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AGENCY & PARTNERSHIP AUGUST 25 ZHY

latter’s consent. The underlying as its exclusive general sales agent within the
principle of the contract of agency is Phils for the sale of air passenger
1.) PURPOSE OF AGENCY to accomplish results by using the transportation. Some of the pertinent
 The purpose of agency is to services of others to do a great provisions are:
extend the personality of the variety of things like selling, buying,
manufacturing, and transporting. Its Orient Air Services shall perform these
principal. It enables the activity services:
of man which is naturally purpose is to extend the personality
limited in its exercise by the of the principal or the party for a. solicit and promote passenger traffic for the
impositions of his whom another acts and from whom services of American and if necessary, employ
physiological conditions to be he or she derives the authority to staff competent and sufficient to do so
legally extended by permitting act. It is said that the basis of
agency is representation, that is, b. provide and maintain a suitable area in its
him to be constructively
the agent acts for and on behalf of place of business to be used exclusively for
present in many different
the principal on matters within the the transaction of the business of American
places and to perform diverse
juridical acts and carry on scope of his authority and said acts
c. arrange for distribution of American’s
many different activities have the same legal effect as if they
timetables, tariffs and promotional material to
through another when physical were personally executed by the
sales agents and the general public in the
presence is impossible or principal. By this legal fiction, the
assigned territory
inadvisable at the same time. actual or real absence of the principal
With the expansion of is converted into his legal or juridical d. service and supervise sales agents in the
commercial transactions and presence – qui facit per alium facit assigned territory including if required by
the consequent increase in per se. American the control of remittances and
business organization commissions retained
ORIENT AIR SERVICE and HOTEL
conducted mainly through the REPRESENTATIVES vs. COURT OF e. hold out a passenger reservation facility to
combined effort of individuals APPEALS (197 SCRA 645) sales agents and general public in the assigned
acting in a representative
territory
capacity, the subject of agency FACTS: American Airlines, inc, an air
has grown in importance. carrier offering passenger and air cargo Alleging that Orient Air had reneged
 In a contract of agency, a person transportation in the Phils, and Orient Air on its obligations under the Agreement by
binds himself to render some service Services and Hotel Representatives entered failing to remit the net proceeds of sale in the
or to do something in representation into a General Sales Agency Agreement amount of US $ 254,400, American Air by
or on behalf of another with the whereby the former authorized the latter to act itself undertook the collection of the proceeds

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
of tickets sold originally by Orient Air and the meaning of its provisions. The various In addition, it is clear from the records
terminated forthwith the Agreement stipulations in the contract must be read that American Air was the party responsible
together to give effect to all for the preparation of the Agreement.
American Air instituted suit against Consequently, any ambiguity in this “contract
Orient Air for Accounting with Preliminary The Agreement, when interpreted in of adhesion” is to be taken “contra
Attachment or Garnishment, Mandatory accordance with the foregoing principles, proferentem” –construed against the party who
Injunction and Restraining Order averring the entitles Orient Air to the 3% overriding cause the ambiguity and could have avoided it
basis for the termination of the Agreement as commission based on total revenue or as by the exercise of a little more care.
well as Orient Air’s previous record of failures referred to by the parties, “total flown
“to promptly settle past outstanding refunds of revenues”. 2.) It is believed, however, that
which there were available funds in the respondent appellate court erred in affirming
possession of the Orient Air to the damage and As the designated General Sales Agent the rest of the decision of the trial court,
prejudice of American Air of American Air, Orient Air was responsible particularly to the lower court's decision
for the promotion and marketing of American ordering American Air to "reinstate defendant
Trial Court ruled in favor of Orient Air Air’s services for air passenger transportation as its general sales agent for passenger
to which the Intermediate Appellate Court and the solicitation of sales therefore. In return transportation in the Philippines in accordance
(now CA) affirmed Trial Court’s decision with for such efforts and services, Orient Air was to with said GSA Agreement."
modifications with respect to monetary awards be paid commissions of 2 kinds: first, a sales
granted. agency commission, ranging from 7 to 8% of By affirming this ruling of the trial
tariff fares and charges from sales by Orient court, respondent appellate court, in effect,
ISSUE: 1. Whether or not Orient Air is Air when made on American Air ticket stock; compels American Air to extend its
entitled to the 3% overriding commission and second, an overriding commission of 3% personality to Orient Air. Such would be
2. Whether or not American Air of tariff fares and charges for all sales of violative of the principles and essence of
should reinstate Orient air as its passenger transportation over American Air agency, defined by law as a contract whereby
General Sales Agent – (related to the services. "a person binds himself to render some
subject) service or to do something in representation
The second type of commissions
or on behalf of another, WITH THE
RULING: 1.) Yes, Orient Air is entitled to would accrue for sales of American Air
CONSENT OR AUTHORITY OF THE
3% overriding commission. services made not on its ticket stock but on the
LATTER . (emphasis supplied) In an agent-
ticket stock of other air carriers sold by such
principal relationship, the personality of the
It is a well settled principle that in the carriers or other authorized ticketing facilities
principal is extended through the facility of
interpretation of a contract, the entirety thereof or travel agents. the agent. In so doing, the agent, by legal
must be taken into consideration to ascertain
fiction, becomes the principal, authorized to

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
perform all acts which the latter would have respondents without their having fully settled notwithstanding the existence of the Deed of
him do. Such a relationship can only be their indebtedness to petitioner. Because of Assignment signed by EDWIN on behalf of
effected with the consent of the principal, this, respondent EDWIN, brother of ERWIN Impact Systems. While said collection did not
which must not, in any way, be compelled by Cuizon, and Alberto de Jesus, general revoke the agency relations of respondents,
law or by any court. The Agreement itself manager of petitioner, executed a Deed of petitioner insists that ERWIN’s action
between the parties states that "either party Assignment of receivables in favor of repudiated EDWIN’s power to sign the Deed
may terminate the Agreement without petitioner from Toledo Power Corp. in the of Assignment. As EDWIN did not
cause by giving the other 30 days' notice by amount of P365,000.00. Thereafter, the sludge sufficiently notify it of the extent of his
letter, telegram or cable." (emphasis supplied) pump was delivered. But allegedly, despite the powers as an agent, petitioner claims that he
The Court, therefore, set aside the portion of existence of the Deed of Assignment, should be made personally liable for the
the ruling of the respondent appellate court respondent still proceeded to collect from obligations of his principal.
reinstating Orient Air as general sales agent of Toledo Power Company the amount of P365k.
American Air. Alarmed, petitioner made several demands to Issue: Whether or not EDWIN B. Cuizon
the respondent and after the final demand should be made liable as a party defendant?
***The Court held that the purpose of letter, petitioner instituted a complaint for sum
every contract of agency is the ability, by legal of money and damages against herein
Ruling: No, since EDWIN did not act in
fiction, to extend the personality of the excess of the authority granted by his
respondents.
principal through the facility of the agent; but principal. The powers of an agent are
that the same can only be effected with the By way of special and affirmative defenses, particularly broad in the case of one acting as
consent of the principal. respondent EDWIN alleged that he is not a a general agent or manager; such a position
real party in interest in this case. According to presupposes a degree of confidence reposed
Eurotech vs Cuizon (521 SCRA 584) him, he was acting as mere agent of his and investiture with liberal powers for the
principal, which was the Impact Systems, in exercise of judgment and discretion in
Facts: Petitioner sold to Impact Systems, a his transaction with petitioner and the latter transactions and concerns which are incidental
sole proprietorship owned by ERWIN Cuizon, or appurtenant to the business entrusted to his
was very much aware of this fact. The trial
various products allegedly amounting to care and management. In the absence of an
court rendered a decision directing the
(P91,338.00). Subsequently, respondents agreement to the contrary, a managing agent
defendant EDWIN B. Cuizon be dropped as
sought to buy from petitioner one unit of may enter into any contracts that he deems
party defendant to which the Court of Appeals
sludge pump valued at P250,000.00 with reasonably necessary or requisite for the
affirmed. Petitioner now contends that the
respondents making a down payment of fifty protection of the interests of his principal
Court of Appeals failed to appreciate the effect
thousand pesos (P50,000.00). When the sludge
of ERWIN’s act of collecting the receivables entrusted to his management.
pump arrived from the United Kingdom,
from the Toledo Power Corporation
petitioner refused to deliver the same to

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
There is, therefore, no doubt in our mind that Petitioner denied that she borrowed money knew that the borrowers are friends of
respondent EDWIN’s participation in the from the respondent and averred that she petitioner. The Court has affirmed that, under
Deed of Assignment was "reasonably referred her friends to respondent whom she 1868 of the Civil Code, the basis of agency is
necessary" to protect the business of his knew to be engaged in the business of lending representation. In the case at bar, both
principal since it can be easily assumed that money, in exchange for personal checks petitioner and respondent have undeniably
the company desperately needed the sludge through her capitalist, Arsenio Pua. She disclosed to each other that they are
pump. Had he not acted in the way he did, the alleged that her friends borrowed money from representing someone else, so both of them are
business of his principal would have been the respondent and issued personal checks but estopped to deny the same. It is sufficient that
adversely affected and he would have violated the checks bounced for insufficiency of funds. petitioner disclosed to respondent that the
his fiduciary relation with his principal. Despite her efforts to assist respondent, she former was acting in behalf of her principal,
could no longer locate them; that she was her friends whom she referred to respondents.
As we declare that respondent EDWIN acted forced to issue eight checks amounting to For an agency to arise, it is not necessary that
within his authority as an agent, who did not P350, 000 to answer for the bounced checks of the principal personally encounter the third
acquire any right nor incur any liability arising the borrowers she referred; that prior to the person with whom the agent interacts. The
from the Deed of Assignment, it follows that issuance of the checks she informed the principal need not personally know or meet
he is not a real party in interest who should be respondent that they were not sufficiently the third persons. Precisely, the purpose of
impleaded in this case. A real party in interest funded but the latter nonetheless deposited the agency is to extend the personality of the
is one who "stands to be benefited or injured checks but they were subsequently principal through the facility of the agent. And
by the judgment in the suit, or the party dishonored. She was forced by respondent to since petitioner, being an agent was not
entitled to the avails of the suit.” In this execute an Absolute Deed of Sale over her authorized by the principal to collect debt in
respect, we sustain his exclusion as a property in Bacoor, Cavite to avoid criminal his behalf, and respondent was acting only as
defendant in the suit before the court a quo. prosecution. an agent with regards to the debtors, the sale
of the respondent’s property having been
Doles vs. Angeles (492 SCRA 407) ISSUE: 1)Whether or not the petitioner can predicated on the loan is void for lack of
be considered as debtor of the respondent. consideration.
FACTS: The respondent filed a complaint for
specific performance with damages against the 2)Whether or not an agent who was
petitioner. Respondent alleged that petitioner 2.) What is the nature of agency?
not authorized by the principal to
was indebted to her as a personal loan collect debt on his behalf could The word “agency” when used in its broadest
amounting to P405, 530.00 representing the directly collect from the debtor. meaning is both a contract and a
principal amount and interest. representative relation.
HELD: Both no. Petitioner knew that the
financier of respondent is Pua; and respondent

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
Since it is a contract, it is essential that the of a parcel of land known as lot no. 5983 of 2. Certificate of Title issued in the
minds of the parties should meet in making it. Cadastral Survey of Cebu covered by TCT name of Felix Go Chan & Sons
Like other contracts, the following requisites No. 11116 of Registry of Cebu.On April 21, Realty Corporation be cancelled
must concur: 1954 the sisters executed a special power of and another Title be issued in the
attorney in favor of their brother, Simeon names of the Corporation and the
a. consent of the contracting parties Rallos, authorizing him to sell for and in their Intestate estate of Concepcion
b. object which is the subject matter of the behalf Lot no. 5983. On March 3, 1955, Rallos in equal undivided shares
contract; and Concepcion Rallos died.
3. Plaintiff be indemnified by way of
c. cause which is established. attorney’s fees and payment of cost
of suit.
The principal must intend that the agent shall In September 12, 1955 Simeon Rallos sold the
act for him, the agent must intend to accept the undivided shares of his sisters in Lot no. 5983
authority and act on it, and the intention of the to Felix Go Chan & Sons Realty Corporation
for the sum of P 10,686.90.The deed of sale Named party defendants were Felix Go Chan
parties must find expression either in words or Realty Corp, Simeon Rallos, and the Register
conduct betwwen them. was registered in the Registry of Deeds of
Cebu and TCT No. 11116 was cancelled and a of Deeds of Cebu, but subsequently , the latter
Although the agency is usually a contractual new TCT no. 12989 was issued in favour of was dropped from the complaint.
one, either expressed or implied, based upon a the Vendee.
consideration, this is not necessarily so; that
is, the relationship may be created by While the case was pending in the trial court,
operation of law, or a person who acts for In May 18, 1956, Ramon Rallos as both Simeon and Gerundia died and they were
another as principal may do so gratuitously. administrator of Intestate Estate of substituted by the respective administrators of
Concepcion Rallos filed a complaint praying their estates.
RALLOS VS FELIX GO CHAN& SONS
REALTY (81 SCRA251) that:

TRIAL COURT’S RULING: ( Later affirmed


1. Sale of the undivided share of the by SC)
FACTS:
deceased Concepcion in Lot no.
5983 be unenforceable, and said
share be reconveyed to her estate. CFI:
Concepcion and Gerundia both surnamed
Rallos were sisters and registered co-owners [Plaintiff’s Complaint]

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
Intestate-Estate of Cerundia Rallos,
covering the same subject-matter
1. Sale of land was null and void insofar Held/Ratio:
as the one-half pro-indiviso share of CA:
Concepcion Rallos (Court discussed relevant principles first)
CFI Decision reversed, upheld the sale
of Concepcion’s share. Relationship of Agency (concept arising from
principles under Art 13171 and 14032)- one
2. Ordered the issuance of new TCTs to MR: denied. party, caged the principal (mandante),
respondent corporation and the estate authorizes another, called the agent
of Concepcion in the proportion of Issues: (mandatario), to act for and in his behalf in
½ share each pro-indiviso and the 1) WON sale was valid although it transactions with third persons.
payment of attorney’s fees and cost of was executed after the death of the
litigation[Respondent filed cross claim -derivative in nature, power emanating
principal,Concepcion. from principal
against Simon Rallos
-agent’s acts are acts of the principal
2) WON sale fell within the exception
 Essential Elements:
to the general rule that
3. Juan T. Borromeo, administrator of death extinguishes the authority of (1) there is consent, express or implied of
the Estate of Simeon Rallos was the agent the parties to establish the relationship;
ordered to paydefendant the price of (2) the object is the execution of a juridical
the ½ share of the land (P5,343.45) act in relation to a third person;
plus attorney’s fees[Borromeo filed a 3) WON agent’s knowledge of the
third party complaint against Josefina principal’s death is a material (3) the agents acts as a representative and
Rallos, special administratrix factor. not for himself, and
of theEstate of Gerundia]

4) WON petitioner must suffer the


4. Dismissed without prejudice to filing consequence of failing to annotate
either a complaint against the a notice of death in the title (thus
regularadministrator of the Estate of there was good faith on the part
Gerundia Rallos or a claim in the of the Respondent vendee)

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
(4) the agent acts within the scope of his IN THE CASE AT BAR: 3) Yes, agent’s knowledge of principal’s
authority. death is material.
1) Sale was void.
Respondent asserts that: there is no provision
 No one may contract in the name of in the Code which provides that whatever is
 Extinguishment another without being authorized by done by an agent having knowledge of the
the latter, or unless he has by law a death of his principal is void even with respect
o Generally: among others3, By right to represent him (Art. 1317 of the
the death, civil interdiction, to third persons who may have contracted with
Civil Code). him in good faith and without knowledge of
insanity or insolvency of the
principal or of the agent  Simon’s authority as agent was the death of the principal
extinguished upon Concolacion’s Court says: this contention ignored the ignores
- death of the principal effects instantaneous
death the existence of the general rule enunciated in
and absolute revocation of the authority of the
agent Article 1919 that the death of the principal
extinguishes the agency. Article 1931, being
o Exceptions: 2) The sale did not fall under the an exception to the general rule, is to be
exceptions to the general rule that strictly construed.
 (Art. 1930) if it has been
death ipso jure extinguishes the
constituted in the common 4) NO, the Civil Code does not impose a
authority of the agent
interest of the latter and of the duty upon the heirs to notify the agent
agent, or in the interest of a o Art. 1930 inapplicable: SPA in or others of the death of the principal.
third person who has accepted favor of Simon Rallos was not
the stipulation in his favor. coupled with interest  If revocation was by the act of the
principal: a general power which
 (Art. 1931) agent acted o Art. 1931 inapplicable: does not specify the persons to whom
without knowledge of the represents' on should be made, it is
pricipal’s death and that the  Simon Rallos knew (as can be
the general opinion that all acts,
third person was in good faith inferred from his pleadings)
executed with third persons who
(both these reqs should be of principal Concepcion’s
contracted in good faith, Without
present) death
knowledge of the revocation, are
 For Art 1931 to apply, both valid.
requirements must be present
 BUT, if revocation was due to death
of the principal: extinguishment, by

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
operation of law, is instantaneous  R&B Insurance issued a marine policy  RTC held Glodel liable for damages
without the need for notification to in favor of Columbia to insure the and dismissed Loadmaster’s
the parties concerned. shipment of 132 bundles of electric counterclaim.
copper cathodes against all risks.
 On appeal, CA held that Loadmasters
 When the cargoes arrived at pier 10, is liable to Glodel as it is an agent of
5) No.
North Harbor, Manila, Columbia the latter.
 Laws on agency, the terms of which engaged the services of Glodel for the
release and withdrawal of the cargoes  Loadmasters hence filed a petition for
are clear and unmistakable leaving no
from the pier and its subsequent review on certiorari before the SC
room for an interpretation contrary to
its tenor, should apply, the law delivery to its warehouses/plants.
provides that death of the principal
 Glodel, in turn, engaged the services of ISSUE
ipso jure extinguishes the authority of
Loadmasters for the use of its delivery
the agent to sell rendering the sale to
trucks to transport the cargoes to  Whether Loadmasters can be
a third person in good faith
Columbia’s warehouses/plants in considered as an agent of Glodel.
unenforceable unless at the agent had
Bulacan and Valenzuela City.
no knowledge of the principal’s death HELD
at that time (exception under Art.  The goods were loaded into 12 trucks
1931)  No. Loadmasters is not an agent of
owned by Loadmasters and driven by
Glodel.
its employed drivers. 6 of which were
to be delivered to Bulacan and the  Article 1868 of the Civil Code
Dispositive: CA Decision reversed, CFI other 6 to Valenzuela. En route, one of provides that: "By the contract of
decision affirmed. Sale was null and void. the trucks headed to bulacan failed to agency a person binds himself to
deliver its cargo. Later on, the truck render some service or to do something
was recovered but without the cargo. in representation or on behalf of
LOADMASTERS CUSTOMS SERVICES another, with the consent or authority
 Columbia filed with R&B Insurance a
INC., vs. GLODEL BROKERAGE of the latter."
claim for insurance indemnity which
CORPORATION ( 639 SCRA 69) the latter paid. After which, R&B  Loadmasters never represented Glodel.
FACTS Insurance filed a claim for damages Neither was it ever authorized to make
against both Glodel and Loadmasters such representation. It is a settled rule
before the RTC. that the basis for agency is

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
representation, that is, the agent acts 4.) Explain the control factor in object is the execution of a juridical act in
for and on behalf of the principal on agency. relation to a third person; (3) the agent acts as
matters within the scope of his a representative and not for himself; (4) the
authority and said acts have the same A Prinipal-Agent relationship to exist, the agent acts within the scope of his authority.
following should be present:
legal effect as if they were personally
executed by the principal. On the part (i) Assent. Assent means an informal
of the principal, there must be an agreement between the principal, who
has capacity, and the agent. RALLOS VS. FELIX GO CHAN &
actual intention to appoint or an
intention naturally inferable from his (ii) Benefit. The agent's conduct must SONS REALTY CORP ( 81 SCRA
be for the principal's benefit. 251)
words or actions, while on the part of
(iii) Control. The principal must
the agent, there must be an intention to have the right to control the agent
accept the appointment and act on it. by having the power to supervise
FACTS: Concepcion and Gerundia Rallos
the manner of its performance. were sisters and registered co-owners of a
3.) Explain the concept of parcel of land known as Lot No. 5983. In
representation. Consideration is not necessary for the 1954, they executed a special power of
creation of an agency relationship attorney in favor of their brother, Simeon
Article 1868, Civil Code: By the contract of and, absent an express statutory
provision to the contrary, neither is a Rallos, authorizing him to sell for and in their
agency a person binds himself to render some writing. behalf the aforementioned parcel of land. On
service or to do something in representation or March 1955, Concepcion Rallos died. On
on behalf of another, with the consent or Any person may be an agent, even a September 1955, Simeon Rallos sold the
authority of the latter. minor or a person with minimal mental undivided shares of his sisters in lot 5983 to
competency.
Felix Go Chan and Sons Realty Corporation.
The basis of agency is representation. On the
A person is not required to have The deed of sale was registered and the
part of the principal, there must be an actual
contractual capacity to act as an previous TCT was cancelled.
intention to appoint or an intention naturally agent.
inferable from his words or actions; and on the On May 1956, Ramos Rallos, as administrator
part of the agent, there must be an intention to of the Intestate Estate of Concepcion Rallos,
accept the appointment and act on it, and in filed a complaint with the CFI of Cebu,
the absence of such intent, there is generally 5.) What are the elements of agency? praying (1) that the sale of the undivided share
no agency. (Victorias Milling Co., Inc. vs. of the deceased Concepcion Rallos be
The elements of a contract of agency
Court of Appeals) declared unenforceable, and said share be
are: (1) consent, express or implied, of the
reconveyed to her estate; (2) that the TCT
parties to establish the relationship; (2) the
issued in the name of Felix Go Chan and Sons

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
Realty Corporation be cancelled; and (3) that knowledge of the death of the principal; and FACTS: The petitioners question the decision
the plaintiff be indemnified by way of (2) that the third person who contracted with of the trial court which was affirmed by the
attorney’s fees and payment of costs of suit. the agent acted in good faith. But because it Court of Appeals concerning the acquittal of
was established that Simeon Rallos had the respondent spouses on the ground that
The trial court rendered judgment declaring knowledge of the death of his principal when Deganos, Brigida Luz’ brother, is not an agent
the deed of sale null and void, insofar as the he made the sale, Article 1931 will not apply. of the respondent spouses.
one-half pro-indiviso share of Concepcion The general rule shall apply then that any act
Rallos in the property in question, and of an agent after the death of his principal is Petitioners are in the business of purchase and
sentencing Juan void ab initio. Simeon Rallos’ actof selling the sale of jewelry and respondent Brigida D. Luz,
share of Concepcion after her death is also known as Aida D. Luz, was their regular
Borromeo, the administrator of the estate of customer. On several occasions during the
Simeon Rallos, to pay Felix Go Chan and therefore null and void.
period from April 27, 1987 to September 4,
Sons Realty Corporation the sum representing AGENCY: The relationship of agency is 1987, respondent Deganos, received several
the price of one-half of the lot. The appellate whereby one party, called the principal pieces of gold and jewelry from petitioners
court reversed the decision and sustained the (mandante), authorizes another, called the amounting to P382,816.00. These items and
sale. agent (mandatario), to act for and in his behalf their prices were indicated in seventeen
ISSUE: Whether or not the sale of the agent in transactions with third persons. The receipts covering the same. Eleven of the
of the principal’s property after the latter’s essential elements of agency are: (1) there is receipts stated that they were received for a
death is valid consent, express or implied of the parties to certain Evelyn Aquino, a niece of Deganos,
establish the relationship; (2) the object is the and the remaining six indicated that they were
HELD: NO. The general rule in Article 1919 execution of a juridical act in relation to a received for Brigida D. Luz.
of the NCC is that death is one of the causes third person; (3) the agents acts as a
for the extinguishment of agency. There being representative and not for himself, and (4) the Only fifty three thousand pesos was remitted
an integration of the personality of the agent acts within the scope of his authority. by Deganos and for the insufficiency, the
principal into that of the agent, it is not Agency is basically personal representative, petitioners seek the help of the Barangay. The
possible for the representation to continue and derivative in nature. The authority of the agreement in the barangay was in vain which
once the death of either is established. There agent to act emanates from the powers granted resulted to the institution of the present civil
are certain exceptions, however, Article 1931 to him by his principal; his act is the act of the case in question. The spouses was made
being one of them. Under this provision, an principal if done within the scope of the respondents to the civil case because Deganos
act done by the agent after the death of the authority. Qui facit per alium facit se. "He is there agent as alleged by the petitioners.
principal is valid and effective if two who acts through another acts himself". ISSUE: WON respondent spouses are liable
conditions concur: (1) the agent acted without to petitioners claim despite the fact that the
BORDADOR VS LUZ (283 SCRA 374)

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
evidence does not show that they signed any the two respondents where no evidence principal-agent relationship existed between
of the subject receipts or authorized Deganos supports such claim. CAI and Holiday Travel.
to receive the items of jewelry on their behalf.
REFER TO: Issue: WON a principal-agent relationship
HELD: No, respondent spouses are NOT exists between CAI and Holiday Travel.
liable to petitioners. The basis for agency is NCC, Art. 1868: By the contract of agency a
representation. Here, there is no showing that person binds himself to render some service or Held: Yes. In Rallos vs. Felix Go Chan &
Brigida consented to the acts of Deganos or to do something in representation or on behalf Sons Realty Corporation the Court explained
authorized him to act on her behalf, much less of another, with the consent or authority of the the nature of an agency and spelled out the
with respect to the particular transactions latter. essential elements thereof: Out of the above
involved. Petitioners attempt to foist liability given principles, sprung the creation and
Sps. Viloria vs. Constinental Airlines
on respondent spouses through the supposed acceptance of the relationship of agency
(G.R. No. 188288 Jan. 16, 2012) whereby one party, called the principal,
agency relation with Deganos is groundless
and ill-advised. authorizes another, called the agent, to act for
Facts: Spouses Viloria purchased two round
and in his behalf in transactions with third
Besides, it was grossly and inexcusably tickets, from California to New Jersey on
persons. The essential elements of agency
negligent of petitioners to entrust to Deganos, board Continental Airlines, from Holiday
are: (1) there is consent, express or implied
not once or twice but on at least six occasions Travel through the latter’s travel agent
of the parties to establish the relationship;
as evidenced by six receipts, several pieces of Margaret Mager. The spouses agreed to buy
(2) the object is the execution of a juridical
jewelry of substantial value without requiring the said tickets after Mager informed them that
act in relation to a third person; (3) the
a written authorization from his alleged there were no available seats at AMTRAK.
agent acts as a representative and not for
principal. A person dealing with an agent is However, the spouses learned that the train
himself, and (4) the agent acts within the
put upon inquiry and must discover upon his trip (AMTRAK) wasn’t fully booked and so
scope of his authority. Agency is basically
peril the authority of the agent. they request for a refund for the plane tickets.
personal, representative, and derivative in
The spouses filed their request with the CAI’s
The records show that neither an express nor nature. The authority of the agent to act
office alleging that they were misled by Mager
an implied agency was proven to have existed emanates from the powers granted to him by
into buying the plane tickets. CAI refused to
between Deganos and Brigida D. Luz. his principal; his act is the act of the principal
refund the said tickets and so the spouses filed
Evidently, petitioners, who were negligent in if done within the scope of the authority. Qui
a case against CAI. The RTC ruled in favor of
their transactions with Deganos, cannot seek facit per alium facit se. “He who acts through
the spouses but the CA reversed the ruling
relief from the effects of their negligence by another acts himself.”
stating that CAI cannot be held liable for
conjuring a supposed agency relation between Mager’s act in the absence of any proof that a Contrary to the findings of the CA, all the
elements of an agency exists in this case. The

11
AGENCY & PARTNERSHIP AUGUST 25 ZHY
first and second elements are present as CAI seeking the cancellation of the mining pendency of the case, DENR AO No.
does not deny that it concluded an agreement claims of Apex on the ground that such 2002-18 was issued declaring an emergency
with Holiday Travel, whereby Holiday Travel mining claims were within a forest situation in the Diwalwal Gold Rush Area
would enter into contracts of carriage with reservation (Agusan-Davao-Surigao Forest and ordering the stoppage of all mining
third persons on CAI’s behalf. The third Reserve) and thus the acquisition on mining operations therein.
element is also present as it is undisputed that rights should have been through an
Holiday Travel merely acted in a application for a permit to prospect with the ISSUE: Whether or not SEM is an agent of
representative capacity and it is CAI and not BFD and not through registration of a DOL MMC?
Holiday Travel who is bound by the contracts with the BMG. RULING: NO. SEM is not an agent of MMC.
of carriage entered into by Holiday Travel on
its behalf. The fourth element is also present When it reached the SC in 1991, the Condition number 6 categorically
considering that CAI has not made any Court ruled against Apex holding that the area states that the permit shall be for the exclusive
allegation that Holiday Travel exceeded the is a forest reserve and thus it should have use and benefit of MMC or its duly authorized
authority that was granted to it. applied for a permit to prospect with the BFD. agents. While it may be true that SEM, the
On February 16 1994, MMC assigned all its assignee of EP 133, is a 100% subsidiary
APEX MINING CO. INC. vs. rights to EP 133 to Southeast Mindanao Gold corporation of MMC, records are bereft of any
SOUTHEAST MINDANAO GOLD Mining Corporation (SEM), a domestic evidence showing that the former is the duly
MINING CORP ET. AL (492 SCRA 355) corporation which is alleged to be a 100%- authorized agent of the latter. For a contract of
owned subsidiary of MMC. EP 133 is subject agency to exist, it is essential that the principal
FACTS: The case involves the “Diwalwal to the following terms and conditions :
Gold Rush Area” (Diwalwal), a rich tract consents that the other party, the agent, shall
of mineral land located inside the Agusan- xxx 6. That this permit shall be for the act on its behalf, and the agent consents so as
Davao-Surigao Forest Reserve in Davao del exclusive use and benefit of the permittee or to act. In the case of Yu Eng Cho v. Pan
Norte and Davao Oriental. his duly authorized agents and shall be used American World Airways, Inc., this Court had
for mineral exploration purposes only and for the occasion to set forth the elements of
Since the early 1980s, Diwalwal has no other purpose. xxx agency, viz:
been stormed by conflicts brought about by
numerous mining claims over it. On March Subsequently, BMG registered (1) consent, express or implied, of the parties
10, 1986, Marcopper Mining Corporation SEM’s Mineral Production Sharing to establish the relationship;
(MMC) was granted an Exploration Permit Agreement (MPSA) application and the Deed (2) the object is the execution of a juridical act
(EP 133) by the Bureau of Mines and of Assignment. Several oppositions were filed. in relation to a third person;
Geo-Sciences (BMG). A long battle ensued The Panel of Arbitrators created by the DENR
between Apex and MMC with the latter upheld the validity of EP 133. During the

12
AGENCY & PARTNERSHIP AUGUST 25 ZHY
(3) the agent acts as a representative and not Furthermore, the concept of agency is circumvent the strict requirements under the
for himself; distinct from assignment. In agency, the agent law by the simple expediency acquiring the
acts not on his own behalf but on behalf of his permit from the original permittee.
(4) the agent acts within the scope of his principal. While in assignment, there is total
authority. transfer or relinquishment of right by the We cannot lend recognition to the
assignor to the assignee. The assignee takes Court of Appeals’ theory that SEM, being a
The existence of the elements of 100% subsidiary of MMC, is automatically an
agency is a factual matter that needs to be the place of the assignor and is no longer
bound to the latter. agent of MMC.
established or proven by evidence. The burden
of proving that agency is extant in a certain Bearing in mind the just articulated A corporation is an artificial being
case rests in the party who sets forth such distinctions and the language of the Deed of created by operation of law, having the right
allegation. This is based on the principle that Assignment, it is readily obvious that the of succession and the powers, attributes, and
he who alleges a fact has the burden of assignment by MMC of EP 133 in favor of properties expressly authorized by law or
proving it. It must likewise be emphasized that SEM did not make the latter the former’s incident to its existence. It is an artificial being
the evidence to prove this fact must be clear, agent. Such assignment involved actual invested by law with a personality separate
positive and convincing. transfer of all rights and obligations MMC and distinct from those of the persons
have under the permit in favor of SEM, thus, composing it as well as from that of any other
In the instant Petitions, it is incumbent legal entity to which it may be related.
upon either MMC or SEM to prove that a making SEM the permittee. It is not a mere
grant of authority to SEM, as an agent of Resultantly, absent any clear proof to the
contract of agency actually exists between contrary, SEM is a separate and distinct entity
them so as to allow SEM to use and benefit MMC, to use the permit. It is a total
abdication of MMC’s rights over the permit. from MMC.
from EP 133 as the agent of MMC. SEM did
not claim nor submit proof that it is the Hence, the assignment in question did not
Litonjua vs Eternit Corp. (490 SCRA
designated agent of MMC to represent the make SEM the authorized agent of MMC to
make use and benefit from EP 133.
204)
latter in its business dealings or undertakings.
SEM cannot, therefore, be considered as an The condition stipulating that the Facts: The Eternit Corporation (EC)
agent of MMC which can use EP 133 and permit is for the exclusive use of the permittee manufactures roofing materials and pipe
benefit from it. Since SEM is not an or its duly authorized agent is not without any products. Ninety (90%) percent of the shares
authorized agent of MMC, it goes without reason. Exploration permits are strictly of stocks of EC were owned by Eteroutremer
saying that the assignment or transfer of the granted to entities or individuals possessing S.A. Corporation (ESAC), a corporation
permit in favor of SEM is null and void as it the resources and capability to undertake registered under the laws of Belgium. Jack
directly contravenes the terms and conditions mining operations. Without such a condition, Glanville was the General Manager and
of the grant of EP 133. non-qualified entities or individuals could President of EC, while Frederick Delsaux was

13
AGENCY & PARTNERSHIP AUGUST 25 ZHY
the Regional Director for Asia of ESAC. In writing, the sale is void and not merely relevant provisions of law. Agency may be
1986, because of the political situation in the unenforceable. oral unless the law requires a specific form.
Philippines the management of ESAC wanted However, to create or convey real rights
to stop its operations and to dispose their 8 Issue: WON there was already a perfected over immovable property, a special power
parcels of land located in Mandaluyong City. contract of sale of the parcels of land that of attorney is necessary. Thus, when a sale
They engaged the services of realtor/broker would in effect make the respondents in of a piece of land or any portion thereof is
Lauro G. Marquez. Marquez thereafter offered default and therefore liable for damages? through an agent, the authority of the latter
the land to Eduardo B. Litonjua, Jr. for shall be in writing, otherwise, the sale shall
Ruling: None. Respondents maintain that
P27,000,000.00. Litonjua counter offered be void. In this case, the petitioners failed to
Glanville, Delsaux and Marquez had no
P20,000,000.00 cash. Marquez apprised adduce in evidence any resolution of the
authority from the stockholders of EC and its
Glanville & Delsaux of the offer. Delsaux sent Board of Directors of EC empowering
Board of Directors to offer the properties for
a telex stating that, based on the Marquez, Glanville or Delsaux as its agents, to
sale to the petitioners. Petitioners assert that
"Belgian/Swiss decision," the final offer was sell, let alone offer for sale, for and in its
there was no need for a written authority from
"US$1,000,000.00 and P2,500,000.00 to cover behalf, the eight parcels of land owned by it.
the Board of Directors of EC for Marquez to
all existing obligations prior to final Moreover, the evidence of petitioners shows
validly act as broker. As broker, Marquez was
liquidation. The Litonjua brothers deposited that Adams and Glanville acted on the
not an ordinary agent because his only job as a
US$1,000,000.00 with the Security Bank & authority of Delsaux, who, in turn, acted on
broker was to look for a buyer and to bring
Trust Company, and drafted an Escrow the authority of ESAC, through its Committee
together the parties to the transaction. He was
Agreement to expedite the sale. Meanwhile, for Asia, and the Belgian/Swiss component of
not authorized to sell the properties; hence,
with the assumption of Corazon C. Aquino as the management of ESAC. The offer of
petitioners argue, Article 1874 of the New
President, the political situation improved. Delsaux emanated only from the
Civil Code does not apply.
Marquez received a letter from Delsaux that "Belgian/Swiss decision," and not the entire
the ESAC Regional Office decided not to A corporation is a juridical person separate management or Board of Directors of ESAC.
proceed with the sale. When informed of this, and distinct from its stockholders and is not While it is true that petitioners accepted the
the Litonjuas, filed a complaint for specific affected by the personal rights, obligations and counter-offer of ESAC, EC was not a party to
performance and payment for damages on transactions of the latter. It may act only the transaction between them; hence, EC was
account of the aborted sale. Both the trial court through its board of directors or, when not bound by such acceptance. Decision of the
and appellate court rendered judgment in favor authorized by its board resolution, through its lower court is affirmed.
of defendants and dismissed the complaint. officers or agents. The general principles of
The lower court declared that since the 6.) Who are the parties to the
agency govern the relation between the
authority of the agents/realtors was not in corporation and its officers or agents, subject contract of agency?
to the articles of incorporation, by-laws, or

14
AGENCY & PARTNERSHIP AUGUST 25 ZHY
PRINCIPAL – The person represented who are absolutely incapacitated active landslide and are therefore not
(mandante) (ex. Insane persons) cannot be conducive for housing. NHA issued a
agents. resolution cancelling the sale of the remaining
AGENT – The person who acts for and in lands and offered P1.225 million to the
representation of another (mandatario) 8.) Are agents real party-in-interest landowners. For such reason, Uy and Roxas
filed a complaint for damages against NHA.
7.) Must the parties in an agency An agent of the seller is not a party to
arrangement be capacitated? the contract of sale between his principal and ISSUE: Whether or not Uy and Roxas are real
the buyer; Since a contract may be violated parties-in-interest.
 Capacity of the Parties: only by the parties thereto as against each
other, the real party-in-interest, either as HELD: No. They are not parties-in-interest
1. Principal because they are merely agents of their
plaintiff or defendant, in an action upon the
a) He may be a natural or a juridical person contract must, generally, either be parties to principals. An action shall be prosecuted in
said contract. (Uy vs Roxas) the name of the party who, by the substantive
b) He must be capacitated. The rule is law, has the right sought to be enforced. Uy
if a person is capacitated to act for The agent has neither rights nor and Roxas are not parties to the contract of
himself or his own right, he can act liabilities as agains the third party; he cannot sale between their principals and NHA. They
through an agent. thus sue or be sued on the contract. (Angeles are mere agents of the owners of the land
vs PNR) subject of the sale. As agents, they only render
i. The agent is not liable where he
some service or do something in
was ignorant of the principal’s Uy and Roxas vs CA (G.R NO.
representation or in behalf of the principals.
incapacity. 120465) The rendering of such service did not make
2. Agent them parties to the contract of sale executed in
FACTS: William Uy and Rodel Roxas
behalf of the latter. Since a contract may be
(petitioners) are agents authorized to sell 8
a) Insofar as the third persons are violated only by the parties thereto as against
parcels of land in Benguet. The petitioners
concerned, it is enough that the each other, the real parties-in-interest may be
offered to sell the parcels of land to NHA for a
principal is capacitated. either the plaintiff or defendant.
housing project. On 1989, NHA passed a
b) Insofar as his obligations to his resolution approving the acquisition of the
principal are concerned, the agent said lands and they executed Deed of Absolute
must be able to bind himself. Sale. However, only 5 out of 8 lands were ANGELES VS. PNR (G.R. NO.
paid for by NHA because of a report from 150128)
c) But as an agent, some mental DENR that the remaining area is located at an
capacity is necessary, so, those

15
AGENCY & PARTNERSHIP AUGUST 25 ZHY
FACTS: On May 5, 1980, respondent in-interest. The Ca affirmed such and retain his interest in the subject
Philippone National Railways (PNR) decision. matter.
informed Gaudencio Romualdez that it
ISSUE: WON the Spouses Angeles are
has accepted his offer to buy PNR’s
real paties-in-interest in the case.
scrap/unserviceable rails in Del The petition is denied.
Carmen, Lubao, Pampanga. After HELD: No. Lizette was not an assignee
paying the purchase price, Romuladez but merely an agent whose authority
addressed a letter to PNR authorizing was limited to the withdrawal of the Ong vs. CA (G.R NO.119858)
Lizette R. Wijanco-Angeles to be his scrap rails, hence without personality to
FACTS:
lawful representative in the withdrawal sue. Where agency exists, the third
of scrap rails in Pampanga but it was party’s (PNR) liability on the contract is  Representing AMAGRI International
not ready for hauling. The PNR instead to the principal (Romualdez) and not to Corp. (AMAGRI), Edward Ong
granted Lizette to withdraw scrap rails applied for a letter of credit with
the agent (Lizette) and the relationship
SOLIDBANK Corp. (Bank) to finance
from Tarlac instead. However, they of the third party to the principal is the
the purchase of differential assemblies
suspended such withdrawal in view of same as that in a contract in which there from Metropole Industrial Sales and
internal issues regarding the Tarlsc is no agent. The words of Romualdez’s subsequently executed the trust.
properties. The spouses Angeles letter to PNR was very clear.
 On a later date, Ong, representing
demanded a refund but PNR refused to
I have authorized the bearer, Lizette r. AMAGRI, applied for another letter of
pay. On August 10, 1988, the spouses credit to finance the purchase
angeles filed a suit against the PNR Wicangco-Angeles XXX to be my
merchandise from Fretiphil
against specific performance and lawful representative in the withdrawal
Corporation. The Bank approved the
of the scrap/unserviceable rails awarded application and Ong, representing
damages before the RTC in Quezon
to me. AMAGRI, executed another trust in
City. Later, Lizette W. Angeles passed
favor of the Bank acknowledging
away and was substituted by her heirs. It cannot be over emphasized that receipt of the merchandise.
The RTC dismissed the case since the Romualdez’s use of the active verb
spouses Angeles were not real parties- “authorized” instead of “assigned”,  When the trust receipts became due
and demandable, ARMAGRI failed to
indicated an intent on his part to keep

16
AGENCY & PARTNERSHIP AUGUST 25 ZHY
pay or deliver the goods to the Bank 9.) Explain integration and  This rule does not apply in criminal
despite several demand letters. cases. (Ong vs. CA) If the agent is
extension as effects of the being sued in a criminal action, this
ISSUE contract of agency. cannot be used as a defense.
 Whether Ong is liable for the default Otherwise, the agent can commit any
Integration- Personality of the principal is
of ARMAGRI as its agent. crime and not be held liable for it.
merged with that of the agent.
3. Notice to agent is notice to principal.
HELD Extension- Personality of the principal is  General rule: information relayed to
reproduced in the persons of his agent the agent in connection with the
 Yes. The Informations expressly state
object of the contract is deemed to
that ARMAGRI, represented by Ong, 1. Authority to act. have been relayed to the principal.
received the goods in trust for the  By legal fiction, the agent becomes (this is known as the theory of
Bank under the express obligation to the principal, authorized to perform imputed knowledge)
remit the proceeds of the sale or to all acts which the latter would have  However, the rule does not apply
return the goods upon demand by the him do. (Orient Air Services v. CA) conversely. Notice to the principal
Bank. Under the Trust Receipts Law, it  The actual or real absence of the is not notice to the agent. (Sunace
is sufficient to allege and establish the principal is converted into his legal Int’l vs. CA)
failure of ARMAGRI, whom Ong or juridical presence. (Eurotech vs.  Exception to the rule: where the
represented, to remit the proceeds or to Cuison) conduct and dealings of the agent re
return the goods to the Bank.
 The principal becomes liable for such as to raise a clear presumption
 When Ong signed the trust receipts, he obligations contracted by the agent that he will not communicate to the
claimed he was representing provided that the act is within the principal the facts in controversy.
ARMAGRI. The corporation authority of the agent. (Prudential (Cosmic Lumber vs. CA)
obviously acts only through its human Bank vs. CA) o This is because if the agent
agents and it is the conduct of such 2. Agent not real party-in-interest were committing fraud, it
agents which the law must deter. The  Since the agent is a mere would be contrary to common
existence of the corporate entity does extension of the personality of the sense to presume that he would
not shield from prosecution the agent principal, he is not a party to the communicate the facts to the
who knowingly and intentionally contract with the third person. The principal. When an agent is
commits a crime at the instance of a liability of the third party is to the engaged in the perpetration of
corporation. principal and not to the agent. fraud upon his principal for his
own exclusive benefit, he is not

17
AGENCY & PARTNERSHIP AUGUST 25 ZHY
really acting for the principal officers that the tickets in question could not Article 1877, CC: An Agency couched in
but is really acting for himself. be extended beyond the period of their validity general terms comprises only acts of
4. Bad faith of the agent is bad faith of without paying the fare rate and travel taxes. administration, even if the principal should
the principal. state that she withholds no power or that the
The Court held that “To all legal agent may execute such acts as he may
intents and purposes, Teresita was the agent consider appropriate, or eventhough the
of the GANAS and notice to her of the agency should authorize a general and
rejection of the request for extension of the unlimited management.
validity of the tickets was notice to the
10.) IS NOTICE TO AGENT, A NOTICE GANAS, her principals.” 13.) Distinguish general agency from
TO PRINCIPAL? agency couched in specific terms.
11.) Is bad faith of the agent, a bad
Yes. Notice to the agent is a notice to the faith of the principal? a) What are the covered transactions?
principal.
YES- Bad faith of agent imputable to principal
ARTICLE 1910. The principal must comply (Caram vs. Laureta)
with all the obligations which the agent may
have contracted within the scope of his Where the principal’s acts contributed to
authority. deceive a third person in good faith.

As for any obligation wherein the agent has NO- if principal had no notice, and even
exceeded his power, the principal is not bound expressly forbade it, the principal is not liable. b) What is/are the effect/s of absence of
except when he ratifies it expressly or tacitly. specific authorization?
Art. 1911. Even when the agent has exceeded
In Air France vs. Court of Appeals, his authority, the principal is solidarily liable Effect of absence of specific authorization
employing the principle that knowledge of the with the agent if the former allowed the latter - in the absence of a grant of special power of
agent is chargeable as knowledge of the to act as though he had full powers. attorney to the agent, he is deemed to have been
extended only a general power of attorney by the
principal, the Court held that an airline
12.) Distinguished General Agency principal who only grants authority to perform acts
company cannot be held liable for breach of of administration
contract when it dishonoured the tickets given from Agency couched in general
to the spouses, whose travel arrangement were terms.
handled by their travel agent, since the c) What is/are the effect/s of specific
evidence showed that their travel agent was Article 1876, Civil Code: General agency
authorization?
duly informed by the airline company’s proper comprises all the business of the principal.

18
AGENCY & PARTNERSHIP AUGUST 25 ZHY
Art. 1897. The agent who acts as such is not in other cases, be able to trace the (P2,513.55). Keeler filed an action for specific
personally liable to the party with whom he source of his reliance to some word or performance in CFI Manila. Lower court ruled
contracts, unless he expressly binds himself or act of the principal himself if the latter for Rodriguez, stating that the payment to
exceeds the limits of his authority without is to be held responsible. As has often Montelibano discharged the debt of the
giving such party sufficient notice of his been pointed out, the agent alone defendant.
powers. cannot enlarge or extend his authority
by his own acts or statements, nor can According to Keller, at the time of the
14.) Who has the obligation to he alone remove limitations or waive shipment, the company sent Juan Cenar, one
determine existence and scope of conditions imposed by his principal. of its employees, with the shipment for the
To charge the principal in such a case, purposes of installing the plant on the
agency?
the principal's consent or concurrence defendant’s premises and to give the statement
 At any rate, even if such affidavit is to must be shown. (Mechem on Agency, of account to Rodrizuez totaling P2,563.95.
be given any probative value, the vol. I, section 757.) According to Cenar, Rodriquez kept the
existence of the agency relationship statement of account while the former made
cannot be established on its sole basis. KEELER ELECTRIC CO. VS. no efforts to collect from the latter because
The declarations of the agent alone are RODRIGUEZ (44 PHIL. 19) Rodriquez said that he would pay for the plant
generally insufficient to establish the in Manila.
Matthews electric plant, buyer did not deliver
fact or extent of his authority.[18] In
the payment after the inspection and Keeler alleges that Montelibano has no
addition, as between the negative
installation of a certain Cenar. authority from the company to receive or
allegation of respondents Canilao and
receipt for money, and that his services were
Tagunicar that neither is an agent nor Facts: Keeler sells Matthews electric plant. confined to the finding of purchases for the
principal of the other, and the AC Montelibano approached Keeler at Manila Matthews plant.
affirmative allegation of petitioners office, claiming that he was from Iloilo and
that an agency relationship exists, it is that he could find purchases for the Matthews Rodriquez however alleges that it was
the latter who have the burden of plant. Keeler promised a 10% commission for Montelibano himself sold and delivered the
evidence to prove their allegation, every sale consummated. plant to him, and was the one who ordered the
failing in which, their claim must installation of the electric plant. Rodriguez
necessarily fail. (Yu Eng Cho v. Pan Montelibano convinced Rodriguez to buy, and presented a statement and receipt which
American, 328 SCRA 717 (2000)) the plant was shipped from Manila to Iloilo Montelibano signed.
 And not only must the person dealing and later installed in the buyer’s premises.
with the agent ascertain the existence Issue: WON Montelibano had authority to
Without Keeler’s knowledge, Rodriquez paid accept payment. NO
of the conditions, but he must also, as
the purchase price to Montelibano

19
AGENCY & PARTNERSHIP AUGUST 25 ZHY
Held: Mechem on Agency Sec.743 entirely within the power of the person dealing
with the agent to satisfy himself that the agent
1. There is nothing on the receipt which Fundamental principles: has the authority he assumed to exercise, or to
showed that Montelibano was the decline to enter into relations with him. The
1. The law indulges no bare
agent of the plaintiff. It was his own person dealing with the agent must also act
presumptions that an agency exists. It
personal receipt and his signature. with ordinary prudence and reasonable
must be proved or presumed from
facts diligence. If, he knows or has good reason to
2. Payments for fare negated the
believe that the agent is exceeding his
allegation of defendant that
2. The agent cannot establish his own authority, he cannot claim protection.
Montelibano was the one who installed
authority either by his representations
the electric plant. (Cenar was the one Judgment reversed.
or by assuming to exercise it
who travelled)
3. An authority cannot be established
3. After Cenar’s return to Manila, Keller
by mere rumor or general
wrote a letter to Rodriguez requesting Yu Eng Cho vs. Pan American (328
reputation
payment, and the latter responded with SCRA 717)
a telegram (paid to Montelibano 3wks 4. Even general authority is not an
Keeler did not present bill). The unlimited one Facts: On July 10, 1976, plaintiffs bought
telegram was in direct conflict with the plane tickets from defendant Claudia
receipt Montelibano issued, which was 5. Every authority must find its Tagunicar who represented herself to be an
an itemized statement of account. As ultimate source in some act or agent of defendant Tourist World Services,
mentioned, there was no evidence that omission of the principal Inc. (TWSI). The destinations are Hongkong,
Montelibano was authorized to receive Tokyo, San Francisco, USA, for the amount of
Persons dealing with an assumed
payment for Keeler. P25,000.00.
agency, whether the it be a general or special
A1162 CC: Payment must be made to the one, are bound at their peril, if they would On said date, only the passage from Manila to
person in whose favor the obligation is hold the principal to ascertain not only the fact Hongkong, then to Tokyo, were confirmed.
constituted, or to another authorized to receive of the agency but the nature and extent of the Their flight from Tokyo to San Francisco was
it in his name. authority and in case either is controverted, the on request status. After calling up Canilao of
burden of proof is upon them to establish it. TWSI, defendant Tagunicar told plaintiffs that
A1727: The principal shall be liable as to their flight is now confirmed all the way.
matters with respect to which the agent has Against the agent, the third person has
Thereafter, she attached the confirmation
exceeded his authority only when he ratifies the obligation to determine existence and
stickers on the plane tickets.
the same expressly or by implication. scope of agency. It is moreover in any case

20
AGENCY & PARTNERSHIP AUGUST 25 ZHY
The plaintiffs left for Hongkong and stayed Held: No. Petitioners stubbornly insist that controverted, the burden of proof is upon
there for five days and after that they left for the existence of the agency relationship has them to establish it.
Tokyo. Upon arrival in Tokyo, they called been established by the judicial admissions
Pan-Am for reconfirmation of their flight to allegedly made by respondents herein, to wit:
15. ) How is agency distinguished
San Francisco but the said airlines informed (1) the admission made by Pan Am in its from other contracts/relationship?
them that their names are not in the manifest. Answer that TWSI is its authorized ticket
a) Master-servant
The plaintiffs then bought airline tickets for agent; (2) the affidavit executed by Tagunicar
Differences between Agent & Servant
Taipei because they could not remain in Japan where she admitted that she is a duly
for more than 72 hours and there was no authorized agent of TWSI; and (3) the
chance for the plaintiffs to obtain airline seats  An Agent Is a Person Who
admission made by Canilao that TWSI
to the US because Northwest Airlines was on Represents His Principal in Dealing
received commissions from ticket sales made
strike.Upon reaching Taipei, there were no With Third Persons.
by Tagunicar. However, respondent Tagunicar
flights available for plaintiffs, thus, they were  A Servant Is a Person Who Acts for
categorically denied in open court that she is a
forced to return back to Manila instead of His Master in a Ministerial Capacity.
duly authorized agent of TWSI, and declared
proceeding to the US. that she is an independent travel agent.
A Servant occupies a position
Petitioners filed a complaint against private By the contract of agency, a person binds which sounds parallel to that occupied
respondents Pan-Am,TWSI, Julieta Canilao, himself to render some service or to do by an agent. For instance, both are
and Claudia Tagunicar for expenses allegedly something in representation or on behalf of employed to act for an on behalf of the
incurred by the former.The RTC of Manila another, with the consent or authority of the master. Similarly, an agent and a
held the defendants jointly and severally liable latter. The elements of agency are: (1) consent, servant transact business (to a greater
except Julieta Canilao. The CA however express or implied, of the parties to establish or less extent) under the control and
rendered a decision holding Tagunicar solely the relationship; (2) the object is the execution supervision of their respective
liable and absolving Pan-Am and TWSI from of a juridical act in relation to a third person; employers. Yet, there is a material
any liability. Petitioners contends that TWSI (3) the agent acts as a representative and not difference between an agent and a
and Pan-Am should be held principally liable for himself; (4) the agent acts within the scope servant, which can be summed up as
for the acts of Tagunicar,because the latter is of his authority. It is a settled rule that follows.
the sub-agent of TWSI which is a duly persons dealing with an assumed agent are
authorized ticketing agent of Pan-Am. bound at their peril, if they would hold the Difference between an Agent &
principal liable, to ascertain not only the Servant
Issue: WON there is an agency relationship fact of agency but also the nature and
between Tagunicar, TWSI, and Pan-Am. extent of authority, and in case either is

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
1) Authority to create contractual the servant of the company, but in juridical relationship on behalf of the principal
relationship: Apart from acting on respect of the matters that come under with third parties. There is, therefore, no
behalf of his/her principal, an agent has his/her domain he/she becomes an element of “representation” in a contract of
the authority to create contractual agent in their dealings with third employment, since the employee does not
relations between the principal and a persons. An agent as such never have the power to enter into juridical relations
third party. A servant ordinarily, has occupies the position of a servant on behalf of employer.
no such authority. because whenever he acts, he acts on
2) Control and Supervision: A behalf of his principal and binds
servant is bound to work under direct him/her (principal) to third parties. c) Lease of service
control and supervision of his 6) Liability: A principal is liable The distinctions are the following:
employer. A ‘principal’ directs the on contracts made by his agent within
agent as to what is to be done, but a scope of authority. But a master is 1.) In agency, the basis is representation, while
master or employer of a servant not answerable for any wrongful act of his in lease of service, it is employment;
only has that right, but also the right to servant if it is committed in the course
2.) In agency, the agent exercises discretionary
direct how it is to be done. of the servant’s employment.
powers, while in lease of service, the lessor
3) Number of Masters: A servant
ordinarily performs only ministerial functions.
usually serves only one master, but an
agent may work for several principals 3.) In agency, three persons are involved: the
at the same time. principal, the agent, and the third person with
4) Remuneration: The mode of b) Employer-employee whom the agent has contracted, while in lease
remuneration is usually different. of service, only two persons are involved: the
Remuneration for a servant is paid by Unlike an agency relationship which is
lessor and the lessee.
way of salary or wages, whereas an essentially contractual in nature, an
agent generally gets his remuneration employment contract under Article 1700 of 4.) Agency relates to commercial or business
in terms of commission calculated on the New Civil Code is the relationship transactions, while lease of service relates
the basis of the amount of business between capital and labor which are not more to matters of mere manual or mechanical
transacted. merely contractual. execution, in which the servant acts under the
5) Duty Assignment: A servant in direction and control of the master.
The purpose of an employer-employee
certain cases to some extent may be relationship is for the employee to render
assigned the duties of an agent, and service for the direct benefit of the employer d) Independent contractor
may act as one. For example, the or of the business of the employer; while
secretary of a company is regarded as agency relationship is entered into to enter into

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
Independent Contractor- A person who Agency to Sell Sale 1. no meeting of the minds
contracts to do work for another person Agent receives the Buyer receives the 2. taking charge of another’s
according to his or her own processes and goods as the goods of goods as owner business or property
the principal
methods. 3. the property or business must
Agent delivers the Buyer pays the price
proceeds of the sale have been abandoned or neglected
Distinction: In Independent Contractor, the (otherwise, the rules on
Agent can return the Generally, buyer
contractor is not subject to another’s control unauthorized contracts would
object in case he is cannot return the
except for what is specified in mutually unable to sell it to a 3rd
object sold apply)
binding agreement for a specific job, with person 4. the officious manager must not
regards to Agency, the agent agrees to act Agent in dealing with Buyer can deal with
have been expressly or implicitly
under the control or direction of another –the the thing received is the thing as he
bound to act according pleases, being the authorized (otherwise the rules on
principal. agency will apply)
to the instructions of owner
Control is one factor which most clearly his principal 5. the officious manager must
distinguishes agency from other legal have voluntarily taken charge.
concepts.  Diligence Required of Officious
Manager [2145]
e) Trust 1. The officious manager shall
The essential distinctions perform his duties with all the
between trust and an agency are found diligence of a good father of a
ordinarily in the fact that in trust, the family.
title and control of the property under 2. He shall pay the damages
the trust instrument passes to the which through his fault or
trustee who acts in his own name, g) Partnership negligence may be suffered by the
while the agent represents and acts for owner of the property or business
While an agent acts only for his principal, a
his principal and in the further fact that under management. The courts
partner acts not only for his co-partners and
while a trust may ordinarily be may, however, increase or
the partnership but also as principal of
terminated only by the fulfilment of its moderate the indemnity according
himself. (Arts. 1767, 1803)
purpose, an agency may in general be to the circumstances of each case.
revoked at any time.
f) Sale h) Negotiorum gestio/ quasi contract
 Agency v Negotiorum Gestio
Agency vs Sale
 Essential Requisites [2144]

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
1.Consent: In agency, there is a  While the agent derives his authority
contract caused by a meeting of the j) Brokerage from his principal, the guardian,
minds, expressly or impliedly; although he acts for and on behalf of
Negotiorum Gestio is a quasi- his ward, does not derive his authority
contract, there having been no A commission agent is one so to act from the ward.
meeting of the minds. engaged in the purchase or sale for  The relation of principal and agent is
2.Control: Agent is controlled by the another of personal property which for founded upon consent of the parties
principal; the officious manager this purpose, is placed in his thereto, while that of guardian and
follows his judgment and the possession and at his disposal. He ward may be created irrespective of the
presumed will of the owner maintains a relation not only with his consent or capacity of the ward.
principal and the purchaser or vendor,  Agents are subject to the control of
i) Judicial administration but also with the property which is the their principals, while guardians are
The provision of law on agency subject matter of the transaction. not subject to the direction of their
should not apply to a judicial On the other hand, a broker has no wards;
administration. relation with the thing he buys or sells.  A legal guardian is substituted by law,
A judicial administrator is appointed He is merely an intermediary or while ordinarily an agent is the
by the court. He is not only the negotiator between the purchaser and appointee of the principal and his
representative of the said court, but the vendor relative to the property with power may at any time be abrogated or
also the heirs and creditors of the the custody or possession of which he modified by the principal; and
estate. A judicial administrator, before has no concern. His only office is to  While an agent represents one who has
entering into his duties, is required to bring together the parties to the capacity to contract for himself where
file a bond. These circumstances re not transaction never acting in his own he present, a guardian represents one
true in agency. the agent is only name but in the name of those who who has no such capacity.
answerable to his principal. The employed him.in effecting a
protection which the law gives the transaction, he, however, acts in a l) Loan
principal, in limiting the powers and certain sense as the agent of both
rights of an agent, stems from the fact parties. Whether in a particular case the relation
that control by the principal can only between the parties is one of lender and
be through agreements; whereas, the k) Guardianship borrower or principal or agent depends on
acts of a judicial administrator are the terms of the contract between them and
subject to specific provisions of law The distinctions are: their intention.
and orders of the appointing court.

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AGENCY & PARTNERSHIP AUGUST 25 ZHY
 Where money advanced to another is  Where one deposits money with a bank
expressly regarded as money lent, no with instructions to apply it in
agency results. One who borrows satisfaction of the debt of a third
money to conduct a business in which person, the conventional “debtor and
the lender has no interest or concern in creditor relationship” between the bank
the manner of its conduct is not an and the depositor is created, coupled
agent of the lender, but the financing with an “agency” on the part of the
of the operations to be carried on by bank to pay the debt, which is
another for the mutual advantage of revocable at the will of the depositor.
both, without any obligation of such
other to return the money advanced,
makes such other an agent rather than a
borrower.
 An agent may be given funds by the
principal to advance the latter’s
business, while a borrower is given
money for purposes of his own and he
must generally return it whether or not
his business is successful. A lot,
however, depends on the intent of the
parties.
 Where checks are deposited with a
collecting bank, the nature of the
relationship created at that stage is one
of agency, that is, the bank is to collect
from the drawees of the checks the
corresponding proceeds. After the
checks are collected and converted into
cash, the creditor and debtor
relationship is created between the
depositor and the bank.

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