1
Group 4 Private respondents filed a complaint with
ALFONSO, Jan Pauline
BAJE, John Winston
BERMUDEZ, Leonie
MAQUINANO, Lam Sigfred
PITOGO, Frances Isabel
I. Bicol Savings and Loan Association v. CA
GR No. 85302, March 31, 1989
TOPIC:
Stipulation in granting authority to sell in a
mortgage is merely ancilliary.
FACTS:
This Petition for Review on certiorari was
filed by Bicol Savings and Loan Association,
seeking the reversal of the Decision ** of
the respondent Court of Appeals in CA-G.R.
CV No. 02213, dated 11 August 1 988,
which ruled adversely against it.
Juan de Jesus was the owner of a parcel of
land situated in Naga City.
He executed a Special Power of Attorney in
favor of his son, Jose de Jesus, to
negotiate, mortgage his real property.
By virtue thereof, Jose de Jesus obtained a
loan of P20,000 from petitioner bank and
executed a deed of mortgage on the real
property.
To secure payment, Jose de Jesus executed
a deed of mortgage on the real property
referred to in the Special Power of
Attorney.
Juan de Jesus died at an unknown date.
By reason of his failure to pay the loan
obligation even during his lifetime,
petitioner bank caused the mortgage to be
extrajudicially foreclosed.
Private respondents (heirs of Juan de
Jesus) including Jose de Jesus failed to
redeem the property within one year from
the date of the registration of the
Provisional Certificate of Sale.
the trial court, praying for the annulment of
the deed of sale.
ISSUE:
The pivotal issue is the validity of the
extrajudicial foreclosure sale of the
mortgaged property instituted by petitioner
bank which, in turn hinges on whether or
not the agent-son exceeded the scope of
his authority in agreeing to a stipulation in
the mortgage deed that petitioner bank
could extrajudicially foreclose the
mortgaged property.
RULING:
Article 1879 of the Civil Code, relied on by
the Appellate Court in ruling against the
validity of the extrajudicial foreclosure sale,
reads:
Art. 1879. A special power to sell excludes
the power to mortgage; and a special
power to mortgage does not include the
power to sell.
The sale proscribed by a special power to
mortgage under Article 1879 is a voluntary
and independent contract, and not an
auction sale resulting from extrajudicial
foreclosure, which is precipitated by the
default of a mortgagor.
The stipulation granting an authority to
extrajudicially foreclose a mortgage is an
ancillary stipulation supported by the same
cause or consideration for the mortgage
and forms an essential or inseparable part
of that bilateral agreement (Perez v.
Philippine National Bank, No. L-21813, July
30, 1966, 17 SCRA 833, 839).
It matters not that the authority to
extrajudicially foreclose was granted by an
attorney-in-fact and not by the mortgagor
personally.
The stipulation in that regard, although
ancillary, forms an essential part of the
mortgage contract and is inseparable
therefrom.
The stipulation in that regard, although
ancillary, forms an essential part of the

mortgage contract and is inseparable
therefrom.
TEACHINGS OF THE COURT:
It is important to take note that the sale
proscribed by a special power to mortgage
under Article 1879 is only applicable to
voluntary and independent contracts.
That power survives the death of the
mortgagor (Perez vs. PNB, supra).
The right of the mortgagee bank to
extrajudicially foreclose the mortgage after
the death of the mortgagor Juan de Jesus,
acting through his attorney-in-fact, Jose de
Jesus, did not depend on the authorization
in the deed of mortgage executed by the
latter.
That right existed independently of said
stipulation and is clearly recognized in
Section 7, Rule 86 of the Rules of Court,
which grants to a mortgagee three
remedies that can be alternatively pursued
in case the mortgagor dies, to wit:
• to waive the mortgage and claim the
entire debt from the estate of the
mortgagor as an ordinary claim;
• to foreclose the mortgage judicially
and prove any deficiency as an
ordinary claim; and
• to rely on the mortgage exclusively,
foreclosing the same at any time
before it is barred by prescription,
without right to file a claim for any
deficiency.
II. Francisco Veloso v. CA et.al.
GR No. 102737, August 21, 1996
TOPIC:
Existence of General Power of Attorney; No
Need for Special Power of Attorney
FACTS:
2
Petitioner Francisco Veloso was the owner
of a parcel of land situated in the district of
Tondo, Manila.
The title was registered in the name of
Francisco A. Veloso.
However, the said title was subsequently
cancelled and a new one, was issued in the
name of Aglaloma B. Escario.
On August 24, 1988, petitioner Veloso filed
an action for annulment of documents,
reconveyance of property with damages
and preliminary injunction and/or
restraining order.
Petitioner alleged therein that he was the
absolute owner of the subject property and
he never authorized anybody, not even his
wife, to sell it.
He alleged that he was in possession of the
title but when his wife, Irma, left for
abroad, he found out that his copy was
missing.
The transfer of property was supported by
a General Power of Attorney and Deed of
Absolute Sale executed by Irma Veloso,
wife of the petitioner and appearing as his
attorney-in-fact, and defendant Aglaloma
Escario.
Petitioner Veloso, however, denied having
executed the power of attorney and alleged
that his signature was falsified.
He also denied having seen or even known
Rosemarie Reyes and Imelda Santos, the
supposed witnesses in the execution of the
power of attorney.
Defendant Aglaloma Escario in her answer
alleged that she was a buyer in good faith
and denied any knowledge of the alleged
irregularity.
She allegedly relied on the general power
of attorney of Irma Veloso which was
sufficient in form and substance and was
duly notarized.
In the decision of the trial court Aglaloma
Escario was adjudged the lawful owner of

the property as she was deemed an
innocent purchaser for value.
The assailed general power of attorney was
held to be valid and sufficient for the
purpose.
There was no need for a special power of
attorney when the special power was
already mentioned in the general one.
Not satisfied with the decision, petitioner
Veloso filed his appeal with the Court of
Appeals. The respondent court affirmed in
toto the findings of the trial court.
ISSUE:
Was there a valid sale of the subject
property considering the fact that the
respondent Angloma Escario relied on the
general power of attorney of Irma Veloso
without the latter’s execution of a separate
and special power of attorney?
RULING:
An examination of the records showed that
the assailed power of attorney was valid
and regular on its face.
It was notarized and as such, it carries the
evidentiary weight conferred upon it with
respect to its due execution.
While it is true that it was denominated as
a general power of attorney, a perusal
thereof revealed that it stated an authority
to sell, to wit:
2. To buy or sell, hire or lease, mortgage or
otherwise hypothecate lands, tenements
and hereditaments or other forms of real
property, more specifically TCT No. 49138,
upon such terms and conditions and under
such covenants as my said attorney shall
deem fit and proper.
Thus, there was no need to execute a
separate and special power of attorney
since the general power of attorney had
expressly authorized the agent or attorney
in fact the power to sell the subject
property.
TEACHINGS OF THE COURT:
3
The special power of attorney can be
included in the general power when it is
specified therein the act or transaction for
which the special power is required.
Even granting for the sake of argument,
that the petitioner's signature was falsified
and consequently, the power of attorney
and the deed of sale were null and void,
such fact would not revoke the title
subsequently issued in favor of private
respondent Aglaloma.
Tenio-Obsequio vs. Court of Appeals
The right of an innocent purchaser for
value must be respected and protected,
even if the seller obtained his title through
fraud. The remedy of the person prejudiced
is to bring an action for damages against
those who caused or employed the fraud,
and if the latter are insolvent, an action
against the Treasurer of the Philippines
may be filed for recovery of damages
against the Assurance Fund.
With Regards to the alleged Falsification of
Documents:
• Forgery cannot be presumed
• Mere variance of the signatures
cannot be considered as
conclusive proof that the same
were forged
To determine forgery, it was held in Cesar
vs. Sandiganbayan:
The process of identification, therefore,
must include the determination of the
extent, kind, and significance of this
resemblance as well as of the variation. It
then becomes necessary to determine
whether the variation is due to the
operation of a different personality, or is
only the expected and inevitable variation
found in the genuine writing of the same
writer. It is also necessary to decide
whether the resemblance is the result of a
more or less skillful imitation, or is the
habitual and characteristic resemblance

which naturally appears in a genuine
writing. When these two questions are
correctly answered the whole problem of
identification is solved.
III. Dioloso v. CA
130 SCRA 350, July 18, 1984
TOPIC:
Revocation of agency when the Principal is
liable.
FACTS:
This is an appeal by certiorari from a
decision by the Court of Appeals where
private respondent instituted case of
recovery of unpaid commission against
petitioners over some of the lots subject of
an agency agreement that were not sold.
4
Mariano Diolosa and wife Alegria
Villanueva-Diolosa, petitioners in this case,
are owners of few subdivisions, including
the Villa Alegria Subdivision, where subject
lots in question are situated.
Private respondent, Quirino Baterna, owner
and proprietor of Quin Baterna Realty,
entered into an agreement with petitioner
spouses to which herein petitioners
authorized the private respondent “to
dispose, sell, cede, transfer and convey”
xxx until all subject property as subdivided
is fully disposed of.” The authority to sell
is not extinguished until all the lots
have been disposed.
Villa Alegre Subdivision, owned by the
petitioners, still had 27 undisposed lots yet
to be disposed by private respondent in a
manner he may deem wise and proper,
when petitioner wife furnished a letter
expressly intending to rescind the
agreement, stating:
“Dear Mr. Baterna,
Please be informed that we have
finally decided to reserve the
remaining unsold lots, as of this
date of our Villa Alegre Subdivision
for our grandchildren.
In view thereof, notice is hereby
served upon you to the effect that
our agreement dated June 20,
1968 giving you the authority to
sell as exclusive sales agent of our
subdivision is hereby rescinded.”
ISSUE:
Can the petitioners terminate the agency
agreement without damages to the private
respondent?
RULING:
NO.
In the contract, herein petitioners
authorized the private respondent “to
dispose, sell, cede, transfer and convey”
 5

xxx until all subject property as subdivided Also, the case teaches that it is a valid
is fully disposed of.” The authority to sell is cause of action when a party to a contract
not extinguished until all the lots have been violates his prestations which would cause
disposed. the other party to suffer damages.
The petitioners are liable to the private
respondent for damages for breach of
contacts when they revoked the contract
through a letter.

The agency agreement, being a valid

contract, may be rescinded only on the
grounds stated in Arts. 1381 and 1382 of
the New Civil Code.

Art. 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the

wards whom they represent suffer lesion by more than one-
fourth of the value of the things which are the object
thereof;

(2) Those agreed upon in representation of absentees, if the

latter suffer the lesion stated in the preceding number;

(3) Those undertaken in fraud of creditors when the latter

cannot in any other manner collect the claims due them;

(4) Those which refer to things under litigation if they have

been entered into by the defendant without the knowledge IV. Rallos v. Yongco
and approval of the litigants or of competent judicial 20 Phil. 269
authority;

(5) All other contracts specially declared by law to be
subject to rescission. (1291a)
Art. 1382. Payments made in a state of insolvency for
obligations to whose fulfillment the debtor could not be
compelled at the time they were effected, are also
rescissible. (1292)
In the case at bar, not one of the grounds
for recession is present. Petition is
dismissed.
TEACHINGS OF THE COURT:
Rescission of a contract, as a general rule,
will not be permitted for slight or casual
breach, but only for such substantial and
fundamental breach as would defeat the
very object of the parties in making the
agreement.
TOPIC:
1. Duty of the principal to give due
notice upon termination of the
agency.
2. Liability of the principal for failure to
give due and timely notice on the
termination of agency.
FACTS:
The defendant sent a letter to the plaintiffs
Florentino Rallos informing the opening of
his shipping and commission department
for buying and selling leaf tobacco and
other native products. The letter also
introduced Florentino Collantes upon whom
he has conferred power of attorney with
the belief that through his knowledge, long
experience in the business and commercial
connections, he may secure the most
advantageous prices for his customers.

Upon receiving the letter, the plantiffs
immediately proceeded to do business with
the defendant through Collantes.
February, 1909, the plaintiffs sent to
Collantes 218 bundles of tobacco to be sold
on commission.
However, it appears that prior to the
sending of said tobacco the defendant had
severed his relations with Collantes and the
latter was no longer acting as his agent.
Thus, defendant seeks to recover the
amount equivalent of the tobacco which he
sent to Collantes but, the defendant
refused to pay on the ground that at the
time said tobacco was received and sold by
Collantes he was acting personally and not
as his agent.
ISSUE:
Whether or not the defendant is liable for
failure to give due notice on the
termination of agency.
RULING:
YES.
The defendant, having advertised the fact
that Collantes was his agent and having
also given them a special invitation to deal
with such agent, it became the defendant’s
duty, upon the termination of the
relationship of principal and agent, to give
due and timely notice thereof to the
plaintiffs.
The general rule is that, when the
relationship of principal and agent is
established, and the principal gives notice
of the agency and holds out the agent as
his authorized representative, upon the
termination of the agency it is the duty of
the principal to give due and timely notice
thereof, otherwise, he will be held liable to
6
third parties acting in good faith and
properly relying upon such agency.
Legal Basis/Jurisprudence:
Art. 1873. If a person specifically informs
another or states by public advertisement
that he has given a power of attorney to a
third person, the latter thereby becomes a
duly authorized agent, in the former case
with respect to the person who received
special information, and in the latter case
with regard to any person.
The power shall continue to be in full force
until the notice is rescinded in the same
manner in which it was given.
COMMENT OF Justice J.B.L. Reyes
To forestall fraud, the following paragraph
must be added to Art. 1873.
“But revocation made in any manner
shall be effective against all persons having
actual knowledge thereof.” (Observations
on the new Civil Code, 16 Lawyer’s Journal,
p. 138).
TEACHING OF THE COURT:
1. Does the principal have the obligation to
give due notice to third parties upon
termination of the agency?
The rule is that, when the relationship of
principal and agent is established, and the
principal gives notice of the agency and
holds out the agent as his authorized
representative, upon the termination of the
agency it is the duty of the principal to give
due and timely notice thereof, otherwise,
he will be held liable to third parties acting
in good faith and properly relying upon
such agency.

V. CMS Logging Inc. v. CA, et. al.
L-41420 July 10, 1992
TOPIC:
Revocation of agency at will; Express or
implied
FACTS:
Petition filed: Petition for review on
certiorari
Petitioner CMS is a forest concessionaire
engaged in the logging business. It
appointed DRACOR as its sole and
exclusive export and sales agent for all logs
that CMS may produce for a period of five
(5) years. It agreed that DRACOR shall
receive 5% commission on the gross sales
of the logs.
Six months prior to the expiration of the
agreement, CMS discovered that DRACOR
had used Shinko Trading Co., Ltd. (Shinko)
as agent or liaison officer in selling CMS’s
logs in Japan for which Shinko earned a
commission, a violation of the agreement.
After the discovery, CMS sold and shipped
logs directly to several firms in Japan
7
without the aid of DRACOR. CMS sued
DRACOR for the commission received by
Shinko and for moral and exemplary
damages. DRACOR counterclaimed for the
commission of the sales made by CMS with
the Japanese firms.
Trial Court- Dismissed the complaint ruling
that no evidence was presented to show
that Shinko received the commission
arising from the sale of CMS’s logs in
Japan.
CA- Affirmed the decision of the Trial Court
Aggrieved, CMS appealed to this Court
ISSUES:
1. Did the CA make a complete findings of
fact?
2. Is DRACOR entitled to its 5%
commission arising from the direct sales
made by CMS to buyers in Japan?
3. Is DRACOR guilty of fraud and bad faith
in its dealings with CMS?
RULING:
1. Yes. The findings of fact made by the CA
are final and conclusive and cannot be
reviewed on appeal to the Supreme Court
2. No. DRACOR is no longer entitled to the
5% commission. CMS appointed DRACOR
as its agent for the sale of its logs to
Japanese firms. Yet, during the existence of
the contract of agency, DRACOR admitted
that CMS sold its logs directly to Japanese
firms. This act constituted an implied
revocation of the contract of agency under
Art. 1924 of the civil code which provides:
Art. 1924. The agency is revoked if the
principal directly manages the business
entrusted to the agent, dealing with third
persons.
Since the contract of agency was revoked
by CMS when it sold its logs to Japanese
firms without the intervention of DRACOR,
the latter is no longer entitled to its
commission from the proceeds of such sale.
 8

3. No. The findings of the CA on the matter

were based on its appreciation of the
evidence, and these findings are binding on
the SC.

TEACHINGS OF THE COURT:

1. The principal may revoke a contract of
agency at will. Such revocation may be
express, or implied, and may be availed of
even if the period fixed in the contract of
agency has not yet expired.

2. As the principal has this absolute right to

revoke the agency, the agent can not VI. Gold Star Mining Co., Inc. v. Lim-
object thereto. Jimena
25 SCRA 597
3. The agent cannot claim damages arising
from such revocation, unless it is shown TOPIC:
that such was done in order to evade the When the principal may sue the person
payment of agent’s commission. whom the agent dealt with

FACTS:
In 1937, Ananias Isaac Lincallo, bound
himself in writing to turn over to Victor
Jimena, (1/2) of the proceeds from all
mining claims that he would purchase with
the money to be advanced by the latter.

This agreement was later on so as to

include in the equal sharing arrangement,
not only the proceeds from several mining
claims, which by that time had already
been purchased by Lincallo with various
sums supplied by Jimena, but also the
lands constituting the same, and so as to
bind thereby their "heirs, assigns, or legal
representatives."

On several occasions, the mining claims in

question were made subject-matter of
contracts entered into by Lincallo in his
own name and for his benefit alone without
the slightest intimation of Jimena's
interests over the same.

In 1951, Lincallo and Alejandro Marquez,

as separate owners of particular mining
claims, entered into an agreement with
Gold Star Mining Co., Inc., the assignee
thereof, regarding allotment to Lincallo of
45% of the royalties due from the
corporation.

Four months later, Lincallo, Marquez and
Congressman Panfilo Manguerra, again as
owners, leased certain mining claims to
Jacob Cabarrus, who, in turn, transferred
to Marinduque Iron Mines Agents, Inc., his
rights under the lease contract.
From 1939 to 1952, Jimena, repeatedly
apprised Gold Star, and Marinduque Iron
Mines Agents, Inc., of his interests over the
mining claims so assigned and/or leased by
Lincallo.
He demanded recognition and payment of
his one-half share in all the royalties
allocated and paid and, thereafter, to be
paid to the latter, but both corporations
ignored his demands.
Payment of the P5,800 advanced for the
purchase of the mining claims, as well as
the one-half share in the royalties paid by
the two corporations, were also repeatedly
demanded by Jimena from Lincallo.
Acknowledging Jimena's contractual claim,
Lincallo off and on promised to settle his
obligations., and on July 14, 1952, Lincallo
promised, for the last time, to settle
everything or before the 30th day of the
same month.
Lincallo, however, did not only fail to settle
his accounts with Jimena, but transferred,
a month after he promised to pay Jimena,
35 of his 45% share in the royalties due
from Gold Star, to Gregorio Tolentino, a
salaried employee, for an alleged
consideration of P10,000.
On September 2, 1954, Jimena
commenced a suit against Lincallo for
recovery of his advances and his one-half
share in the royalties. Gold Star and
Marinduque Iron, together with Tolentino,
were later joined as defendants.
On September 17, 1954, the trial court
issued, upon petition of Jimena, a writ of
preliminary injunction, restraining Gold
Star Mining and Marinduque Iron, from
paying royalties during the pendency of the
case to Lincallo, his assigns or legal
representatives.
9
Despite the injunction, however, Gold Star
Mining was found out to have paid
P30,691.92 to Lincallo and Tolentino.
Gold Star claimed on appeal that the
injunction had been superseded and/or
dissolved on May 25, 1955 by the trial
court's grant of Jimena's petition for a writ
of preliminary attachment "to supersede
the writ of preliminary injunction previously
issued."
But as the grant was conditioned upon
filing of a bond to be approved by the trial
court. No writ of attachment was issued
because the bond offered by Jimena was
disapproved.
After a protracted trial, the lower court
rendered a decision in favor of Jimena.
All four defendants, Lincallo, the widow and
children of Tolentino, and the two
corporations, appealed to the CA.
The appeal interposed by Marinduque Iron
Mines Agents, Inc., was, however,
withdrawn, while that of Lincallo was
dismissed for his failure to file brief.
Pending outcome of the appeal, the
royalties due from Gold Star Mining, were
required to be deposited with the trial
court. In compliance therewith, Gold Star
made a judicial deposit in the amount of
P30,691.92.
On October 8, 1965, the CA handed down a
decision sustaining in its entirety that of
the RTC. Gold Star Mining moved for
re-consideration of said decision insofar as
Its adjudged solidary liability with Lincallo
to pay to the Jimenas the sum of
P30,691.92 "for flagrant violation of the
injunction" was concerned.
The motion was denied. Hence, the
present appeal.
Petitioner, Gold Star Mining, argues that
the CA's decision that respondents Jimenas
have a cause of action against it, and
condemning it to pay the sum of
P30,691.92 for violation of an allegedly
 10

non-existent injunction, are reversible own name, when the transaction involves
errors. things belonging to the principal.

ISSUE:
Whether or not the principal may sue the
one with whom his agent dealt with in his
agent's own name, when the transaction
involves things belonging to the principal.
RULING:
The Court ruled that principal may sue the
one with whom his agent dealt with in his
agent's own name, when the transaction
involves things belonging to the principal.

Under Art. 1883 of the New Civil Code, the

principal may sue the person with whom
the agent dealt with in his agent's own
name, when the transaction involves things
belonging to the principal.

In this case, under such conditions, the

principal, Jimena, has an action against the
one (Gold Star Mining) with whom his
agent dealt with in his agent's own name,
with respect to Jimena's share of the
claims, pursuant to Article 1883 of the
NCC.

Furthermore, regarding the violation of the

injunction, the Court said that the facts
speak for themselves. Res Ipsa Loquitur.

They ruled that, considering that no writ of

preliminary attachment was issued by the
trial court, the condition for its issuance not
having been met by Jimena, nothing can be
said to have superseded the writ of
preliminary injunction in question. The
preliminary injunction was, therefore,
subsisting and evidently violated by Gold
Star Mining when it paid the sum of
P30,691.92 to Lincallo and Tolentino.

TEACHING OF THE COURT:

Can the principal sue the one with whom
his agent dealt with in his agent's own
name, when the transaction involves things
belonging to the principal?

Yes, Under Art. 1883 of the New Civil Code,

the principal may sue the person with
whom the agent dealt with in his agent's