceeded his authority as stated in the Special Power of Attorney, wherein
he was authorized to solicit business and issue surety bonds not exceeding P500,000.00 but only
in favor of the Department of Public Works and Highways, National Power Corporation, and
other government agencies.

ISSUE: Whether or not CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16)
29419.

HELD: No. It is apparent that Unimarine had been negligent or less than prudent in its dealings
with Quinain. In Manila Memorial Park Cemetery, Inc. v. Linsangan, this Court held:

The ignorance of a person dealing with an agent as to the scope of the latters authority is
no excuse to such person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the
principal by relying upon the agents assumption of authority that proves to be unfounded. The
principal, on the other hand, may act on the presumption that third persons dealing with his agent
will not be negligent in failing to ascertain the extent of his authority as well as the existence of
his agency.

Unimarine undoubtedly failed to establish that it even bothered to inquire if Quinain was
authorized to agree to terms beyond the limits indicated in his special power of
attorney. Moreover, both Unimarine and Paul Rodriguez could have inquired directly from
CBIC to verify the validity and effectivity of the surety bond and endorsement; but, instead, they
blindly relied on the representations of Quinain. As this Court held in Litonjua, Jr. v. Eternit
Corp.:
A person dealing with a known agent is not authorized, under any circumstances, blindly
to trust the agents; statements as to the extent of his powers; such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the
agent acts within the scope of his authority. The settled rule is that, persons dealing with
an assumed agent are bound at their peril, and if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to prove it.

In light of the foregoing, this Court is constrained to release CBIC from its liability on Surety
Bond No. G (16) 29419 and Endorsement No. 33152.

TOPIC: Third party dealing with agent

G.R. No. 171359 July 18, 2012

BENJAMIN A. UMIPIG, Petitioner, vs.


PEOPLE OF THE PHILIPPINES, Respondent.

VILLARAMA, JR., J.:

FACTS:

The National Maritime Polytechnic (NMP) is an attached agency of the Department of Labor and
Employment tasked to provide necessary training to seafarers in order to qualify them for
employment.

Sometime in 1995, National Maritime Polytechnic (NMP) undertook an expansion program. A


pre-feasibility study conducted by the NMP identified Cavite as a possible site for the expansion.
Petitioner Palomo, then NMP Executive Director, presented for approval to the NMP Board of
Trustees the two parcels of land they identified, the Board approved the same.

Palomo thereafter began negotiations with Glenn Solis for the purchase of Lots 1730-C and
1730-D. Solis is the Attorney-in-Fact of the registered owners of said properties by virtue of a
SPA executed in his favor. A Contract to Sell was executed and eventually ripened into a
consummated sale.

After consummating the first purchase, Palomo again negotiated with Solis for the purchase of
two more parcels of land adjacent to the lots subject of the first purchase: Solis this time was
armed with two Special Power of Attorneys(SPAs): the one to have been executed by the
Jimenez heirs, all residents of California, U.S.A., authorizing Teresita Jimenez-Trinidad to sell
Lots 1731 and 1732 and to receive consideration; and another dated July 12, 1996 executed by
Trinidad authorizing Solis to sell Lots 1731 and 1732 and to receive consideration.

On August 1, 1996, Palomo and Solis executed a Contract to Sell over Lots 1731 and 1732. It
specified a total purchase price of P11,517,100.

The total payments made for the "second purchase" covering Lots 1731 and 1732
was P8,910,260.00, which is the subject of the present controversy. After receiving these
payments, Solis disappeared and never showed up again at the NMP. Palomo sought the
assistance of the OSG and informed the latter of the inability to locate Solis. The OSG then
inquired with the Philippine Consulate General in Los Angeles, California as to the genuineness
and authenticity of the SPA that was executed by Urbano Jimenez, et al. authorizing Teresita
Trinidad to sell Lots 1731 and 1732. The OSG found out that the SPA was fake.

ISSUE: Whether or not Palomo, Umipig, the NMP administrative officer and Mabitad, the
accountant, all signatories in the disbursement voucher, are liable having caused injury or loss to
the Government by their gross inexcusable negligence and evident bad faith, thus liable to
restitute the amount of P8,910,260 that was paid to Solis.

HELD: YES. There being no perfected contract of sale, Palomo had no authority to effect
substantial payments for the second purchase. Hence, the court upheld the findings of the
Sandiganbayan which held that, the facts established conspiracy among the petitioners because
the unlawful disbursements could not have been made had they not affixed their signatures on
the disbursement vouchers and checks. When petitioners thus signed the vouchers, they made it
appear that disbursements were valid when, in fact, they were not. Since each of the petitioners
contributed to attain the end goal, it can be concluded that their acts, taken collectively,
satisfactorily prove the existence of conspiracy among them.

Moreover, the authenticity of the SPAs supposedly showing the authority of the alleged attorney-
in-fact, Jimenez-Trinidad, and the latters sub-agent, Solis, had not been properly verified. The
purchase by NMP, which already made substantial or almost full payment of the price, was
evidenced only by a contract to sell executed by Solis who was later discovered lacking authority
to do so, the SPA in favor of Jimenez-Trinidad being a fake document.

The settled rule is that, persons dealing with an assumed agent are bound at their peril, and if
they would hold the principal liable, to ascertain not only the fact of agency but also the nature
and extent of authority. In this case, Palomo dealt with Solis who was a mere sub-agent of the
alleged attorney-in-fact of the registered owners, a certain Jimenez-Trinidad, under an SPA
which was notarized abroad. At the very least, therefore, Palomo should have exercised
reasonable diligence by ascertaining such fact of agency and sub-agency, knowing that he is
dealing with a mere broker and not the registered owners themselves who are residents of a
foreign country.

TOPIC: Third party dealing with agent


G.R. No. 199990, February 04, 2015

SPOUSES ROLANDO AND HERMINIA SALVADOR, Petitioners, v. SPOUSES


ROGELIO AND ELIZABETH RABAJA AND ROSARIO GONZALES, Respondents.

MENDOZA, J.:

FACTS:
Sometime in July 1998, Spouses Salvador, sellers, and Spouses Rabaja, buyers, executed the
Contract to Sell which stipulated for a consideration of P5,000,000.00 of the subject property.
Spouses Rabaja made several payments totalling P950,000.00, which were received by Gonzales
pursuant to the SPA executed by Rolando Salvador (Rolando). Beforehand, Petitioner Herminia
Salvador (Herminia) personally introduced Gonzales to Spouses Rabaja, as the administrator of
the said property. Spouses Salvador even handed to Gonzales the owners duplicate certificate of
title over the subject property.

Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did
not receive any payment from Gonzales. This prompted Spouses Rabaja to suspend further
payment of the purchase price; and as a consequence, they received a notice to vacate the subject
property from Spouses Salvador for non-payment of rentals.

Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In turn,
Spouses Rabaja filed an action for rescission of contract against Spouses Salvador and Gonzales,
the subject matter of the present petition.

ISSUE: Is Gonzales an authorized agent of the Spouses Salvador, hence could validly receive
payments?

HELD: YES. Gonzales, as agent of Spouses Salvador, could validly receive the payments from
Spouses Rabaja.

The Court agrees with the courts below in finding that the contract entered into by the parties
was essentially a contract of sale which could be validly rescinded. Spouses Salvador insist that
they did not receive the payments made by Spouses Rabaja from Gonzales which totalled
P950,000.00 and that Gonzales was not their duly authorized agent. These contentions, however,
must fail in light of the applicable provisions of the New Civil Code which state:
Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within
the scope of the agent's authority, if such act is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.

Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or the instructions as regards the agency.
Private or secret orders and instructions of the principal do not prejudice third persons who have
relied upon the power of attorney or instructions shown them.
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and
extent of the agents authority. A third person with whom the agent wishes to contract on behalf
of the principal may require the presentation of the power of attorney, or the instructions as
regards the agency. The basis for agency is representation and a person dealing with an agent is
put upon inquiry and must discover on his own peril the authority of the agent.

According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act
is deemed to have been performed within the scope of the agent's authority, if such act is within
the terms of the power of attorney, as written.

In this case, Spouses Rabaja did not recklessly enter into a contract to sell with Gonzales. They
required her presentation of the power of attorney before they transacted with her principal. And
when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to rely on it.

As the agent acted within the scope of his authority, the principal must comply with all the
obligations. As correctly held by the CA, considering that it was not shown that Gonzales
exceeded her authority or that she expressly bound herself to be liable, then she could not be
considered personally and solidarily liable with the principal, Spouses Salvador.

Perhaps the most significant point which defeats the petition would be the fact that it was
Herminia herself who personally introduced Gonzalez to Spouses Rabaja as the administrator of
the subject property. By their own ostensible acts, Spouses Salvador made third persons believe
that Gonzales was duly authorized to administer, negotiate and sell the subject property. This fact
was even affirmed by Spouses Salvador themselves in their petition where they stated that they
had authorized Gonzales to look for a buyer of their property. It is already too late in the day for
Spouses Salvador to retract the representation to unjustifiably escape their principal obligation.

If Spouses Salvador did not receive the payments or they wish to specifically revoke the SPA,
then their recourse is to institute a separate action against Gonzales. Such action, however, is not
any more covered by the present proceeding.

TOPIC: Agent acts in his own name

G.R. No. 179625 February 24, 2014


NICANORA G. BUCTON (deceased), substituted by REQUILDA B. YRAY, Petitioner,
vs.RURAL BANK OF EL SALVADOR, INC., MISAMIS ORIENTAL, and REYNALDO
CUYONG, Respondents, vs.ERLINDA CONCEPCION AND HER HUSBAND AND
AGNES BUCTON LUGOD, Third Party Defendants.

DEL CASTILLO, J.:

FACTS:

Petitioner alleged that she is the owner of a parcel of land, covered by TCT No. T-3838, located
in Cagayan de Oro City; that on June 6, 1982, Concepcion borrowed the title on the pretext that
she was going to show it to an interested buyer; that Concepcion obtained a loan in the amount
of P30,000.00 from respondent bank; that as security for the loan, Concepcion mortgaged
petitioners house and lot to respondent bank using a SPA allegedly executed by petitioner in
favor of Concepcion; that Concepcion failed to pay the loan; that petitioners house and lot were
foreclosed by respondent sheriff without a Notice of Extra-Judicial Foreclosure or Notice of
Auction Sale; and that petitioners house and lot were sold in an auction sale in favor of
respondent bank.

ISSUE: Whether or not a mortgage executed by an authorized agent who signed in his own
name without indicating that he acted for and on behalf of his principal binds only the agent and
not the principal.

HELD: YES. A mortgage executed by an authorized agent who signed in his own name without
indicating that he acted for and on behalf of his principal binds only the agent and not the
principal.

As early as the case of Philippine Sugar Estates Development Co. v. Poizat, we already ruled that
"in order to bind the principal by a deed executed by an agent, the deed must upon its face
purport to be made, signed and sealed in the name of the principal." In other words, the mere fact
that the agent was authorized to mortgage the property is not sufficient to bind the principal,
unless the deed was executed and signed by the agent for and on behalf of his principal.

In this case, the authorized agent failed to indicate in the mortgage that she was acting for and on
behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it was signed
by Concepcion in her own name and in her own personal capacity. In fact, there is nothing in the
document to show that she was acting or signing as an agent of petitioner. Thus, consistent with
the law on agency and established jurisprudence, petitioner cannot be bound by the acts of
Concepcion.

TOPIC: Obligation of agent

G.R. No. 192085 February 22, 2012


CARIDAD SEGARRA SAZON,Petitioner, - versus -LETECIA VASQUEZ-MENANCIO,
represented by attorney-in-fact EDGAR S. SEGARRA,Respondent.

SERENO, J.:

FACTS:

Respondent is a resident of the United States of America. Sometime in 1979, she entrusted the
management, administration, care and preservation of her properties to petitioner. According to
respondent, petitioner never rendered a full accounting of the fruits and income derived from the
properties, but has instead appropriated and in fact applied these for her own use and benefit.
Denying this allegation, petitioner presented five letters which had been sent to respondent as
proof of the accounting. Also, she avers that, since the start of her agency agreement with
respondent, the latter never answered any of the communications petitioner had sought to initiate.

As a result of the foregoing, respondent revoked, in writing, all the powers and authority of
administration granted to petitioner effective March 1997. Thereafter, the former demanded that
petitioner return and/or turn over the possession and administration of the properties thru filing a
complaint in court.

ISSUES: 1) Whether or not petitioner has the obligation to render an account of the relevant
transactions she entered into as respondents agent.

2) Whether or not the agent has the obligation to turn over the possession of lots 1 to 3
even though these are covered already by valid lease agreements.

HELD:

1) YES. Article 1891 of the Civil Code contains a few of the obligations owed by an agent to his
principal - Art. 1891. Every agent is bound to render an account of his transactions and to deliver
to the principal whatever he may have received by virtue of the agency, even though it may not
be owing to the principal.Every stipulation exempting the agent from the obligation to render an
account shall be void.

It is evident that the reason behind the failure of petitioner to render an accounting to respondent
is immaterial. What is important is that the former fulfill her duty to render an account of
the relevant transactions she entered into as respondents agent.

Petitioner claims that in the course of her administration of the properties, the letters she sent to
respondent should be considered as a fulfillment of her obligation, as respondents agent, to
render an accounting of her administration. Both the RTC and the CA found these letters
insufficient. We agree. Petitioner was the administrator of respondents properties for 18 years or
from 1979 to 1997, and four letters within 18 years can hardly be considered as sufficient to keep
the principal informed and updated of the condition and status of the latters properties.

The trial court correctly ordered petitioner to render full, accurate, and complete accounting of
all the fruits and proceeds of the subject properties during the period of her administration.
However, it should have also ordered petitioner to present all her evidence regarding the alleged
transportation expenses, attorneys fees, docket fees, and other fees; the total amount expended
for the purchase of respondents Las Pias property; and the total amount of real property taxes
paid. These claimed expenses, if and when duly proven by sufficient evidence, should be
deducted from the total income earned by the properties.

Moreover, there is no doubt that petitioner is entitled to compensation for the services she
rendered. Since there was no exact amount agreed upon, and she failed to fix her own salary
despite the authority given to her, the RTC correctly applied the doctrine of quantum meruit. The
doctrine of quantum meruit (as much as one deserves) prevents undue enrichment based on the
equitable postulate that it is unjust for a person to retain benefit without paying for it. Being an
equitable principle, she should at least be given what she merits for her services.

2) YES. We agree with the CA in its ruling that even though the lease agreements covering
these lots should be respected, petitioner must turn over the administration of the leases to
respondents attorney-in-fact. The reason is that respondent has already revoked the
authority of petitioner as administrator. Hence, the latter no longer has the right to
administer the properties or to receive the income they generate on respondents behalf.

TOPIC: Obligation of Agent

G.R. No. 171591 25 June 2012

ACE NAVIGATION CO., INC., petitioner, vs.


FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY
CORPORATION, Respondents.

PERLAS-BERNABE, J.:

FACTS:

On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at
Shanghai Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be
discharged at the Port of Manila and delivered to its consignee, Heindrich Trading Corp.
(HEINDRICH). The subject shipment was insured with respondents, FGU Insurance Corp.
(FGU) and Pioneer Insurance and Surety Corp. (PIONEER), against all risks under Marine Open
Policy No. 062890275 for the amount of P18,048,421.00.
The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun
Kaisha Ltd. (SHINWA). Representing itself as owner of the vessel, SHINWA entered into a
charter party contract with Sky International, Inc. (SKY), an agent of Kee Yeh Maritime Co.
(KEE YEH), which further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it
was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean
Bill of Lading No. SM-1.

On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged.
However, upon inspection of HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV),
agent of CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad
order and condition. Unable to collect the sustained damages in the amount of P1,423,454.60
from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the
cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94,
respectively, and consequently became subrogated to all the rights and causes of action accruing
to HEINDRICH.

Thus, on August 8, 1991, respondents filed a complaint for damages against the following
defendants: "REGENCY EXPRESS LINES, S.A./ UNKNOWN CHARTERER OF THE
VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER OF
THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION
COMPANY, INC." .

ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest
from whom the respondents can demand compensation.

The respondents appealed the decision of the RTC to the CA which, in its assailed June 22, 2004
Decision, found PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of
the respondents' claim, with the remaining 30% to be shouldered solidarily by CARDIA and its
agent, ACENAV.

ISSUE: Whether or not ACENAV ,as agent of CARDIA, be held liable to the respondents for
30% of their claim.

HELD: NO.

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier
PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship with
PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY
likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of
CARDIA, also became a party to the said contract of carriage.

The respondents, however, maintain that ACENAV is a ship agent and not a mere agent of
CARDIA, as found by both the CA and the RTC. The Court disagrees. Article 586 of the Code
of Commerce provides:
ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and
for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the
creditor proves that the amount claimed was invested therein.

By ship agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she may be found.

Records show that the obligation of ACENAV was limited to informing the consignee
HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession of
the goods. No evidence was offered to establish that ACENAV had a hand in the provisioning of
the vessel or that it represented the carrier, its charterers, or the vessel at any time during the
unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility
over the cargo when they were unloaded from the vessel. Hence, no reversible error was
committed by the courts a quo in holding that ACENAV was not a ship agent within the
meaning and context of Article 586 of the Code of Commerce, but a mere agent of
CARDIA, the shipper.

On this score, Article 1868 of the Civil Code states:

ART. 1868. By the contract of agency, 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.

Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the
party with whom he contracts, unless he expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice of his powers.

Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV
exceeded its authority in the discharge of its duties as a mere agent of CARDIA. Neither was it
alleged, much less proved, that ACENAV's limited obligation as agent of the shipper, CARDIA,
was not known to HEINDRICH.

Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability
attributed upon it by the CA on the basis of its finding that the damage sustained by the cargo
was due to improper packing cannot be borne by ACENAV. As mere agent, ACENAV cannot be
made responsible or held accountable for the damage supposedly caused by its principal.

Accordingly, the Court finds that the CA erred in ordering ACENAV jointly and severally liable
with CARDIA to pay 30% of the respondents' claim.

TOPIC: Ratification

G.R. No. 158597 June 18, 2012

MARCOS V. PRIETO,Petitioner, versusTHE HON. COURT OF APPEALS


,HON. MARY R. MOLINA-ALIM, In Her Capacity as Pairing Judge of Branch 67 of the
RTC, First Judicial Region, Bauang, La Union, FAR EAST BANK &
TRUST COMPANY, now the BANK OF THE PHILIPPINE ISLANDS, through ATTY.
EDILBERTO B. TENEFRANCIA, and SPOUSES ANTONIO and MONETTE PRIETO,
Respondents.

BERSAMIN, J.:

FACTS:

The plaintiffs narrated that in January 1996, they had executed a special power of attorney (SPA)
to authorize Antonio to borrow money from FEBTC, using as collateral their real property
consisting of a parcel of land ; that defendant spouses, using the property as collateral, had
thereafter obtained from FEBTC a series of loans totaling P5,000,000.00, evidenced by
promissory notes, and secured by separate real estate mortgage contracts; that defendant spouses
had failed to pay the loans, leading FEBTC to initiate the extra-judicial foreclosure of the
mortgages; that the foreclosure sale had been scheduled on October 31, 1997; and that the
promissory notes and the real estate mortgage contracts were in the name of defendant spouses
for themselves alone, who had incurred the obligations, rendering the promissory notes and the
mortgage contracts null and void ab initio.

On July 31, 2001 the RTC rendered its decision dismissing the complaint, ruling that although
the name of plaintiff Marcos (as registered owner) did not appear in the real estate mortgage
contracts, Marcos could not be absolved of liability because he had no right of action against the
person with whom his agent had contracted; that the mortgage contracts, even if entered into in
the name of the agent, should be deemed made in his behalf as the principal because the things
involved belonged to the principal; and that even assuming that Antonio had exceeded his
authority as agent, Marcos had ratified Antonios action by executing the letter of
acknowledgement dated September 12, 1996, making himself liable under the premises.

ISSUE: Whether or not Marcos validly ratified Antonios action when he executed the letter of
acknowledgement making himself liable under the premises.

HELD: YES.
In agency, ratification is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. Here, there was such a ratification by Marcos, as borne out
by his execution of the letter of acknowledgement on September 12, 1996.

The Court is confounded by Marcos dismissal of his own express written ratification of Antonios
act. Being himself a lawyer, Marcos was aware of the import and consequences of the letter of
acknowledgment. The Court cannot agree with his insistence that the letter was worthless due to
its being a contract of adhesion. The letter was not a contract, to begin with, because it was only
a unilateral act of his. Secondly, his insistence was fallacious and insincere because he knew as a
lawyer that even assuming that the letter could be treated as a contract of adhesion it was
nonetheless effective and binding like any other contract.

As the tenor of the acknowledgment indicated, he was fully aware of the meaning and sense of
every written word or phrase, as well as of the legal effect of his confirmation thereby of his
agents act. It is axiomatic that a mans act, conduct and declaration, wherever made, if voluntary,
are admissible against him, for the reason that it is fair to presume that they correspond with the
truth, and it is his fault if they do not.

TOPIC: Ratification and Agency by estoppel

G.R. No. 166044 June 18, 2012

COUNTRY BANKERS INSURANCE CORPORATION, Petitioner,v KEPPEL CEBU


SHIPYARD, UNIMARINE SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER
RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN QUINAIN,Respondents

LEONARDO-DE CASTRO, J.:

FACTS:

On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the
shipping industry, contracted the services of Keppel Cebu Shipyard (Cebu Shipyard), for dry
docking and ship repair works on its vessel, the M/V Pacific Fortune.
Pursuant with the ship repair bill agreement, Unimarine, through its Pres. Paul Rodriguez,
secured from Country Bankers Insurance Corp. (CBIC), through the latters agent,
Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16) 29419 in the amount
of P3,000,000.00. The expiration of this surety bond was extended to January 15, 1993, through
Endorsement No. 33152 (the endorsement), which was later on attached to and formed part of
the surety bond. In addition to this, Unimarine, on February 19, 1992, obtained another bond
from Plaridel Surety and Insurance Co. (Plaridel) in the amount of P1,620,000.00.

Unimarine defaulted on its payment with regard to the ship repair works of Cebu shipyard.
Hence, on November 18, 1992, Cebu Shipyard, through its counsel, sent Unimarine a letter,
demanding payment, within seven days from receipt of the letter, the amount of P4,859,458.00.

Due to Unimarines failure to heed Cebu Shipyards repeated demands, Cebu Shipyard, through
counsel, wrote the sureties CBIC and Plaridel to inform and to ask them to fulfill their
obligations as sureties. However, even the sureties failed to discharge their obligations, and so
Cebu Shipyard filed a Complaint before the RTC against Unimarine, CBIC, and Plaridel.

CBIC, in its Answer, said that Cebu Shipyards complaint states no cause of action. CBIC alleged
that the surety bond that was issued by its agent, Quinain, was in excess of his authority. It
further alleged that he exceeded his authority as stated in the Special Power of Attorney, wherein
he was authorized to solicit business and issue surety bonds not exceeding P500,000.00 but only
in favor of the Department of Public Works and Highways, National Power Corporation, and
other government agencies.

ISSUE: Whether or not CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16)
29419.

HELD: NO. As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the principal
is solidarily liable with the agent if the former allowed the latter to act as though
he had full powers.
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his authority
only if Quinains act of issuing Surety Bond No. G (16) 29419 is deemed to have been performed
within the written terms of the power of attorney he was granted. However, contrary to what the
RTC held, the Special Power of Attorney accorded to Quinain clearly states the limits of his
authority and particularly provides that in case of surety bonds, it can only be issued in favor
of the Department of Public Works and Highways, the National Power Corporation, and other
government agencies; furthermore, the amount of the surety bond is limited to P500,000.00. This
Court finds that Quinain has indeed exceeded them.

Under Articles 1898 and 1910, an agents act, even if done beyond the scope of his authority, may
bind the principal if he ratifies them, whether expressly or tacitly. It must be stressed though that
only the principal, and not the agent, can ratify the unauthorized acts, which the principal must
have knowledge of. Expounding on the concept and doctrine of ratification in agency, this Court
said:

Ratification in agency is the adoption or confirmation by one person of an act performed


on his behalf by another without authority.The substance of the doctrine is confirmation after
conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full
knowledge at the time of ratification of all the material facts and circumstances relating to the
unauthorized act of the person who assumed to act as agent. Thus, if material facts were
suppressed or unknown, there can be no valid ratification and this regardless of the purpose
or lack thereof in concealing such facts and regardless of the parties between whom the
question of ratification may arise. Nevertheless, this principle does not apply if the principals
ignorance of the material facts and circumstances was willful, or that the principal chooses to act
in ignorance of the facts. However, in the absence of circumstances putting a reasonably
prudent man on inquiry, ratification cannot be implied as against the principal who is
ignorant of the facts.

Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that it was
unaware of the existence of Surety Bond No. G (16) 29419 and Endorsement No. 33152. There
were no allegations either that CBIC should have been put on alert with regard to Quinains
business transactions done on its behalf. It is clear, and undisputed therefore, that there can be no
ratification in this case, whether express or implied.

Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the
protection of third persons. It states that the principal is solidarily liable with the agent even
when the latter has exceeded his authority, if the principal allowed him to act as though he had
full powers. However, for an agency by estoppel to exist, the following must be established:
1. The principal manifested a representation of the agents authority or
knowingly allowed the agent to assume such authority;

2. The third person, in good faith, relied upon such representation; and

3. Relying upon such representation, such third person has changed his position to his
detriment.

In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n agency by estoppel, which is
similar to the doctrine of apparent authority, requires proof of reliance upon the representations,
and that, in turn, needs proof that the representations predated the action taken in reliance.

For one to successfully claim the benefit of estoppel on the ground that he has been
misled by the representations of another, he must show that he was not misled through his own
want of reasonable care and circumspection.

TOPIC: QUASI-CONTRACT

G.R. No. 160600 January 15, 2014

DOMINGO GONZALO, Petitioner, vs. JOHN TARNATE, JR., Respondent.

BERSAMIN, J.:

FACTS:

After the Department of Public Works and Highways (DPWH) had awarded on July 22, 1997 the
contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain Province-
Benguet Road to Gonzalo Construction, petitioner Domingo Gonzalo (Gonzalo) subcontracted to
respondent John Tarnate, Jr. (Tarnate) the supply of materials and labor for the project under the
latters business known as JNT Aggregates. This subcontracting was without the approval of the
DPWH. There is no question that every contractor is prohibited from subcontracting with or
assigning to another person any contract or project that he has with the DPWH unless the
DPWH Secretary has approved the subcontracting or assignment. This is pursuant to Section 6
of Presidential Decree No. 1594.
Gonzalo executed a deed of assignment whereby he, as the contractor, was assigning to Tarnate
an amount equivalent to 10% of the total collection from the DPWH for the project. This 10%
retention fee (equivalent to P233,526.13) was the rent for Tarnates equipment that had been
utilized in the project.

Thereafter, Tarnate learned that Gonzalo had unilaterally rescinded the deed of assignment by
means of an affidavit of cancellation of deed of assignment dated April 19, 1999 filed in the
DPWH on April 22, 1999; and that the disbursement voucher for the 10% retention fee had then
been issued in the name of Gonzalo, and the retention fee released to him.

ISSUE: Whether or not guilty parties to an illegal contract cannot recover from one another and
are not entitled to an affirmative relief because they are in pari delicto or in equal fault.

HELD: As a rule, according to Article 1412 (1) of the Civil Code, the guilty parties to an illegal
contract cannot recover from one another and are not entitled to an affirmative relief because
they are in pari delicto or in equal fault.

In the case, the illegality of the Sub-Contract Agreement necessarily affects the Deed of
Assignment because the rule is that an illegal agreement cannot give birth to a valid contract.
Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to
law is a void or inexistent contract. As such, a void contract cannot produce a valid one. To the
same effect is Article 1422 of the Civil Code, which declares that "a contract, which is the direct
result of a previous illegal contract, is also void and inexistent."

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted
exception arises when its application contravenes well-established public policy. In this
jurisdiction, public policy has been defined as "that principle of the law which holds that no
subject or citizen can lawfully do that which has a tendency to be injurious to the public or
against the public good."

Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a person unjustly retains
a benefit at the loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience." The prevention of unjust
enrichment is a recognized public policy of the State, for Article 22 of the Civil Code explicitly
provides that "[e]very person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him."

There is no question that Tarnate provided the equipment, labor and materials for the project in
compliance with his obligations under the subcontract and the deed of assignment; and that it
was Gonzalo as the contractor who received the payment for his contract with the DPWH as well
as the 10% retention fee that should have been paid to Tarnate pursuant to the deed of
assignment. Considering that Gonzalo refused despite demands to deliver to Tarnate the
stipulated 10% retention fee that would have compensated the latter for the use of his equipment
in the project, Gonzalo would be unjustly enriched at the expense of Tarnate if the latter was to
be barred from recovering because of the rigid application of the doctrine of in pari delicto. The
prevention of unjust enrichment called for the exception to apply in Tarnates favor.
Consequently, the RTC and the CA properly adjudged Gonzalo liable to pay Tarnate the
equivalent amount of the 10% retention fee (i.e., P233,526.13).

TOPIC: QUASI- CONTRACT

G.R. No. 192105, December 09, 2013

ANTONIO LOCSIN II, Petitioners, v. MEKENI FOOD CORPORATION, Respondent.

DEL CASTILLO, J.:

FACTS:

In February 2004, respondent Mekeni Food Corporation (Mekeni) a Philippine company


engaged in food manufacturing and meat processing offered petitioner Antonio Locsin II the
position of Regional Sales Manager to oversee Mekenis National Capital Region
Supermarket/Food Service and South Luzon operations. In addition to a compensation and
benefit package, Mekeni offered petitioner a car plan, a Honda Civic car valued at P280,000.00,
under which one-half of the cost of the vehicle is to be paid by the company and the other half to
be deducted from petitioners salary.

Locsin resigned, effective February 25, 2006. By then, a total of P112,500.00 had been deducted
from his monthly salary and applied as part of the employees share in the car plan. In his
resignation letter, he made an offer to purchase his service vehicle by paying the outstanding
balance thereon. They could not agree on the terms of the purchase hence, he returned the car.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a
Complaint for the recovery of monetary claims consisting of unpaid salaries, commissions,
sick/vacation leave benefits, and recovery of monthly salary deductions which were earmarked
for his cost-sharing in the car plan.

ISSUE: Whether petitioner is entitled to a refund of his amortization payments on his service
vehicle amounting to P112,500.00 if not, unjust enrichment would result

HELD: YES.
In the absence of specific terms and conditions governing a car plan agreement between the
employer and employee, the former may not retain the installment payments made by the latter
on the car plan and treat them as rents for the use of the service vehicle, in the event that the
employee ceases his employment and is unable to complete the installment payments on the
vehicle. The underlying reason is that the service vehicle was precisely used in the formers
business; any personal benefit obtained by the employee from its use is merely incidental.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the car
plan. Under Article 22 of the Civil Code, [e]very person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.

Article 2142 of the same Code likewise clarifies that there are certain lawful, voluntary and
unilateral acts which give rise to the juridical relation of quasi-contract, to the end that no one
shall be unjustly enriched or benefited at the expense of another. In the absence of specific terms
and conditions governing the car plan arrangement between the petitioner and Mekeni, a quasi-
contractual relation was created between them. Consequently, Mekeni may not enrich itself by
charging petitioner for the use of its vehicle which is otherwise absolutely necessary to the full
and effective promotion of its business. It may not, under the claim that petitioners payments
constitute rents for the use of the company vehicle, refuse to refund what petitioner had paid, for
the reasons that the car plan did not carry such a condition; the subject vehicle is an old car that is
substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the most
part; and any personal benefit obtained by petitioner from using the vehicle was merely
incidental.

TOPIC: QUASI-CONTRACT

G.R. No. 178031 August 28, 2013

VIRGINIA M. VENZON, Petitioner, vs. RURAL BANK OF BUENAVISTA (AGUSAN DEL


NORTE), INC., represented by LOURDESITA E. PARAJES, Respondent.

DEL CASTILLO, J.:

FACTS:
Petitioner alleged that in 1983 she and her late spouse, George F. Venzon, Sr., obtained a
P5,000.00 loan from respondent against a mortgage on their house and lot in Libertad, Butuan
City; that she was able to pay P2,300.00, thus leaving an outstanding balance of only P2,370.00;
that sometime in March 1987, she offered to pay the said balance in full, but the latter refused to
accept payment, and instead shoved petitioner away from the bank premises; that in March 1987,
respondent foreclosed on the mortgage, and the property was sold at auction for P6,472.76 to
respondent, being the highest bidder; that the foreclosure proceedings are null and void for lack
of notice and publication of the sale, lack of sheriffs final deed of sale and notice of redemption
period; and that she paid respondent P6,000.00 on October 9, 1995, as evidenced by respondents
Official Receipt No. 410848 issued on October 9, 1995.

In its Answer with Counterclaims, respondent claimed that petitioner did not make any payment
on the loan; that petitioner never went to the bank in March 1987 to settle her obligations in full;
that petitioner was not shoved and driven away from its premises; that the foreclosure
proceedings were regularly done and all requirements were complied with; that a certificate of
sale was issued by the sheriff and duly recorded in the Registry of Deeds; that petitioners claim
that she paid P6,000.00 on October 9, 1995 is utterly false; that petitioners cause of action has
long prescribed as the case was filed only in 2005 or 18 years after the foreclosure sale; and that
petitioner is guilty of laches. Respondent interposed its counterclaim for damages and attorneys
fees as well.

ISSUE: Whether or not Venzon is entitled to recover the amount she paid in the amount of P
6,000.00.

HELD:

Petitioner is entitled to a return of the P6,000.00 she paid to respondent in 1995. While this may
not be validly considered as a redemption of her property as the payment was made long after the
redemption period expired, respondent had no right to receive the amount.

Interestingly, respondent did not deny being the issuer of Official Receipt No. 410848. Instead, it
averred that petitioners payment to it of P6,000.00 was false and self-serving, but in the same
breath argued that, without necessarily admitting that payment of P6,000.00 was made, the same
cannot be considered as redemption price.

If something is received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. Moreover, pursuant to Circular No. 799, series of 2013
of the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount of P6,000.00 shall
earn interest at the rate of 6% per annum computed from the filing of the Petition in Civil Case
No. 5535 up to its full satisfaction.

TOPIC: QUASI-CONTRACT

G.R. No. 170498 January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner, vs. ABSOLUTE


MANAGEMENT CORPORATION, Respondent.

BRION, J.:

FACTS:

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000
pieces of plywood and 16,500 plyboards in the sum of P12,277,500.00, covered by Metrobank
Check Nos. 1407668502, 140768507, 140768530, 140768531, 140768532, 140768533 and
140768534. These checks were all crossed, and were all made payable to AMC. They were given
to Chua, AMCs General Manager, in 1998.

Chua died in 1999, and a special proceeding for the settlement of his estate was commenced
before the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer
with counterclaims and third-party complaint.

SHCI made demands on AMC, after Chuas death, for allegedly undelivered items
worth P8,331,700.00. According to AMC, these transactions could not be found in its records.
Upon investigation, AMC discovered that in 1998, Chua received from SHCI 18 Metrobank
checks worth P31,807,500.00. These were all payable to AMC and were crossed or "for payees
account only."

In its answer with counterclaims and third-party complaint, AMC averred that it had no
knowledge of Chuas transactions with SHCI and it did not receive any money from the latter.
AMC also asked the RTC to hold Metrobank liable for the subject checks in case it is adjudged
liable to SHCI.

Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint against Chuas
estate. It alleged that Chuas estate should reimburse Metrobank in case it would be held liable in
the third-party complaint filed against it by AMC.

ISSUE: Is Metrobanks claim against the Estate of Jose Chua based on a quasi-contract?
HELD: YES.

Both the RTC and the CA described Metrobanks claim against Chuas estate as one based on
quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of
certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment. The Civil
Code provides an enumeration of quasi-contracts, but the list is not exhaustive and merely
provides examples.

According to the CA, Metrobanks fourth-party complaint falls under the quasi-contracts
enunciated in Article 2154 of the Civil Code. Article 2154 embodies the concept "solutio
indebiti" which arises when something is delivered through mistake to a person who has no right
to demand it. It obligates the latter to return what has been received through mistake.

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites:
first, that something has been unduly delivered through mistake; and second, that something was
received when there was no right to demand it.

In its fourth-party complaint, Metrobank claims that Chuas estate should reimburse it if it
becomes liable on the checks that it deposited to Ayala Lumber and Hardwares account upon
Chuas instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a
mistake when it deposited the AMC checks to Ayala Lumber and Hardwares account; because of
Chuas control over AMCs operations, Metrobank assumed that the checks payable to AMC
could be deposited to Ayala Lumber and Hardwares account. Second, Ayala Lumber and
Hardware had no right to demand and receive the checks that were deposited to its account;
despite Chuas control over AMC and Ayala Lumber and Hardware, the two entities are distinct,
and checks exclusively and expressly payable to one cannot be deposited in the account of the
other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its
sole proprietor, Chua, to return the amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobanks fourth-party complaint as a claim
closely analogous to solutio indebiti is only to determine the validity of the lower courts orders
denying it. It is not an adjudication determining the liability of Chuas estate against Metrobank.